Young & Co's Brew. - Interim Results
10/11/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221110:nRSJ9104Fa&default-theme=true
RNS Number : 9104F Young & Co's Brewery PLC 10 November 2022
YOUNG & CO.'S BREWERY, P.L.C.
INTERIM RESULTS FOR THE 26 WEEKS ENDED 26 SEPTEMBER 2022
ENCOURAGING RESULTS AS OUR TRADING MOMENTUM CONTINUED THROUGHOUT THE PERIOD
REFLECTING A WELCOME RETURN TO A NORMAL PUB ENVIRONMENT
2022 2021 %
£m £m change
Revenue(1) 186.5 149.6 +24.7
Adjusted operating profit(1) (3) 29.0 27.1 +7.0
Adjusted profit before tax(1) (3) 25.0 21.8 +14.7
Adjusted EBITDA(1 3) 45.0 42.7 +5.4
Net debt 168.1 140.3 -19.8
Net debt to EBITDA(1 2) 2.0x 3.6x -1.6x
Operating profit(1) 27.9 27.5 +1.5
Profit before tax(1) 23.9 22.2 +7.7
Net cash generated from operations 48.5 71.4 -32.1
Adjusted basic earnings per share(1) (3) 34.54p 28.22p +22.4
Basic earnings per share(1) 32.66p 17.96p +81.8
Interim dividend per share 10.26p 8.55p +20.0
Net assets per share £12.11 £11.16 +8.5
1 The prior period results exclude trading from 56 sites which formed a
majority of the Ram Pub Company segment (sold in August 2021) and were
disclosed in last period's interim results as discontinued operations (see
note 5).
2 Net debt (including lease liabilities) to EBITDA has been calculated based
on the last 12 months' actual adjusted EBITDA of £84.8 million (see note 2
for adjusted EBITDA and note 9 for net debt).
3 Reference to an "adjusted" item means that item has been adjusted to exclude
non-underlying items (see note 2 for adjusting items and note 7 for earnings
per share).
PERFORMANCE HIGHLIGHTS
· Total revenue for the period was £186.5 million, with an
adjusted EBITDA of £45.0 million; managed house EBITDA for the period was
£55.5 million up £3.3 million against last year
· Like-for-like revenue was ahead of same period in 2019 by 6.2%,
and up by 20.4% against last year
· Adjusted operating profit up 7.0% to £29.0 million, delivering a
margin of 15.5%, down from last year's 18.1% which benefited significantly
from the reduced 5% VAT rate (£8.2 million) and lower utility costs (£1.9
million on a like-for-like basis)
· Investment of £28.7 million in the period, including four
freehold acquisitions and £14.5 million invested in our existing estate, with
a further two acquisitions since the end of the period
· Healthy cash generation reduced the year-end net debt by £5.7
million to £168.1 million
· Interim dividend of 10.26 pence per share, an increase of 20.0%
(1.71 pence) against the last interim dividend
· Since the period end, managed house revenue for the last 13 weeks
was ahead of last year by 6.6%; on a like-for-like basis up 2.0% on last year
and ahead of 2019 comparatives by 5.5%
· A balance sheet that supports our strategy, with the financial
capacity for continued capital investment
Simon Dodd, Chief Executive of Young's, commented:
"I am very pleased with the performance of the business and the hard work of
our teams in the first half of the year. This has been the first time in three
years we have been able to report on a period without any covid related
trading restrictions, with the business returning to normality.
Recent trading has been robust despite all the economic uncertainty, and we
continue to see our pubs in Central London and the City bounce back as workers
and tourists return, like-for-like sales since the end of the period were up
against last year by 22.0% and 11.1% respectively.
We have continued to reinvest the funds generated by the sale last year of our
tenanted estate, with the welcome addition of four fantastic freehold pubs
combined with the two recent acquisitions, the Carpenters Arms (Tonbridge) and
the Griffin Inn (Fletching), both wonderful freehold pubs with rooms.
Bookings are already strong for our first full trading Christmas in three
years, which follows closely after the football World Cup. Although we are
conscious of the current macroeconomic conditions, we have fixed contracts for
both drinks and utilities, and, whilst not immune to the external cost
pressures across our supply chain, we are taking steps to mitigate as far as
possible.
Our strategy of operating premium, individual and well-invested managed pubs
is unchanged, and we are confident that it will continue to deliver superior
returns for our shareholders."
For further information, please contact:
Young & Co.'s Brewery,
P.L.C.
020 8875 7000
Simon Dodd, Chief Executive
Michael Owen, Chief Financial Officer
MHP
Communications
020 3128 8742 / 8147
Tim Rowntree/Robert Collett-Creedy
INTERIM STATEMENT
I am pleased to report a strong set of results, with our positive trading
momentum continuing throughout the first half of the financial year.
For the 26 weeks our total revenue was up 24.7% to £186.5 million (2021:
£149.6 million), with adjusted profit before tax up 14.7% to £25.0 million
(2021: £21.8 million), reflecting a welcome return to a normal pub trading
environment. Managed like-for-like sales were ahead of last year by 20.4% and
6.2% higher than the same period in 2019.
We have continued to invest the proceeds from the sale of our tenanted
businesses last year, with total capital investment of £28.7 million in the
period, including the addition of four freehold acquisitions. Three of these
acquisitions, the Bedford Arms Hotel (Rickmansworth), Merlin's Cave (Chalfont
St Giles) and the Half Moon (Windlesham) have created the opportunity to
introduce Young's to new trading regions. In September we purchased our fourth
pub, when we exercised our option to acquire the Wild Duck (Ewen) from the
Lucky Onion Group, in addition to the six businesses we purchased from them in
February, further strengthening our established position in the Cotswolds.
The valuable role our pubs play in their communities, once again proved vital
in recent months by providing such a unique environment, bringing people
together whatever the occasion. In this historic summer, we both enjoyed and
endured prolonged periods of hot weather, something that our exceptional
gardens and outdoor spaces were perfectly placed to capitalise on. The two
additional bank holidays for the Queen's jubilee and funeral marked poignant
moments of national celebration and mourning, yet for both, the pub was the
perfect setting to raise a glass or two to honour our late sovereign. Despite
the effect of the rail strikes, which inevitably had an adverse impact on our
trade, the positive performance of our great pubs after two extremely
challenging years has been hugely encouraging.
I am both honoured and delighted to take over the reins as CEO of Young's and
to have the opportunity to continue to grow such a wonderful and unique
business. Once again, I would like to thank Patrick for his guidance since I
joined and for his enormous contribution to the company over the past 20
years. In September, we also welcomed Mark Loughborough to the board,
following his promotion to Retail Director. Mark has been with Young's for 11
years in a number of senior roles, most recently as Senior Director of
Operations. His promotion underlines our commitment to a succession plan that
places value on fostering internal development.
