REG - Heavitree Brewery - Preliminary Statement
19/02/2024 14:00
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RNS Number : 6151D Heavitree Brewery PLC 19 February 2024
The Heavitree Brewery PLC
Trood Lane
Matford
Exeter EX2 8YP
Date: 19 February 2024
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, 19 February 2024, the Directors announce
the preliminary statement of results for the year ended 31 October 2023.
ISIN: GB0004182720 for 'A' Limited Voting Ordinary Shares
ISIN: GB0004182506 for Ordinary Shares
Chairman's statement
In my statement at the half-year, I reported that the consensus among our
tenants was that top line trading had held up well during the first six months
of the year despite the many concerns we all shared about the pressures to
which the trade as a whole was and continues to be subjected. Now that we are
reviewing the full year, I am pleased that the second half of the year has
continued in a similar vein and a small increase in turnover has been
achieved. I do feel it is important to understand that very few of the
aforementioned pressures have gone away and it is a reflection of the hard
work of our tenants in the pubs combined with the good support from Head
Office that has meant that the pubs continue to trade well in these difficult
times.
Turnover has increased by 0.9% to £7,346,000 (2022: £7,280,000). Rental
income has been adjusted, as in recent years, by the winding down of the
rental concessions given during the Covid years in accordance with the IFRS16
Lease Accounting standard; there has been reduction to revenue of £121,000
(2022: £230,000). An operating profit for the year for the Group of
£1,042,000 has been returned (2022: £1,422,000).
The reduction in operating profit against the previous year has been as a
direct result of a programme of significant spending on repairs including at
the Swan Inn in Lympstone, Henry's Bar in Exeter and the Two Mile Oak near
Newton Abbot which now have wonderfully improved external trading areas.
Further significant repairs were completed at the Beach in Exmouth and the
Horse and Groom in Heavitree. In total the spend on repairs has reached
£1,061,000 (2022: £771,000). Operating profit was further affected by
increased insurance costs inflated by an 18% hike in the rebuild index applied
to the base cost.
The Group results are also affected by an impairment cost of £150,000
relating to the Heavitree in Exmouth
The Company has continued with the programme of selling non-core assets to
reduce debt and it is planned to make a further reduction in the year ahead.
Although in the year under review an increase in net debt of £188,000 has
been reported, this is a consequence of a large capital refurbishment at the
Ley Arms (further details below), large repair costs as detailed above and the
timing of the sales of a couple of properties which have been delayed into the
new financial year.
Dividend
The Directors are pleased to recommend a final dividend at a rate (unchanged
from last year) of 3.5p per ordinary and 'A' limited voting ordinary shares to
those shareholders on the Register on 15 March 2024. The dividend, subject
to shareholder approval at the Annual General Meeting to be held on 11 April
2024, will be paid on 19 April 2024.
Chairman's statement (continued)
Property
The following properties have been sold during the year under review:
The Jolly Abbot in Newton Abbot.
The Sun Inn in Buckfastleigh.
The Wonford Inn in Exeter.
The Dewdrop Inn in Kingsteignton.
Also, a terraced cottage in Clyst Honiton and a house connected to The
Marshalls in Barnstaple (sold in the previous year) have been sold together
with a pocket of garden land in Christow. These sales have realised a profit
of £1,065,000 in total.
The development of the new accommodation block at the Ley Arms in Kenn is
close to completion with the bedrooms being available to book from the
beginning of February. The rooms are original in design, beautifully finished
and complement the quality offer at the pub. We wish Karen and Martin every
success with this exciting new addition to their business.
The plans for the rebuild on the Jolly Sailor site in East Ogwell, which was
destroyed by fire in 2021, are being discussed with the local parish council
prior to submitting a full application to Teignbridge District Council
Heavitree Inc.
All final tax returns were filed in the year under review. Our accountants in
the USA are awaiting the issue of a 'Certificate of Good Standing' to allow
the Texas Secretary of State to finalise the termination of our American
subsidiary.
Bank Facility
Our bank facility with Barclays was renegotiated and renewed for a further
five years under slightly better terms but without any additions or reductions
applied. The Directors are grateful for this continued relationship with
Barclays. Please see the Going Concern explanation for further details on the
renewal.
During the course of finalising the draft statutory accounts, it was
identified that a technical breach in the debt service covenant as at 31
October 2023 had occurred. The bank are not able to issue a formal waiver of
the breach as the old loan and applicable covenants are no longer in existence
following the agreement of the new loan after the year end. The bank have
confirmed that the debt service covenant was not an appropriate testing
mechanism and as the loan has already been replaced with a new facility, there
will be no further action in respect of the breach.
However, due to the requirements of IAS1 the Term Loan balance of £2,065,000
is shown in the balance sheet of the 2023 financial statements as a current,
rather than non-current liability. As a result of the post year-end renewal,
and on the basis that there are no further instances of covenant
non-compliance, next year's financial statements will show a movement back to
non-current liabilities.
Chairman's statement (continued)
Pension Scheme
The last requirements to achieve the wind-up of the Company's final salary
pension scheme have been slow to finalise. The regulatory obligation to
complete wind-up by 17 January 2024 was not met although all the delays have
been out of the hands of the Trustees and, in turn, the Directors. We are
caught up in the painfully slow process of the insurance companies (of which
there are five) providing their annuity reassignment requirements to allow for
direct payments to each individual member. Although immensely frustrating, the
scheme's actuary is continuing to liaise with insurers and progress is being
made. The scheme's actuary has also contacted the Pension Regulator and passed
on all relevant correspondence. I shall report further at the half-year.
Prospects
The announcement by the Government to extend the 75% business rates relief for
a further 12 months was received with relief from all operators although the
headline announcement failed to draw attention to the inflationary increase
that was implemented. There had been nervousness about a further financial
squeeze which would have been, in the present inflationary climate, difficult
to absorb.
The Company has enjoyed a decent start to the new financial year with
like-for-like beer sales being ahead of the previous year. I look forward to
further progress during the year ahead.
N H P TUCKER
Chairman
19 February 2024
Group income statement
for the year ended 31 October 2023
Total Total
2023 2022
Notes £000 £000
Revenue 7,346 7,280
Other operating income 215 211
Purchase of inventories (2,991) (2,980)
Staff costs (1,483) (1,477)
Depreciation of property, plant and equipment
(236) (228)
Other operating charges (1,809) (1,384)
(6,304) (5,858)
Group operating profit/(loss) 1,042 1,422
Profit on sale of property plant and equipment
Impairment of fixed assets 1,065 968
(150) -
Group profit before finance costs and taxation 1,957
2,390
Finance costs (131) (117)
(131) (117)
Profit before taxation 1,826 2,273
Tax expense (327) (306)
Profit for the year attributable to equity holders of the parent
1,499 1,967
Basic earnings per share 2 31.0p 40.7p
Diluted earnings per share 2 31.0p 40.7p
Group statement of comprehensive income
for the year ended 31 October 2023
2023 2022
£000 £000
Profit for the year 1,499 1,967
Items that will not be reclassified to profit or loss
Fair value adjustment on investment in - -
equity
Items that may be reclassified to profit or loss
Exchange rate differences on translation of subsidiary undertaking
5 1
5 1
Other comprehensive income for the year, net of tax 1,504 1,968
Total comprehensive income attributable to:
Equity holders of the 1,504 1,968
parent
Group balance sheet
at 31 October 2023
Restated
2023 2022
£000 £000
Non-current assets
Property, plant and equipment 16,891 16,593
Investment property 2,255 1,211
Right of use asset 77 60
19,223 17,864
Financial assets 469 362
Deferred tax asset 16 16
19,708 18,242
Current assets
Inventories 10 10
Trade and other receivables 1,170 1,303
Cash and cash equivalents 373 788
1,553 2,101
Assets held for sale 70 180
Total assets 21,331 20,523
Current liabilities
Trade and other payables (1,005) (1,133)
Financial liabilities (2,101) (229)
Income tax payable (263) (339)
(3,369) (1,701)
Non-current liabilities
Other payables (338) (326)
Financial liabilities (97) (2,195)
Deferred tax liabilities (852) (784)
Defined benefit pension plan deficit (92) (92)
(1,379) (3,397)
Total liabilities (4,748) (5,098)
Net assets 16,583 15,425
Capital and reserves
Equity share capital 251 264
Capital redemption reserve 686 673
Own share reserve (1,041) (1,537)
Fair value adjustments reserve 10 10
Currency translation 19 14
Retained earnings 16,658 16,001
Total equity 16,583 15,425
Group statement of cash flows
for the year ended 31 October 2023
2023 2022
£000 £000
Operating activities
Profit for the year 1,499 1,967
Tax expense 327 306
Net finance costs 132 117
Profit on disposal of non-current assets and assets held for sale (1,065) (968)
Depreciation and impairment of property, plant and equipment
236 228
Decrease in trade and other receivables 133 264
(Decrease)/increase in trade and other payables (130) 157
Impairment of fixed assets 150 -
Cash generated from operations 1,282 2,071
Income taxes paid (335) (24)
Interest paid (166) (117)
Net cash inflow from operating activities 781 1,930
Investing activities
Proceeds from sale of property, plant and equipment and assets held for sale
1,202 2,038
Payments to acquire property, plant and equipment (1,774) (425)
Net cash (outflow)/inflow from investing activities (572) 1,613
Financing activities
Preference dividend paid (1) (1)
Equity dividends paid (267) -
Consideration received by EBT on sale of shares 61 42
Consideration paid by EBT on purchase of shares (140) (50)
Capital element of finance lease rental payments (76) (34)
Loan repayment (252) (1,998)
Mortgage receipts 51 41
received
Net cash outflow from financing activities (624) (2,000)
(Decrease)/increase in cash and cash equivalents (415) 1,543
Cash and cash equivalents at the beginning of the year 788 (755)
Cash and cash equivalents at the year end 373 788
Group statement of changes in equity
for the year ended 31 October 2023
Equity share capital Capital redemption reserve Own share reserve Fair value adjustment reserve
£000 £000 £000 £000 Currency translation Retained earnings Total equity
£000 £000 £000
At 1 November 2021 264 673 (1,529) 10 13 14,034 13,465
Profit for the year - - - - - 1,967 1,967
Other comprehensive
income for the year - - - - 1 - 1
net of income tax
Total comprehensive
income for the year - - - - 1 1,967 1,968
Consideration received
by EBT on sale of
shares - - 42 - - - 42
Consideration paid by
EBT on purchase of shares - - (50) - - - (50)
At 31 October 2022 264 673 (1,537) 10 14 16,001 15,425
Equity share capital Capital Own share reserve Fair value adjustment reserve
£000 redemption reserve £000 £000 Currency translation Retained earnings Total equity
£000 £000 £000 £000
At 1 November 2022 264 673 (1,537) 10 14 16,001 15,425
Profit for the year - - - - - 1,499 1,499
Other comprehensive
income for the year - - - - 5 - 5
net of income tax
Total comprehensive
income for the year - - - - 5 1,499 1,504
Consideration received
by EBT on sale of
shares - - 61 - - - 61
Consideration paid by
EBT on purchase of shares - - (140) - - - (140)
Buy back of own shares (13) 13 575 (575) -
Equity dividends paid - - - - - (267) (267)
At 31 October 2023 251 686 (1,041) 10 19 16,658 16,583
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.
Own share reserve
Own share reserve represents the cost of The Heavitree Brewery PLC shares
purchased in the market and held by The Heavitree Brewery PLC Employee
Benefits Trust ('EBT').
At 31 October 2023 the Group held 98,938 Ordinary Shares and 59,641 'A'
Limited Voting Ordinary Shares (2022: 210,335 Ordinary Shares and 195,386 'A'
Limited Voting Ordinary Shares) of its own shares. During the year there were
purchases of 38,603 Ordinary Shares and sales of 23,393 '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 2023. 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 2023 and 31 October 2022. 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 UK adopted international accounting standards as applied in accordance
with the Companies Act 2006. The accounting policies have been consistently
applied and are described in full in the statutory financial statements for
the year ended 31 October 2023, which are expected to be mailed to
shareholders on 07 March 2024. The financial statements will also be
available on the Group's website www.heavitreebrewery.co.uk
(http://www.heavitreebrewery.co.uk) .
