Young & Co's Brewery Regulatory News (YNGA)

26 May 2005 07:01

Young & Co's Brewery PLC26 May 2005 26th May 2005 YOUNG & CO.'S BREWERY, P.L.C. PRELIMINARY RESULTS FOR THE 53 WEEKS TO 2 APRIL 2005 Financial highlights • Turnover £119.5 million up 6.7% • Operating profit before site review costs £13.5 million up 7.0% • Operating profit £13.0 million up 3.2% • Adjusted profit before tax £9.6 million* up 6.0% • Profit on ordinary activities before tax £9.4 million up 6.2% • Adjusted earnings per share 55.47p* up 10.7% • Basic earnings per share 56.36p up 15.1% • Dividend per share 23.65p up 5.1% • Net assets per share £12.48 up 2.8% * Adjusted to exclude non-operating exceptional items and site review costs Operational highlights • The Beer Company has had an excellent year with over 168,000 barrels brewed, a level not seen since the early eighties; • Young's Bitter increased volume by 9.5% and is now the 4th largest cask ale in London and the 10th largest cask ale brand in the UK; • Key distribution gains with major customers such as Spirit, Mitchells & Butlers, Punch and Enterprise; • Good performance from managed pubs and inns with turnover up 7.0% and operating profit up 9.7%. The operating profit increase was helped by food sales up 14.5% and improved food margins; • £15.5 million invested over the year. This includes seven new freehold sites. Net debt has been reduced to £53 million; • 5 May announced proposals to transfer to AIM and merge two classes of voting shares. EGM to be held on 2 June 2005 to approve proposals. John Young, Chairman, commented: "Our principles of providing first class products and service have served uswell, with good progress made across the business in the year. Despite strongcomparatives of the previous summer, our retail estate has again increased bothsales and profits. We are pleased at the progress we are making on our strategyof establishing Young's Bitter as a national brand. "Looking ahead, we remain focused on our strategy and anticipate making progressin the coming year, even though we expect conditions to be challenging.Stalling consumer confidence and ever increasing margin pressures, from risingstaff and utility costs, never ending red tape and this year, the added costsfrom new licensing laws and increases in business rates, are all challenges wewill have to face. Accordingly, any sales and profit growth achieved this yearwill be well earned. "Nonetheless we are confident that our actions will provide long-termsustainable growth for our shareholders." For further information, please contact: Stephen Goodyear Young & Co.'s Brewery, P.L.C. 020 8875 7000Chief ExecutivePeter Whitehead Young & Co.'s Brewery, P.L.C. 020 8875 7000Finance DirectorJames Longfield / Hogarth Partnership 020 7357 9477Georgina Briscoe Photographs are available from Hogarth on request. YOUNG & CO.'S BREWERY, P.L.C. PRELIMINARY RESULTS FOR THE 53 WEEKS TO 2 APRIL 2005 Operational review Quality and service are the essential ingredients to prosper in today'scompetitive market place. Their importance is vital given the fragile nature ofconsumer demand and ever-increasing regulatory and legislative burdens and theirassociated costs. It is therefore pleasing to report that our principles of providing first classproducts and service have served us well once more. Turnover has increased by6.7% to £120 million and reported profit before tax was up 6.2% at £9.4 million.Adjusted profit before tax which excludes exceptional items relating to propertyand the costs of the review of our Wandsworth operation was up 6.0% to £9.6million. Adjusted earnings per share were up 10.7% at 55.47p. Once again thisincrease was higher than the growth in adjusted profits as a result of sharerepurchases made in the previous financial year. The annual general meeting on 12 July 2005 will be asked to approve a finaldividend of 12.25p, making a total for the year of 23.65p, up 5.1%. The finaldividend is due to be paid on 14 July to shareholders on the register on 17June. Retail Young's retail success in the year under review is we believe the result ofdelighting our customers with stylish pubs, great service, quality food andunique beers. It proved to be a challenging year for our managed business competing with theexceptional summer of 2003 and stricken with the seemingly endless additionalcosts of regulation and legislative burdens. Nonetheless, turnover was up 7.0%and operating profit by 9.7%. Like for like turnover and operating profitimproved by 2.0% and 5.7% respectively. The operating profit increase was helpedby food sales up 14.5% and food margins also improved on the back ofefficiencies from tighter supply chain management that have resulted from theinvestment in, and successful roll out of, our internet food ordering solution. The