The board has decided to raise the interim dividend by 20.0% to 10.26 pence
per share (2021: 8.55 pence per share), and this is expected to be paid on 2
December 2022 to shareholders on the register at close of business on 18
November 2022.
BUSINESS REVIEW
Total managed house revenue for the period was £186.1 million (2021: £148.9
million), up 25.0% compared with the gradual unwinding of restrictions last
year. We ended the period with 223 managed houses, including 37 hotels, which
is up from 219 at the end of the last period. Adjusted operating profit
attributable to our managed houses was up 7.8% to £40.0 million (2021: £37.1
million). Operating profit growth against prior year has been challenged by
significant headwinds, such as the return to a normalised VAT rate (£8.2
million) and increased utility costs (£1.9 million on a like-for-like basis).
Drink sales were the main beneficiary from the softer comparatives in the
early months of last year, with total drink sales up 30.5%, or 28.0% on a
like-for-like basis. In April, we launched our new draft range, introducing
Brooklyn Pilsner and Pravha, as well as two exciting new ales from Beavertown:
Young Sun - their new keg pale ale - and Rocket Ram, a seasonal special cask
ale. As spring made way to summer, our exceptional gardens, riverside pubs and
well-invested estate offered the perfect relief from the scorching
temperatures. The timely return of Aspall as our premium draft cider, helped
drive growth in the total cider category, with sales up 61.9%. Draught lager
was the other standout category, up by 29.6% against last year.
Food sales in the period were set against some strong prior year comparatives
that were boosted by last year's VAT benefit. Despite this, our food sales
were up 7.0% in total, equating to 1.5% on a like-for-like basis, and up by
8.8% compared to 2019. Our focus on fresh, seasonal and locally sourced
British ingredients with dynamic menus tailored to the individual pub,
underscored by our core classics, continues to pay dividends. Against the
backdrop of well documented cost pressures, we have taken steps to consolidate
and tease out efficiencies in our supply chain. Alongside this, our executive
chef team created the Young's Recipe Book, full of inspiring dishes for our
chefs to draw upon to ensure our food remains consistent, authentic and
premium.
Over the course of the last 18 months, we have added a further 132 bedrooms to
our estate, ending the period with a total room stock of 820. This recent
investment coincided with a timely increase in hotel demand during the period,
with strong occupancies and average room rates enjoyed across all geographies.
The trend for holidaying in the UK remained positive, alongside a pickup in
foreign travel towards the end of the period. Despite no longer benefitting
from the reduced VAT rates of last year, total hotel sales were up 109.1% with
like-for-like sales up by 72.7%. RevPAR was up to £77.11 compared with
£59.48 last year.
Despite the impact of rail strikes and extra bank holidays, Central London and
City areas continued to bounce back with returning workers and tourists, with
sales returning to 2019 levels and growing by 81.4% and 46.5% respectively on
the comparative period last year. Our more food orientated pubs and hotels in
the Home Counties and West Country have understandably seen sales drop back
compared to last period, a reflection of last year's lower VAT rates, but in a
testament to how far these businesses have moved forward, like-for-like sales
were 7.4% and 12.2% ahead of 2019 respectively.
At the start of the financial year, we introduced Young's to the Chilterns,
with the purchase of the Bedford Arms Hotel (Rickmansworth). This impressive
18(th) century pub with 18 rooms boasts period features throughout, a
characterful front terrace and a wonderful garden. Our second acquisition,
Merlin's Cave, in the nearby affluent commuter town of Chalfont St Giles,
opened in August following significant investment. The pub has an outstanding
garden bordering the River Misbourne, combined with a picturesque setting on
the village green. We later purchased the Half Moon in Windlesham, which was
held by its previous stewards for 113 years and is a fine example of a
characterful country pub, complete with a large south facing garden. Our
acquisition of the Wild Duck, near Cirencester, adds further to our future
growth pipeline. In recent years, this impressive site has been closed as part
of a monumental back-to-brick renovation and, following our extensive
investment, will reopen as another premium Young's pub in the heart of the
Cotswolds.
Core to Young's strategy has been growth through acquisition while maintaining
the highest degrees of investment within our existing estate. During the
period, we invested £5.2 million completing major projects at the Coborn
(Bow), Crown (Bow), East Hill (Wandsworth), Halfway House (Earlsfield) and the
Phoenix (Victoria), together with some smaller projects at the Blue Boar
(Chipping Norton), Dunstan House (Burnham-on-Sea) and the Orange Tree
(Richmond). Alongside these projects we also invested £7.2 million for the
ongoing maintenance of our pub estate.
INVESTMENT AND FINANCE
The adjusted earnings per share has risen by 22.4% to 34.54 pence largely due
to the impact of the change in corporation tax rate in the prior period.
At the period end, our net debt reduced to £168.1 million from £173.8
million at the year-end, with a positive net cash flow from operations of
£48.5 million. During the prior interim period our net cash flow from
operations was £71.4 million due to the large movement in working capital
following the reopening of our pubs after a period of lockdown. Our net debt
excluding lease liabilities sits at £96.0 million. Based on the last twelve
month's adjusted EBITDA of £86.9 million, our net debt (including lease
liabilities) to EBITDA ratio has now reduced to 2.0 times (March 2022: 2.1
times). Our cash balance of £39.0 million and drawn down debt of £135.0
million provides us with debt headroom of £139.0 million.
Period adjusting items were a cost totalling £1.1 million compared with
profit of £0.4 million last interim period. We incurred purchase costs of
£0.8 million relating to the four acquisitions made in the period as well as
tenant compensation of £0.3 million for the termination of a lease at an
unlicensed property, that formed part of our existing freehold interest at the
Village Inn (Ealing).
The methodology and assumptions prescribed for the purposes of IAS 19 Pensions
accounting mean that the balance sheet surplus or deficit are inherently
volatile and will vary greatly according to investment market conditions at
each accounting date. In recent months, the uncertainty and market turbulence
due to the economic climate has led to an increase in the discount rate used
to 5.6% (March 2022: 2.8%), as well as a decrease in corporate bond yields,
the rate at which our pension liabilities are discounted. This has resulted in
the net surplus position of our retirement benefit schemes to reduce by £12.0
million to £0.2 million since the year-end.
ESG
As a group, we are committed to operating sustainably and to continuously find
ways to reduce our carbon footprint. Our managed pubs are at the heart of
their communities in which we operate, bringing people together and giving us
the opportunity to improve the wellbeing of both our teams and our customers.
As a founding member of the Zero Carbon Forum, a group which has created a
"Roadmap for Hospitality to Net Zero" we have aligned ourselves with the
industry's roadmap to become net zero across scope 1, 2 and 3 emissions by
2040. We actively participate in their action groups, sharing ideas,
collaborating, and collectively working towards a net zero future. Taking
advice from our partners at Savills Earth, we have grouped our properties
based on age, condition, servicing, and heritage status to guide our net zero
implementation plans. In May, we launched the "Save While You Sleep"
initiative in partnership with the Zero Carbon Forum, to guide and encourage
energy saving opportunities through operational best practice.
