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Young & Co's Brew. (YNGA)

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Thursday 19 November, 2009

Young & Co's Brew.

Half Yearly Report

RNS Number : 7364C
Young & Co's Brewery PLC
19 November 2009
 




    

19 November 2009

INTERIM RESULTS

For the 26 weeks ended 26 September 2009


Highlights




Restated


 

2009

2008



£000

£000






Revenue

67,240

66,275

+1.5%

Profit before tax

11,462

9,398

+22.0%

Adjusted profit before tax*

12,342

11,903

+3.7%

Basic earnings per share

17.43p

12.68p

+37.5%

Adjusted basic earnings per share*

17.79p

17.41p

+2.2%

Interim dividend per share

6.24p

6.12p

+2.0%


  • Good performance across the business in a challenging environment for the industry;


  • Managed house revenue up 1.7%, 0.7down like-for-like; operating profit up 0.7despite large increases in electricity and rates;


  • Managed house liquor revenue up 2.3%, flat like-for-like; food revenues up 3.1%, down 0.6% like-for-like;


  • Managed house combined liquor and food gross margins ahead of last year; 


  • Solid performance from Wells & Young'sone of Britain's leading traditional cask ale brewers by volume (Nielsen); 


  • Over £5m investment across the existing estate to maintain premium position; 


  • Highly cash generative business model; balance sheet remains robust with gearing at 39.3%; net debt reduced to £64.9m (2008: £66.1m) in spite of continued programme of investment;


  • Interim dividend increased for the 13th consecutive year;


  • Encouraging performance in the first seven weeks of the second half with managed house revenue up 0.9% on a like-for-like basis.


           Note:       All of the results above are for continuing operations. 

             The comparative figures for September 2008 have been restated as detailed in note 10(a).

    * Throughout this interim report, reference to an adjusted item means that it refers to continuing  
    operations only and has been adjusted to exclude
 (for both parent and associateexceptional items and, 
    in the case of after-tax amounts, the tax adjustment on phasing out of industrial buildings allowances.


Stephen Goodyear, Chief Executive of Young's, commented:


"Young's has turned in a good performance in a period that has seen many challenges for the pub industry.  


"Our strategy is focused on maintaining the premium position of our estate to maximise long term profitability. We have therefore resisted the temptation to chase sales through heavy discounting and this approach has served us well.


"We continue to invest in our managed and tenanted pubs, and in our hotel offering. Despite this we have achieved a small reduction in debt and have one of the strongest balance sheets amongst the quoted pub companies. We are therefore well positioned to expand our estate through acquisition as the right value enhancing opportunities become available.


"Given the current market conditions trading since the end of September has been encouraging and we believe that we are well placed to build on a positive first half performance."


For further information, please contact:


Young & Co.'s Brewery, P.L.C.

020 8875 7000

Stephen Goodyear, Chief Executive


Peter Whitehead, Finance Director




Hogarth Partnership

020 7357 9477

John Olsen / Fiona Noblet / James White




  

INTERIM RESULTS



Overview


Young's produced a good performance in the first half of the year in challenging environment for the industry. Revenues rose 1.5%, adjusted profit before tax was up 3.7%, and adjusted basic earnings per share were up 2.2% to 17.79p. On an unadjusted basis profit before tax was up 22.0%.


Notwithstanding the current economic climate, Young's has remained committed to delivering shareholder value through, amongst other things, dividend growth built on operational performance and the strength of its balance sheet. We believe we are well placed to emerge from the worst of the downturn in a strong position. We have a highly cash generative business, supported by a robust balance sheet with financial gearing of 39.3%We own the freehold of 185 of our 221 trading pubs, which assists in minimising the fixed costs in our business. Of the 36 leasehold sites, 11 have over 40 years to run with minimal rents.


We have not adopted heavy discounting measures to chase like-for-like salesWe believe we have sustained the quality of the Young's brand and we remain committed to maintaining our premium position within the marketplace, providing customers with the product range, the quality of service and the ambience of a well invested estateWe delivered a resilient like-for-like sales performance and at the same time our managed house combined gross margins for liquor and food were ahead of last year.


As a sign of confidence in the business, the board has decided to increase the interim dividend by 2.0% to 6.24p per share - the thirteenth year of interim growth. The interim dividend is expected to be paid on 18 December 2009 to shareholders on the register at the close of business on 4 December 2009.