improvement in our operations has been supported by £8.8 million of capitalexpenditure on the managed estate. High property prices have not prevented usduring the year from finding attractive opportunities to acquire freehold pubs,with three new acquisitions, the White Hart in Sherfield-on-Loddon, the PennyBlack in Leatherhead and the Bell in Fetcham. These pubs fit perfectly into theYoung's model and are already trading above expectations. We sold our leaseholdinterests in the Columbia Bar, Bill Bentley's in the Minories and Willy's WineBar. In addition we sold the Crown and Anchor in Chiswick and the King's Head inMerton, two freeholds that were no longer providing adequate returns. Wecontinue to manage our estate to ensure an optimal balance and this has resultedin the transfer of the Lamb at Hindon and Next Door in Oxford to tenancy.Conversely the Duke's Head, a large riverside pub in Putney, was transferredfrom tenanted to managed. Our managed estate at the year end comprised 109 pubscompared with 112 last year. Eight major developments were completed at the County Arms, Leather Bottle, OldShip, Dunstan House, Waverley, Bishop out of Residence, Duke of Wellington andFinch's, Finsbury Square, which has been transformed into the Master Gunner, thename of a popular pub that was lost as part of the Paternoster Squareredevelopment. Service standards are a major part of our retail proposition and we haverecently rolled out a comprehensive interactive training programme. Thisprogramme is designed to improve service quality but also ensures that staffkeep ahead of all the new legislation and regulation that affects our business.Events and prizes, such as the Academy Reward Dinner, the Cellar and BeerQuality competition and the Gardens competition, all help to develop the Young'sservice culture and make our licensees feel they are part of the Young's family. Profit in our inns division increased by 16.8%, the result of recent investmentbut competition remains intense, with RevPAR (average room rate multiplied byoccupancy) up a fraction of one per cent at £37.73. Both occupancy and roomrates were little changed on last year. In our tenanted estate, turnover was up by 4.8% and operating profit was up by0.8%. Like for like operating profit improved by 2.9%. We invested £4.8 millionin our tenanted estate. Four pubs were acquired during the year, the Two Dovesin Bromley, the Bell in Broadway, the Unicorn in Somerton and the Lord Nelson inBarnet. The Maltese Cat in Roehampton was sold and there was a net transfer ofone pub from management, resulting in a total of 99 pubs in our tenanteddivision, four higher than last year. Our traditional tenancies continue to attract experienced tenants to whom we areable to offer support and investment to generate a sustainable long-termbusiness relationship. Last year saw the setting up of our first tenant liaisonpanel, aimed at improving communication and fostering new business opportunitiesin partnership with our licensees. The Retail business has a total of 208 pubs and inns run under management andtenancy, one more than last year. The freehold estate has increased by four to164 over the year. Beer Company The Beer Company has had an excellent year with over 168,000 barrels brewed, alevel not seen since the early eighties. Young's Bitter, our flagship brand,increased volume by 9.5% in a declining cask ale market. Young's Bitter is nowthe fourth largest cask ale in London and the 10th largest cask ale brand in theUK. This represents excellent progress in our strategy to establish Young'sBitter as a national brand. This growth in volume has been led by free trade and exports, which were up atotal of 6.7% on last year, but it is also encouraging to note that volumesincreased by 0.8% in our managed and tenanted pubs. The multiple pub group channel has played a significant part with Young's Bittergrowing by 24.6% and there have been key distribution gains with major customerssuch as Spirit Group, Mitchells & Butlers, Punch and Enterprise. The take home market becomes more competitive each year, with volumes littlechanged. In response, we relaunched Waggle Dance, our leading take home brand,in November 2004 with a distinctive new label. Special London Ale and ChampionLive Lager, both bottle conditioned products, are leading Young's drive topenetrate the premium end of the take home market. The wholesale channel produced a very good performance, with volume up by 33.3%as a result of developing stronger partnerships with the major wholesalers, BeerSeller and National Drinks Distributors, which gave Young's Bitter theirChampion status for a third year running. Independent free trade is a central part of our business, with a diversified andloyal customer base. The strength of our team ensures