PRELIMINARY RESULTS FOR THE 52 WEEKS
ENDED 29 JUNE 2019
2019: A YEAR OF GOOD STRATEGIC PROGRESS
• Solid financial performance in line with expectations
• Well established, long term strategy to build all three business divisions
• Acquired new managed pubs in North Kent area due for major economic development
• Repositioned our brand portfolio to align with growth areas of the market
• Entered into new financing structure for the long term
• Agreed future changes to Board
• Previous year was a 53 week financial year
• Statutory turnover down -6.9%. Statutory profit before tax £3.5m (2018: £12.1m)
• On adjusted 52 v 52 week basis:
• Underlying profit before tax -0.3%1
• Underlying earnings per share level2
• Encouraging start to new financial year
2
1Operating profit excluding operating charges that are either material or infrequent in nature and do not relate to the underlying performance less underlying net finance costs 2Underlying profit less attributable taxation divided by the weighted average number of ordinary shares in issue during the period. The number of shares in issue excludes those held by the Company and not allocated to employees under the Share Incentive Plan, which are treated as cancelled
FUTURE BOARD CHANGES
3
• Richard Oldfield will become Chairman in October 2020
• Richard brings significant skills and
expertise in finance, investment
and governance
• Kevin Georgel will join the Board from July 2020 • Kevin has spent over 20 years
working in the UK brewing and
pub sector
FURTHER GROWTH IN NET ASSETS AND DIVIDEND PER SHARE
• Proposed final dividend of 24.21p taking total dividend to 30.08p (2018: 29.20p), an increase of 3.0%
• This represents underlying cover of 2.0 times (2018: 2.2 times), consistent with policy
4
*
*Net assets at the balance sheet date divided by the number of shares in issue being 14,857,500 50p shares
PERFORMANCE HIGHLIGHTS
5
2019 2018* 52 wk** 53 wk
Underlying results £m £m % %
Turnover 145.8 156.6 (5.0) (6.9)
Operating profit 15.3 16.1 (2.2) (5.0)
Net finance costs (3.9) (4.3) 7.4 9.2
Profit before tax 11.4 11.8 (0.3) (3.5)
Tax rate (%) 21.1 21.3
Earnings per share (pence) 60.9 63.0 - (3.3)
Full year dividend per share (pence) 30.08 29.20 3.0
Reconciliation to statutory profit
Total items excluded from underlying results (7.9) 0.3
Statutory profit before tax 3.5 12.1
*2018 was a 53 week year **excludes impact of 53rd week – these are not statutory figures
CASH FLOW:
CONSISTENT FREE CASH GENERATION FUNDS INVESTMENT
6
• Investment of free cash flow into acquisitions
• Continued transformation of estate
• Refinancing
Internally generated free cash 21.1 18.1
Core capex (10.3) (14.0)
Acquisitions including cash on acquisition of subsidiary (8.6) (0.7)
Settlement of derivative financial instruments and new cap (9.6) -
Debt movement 5.0 (2.0)
Net cash (outflow)/inflow (2.4) 1.4
2019 £m
2018* £m
*2018 was a 53 week year
IMPROVED FINANCING STRUCTURE
7
New structure provides: • Long term certainty as
the business looks for growth
• A lower cost of debt than the debt replaced
• Improved debt maturity
profile
• Head room at year end £25.5m
BALANCE SHEET:
CONTINUED GROWTH IN NET ASSETS PER SHARE
8
2019 2018
£m £m
Fixed assets 315.5 308.7
Other assets and liabilities (18.6) (15.8)
Net debt (82.0) (74.8)
Derivative Liability (6.8) (17.0)
Shareholders funds 208.1 201.1
