Young & Co's Brewery Regulatory News (YNGA)

23 May 2006 07:03

Young & Co's Brewery PLC23 May 2006 23rd May 2006 YOUNG & CO.'S BREWERY, P.L.C. PRELIMINARY RESULTS FOR THE 52 WEEKS TO 1 APRIL 2006 Financial highlights (52 weeks for 2006 against 53 weeks for 2005) Turnover £123.9 million Up 3.6%Operating profit before exceptionals £13.6 million Down 0.6%Adjusted profit before tax £10.3 million* Up 1.8%Profit before tax £7.6 million Down 18.3%Adjusted earnings per share 59.65p* Up 1.8%Basic earnings per share 40.31p Down 25.3%Dividend per share (interim + 24.90p Up 5.3%recommended final)Net assets per share £12.34 Up 3.9% * Adjusted to exclude exceptional items Operational highlights • Strong retail performance, with managed pub turnover up 3.2% and profit up 6.5%, helped by food sales up 10.0%; • Young's Bitter increases volumes by 0.6% against a market decline and becomes UK's ninth largest standard ale brand (AC Neilsen); • Despite total beer volumes increasing by 0.6%, wholesale profit decline underlines the difficulties of scale and operating the current brewery site; • Conclusion of review announced today (see separate announcement): - Young's creates new UK force in brewing with formation of Wells & Young's Brewing Company with Charles Wells; and - confirms decision and advanced discussions regarding the sale of brewery and Buckhold Road sites. Stephen Goodyear, Chief Executive, commented: "We have produced a resilient performance, particularly in retail, in a year ofconsiderable change, which included new licensing laws, our transfer to AIM aswell as the uncertainty surrounding our future brewing operations. "Our retail business performance has started well, although we are only a shortway into the new financial year. Sales in the seven weeks to 20 May are up10.7%, with strong like for like growth. "After a period of considerable uncertainty, we are pleased to be bringing theprocess to a successful conclusion. We look forward to the future with greatenthusiasm and confidence." For further information, please contact: Young & Co.'s Brewery, P.L.C.Stephen Goodyear Today: 020 7357 9477Chief Executive Thereafter: 020 8875 7000 Peter Whitehead Today: 020 7357 9477Finance Director Thereafter: 020 8875 7000 Hogarth PartnershipJames Longfield / GeorginaBriscoe 020 7357 9477 Photographs are available from Hogarth on request. YOUNG & CO.'S BREWERY, P.L.C. PRELIMINARY RESULTS FOR THE 52 WEEKS TO 1 APRIL 2006 Operational review Young's produced a resilient performance in a year of considerable change, whichincluded new licensing laws, our transfer to AIM as well as the uncertaintysurrounding our future brewing operations, as we entered the final stages of ourbrewery site review. Turnover was up 3.6% at £123.9 million. Adjusted profit before tax was £10.3million and adjusted earnings per share were 59.65p both up 1.8%. The financialsand trading reported today are negatively impacted by comparing 52 weeks forthis year against 53 weeks in 2005. The exceptional costs associated with thereview and related transactions in the year, together with the one-off costs ofthe move to AIM, employment related matters and other property costs, amountedto £2.6 million. This resulted in profit before tax after exceptional items of£7.6 million, a decrease of 18.3%. The continued improvement in underlying performance has led the Board to decideto pay an increased final dividend, up 5.3% to 12.90p, making the total for theyear of 24.90p, up 5.3% on 2005. The final dividend will be paid on 13 July 2006to shareholders on the register on 16 June 2006. Since the year end, the Board has concluded its review of the future options forthe Ram Brewery site and ongoing brewing alternatives. The outcome of thisreview is announced today (see separate release) and will result in the mergerof all Young's brewing activities with the brewing assets and beer brands ofCharles Wells Ltd. This new brewing company will be called the Wells & Young'sBrewing Company Ltd. The resolution of Young's future brewing operations shouldfacilitate the Board's ability to finalise a sale of the Ram Brewery and itssite in Buckhold Road. The Board is in advanced discussions with a potentialdeveloper with respect to the disposal of the Wandsworth sites, however, thereis no certainty that these current discussions will result in a transaction. Retail A strong retail performance, in what was a very challenging year for theindustry, highlighted the quality of our retail estate and the benefits ofremaining focused on combining great pubs with high service standards, excellentfood and market leading drinks. Retail turnover and profits were up 3.0% and 6.4% respectively and 4.5% and 4.3%on a like for like basis, despite cost pressures once more from minimum wage,utilities, rates and the costs arising from applying for new licences