a steady flow of qualitynew business, which has supported the volume increase of 6.7%. Export volumes were up 5.5%. A listing for canned Special Bitter provided theimpetus for a 42.2% volume growth in our Scandinavian market. Young's marketshare continues to grow in the United States with volumes up 1.5% despite a weakdollar. In excess of £1 million has been invested in supporting Young's Bitter. InSeptember 2004, we launched our new campaign, "This is a Ram's World",comprising a heavyweight poster campaign within our London heartland. This wasrepeated in December and again at the start of the current year and wassupported with new-style point of sale. Consumer reaction has been favourableand among London's cask ale drinkers our brand awareness grew to 91%, thehighest ever for the brand. Cockburn & Campbell Wine's popularity in pubs continues to increase, exploited by Young's through awide, high-quality, on-trade focused product range backed up by comprehensivetraining in product knowledge and service. As a consequence of this trend,Cockburn & Campbell continued to see volume increases, with overall wine volumesup by 12.6%. More than a hundred people working in our pubs hold anindustry-recognised wine qualification and more than half our pubs offer atleast 14 wines by the glass. In the free trade, an expanded sales team had an excellent year, increasing winevolumes by 22.9%. The pre-mixed spirits category continued its predictabledecline. Wine volumes in the tied trade were up 7.3%. Investment and finance Asset-backed sustainable dividend growth, our main financial objective, has onceagain been achieved with a dividend increase for the year of 5.1% to 23.65p,more than double the rate of inflation. Dividends have been increased for eightsuccessive years, providing a total increase of 30.7% over the past five years. The adjusted earnings per share are stated before exceptional items in order toillustrate the underlying performance of the business. The exceptional itemsthis year are made up of property related profits of £0.4 million and the £0.5million costs incurred throughout the year in respect of the review of ourWandsworth operation. Adjusted earnings per share increased by 10.7%, providinga total increase over five years of 37.8%. We have invested £15.5 million in our business in the year, mainly on ourexisting retail estate and on seven new freehold pubs. The combination of astrong operating cash flow and proceeds from disposal of underperforming assetshas allowed this level of investment to be undertaken at the same time asreducing net debt to £53 million. Before the year end, we renewed and increased our unsecured revolving creditfacility on attractive terms. The new £25 million committed facility expires on30 April 2010 and provides headroom for our future investment plans as and whenopportunities present themselves. Our approach to interest rate management remains unchanged with 74% of our debtfixed at the year end. Should interest rates rise by 1%, our interest costs willincrease by £0.1 million. Gearing finished the year at 37.0% and operatingprofit before site review costs covers interest costs by 3.4 times. Alternative Investment Market On 5 May, we announced proposals for the unification of our two classes ofvoting shares and, at the same time, a transfer to the Alternative InvestmentMarket. We believe that the greater liquidity offered by the enlarged class ofvoting shares, together with the reduced regulatory regime and tax advantages ofAIM, will be of benefit to the company and shareholders alike. These proposalsare subject to shareholder approval at an extraordinary general meeting on 2June 2005. Ram Brewery development We continue to make good progress on our review of the development potential ofthe Ram Brewery site. As part of this review, discussions have been held overrecent months with a number of commercial developers in order to gain theirviews of the site's potential and value. We are very grateful to WandsworthCouncil for their support and guidance in this complex process. Outlook We remain focused on our strategy and anticipate making progress in the comingyear, even though we expect conditions to be challenging. Stalling consumer confidence and ever increasing margin pressures, from risingstaff and utility costs, never ending red tape and this year added costs fromnew licensing laws and increases in the business rate, are all challenges wewill have to face. Accordingly, any sales and profit growth achieved this yearwill be well earned. Nonetheless we are confident that our actions will provide long-term sustainablegrowth for our shareholders. YOUNG & CO.'S BREWERY, P.L.C. Unaudited profit and loss account For the 53 weeks ended 2 April 2005 --------------------------------- --------- --------- 