REG - Heavitree Brewery - Final Results
16/02/2023 15:00
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RNS Number : 1540Q Heavitree Brewery PLC 16 February 2023
The Heavitree Brewery PLC
Trood Lane
Matford
Exeter EX2 8YP
Date: 16 February 2023
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, 16 February 2023, the Directors announce
the preliminary statement of results for the year ended 31 October 2022.
ISIN: GB0004182720 for 'A' Limited Voting Ordinary Shares
ISIN: GB0004182506 for Ordinary Shares
Chairman's statement
Having reported a pandemic-affected small operating loss at the 2021 year-end,
it is pleasing that the company returned a satisfactory performance in the
second half of this year to follow the steady performance reported on at the
half-year. This has resulted in an increase in turnover of 57.64% to
£7,280,000 against the previous year's figure of £4,618,000 and this
includes a reduction in rental income of £230,000 in accordance with the IFRS
16 accounting treatment, the application of which I have explained in recent
years. An operating profit for the year for the Group of £1,422,000 has
been returned (2021: a loss of £59,000). We have finished the year
returning numbers similar to those achieved before the start of the Covid
pandemic.
In my statement accompanying the half-year accounts I expressed caution about
just what might be lying ahead of us in future months. The much reported
hikes in the cost of living, rises in mortgage rates and the cost of doing
business are inevitably putting pressures on the general trading environment
for all our operators. Energy costs are of a particular concern, and we have
seen some renegotiated contracts during the last six months which have
resulted in a tripling, or even quadrupling of electricity and gas costs.
Another example of the many inflationary pressures the sector is exposed to
is reflected in the extraordinary wholesale beer price increases announced by
one of our main suppliers; a 9% increase in September of last year followed by
a further 15% increase in January of this year. These beer price rises are
not immediately impacting our pubs due to timings within our contractual
agreements, but some level of increase will be applied during the year ahead.
I have given you two examples of the numerous inflationary strains on our
pubs.
The Company has continued the programme of selling non-core assets to reduce
the level of borrowing. The term loan with Barclays has been reduced by
£1,998,000 and overall bank debt which includes the overdraft facility has
been reduced by £2,805,000 during the year under review. This programme
will continue, and other sites will be considered when they become available.
Dividend
I reported after the first six months that the payment of a dividend is
considered by the Board to be an intrinsic part of our business and it would
be further reviewed once trading had returned to some sort of normality and
the Directors are confident about generating cash through a sustainable
operating profit. The Directors are pleased to be reinstating a final
dividend at a rate of 3.5p per share to those shareholders on the Register at
17 March 2023. The dividend, subject to shareholder approval at the Annual
General Meeting to be held on 13 April 2023, will be paid on 21 April 2023.
The Board would like to thank all shareholders for their patience,
understanding and support during the period of non-payment of dividends while
our ability to trade properly was affected by the pandemic.
Sale of Property
Further to the properties I reported on at the half-year, there are three
unlicensed houses which have been sold during the second half of the year.
All three cottages are at the Exeter Inn site in Honiton Clyst.
A book profit of £968,000 on the sale of properties has been returned during
this full year (2021: £1,318,000).
Heavitree Inc.
Our American subsidiary is in the process of being wound up after the sale of
the final piece of land held by Heavitree Inc. early in this year under
review. The final tax return is due in May 2023.
Development
The building of a new eight bedroom development, replacing the old function
room, is at last underway at the Ley Arms in Kenn. Planning approval was
granted before the original lockdown. We are looking for completion of this
project to be in September 2023 and there is already great interest in the
addition of these facilities to such a popular and busy pub.
Pension Scheme
The process of winding up our defined benefit pension scheme continues. All
liabilities from the Guaranteed Minimum Pension (GMP) calculated by the
scheme's actuary have been met. There remain small liabilities for GMP
arrears to be finalised and also, the Board is waiting on a requote before
securing a trustees' indemnity policy. There is a legal requirement to
complete the wind-up process by January 2024.
Prospects
Reducing our level of debt so successfully over the last 3 years has
strengthened the company's financial position. Net debt has reduced overall
in this year by £3,539,000.
Our team has recently let three tenancies to new, quality operators who we
welcome to the Company. At present there are no vacancies within our
estate, and I am very pleased by our retention of tenants and our ability to
attract new people.
Together these two achievements are giving us a foundation for the future
while we face a trading environment being challenged by the many issues of
today's world.