and theinevitable administrative burden of this new system. Nonetheless these newlicensing laws, with sensible later opening hours, have had a positive impact ontrade. The Retail business comprised 208 pubs and inns at the year end, of which 164are freehold. This is split between 112 managed and 96 tenanted houses. Managed houses The managed houses showed an increase in turnover of 3.2%, while profit was upby 6.5%. Like for like turnover and operating profit were up by 4.6% and 4.7%respectively. The major drive on food, with sales up 10.0%, and improved margins on bothliquor and food have helped to offset the increased costs referred to earlier.We have targeted training and are introducing independent assessments of theperformances of our pubs. Our objective is to maintain our unique culture ofexcellent service standards. A total of £10.8 million has been invested in the managed estate on both new andexisting sites. We have acquired three riverside sites at Vauxhall, Fulham andBattersea on 999 year leases at peppercorn rents. The Battersea site will becompleted post year end. The total investment for these three sites is likely tobe £9.6 million of which £3.8 million was made during the year under review.These sites called Riverside in Vauxhall, Waterside in Fulham and Waterfront inBattersea should open in June, September and October respectively. When thesedevelopments have been completed Young's Thames side estate will start at theSwan in Walton on Thames and stretch to the Founder's Arms by the MillenniumBridge, taking in a total of 13 managed and tenanted pubs. £3.3 million was invested on major refurbishments within our existing estate.Our investment approach is very individual and tailored to the catchment areaand customer demographics of the pub. Our dual approach is either to preservethe timeless, traditional values of the pub, as demonstrated by refurbishmentsat the Victoria in Surbiton, the Nightingale in Balham and the Spread Eagle inCamden; alternatively we seek to introduce more dramatic changes in format witha more contemporary style to attract new customers and re-invigorate sales, aswe have done in sites such as the Queen Adelaide in Wandsworth, the Bear inOxshott, the Duke on the Green (formerly Duke of Cumberland) in Fulham, theBritannia in Kensington and the Orange Tree in Richmond. In recent years, all development activity has included investment in covered,well lit and comfortable outside areas as we prepared for the effects of theoutright ban on smoking. We have been planning for a ban for the last two yearsand support the clarity that the total ban on smoking will bring. Whilst theremay be some initial downside, the medium to long term affects will, we believe,be positive for Youngs. The year under review also saw the start of a four year refurbishment project onour 12 inns. We invested £0.9 million refurbishing 19% of our 326 bedrooms, aswell as a complete refurbishment of the ground floor areas of the Bridge inGreenford. RevPAR (average room rate multiplied by occupancy) was £37.98, a 0.6%increase on last year. Our ongoing review of the overall estate has resulted in four transfers fromtenanted to managed houses; the Grove in Balham, the Coopers Arms in Chelsea,the Clock House in Peckham and in the last week of the financial year the Almain Wandsworth. We will also take back the Ship in Wandsworth and the Duke ofCambridge in Battersea in the first half of the new year. In each case we havepaid or are contracted to pay compensation to the outgoing tenant and these havebeen treated as exceptional operating items in the current year due to theirscale. We believe this investment will be paid back within four years. The Rattlebone in Sherston, Wiltshire and the Bell in Staines have beentransferred to tenancy and we disposed of our leasehold interest in the BathArms during the year, leaving us 112 managed houses and inns and 362 bedrooms atthe end of the year. Tenanted houses The tenanted houses showed an increase in turnover of 0.1%, with profit up by5.9%. Like for like turnover and operating profit were up by 2.3% and 4.8%respectively. During the current year we invested £1.1 million in the estate including threerefurbishments at the Bulls Head in Barnes, the Lord Nelson in Sutton and theKings Arms in Wandsworth and have disposed of our leasehold interest in the NextDoor, Oxford, leaving us 96 tenanted houses at the end of the year. In the new financial year we will be commencing a four year development programcovering the entire tenanted estate, with a major investment in outside areas toassist with the no smoking ban and to bring all sites up to standard. Wholesale Despite further progress in sales and profits of our wines and spirits divisionand a 4% increase in beer sales, our wholesale business recorded its smallestprofit in six years, highlighting