Young & Co's Brewery Regulatory News (YNGA)

16 Nov 2006 07:02

Young & Co's Brewery PLC16 November 2006 16 November 2006 INTERIM RESULTS for the 26 weeks to 30 September 2006 Financial Highlights • Turnover increased to £69.1 million up 10.6% • Adjusted profit before tax of £5.8 million* up 4.8% • Reported profit before tax of £42.7 million up 885.5% • Adjusted earnings per share of 33.83p* up 6.4% • Proposed dividend per share increased to 18.00p up 50.0% *Excludes exceptional items and discount of site proceeds • Total managed house turnover up 15.2% with operating profit up 7.1%; • Like for like managed house turnover up 11.2% on an invested basis and 7.0% on an uninvested basis; • 14 pubs acquired for £32.5 million; • Successful integration of brewing and wholesaling activities into Wells & Young's Brewing Company, which commenced trading at the beginning of October; • Sale of Wandsworth sites for £69 million; • Recent valuation of the estate at £399 million would increase NAV per share by £15.01 to £31.87. Stephen Goodyear, Chief Executive of Young's, commented: "This has been an eventful half year for Young's, a period tinged with sadnessfollowing the death of our long standing and unique Chairman John Young, butalso one in which we have undergone major changes as we set down the foundationsfor the future of the business. "We are clear in our determination to build on John's legacy and achieve a stepchange in the financial performance of the business. We have a retail andproperty strategy to deliver this transformation, and today's proposed 50%increase in the interim dividend is a sign of our confidence in achieving it. "Trading in our pubs has been strong in the first half, and this trend hascontinued in the second half with managed house total sales for the first sixweeks up 21.9% and up 10.6% on an invested like for like basis. We have themanagement, operational infrastructure and financial resources in place tocontinue this growth. We look forward to the future with considerableconfidence." For further information, please contact: Young & Co.'s Brewery, P.L.C 020 8875 7000Stephen Goodyear, Chief ExecutivePeter Whitehead, Finance Director Hogarth Partnership 020 7357 9477James Longfield / Georgina Briscoe INTERIM RESULTS for the 26 weeks to 30 September 2006 Interim statement The first half has been a period of enormous change at Young's with theresolution of our future brewing activities through the joint venture withCharles Wells and the sale of the Ram Brewery and nearby office and warehousespace, our Wandsworth sites. Sadly, it also marked the death of our longstanding and unique Chairman, John Young. John leaves behind a strong legacywith the foundations firmly in place for Young's continued success. All of us at Young's share a great attachment to the history and heritage of theRam Brewery, but the Board has been very aware of the compelling need forchange. It has been increasingly difficult for a brewer the size of Young's tocompete in a fast consolidating sector, and the costs and inefficiencies ofoperating the Ram Brewery have also restricted the company's ability to expand.The formation of the Wells & Young's joint venture has enabled us to addressthese issues and facilitate the sale of the Wandsworth sites to Minerva for £69million. One impact of these major changes is that the results for the first half aredistorted by operating and non-operating one-off items. These include asubstantial profit on the sale of the Wandsworth sites as well as some largeexceptional costs connected with this deal and the joint venture. After theseadjustments, profit before tax was £5.8 million and adjusted earnings per sharewere 33.83p up 4.8% and 6.4% respectively. Looking at the retained retail business, however, shows that we have made goodprogress in the period. Turnover was up 12.7%, driven by like for likeperformance, the accelerated roll out of our high quality food offering and pastinvestment. Young's retail business comprised 221 pubs at the end of the firsthalf, of which 178 are freehold and ten are leases with in excess of 45 years torun, with rents that in total amount to less than £10,000. A recently completedvaluation of the pub estate has set its value at £399 million, an uplift of £174million on book value. The substantial changes to the business executed by the Board in the first halfare designed to achieve a step change in financial performance. The Board has aretail and property strategy to deliver this transformation. As a sign ofconfidence in achieving this, the Board is today proposing a 50% increase in theinterim dividend to 