2005 2004 £000 £000--------------------------------- --------- ---------Turnover 119,532 111,982Net operating costs before site review costs (106,009) (99,343)--------------------------------- --------- ---------Operating profit before site review costs 13,523 12,639Site review costs (485) ---------------------------------- --------- ---------Operating profit 13,038 12,639Non-operating exceptional items 362 (129)--------------------------------- --------- ---------Profit on ordinary activities before interest 13,400 12,510Net interest charge (3,969) (3,626)--------------------------------- --------- ---------Profit on ordinary activities before tax 9,431 8,884Tax on profit on ordinary activities (2,976) (3,014)--------------------------------- --------- ---------Profit attributable to ordinary shareholders 6,455 5,870Ordinary dividends on equity shares (2,730) (2,660)--------------------------------- --------- ---------Retained profit for the financial period 3,725 3,210--------------------------------- --------- --------- Pence Pence--------------------------------- --------- ---------Basic earnings per 50p ordinary share 56.36 48.95--------------------------------- --------- ---------Exceptional items (0.89) 1.16--------------------------------- --------- ---------Adjusted earnings per 50p ordinary share 55.47 50.11--------------------------------- --------- ---------Diluted basic earnings per 50p ordinary share 55.23 48.44--------------------------------- --------- --------- The above results are all in respect of continuing operations of the company. There are no recognised gains and losses other than those shown above. The prioryear adjustment arising from the adoption of UITF 38 Accounting for ESOP Trustshas had no impact on total recognised gains or losses. YOUNG & CO.'S BREWERY, P.L.C. Unaudited balance sheet At 2 April 2005 --------------------------------- --------- --------- 2005 Restated £000 2004 £000--------------------------------- --------- ---------Fixed assets 212,413 209,057Tangible fixed assets 42 197Investments--------------------------------- --------- --------- 212,455 209,254--------------------------------- --------- ---------Current assets and liabilities 4,018 4,221Stocks 6,247 7,897Debtors 1,028 1,005Cash--------------------------------- --------- --------- 11,293 13,123--------------------------------- --------- ---------Creditors: amounts falling due within one year (19,189) (18,633)--------------------------------- --------- ---------Net current liabilities (7,896) (5,510)--------------------------------- --------- ---------Total assets less current liabilities 204,559 203,744Creditors: amounts falling due after more than one year (53,806) (57,011)Provisions for liabilities and charges (7,470) (7,484)--------------------------------- --------- ---------Net assets 143,283 139,249Capital and reserves 6,028 6,028Called-up share capital 1,319 1,341Share premium account 87,139 88,094Revaluation reserve 1,808 1,808Capital redemption reserve (3,267) (3,188)Investment in own shares 50,256 45,166Profit and loss account--------------------------------- --------- ---------Equity shareholders' funds 143,283 139,249--------------------------------- --------- --------- The 2004 figures have been restated for the effects of the adoption of UITF 38Accounting for ESOP Trusts. YOUNG & CO.'S BREWERY, P.L.C. Unaudited cash flow statement For the 53 weeks ended 2 April 2005 --------------------------------- --------- --------- 2005 Restated £000 2004 £000--------------------------------- --------- ---------Net cash inflow from operating activities 24,705 20,915--------------------------------- --------- ---------Interest received 22 11Interest paid (4,340) (3,561)--------------------------------- --------- ---------Returns on investments and servicing of finance (4,318) (3,550)--------------------------------- --------- ---------Corporation tax paid (2,983) (2,453)--------------------------------- --------- ---------Purchases of tangible fixed assets (15,526) (12,539)Sales of tangible fixed assets 4,382 1,164--------------------------------- --------- ---------Capital expenditure (11,144) (11,375)--------------------------------- --------- ---------Equity dividends paid (2,671) (2,660)--------------------------------- --------- ---------Cash inflow before financing 3,589 877--------------------------------- --------- ---------(Decrease)/increase in loan capital (3,183) 9,632Repurchase of share capital - (5,728)(Decrease) in lease finance (15) (14)Employee benefit trust share redemptions (368) (737)--------------------------------- --------- ---------Financing (3,566) 3,153--------------------------------- --------- ---------Increase in cash in period 23 4,030--------------------------------- --------- --------- The 