the growing difficulties of limited scale andoperating under the inefficiencies and restrictions of the Ram Brewery site. Beer Company Our flagship cask ale brand Young's Bitter continued to buck the market declinewith growth of 0.6% in the last 12 months. Young's Bitter is now the ninthlargest standard ale in the UK (AC Nielsen). Total beer volumes were also up 0.6% at 179,159 barrels, but production was down0.8%. Our tied trade volumes accounted for 32.8% of our total own volume and46.8% of all volumes excluding contract. Free trade volumes were up 4.6%. The multiple pub groups and brewers saw significant growth of our drive brandYoung's Bitter, which increased 11.4% in volume, but once more the continuedmarket decline of Young's Light Ale held back overall volumes, with the sectordown 5.5%. As the pub sector continues to consolidate, this route to marketbecomes increasingly important. The major pub groups now control a largepercentage of the market and the trading relations we have with Punch Taverns, M&B and Enterprise Inns are essential as are the recent account wins with LaurelPub Company. Take home volumes saw a strong 18.8% increase driven by national listings forSpecial London Ale and St George's Ale. Special London Ale is firmly establishedas the UK's number one bottle conditioned ale. We increased listings in all themajor multiples, in particular Special London Ale in Tesco, and St George's Alein Asda. In the independent sector Winter Warmer proved a great success inThreshers as did St George's in Majestic and Waggle Dance in the cash and carryMakro. Young's beers also performed exceptionally well in the expandingChristmas gift market, which gives our brands important exposure. Wholesale volumes increased by 15.4% and continue to be an essential route tomarket through National Drinks Distributors where Young's Bitter has achievedNational Champion Ale status for the fourth year running and has been givenNational Core Brand status in WaverleyTBS. Volume increases have been at theexpense of margin with increased competition from the major brewers. Regional free trade saw a steady performance, with a small increase in volume,but like all the other trade channels saw intense margin pressure. Neverthelesswe continue to grow quality new business across the south of England and thisremains the sector with the highest profit margins. Export sales declined 5.5%, impacted by the effect of the weak US dollar on ourpricing. Our main brand in the US is Double Chocolate Stout, a unique productwith a growing reputation. Elsewhere, in Finland and Denmark packagingregulation changes affected our entire portfolio causing major disruption.Meanwhile Russia and the Ukraine are providing new opportunities. With all the uncertainty surrounding the brewery it is to the credit of ourbrewers that they are still crafting award winning ales and this year is noexception. The Brewing Industry International Awards competition awarded goldmedals for Oatmeal Stout and for cask Ram Rod. We have now won more medals inthis competition than any other brewery in the world. In addition we won theTesco Autumn Challenge for a third time with Young's Ruby Star, a new bottleconditioned beer. We have never been out of the finals since this competitionstarted 10 years ago. Cockburn & Campbell Cockburn & Campbell, our wines and spirit business, saw a 3.9% increase inprofit. This was the result of a 4.3% increase in sales led by wine sales up7.8%. Sales to our own retail estate have expanded by 1.8% in value terms withthe refurbishments referred to earlier and the increased emphasis on food. Freetrade sales were up 10.6%. We've extended our wine range from France, Italy, New Zealand, South Africa andChile. The TerraMater range from Chile has proved the greatest success;introduced in spring of last year, its sales are double those of our previousChilean range. In addition we have introduced a new wine from Bodegas El Coto,named Coto Vintage, aimed specifically at the off-trade. Several listings havebeen achieved, including Sainsbury's. Investment and finance We invested £13.5 million in our business. Retail capital expenditure formed themajor part of this total, with £3.8 million invested in the first phase of ournew riverside developments; £4.0 million on 12 major refurbishments and £4.1million on smaller developments. Strong operating cash flow has allowed this tobe achieved with only a modest change in net debt to £54.4 million. Gearing atthe end of the period was 38.1% and operating profit before exceptional costscovered interest by 3.5 times. As announced separately today we have entered into an agreement with CharlesWells Ltd to form the Wells & Young's Brewing Company Ltd. ("Wells & Young's").This business will incorporate Young's brewing activities and wholesale beer,wines and spirits