Heavitree Regulatory News (HVT)

 The Heavitree Brewery PLC

 Trood Lane

 Matford

 Exeter EX2 8YP

Date: 15 February 2022

Contact: Graham Crocker - Managing Director - 01392 217733

Nicola McLean - Company Secretary - 01392 217733

Patrick Castle /Anita Ghanekar - Shore Capital - 0207 408 4052

Following a Board Meeting held today, 15 February 2022, the Directors announce the preliminary statement of results for the year ended 31 October 2021.

ISIN: GB0004182720 for 'A' Limited Voting Ordinary Shares

ISIN: GB0004182506 for Ordinary Shares

Chairman's statement

The results reported at the half-year showed that this Company, like most in the hospitality sector, inevitably would be reporting at the year-end numbers that had been detrimentally affected by the ongoing Covid-19 pandemic. At the beginning of the year under review, during November 2020, our pubs were under lockdown. This was followed by trading under restrictions in December until Boxing Day when the Government implemented another lockdown which continued until 12th April. Following this our pubs were permitted to trade with restrictions until 19th July when social distancing measures were eased. As in the previous year, the Board has remained determined to support and protect our Tenants and Leaseholders as best we can during the periods of lockdown and the periods of restricted trading by waiving and discounting rents as appropriate. Consequently, only three months of the year had rents collected at the full rate. This has had an increased impact on turnover against the previous year and revenue for the year under review has decreased by 7.98% to £4,618,000 (2020: £5,019,000). The Group returned a small operating loss of £59,000. Profit before taxation was £1,114,000 (2020: £414,000).

The IFRS 16 Lease Accounting calculation which apportions rental income to each year of the full term of the lease and which I referred to in last year's statement, has once again skewed the position by causing the inclusion of significant rental income that was not actually collected, nor charged, in the year.

Also, in April 2021, The Jolly Sailor in East Ogwell was destroyed by a devastating fire. Thankfully, and most importantly, our Tenants John Turner and Amanda Bearne and their customers were not harmed, nor any members of the local emergency services who bravely attended the scene and prevented any spread to other properties in the village. At the time of writing, the site has been made secure while we await the decision, following the recommendation of the conservation officer, of a demolition application of the damaged, unstable gable end. Included in the operating loss for the year is the impairment loss £119,000 for The Jolly Sailor, in order to write off the book 'historical cost' carrying value.

The Company has continued the programme of selling some non-core assets and this has realised a book profit of £1,318,000 (2020: £293,000) in this respect. This policy is in line with the Board's decision to reduce the Company's level of borrowing.

Dividend

At the half-year, I reported that the Directors would not consider the payment of a dividend for the financial year 2020/2021. When trading does return to some sort of normality, the Board will be able to review future dividend payments.

Sale of Property

The properties that were sold during the year are listed as follows:

The Maltsters Arms in Harbertonford, which had been closed since September 2018. The adjacent cottage Bridge house. The garage opposite the pub.

The Castle Inn in Holcombe.

The Toby Jug Inn in Bickington which had been closed since May 2003.

Rose Cottage in Strete.

Two flats at the Old St.Loye's Hotel site.

Land at the rear of the Globe Inn in Chudleigh.

Two garden plots in Abbotskerswell.

Within the financial year, the Company made a reduction in borrowings of £661,000. Early in the new year following the completion of further sales of The Victoria Inn in Ashburton with a small adjoining cottage and the Maltster's Arms site in Clyst St Mary, a prepayment on the term loan of £750,000 was made.

Heavitree Inc.

The final piece of land held by our American subsidiary in Houston has been sold for $45,000 (£33,000). This is a post balance sheet event which will end our involvement in Houston. This started in 1982 with our investment in a company operating an English style pub and restaurant in the city called The Bear and Ragged Staff. The collapse of the oil price and, in turn, the collapse of the Houston economy led to the demise of the operating company and this Company taking direct control of the site in 1983. In 1986 the original site was swapped for a parcel of undeveloped land. Over the years, a series of land sales has distributed cash to the parent Company.