Net debt: Underlying EBITDA 3.5 3.0
Balance sheet gearing 39% 37%
Net assets per share £14.01 £13.53
• As part of the refinancing exercise an off balance sheet directors valuation of the pub estate was
carried out as at June 2018 indicating a surplus over book value of £24m at that time
• As accounts prepared under FRS102, IFRS16 is not currently applicable
THE STRATEGIC OPPORTUNITY
9
• A modern, well invested, balanced company
• A business that appeals to today’s consumer attitudes: independent, authentic,
community-focused
• A strong platform in beer and pubs with opportunities in both segments
• Geographically well located in the South East
• With a heartland where the population is expected to grow by more than 20% and become more affluent in the next 10 years
• Backed by a strong balance sheet and long term financing
THE ECONOMIC OPPORTUNITY
10
A LONG TERM BUSINESS
11
Thinking for the long term
• Building high quality asset
base
• Recruiting new
consumers to our brands
and pubs
• Building the Shepherd
Neame brand
Investing for the long term
• Targeting investments in
areas of economic
growth in heartland
• Raising the standard of
our pubs
• Modernising brewery
infrastructure
Financing for the long
term
• No new facilities
required until 2023
• High proportion of
debt on fixed rates of
interest
• Portion of debt in
place to 2038 to
support infrastructure
developments
A CONSISTENT STRATEGY
12
TO DEVELOP
OUR OFFER
TO ENHANCE
THE
CUSTOMER
EXPERIENCE
TO CREATE
DEMAND AND
BUILD
AWARENESS
FOR OUR
BRANDS
TO ATTRACT,
RETAIN AND
DEVELOP THE
BEST PEOPLE
TO DRIVE
FOOTFALL TO
OUR PUBS
OUR
STRATEGIC
OBJECTIVES
A DECADE OF TRANSFORMING THE PUB PROFILE
13
Average income*
2009 Acquisitions Net transfers Disposals 2019 per pub growth
Tenanted 331 16 (17) (91) 239 +42.4%
Managed 49 21 - - 70 +72.1%
Investment properties - - 17 (4) 13
Total 380 37 - (95) 322
• 100% of the estate is in the affluent south east
• 85% of pub estate is freehold
• £8.8m of investment property
*Pub profit before depreciation, amortisation, rent payable, property costs and other cost allocations
TO DRIVE
FOOTFALL
TO OUR
PUBS
RE-INVESTING TO DRIVE UP THE QUALITY OF OUR PUBS
14
• Total realised from disposals: £34.8m
• Total invested in
acquisitions: £42.6m
• Total capital invested
in existing estate: £39.3m
TO DRIVE
FOOTFALL
TO OUR
PUBS
£9.8 MILLION INVESTED IN OUR EXISTING ESTATE: MANAGED PUBS
15
The Vine, Tenterden
The Vine, Tenterden Royal Albion, Broadstairs
Marine Hotel, Tankerton
TO DRIVE
FOOTFALL
TO OUR
PUBS
16
Neptunes Hall, Broadstairs
Royal Naval Reserve, Whitstable White Horse, Hawkinge
Royal Naval Reserve, Whitstable
£9.8 MILLION INVESTED IN OUR EXISTING ESTATE:
TENANTED PUBS TO DRIVE
FOOTFALL
TO OUR
PUBS
NEW PUBS ACQUIRED IN 2019
17
Cheshire Cheese, London Horse & Groom, Wilmington
Wheatsheaf, Farnham Horse & Groom, Wilmington
TO DRIVE
FOOTFALL
TO OUR
PUBS
GROWING IN AREAS OF LONG TERM DEVELOPMENT
18
• The Crown at Rochester, a high street property in the heart of the riverside re-generation
• The Chalk Yard, a pub restaurant
hotel at Castle Hill in the centre of Ebbsfleet Garden City due to open 2021
TO DRIVE
FOOTFALL
TO OUR
PUBS
EXCELLENT PERFORMANCE IN MANAGED PUBS
19
Underlying results 2019 20182 52 wk3 53 wk
LFL sales growth1 +3.2% +1.3%
Turnover (£m) 68.8 65.3 +7.6 +5.3