N H P TUCKER
Chairman
16 February 2023
Group income statement
for the year ended 31 October 2022
Total Total
2022 2021
Notes £000 £000
Revenue 7,280 4,618
Other operating income 211 310
Purchase of inventories (2,980) (1,909)
Staff costs (1,477) (1,349)
Depreciation of property, plant and equipment
(228) (177)
Other operating charges (1,384) (1,552)
(5,858) (4,677)
Group operating profit/(loss) 1,422 (59)
Profit on sale of property plant and equipment
968 1,318
Group profit before finance costs and taxation 2,390 1,259
Finance costs (117) (145)
(117) (145)
Profit before taxation 2,273 1,114
Tax expense (306) (313)
Profit for the year attributable to equity holders of the parent
1,967 801
Basic earnings per share 2 40.7p 16.6p
Diluted earnings per share 2 40.7p 16.6p
Group statement of comprehensive income
for the year ended 31 October 2022
2022 2021
£000 £000
Profit for the year 1,967 801
Items that will not be reclassified to profit or loss
Fair value adjustment on investment in equity - 5
- 5
Items that may be reclassified to profit or loss
Exchange rate differences on translation of subsidiary undertaking
1 -
1 -
Other comprehensive income for the year, net of tax 1,968 806
Total comprehensive income attributable to:
Equity holders of the parent 1,968 806
Group balance sheet
at 31 October 2022
2022 2021
£000 £000
Non-current assets
Property, plant and equipment 16,593 16,436
Investment property 1,211 1,490
Right of use asset 60 71
17,864 17,997
Financial assets 34 34
Deferred tax asset 16 16
17,914 18,047
Current assets
Inventories 10 10
Trade and other receivables 1,631 1,936
Cash and cash equivalents 788 52
2,429 1,998
Assets held for sale 180 883
Total assets 20,523 20,928
Current liabilities
Trade and other payables (1,133) (984)
Financial liabilities (229) (1,158)
Income tax payable (339) (108)
(1,701) (2,250)
Non-current liabilities
Other payables (326) (318)
Financial liabilities (2,195) (4,069)
Deferred tax liabilities (784) (734)
Defined benefit pension plan deficit (92) (92)
(3,397) (5,213)
Total liabilities (5,098) (7,463)
Net assets 15,425 13,465
Capital and reserves
Equity share capital 264 264
Capital redemption reserve 673 673
Own share reserve (1,537) (1,529)
Fair value adjustments reserve 10 10
Currency translation 14 13
Retained earnings 16,001 14,034
Total equity 15,425 13,465
Group statement of cash flows
for the year ended 31 October 2022
2022 2021
£000 £000
Operating activities
Profit for the year 1,967 801
Tax expense 306 313
Net finance costs 117 145
Profit on disposal of non-current assets and assets held for sale (968) (1,200)
Depreciation and impairment of property, plant and equipment
228
177
Decrease/increase in trade and other receivables 264 (442)
Increase/(decrease) in trade and other payables 157 353
Impairment of fixed assets - -
Cash generated from operations 2,071 147
Income taxes paid (24) (245)
Interest paid (117) (145)
Net cash inflow/(outflow) from operating activities 1,930 (243)
Investing activities
Interest received - -
Proceeds from sale of property, plant and equipment and assets held for sale
2,038 1,411
Payments to acquire property, plant and equipment (425) (473)
Net cash inflow from investing activities 1,613 938
Financing activities
Preference dividend paid (1) (1)
Equity dividends paid - -
Consideration received by EBT on sale of shares 42 41
Consideration paid by EBT on purchase of shares (50) (81)
Capital element of finance lease rental payments (34) (25)
Loan repayment (1,998) (187)
Mortgage 41 35
Net cash outflow from financing activities (2,000) (218)
Increase in cash and cash equivalents 1,543 477
Cash and cash equivalents at the beginning of the year (755) (1,232)
Cash and cash equivalents at the year end 788 (755)
Group statement of changes in equity
for the year ended 31 October 2022
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 2020 264 673 (1,522) 5 13 13,266 12,699
Profit for the year - - - - - 801 801
Other comprehensive
income for the year - - - 5 - - 5
net of income tax
Total comprehensive
income for the year - - - 5 - 801 806
Consideration received
by EBT on sale of
shares - - 41 - - - 41
Consideration paid by
EBT on purchase of shares - - (81) - - - (81)
Loss by EBT on sale
of shares - - 33 - - (33) -
Equity dividends paid - - - - - - -
At 31 October 2021 264 673 (1,529) 10 13 14,034 13,465
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 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)
Loss by EBT on sale
of shares - - - - - - -
Equity dividends paid - - - - - - -
At 31 October 2022 264 673 (1,537) 10 14 16,001 15,425
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 2022 the Group held 210,335 Ordinary Shares and 195,386 'A'
Limited Voting Ordinary Shares (2021: 193,053 Ordinary Shares and 238,310 'A'
Limited Voting Ordinary Shares) of its own shares. During the year there were
purchases of 17,282 Ordinary Shares and sales of 34,205 '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 2022. 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 2022 and 31 October 2021. 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 2022, which are expected to be mailed to
shareholders on 09 March 2023. The financial statements will also be
available on the Group's website www.heavitreebrewery.co.uk
(http://www.heavitreebrewery.co.uk) .