business together with the brewing assets and beer brands ofCharles Wells. This merger, together with a subscription for shares by Young'sin Wells & Young's at a cost of £10m, will result in Young's holding a 40% stakein Wells & Young's, with Charles Wells Ltd owning the other 60%. Wells & Young'swill commence trading on 1 October 2006. Outlook Our retail business performance has started well, although we are only a shortway into the new financial year. Sales in the seven weeks to 20 May are up10.7%, with strong like for like growth. Since the period end we have acquiredtwo pubs and are in negotiations on a further five tenancies. The resolution of our future brewing activities, together with the planned saleof the brewery site, which will unlock a substantial amount of capital over thenext few years, will enable us to make a step change in the financialperformance of the business. Through the creation of the Wells & Young's Brewing Company, Young's remains avertically integrated business, with a significant interest in a modernefficient brewing business with a strong portfolio of growing speciality alesand lager brands. It secures the future of Young's unique beer brands andensures they will continue to be available in all Young's pubs. We believe that we have secured the best overall outcome for the business,customers, employees and shareholders. After a period of considerableuncertainty and change, we are pleased to be bringing the process to asuccessful conclusion. We look forward to the future with great enthusiasm andconfidence. YOUNG & CO.'S BREWERY, P.L.C. Unaudited profit and loss account For the 52 weeks ended 1 April 2006 Restated 2006 2005 £000 £000 --------- ---------Turnover 123,873 119,532 Net operating costs before exceptional items (110,274) (105,856)--------------------------------- --------- ---------Operating profit before exceptional items 13,599 13,676Operating exceptional items (2,574) (1,114)--------------------------------- --------- ---------Operating profit 11,025 12,562Non-operating exceptional items (70) 362--------------------------------- --------- ---------Profit on ordinary activities before interest 10,955 12,924Net interest charge (3,873) (3,969)Other finance income 527 364--------------------------------- --------- ---------Profit on ordinary activities before tax 7,609 9,319Tax on profit on ordinary activities (2,958) (3,135)--------------------------------- --------- ---------Profit attributable to ordinary shareholders 4,651 6,184Ordinary dividends on equity shares (2,808) (2,671)--------------------------------- --------- ---------Retained profit for the financial period 1,843 3,513--------------------------------- --------- --------- Pence Pence--------------------------------- --------- ---------Basic earnings per 50p ordinary share 40.31 53.98 --------------------------------- --------- ---------Exceptional items 19.34 4.61 --------------------------------- --------- ---------Adjusted earnings per 50p ordinary share 59.65 58.59 --------------------------------- --------- ---------Diluted basic earnings per 50p ordinary share 39.33 52.91 --------------------------------- --------- --------- The above results are all in respect of continuing operations of the company. The comparative figures have been restated for the effects of the adoption ofFRS 17 Retirement benefits and FRS 21 Events after the balance sheet date andthe recognition of capital gains tax on ESOP allocated shares. The effect ofthese changes is detailed in note (7). YOUNG & CO.'S BREWERY, P.L.C. Unaudited balance sheet At 1 April 2006 Restated 2006 2005 £000 £000 --------- ---------Fixed assetsTangible fixed assets 217,526 212,413Investments 42 42--------------------------------- --------- --------- 217,568 212,455--------------------------------- --------- ---------Current assets and liabilitiesStocks 4,193 4,018Debtors 6,839 6,247Cash - 1,028--------------------------------- --------- --------- 11,032 11,293--------------------------------- --------- ---------Creditors: amounts falling due within one yearShort term borrowings (283) (177)Other creditors (19,261) (17,613)--------------------------------- --------- --------- (19,544) (17,790)--------------------------------- --------- ---------Net current liabilities (8,512) (6,497)--------------------------------- --------- ---------Total assets less current liabilities 209,056 205,958 Creditors: amounts falling due after more thanone year (54,140) (53,806)Provisions for liabilities and charges (8,122) (7,325)--------------------------------- --------- ---------Net assets excluding retirement benefitliability 146,794 144,827Retirement benefit liability (4,129) (8,436)--------------------------------- --------- ---------Net assets 142,665 136,391--------------------------------- --------- --------- Capital