18.00p. This will be paid on 8 December 2006 to shareholderson the register on 24 November 2006. Retail operations Despite the substantial changes to the business, we retained our operationalfocus in the period and, supported by a good summer, delivered a strong retailperformance in the first half. This highlights the quality of our estate and ourdetermination to widen our point of differentiation in a competitive marketplace by exploiting our excellent locations, designs, high service standards,quality food and market leading drinks. Managed pubs The managed division saw an increase in turnover of 15.2%. Like for liketurnover increased 11.2% on an invested basis and 7.0% on an uninvested basis.Operating profit for our managed division increased 7.1%. The improvement in operating profit was particularly pleasing in view of majordisruption from closures during our refurbishment programme, large start upcosts incurred on recently acquired pubs, long lead times for our newly builtriverside sites and increases in the minimum wage, utilities and business rates. The new developments and acquired pubs are a clear point of differentiationbetween us and our competitors. They also demonstrate our intent to raise ourstandards and set a new level of customer experience. In particular the foodoffering is individual, exciting and of exceptional quality; it has led the wayin contributing to overall food sales growth of 27.2%. Food sales now accountfor 22.4% of total managed sales. We invested £31.4 million in our managed estate. Of this, £27.4 million was onnew sites including the acquisition of eight pubs towards the end of thisperiod: the Crown & Anchor in Chichester, the Prince Alfred in Maida Vale, theGrange in Ealing, the Grove in Camberwell, the Fire Stables in Wimbledon, theHollywood in Fulham, the Waterfront in Battersea and the Hand and Spear inWeybridge. Major developments were also completed at the Windmill in Clapham,the Ship and the Alma in Wandsworth, the Duke's Head in Putney, the Bear inEsher, Horts in Bristol, the Riverside in Vauxhall and the Waterside in Fulham.Developments continue at the Dog & Fox in Wimbledon and the Waterfront inBattersea, both of which will be open soon for the important Christmas trade. In recent years, all development activity has included, where appropriate,investment in covered, well-lit and comfortable outside areas as we prepare forthe effects of the outright ban on smoking due to come into force next summer.Whilst there may be some initial downside from a ban, the medium to long termeffects are expected to be positive for Young's, especially with our enhancedfood offering. Our hotel rooms showed the early benefit of our room refurbishment programmewhich commenced last year. RevPar for all our pubs (average room rate achievedmultiplied by occupancy percentage) was up 9.0% at £40.73. The total number of pubs in our managed estate at the end of the period was 116,of which 93 are freehold. Tenanted and leased The tenanted and leased division's turnover and profit were down 1.7% and 14.7%respectively, as a direct result of the transfer of some landmark tenanted pubsback in to management. The Ship in Wandsworth and the Duke of Cambridge inBattersea were transferred out during the summer and the Alma in Wandsworth wastransferred at the end of last year. We have invested £6.0 million in the tenanted estate, of which £5.1 million wason six new freehold pubs. We have created a new tenanted site from part of ourDog & Fox redevelopment, and disposed of one freehold and three leasehold pubs. The following sites were all transferred from management: the Gardener's Arms inWandsworth, the Pig and Whistle in Earlsfield, the King's Arms in Mitcham, thePrincess of Wales in Merton, the Princess of Wales in Clapton and the SquareTavern in Euston. The tenanted estate is an area where we believe we have substantial opportunity.In addition to investing alongside our tenants, we intend to increase markedlythe number of long leases that we grant. Such a format inevitably attracts thebest operators and should result in a significant improvement in sales andprofits. By way of example, one of our few current long lease tenants, WillBeckett at the Marquess Tavern, recently won Time Out's Gastro pub of the yearaward. We are aware of the concern that the smoking ban is causing our tenants and havea plan in place for each pub. Fortunately all but nine of our tenancies haveoutside areas that we believe can provide those customers who wish to, with theopportunity to smoke. The total number of tenancies at the end of the half was 105, of which 85 arefreehold. Wells & Young's Brewing Company On 23 May we announced our intention to merge our brewing and wholesalingactivities with those of Charles Wells of Bedford. We successfully managed thisprocess, including the matching of Young's beers to Ram Brewery flavours andstandards, and Wells & Young's started trading at the beginning of October withYoung's holding a 40% share. The combination of Charles Wells and Young's brewing interests creates asubstantial new beer company, with a broad portfolio of growing speciality caskale and lager brands, led by Young's Bitter (standard) and Wells Bombardier(premium). It operates from the Eagle Brewery in Bedford, one of Europe's mostmodern breweries, with capacity for further growth. The merger presentsopportunities for significant scale synergies and offers greater marketing andsales resource and stronger routes to market than Young's could achieveindependently. The financial impact of the brewing merger for Young's is an immediateannualised improvement in net profit of £2.5 million, commencing 1 October 2006,from improved beer supply terms and other cost savings. In addition, Young'swill benefit through its shareholding in Wells & Young's in any profitimprovement that the joint venture can achieve through scale, synergy and otherintegration benefits. When we announced the Wells & Young's deal, we reported that the cost of sellingthe Wandsworth sites and fundamental reorganisation costs were likely to be inthe order of £8 million. During the course of the first half we have incurred£4.2 million of such costs and there will be further costs in the second halfthat relate to the decommissioning of the brewery. We continue to anticipatethat all reorganisation costs will be within our original £8 million target. Investment and finance We invested £37.4 million in the retail business in the first half, of which£32.5 million was on new pubs. This was financed through a new £75 millionshort-term revolving credit facility. The repayment of this is timed to coincidewith the receipt of cash proceeds from the Wandsworth sites sale. Net debt atthe end of September was £102.3 million and gearing at the end of the period was52.4%. Ongoing strategy With the resolution of our future brewing operations through the creation of theWells & Young's joint venture, Young's today is a focused pubs and propertybusiness; currently operating managed, tenanted and leased pubs in London andSouthern England. Active operational management We seek to position the Young's estate at the premium end of the pub market,focusing on the style, quality and individuality of each outlet. We measureourselves against the best individual pub and restaurant operators in thelocations where we trade, with a strong emphasis on service and training and bymaintaining a high level of investment in the estate. By investing in high quality pub design, ambience, food, service and ensuring apremium drinks offering, we have an operational strategy to drive performance.Through this investment, further innovation and the differentiation of theYoung's brand, we plan to deliver both absolute and like for like sales growth.Our premium strategy aims to attract more customers and improve gross margins. Active estate management This organic growth will be augmented by the active management of our estate,including acquisitions of individual pubs or pub packages to build scale to thebusiness and maximise value for shareholders. We have in place an operatinginfrastructure and management team capable of managing a significantly largerpub estate and we are actively exploring acquisition opportunities to deliverthis. We will review the balance of the estate between managed, tenanted and leased toensure that we are adopting the most beneficial format and we will maintain ourprogramme of investments in high returning projects across the existing pubestate. Where appropriate, we will continue to make disposals. Our overridingproperty objective is to maximize returns, whilst maintaining and improving theoverall quality of the Young's estate. Following the sale of the Wandsworth sites and the expected improvements in ourfinancial performance, Young's has substantial headroom for fundingacquisitions. We will target pubs that meet our strict investment criteria andproduce returns in excess of our cost of capital. Acquisitions will be focusedon our existing trading areas of London and Southern England. In line with theBoard's stated policy, investment opportunities will be measured against thebenefits of returning capital to shareholders. A greater level of borrowings would also be supported by our