We are passionate about seasonal, premium and sustainable British produce. In
September, we launched our "Food for Thought" dinner series in partnership
with Plymouth Gin, further building on our support of the Ocean Conservation
Trust. Menus were based around invasive, underutilised and abundant foodstuffs
from the UK to encourage diners to be mindful about their food choices, and
include ingredients such as goat, seaweed, Dorset snails and wood pigeon.
Further information about our ESG initiatives and our evolving sustainability
strategy will be provided in our 2023 Annual Report.
CURRENT TRADING AND OUTLOOK
Recent trading continues to show robust performance despite all the economic
uncertainty, with total sales for the last 13 weeks up by 6.6% and up by 2.0%
on a like-for-like basis. Against our comparatives in 2019, managed
like-for-like sales were up by 5.5%.
We are looking to the rest of the year with positivity. London continues to
return to more normal levels of trade with the City up by 11.1% on last year.
Christmas bookings are looking strong, and we are excited by the prospect of
our first full trading Christmas for three years on the back of the football
World Cup, which begins in November. Our enhanced outdoor spaces, with
comfortable heated areas, positions us perfectly for a prosperous Christmas
and New Year.
Since the period end, we have completed two individual freehold acquisitions,
adding the Carpenters Arms (Tonbridge) in Kent and the award-winning Griffin
Inn (Fletching), in Sussex. These two premium pubs with rooms perfectly
complement our existing estate and further extend Young's into new
territories. We also reached an agreement with our tenants of Boisdales
(Bishopsgate) for the early termination of the lease. Following a minor
investment this will add to our City presence and provide additional trade in
the lead up to Christmas. We continue to invest in our existing estate to
ensure our pubs remain premium, individual and differentiated with projects
recently completed at the Brook Green Hotel (Hammersmith), Bull (Streatham),
and the Hammersmith Ram (Hammersmith).
However, during these uncertain times, we remain mindful of the potential
impact that macroeconomic factors may have on consumer sentiment. We are also
conscious of the impact further rail strikes could have on trade in the
buildup to the festive period, an important time of year for the hospitality
sector. We are hopeful that a suitable resolution for both sides can be
reached in a timely manner. The steps we took last year to protect our
business by forward purchasing our energy through to the end of March 2024 has
limited the impact from utility cost increases. We are not immune to the
external cost pressures across our supply chain, but we are taking steps to
mitigate, as far as possible, the impact of the current inflationary
environment on our cost base. Following the recent appointment of the new
Prime Minister, we now hope for a period of stability and will closely monitor
for any future policy changes from the UK Government.
Young's is a long-term business having traded for over 191 years. Our well
invested pub estate with an asset value of £824.1 million, underpins the
significant recovery potential post covid which includes unlocking further
value from our recent investments. The business is cash generative with a
robust balance sheet. We have a long track record of delivering results and
our differentiated offering has helped us face the most demanding market
conditions in the past. We remain focused on maintaining our premium position
within the pub sector and are confident in our winning strategy of operating
premium, individual and well-invested managed pubs, crucial to our continuing
success and the delivery of superior returns for our shareholders.
Simon Dodd
Chief Executive
9 November 2022
Group income statement
For the 26 weeks ended 26 September 2022
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Notes £m £m £m
Continuing operations
Revenue 3 186.5 149.6 309.0
Other income 4 - 3.8 5.0
Operating costs before adjusting items (157.5) (126.3) (262.6)
Adjusted operating profit 29.0 27.1 51.4
Adjusting items 2 (1.1) 0.4 0.3
Operating profit 27.9 27.5 51.7
Finance costs (4.2) (5.2) (9.5)
Finance credit/(charge) for pension obligations 12 0.2 (0.1) (0.1)
Profit before tax from continuing operations
23.9 22.2 42.1
Income tax expense 6 (4.8) (11.7) (17.2)
Profit after tax for the period from continuing operations
19.1 10.5 24.9
Discontinued operations(1)
Profit after tax for the period from discontinued operations
5 - 9.5 9.5
Profit for the period attributable to shareholders of the parent company
19.1 20.0 34.4
(1) Discontinued operations during the 52 week period ended 28 March 2022
related to the sale of 56 tenanted pubs.
Pence Pence Pence
Earnings per 12.5p ordinary share
Basic 7 32.66 34.20 58.83
Diluted 7 32.64 34.20 58.80
Earnings per 12.5p ordinary share for continuing operations
Basic 7 32.66 17.96 42.58
Diluted 7 32.64 17.95 42.56
Group statement of comprehensive income
For the 26 weeks ended 26 September 2022
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Notes £m £m £m
Profit for the period 19.1 20.0 34.4
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Unrealised gain on revaluation of property - - 28.7
Remeasurement of retirement benefit schemes 12 (12.8) 1.1 17.2
Tax on above components of other comprehensive income 6 3.2 (14.9) (25.3)
Items that will be reclassified subsequently to profit or loss:
Fair value movement of interest rate swaps 6.2 1.2 5.2
Tax on fair value movement of interest rate swaps 6 (1.5) (0.1) (1.1)
(4.9) (12.7) 24.7
Total comprehensive income attributable to shareholders of the parent company
14.2 7.3 59.1
Total comprehensive income/(loss) attributable to shareholders of the parent
company from continuing operations
14.2 (2.2) 49.6
Total comprehensive income attributable to shareholders of the parent company
from discontinued operations
- 9.5 9.5
Group balance sheet
At 26 September 2022
Restated Restated
Unaudited unaudited audited
at 26 Sep at 27 Sep at 28 Mar
2022 2021 2022
Notes £m £m £m
Non-current assets
Goodwill 11 32.5 32.5 32.5
Property and equipment 10 824.1 732.7 808.0
Right-of-use assets 11 145.0 149.0 147.0
Derivative financial instruments 5.4 - 2.2
Retirement benefit schemes 12 1.8 - 14.3
1,008.8 914.2 1,004.0
Current assets
Inventories 5.4 4.3 4.7
Trade and other receivables 7.7 3.9 8.9
Income tax receivable 6.0 6.5 6.2
Derivative financial instruments 2.6 - -
Cash 39.0 68.2 34.0
60.7 82.9 53.8
Total assets 1,069.5 997.1 1,057.8
Current liabilities
Borrowings (30.0) - (30.0)
Lease liabilities 11 (5.2) (4.9) (4.9)
Derivative financial instruments - (1.6) (0.3)
Trade and other payables (48.6) (39.3) (43.7)
(83.8) (45.8) (78.9)
Non-current liabilities
Borrowings (104.0) (133.7) (103.8)
Lease liabilities 11 (67.9) (69.9) (69.1)
Derivative financial instruments - (0.4) -
Deferred tax liabilities (104.1) (90.0) (104.2)
Retirement benefit schemes 12 (1.6) (4.5) (2.1)
(277.6) (298.5) (279.2)
Total liabilities (361.4) (344.3) (358.1)
Net assets 708.1 652.8 699.7
Capital and reserves
Share capital 13 7.3 7.3 7.3
Share premium 13 7.8 7.7 7.7
Capital redemption reserve 1.8 1.8 1.8
Hedging reserve 6.4 (1.3) 1.7
Revaluation reserve 249.4 228.2 249.4
Retained earnings 435.4 409.1 431.8
Total equity 708.1 652.8 699.7
Prior period comparatives have been restated (see note 1).