Pension Scheme

In January 2022 the trustees of the Final Salary Pension Scheme and the Company formally gave notice to trigger the wind-up of the Scheme. The Scheme was closed to new members in July 2002, with no future accrual since April 2006 and the last deferred members transferred out in June 2018. Wind-up must be completed within a two-year period. As part of the wind-up, retired members who had annuities purchased on their behalf in the Scheme's name will, in due course, have those annuities transferred into their own names.

Personnel

I am very sad to report that Joan Ballman who was the landlady of our Locomotive Inn in Exeter since 1988 and who held the tenancy of The Mitre in Exeter before that, passed away in December 2021. Joan commanded the utmost respect and affection from all of us at head office during her long time at The Locomotive and the huge number of attendees at her funeral showed how she was held in the highest esteem by the many who visited her pub. We will all miss Joan.

A similarly huge figure from the Exeter licencing trade was Derek Elson who we also sadly lost early in 2022. Derek (with his wife Adrienne) was probably ahead of his time in terms of being a multi pub operator and started as our very first Manager when taking on The Gardeners' Arms in Exeter in 1965. He was then appointed as our Manager at The Upton Vale in Torquay in 1968 and after that held tenancies or leases with us at The St. Loye's Hotel in Exeter, The George in Babbacombe and most famously at The Kings Arms in Exeter, which he took on in 1976. Our Managing Director even managed to persuade him to come out of retirement to help us by taking The Royal Oak in Exeter, for a short period, while a new tenant was being sought. We will always be grateful to Derek for a long, happy and highly respected association with this Company and again, he will be greatly missed by many.

Prospects

The trading environment remains testing; although there was no actual lockdown, Christmas trading was hindered as customers became unsettled by the recent infection rate peak caused by the Omicron variant. Staff shortages and increasing costs are also a continual concern.

However, the success of the vaccination programme has clearly helped in encouraging customers to support pubs and enjoy everything they have to offer and some comfort for the future was drawn from the strong trade during late Summer and Autumn. Also, the houses I visited during the variant affected build up to Christmas and in the early new year showed not only how professional and robust our operators are but also how determined our customers are to enjoy the offer provided by our great pubs.

N H P TUCKERChairman

15 February 2022

Group income statement

for the year ended 31 October 2021

Group statement of comprehensive income

for the year ended 31 October 2021

Group balance sheet

at 31 October 2021

Group statement of cash flows

for the year ended 31 October 2021

Group statement of changes in equity

for the year ended 31 October 2021

Equity share capital

The balance classified as share capital includes the total net proceeds (nominal amount only) arising or deemed to arise on the issue of the Company's equity share capital, comprising Ordinary Shares of 5p each and 'A' Limited Voting Ordinary Shares of 5p each.

Capital redemption reserve

The capital redemption reserve arises on the re-purchase and cancellation by the Company of Ordinary Shares.

Treasury shares

Treasury shares represent the cost of The Heavitree Brewery PLC shares purchased in the market and held by The Heavitree Brewery PLC Employee Benefits Trust and Employee Share Option Scheme ('EBT').

At 31 October 2021 the Group held 193,053 Ordinary Shares and 238,310 'A' Limited Voting Ordinary Shares (2020: 183,719 Ordinary Shares and 254,153 'A' Limited Voting Ordinary Shares) of its own shares. During the year there were purchases of 9,334 Ordinary Shares and 17,204 'A 'Limited Voting ordinary Shares and sales of 33,147 'A; Limited Voting Ordinary Shares.

Fair value adjustments reserve

The fair value adjustments reserve is used to record differences in the year on year fair value of the investment classified as fair value through other comprehensive income.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Notes to the preliminary announcement

1. Basis of preparation

These figures do not constitute full accounts within the meaning of Section 396 of the Companies Act 2006. They have been extracted from the statutory financial statements for the year ended 31 October 2021. The statutory financial statements have not yet been delivered to the Registrar of Companies.