Business review


Managed houses


Our managed pub estate accounts for 88.8% of total revenues. Managed house revenue increased 1.7% to £59.7 million, with same outlet like-for-like revenues just 0.7% behind last year. We have maintained a premium pricing policy, but profitability has suffered from large increases in electricity prices and rates. Nonetheless, operating profit is 0.7% ahead at £14.8 million and the average EBITDAR per same outlet managed house was £167,800 for the six months.


Liquor has proved the most resilient component of our revenue stream, growing in total by 2.3%, and is flat on a like-for-like basis whilst the gross margin was maintained. We believe that our diverse range of cask ales, supported by the pick of the leading lager brands, is an integral part of our success. 


Food sales have been more affected by the downturn although we still recorded a gain of 3.1% in total food revenue and only a modest 0.6% decline on a like-for-like basis. There was a positive impact from the "Dine with Wine" promotion which ran for six weeks during the summer and further food and drink promotions are planned for selected quiet periods in the second half. 


Despite the promotional activity, food margins have improved by 2.9 percentage points compared with last year; the result of better purchasing economies and software investment targeted at margin improvement. Nonetheless, we have avoided standard corporate menus within our pubs, believing that quality and freshly prepared food helps to differentiate us in today's crowded market place. We continue to promote our "Best of British" range with great emphasis on local provenance and were proud participants in September's British Food Fortnight, a national initiative to promote British agriculture and produce.


E-marketing, as in recent years, has been the cornerstone of our marketing initiatives. At the end of September we had a database in excess of 250,000 customers. With an e-marketing message sent on average once a month, this gives us over 3 million sales opportunities annually which have enabled us to establish an online dialogue and build loyalty with our customers. 


We have invested £2.8 million in managed pubs. This was partly on finishing major projects started last year at the Hare and Hounds, Sheen, the Leather Bottle, Earlsfield and the Ship, Wandsworth with £0.3 million invested in recently acquired sites. In addition, major refurbishments were carried out at the Crown, Lee, the Dog and Bull, Croydon, the Pied Bull, Streatham, the Spread Eagle, Camden, the Spring Grove, Kingston, the White Hart, Barnes and the Duke of Wellington, Portobello Road. The increase in EBITDA of the pubs refurbished last summer that have now completed their first 12 months trading post development demonstrate a 15.3% return on our investment. 


The difficult hotel market has impacted our accommodation sales with corporate bookings on Wednesday and Thursday nights being hardest hit. In total, revenue was down 13.3% and REVPAR (revenue per available room) also down 13.3% at £38.45The downturn in the hotel market, which we consider to be short term, has provided us with the opportunity to invest £1.4 million with minimal disruption and without turning away too many room sales. The major investments were at the Coach and Horses, Kew, the Duke's Head, Wallington, the Alexander Pope, Twickenham and the Windmill, Clapham; these have resulted in almost a third of our 351 hotel rooms having been upgraded during the last six months. 


To strengthen the long term position of our hotel offering we have a project underway to improve revenue management and to further establish the Young's hotel brand, as discrete but complementary component of the Young's retail proposition. We have also engaged in a direct marketing campaign to target 200,000 potential customers over and above the usual promotional activity to the Young's database. We are confident that this hotel project and these tactical marketing initiatives will help us to address the ongoing challenges in the hotel cycle and ensure that we enter the second half well equipped to meet the demands of the marketplace. 


Tenanted division 


Our tenanted pub estate represents 10.9% of total revenues and has had a comparatively strong six months given the market conditions, with like-for-like volume and revenue growth. Overall, the transfer of the Thatched HouseHammersmith to management and the closure of the Wheatsheaf, Borough Market whilst local rail networks are upgraded, have resulted in tenanted volume and revenue being down 1.8% and 0.5% respectively and the overall tenanted division'operating profit being down 4.6at £2.8 million. 


A number of new tenants have joined us, stimulating this important part of our business with new and exciting ideas. The Hope and Anchor, Brixton, where sales are up 56.5%, is a prime example of where a tenant's entrepreneurial flair, combined with our own experience, has transformed the business into a thriving pub for the benefit of its customers and local community. It is this partnership approach which is the key to our success.