Group statement of changes in equity
For the 26 weeks ended 26 September 2022
Notes Share capital and premium Capital redemption reserve Hedging reserve Revaluation reserve Retained earnings Total equity
£m £m £m £m £m £m
At 28 March 2022 15.0 1.8 1.7 249.4 431.8 699.7
Total comprehensive income
Profit for the 26 week period - - - - 19.1 19.1
Other comprehensive income
Remeasurement of retirement benefit
schemes 12 - - - - (12.8) (12.8)
Fair value movement of interest rate swaps - - 6.2 - - 6.2
Tax on above components of other
comprehensive income 6 - - (1.5) - 3.2 1.7
Total comprehensive income - - 4.7 - 9.5 14.2
Transactions with owners recorded directly in equity
Issued equity 13 0.1 - - - - 0.1
Dividends paid on equity shares - - - - (6.0) (6.0)
Share based payments - - - - 0.1 0.1
0.1 - - - (5.9) (5.8)
At 26 September 2022 15.1 1.8 6.4 249.4 435.4 708.1
At 29 March 2021 14.9 1.8 (2.4) 253.6 377.5 645.4
Total comprehensive income
Profit for the 26 week period - - - - 20.0 20.0
Other comprehensive income
Remeasurement of retirement benefit
schemes 12 - - - - 1.1 1.1
Fair value movement of interest rate swaps - - 1.2 - - 1.2
Tax on above components of other
comprehensive income 6 - - (0.1) (16.5) 1.6 (15.0)
Total comprehensive income - - 1.1 (16.5) 22.7 7.3
Transactions with owners recorded directly in equity
Issued equity 13 0.1 - - - - 0.1
Revaluation reserve realised on disposal of properties - - - (8.9) 8.9 -
0.1 - - (8.9) 8.9 0.1
At 27 September 2021 15.0 1.8 (1.3) 228.2 409.1 652.8
Group statement of cash flow
For the 26 weeks ended 26 September 2022
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Notes £m £m £m
Operating activities
Net cash generated from operations 9 48.5 71.4 107.0
Tax paid (3.0) (2.9) (5.1)
Net cash flow from operating activities 45.5 68.5 101.9
Investing activities
Proceeds from disposal of property and equipment(1) - 54.4 59.7
Purchases of property and equipment 10 (18.9) (13.1) (36.9)
Business combinations, net of cash acquired 10 (9.8) - (36.9)
Net cash used in investing activities (28.7) 41.3 (14.1)
Financing activities
Issued equity, net of transaction costs 13 0.1 0.1 (9.7)
Interest paid (2.4) (4.5) 0.1
Equity dividends paid (6.0) - (5.0)
Payments of principal portion of lease liabilities (3.5) (1.9) (4.1)
Repayments of borrowings(2) - (40.0) (39.8)
Net cash flow used in financing activities (11.8) (46.3) (58.5)
Increase in cash 5.0 63.5 29.3
Cash at the beginning of the period 34.0 4.7 4.7
Cash at the end of the period 39.0 68.2 34.0
(1) During the prior 52 week period to 28 March 2022 £53.0 million related to
the sale of 56 tenanted pubs (see note 5). The remaining balance related to
other disposals of tenanted sites.
(2) During the prior 52 week period to 28 March 2022 the group repaid £30.0
million of Covid Corporate Financing Facility and £10.0 million Revolving
Credit Facility.
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTS
This interim report was approved by the board on 9 November 2022. The interim
financial statements are unaudited and are not the group's statutory accounts
as defined in s.434 of the Companies Act 2006.
The accounting policies used in the preparation of the consolidated interim
financial statements are in accordance with the recognition and measurement
criteria of international accounting standards in conformity with the
requirements of the Companies Act 2006 (UK-adopted International Accounting
Standards). These standards are applied from 29 March 2022 with no changes to
the accounting policies set out in the statutory accounts of Young & Co.'s
Brewery, P.L.C. for the period ended 28 March 2022 (IFRS), except for those
noted below. The financial statements have not been prepared (and are not
required to be prepared) in accordance with IAS 34: 'Interim Financial
Reporting', with the exception of note 6, taxation, where the tax charge for
the half year to 26 September 2022 has been calculated using an estimate of
the full year effective tax rate, in line with the principles of IAS 34. The
accounting policies have been applied consistently throughout the group for
the purposes of preparation of this financial information.
The interim report is presented in pounds sterling and all values are shown in
millions of pounds (£m) rounded to the nearest £0.1 million, except where
otherwise indicated.
Statutory accounts for the period ended 28 March 2022 have been delivered to
the Registrar of Companies. The auditor's report on those accounts was
unqualified and did not contain any reference to any matters to which the
auditor drew attention by way of emphasis without qualifying the report.
Further, that report did not contain a statement under s.498(2) or (3) of the
Companies Act 2006.
This interim report has been prepared in accordance with the AIM Rules issued
by the London Stock Exchange.
Restatement of prior periods
In accordance with the requirements of IAS 12: Income Taxes, management has
restated the deferred tax assets as at 28 March 2022 and 27 September 2021 to
be presented net against the deferred tax liabilities. The impact on the group
balance sheet at 28 March 2022 is a reduction in the deferred tax asset of
£4.1 million to £nil and a decrease in the deferred tax liability of £4.1
million to £104.2 million. This reduces the non-current asset subtotal by
£4.1 million to £1,004.0 million and the non-current liability subtotal by
£4.1 million to £279.2 million. The total assets are reduced by £4.1
million to £1,057.8 million and the total liabilities are reduced by £4.1
million to £358.1 million. The overall impact on net assets is £nil. The
impact on the unaudited group balance sheet at 27 September 2021 is a
reduction in the deferred tax asset of £6.3 million to £nil and a decrease
in the deferred tax liability of £6.3 million to £90.0 million. This reduces
the non-current asset subtotal by £6.3 million to £914.2 million and the
non-current liability subtotal by £6.3 million to £298.5 million. The total
assets are reduced by £6.3 million to £997.1 million and the total
liabilities are reduced by £6.3 million to £344.3 million. The overall
impact on net assets is £nil. There is no impact to the income statement or
cash flow statement in any period presented as a result of this adjustment.
NEW ACCOUNTING STANDARDS AND ACCOUNTING POLICIES
Other standards
The directors have adopted the following Standards, Amendments and
Interpretations listed below for the first time during the period. The
adoption of these amendments has not had a material impact on the interim
financial statements of the group:
(1 ) Amendments to IAS 16 - Property, Plant and Equipment: Proceeds
before Intended Use - effective 1 January 2022;
(2 ) Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a
Contract - effective 1 January 2022;
(3 ) Amendments to IFRS 3 - Reference to the Conceptual Framework -
effective 1 January 2022.
GOING CONCERN
At 26 September 2022, the group had cash in bank of £39.0 million and
committed borrowing facilities of £235.0 million, of which £135.0 million
was drawn down. No board decision has been made on whether to replace the
£30.0 million term loan that is due for renewal at the end of March 2023. On
this basis, for going concern purposes, the group has assumed that available
facilities will be £205.0 million at the end of the going concern period. In
addition to these committed facilities, the group has a £10.0 million
overdraft with HSBC, which is not committed, and is therefore not assumed to
continue for the purpose of this assessment.
As part of the directors' consideration of the appropriateness of adopting the
going concern basis, the group has modelled a base case and three sensitised
scenarios for the going concern period, which is defined as the 12-month
period from the date of approval of these financial statements to 27 November
2023.
The base case is the board approved forecast to March 2023 as well as the
board approved strategic plan covering April to November 2023, updated to
reflect current cost inflation. The key judgements applied are the extent of
any influence on trade because of the current economic downturn and its impact
on consumers, and the inflationary cost pressures that the hospitality
industry is currently facing. The base case model assumes the group continues
to trade as now whilst reflecting the inflationary environment that currently
exists across the going concern period. The general reduction in trade
scenario looks at a decline of 20% in sales and 25% in profit across the
period. This aims to capture the potential slowdown in consumer spending
influenced by the current cost of living crisis. The cost inflation scenario
includes an average 8% increase in the food cost base and 10% increase in
general pub operating costs for the period with no retail price increases.
Utility pricing has been held at the base case rates, given the group has
forward bought utilities to March 2024. The group has assumed capital
expenditure levels will continue at historical levels and no structural
changes to the business will be needed in any of the scenarios modelled.
In the base case; general reduction in trade; and cost inflation scenarios
there continues to be significant headroom on the group's debt facilities, and
all banking covenants are fully complied with throughout the going concern
period.
The reverse stress test focused on the decline in sales and profit that the
group would be able to absorb before breaching any financial covenants or
indeed any liquidity issues (the former being the main stress point given the
debt headroom). There would need to be a sales reduction of c.45% and profit
reduction of c.55% between December 2022 and October 2023 compared to the base
case, a reduction far in excess of those experienced historically (with the
exception of the restricted covid-19 period), before there is a breach of
financial covenants in the period and is calculated before reflecting any
mitigating actions such as reduced capital expenditure.
The group has also considered the impact of climate change on going concern
and has determined that there is no impact on the business during the going
concern period. Aligned with the group's developing ESG strategy this will
continue to feature in future assessments, as the group determines the
potential wider impact on the asset base, capital expenditure and cost of
compliance.
Based on these forecasts and sensitivities, coupled with the current debt
levels and the ongoing debt structure in place, the board is confident that
the group is able to manage its business risks and therefore continue in
operational existence for the foreseeable future. For this reason, the group
continues to adopt the going concern basis in preparing its interim financial
statements.
2. ADJUSTING ITEMS AND OTHER FINANCIAL MEASURES
The table shows adjusting items from continuing operations.
During the period the cash flow impact of adjusting items was £1.1 million
(for the period ended 27 September 2021: £1.8 million).
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Amounts included in operating profit
Purchase costs(1) (0.8) (0.1) (2.7)
Tenant compensation(2) (0.3) (0.2) (0.2)
Net profit on disposal of properties(3) - 0.7 2.4
Upward movement on the revaluation of properties (note 10)(4) - - 5.5
Downward movement on the revaluation of properties (note 10)(4) - - (4.7)
(1.1) 0.4 0.3
Tax attributable to above adjusting items - (0.3) (0.6)
Impact of change in corporation tax rate(5) - (6.1) (6.9)
- (6.4) (7.5)
Total adjusting items after tax (1.1) (6.0) (7.2)
During the prior period tenant compensation and purchase costs related to
managed houses. Net profit on disposal of properties related to tenanted
houses. For adjusting items from discontinued operations see note 5.
( 1 ) Purchase costs related to professional fees
and stamp duty land tax arising on the acquisition of the Bedford Arms
(Rickmansworth), Merlin's Cave (Chalfont St Giles) and the Half Moon
(Windlesham). During the previous 52 week period to 28 March 2022, costs
related to the purchase of the Bull (Ditchling), Pheasant Inn (Lambourn), the
White Horse (Hascombe), the freehold of the Lamb (Bloomsbury) and the Lucky
Onion group, a group of six sites acquired on 21 February 2022. This also
included lease extensions of the Cherry Tree (Dulwich), East Hill (Wandsworth)
and Riverside House (Wandsworth). These included legal and professional fees
and stamp duty land tax.
( 2 ) Tenant compensation was paid to the tenants
of an unlicensed property (Ealing) to terminate their lease agreement early.
During the previous 52 week period to 28 March 2022, tenant compensation of
£0.2 million was paid to previous tenants of the Grand Junction Arms
(Harlesden) to terminate their lease agreement early.
( 3 ) During the previous 52 week period to 28
March 2022, the profit on disposal of properties related to the difference
between cash, less disposal costs, received from the sale of the Lord Wargrave
(Marylebone) and Grove House (Camberwell) and the carrying value of their
assets, including goodwill, at the dates of disposal, and the surrender
premium related to the lease of Prince William Henry (Southwark).
( 4 ) The net upward movement on the revaluation
of properties in the previous 52 week period to 28 March 2022 related to net
upward movements in excess of amounts recognised in equity. See note 11(1) in
the statutory accounts for the period ended 28 March 2022 for further details.
( 5 ) An increase in the corporation tax rate
from 19% to 25%, with effect from 1 April 2023, was announced in the March
2021 Budget, and substantively enacted on 24 May 2021. This has resulted in an
increase in the deferred tax liabilities and assets of the group, to the
extent they are not expected to reverse prior to 1 April 2023, with a net
charge of £6.1 million associated with the rate change. This was recognised
as an adjusting item in the tax charge for the 52 week period to 28 March 2022
as it was unrelated to the underlying trading activities of the group.
Other financial measures
The table below shows how adjusted EBITDA, adjusted operating profit and
profit before tax have been arrived at. These alternative performance measures
have been provided as the board believes that they give useful additional
measures of the group's underlying performance and are the measures that the
board uses to assess the group's performance. Other financial measures in the
prior periods exclude discontinued operations.
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Profit before tax 23.9 22.2 42.1
Adjusting items 1.1 (0.4) (0.3)
Adjusted profit before tax 25.0 21.8 41.8
Net finance costs 4.2 5.2 9.5
Finance (credit)/charge for pension obligations (0.2) 0.1 0.1
Adjusted operating profit 29.0 27.1 51.4
Depreciation and amortisation 16.0 15.6 31.1
Adjusted EBITDA 45.0 42.7 82.5
During the period, £40.0 million of adjusted operating profit related to
managed houses (in the period ended 27 September 2021: £37.1 million).
Adjusted operating loss of £11.0 million mainly related to head office costs
and was unallocated (in the period ended 27 September 2021: £10.0 million).
During the period, £55.5 million of adjusted EBITDA related to managed houses
(in the period ended 27 September 2021: £52.2 million). Adjusted negative
EBITDA of £10.5 million mainly related to head office costs and was
unallocated (in the period ended 27 September 2021: £9.5 million).
3. REVENUE
The recognition of revenue from continuing operations under each of the
group's material revenue streams is as follows:
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Sales of goods 174.7 143.6 295.9
Accommodation sales 11.5 5.5 12.3
Total revenue from contracts with customers 186.2 149.1 308.2
Rental income 0.3 0.5 0.8
Total revenue recognised 186.5 149.6 309.0
During the period, £186.1 million of revenue related to managed houses and
£0.4 million was unallocated (in the prior period ended 27 September 2021:
£148.9 million and £0.7 million respectively). Unallocated income related to
tenanted income and rental income derived from unlicensed properties.
4. GOVERNMENT GRANTS AND ASSISTANCE
During the prior period, the group was eligible for a number of government
grant schemes which were introduced to mitigate the impact of covid-19. The
impact of each scheme on the income statement was as follows:
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Government grant scheme Income statement line impacted £m £m £m
Government grant income Other income - 3.8 5.0
Coronavirus Job Retention Scheme ('CJRS') Operating costs before adjusting items
- 2.6 2.2
Total government grants rereceived - 6.4 7.2
The table above shows government grants related to continuing operations.
During the prior period, the group continued to take advantage of the business
rate holiday, saving £3.7 million, further business rate relief under the
expanded retail discount, saving £0.7 million and reduced 5% VAT on eligible
sales.
There were no such amounts relevant to the 26 week period to 26 September
2022.
5. DISCONTINUED OPERATIONS
On 2 July 2021, the board made the decision to sell most of its tenanted
estate, and the 56 sites were classified as a discontinued operation. The
disposal for a total consideration of £53.0 million occurred during the prior
52 week period to 28 March 2022 and was consistent with the group's strategy
to target growth through investment on higher turnover managed pubs and
hotels.
With the 56 out of 63 tenanted estate sites being classified as discontinued
operations, the Ram Pub Company segment is no longer presented in a segmental
reporting note. Total revenue generated from the Ram Pub Company in the prior
period was £3.2 million, of which £0.6 million related to continuing
operations and the remaining £2.6 million related to discontinued operations.
The results from discontinued operations are presented below:
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Revenue - 2.1 2.1
Rental income - 0.5 0.5
Total revenue - 2.6 2.6
Operating costs - (1.8) (1.8)
Adjusted operating profit - 0.8 0.8
Adjusting items(1) - 9.0 9.0
Profit before tax - 9.8 9.8
Income tax expense - (0.3) (0.3)
Profit after tax from discontinued operations - 9.5 9.5
(1) Adjusting items related to the difference between cash, less disposal
costs, received from the sale of the 56 sites and the carrying value of their
assets, at the date of disposal. During the previous 52 week period to 28
March 2022, the adjusting items related to the net upward movement on the
revaluation of properties in excess of amounts recognised in equity. See note
11(1) in the statutory accounts for the period ended 28 March 2022 for further
details.
Earnings per ordinary share for discontinued operations
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Number Number Number
Basic weighted average number of ordinary shares in issue 58,482,021 58,475,877 58,476,259
Dilutive potential ordinary shares from outstanding employee share options
26,920 4,890 30,877
Diluted weighted average number of shares 58,508,941 58,480,767 58,507,136
Pence Pence Pence
Basic - 16.25 16.25
Effect of adjusting items - (14.88) (14.88)
Adjusted basic - 1.37 1.37
Pence Pence Pence
Diluted - 16.24 16.24
Effect of adjusting items - (14.87) (14.88)
Adjusted diluted - 1.37 1.36
The table below shows tax charged on discontinued operations.
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Tax charged in the group income statement £m £m £m
Deferred tax
Rolled over gains on disposal of properties - 1.8 1.8
Reversal of temporary differences on revaluations - (1.5) (1.5)
Tax charge in the income statement - 0.3 0.3
The net cash flows incurred are as follows:
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Operating - 0.1 0.1
Investing - 52.5 52.5
Financing - (0.1) (0.1)
Net cash inflow - 52.5 52.5
6. TAXATION
The taxation charge for the 26 weeks ended 26 September 2022 results in an
effective tax rate of 18.5% (52 weeks ended 28 March 2022: 33.7%).
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
Tax charged in the group income statement 2022 2021 2022
£m £m £m
Current tax
Corporation tax expense 3.1 2.1 4.8
Adjustment in respect of current tax of prior periods - - (0.1)
3.1 2.1 4.7
Deferred tax
Origination and reversal of temporary differences 1.7 3.5 6.7
Change in corporation tax rate - 6.1 6.9
Adjustment in respect of prior periods - - (0.8)
1.7 9.6 12.8
Tax charge in the income statement 4.8 11.7 17.5
Deferred tax in the group income statement
Property revaluation and disposals 0.2 - 2.3
Capital allowances 1.2 1.9 2.4
Retirement benefit schemes 0.2 0.1 0.2
Trade losses - 0.6 1.0
Capital losses - 0.8 -
Share based payments 0.1 0.1 -
Change in corporation tax rate - 6.1 6.9
Tax charge in the income statement 1.7 9.6 12.8
Deferred tax in the group statement of comprehensive income
Interest rate swaps - cash flow hedge 1.5 0.2 1.0
Retirement benefit schemes (3.2) 0.2 3.3
Property revaluation and disposals - 0.2 4.8
Capital losses - (0.2) -
Change in corporation tax rate - 14.6 17.3
Tax (credit)/charge in other comprehensive income (1.7) 15.0 26.4
The income tax charge for the 52 weeks ended 28 March 2022 related to £17.2
million from continuing operations and £0.3 million from discontinued
operations.
The 2021 Budget announced an increase in the corporation tax rate from 19% to
25% with effect from 1 April 2023. This was substantively enacted on 24 May
2021. Accordingly, the deferred tax assets and liabilities at the balance
sheet date were calculated at the substantively enacted rate of 25% at the
prior period end, to the extent they were not expected to reverse before 1
April 2023. This amount was recognised as an adjusting item in the prior
period (see note 2).
The effective full year current tax rate of 12.6% is up from 8.7% in the prior
52 week period to 28 March 2022. This is below the standard rate, due largely
to the temporary differences arising from the introduction, with effect from 1
April 2021, of the capital allowances "super deduction" at 130% of eligible
expenditure and special rate allowance at 50% of eligible expenditure,
substantively enacted on 24 May 2021. The effective tax rate in the prior
period was also impacted by losses brought forward from the prior year,
utilised in the period.
7. EARNINGS PER ORDINARY SHARE
(a) Weighted average number of shares
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Number Number Number
Basic weighted average number of ordinary shares in issue 58,482,021 58,475,877 58,476,259
Dilutive potential ordinary shares from outstanding employee share options
26,920 4,890 30,877
Diluted weighted average number of shares 58,508,941 58,480,767 58,507,136
(b) Earnings attributable to shareholders of the parent company
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Profit for the period 19.1 20.0 34.4
Adjusting items 1.1 (9.4) (9.3)
Tax attributable to adjusting items - 6.7 7.8
Adjusted earnings after tax 20.2 17.3 32.9
Basic earnings per share
Pence Pence Pence
Basic 32.66 34.20 58.83
Effect of adjusting items 1.88 (4.62) (2.57)
Adjusted basic 34.54 29.58 56.26
Diluted earnings per share
Pence Pence Pence
Diluted 32.64 34.20 58.80
Effect of adjusting items 1.88 (4.62) (2.57)
Adjusted diluted 34.52 29.58 56.23
(c) Earnings from continuing operations
£m £m £m
Profit for the period 19.1 10.5 24.9
Adjusting items 1.1 (0.4) (0.3)
Tax attributable to adjusting items - 6.4 7.5
Adjusted earnings after tax 20.2 16.5 32.1
Basic earnings per share
Pence Pence Pence
Basic 32.66 17.96 42.58
Effect of adjusting items 1.88 10.26 12.31
Adjusted basic 34.54 28.22 54.89
Diluted earnings per share
Pence Pence Pence
Diluted 32.64 17.95 42.56
Effect of adjusting items 1.88 10.26 12.31
Adjusted diluted 34.52 28.21 54.87
The basic earnings per share figure is calculated by dividing the net profit
for the period by the weighted average number of ordinary shares in issue
during the period. Diluted earnings per share have been calculated on a
similar basis taking into account 26,920 (2021: 4,890) dilutive potential
shares under the group's SAYE and LTIP schemes.
Adjusted earnings per share are presented to eliminate the effect of the
adjusting items on basic and diluted earnings per share.
For basic, diluted and the effect of adjusting items on earnings per share on
discontinued operations see note 5.
8. DIVIDENDS ON EQUITY SHARES
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
Pence Pence Pence
Final dividend (previous period) 10.26 - -
Interim dividend (current period) - - 8.55
10.26 - 8.55
The table above sets out dividends that have been paid. The final dividend in
respect of the period ended 28 March 2022, at a cost of £6.0 million (for the
period ended 26 March 2021: £nil) was paid during the period. The interim
dividend, in respect of the period ended 26 September 2022, at a cost of £6.0
million (for the period ended 27 September 2021: £5.0 million), is expected
to be paid on 2 December 2022 to shareholders on the register at the close of
business on 18 November 2022.
9. NET CASH GENERATED FROM OPERATIONS AND ANALYSIS OF NET DEBT
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Profit before tax from continuing operations 23.9 22.2 42.1
Profit before tax from discontinued operations - 9.8 9.8
Finance costs 4.2 5.2 9.5
Finance (credit)/charge for pension obligations (0.2) 0.1 0.1
Operating profit 27.9 37.3 61.5
Depreciation of property and equipment 12.6 12.4 24.4
Depreciation of right-of-use assets 3.4 3.6 7.1
Movement on the revaluation of properties - - (0.8)
Net profit on disposal of properties - (9.6) (11.4)
Difference between pension service cost and cash contributions paid (0.6) (0.6) (1.2)
Share based payments - - (0.1)
Movements in working capital
- Inventories (0.7) (1.7) (2.0)
- Receivables 1.1 6.5 1.5
- Payables 4.8 23.5 28.0
Net cash generated from operations 48.5 71.4 107.0
Analysis of group net debt
At 26 Sep At 27 Sep At 28 Mar
2022 2021 2022
£m £m £m
Cash 39.0 68.2 34.0
Current borrowings and loan capital (30.0) - (30.0)
Current lease liabilities (5.2) (4.9) (4.9)
Non-current borrowings and loan capital (104.0) (133.7) (103.8)
Non-current lease liabilities (67.9) (69.9) (69.1)
Net debt (168.1) (140.3) (173.8)
10. PROPERTY AND EQUIPMENT
Fixtures,
Land & fittings &
buildings equipment Total
Cost or valuation £m £m £m
At 29 March 2021 717.9 156.2 874.1
Additions 11.5 25.4 36.9
Business combinations 35.3 1.5 36.8
Disposals(1) (44.2) (10.8) (55.0)
Fully depreciated assets (0.5) (18.3) (18.8)
Revaluation
- effect of upward movement in property valuation 40.3 - 40.3
- effect of downward movement in property valuation (10.7) - (10.7)
At 28 March 2022 749.6 154.0 903.6
Additions 5.3 13.6 18.9
Business combinations 8.6 1.2 9.8
Fully depreciated assets - (10.3) (10.3)
At 26 September 2022 763.5 158.5 922.0
Depreciation and impairment
At 29 March 2021 23.7 76.7 100.4
Depreciation charge 1.6 22.8 24.4
Disposals(1) (5.2) (5.3) (10.5)
Fully depreciated assets (0.5) (18.3) (18.8)
Revaluation
- effect of downward movement in property valuation (4.6) - (4.6)
- effect of upward movement in property valuation 4.7 - 4.7
At 28 March 2022 19.7 75.9 95.6
Depreciation charge 0.8 11.8 12.6
Fully depreciated assets - (10.3) (10.3)
At 26 September 2022 20.5 77.4 97.9
Net book value
At 29 March 2021 694.2 79.5 773.7
At 28 March 2022 729.9 78.1 808.0
At 26 September 2022 743.0 81.1 824.1
(1) During the prior period, the majority of the disposals related to the sale
of 56 tenanted pubs (see note 5).
Business combinations
During the period, the group acquired the Bedford Arms (Rickmansworth),
Merlin's Cave (Chalfont St Giles) and the Half Moon (Windlesham), which formed
business combinations for a total cash consideration of £9.8 million, which
was settled during the period. When assets are acquired, management determines
whether the assets form a business combination. Business combinations must
involve the acquisition of a business, which generally have three elements:
input, process and output. The final aggregated fair value of the identifiable
assets and liabilities of the acquired businesses were property and equipment
of £9.8 million. The group incurred £0.8 million of costs associated with
the acquisitions, which have been recorded within adjusting items (see note
2). In the prior period to 27 September 2021, the group made no business
acquisitions.
Other acquisitions
During the period the group also acquired the Wild Duck (Ewen) as an asset
acquisition for a total cash consideration of £2.7 million. In the prior
period to 27 September 2021, the group acquired the Greenwich Union
(Greenwich) for a total cash consideration of £1.5 million.
Revaluation of property and equipment
The values of the group's freehold land, buildings and fixtures and fittings
were reviewed in light of current market factors by management and by Savills,
who perform a desktop review based upon information provided by the group,
pursuant to the group's accounting policy. The group considers that the
valuation reached at 28 March 2022 still represents the best estimate of the
fair value of the estate at 26 September 2022.
Details of the methodology used in determining the group's property values are
discussed in the group's audited accounts for the 52 weeks ended 28 March
2022. The key inputs are EBITDA, a multiplier and, in some cases, underlying
property values. A sensitivity analysis has been conducted on the property
estate to give an indication of the impact of movements in the most sensitive
assumption, EBITDA. The analysis considers this single change with the other
assumptions unchanged. In practice, changes in one assumption may be
accompanied by changes in another. Changes in market values may also occur at
the same time as any changes in assumptions. This information should not be
taken as a projection of likely future valuation movements. Decreasing or
increasing the EBITDA used in the revaluation by 10% would decrease/increase
the valuation by £54.7 million.
11. LEASE LIABILITIES, RIGHT-OF-USE ASSETS AND GOODWILL
Set out below are the carrying amounts of the group's right-of-use assets and
lease liabilities and the movements during the period:
Right-of-use assets Lease
liabilities
£m £m
As at 29 March 2021 158.0 80.2
Additions 1.2 1.2
Lease amendments (5.1) (3.3)
Depreciation expense (7.1) -
Accretion of interest - 2.5
Payments - (6.6)
As at 28 March 2022 147.0 74.0
Additions 0.2 0.2
Lease amendments 1.2 1.2
Depreciation expense (3.4) -
Accretion of interest - 1.2
Payments - (3.5)
As at 26 September 2022 145.0 73.1
Right-of-use assets predominantly relate to leasehold properties, along with
motor vehicles and IT equipment.
The depreciation charge is recognised within operating costs in the income
statement.
Lease amendments in the current period largely represent upwards market rent
reviews. In the prior period, lease amendments included £0.7 million of rent
holidays treated as lease modifications which were offset against £0.7
million of rent amendments.
During the prior 52 week period to 28 March 2022 lease amendments included the
amounts disposed of in relation to the sale of 56 tenanted pubs (see note 5)
and lease modifications in respect of changes to lease terms and lease
terminations.
Impairment considerations
The group tests goodwill annually for impairment or more frequently if there
are indicators that goodwill may have been impaired. There will be an
impairment if the recoverable amount is lower than carrying value. Recoverable
amount is the higher of value in use or fair value less costs to sell. The
value in use is calculated based upon, in management's view, the most likely
recovery from the impact of covid-19 in year one, followed by a return to full
trade in year two.
At 28 March 2022, for all cash generating units except Smiths of Smithfield
Limited, cash flows assumed a 1.4% growth (2021: 1.4%) from a base of expected
FY24 EBITDA, derived from the board approved FY23 budget and the anticipated
impact of a return to normalised trading for some sites. For Smiths of
Smithfield Limited growth rates are higher over a five-year period to reflect
the arrival of Crossrail in 2022 and the opening of the Museum of London in
2025, and then revert back to a long-term growth rate of 1.4% thereafter. The
pre-tax discount rate applied to all cash flow projections was 9.2% (2021:
8.8%).
The group monitors the latest government legislation in relation to climate
related matters. At the current time, no legislation has been passed that will
significantly impact the group's impairment review. The group will adjust the
key assumptions used in value-in-use calculations and sensitivity to changes
in assumptions should a change be required.
At 28 March 2022, management performed a sensitivity analysis on the
impairment test. The impairment calculation is most sensitive to the pre-tax
discount rate and EBITDA assumptions. Given the uncertainty surrounding future
trade levels following the impact of covid-19, several scenarios were
modelled. The model included a number of assumptions, including the recovery
from covid-19 and EBITDA forecasts, and assumptions over the long-term growth
of Smiths of Smithfield Limited.
For Smiths of Smithfield Limited, the headroom would be eliminated as a result
of increasing the pre-tax discount rate to 10.4% or reducing EBITDA by 11.9%
from forecast levels. For the Geronimo Group Limited, Redcomb Pubs Limited,
Spring Pub Company Limited and 580 Limited, management considered the impact
of an increase in either the pre-tax discount rate by 1% or a reduction of
EBITDA by 10% from forecasted levels to be a reasonable change in assumptions.
With the exception of the Spring Pub Company Limited, the models are not
sensitive to these changes in variables. Specifically, increasing the pre-tax
discount rate to 9.9% or reducing EBITDA by 6.7% would result in the
elimination of headroom in Spring Pub Company Limited. Although not considered
probable, if trade continued at the current year level with no future growth
rate, no impairment would be recognised apart from for Spring Pub Company
Limited and Smiths of Smithfield Limited.
12. RETIREMENT BENEFIT SCHEMES
The table below summarises the movement in the retirement benefit schemes in
the period.
26 weeks 26 weeks 52 weeks
to 26 Sep to 27 Sep to 28 Mar
2022 2021 2022
£m £m £m
Changes in the present value of the retirement benefit schemes are as follows:
Opening surplus/(deficit) 12.2 (6.1) (6.1)
Current service cost (0.1) (0.2) (0.4)
Contributions 0.7 0.8 1.6
Finance credit/(charge) for pension obligations 0.2 (0.1) (0.1)
Remeasurement through other comprehensive income (12.8) 1.1 17.2
Closing surplus/(deficit) 0.2 (4.5) 12.2
The £12.8 million remeasurement through other comprehensive income is largely
driven by the actual return in assets being less than expected. This was
partially offset by a reduction in liabilities due to changes in market
conditions with a decrease in RPI inflation to 3.30% (28 March 2022: 3.60%)
and an increase to the discount rate to 5.60% (28 March 2022: 2.80%).
13. SHARE CAPITAL
Total share capital comprises the nominal value of the share capital issued
and fully paid of £7.3 million (2022: £7.3 million) and the share premium
account of £7.8 million (2022: £7.7 million). Share capital issued in the
period comprises a nominal value of £nil (2022: £nil) and a share premium of
£0.1 million (2022: £0.1 million).
The shares issued in the period related to the deferred annual bonus scheme.
14. POST BALANCE SHEET EVENTS
Subsequent to the period end the group acquired the trade and assets of the
Carpenters Arms (Tonbridge) and the Griffin Inn (Fletching) for a total cash
consideration of £8.4 million.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FSAEEUEESEFF