The auditors, PKF Francis Clark, have reported on the accounts for the years ended 31 October 2021 and 31 October 2020. Their audit reports in both years were unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006 in respect of those accounts.

The financial information in this statement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom. The accounting policies have been consistently applied and are described in full in the statutory financial statements for the year ended 31 October 2021, which are expected to be mailed to shareholders on 11 March 2022. The financial statements will also be available on the Group's website www.heavitreebrewery.co.uk.

Going concern

With the continued uncertain nature of the pandemic and further lockdowns and restrictions being in place during this financial year, the Directors have considered the Group's financial resources. This had included a further review of the medium-term financial plan, along with a range of cash flow forecasts for 12 months from the date of approval of these financial statements. The Group has positive cash generation from its operations before tax and interest and the gearing remains low. These forecasts include a reduction in trade in the financial year to October 2022 due to an anticipated decrease in footfall and assume that there will be no further lockdown or significant trading restrictions. The mitigation measures which are in place in order to protect the cash position of the business have been incorporated into the forecasts for future cash positions. The forecast for capital receipts in 2022 includes non-core asset sales of £2m of which £880,000 has been received. These forecasts leave the Group with headroom of over £1.4m on an overdraft facility of £3m. The Board will continue to review cashflows as guidance from Government changes.

The Board took the decision last year to accelerate the paying down of its £4.5m term loan by the selling of non-core assets to secure its current position and the long term trading position of the Group. The Board identified up to 15 non-core assets with a value of between £5m and £7m to be realised over a period of 2 to 3 years. These include unlicensed properties and developments with permissions which are already within the Estate. This year the Group has sold 9 of the non-core assets resulting in profits of £1,318,000 being realised from these sales, with a further property completing early in the new financial year this has enabled the Group post year end to make a further prepayment on the term loan of £750,000, meaning that by the 31 December 2021 the Group has paid down £992,000 on the loan.

The Board has continued to engage with the bank regarding its facilities and forward trading, it has in place a waiver of covenant testing until April 2022 along with the agreement on paying down of loan facilities, projections show that there is a good level of headroom in the debt service cover covenant both to April 2022 and October 2022. However one covenant will fail the April 2022 testing but will have headroom in October 2022. A further waiver has been received from the bank in respect of the April 2022 covenant test. The Directors are satisfied that the Group's forecasts and projections, which take account the anticipated changes which will come about as a direct result of the Covid-19 pandemic and shows that the Group will be able to operate within its facilities. The current trading performance of the Group also shows that it will be able to operate within the level of its facilities for the 12 months from date of approval. With value in the Estate being realised over time and with the support from the bank there are no material uncertainties in relation to going concern. For this reason, the Group continues to adopt the going concern basis in preparing its financial statements.

2. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of Ordinary shares and 'A' Limited Voting Ordinary shares outstanding during the year.

The following reflects the income and shares data used in the basic and diluted earnings per share

Computation:

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

3. Dividends paid and proposed

4. Segment information

 Primary reporting format - business segments

During the year the Group operated in one business segment - leased estate.

Leased estate represents properties which are leased to tenants to operate independently from the Group, under tied and free of tie tenancies.

Secondary reporting format - geographical segments

The following tables present revenue, expenditure and certain asset information regarding the Group's geographical segments for the years ended 31 October 2021 and 2020. Revenue is based on the geographical location of customers and assets are based on the geographical location of the asset.

5. General information

The 2021 Annual Report and Financial Statements will be published and posted to shareholders on 11th March 2022 Further copies may be obtained by contacting the Company Secretary at The Heavitree Brewery PLC, Trood Lane, Matford, Exeter EX2 8YP. The 2021 Annual Report and Financial Statements will also be available on the Company's website at http://www.heavitreebrewery.co.uk/financial/

The Annual General Meeting will be held at the Registered Office on 13 April 2022 at 11.30am.

Ends.