recent pub estaterevaluation by Fleurets Chartered Surveyors. The market value of the estate is£399 million, an uplift of £174 million on the book value, or an increase of£15.01 per share in net asset value to £31.87 per share. This valuation has beenmade in accordance with the RICS Appraisal and Valuation Standards (Red Book)and represents the aggregate sum total of the property assets. This is not aportfolio valuation and the value of the estate as a single entity would besignificantly higher. Outlook The substantial changes to the business and our investments in the first halfoffer a unique opportunity to improve shareholder returns significantly and tomaximise the undoubted potential that lies within the new Young's. Trading in our pubs has been strong in the first half, and this trend hascontinued in the second half with managed house total sales for the first sixweeks up 21.9% and up 10.6% on an invested like for like basis. The second halfwill additionally benefit from the new supply agreement, the joint venture andfrom the recent investments in the retail estate. We have the management, operational infrastructure and financial resources inplace to continue this growth and are looking forward to the future withconsiderable confidence. YOUNG & CO.'S BREWERY, P.L.C. Unaudited profit and loss account For the 26 weeks ended 30 September 2006 Restated 26 weeks to 30 26 weeks to 1 52 weeks to 1--------------------------- Sept 06 Oct 05 Apr 06 £000 £000 £000 --------- --------- -----------------------------------Turnover 69,135 62,528 123,873Net operatingcosts beforeexceptionalitems (62,069) (55,368) (110,274)--------------------------- --------- --------- --------Operatingprofit beforeexceptionalitems 7,066 7,160 13,599Operatingexceptionalitems (Note2(a)) (1,260) (1,105) (2,574)--------------------------- --------- --------- --------Operatingprofit 5,806 6,055 11,025Non-operating exceptional items (Note2(b))Costs offundamentalreorganisation (4,404) - -Profit/(loss)on sale offixed assets 46,425 (72) (70)--------------------------- --------- --------- --------Profit onordinaryactivitiesbeforeinterest 47,827 5,983 10,955Net interestcharge (2,188) (1,920) (3,873)Discount ofsite proceeds (3,863) - -Other financeincome 896 267 527--------------------------- --------- --------- --------Profit onordinaryactivitiesbefore tax 42,672 4,330 7,609Tax on profiton ordinaryactivities(Note 3) (1,432) (1,845) (2,958)--------------------------- --------- --------- --------Profitattributableto ordinaryshareholders 41,240 2,485 4,651Ordinarydividends onequity shares(Note 4) (1,498) (1,414) (2,808)--------------------------- --------- --------- --------Retainedprofit for thefinancialperiod 39,742 1,071 1,843--------------------------- --------- --------- -------- Pence Pence Pence--------------------------- --------- --------- --------Basic earningsper 50pordinary share(Note 5) 356.41 21.58 40.31Effect ofoperatingexceptionalitems 10.89 9.59 18.70Effect ofnon-operatingexceptionalitems (366.86) 0.63 0.64Effect ofdiscount ofsite proceeds 33.39 - ---------------------------- --------- --------- --------Adjustedearnings per50p ordinaryshare 33.83 31.80 59.65--------------------------- --------- --------- --------Diluted basicearnings per50p ordinaryshare 347.34 21.09 39.33--------------------------- --------- --------- -------- The results above are all in respect of continuing operations ofthe company. The comparative figures to 1 October 2005 have been restated for the effects ofthe recognition of capital gains tax on ESOP allocated shares.Discount of site proceeds represents the difference between the site proceedsand the net present value of the future cash flows in respect of those proceeds- see note (7). YOUNG & CO.'S BREWERY, P.L.C. Unaudited balance sheet at 30 September 2006 Restated At At At 30 Sept 06 1 Oct 05 1 Apr 06 £000 £000 £000---------------------------- --------- --------- --------Fixed assetsTangible fixed assets 227,265 213,198 217,526Investments 20 42 42Investment in associated undertaking (Note6) 22,508 - ----------------------------- --------- --------- -------- 249, 793 213,240 217,568---------------------------- --------- --------- --------Current assets and liabilitiesStocks 1,419 4,364 4,193Debtors: amounts falling due after more thanone year 55,236 - -Debtors: amounts falling due within one year 20,901 7,003 6,839Cash - 2,174 ----------------------------- --------- --------- -------- 77,556 13,541 11,032---------------------------- --------- --------- --------Short term borrowings (1,938) (183) (283)Other creditors (20,185) (17,371) (19,261)---------------------------- --------- --------- --------Creditors: amounts falling due within oneyear (22,123) (17,554) (19,544)---------------------------- --------- --------- --------Net current assets/(liabilities) 55,433 (4,013) (8,512)---------------------------- --------- --------- -------- Total assets less current liabilities 305,226 209,227 209,056 Creditors: amounts falling due aftermore than one year (100,358) (55,058) (54,140)Provisions for liabilities and charges (8,903) (8,134) (8,122)---------------------------- --------- --------- --------Net assets excluding retirement benefitliability 195,965 146,035 146,794Retirement benefit liability (631) (4,790) (4,129)---------------------------- --------- --------- --------Net assets 195,334 141,245 142,665---------------------------- --------- --------- -------- Capital and reservesCalled-up share capital 6,028 6,028 6,028Share premium account 1,285 1,307 1,296Revaluation reserve 77,714 87,139 87,139Capital redemption reserve 1,808 1,808 1,808Investment in own shares (2,657) (2,861) (2,861)Profit and loss account 111,156 47,824 49,255---------------------------- --------- --------- --------Equity shareholders' funds 195,334 141,245 142,665---------------------------- --------- --------- -------- The comparative figures at 1 October 2005 have been restated for the effects ofthe recognition of capital gains tax on ESOP allocated shares. YOUNG & CO.'S BREWERY, P.L.C. Unaudited cash flow statement For the 26 weeks ended 30 September 2006 26 weeks to 30 26 weeks to 1 52 weeks to 1 Sept 06 Oct 05 Apr 06 £000 £000 £000 ---------------------------- --------- -------- --------Net cashinflow fromoperatingactivities(Note 8) 9,527 9,762 21,769---------------------------- --------- -------- --------Interestreceived 108 5 8Interest paid (2,384) (2,002) (4,021)---------------------------- --------- -------- --------Returns oninvestmentsand servicingof finance (2,276) (1,997) (4,013)---------------------------- --------- -------- --------Corporationtax paid (1,500) (1,503) (3,088)---------------------------- --------- -------- --------Purchases oftangible fixedassets (37,786) (5,022) (13,451)Sales oftangible fixedassets 49 62 123Costs offundamentalreorganisation (4,389) - ----------------------------- --------- -------- --------Capitalexpenditure &financialinvestment (42,126) (4,960) (13,328)---------------------------- --------- -------- --------Investment inassociatedundertaking (10,000) - ----------------------------- --------- -------- --------Acquisitions &disposals (10,000) - ----------------------------- --------- -------- --------Equitydividends paid (1,498) (1,414) (2,808)---------------------------- --------- -------- --------Cash (outflow)beforefinancing (47,873) (112) (1,468)---------------------------- --------- -------- --------Increase inloan capital 46,226 1,270 362(Decrease) inlease finance (9) (12) (16)---------------------------- --------- -------- --------Financing 46,217 1,258 346---------------------------- --------- -------- --------(Decrease)/increase in cashin period (1,656) 1,146 (1,122)---------------------------- --------- -------- -------- YOUNG & CO.'S BREWERY, P.L.C. Reconciliation of net cash flow to movement in net debt For the 26 weeks ended 30 September 2006 26 weeks to 30 26 weeks to 1 52 weeks to 1 Sept 06 Oct 05 Apr 06 £000 £000 £000 --------------------------- --------- --------- --------(Decrease)/increase in cashin period (1,656) 1,146 (1,122)(Increase) indebt in period (46,217) (1,258) (346)--------------------------- --------- --------- --------(Increase) innet debt inperiod (47,873) (112) (1,468)Opening netdebt (54,423) (52,955) (52,955)--------------------------- --------- --------- --------Closing netdebt (102,296) (53,067) (54,423)--------------------------- --------- --------- -------- YOUNG & CO.'S BREWERY, P.L.C. Statement of total recognised gains and losses For the 26 weeks ended 30 September 2006 Restated 26 weeks to 30 26 weeks to 1 52 weeks to 1 Sept 06 Oct 05 Apr 06 £000 £000 £000 ---------------------------- --------- --------- --------Profit for thefinancialperiod 41,240 2,485 4,651Actuarial gainon retirementbenefitschemes 2,169 4,825 5,750Deferred taxon actuarialgain (651) (1,448) (1,725)Gain onexchange ofassets forinterest inassociate 11,205 - ----------------------------- --------- --------- --------Totalrecognisedgains for thefinancialperiod 53,963 5,862 8,676Prior yearadjustments - - (4,821)---------------------------- --------- --------- --------Total gainsrecognisedsince lastreport 53,963 5,862 3,855---------------------------- --------- --------- -------- The