Divisional underlying operating profit (£m) 9.2 8.7 +9.5 +6.0
TO DRIVE
FOOTFALL
TO OUR
PUBS
1 On a 52 vs 52 week basis 2 2018 was a 53 week year 3 Excludes impact of 53rd week. These are not statutory figures
CONSISTENT LIKE-FOR-LIKE PERFORMANCE IN TENANTED PUBS
20
Underlying results 2019 20182 52 wk3 53 wk
LFL income growth1 +2.3% +2.1%
Turnover (£m) 35.0 35.4 +1.0% (1.0)%
Divisional underlying operating profit (£m) 13.0 13.2 +0.2% (2.0)%
TO DRIVE
FOOTFALL
TO OUR
PUBS
1 On a 52 vs 52 week basis 2 2018 was a 53 week year 3 Excludes impact of 53rd week. These are not statutory figures
DEVELOPING OUR FOOD OFFER
21
• Number of new initiatives • Improved presentation of top dishes
• Expanded range of healthy, vegan or low
calorie options
• Improvements in how food offer
communicated
• Use of local food suppliers where possible
• Continue ways of working to improve speed of service #shepsfood
TO DEVELOP
OUR OFFER
TO ENHANCE
THE
CUSTOMER
EXPERIENCE
CREATING ROOMS WITH CHARACTER
22
• Refurbished 31 bedrooms out of 294 in managed estate
• The Chalk Yard in Ebbsfleet will add
17 rooms to our estate
• Occupancy in 2019 77% (2018: 79%)
and RevPAR £68 (2018: £67)
TO DEVELOP
OUR OFFER
TO ENHANCE
THE
CUSTOMER
EXPERIENCE
TRAINING AND DEVELOPING TOMORROW’S TEAM
23
• Launched apprenticeship scheme
for chefs and pub managers
• New system to support training and personal development
• On site champions for coffee,
service and social media
• Delighted with results from KAM media industry survey of licensee satisfaction
• Comprehensive compliance
package launched to support licensees
TO
ATTRACT,
RETAIN AND
DEVELOP
THE BEST
PEOPLE
REPOSITIONING THE PORTFOLIO TO GROWTH AREAS
OF THE MARKET
24
• Market evolving with world lager and craft in growth
• Cask and premium bottled ale in decline
• Demand for taste and flavour and
more hop-forward beers
• Shepherd Neame Own Brand beer
and cider volume up +0.5% • Own beer down -23.3%
• Asahi and Lidl contracts
accounted for 40,000 barrels of
the variance
TO CREATE
DEMAND
AND BUILD
AWARENESS
FOR OUR
BRANDS
MODERNISING SPITFIRE AND REFRESHING
WHITSTABLE BAY
25
TO CREATE
DEMAND
AND BUILD
AWARENESS
FOR OUR
BRANDS
INTRODUCING NEW BRANDS
26
TO CREATE
DEMAND
AND BUILD
AWARENESS
FOR OUR
BRANDS
BUILDING NEW PARTNERSHIPS
27
• In August 2019 entered into new partnership with Boon Rawd
Brewery to import and distribute Singha beer, Thailand’s original beer
• Exciting world lager in our sales portfolio which appeals to
younger, discerning and adventurous customers
• Brand is backed by top level sponsorships at Chelsea FC and Moto GP
• Good opportunities for growth over medium term
TO CREATE
DEMAND
AND BUILD
AWARENESS
FOR OUR
BRANDS
BREWING AND BRANDS: A YEAR OF TRANSITION
28
Underlying results 2019 20182 52 wk3 53 wk
Own brand beer and cider volume1 +0.5% (0.9)%
Turnover (£m) 40.7 54.4 (23.9)% (25.1)%
Divisional operating profit (£m) 0.9 2.3 (58.4)% (59.9)%
Underlying divisional EBITDA (£m) 3.0 4.4 (31.2)% (33.3)%
TO CREATE
DEMAND
AND BUILD
AWARENESS
FOR OUR
BRANDS
1 On a 52 vs 52 week basis 2 2018 was a 53 week year 3 Excludes impact of 53rd week. These are not statutory figures
ENCOURAGING START TO THE NEW YEAR
29
• Shepherd Neame is a well balanced
business with opportunities in beer and pubs
• Excellent performance in managed pubs and a year of transition in brewing and brands
• New financing gives platform for growth