A comprehensive support package is available for our tenants. This includes 17 core training courses which range from basic food hygiene, through everyday management to an advanced wine programme leading to recognised Wine and Spirit Education Trust qualifications.


Our tenants also benefit from the wide portfolio of ales and lagers supplied by Wells & Young's, complemented by a guest ale range which, during the summer, included Caledonian's Deuchars IPA and St Austell's Tribute. The value for money wine offer from Wells & Young's subsidiary, Cockburn & Campbell, has continued to be well received by both our tenants and customers.


We have never believed in chasing short term profits from the tenanted model at the expense of the long term success of our tenanted estate. Instead we have sought the best tenant for each individual pub and ensured that their share of the profit motivates and rewards their efforts in driving their business forward. With one of the highest average EBITDARs per pub in the sector£36,500 on a same outlet basis for the six months, we are confident that this is the right approach.


During the course of the summer we invested £0.9 million in our tenanted pubs. Pubs such as the Gardeners Arms, Wandsworth, the Lamb Inn, Hindon, the Malt Shovel, Dartford, the Plough Inn, Lambeth, the Britannia Tap, Kensington, the Surprise, Lambeth and the Marble Hill, Twickenham received particular attention whilst projects started last year at the Waggon and Horses, Surbiton, the Horse Pond Inn, Castle Cary and the Lord Napier, Thornton Heath were finished. Work also started on a major project at the Kings Arms, Epsom which is due to open in late November.


We welcome the decision by the Office of Fair Trading to take no further action on the tie. Whilst there still remains the possibility for Lord Mandelson to order a Competition Commission inquiry, the industry is working constructively with the Government on the critical issues affecting our business, not least those concerning tax and regulationThis represents some of the pressure on pubs but the bigger issue remains the irresponsible sale of loss leading, low priced alcohol in supermarkets and the off trade.   



Wells & Young's


Wells & Young's is our brewing partnership with Charles Wells. The brewery, based in Bedford, has had a good summer, with continued focus on both efficiency and costs in all areas of the business. This has resulted in revenue up 1.0% and our 40% share in Wells & Young's has contributed £1.8 million to Young's adjusted profit before tax. Further rationalisation of the business with the restructuring of the packaging lines has resulted in an exceptional cost of which our share is £0.1 million.


Own and licensed brand volumes brewed by Wells & Young's were flat; a comparatively strong performance given current market conditions. The business remains innovative, as witnessed by the successful introduction of Kew Gold on draught within the Young's estate. 


The wide range of cask ale and lager within the Wells & Young's portfolio is accompanied by a variety of wines and spirits available through its subsidiary, Cockburn & Campbell. This provides Young's with a point of distinction for our customers within both our managed and tenanted estate. 



Investment and finance


Increased revenues, lower finance costs and tight cost control have offset the now familiar increases in duty, utilities and regulatory burdens. Adjusted profit before tax was up 3.7% at £12.3 million and adjusted basic earnings per share were up 2.2% at 17.79p. On an unadjusted basis profit before tax was up 22.0%.


The business remains both cash generative and soundly financed. Net debt finished a little lower at £64.9 million despite investing £5.2 million in the business during the course of the summer. There is plenty of headroom within our existing £90.0 million bank facilities, none of which needs to be renegotiated until March 2013 and the majority not until March 2023. With gearing at 39.3%, we have avoided the over-leverage that has blighted some operators in the pub sector. Indeed, we believe that we have one of the stronger balance sheets amongst the publicly quoted pub companies. 


Our balance sheet is underpinned with the freehold interests of 185 of our 221 trading pubs, 122 of which are managed and 99 of which are tenantedOf the 36 leasehold sites, 11 have over 40 years to run with minimal rents. In addition, we own the freehold interests in the Wheatsheaf and the Brewery Tap, both closed as we await planning opportunities arising from the redevelopment of Wandsworth. Shortly after the period end we sold the Britannia, Barkingexchanged contracts for the Cricketers, Mitcham and the Tamworth Arms, Croydon and did not renew the lease on the Bedford ParkStreatham as, over recent years, these businesses had become increasingly unviable and we felt that our management time and capital could be applied more effectively elsewhere.