and reservesCalled-up share capital 6,028 6,028Share premium account 1,2960 1,319Revaluation reserve 87,139 87,139Capital redemption reserve 1,808 1,808Investment in own shares (2,861) (3,267)Profit and loss account 49,255 43,364--------------------------------- --------- ---------Equity shareholders' funds 142,665 136,391--------------------------------- --------- --------- The comparative figures have been restated for the effects of the adoption ofFRS 17 Retirement benefits and FRS 21 Events after the balance sheet date andthe recognition of capital gains tax on ESOP allocated shares. The effect ofthese changes is detailed in note (7). YOUNG & CO.'S BREWERY, P.L.C. Unaudited cash flow statement For the 52 weeks ended 1 April 2006 2006 2005 £000 £000 --------- ---------Net cash inflow from operating activities 21,769 24,705--------------------------------- --------- ---------Interest received 8 22Interest paid (4,021) (4,340)--------------------------------- --------- ---------Returns on investments and servicing of finance (4,013) (4,318)--------------------------------- --------- ---------Corporation tax paid (3,088) (2,983)--------------------------------- --------- ---------Purchases of tangible fixed assets (13,451) (15,526)Sales of tangible fixed assets 123 4,382--------------------------------- --------- ---------Capital expenditure (13,328) (11,144)--------------------------------- --------- ---------Equity dividends paid (2,808) (2,671)--------------------------------- --------- ---------Cash (outflow)/inflow before financing (1,468) 3,589--------------------------------- --------- ---------Increase/(decrease) in loan capital 362 (3,183)Decrease in lease finance (16) (15)Employee benefit trust share redemptions - (368)--------------------------------- --------- ---------Financing 346 (3,566)--------------------------------- --------- ---------(Decrease)/increase in cash in period (1,122) 23--------------------------------- --------- --------- YOUNG & CO.'S BREWERY, P.L.C. Unaudited reconciliation of net cash flow to movement in net debt For the 52 weeks ended 1 April 2006 2006 2005 £000 £000 --------- --------- (Decrease)/increase in cash in period (1,122) 23 (Increase)/decrease in debt in period (346) 3,198 --------------------------------- --------- --------- (Increase)/decrease in net debt in period (1,468) 3,221 Opening net debt (52,955) (56,176) --------------------------------- --------- --------- Closing net debt (54,423) (52,955) --------------------------------- --------- --------- YOUNG & CO.'S BREWERY, P.L.C. Unaudited statement of total recognised gains and losses For the 52 weeks ended 1 April 2006 Restated 2006 2005 £000 £000 --------- ---------Profit for the financial period 4,651 6,184 Actuarial gain/(loss) on retirement benefitschemes 5,750 (2,656) Deferred tax on actuarial gain/(loss) (1,725) 797--------------------------------- --------- ---------Total recognised gains for the financial period 8,676 4,325Prior year adjustments (4,821) ---------------------------------- --------- ---------Total gains recognised since last annual report 3,855 4,325--------------------------------- --------- --------- YOUNG & CO.'S BREWERY, P.L.C. Unaudited reconciliation of movements in shareholders' funds For the 52 weeks ended 1 April 2006 Restated 2006 2005 £000 £000 --------- ---------Profit attributable to ordinary shareholders 4,651 6,184 Dividends (2,808) (2,671) Movement in own shares: Employee benefit trust redemptions - (368) Employee benefit trust allocations 406 677 Actuarial gain/(loss) on retirement benefitschemes, net of deferred tax 4,025 (1,859)--------------------------------- --------- ---------Net addition to shareholders' funds 6,274 1,963Opening shareholders' funds, as restated 136,391 134,428--------------------------------- --------- ---------Closing shareholders' funds 142,665 136,391--------------------------------- --------- --------- The comparative figures have been restated for the effects of the adoption ofFRS 17 Retirement benefits and FRS 21 Events after the balance sheet date andthe recognition of capital gains tax on ESOP allocated shares. The effect ofthese changes is detailed in note (7). Notes to the accounts (1) Accounts This preliminary announcement, which was approved by the board on 22 May 2006,has been prepared using the same accounting policies as set out in the previousannual accounts with the exception of the adoption of FRS 17 Retirement benefitsand FRS 21 Events after the balance sheet date and the recognition of capitalgains tax on ESOP allocated shares. The accounts present information about thecompany as an individual undertaking. The above financial information does not amount to full accounts within themeaning of S.240 of the Companies Act 1985. Full accounts for the period ended 2April 2005 have been