comparative figures to 1 October 2005 have been restated for the effects ofthe recognition of capital gains tax on ESOP allocated shares. YOUNG & CO.'S BREWERY, P.L.C. Reconciliation of movements in shareholders' funds For the 26 weeks ended 30 September 2006 Restated 26 weeks to 30 26 weeks to 1 52 weeks to 1 Sept 06 Oct 05 Apr 06 £000 £000 £000--------------------------- ----------- --------- --------Profitattributableto ordinaryshareholders 41,240 2,485 4,651Dividends (1,498) (1,414) (2,808)Movement in own shares:Employeebenefit trustallocations 204 406 406Actuarial gainon retirementbenefitschemes, netof deferredtax 1,518 3,377 4,025Gain onexchange ofassets forinterest inassociate 11,205 - ---------------------------- ----------- --------- --------Net additiontoshareholders'funds 52,669 4,854 6,274Openingshareholders'funds 142,665 136,391 136,391--------------------------- ----------- --------- --------Closingshareholders'funds 195,334 141,245 142,665--------------------------- ----------- --------- -------- The comparative figures to 1 October 2005 have been restated for the effects ofthe recognition of capital gains tax on ESOP allocated shares. Notes to the accounts (1) Accounts The interim financial statements were approved by the Board on 15 November 2006.They are unaudited, have been prepared on the basis of the accounting policiesset out in the company's statutory accounts for the 52 weeks ended 1 April 2006and present information about the company as an individual undertaking. They donot constitute statutory accounts within the meaning of S.240 of the CompaniesAct 1985. Statutory accounts for the 52 weeks ended 1 April 2006 have beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified and did not contain any statement under S.237 of the CompaniesAct 1985. (2) Exceptional items (a) Operating exceptional items 26 weeks to 26 weeks to 52 weeks to 30 Sept 06 1 Oct 05 1 Apr 06 £000 £000 £000 Capital gains tax on ESOP allocatedshares 1,060 544 708Property valuations 200 - -Site review costs - 212 335Lease compensation payments totenants - - 760Transaction costs - - 141Other employee related matters - - 244Transfer of company's share listingto AIM - 349 386------------------------- ---------- --------- ---------- 1,260 1,105 2,574------------------------- ---------- --------- ---------- Site review costs in the current financial period have been classified as 'Costsof fundamental reorganisation' in non-operating exceptional costs, due to thefinalisation of the site review. (b) Non-operating exceptional items 26 weeks to 26 weeks to 52 weeks to 30 Sept 06 1 Oct 05 1 Apr 06 £000 £000 £000 Proceeds from Wandsworth sites 69,000 - -Less: Net book value of sites (10,849) - -Assets held on sites (11,543) - -------------------------- ---------- --------- ----------Gain on disposal of Wandsworth sites 46,608 - -Costs of fundamental reorganisation (4,404) - -------------------------- ---------- --------- ----------Gain on sale and reorganisation 42,204 - -Loss on sale of other properties (183) (72) (70)------------------------- ---------- --------- ---------- 42,021 (72) (70)------------------------- ---------- --------- ---------- The tax credit on exceptional items was £427,000 for the 26 weeks to 30September 2006 (2005: £Nil; for the 52 weeks to 1 April 2006: £413,000). (3) Taxation Corporation tax has been provided on the profits for the 26 weeks to 30September 2006 at a rate of 30% (2005: 30%; for the 52 weeks to 1 April 2006:30%). (4) Ordinary dividends on equity shares 26 weeks to 26 weeks to 52 weeks to 30 Sept 06 1 Oct 05 1 Apr 06 Pence Pence Pence Final dividend 12.90 12.25 12.25Interim dividend - - 12.00------------------------- ---------- --------- ---------- 12.90 12.25 24.25------------------------- ---------- --------- ----------The trustee of the Ram Brewery Trust has waived its rights in respect of thedividends on the shares held in the trust on behalf of the directors' shareoption schemes. (5) Earnings per share Restated-------------------------- --------- --------- --------- 26 weeks to 26 weeks to 52 weeks to 30 Sept 06 1 Oct 05 1 Apr 06 £000 £000 £000-------------------------- --------- --------- ---------Profit attributable to ordinaryshareholders 41,240 2,485 4,651Operating exceptional items, afteradjusting for tax 1,260 1,105 2,157Non-operating exceptional items,after adjusting for tax (42,448) 72 74Discount of site proceeds 3,863 - --------------------------- --------- --------- ---------Adjusted earnings 3,915 3,662 6,882-------------------------- --------- --------- --------- Earnings per share are calculated by dividing the