Even with a prosperous summer for our pension fund investmentsour pension fund liabilities have increased as result of the lower discount rate that is applied, a direct result of the improving conditions within the bond markets. As a result, our net pension fund deficit has risen during the course of the six months by £4.7 million to £16.4 million. 



Current trading and outlook


Trading conditions will undoubtedly remain challenging for the remainder of the financial year.  


However, we have achieved a resilient performance in the year to date, and we are working hard to drive value in our existing estate. We are continuing to invest, and are pursuing initiatives to drive profitable revenue growth, whilst remaining true to our strategy of maintaining a premium positioning that attracts a wide and diverse customer base. At the same time, we stay alert to opportunities for further expansion.  


In the first seven weeks of the second half, total managed house sales were up 0.8% and 0.9% on a like-for-like basis. We view this as an encouraging performance in the current market, and believe that we are well placed to build on a positive first half result.



Stephen Goodyear

Chief executive

19 November 2009



The 2009 interim report will be mailed to shareholders on 27 November 2009 and copies of it will be available on the Company's website and on request from the Company Secretary at the Company's registered office: Riverside House, 26 Osiers Road, Wandsworth, London, SW18 1NH (tel: 020 8875 7000).



INDEPENDENT REVIEW REPORT TO YOUNG & CO.'S BREWERY, P.L.C. 



Introduction 


We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 26 September 2009 which comprises the group income statement, the group statement of comprehensive income, the group balance sheet, the group statement of cash flow, the group statement of changes in equity and the related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 


This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.


Directors' Responsibilities 


The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.


 As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange. 


Our Responsibility 


Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 


Scope of Review 


We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 


Conclusion 


Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 26 September 2009 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with IFRS's as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.





Ernst & Young LLP
London

18 November 2009


  

Unaudited group income statement

For the 26 weeks ended 26 September 2009





Restated




26 weeks

26 weeks

52 weeks



to 

to 

to 



26 Sept 09

27 Sept 08

28 March 09


Note

£000

£000

£000

Continuing operations





Revenue


67,240 

66,275 

126,091 

Operating costs before exceptional items


(55,242)

(54,085)

(105,545)

Operating profit before exceptional items


11,998 

12,190 

20,546 

Operating exceptional items

4

(510)

(10,519)

Operating profit


11,998 

11,680 

10,027 






Share of associate's profit before exceptional items and tax


1,789 

1,368 

1,892 

Share of associate's operating exceptional items

4

(215)

(264)

(3,740)

Share of associate's tax expense


(665)

(1,731)

(685)

Share of associate's post tax result


909 

(627)

(2,533)



 

 

 

Profit before interest


12,907 

11,053 

7,494 

Finance costs


(1,348)

(2,017)

(3,788)

Finance revenue


219 

222 

Other finance (charge)/income


(98)

143 

285 

Profit before tax


11,462 

9,398 

4,213 

Taxation

5

(3,071)

(3,321)

(2,988)

Profit from continuing operations


8,391 

6,077 

1,225 

Profit from discontinued operation

2

849 

Profit for the period


8,391 

6,077 

2,074 

















Note

Pence

Pence

Pence

Earnings per 12.5p ordinary share from continuing operations

6




Basic


17.43

12.68

2.55

Diluted


17.43

12.66

2.55






Earnings per 12.5p ordinary share from continuing and discontinued operations

6




Basic


17.43

12.68

4.33

Diluted


17.43

12.66

4.33











The comparative figures for September 2008 have been restated as detailed in note 10(a).


  Unaudited group statement of comprehensive income 

For the 26 weeks ended 26 September 2009





Restated




26 weeks

26 weeks

52 weeks



to 

to 

to 



26 Sept 09

27 Sept 08

28 March 09


Note

£000

£000

£000






Profit for the period


8,391 

6,077 

2,074 






Other comprehensive income





Actuarial loss on retirement benefit schemes


(5,411)

(7,294)

(6,817)

Hedging reserve fair value movement of interest rate swap


729 

157 

(4,287)

Tax on above components of other comprehensive income

5

1,457 

2,289 

3,060 

Associate's actuarial (loss)/gain (net of deferred tax) on retirement benefit schemes


(917)

915 

(685)



(4,142)

(3,933)

(8,729)






Total comprehensive income


4,249 

2,144 

(6,655)











The comparative figures for September 2008 have been restated as detailed in note 10(a).


