HEAVITREE BREWERY PLC

Quarterly Report • Jun 26, 2020

National Storage Mechanism | Additional information

RNS Number : 2294R

Heavitree Brewery PLC

26 June 2020

The Heavitree Brewery PLC

Trood Lane

Matford

Exeter EX2 8YP

Date:               26 June 2020

Contact:          Graham Crocker - Managing Director - 01392 217733

Nicola McLean - Company Secretary - 01392 217733

Patrick Castle /Anita Ghanekar - Shore Capital - 0207 408 4090

Following a meeting by a duly authorised committee of the Board of Directors held today, 26 June 2020, the Directors announce the interim results for the six months ended 30 April 2020.

Chairman's statement

The request by the Prime Minister asking the public to avoid visiting pubs, and the subsequent forced closure of pubs, clubs and restaurants across the UK on March 20th 2020 has had an inevitably devastating effect on the trade as a whole and, of course, our business is not immune to the impact that has been felt by all pub companies. After the closure announcement, in a move to conserve cash within the business at this incredibly challenging time, all capital works were immediately postponed, the Board withdrew its recommendation to pay a final dividend for the year ending October 2019, the Directors volunteered and took a salary reduction and in turn, some members of our Head Office staff were placed on the Government's Coronavirus Job Retention Scheme. Whilst we all understand the reasoning for the closure, it is hard to convey the shockwave felt by all within our organisation and how saddening it has been to see our pubs standing empty during a traditionally strong trading time of the year. One of our tenants commented that in the 45 years of his family operating one of our houses, this was the first time he had ever had to close. Similar sentiments have been felt throughout our estate.

Results

Turnover for the period under review has decreased by £804,000 (23.46%) to £2,623,000.  The Group has returned an Operating Profit of £243,000 (2019: £624,000), a reduction of 61.00%.  Profit Before Tax is £184,000 (2019: £705,000) a reduction of 73.90% on the previous year.  It is worth noting that the Profit Before Tax in the previous year did include a book profit of £173,000 on, predominantly, the sale of an unlicensed property.

Dividend

The Directors do not recommend the payment of a dividend at the half-year. Once our pubs reopen and when we see trading back on a more even keel, the Board will be able to review future dividends.

Property

A small parcel of land has been sold in Christow, near Exeter for £15,000.

Prospects

Much has been written about getting the pubs open to "save our summer".  It is important to remember that, rather ominously for the second  half of our financial year, we already have two months without any trading to absorb.

Immediately following the closure, we gave some comfort to our tenants by deferring the rents that were to be collectable. Since then we have taken the decision to cancel rents completely for all our licensed houses up to the end of July 2020.  Rents will be reviewed as we go forward.  Obviously, there has been no revenue coming in from tied product sales during the period of closure.

I am most grateful to each of our staff members for the calm and considered response to the closure and to the changes and stresses to office and day to day life that the pandemic has caused.  This approach has aided us in updating and advising all our tenants regularly to help them to navigate through an ever-changing landscape.

Barclays Bank has extended its support to our business by offering an increased overdraft facility if required, a 12 months' capital repayment holiday on our existing facility and a relaxation of the covenants attached to the original facility.  We have enjoyed a long relationship with Barclays and are appreciative of the Bank's reaction to the difficulties that have arisen from the pandemic.

At the time of writing we are reacting to the publication of the Government's "Safer Workplace Guidance for Pubs and Restaurants" following the confirmation by the Prime Minister that pubs can reopen on or after July 4th.  There will be restrictions and new practices to adhere to, each of which bring their own issues which will have to be managed.  Our team will continue to support our tenants through this next chapter, and we all look forward to the sector returning to happier times.