delivered to the Registrar of Companies. The auditors'report on those accounts was unqualified and did not contain any statement underS.237 of the Companies Act 1985. The auditors' report on the statutory accountsfor the period ended 1 April 2006 has yet to be signed. (2) Operating exceptional costs Restated 2006 2005 £000 £000 --------- ---------Transfer of company's share listing to AIM 386 -Site review costs 335 485Lease compensation payments to tenants 760 -Transaction costs 141 -Capital gains tax on ESOP allocated shares 708 629Other employee related matters 244 ---------------------------------- --------- --------- 2,574 1,114--------------------------------- --------- --------- (3) Taxation Corporation tax has been provided on the profits for the 52 weeks to 1 April2006 at 30% (2005: 30%). (4) Earnings per share Restated 2006 2005 £000 £000 --------- ---------Profit attributable to ordinary shareholders 4,651 6,184Operating exceptional items, after adjusting fortax 2,157 1,114Non-operating exceptional items, after adjustingfor tax 74 (587)--------------------------------- --------- ---------Adjusted earnings 6,882 6,711--------------------------------- --------- --------- Earnings per share are calculated by dividing the profit attributable toordinary shareholders by the weighted average number of ordinary shares inissue. The weighted average number of ordinary shares in issue, which excludes theinvestment in own shares, is 11,536,993 (2005: 11,453,672). Diluted earnings per ordinary share are calculated by adjusting basic earningsper ordinary share to reflect the notional exercise of the weighted averagenumber of ordinary share options outstanding during the period. The resultingweighted average number of ordinary shares is 11,824,854 (2005: 11,687,302). An adjusted earnings per share figure is presented to eliminate the effect ofthe operating and the non-operating exceptional items on basic earnings pershare. (5) Ordinary dividends on equity shares Restated 2006 2005 Pence Pence --------- --------- Final dividend (previous year) 12.25 11.65 Interim dividend (current year) 12.00 11.40 --------------------------------- --------- --------- 24.25 23.05 --------------------------------- --------- --------- The trustee of the Ram Brewery Trust has waived its rights to dividends onshares held within the Ram Brewery Trust General Fund on behalf of the executiveshare option schemes. (6) Net cash inflow from operating activities Restated 2006 2005 £000 £000 --------- ---------Operating profit 11,025 12,562Depreciation 8,145 8,127Employee benefit trust share allocations 406 677Provision for capital gains tax on ESOPallocated shares 708 629Movements in working capitalStocks (175) 203Debtors (592) 1,650Creditors 2,252 857--------------------------------- --------- ---------Net cash inflow from operating activities 21,769 24,705--------------------------------- --------- --------- (7) Changes in accounting policies The company has adopted the following accounting standards in the year. FRS 17 Retirement benefits requires changes to the accounting treatment ofdefined benefit pension arrangements. FRS 21 Events after the balance sheet date includes the requirement thatdividends be recognised when declared, not when proposed. In addition, the company is now recognising the capital gains tax liability thatmay arise on the allocated shares in the Ram Brewery Trust when they aretransferred to employees. The liability has been recognised following theclarification of the treatment for tax purposes of certain items related to theRam Brewery Trust. Comparative figures have been restated for the effects of these changes. Thechange in accounting policy has had the following effect on the profit and lossaccount and balance sheet. Profit and loss account 2006 2005 £000 £000 --------- ---------FRS 17: Reduction in service cost and finance costrecognised inprofit and loss account, net of tax 342 358FRS 21: Reduction in dividend charge in profit andloss 84 59accountFRS 17: Actuarial gain/(loss) taken to statementof total recognisedgains and losses, net of tax 4,025 (1,859)Capital gains tax on ESOP allocated shares (708) (629)--------------------------------- --------- ---------Increase/(decrease) in total recognised gains forthe financial period 3,743 (2,071)--------------------------------- --------- --------- Balance sheet 2005 £000 ---------Opening shareholders' funds, as previously 139,249reportedPrior year adjustments:FRS 17: Retirement benefit liability (5,184)FRS 21: Change in dividend accounting policy 1,355Capital gains tax on ESOP allocated shares (992)--------------------------------- ---------Opening shareholders' funds, as restated 134,428--------------------------------- --------- This information is provided by RNS The company news service from the London Stock Exchange