  Unaudited group balance sheet 

At 26 September 2009





Restated




At

At

At



26 Sept 09

27 Sept 08

28 March 09



£000

£000

£000

Non current assets





Property, plant and equipment


258,035 

264,348 

256,908 

Prepaid operating lease premiums


5,873 

5,959 

5,916 

Investment in associate


16,609 

20,053 

16,604 

Other financial asset


600 

600 

600 

Retirement benefit scheme


6,432 

6,086 

5,359 



287,549 

297,046 

285,387 

Current assets





Prepaid operating lease premiums


86 

86 

86 

Inventories


1,700 

1,609 

1,702 

Trade and other receivables


4,285 

5,395 

4,742 

Cash


1,411 

2,131 

1,519 



7,482 

9,221 

8,049 






Non current assets classified as held for sale


797 

771 

797 






Total assets


295,828 

307,038 

294,233 











Current liabilities





Borrowings


(2)

(2)

(2)

Trade and other payables


(15,035)

(17,808)

(18,798)

Income tax payable


(2,881)

(3,107)

(1,705)



(17,918)

(20,917)

(20,505)

Non current liabilities


 

 

 

Borrowings


(66,318)

(68,219)

(66,819)

Derivative financial instruments


(4,069)

(354)

(4,798)

Deferred tax


(19,362)

(23,483)

(20,788)

Retirement benefit schemes


(22,878)

(18,678)

(17,112)



(112,627)

(110,734)

(109,517)






Total liabilities


(130,545)

(131,651)

(130,022)






Net assets


165,283 

175,387 

164,211 






Capital and reserves





Share capital


6,028 

6,028 

6,028 

Share premium


1,274 

1,274 

1,274 

Other reserves


(984)

1,691 

(1,509)

Investment in own shares


(38)

(112)

(38)

Retained earnings


159,003 

166,506 

158,456 

Total equity


165,283 

175,387 

164,211 







The comparative figures for September 2008 have been restated as detailed in note 10.


  Unaudited group statement of cash flow 

For the 26 weeks ended 26 September 2009




26 weeks

26 weeks

52 weeks



to

to

to



26 Sept 09

27 Sept 08

28 March 09


Note

£000

£000

£000






Operating activities





Cash generated from operations

8

12,006 

12,593 

26,438 

Exceptional VAT on disposal of sites


(10,281)

(10,281)

Interest received


219 

222 

Income tax (paid)/tax rebates received


(1,864)

2,692 

244 

Net cash flow from operating activities


10,143 

5,223 

16,623 






Investing activities





Sales of property, plant and equipment


17 

1,415 

1,391 

Purchases of property, plant and equipment


(5,248)

(18,515)

(24,487)

Net cash used in investing activities


(5,231)

(17,100)

(23,096)






Financing activities





Interest paid


(1,322)

(1,212)

(3,431)

Equity dividends paid


(3,197)

(3,122)

(6,062)

Proceeds from exercise of share options in the employee benefit trust


88 

636 

(Decrease)/increase in borrowings


(500)

17,900 

16,500 

(Decrease)/increase in finance leases


(1)

Net cash (used in)/generated from financing activities


(5,020)

13,659 

7,643 






(Decrease)/increase in cash


(108)

1,782 

1,170 

Cash at the beginning of the period


1,519 

349 

349 

Cash at the end of the period


1,411 

2,131 

1,519 





















Analysis of group net debt





At 26 September 2009







At

At

At



26 Sept 09

27 Sept 08

28 March 09



£000

£000

£000






Cash


1,411 

2,131 

1,519 

Loan capital and finance leases


(66,320)

(68,221)

(66,821)

Net debt


(64,909)

(66,090)

(65,302)












  Unaudited group statement of changes in equity

For the 26 weeks ended 26 September 2009





Restated

Restated



26 weeks

26 weeks

52 weeks



to

to

to



26 Sept 09

27 Sept 08

28 March 09


Note

£000

£000

£000






Opening equity as previously stated


164,211 

173,942 

173,942 

Prior year adjustment to deferred tax liabilities on





impairment of properties and brands

10 

2,329 

2,329 

Opening equity as restated


164,211 

176,271 

176,271 






Total comprehensive income





Profit for the period


8,391 

6,077 

2,074 






Other comprehensive income





Actuarial loss on retirement benefit schemes


(5,411)