N H P TUCKER

Chairman

Group income statement (unaudited)

For the six months ended 30 April 2020

		6 months to 30 April 2020	6 months to 30 April 2019	Audited 12 months to 31 October 2019
	Note	£' 000	£' 000	£' 000
Revenue		2,623	3,427	7,528
Change in stocks		-	-	-
Other operating income		136	131	302
Purchase of inventories		(995)	(1,362)	(3,100)
Staff costs		(713)	(706)	(1,385)
Depreciation of property, plant and equipment		(87)	(111)	(222)
Other operating charges		(721)	(755)	(1,284)
		(2,380)	(2,803)	(5,689)
Group operating profit		243	624	1,839
Profit on sale of property, plant and equipment		15	173	184
Movements in valuation of estate and related assets		-	-	-
Group profit before finance costs and taxation		258	797	2,024
Finance income		2	2	4
Finance costs		(76)	(94)	(185)
Other finance costs-pensions		-	-	-
		(74)	(92)	(180)
Profit before taxation		184	705	1,844
Tax expense		(42)	(141)	(313)
Profit for the period		142	564	1,531
Earnings per share - basic - diluted	2	3.0p 3.0p	11.8p 11.8p	32.0p 32.0p

Group statement of comprehensive income (unaudited)

For the six months ended 30 April 2020

		6 months to 30 April 2020	6 months to 30 April 2019	Audited    12months     to  31 October       2019
		£' 000	£' 000	£' 000
Profit for the period		142	564	1,531
Items that will not be reclassified to profit or loss Fair value adjustment on investment in equity Actuarial (losses)/gains on defined benefit pension plans Tax relating to items that will not be reclassified		(9)     -	(6) -	(6) -
		(9)	(6)	(6)
Items that may be reclassified to profit or loss Exchange rate differences on translation of subsidiary undertaking Tax relating to items that may be reclassified		(2) - (2)	(5) - (5)	(2) - (2)
Other comprehensive income for the year, net of tax		131	553	1,527
Total comprehensive income attributable to: Equity holders of the parent		131	553	1,527

Group balance sheet (unaudited)

at 30 April 2020		30 April 2020 £' 000	30 April 2019 £' 000	Audited 31 October 2019 £'000
Non-current assets
Property, plant and equipment		19,364	19,064	19,177
Financial assets		32	42	41
Deferred tax asset		16	38	16
		19,412	19,144	19,234
Current assets
Trade and other receivables		915	1,322	1,344
Inventories		10	10	10
Cash and short-term deposits		45	61	51
		970	1,393	1,405
Assets held for sale		-	-	-
Total assets		20,382	20,537	20,639
Current liabilities
Trade and other payables		(452)	(918)	(953)
Financial liabilities		(1,681)	(977)	(6,087)
Income tax payable		(267)	(268)	(231)
		(2,400)	(2,163)	(7,271)
Non-current liabilities
Other payables		(296)	(274)	(284)
Financial liabilities		(4,531)	(6,011)	(37)
Deferred tax liabilities		(394)	(300)	(394)
Defined benefit pension plan		(92)	(40)	(92)
		(5,313)	(6,625)	(807)
Total liabilities		(7,713)	(8,788)	(8,078)
Net assets		12,669	11,749	12,561
Capital and reserves
Equity share capital		264	264	264
Capital redemption reserve		673	673	673
Treasury shares		(1,585)	(1,573)	(1,562)
Fair value adjustments reserve		8	17	17
Currency translation		15	10	17
Retained earnings		13,294	12,358	13,152
Total equity		12,669	11,749	12,561

Dividends

The Directors do not recommend a dividend to be paid at the half-year. 

Group statement of cash flows (unaudited)