Prior period reclassification
Having considered the nature of the loans/ mortgage's receivable from Tenants
and former Tenants in both the current and prior financial year, the Directors
have deemed it most appropriate to show the loans due as financial assets
rather than other debtors as they were presented last year and as such, the
comparatives have been restated to reclassify the balances in 2022.
Going Concern
The Directors closely monitor the Group's financial resources. This included a
continual review of the medium-term financial plan, along with sensitised cash
flow forecasts for 12 months from the date of approval of these financial
statements. We have seen some of the impact on our Tenants with the continued
increase in prices for food, energy, staffing, along with the continued
difficulty of retaining staff. These factors remain across the Estate and the
industry as a whole. This has been taken into account when forecasting for the
coming year and is included within the forecast for the period to April 2025.
The forecast for capital receipts in 2024 includes sales of two non-core
assets and one unlicensed property, with a budgeted estimate of £1.7m. Any
further decisions on the sale of assets will be discussed in Board meetings
during the year. These forecasts leave the Group with minimum headroom of over
£2m on an overdraft facility of £3m. The Board will continue to review
cashflows as part of its ongoing strategy.
The Board took the decision 3 years ago 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 originally
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. This has been reviewed each year
with some further properties being added as the process has progressed. These
include unlicensed properties and developments with permissions which are
already within the Estate. This year the Group has sold 7 (2022: 8) of the
non-core assets resulting in profits of £1,065,000 being realised from these
sales, leaving the balance of the Term Loan at 31 October 2023 of £2,065,000.
The Board has continued to engage with the bank regarding its facilities and
forward trading. After the year end the Board has negotiated a new 5 Year
banking facility including the Term Loan and the £3m overdraft facility. The
overdraft facility terms remain the same with no increase on interest rate
over the base rate. A small reduction in interest rate on the Term Loan over
base has been achieved with an adjustment in the debt service covenant which
is now an EBITDA calculation only.
Covenant testing resumed from the 31 October 2022 and our year end results
show that we have achieved one of our covenants but that a technical breach
has been shown in the debt service cover, this covenant changes with the new
bank agreement, which is now in place from November 2023. The bank are not
able to issue a formal waiver of the loan as the old loan and applicable
covenants are no longer in existence following the agreement of the new loan
after the year end. The bank have confirmed that as the loan has been replaced
with a new facility, there will be no further action in respect of the breach
at the year end.
The Directors are satisfied that the Group's forecasts and projections, which
take account of the anticipated cost of living impact on the Estate. This has
been reflected in the budgets with decrease percentage built in on trade and
rental income. The forecasts indicate that the Group will be able to operate
within its new covenants and facilities. The current trading performance of
the Group also shows that it will be able to operate within the level of its
facilities and covenant testing for the 12 months from the date of these
financial statements. 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:
2023 2022
£000 £000
Profit for the year 1,499 1,967
2023 2022
N(o). N(o).
(000) (000)
Basic weighted average number of shares (excluding own shares) 4,840 4,834
3. Dividends paid and proposed
2023 2022
£000 £000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2022: 3.5p (2021: nil) 176 -
First dividend for 2023: 2.00p (2022: nil) 101 -
Less dividend on shares held within employee share schemes (10) -
Dividends paid 267 -
Proposed for approval at AGM
(not recognised as a liability as at 31 October 2023)
Final dividend for 2023 3.5p (2022 : 3.5p) 176 176
Cumulative preference dividends 1 1
4. Segment information
Primary reporting format - business segments
During the year the Group operated in one business segment - leased estates.
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
Revenue is based on the geographical location of customers. All revenue is
generated in, and all assets are held in the United Kingdom.
5. General information
The 2023 Annual Report and Financial Statements will be published and posted
to shareholders on 7th March 2024 Further copies may be obtained by contacting
the Company Secretary at The Heavitree Brewery PLC, Trood Lane, Matford,
Exeter EX2 8YP. The 2023 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 11 April
2024 at 11.30am.
Ends.
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