(7,294)

(6,817)

Hedging reserve fair value movement of interest rate swap


729 

157 

(4,287)

Tax on above components of other comprehensive income


1,457 

2,289 

3,060 

Associate's actuarial (loss)/gain (net of deferred tax) on retirement benefit schemes


(917)

915 

(685)



(4,142)

(3,933)

(8,729)






Total comprehensive income


4,249 

2,144 

(6,655)






Transactions with owners recorded directly in equity





Dividends paid on equity shares


(3,197)

(3,122)

(6,062)

Allocation of shares to employees


94 

604 

Share-based payments by associate


20 

53 



(3,177)

(3,028)

(5,405)






Closing equity


165,283 

175,387 

164,211 






The comparative figures have been restated as detailed in note 10.


  Notes:


1. Accounts


This interim report was approved by the board on 18 November 2009. The interim financial statements in it are unaudited, and are not the group's statutory accounts as defined in s. 240 of the Companies Act 1985. They have been prepared in accordance with the IFRS accounting policies as adopted by the European Union that the group expects to apply in the 2010 full year financial statements. These accounting policies are consistent with the accounting policies set out in the group's audited accounts for the 52 weeks ended 28 March 2009, with the exception of the following changes to IFRS standards which the group has adopted for the 2010 financial year:


(a) IAS 1 (Revised): Presentation of Financial Statements:


The revised standard introduces the concept of a statement of comprehensive income, which enables users of the financial statements to analyse changes in a company's equity resulting from transactions with owners separately from non-owner changes.


The statement of changes in equity is now presented as a primary statement rather than a note; the statement of recognised income and expense has been replaced by the statement of comprehensive income; and the group has opted to continue to present a separate income statement. These changes are purely in presentation and have no effect on the group's operating results and financial position.


(b) IFRS 8: Operating Segments:


From 29 March 2009, the group has adopted IFRS 8 'Operating Segments'. IFRS 8 replaces IAS 14 'Segment Reporting'.


IFRS 8 requires a company to identify segments based on the information that management uses to make decisions.


Under IFRS 8, the changes to the group financial statements are: segment results are now shown as operating profit before exceptional items and a full reconciliation between segment operating profit before exceptional items and profit before tax and discontinued operations is now disclosed.


These changes are purely in presentation and have no effect on the group's operating results and financial position.


(c) IAS 23 (Revised): Borrowing Costs:


This standard now requires the capitalisation of interest attributable to certain qualifying assets which take a substantial period of time to get ready for use. The group does not anticipate acquiring any qualifying assets and will continue to expense all interest costs.


(d) IFRIC 14: IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction:


IFRIC 14 provides guidance on the recognition of defined benefit assets in conjunction with minimum funding requirements (MFRs). The extent to which an asset may be recognised is dependent upon the entity's entitlement to a future refund or reduction in contributions, and the existence of an MFR may give rise to an additional liability if contributions are not available to the entity once they have been paid. The group believes that this amendment will have no impact on the amounts recognised under defined benefit schemes.


The board and the respective trustees of the three defined benefit schemes are working together on the future of the schemes. This is expected to involve a merger of the three schemes. The trustees of the three schemes are supportive of this.


Statutory accounts for the 52 weeks ended 28 March 2009 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report. Further, that report did not contain a statement under s. 237(2) or (3) of the Companies Act 1985 (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations).


This interim report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange. As permitted, the interim report has not been prepared in accordance with IAS 34 'Interim Financial Reporting', which is not mandatory for AIM listed groups.

  

2. Discontinued operation


The group's brewing, beer brands and wholesale operations were treated as a discontinued operation in the 2007 period, following the disposal of the Ram Brewery site and the merger of its brewing, beer brands and wholesale operations with those of Charles Wells Limited to form a new brewing business, Wells and Young's Brewing Company Limited, of which the company has a 40% share.


The table below shows the results of the discontinued operation included in the income statement of the group:




26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09


£000

£000

£000





Profit before tax




Non-operating exceptional items-restructuring costs written back

304 

Tax credit

545 

Profit from discontinued operation

849 






  3. Segmentation


The group is organised into the reportable segments referred to below. These segments are based on different resources and risks involved in the running of the group. The executive board of the group reviews each reportable segment's operating profit or loss before exceptional items for the purpose of deciding on the allocation of resources and assessing performance.  