profit attributable toordinary shareholders by the weighted average number of ordinary shares inissue. An adjusted earnings per share figure is presented to eliminate theeffect of the exceptional items and the discount of site proceeds on basicearnings per share. The weighted average number of shares in issue, which excludes the investment inown shares, is 11,570,927 (2005: 11,517,202; for the 52 weeks to 1 April 2006:11,536,993). Diluted earnings per share are calculated by adjusting basicearnings per share to reflect the notional exercise of the weighted averagenumber of share options outstanding during the period. The resulting weightedaverage number of shares is 11,873,082 (2005: 11,781,459; for the 52 weeks to 1April 2006: 11,824,854). (6) Wells & Young's Brewing Company Limited On 23 May 2006, the company announced the merger of its brewing, beer brands andwholesale operations with the brewing assets, including the freehold site of theEagle Brewery, beer brands and wholesale operations of Charles Wells Ltd.("Charles Wells") to form a new brewing business called Wells & Young's BrewingCompany Ltd. ("Wells & Young's"). On 29 September 2006, the company contributed its beer brands and certain assetsto Wells & Young's. Following an additional subscription for shares in Wells &Young's by the company on 29 September 2006 at a cost of £10 million, thecompany now holds a 40% stake in Wells & Young's, with the remaining 60% beingheld by Charles Wells. The company has accounted for the acquisition of the investment in Wells &Young's in accordance with UITF 31 - 'Exchanges of businesses or othernon-monetary assets for an interest in a subsidiary, joint venture orassociate'. As a result of the transaction, a gain of £11.2 million has beenrecognised in the statement of total recognised gains and losses. The company's investment in Wells & Young's is being carried at £22.5 million,the company's 40% share of Wells & Young's net assets excluding the company'sinternally generated beer brands. For the period 29 September 2006 to 30September 2006, Wells & Young's has neither made a profit nor a loss. The investment is accounted for as an associate using the equity method, inaccordance with FRS 9 - 'Associates and Joint Ventures'. (7) Disposal of Wandsworth sites On 3 August 2006, the company announced the disposal of the Ram Brewery site andthe nearby Buckhold Road office and warehouse space in Wandsworth for a totalcash consideration of £69 million. The cash consideration is made up of a deposit of £14 million, held in trust bysolicitors and receivable by the company on completion of each of the sites. Inaddition, £8.5 million will become payable in June 2007, on completion of thesale of the Buckhold Road site, and £46.5 million will become payable in January2008, on completion of the sale of the Ram Brewery site. All payments areunconditional and are guaranteed by Minerva plc, a company listed on the mainmarket of the London Stock Exchange. The £69 million cash receivable has been discounted to £64.6 million in thefinancial statements, based on a discount rate of 6% per annum. This discount of£4.4 million has been charged to the profit and loss account after deducting awriteback of £0.5 million and described as "Discount of site proceeds". The £4.4million is being written back through the profit and loss account over theperiod until receipt of the final consideration. The net book value of the Wandsworth sites at 3 August 2006 was £10.8 millionand at 30 September 2006 there were £11.6 million of additional assets connectedwith the wholesaling activities on these sites which have been written off aspart of this transaction. Assuming reinvestment of the disposal proceeds, the company expects that thetaxable gains on the disposal of the Wandsworth sites should not becrystallised. (8) Net cash inflow from operating activities --------------------------- -------- -------- ---------- 26 weeks to Restated 52 weeks to 30 Sept 06 26 weeks to 1 Apr 06 1 Oct 05 £000 £000 £000--------------------------- -------- -------- ----------Operating profit 5,806 6,055 11,025Depreciation 4,422 4,103 8,145Employee benefit trust share allocations 204 406 406Provision for capital gains tax on ESOPallocated shares 1,060 544 708Movements in working capitalStocks 2,774 (346) (175)Debtors (4,161) (756) (592)Creditors (578) (244) 2,252--------------------------- -------- -------- ----------Net cash inflow from operatingactivities 9,527 9,762 21,769--------------------------- -------- -------- ---------- This information is provided by RNS The company news service from the London Stock Exchange