for the six months ended 30 April 2020                                                           

		6 months to 30 April 2020	6 months to 30 April 2019	Audited 12months  to 31 October 2019
Operating activities		£' 000	£' 000	£' 000
# Profit for the period		142	564	1,531
Tax expense		42	141	313
Net finance costs		74	92	180
(Profit) on disposal of non-current assets and assets held for sale		(15)	(173)	(185)
Depreciation and impairment of property, plant and equipment		87	165	222
Exchange gain on cash, liquid resources and loan		-	-	-
Difference between pension contributions paid and recognised in the income statement		-	-	52
Decrease/(increase) in trade and other receivables		416	(30)	(72)
(Decrease)/increase in trade and other payables		(528)	(204)	(145)
Cash generated from operations		218	555	1,896
Income taxes paid		-	5	(97)
Interest paid		(76)	(94)	(184)
Net cash inflow from operating activities		142	466	1,615
Investing activities
Interest received		2	2	4
Proceeds from sale of property, plant and equipment and assets held for sale		15	229	278
Payments to acquire property, plant and equipment		(262)	(323)	(506)
Net cash(outflow)/ inflow from investing activities		(245)	(92)	(224)
Financing activities
Preference dividend paid		(1)	(1)	(1)
Equity dividends paid		-	(203)	(379)
Consideration received by EBT on sale of shares		-	-	56
Consideration paid by EBT on purchase of shares		(23)	(256)	(298)
Capital element of finance lease rental payments		(6)	(1)	(15)
Repayment of bank borrowings		(6,000)	-	-
Draw down of bank borrowings		4,500	-	-
Net cash outflow from financing activities		(1,530)	(461)	(637)
(Decrease)/increase in cash and cash equivalents		(1,633)	(87)	754
Cash and cash equivalents at the beginning of the period		(3)	(757)	(757)
Cash and cash equivalents at the period end		(1,636)	(844)	(3)
Group statement of cash flows (unaudited) (continued) for the six months ended 30 April 2020
Represented by:
Cash and short term deposits		45	61	51
Overdraft		(1,681)	(905)	(54)
		(1,636)	(844)	(3)

Group reconciliation of movements in equity (unaudited)

6 months to	Equity	Capital		Fair
30 April 2020	share	redemption	Treasury	value	Currency	Retained	Total
	capital	reserve	shares	adjustment	translation	earnings	equity
	£' 000	£' 000	£' 000	£' 000	£' 000	£' 000	£' 000
At 1November 2019	264	673	(1,562)	17	17	13,152	12,561
Profit for the period	-	-	-	-	-	142	142
Other comprehensive income for the period, net of income tax	-	-	-	(9)	(2)	-	(11)
Total     comprehensive income for the period	-	-	-	(9)	(2)	142	131
Consideration received by EBT on sale of shares	-	-	-	-	-	-	-
Consideration paid by EBT on purchase of shares	-	-	(23)	-	-	-	(23)
Gain by EBT on sale of shares	-	-	-	-	-	-	-
Equity dividend paid	-	-	-	-	-	-	-
At 30 April 2020	264	673	(1,585)	8	15	13,294	12,669

Group reconciliation of movements in equity (unaudited) - continued

6 months to	Equity	Capital		Fair
30 April 2019	share	redemption	Treasury	value	Currency	Retained	Total
	capital	reserve	shares	adjustment	Translation	earnings	equity
	£' 000	£' 000	£' 000	£' 000	£' 000	£' 000	£' 000
At 1November 2018	264	673	(1,317)	23	15	11,997	11,655
Profit for the period	-	-	-	-	-	564	564
Other comprehensive income for the period, net of income tax	-	-	-	(6)	(5)	-	(11)
Total     comprehensive income for the period	-	-	-	(6)	(5)	564	553
Consideration received by EBT on sale of shares	-	-	-	-	-	-	-
Consideration paid by EBT on purchase of shares	-	-	(256)	-	-	-	(256)
Gain by EBT on sale of shares	-	-	-	-	-	-	-
Equity dividend paid	-	-	-	-	-	(203)	(203)
At 30 April 2019	264	673	(1,573)	17	10	12,358	11,749

Group reconciliation of movements in equity (unaudited) - continued

12 months to 31 October 2019 Audited	Equity share capital £000	Capital redemption reserve £000	Treasury shares £000	Fair value adjustment reserve £000	Currency translation £000	Retained earnings £000	Total equity £000
At 1 November 2018	264	673	(1,317)	23	15	11,997	11,655
Profit for the year	-	-	-	-	-	1,531	1,531
Other comprehensive income for the year net of income tax	-	-	-	(6)	2	-	(4)
Total comprehensive
income for the year	-	-	-	(6)	2	1,531	1,527
Consideration received by EBT on sale of shares	-	-	56	-	-	-	56
Consideration paid by
EBT on purchase of shares	-	-	(298)	-	-	-	(298)
Loss by EBT on sale of shares	-	-	(3)	-	-	3	-
Equity dividends paid	-	-	-	-	-	(379)	(379)
At 31 October 2019	264	673	(1,562)	17	17	13,152	12,561

Equity share capital

The balance classified as share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital, comprising 5p Ordinary and 'A' Limited Voting Ordinary Shares.

Treasury shares

Treasury shares represent the cost of The Heavitree Brewery PLC shares purchased in the market and held by The Heavitree Brewery PLC Employee Benefit Trust ('EBT').

Notes to the interim results

1.  Basis of preparation

These unaudited interim condensed and consolidated financial statements have been prepared in accordance with IAS34 "interim financial reporting" and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  They have been prepared on the basis of the accounting policies that were complied with in the annual financial statements for the year ended 31 October 2019 except for the adoption of new accounting standards as set out below. The accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union.

These unaudited financial statements were approved and authorised for issue by a duly appointed and authorised committee of the Board of Directors on 26 June 2020.

2. Going concern

Due to the impact of Covid-19 on the Pub sector the Directors have revised budgets and cash flow forecasts.  As noted in the Chairman's statement, the Group is committed to supporting its tenants through this challenging time and has cancelled rents for all licenced houses up to the end of July 2020.  Combined with no revenue from tied product sales during the period of closure this represents a significant reduction in cash generation. 

The Board has therefore taken measures to minimise cash outflow by putting all project work and major building work on hold, withdrawing the recommendation to pay a final dividend for the year ending 31 October 2019, the Directors taking a salary reduction and making use of the Government's Coronavirus Job Retention Scheme where necessary. 

Additionally, the Directors have been in discussions with the company's bankers to provide flexibility to its existing facilities, which includes an extended overdraft facility should it be required, a twelve-month payment holiday on the term Loan, and a postponement on covenant testing.  With these measures in place, and having prepared prudent budgets and cash flow forecasts, the Board is satisfied that the Group will be able to operate within available resources for a period of at least 12 months from the date of approval of these interim financial statements.  For this reason, the Group continues to adopt the going concern basis of preparation.

3. New Standard

The following new standards have been adopted, effective from 1 November 2019:

IFRS16:  Leases.  The Group holds a small number of immaterial operating leases as a lessee and as a result there is no material impact upon adoption of the new standard.

Notes to the interim results - continued

4. Key Estimates

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:

Impairment of assets

The Directors assess impairment of assets at each reporting date on a property by property basis.  The Directors take into consideration trade performance during the year and open market value as to whether there is an indication that an asset may be permanently impaired.  When necessary external valuations are carried out.  The impact of the ongoing Covid-19 pandemic on the pub trade and the wider UK economy could have ramifications for the valuation of the Group's estate.  Given the current significant and unprecedented levels of uncertainty, the Directors' view is that it is not possible to quantify any potential impact at this time, and as such the values in these interim financial statements have not been adjusted to take into account the impact of the pandemic.

5.  Basic and diluted earnings per share

The calculation of basic earnings per ordinary share is based on earnings of £142,000 (2019: £564,000), being profit after taxation for the period, and on 4,777,939 (2019: 4,786,818) shares being the weighted average number of Ordinary and 'A' Limited Voting Ordinary Shares in issue during the period after excluding the shares owned by The Heavitree Brewery PLC Employee Benefits Trust and those shares under option pursuant to the Employee Share Option Scheme. Employee share options could potentially dilute basic earnings per share in the future but are not included in the interim calculation of dilutive earnings per share because they are antidilutive for the period presented. The Ordinary Shares and the 'A' Limited Voting Ordinary Shares have equal dividend rights and therefore no separate calculation of earnings per share for the different classes has been given.

6.  Segment information

Primary reporting format - Business segments

The primary segmental reporting format is determined to be business segments as the Group's risks and rates of return are affected predominantly by differences in the products and services provided.

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.

7.  Interim report

Copies of this announcement are available from the Company at Trood Lane, Matford, Exeter EX2 8YP. The Company's interim report for the six months ended 30 April 2020 has been posted to shareholders today and will be available on our website at www.heavitreebrewery.co.uk.

Ends.

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