    Managed houses - operates and runs pubs. Revenue is derived from sales of drink, food and accommodation.


    Tenanted houses - pubs owned or leased by Young's and leased or sub leased to third parties. Revenue is derived from rents payable by, and 
      sales of drink made to, tenants
.


There were no intersegment revenues between the segments in the current period, the prior period and the prior full year.



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09


£000

£000

£000





Revenue




Managed houses

59,739 

58,754 

111,415 

Tenanted houses

7,325 

7,363 

14,329 

Segment Revenue

67,064 

66,117 

125,744 

Unallocated income

176 

158 

347 

Total

67,240 

66,275 

126,091 





Operating profit before exceptional items




Managed houses

14,848 

14,743 

25,939 

Tenanted houses

2,816 

2,953 

5,815 

Segment operating profit before exceptional items

17,664 

17,696 

31,754 

Unallocated expense

(5,666)

(5,506)

(11,208)

Total

11,998 

12,190 

20,546 





Share of associate's post tax result

909

(627)

(2,533)

Finance costs

(1,348)

(2,017)

(3,788)

Finance revenue

219 

222 

Other finance (charge)/income

(98)

143 

285 

Operating exceptional items

(510)

(10,519)

Profit before tax from continuing operations

11,462 

9,398 

4,213 

Profit before tax from discontinued operation

304 

Profit before tax 

11,462 

9,398 

4,517 










  

4. Exceptional items



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09


£000

£000

£000





(a) Operating exceptional items








Profit on sales of properties

961 

925 

Impairment of properties

(1,461)

(10,671)

Capital gains tax on ESOP allocated shares

(10)

(90)

Hotel project fees written off

(683)


(510)

(10,519)









(b) Share of associate's operating exceptional items








Reorganisation costs

(121)

(264)

(605)

Fair value movement on foreign exchange forward contracts

(290)

421 

Fair value movement on interest rate swap

196 

(788)

Impairment of property

(2,768)


(215)

(264)

(3,740)






The associate's reorganisation costs arise from the restructuring of its packaging lines. In addition, with such volatility in the foreign exchange and financial markets, there have been large movements in the fair value of foreign exchange and interest rate contracts.

  5. Taxation



Restated



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09


£000

£000

£000

(a) Tax (charged)/credited in the income statement








(i) Continuing operations








Current tax




Group excluding associate

(3,040)

(2,982)

(4,508)

Adjustment in respect of prior periods

(161)

Total current tax

(3,040)

(2,982)

(4,669)





Deferred tax




Deferred tax on impairment of properties (see note 10(a))

409 

2,435 

Origination and reversal of temporary differences

(31)

(294)

(210)

Adjustment on phasing out of industrial buildings allowances

(472)

(472)

Adjustment in respect of prior periods

18 

(72)

Total deferred tax

(31)

(339)

1,681 




 

Tax charge in the income statement on continuing operations

(3,071)

(3,321)

(2,988)





(ii) Discontinued operation








Current tax




Current tax

495 

Adjustment in respect of prior periods

50 

Current tax credit in the income statement on discontinued 

545 

   operation




 

Tax charge in the income statement

(3,071)

(3,321)

(2,443)





(b) Tax (charged)/credited on group components of other comprehensive income








Current tax movement on share based payments

69 

165 





Deferred tax




Retirement benefit schemes

1,516 

2,042 

1,908 

Property revaluation - movement due to indexation

145 

289 

(39)

Interest rate swaps

(204)

(44)

1,200 

Movement on share based payments

(67)

(174)

Total deferred tax

1,457 

2,220 

2,895 




 

Tax credit on group components of other comprehensive income

1,457 

2,289 

3,060 





(c) Deferred tax (charged)/credited in the income statement








Continuing operations




Capital allowances

169 

(429)

52 

Impairment of properties (see note 10(a))

409 

2,435 

Other tax provisions

(157)

(645)

Retirement benefit schemes

(200)

60 

(43)

Rolled over gains

(222)

(118)

Total deferred tax in the income statement

(31)

(339)

1,681 





The comparative figures for September 2008 have been restated as detailed in note 10(a).


6. Earnings per 12.5p ordinary share




Restated



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09





(a) