REG - Fuller,Smith &Turner - Final Results <Origin Href="QuoteRef">FSTA.L</Origin> - Part 2
09/06/2017 07:05
- Part 2: For the preceding part double click ID:nRSI6029Ha
of the Companies Act 2006. The financial information for the 53
weeks ended 1 April 2017 has been extracted from the statutory financial
statements on which an unmodified audit opinion has been issued and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. Statutory financial statements for the 52 weeks ended 26 March 2016,
including an unmodified auditor's report which did not make any statement
under Section 498 of the Companies Act 2006, have been delivered to the
Registrar of Companies.
The Group financial statements are presented in Sterling and all values are
shown in millions of pounds (£m) rounded to the nearest hundred thousand
pounds, except when otherwise indicated. The accounting policies used have
been applied consistently, except where set out below, and are described in
full in the statutory financial statements for the 53 weeks ended 1 April
2017, which will be mailed to shareholders on or before 23 June 2017
and delivered to the Registrar of Companies. The financial statements will
also be available from the Company's registered office: Griffin Brewery,
Chiswick Lane South, Chiswick, London, W4 2QB, and on its website, from that
date.
2. Segmental Analysis
For management purposes, the Group's operating segments are:
· Managed Pubs and Hotels, which comprises managed pubs, managed hotels,
and The Stable Pizza & Cider Limited;
· Tenanted Inns, which comprises pubs operated by third parties under
tenancy or lease agreements; and
· The Fuller's Beer Company, which comprises the brewing and distribution
of beer, cider, wines, spirits and soft drinks, and Nectar Imports Limited.
The Group's business is vertically integrated. The most important measure used
to evaluate the performance of the business is adjusted profit, which is the
profit before tax, adjusted for separately disclosed items. The operating
segments are organised and managed separately according to the nature of the
products and services provided, with each segment representing a strategic
operating unit. More details of these segments are given in the Chief
Executive's Review. Segment performance is evaluated based on operating profit
before separately disclosed items and is measured consistently with the
operating profit before separately disclosed items in the consolidated
financial statements.
Transfer prices between operating segments are set on an arm's length basis in
a manner similar to transactions with third parties. Segment revenue, segment
expense and segment result include transfers between operating segments. Those
transfers are eliminated on consolidation. Group financing, including finance
costs and revenue, and taxation are managed on a Group basis.
53 weeks ended 1 April 2017 ManagedPubs andHotels£m TenantedInns£m The Fuller'sBeerCompany£m Unallocated1£m Total£m
Revenue
Segment revenue 261.3 31.2 147.9 - 440.4
Inter-segment sales (48.4) - (48.4)
Revenue from third parties 261.3 31.2 99.5 - 392.0
Segment result 32.4 13.2 8.0 (4.1) 49.5
Operating separately disclosed items (3.1)
Operating profit 46.4
Profit on disposal of properties 0.9
Net finance costs (7.4)
Profit before tax 39.9
Other segment information
Capital expenditure: property, plant and equipment 26.0 2.1 6.9 - 35.0
Business combinations 19.3 - 1.5 - 20.8
Depreciation and amortisation 15.7 1.6 3.7 - 21.0
Impairment of property - - - - -
Reversal of impairment on property - - - - -
1 Unallocated expenses represent primarily the salaries and costs of
central management.
52 weeks ended 26 March 2016 ManagedPubs andHotels£m TenantedInns£m The Fuller'sBeerCompany£m Unallocated1£m Total£m
Revenue
Segment revenue 238.4 31.5 126.8 - 396.7
Inter-segment sales - - (46.2) - (46.2)
Revenue from third parties 238.4 31.5 80.6 - 350.5
Segment result 30.9 13.4 7.6 (5.0) 46.9
Operating separately disclosed items (3.9)
Operating profit 43.0
Profit on disposal of properties 2.9
Pension fund curtailment gain -
Net finance costs (6.7)
Profit before tax 39.2
Other segment information
Capital expenditure: property, plant and equipment 60.9 2.2 2.9 - 66.0
Business combinations 7.3 4.7 2.7 - 14.7
Depreciation and amortisation 13.0 1.6 3.5 - 18.1
Impairment of property 1.2 0.2 - - 1.4
Reversal of impairment on property (0.5) (0.1) - - (0.6)
1 Unallocated expenses represent primarily the salaries and costs of central
management.