• Encouraging start to new financial year
• Total managed sales growth +4.7%
and LFL managed sales up +1.6% to
14 September
• Shepherd Neame own brand beer
and cider volume up +5.8% to 14
September
• LFL tenanted pub income up +2.7%
to 31 August
QUESTIONS
RESOLUTIONS
31
RESOLUTION 1
To receive the Annual Report and
Accounts
32
RESOLUTION 1
TO RECEIVE THE ANNUAL REPORT AND ACCOUNTS
33
No of
shareholders
No of
Votes
For + Discretion 205 2,857,547 100.00%
Against - - 0.00%
100.00%
Withheld - -
19.23% of total votes cast by proxy
RESOLUTION 2
34
To declare a final dividend
RESOLUTION 2
TO DECLARE A FINAL DIVIDEND
35
No of
shareholders
No of
Votes
For + Discretion 205 2,857,547 100.00%
Against - - 0.00%
100.00%
Withheld - -
19.23% of total votes cast by proxy
RESOLUTION 3
36
To re-elect Mr J B Neame as a Director
RESOLUTION 3
TO RE-ELECT MR J B NEAME AS A DIRECTOR
37
19.07% of total votes cast by proxy
No of
shareholders
No of
Votes
For + Discretion 201 2,832,279 99.97%
Against 1 959 0.03%
100.00%
Withheld 3 24,309
RESOLUTION 4
38
To re-elect Mr G H A Barnes as a Director
RESOLUTION 4
TO RE-ELECT MR G H A BARNES AS A DIRECTOR
39
No of
shareholders
No of
Votes
For + Discretion 199 2,818,489 99.47%
Against 4 15,058 0.53%
100.00%
Withheld 2 24,000
19.07% of total votes cast by proxy
RESOLUTION 5
40
To re-elect Mr M H Templeman as a
Director
RESOLUTION 5
TO RE-ELECT MR M H TEMPLEMAN AS A DIRECTOR
41
19.14% of total votes cast by proxy
No of
shareholders
No of
Votes
For + Discretion 191 2,803,593 98.56%
Against 9 40,820 1.44%
100.00%
Withheld 6 13,134
RESOLUTION 6
42
To re-elect Mr W J Brett as a Director
RESOLUTION 6
TO RE-ELECT MR W J BRETT AS A DIRECTOR
43
No of
shareholders
No of
Votes
For + Discretion 191 1,870,096 98.46%
Against 8 29,155 1.54%
100.00%
Withheld 6 958,296
12.78% of total votes cast by proxy
RESOLUTION 7
44
To re-elect Mrs H S Riva as a Director
RESOLUTION 7
TO RE-ELECT MRS H S RIVA AS A DIRECTOR
45
19.07% of total votes cast by proxy
No of
shareholders
No of
Votes
For + Discretion 200 2,831,636 99.93%
Against 3 1,861 0.07%
100.00%
Withheld 3 24,050
RESOLUTION 8
46
To re-elect Mr R J Oldfield as a Director
RESOLUTION 8
TO RE-ELECT MR R J OLDFIELD AS A DIRECTOR
47
No of
shareholders
No of
Votes
For + Discretion 198 2,829,577 99.95%
Against 2 1,552 0.05%
100.00%
Withheld 5 25,418
19.06% of total votes cast by proxy
RESOLUTION 9
48
To re-appoint Deloitte LLP as the auditor
of the Company
RESOLUTION 9
TO RE-APPOINT DELOITTE AS AUDITOR OF THE COMPANY
49
19.20% of total votes cast by proxy
No of
shareholders
No of
Votes
For + Discretion 196 2,827,631 99.10%
Against 6 25,599 0.90%
100.00%
Withheld 3 4,317
RESOLUTION 10
50
To authorise the Directors to determine
the auditor’s remuneration
RESOLUTION 10
TO AUTHORISE THE DIRECTORS TO DETERMINE THE AUDITOR’S REMUNERATION
51
No of
shareholders
No of
Votes
For + Discretion 201 2,833,255 99.15%
Against 3 24,190 0.85%
100.00%
Withheld 1 102
19.23% of total votes cast by proxy
RESOLUTION 11
52
To authorise the Company to make
market purchases of ordinary shares of 50
pence each
RESOLUTION 11 TO AUTHORISE THE COMPANY TO MAKE MARKET PURCHASES OR ORDINARY SHARES OF 50 PENCE EACH
53
19.20% of total votes cast by proxy
No of
shareholders
No of
Votes
For + Discretion 195 2,826,489 99.06%
Against 9 26,843 0.94%
100.00%
Withheld 2 4,215