Final Results
Young & Co's Brewery PLC
05 June 2003
YOUNG & CO.'S BREWERY, P.L.C.
5th June 2003
PRELIMINARY RESULTS
FOR THE 52 WEEKS TO 29 March 2003
Financial highlights
• Turnover increased to £107.8 million up 1.5%
• Operating profit £12.0 million up 2.5%
• Adjusted profit before tax £8.6 million* up 0.1%
• Adjusted EBITDA of £19.3 million* up 2.7%
• Profit before tax £9.4 million up 6.1%
• Adjusted earnings per share of 46.39p* up 1.5%
• Dividend per share increased to 21.40p up 5.2%
• Net assets per share £11.85 up 2.2%
* Adjusted to exclude non-operating exceptional items
Operational highlights
• Maintained sales and profitability in challenging year;
• Young's Bitter volumes up 6.6% following relaunch, but total Young's
beer production remains steady compared with a decline in the overall beer
market;
• Prudent management of the retail estate sees nine pubs transferred to
tenancy, with a further 13 transfers planned for the coming year;
• Free trade and exports now represent 60.8% of own beer volumes, a
reflection of the growing strength of the Young's brands (5 years ago it was
49.6%)
• £16.5 million invested in the business in 2003, of which £13.8 million
was spent on acquisitions and the refurbishment of the retail estate. Ample
scope for continued investment where opportunities arise, but current price
expectations for pubs of the quality that Young's seeks are too high;
• As announced on 18 March 2003, Stephen Goodyear is to succeed Patrick
Read as Chief Executive following his retirement after the Young's AGM on 15
July 2003.
John Young, Chairman, commented:
'It is hard to imagine a more challenging set of market conditions than those
which faced the business during the past year. It is a testament to everyone at
Young's that trade held up so well. We expect a rather more stable, albeit still
challenging environment going forward, but it is too early to predict how the
year will turn out. However, we believe that as and when conditions do start to
improve, the steps we have taken and continue to take will put us in a good
position to benefit.'
For further information, please contact:
Patrick Read, Chief Executive Young & Co.'s Brewery, P.L.C. 020 8875 7000
Peter Whitehead, Finance Director Young & Co.'s Brewery, P.L.C. 020 8875 7000
James Longfield / Chelsea Hayes Hogarth Partnership 020 7357 9477
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Operational review
In many respects 2003 was not an easy year, but despite this Young's has managed
to maintain sales and profitability. Turnover was up 1.5 per cent to £108
million. Operating profit was up 2.5 per cent at £12 million. Profit before tax,
once adjusted to exclude non-operating exceptional items, was marginally above
last year at £8.6 million.
The annual general meeting on 15 July 2003 will be asked to approve a final
dividend of 11.10p, making a total for the year of 21.40p, up 5.2 per cent. This
increase reflects the board's continued confidence in the long-term future of
the business and is an integral part of our strategy of delivering long-term
value to shareholders.
Brewing and brands
Own beer production was level with last year in a market that once more was in
decline. Young's Bitter volumes were up 6.6%, following the successful relaunch
of our flagship brand last spring. Other large increases came from Waggledance,
up 8.5% and Winter Warmer, up 21.2%.
During the course of the year we promoted Young's Bitter through an Underground
and roadside poster campaign with the slogan 'How would you describe the taste?'.
This continues the irreverent tone of previous campaigns promoting a
traditional but quirky image.
The quality of our products was once more recognised by independent judges. Our
brewers won the Tesco Beer Challenge for a bottle conditioned lager called
Young's Champion and both Double Chocolate Stout and Elysium won silver medals
in their classes in the International Beer and Cider Competition 2003.
We aim to repeat the success of our relaunch of Young's Bitter with Young's
Special, our premium cask ale brand, which will continue to be brewed with the
finest natural English ingredients but which has been refined to create a
lighter and more refreshing beer. It will also have a new pump clip, designed to
combine the Young's ram, a hallmark for quality ales, with a horse brass to
emphasise the tradition of Britain's oldest brewery.
Managed pubs and inns
Managed house profits increased by 2.9% despite turnover remaining level with
last year. Reduced tourism, job losses in the City and economic and political
uncertainty have all contributed to tough trading conditions throughout the
year. These have been exacerbated by the impact of a full year of the marked
increase in minimum wage and considerably higher insurance premiums.
Against this backdrop the reorganisation of the estate has been both prudent and
timely. During the course of the year nine pubs were transferred to tenancy,
two sites were sold, three acquired and Next Door, an Oxford site acquired last
year, was opened after extensive work. At the end of the year there were 123
pubs and inns under management.
Key marketing initiatives have been based on major sporting events such as the
World Cup and Six Nations Rugby, and we have worked hard at promoting our
products through tastings and events such as the Independent Family Brewers of
Britain Real Beer Week. New EPOS till and information systems have been
introduced to maintain a downward pressure on costs and increase efficiencies
within the pub estate.
Managed house acquisitions during the year cost £6.2 million. These included
acquiring the freeholds in three former leasehold pubs and also the Mitre in
Shaftesbury, Dunstan House in Burnham on Sea and a riverside site by Putney
Bridge. In addition we spent £2.8 million on major developments and £2.6
million on smaller developments. Redeveloped sites completed in the second half
of the year are the Duke of Devonshire in Balham, the Dukes Head at Wallington
and the Swan at Walton on Thames.
Difficulties facing the hotel industry have been well documented by others and
our hotels were not immune to reduced tourism levels. More active marketing and
higher discounting resulted in an increase in occupancy levels at 63.2%, but
like others our REVPAR was down, in our case from £40.04 to £38.91. Total
number of letting rooms increased to 355, with the addition of 19 from the
acquisition of Dunstan House and the development at the Rose and Crown in the
heart of Wimbledon village.
Tenanted houses
Profits from the tenanted business increased by 3.1%, benefiting from the
transfer of nine additional pubs from management. There will be a further 13
transfers during the coming year and the managers, some of whom will become
tenants, have already been informed.
A total of £2.2 million was invested in the tenanted estate, including the
acquisition of the Horse Pond Inn at Castle Cary, our fifth pub in Somerset and
the freehold interest in the Old Inn at Congresbury. Major developments
completed in the year are the Alma in Wandsworth, the Marquess Tavern in
Islington and the Queen Dowager in Teddington. We ended the year with 84
tenancies.
Our tenanted division was recently judged by the Publican newspaper as the 2003
Tenanted Estate of the Year in their prestigious Grosvenor House award ceremony.
Free trade and exports
Free trade has enjoyed a successful year with volumes up 4% on last year, led by
cask ale, which was up 8.3% overall and included a 21.4% increase in Young's
Bitter. This is the seventh consecutive year that we have enjoyed faster than
market growth in an extremely competitive marketplace.
Our largest channel of business, brewers and multiple pub groups, increased by
3.6% with cask ale up 6.6%. New customers include S&N Retail and the National
Union of Students. Wholesaler volume increased by 12.9%, with Young's Bitter
and Young's Special chosen as cask ale champions by the National Drinks
Distributors. Independent free trade increased by 4.7%, driven by our increased
presence in the West Country. Take home sales, which have had so much recent
success in the major supermarkets, maintained volumes overall with Waggledance
growing by 5.4%.
Export volumes were down 4.6% largely due to a decline in the US market for
British beers. However, we have achieved growth in Europe with expanding trade
in Finland, Sweden and Italy, which bodes well for future expansion of our total
exports.
Free trade and exports now represent 60.8% of our total own beer volumes, a
testament to the growing strength of our brands and compares with 49.6% 5 years
ago.
Cockburn & Campbell
Net profit increased by 7.5% as a result of continued growth in wine sales,
especially in the tied trade where volumes were up by 5.6%. Spirit volumes were
down, mainly due to the predicted drop in sales of premium packaged spirits as
the category fell out of fashion.
Wine sales to regional merchants around the UK were strong and our flagship
brand, El Coto de Rioja, was particularly successful. Free trade sales in London
were challenging. The forthcoming year will see considerable support for our
Pinehurst brand from South Africa and the launch of a major new range from
Argentina.
Our exclusive whisky brand The Royal & Ancient won the Gold Medal for the fourth
time in seven years at the International Spirits Challenge.
Pensions
Our recent triennial valuation shows the effect of falls in stock market values
and corporate bond yields. In order to retain the defined benefit scheme for
existing employees, both the company and the members will be making larger cash
contributions in future. This will increase the company's staff costs by £0.3
million next year. New employees are invited to join a stakeholder scheme.
The adoption of FRS 17 is likely to give rise to significant fluctuations in the
reported values of the pension schemes' assets and liabilities. They do not
necessarily give rise to the need for changes in the required contribution rate,
which is recommended by an independent actuary based on the expected long-term
rates of return on the schemes' assets. The FRS 17 deficit at the year-end was
£13.3 million after tax.
Investment and finance
A total of £16.5 million was invested in the business, with the majority spent
on the continued development of the retail estate. Of this total, £7.3 million
was the purchase and subsequent development of new sites and the acquisition of
the freehold interest in four leases, £6.5 million was spent on refurbishments
to established properties and the remainder was accounted for by a number of
improvements to the brewery. During the year four new sites were acquired and
three disposed of, leaving the total estate with 207 pubs of which 161 are
freeholds.
We continue to seek opportunities to increase the retail estate, but believe
that in many cases current price expectations for pubs of the quality we seek
are unrealistically high. In the absence of such investment opportunities we
have sought shareholder approval to buy our own shares and on 6 February 2003
the preference share capital was redeemed at a cost of £1.9 million and
cancelled. This was followed by the purchase of 193,636 non-voting shares at
£5.60 per share on 27 February 2003. At the year-end, Young's had net debt of
£50.6 million and gearing of 35%.
On 28 March 2003 we agreed a £15 million bank loan, which has a floating charge
over the company's assets and is repayable in instalments between 2018 and 2023.
The interest rate on the £10 million final instalment has been fixed at 5.9% per
annum.
As a consequence of these prudent initiatives Young's has in place the long-term
resources to invest for the future and enhance shareholder value either by
acquiring sensibly priced properties or investing in its own shares when such
opportunities become available.
Board changes
As announced on 18 March 2003 Patrick Read, our chief executive, retires
following the AGM in July to be replaced by Stephen Goodyear our current sales
and marketing director. Patrick has made a huge contribution to the company
over the past 35 years, a period that has seen great changes not only at Young's
but also in the brewing industry generally. His leadership, good humour and
passion for the business will be long remembered and we wish him every success
in his well-deserved retirement.
Outlook
It is hard to imagine a more challenging set of market conditions than those
which faced the business during the past year. It is a testament to everyone at
Young's that trade held up so well. We expect a rather more stable, albeit still
challenging environment going forward.
We will be opening two prime retail sites in the course of the coming year: in
Paternoster Square, behind St Paul's in the City, and a prestigious riverside
location next to Putney Bridge. In addition we are developing a further 15
bedrooms at our City Gate pub in the middle of Exeter. We will continue to
invest in the business to ensure we are ready for the upturn as and when it
arrives.
YOUNG & CO.'S BREWERY, P.L.C.
Profit and loss account
For the 52 weeks ended 29 March 2003
2003 2002
£000 £000
Turnover 107,828 106,253
Net operating costs (95,875) (94,588)
Operating profit 11,953 11,665
Non-operating exceptional items 757 227
Profit on ordinary activities before interest 12,710 11,892
Net interest charge (3,343) (3,062)
Profit on ordinary activities before tax 9,367 8,830
Tax on profit on ordinary activities (2,768) (2,665)
Profit on ordinary activities after tax 6,599 6,165
Preference dividends on non-equity shares (113) (113)
Profit attributable to ordinary shareholders 6,486 6,052
Ordinary dividends on equity shares (2,643) (2,539)
Retained profit for the financial period 3,843 3,513
Pence Pence
Basic earnings per 50p ordinary share 52.98 49.31
Effect of non-operating exceptional items (6.59) (3.62)
Adjusted earnings per 50p ordinary share 46.39 45.69
Diluted basic earnings per 50p ordinary share 52.63 48.98
The results above are all in respect of continuing operations of the company.
YOUNG & CO.'S BREWERY, P.L.C.
Statement of total recognised gains and losses
For the 52 weeks ended 29 March 2003
2003 2002
£000 £000
Profit for the financial period 6,599 6,165
Prior year adjustment arising from the adoption of
FRS 19 Deferred Tax - (635)
Total gains recognised since last report 6,599 5,530
YOUNG & CO.'S BREWERY, P.L.C.
Balance sheet
At 29 March 2003
2003 2002
£000 £000
Fixed assets 207,739 200,534
Current assets and liabilities
Stocks 4,207 4,504
Debtors 6,938 6,447
Cash - 765
11,145 11,716
Creditors: amounts falling due within one year (19,652) (16,082)
Net current liabilities (8,507) (4,366)
Total assets less current liabilities 199,232 196,168
Creditors: amounts falling due after more than one year (47,409) (45,473)
Provisions for liabilities and charges (7,229) (6,772)
144,594 143,923
Capital and reserves
Called-up share capital: equity 6,378 6,475
Non-equity - 1,361
Share premium account 1,363 1,386
Capital redemption reserve 1,458 -
Revaluation reserve 87,911 88,646
Profit & loss account 47,484 46,055
Equity shareholders' funds 144,594 142,562
Non-equity shareholders' funds - 1,361
144,594 143,923
YOUNG & CO.'S BREWERY, P.L.C.
Cash flow statement
For the 52 weeks ended 29 March 2003
2003 2002
£000 £000
Net cash inflow from operating activities 19,623 17,614
Interest received 13 19
Interest paid (3,524) (3,209)
Non-equity dividends paid (124) (113)
Returns on investments and servicing of finance (3,635) (3,303)
Corporation tax paid (2,358) (2,612)
Purchases of tangible fixed assets (16,486) (18,748)
Sales of tangible fixed assets 2,883 2,219
Capital expenditure (13,603) (16,529)
Equity dividends paid (2,595) (2,483)
Cash (outflow) before financing (2,568) (7,313)
Increase in loan capital 1,889 9,396
Repurchase of share capital (3,172) -
Increase/(decrease) in lease finance 61 (24)
Financing (1,222) 9,372
(Decrease)/increase in cash in period (3,790) 2,059
YOUNG & CO.'S BREWERY, P.L.C.
Reconciliation of net cash flow to movement in net debt
For the 52 weeks ended 29 March 2003
2003 2002
£000 £000
(Decrease)/increase in cash in period (3,790) 2,059
(Increase) in debt in period (1,950) (9,372)
(Increase) in net debt in period (5,740) (7,313)
Opening net debt (44,848) (37,535)
Closing net debt (50,588) (44,848)
Notes to the accounts
(1) Accounts
The above financial information does not amount to full accounts within the
meaning of S.240 of the Companies Act 1985. Full accounts for the period ended
30 March 2002, including an unqualified auditors' report, have been delivered to
the Registrar of Companies. The statutory accounts for the period ended 29
March 2003, including an unqualified auditors' report, will be delivered to the
Registrar of Companies.
The preliminary announcement has been prepared on the basis of the same
accounting policies as set out in the previous annual accounts.
(2) Taxation
Corporation tax has been provided on the profits for the 52 weeks to 29 March
2003 at a rate of 30% (2002: 30%).
(3) Earnings per share
Earnings per share are calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue.
The weighted average number of ordinary shares in issue, which exclude the
investment in own shares, is 12,241,918 (2002: 12,274,334).
Diluted earnings per ordinary share are calculated by adjusting basic earnings
per ordinary share to reflect the notional exercise of the weighted average
number of ordinary share options outstanding during the period. The resulting
weighted average number of ordinary shares is 12,322,681 (2002: 12,355,170).
An adjusted earnings per share figure is presented to eliminate the effect of
the non-operating exceptional items on basic earnings per share.
(4) Ordinary dividends on equity shares
2003 2002
Pence Pence
Interim dividend 10.30 9.80
Proposed final dividend 11.10 10.55
21.40 20.35
The trustees of the Ram Brewery Trust have waived their rights to dividends on
shares held within the Ram Brewery Trust General Fund on behalf of the
directors' share option schemes.
(5) Net cash inflow from operating activities
2003 2002
£000 £000
Operating profit 11,953 11,665
Depreciation 7,382 7,169
Movements in working capital
Stocks 297 (84)
Debtors (491) (542)
Creditors 482 (594)
Net cash inflow from operating activities 19,623 17,614
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