3. Separately Disclosed Items
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Amounts included in operating profit:
Acquisition costs (1.3) (1.1)
Reorganisation cost (1.5) -
Deemed remuneration on the future purchase of shares in The Stable (0.3) (2.2)
Impairment of properties - (1.4)
Reversal of impairment on property - 0.6
Onerous lease provision release/(charge) - 0.2
Total separately disclosed items included in operating profit (3.1) (3.9)
Profit on disposal of properties 0.9 2.9
Separately disclosed finance costs:
Finance charge on net pension liabilities (note 10) (0.8) (0.8)
Movement in fair value of financial instruments - 0.1
Total separately disclosed finance costs (0.8) (0.7)
Total separately disclosed items before tax (3.0) (1.7)
Separately disclosed tax:
Change in corporation tax rate (note 5) 1.0 1.9
Profit on disposal of properties - (0.5)
Other items 0.7 0.8
Total separately disclosed tax 1.7 2.2
Total separately disclosed items (1.3) 0.5
Acquisition costs of £1.3 million during the 53 weeks ended 1 April 2017
(2016: £1.1 million) relate to transaction costs on site acquisitions both
completed and aborted. In the 52 weeks ended 26 March 2016, the costs incurred
related to site and business acquisitions. See note 9.
The reorganisation costs of £1.5 million incurred in the period, were
principally incurred within The Fuller's Beer Company and primarily relate to
staff costs.
Deemed remuneration on the future purchase of shares in The Stable relates to
the remuneration element of the increase in the estimated value of the option
remaining on The Stable group of companies. The original option was over 49%
of the shares, but during the current period, the Group exercised the option
to purchase an additional 25% of the shares for £2.7 million, taking its
shareholding to 76%. The current estimate of the amount payable for the
remaining 24% is £3.4 million, of which £2.8 million is accrued at the balance
sheet date, with the balance to be accrued over the remaining period to 31
March 2018.
There was no property impairment in the period. In the 52 weeks ended 26 March
2016, there was a write down of licensed properties to their recoverable
value. The reversal of impairment credit of £0.6 million during the 52 weeks
ended 26 March 2016 related to the write back of previously impaired licensed
properties to their recoverable value.
The onerous lease provision release of £0.2 million in the prior period
relates to a leasehold property disposed in the prior period.
The profit on disposal of properties of £0.9 million during the 53 weeks ended
1 April 2017 (2016: £2.9 million) relates to the disposal of six licensed
properties (2016: five licensed properties).
The cash impact of separately disclosed items before tax for the 53 weeks
ended 1 April 2017 was £2.4 million cash outflow (2016: £1.1 million cash
outflow).
4. Finance Costs
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Interest expense arising on:
Financial liabilities at amortised cost - loans and debentures 6.2 5.7
Financial liabilities at amortised cost - preference shares 0.1 0.1
Total interest expense for financial liabilities 6.3 5.8
Unwinding of discounts on provisions 0.3 0.2
Total finance costs before separately disclosed items 6.6 6.0
Finance charge on net pension liabilities (note 3) 0.8 0.8
Movement in fair value of financial instruments (note 3) - (0.1)
Total finance costs 7.4 6.7
5. Taxation
Tax on Profit on Ordinary Activities
53 weeks ended1 April2017 £m 52 weeksended26 March2016£m
Tax charged in the Income Statement
Current income tax:
Corporation tax 9.6 9.3
Amounts (over)/under provided in previous years (0.1) -
Total current income tax 9.5 9.3
Deferred tax:
Origination and reversal of temporary differences (1.0) (1.2)
Change in corporation tax rate (note 3) (1.0) (1.9)
Amounts (over)/under provided in previous years (0.1) -
Total deferred tax (2.1) (3.1)
Total tax charged in the Income Statement 7.4 6.2
Analysed as:
Before separately disclosed items 9.1 8.4
Separately disclosed items (1.7) (2.2)
7.4 6.2
Reconciliation of the Total Tax Charge
The tax expense in the Income Statement for the year is lower than the
standard rate of corporation tax in the UK of 20% (2016: 20%). The differences
are reconciled below:
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Profit from continuing operations before taxation 39.9 39.2
Accounting profit multiplied by the UK standard rate of corporation tax of 20% (2016: 20%) 8.0 7.8
Items not deductible for tax purposes 0.5 0.5
Current and deferred tax overprovided in previous years (0.2) -
Change in corporation tax rate (1.0) (1.9)
Other 0.1 (0.2)
Total tax charged in the Income Statement 7.4 6.2
Deferred tax relating to items charged/(credited) to the Income Statement
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Deferred tax depreciation (1.5) (2.3)
Rolled over capital gains (0.6) (0.1)
Retirement benefit obligations - (0.1)
Tax losses carried forward - (0.1)
Employee share schemes 0.1 -
Pub acquisition costs (0.1) (0.1)
Others - (0.4)
Deferred tax in the Income Statement (2.1) (3.1)
Tax relating to items charged/(credited) to the Statement of Comprehensive
Income
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Deferred tax:
Change in corporation tax rate 0.3 0.6
Net actuarial (losses)/gains on pension scheme (2.4) 0.1
Total tax charged in the Statement of Comprehensive Income (2.1) 0.7
Tax relating to items charged/(credited) directly to equity
Deferred tax:
Reduction in deferred tax liability due to indexation (0.1) -
Share-based payments - 0.1
Current tax:
Share-based payments (0.1) (0.4)
Total tax charged to equity (0.2) (0.3)
During the period The Finance Act 2016 received Royal Assent. The main impact
was the reduction of the UK corporation tax rate from 18% to 17% from 1 April
2020. To the extent that this rate change will affect the amount of future
cash tax payments to be made by the Group, this will reduce the size of both
the Group's Balance Sheet deferred tax liability and deferred tax asset. The
impact in the 53 weeks to 1 April 2017 was a credit to separately disclosed
items in the Income Statement of £1.0 million, and a charge to the Statement
of Comprehensive Income of £0.3 million.
6. Earnings Per Share
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Profit attributable to equity shareholders 32.7 32.8
Separately disclosed items net of tax 1.2 (0.5)
Adjusted earnings attributable to equity shareholders 33.9 32.3
Number Number
Weighted average share capital 55,223,000 55,356,000
Dilutive outstanding options and share awards 636,000 764,000
Diluted weighted average share capital 55,859,000 56,120,000
40p 'A' and 'C' ordinary share Pence Pence
Basic earnings per share 59.21 59.25
Diluted earnings per share 58.54 58.45
Adjusted earnings per share 61.39 58.35
Diluted adjusted earnings per share 60.69 57.56
4p 'B' ordinary share Pence Pence
Basic earnings per share 5.92 5.93
Diluted earnings per share 5.85 5.85
Adjusted earnings per share 6.14 5.84
Diluted adjusted earnings per share 6.07 5.76
For the purposes of calculating the number of shares to be used above, 'B'
shares have been treated as one tenth of an 'A' or 'C' share. The earnings per
share calculation is based on earnings from continuing operations and on the
weighted average ordinary share capital which excludes shares held by trusts
relating to employee share options and shares held in treasury of 1,760,953
(2016: 1,628,444).
Diluted earnings per share amounts are calculated using the same earnings
figure as for basic earnings per share, divided by the weighted average number
of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares. Adjusted earnings per
share are calculated on profit before tax excluding separately disclosed items
and on the same weighted average ordinary share capital as for the basic and
diluted earnings per share. An adjusted earnings per share measure has been
included as the Directors consider that this measure better reflects the
underlying earnings of the Group.
7. Dividends
53 weeksended1 April2017£m 52 weeksended26 March2016£m
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2016: 11.00p (2015: 10.20p) 6.1 5.6
Interim dividend for 2017: 7.25p (2016: 6.90p) 4.0 3.9
Equity dividends paid 10.1 9.5
Dividends on cumulative preference shares (note 4) 0.1 0.1
Proposed for approval at the Annual General Meeting:
Final dividend for 2017: 11.55p (2016: 11.00p) 6.4 6.1
The pence figures above are for the 40p 'A' ordinary shares and 40p 'C'
ordinary shares. The 4p 'B' ordinary shares carry dividend rights of one tenth
of those applicable to the 40p 'A' ordinary shares. Own shares held in the
employee share trusts do not qualify for dividends as the Trustees have waived
their rights. Dividends are also not paid on own shares held as treasury
shares.
8. Property, Plant and Equipment
Land &buildings£m Plant,machinery& vehicles£m Containers,fixtures &fittings£m Total£m
Cost
At 28 March 2015 438.8 37.8 128.7 605.3
Additions 48.3 2.4 18.5 69.2
Acquisitions (note 9) 13.3 0.7 0.2 14.2
Disposals (3.0) (2.1) (6.9) (12.0)
Transfer to assets held for sale (0.5) - - (0.5)
At 26 March 2016 496.9 38.8 140.5 676.2
Additions 13.3 2.8 19.8 35.9
Acquisitions (note 9) 16.4 - 0.2 16.6
Disposals (3.4) (1.2) (6.3) (10.9)
Transfers from investment property 0.5 - - 0.5
Transfer to assets held for sale (6.8) - (1.4) (8.2)
At 1 April 2017 516.9 40.4 152.8 710.1
Depreciation and impairment
At 28 March 2015 28.9 24.0 80.5 133.4
Provided during the year 3.3 2.1 11.9 17.3
Acquisitions (note 9) 0.1 0.4 0.1 0.6
Impairment loss net of reversals 0.8 - - 0.8
Disposals (1.2) (2.2) (6.3) (9.7)
At 26 March 2016 31.9 24.3 86.2 142.4
Provided during the year 4.0 2.2 14.0 20.2
Disposals (0.6) (1.2) (5.9) (7.7)
Transfer to assets held for sale (1.2) - (1.1) (2.3)
At 1 April 2017 34.1 25.3 93.2 152.6
Net book value at 1 April 2017 482.8 15.1 59.6 557.5
Net book value at 26 March 2016 465.0 14.5 54.3 533.8
Net book value at 28 March 2015 409.9 13.8 48.2 471.9
9. Business Combinations
During the 53 weeks ended 1 April 2017, the Company has individually acquired
four new pubs for £16.6 million, all of which have been treated as business
combinations as they were operating as a business at the point the Company
acquired them.
On 27 May 2016, the Group purchased an additional 25% of the shares in The
Stable Pizza & Cider Limited for £2.7 million, bringing the Group's interest
in the Stable Pizza & Cider Limited to 76%. The Group has the option to
acquire the remaining 24% of shares in 2018 and a liability of £2.8 million
has been recognised at the balance sheet date, which reflects management's
best estimate of the option value.
The Group has also paid £1.2 million in contingent consideration to the former
owners of Cornish Orchards Limited, which was acquired on 4 June 2013, and
£0.3 million to the company that formerly held the import and distribution
rights to Sierra Nevada.
In the prior year, the Company purchased a 51% holding in Nectar Imports
Limited which is a wholesale distributor and 100% of G & M Leisure Limited,
which operates The Lord Northbrook pub in Lee, South East London. Additional
contingent consideration of £2.5 million has been recognised as a balance
sheet liability in relation to the acquisition of Nectar Imports Limited and
reflects management's best estimate of the likely amount to be paid out for
the remaining 49% of the business. Under the terms of the agreement the total
consideration will not exceed £10 million.
10. Pensions
Total amounts included in the Balance Sheet arising from the Group's pension
obligations in respect of its defined benefit retirement plan are:
2017£m 2016£m
Fair value of Scheme assets 111.4 96.0
Present value of Scheme liabilities (149.3) (119.5)
Deficit in the Scheme (37.9) (23.5)
Defined benefit obligation Fair value of Scheme assets Net defined benefit / (deficit)
2017£m 2016£m 2017£m 2016£m 2017£m 2016£m
Balance at beginning of the year (119.5) (127.9) 96.0 103.5 (23.5) (24.4)
Included in profit and loss
Current service cost - - (0.3) (0.2) (0.3) (0.2)
Curtailment gain - - - - -
Net interest cost (4.2) (4.2) 3.4 3.4 (0.8) (0.8)
(4.2) (4.2) 3.1 3.2 (1.1) (1.0)
Included in Other Comprehensive Income
Actuarial gains/(losses) relating to:
Actual return less expected return on Scheme assets - - 15.5 (6.8) 15.5 (6.8)
Experience gains/(losses) arising on Scheme liabilities (30.1) 7.5 - - (30.1) 7.5
(30.1) 7.5 15.5 (6.8) (14.6) 0.7
Other
Employer contributions - 0.2 - - - 0.2
Employer special contributions - - 1.3 1.0 1.3 1.0
Employee contributions - - - - - -
Benefits paid 4.5 4.9 (4.5) (4.9) - -
4.5 5.1 (3.2) (3.9) 1.3 1.2
Balance at end of the year (149.3) (119.5) 111.4 96.0 (37.9) (23.5)
The key assumptions used in the 2017 valuation of the Scheme are set out
below:
Key financial assumptions used in the valuation of the Scheme 2017 2016
Rate of increase in pensions in payment 3.30% 3.05%
Discount rate 2.60% 3.55%
Inflation assumption - RPI 3.30% 3.05%
Inflation assumption - CPI 2.30% 2.05%
Mortality assumptions 2017Years 2016Years
Current pensioners (at 65) - males 22.2 22.2
Current pensioners (at 65) - females 24.3 24.4
Future pensioners (at 65) - males 24.0 23.6
Future pensioners (at 65) - females 26.2 25.9
Assets in the Scheme
2017£m 2016£m
Corporate bonds 21.8 19.3
UK equities 20.5 24.4
Overseas equities 26.3 20.4
Alternatives 37.0 28.3
Property - 1.0
Cash 2.3 1.4
Annuities 3.5 1.2
Total market value of assets 111.4 96.0
11. Cash, Borrowings and Net Debt
Analysis of Net Debt
At 26 March2016£m Cash flows£m Non-cash1£m At 1 April2017£m
Cash and cash equivalents
Cash and short term deposits 6.2 9.1 - 15.3
6.2 9.1 - 15.3
Debt
Bank loans2 (177.0) (16.5) (0.2) (193.7)
Other loans (0.2) - - (0.2)
Debenture stock (25.9) - - (25.9)
Preference shares (1.6) - - (1.6)
(204.7) (16.5) (0.2) (221.4)
Net debt (198.5) (7.4) (0.2) (206.1)
1 Non-cash movements relate to the amortisation of arrangement fees
2 Bank loans net of arrangement fees
At 28 March2015£m Cash flows£m Non-cash1£m At 26 March2016£m
Cash and cash equivalents
Cash and short term deposits 5.1 1.1 - 6.2
5.1 1.1 - 6.2
Debt
Bank loans2 (140.0) (36.2) (0.8) (177.0)
Other loans (0.2) 0.2 (0.2) (0.2)
Debenture stock (25.9) - - (25.9)
Preference shares (1.6) - - (1.6)
(167.7) (36.0) (1.0) (204.7)
Net debt (162.6) (34.9) (1.0) (198.5)
1 Non-cash movements relate to the amortisation of arrangement fees and the
acquisition of Nectar Imports Limited and G & M Leisure Limited during the
year.
2 Bank loans net of arrangement fees.
12. Post Balance Sheet Event
Following the period end the Company sold two Tenanted properties classified
as assets held for sale at 1 April 2017 for £1.7 million.
This information is provided by RNS
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