Going concern
The Directors closely monitor the Group's financial resources. This had
included a continued review of the medium-term financial plan, along with a
range of cash flow forecasts for 12 months from the date of approval of these
financial statements. The Group has positive cash generation and the gearing
remains low. Although we have not yet seen the full impact of the energy,
inflation, and cost of living crisis the Board has included within its
forecasts an anticipated decrease in footfall and possible rental difficulties
within the forecast for the period to April 2024. The forecast for capital
receipts in 2023/24 includes non-core asset sales of £3m. These forecasts
leave the Group with 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 2 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 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. These include unlicensed properties and
developments with permissions which are already within the Estate. This year
the Group has sold 8 (2021: 9) of the non-core assets resulting in profits of
£968,000 being realised from these sales, this has enabled the Group to pay
down an extra £1,750,000 on the term loan, leaving the balance of the term
loan at 31 October 2022 £2,315,000.
The Board has continued to engage with the bank regarding its facilities and
forward trading, it had a waiver for the covenant testing to April 2022, with
covenant testing resuming from the 31 October 2022. Our year end results have
enabled us to achieve better than expected cover on both our debt service
covenant and our gross borrowings EBITDA calculations and this has resulted
since year end in our covenants being put back to a 12 month covenant testing
on half year and year end results. The Directors are satisfied that the
Group's forecasts and projections, which take account of the anticipated cost
of living impact on the estate, show that the Group will be able to operate
within its current 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:
2022 2021
£000 £000
Profit for the year 1,967 801
2022 2021
N(o). N(o).
(000) (000)
Basic weighted average number of shares (excluding own shares shares) 4,834 4,824
On the 7(th of) December 2022 a stock exchange announcement was made by the
Group regarding the following share transactions.
Purchase of own shares from the Company's Employee Benefit Trust
- 150,000 Ordinary Shares of 5p each at £2.90
(mid-market price on 6/12/22) per share representing 7.51% of the total number
of Ordinary Shares in issue.
- 100,000 'A' Limited Voting Shares of 5p each at £1.40
(mid-market price on 6/12/22) per share representing 3.04% of the total number
of 'A' Limited Voting Shares in issue.
The EBT's net proceeds from the Share Purchase, which amounts to £575,000,
will be applied to repay debt of £635,386 which is owed to the Company by
the EBT (the "Debt Repayment" and together with the Share Purchase (the
"Transaction")). Following the Share Purchase, the EBT will hold 60,335
Ordinary Shares representing 3.27% of total Ordinary share in issue and
95,386 'A' Limited Voting Shares representing 2.99% of the total number of
'A' limited Voting Shares in issue. The outstanding balance post the Debt
Repayment will be £60,386.
The shares purchased by the Company pursuant to the Share Purchase have been
cancelled.
3. Dividends paid and proposed
2022 2021
£000 £000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2021: nil (2020: nil) - -
First dividend for 2022: nil (2021: nil) - -
Less dividend on shares held within employee share schemes - -
Dividends paid - -
Proposed for approval at AGM
(not recognised as a liability as at 31 October)
176 -
Final dividend for 2022 3.5p (2021: nil) 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 estate.
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
The following tables present revenue, expenditure and certain asset
information regarding the Group's geographical segments for the years ended 31
October 2022 and 2021. Revenue is based on the geographical location of
customers and assets are based on the geographical location of the asset.
Segment information
Year ended 31 October 2021 UK United States Total
£000 £000 £000
Revenue
Sales to external customers 4,618 - 4,618
Other segment information
Segment assets 20,886 42 20,928
Total Assets 20,886 42 20,928
Capital expenditure
Property, plant and equipment 473 - 473
Right of use asset 71 71
Year ended 31 October 2022 UK United States Total
£000 £000 £000
Revenue
Sales to external customers 7,280 - 7,280
Other segment information
Segment assets
20,523 - 20,523
Total Assets 20,523 - 20,523
Capital expenditure
Property, plant and equipment 474 - 474
Right of use asset - -
5. General information
The 2022 Annual Report and Financial Statements will be published and posted
to shareholders on 9th March 2023 Further copies may be obtained by contacting
the Company Secretary at The Heavitree Brewery PLC, Trood Lane, Matford,
Exeter EX2 8YP. The 2022 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 13 April
2023 at 11.30am.
Ends.
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