2004 figures have been restated for the effects of the adoption of UITF 38Accounting for ESOP Trusts. YOUNG & CO.'S BREWERY, P.L.C. Unaudited reconciliation of net cash flow to movement in net debt For the 53 weeks ended 2 April 2005 --------------------------------- --------- --------- 2005 2004 £000 £000--------------------------------- --------- ---------Increase in cash in period 23 4,030Decrease/(increase) in debt in period 3,198 (9,618)--------------------------------- --------- ---------Decrease/(increase) in net debt in period 3,221 (5,588)Opening net debt (56,176) (50,588)--------------------------------- --------- ---------Closing net debt (52,955) (56,176)--------------------------------- --------- --------- YOUNG & CO.'S BREWERY, P.L.C. Unaudited reconciliation of share capital and other shareholders' funds For the 53 weeks ended 2 April 2005 --------------- -------- -------- --------- --------- -------- -------- Called-up Share Revaluation Capital Investment Profit and share premium reserve redemption in own loss capital reserve shares account £000 £000 £000 £000 £000 £000--------------- -------- -------- --------- --------- -------- --------At 2004 aspreviously stated 6,028 1,341 88,094 1,808 - 44,805Prior yearadjustment - - - - (3,188) 361--------------- -------- -------- --------- --------- -------- --------At 2004-restated 6,028 1,341 88,094 1,808 (3,188) 45,166Profit for theperiod - - - - - 3,725Debenture issue costs written off - (22) - - - 22Amount (writtenback)/realised on sales ofproperties - - (955) - - 955--------------- -------- -------- --------- --------- -------- --------Movement inown shares: Employeebenefit trust redemptions - - - - (368) -Employeebenefit trust allocations - - - - 289 388--------------- -------- -------- --------- --------- -------- --------At 2005 6,028 1,319 87,139 1,808 (3,267) 50,256--------------- -------- -------- --------- --------- -------- -------- Prior year adjustment UITF 38, Accounting for ESOP Trusts, has been adopted for the first time inthese financial statements. A prior year adjustment has been made andcomparative figures restated. Unallocated shares held by the Ram Brewery Trustare now shown as a deduction in arriving at shareholders' funds where previouslythey were shown as an investment. Notes to the accounts (1) Accounts This preliminary announcement, which was approved by the board on 25 May 2005,has been prepared using the same accounting policies as set out in the previousannual accounts with the exception of the adoption of UITF 38 Accounting forESOP Trusts. The accounts present information about the company as an individualundertaking. 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 ended27 March 2004, including an unqualified auditors' report, have been delivered tothe Registrar of Companies. The statutory accounts for the period ended 2 April2005 will be delivered to the Registrar of Companies. (2) Site review costs Site review costs of £485,000 (2004: nil) comprise costs incurred to daterelating to the possible redevelopment of the company's sites in Wandsworth. (3) Taxation Corporation tax has been provided on the profits for the 53 weeks to 2 April2005 at 30% (2004: 30%). (4) Earnings per share 2005 2004 £000 £000--------------------------------- --------- ---------Profit attributable to ordinary shareholders 6,455 5,870Site review costs 485 -Non-operating exceptional items, after adjusting for tax (587) 139--------------------------------- --------- ---------Adjusted earnings 6,353 6,009--------------------------------- --------- --------- 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 exclude theinvestment in own shares, is 11,453,672 (2004: 11,991,159). 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 11,687,302 (2004: 12,116,939). An adjusted earnings per share figure is presented to eliminate the effect ofthe site review costs and the non-operating exceptional items on basic earningsper share. (5) Ordinary dividends on equity shares 2005 2004 Pence Pence--------------------------------- --------- ---------Interim dividend 11.40 10.85Proposed final dividend 12.25 11.65--------------------------------- --------- --------- 23.65 22.50--------------------------------- --------- --------- 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 2005 Restated 2004 £000 £000Operating profit 13,038 12,639Depreciation 8,127 7,547Employee benefit trust share allocations 677 640--------------------------------- --------- ---------Movements in working capital 203 (14)Stocks 1,650 (1,465)Debtors 1,010 1,568Creditors--------------------------------- --------- ---------Net cash inflow from operating activities 24,705 20,915--------------------------------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange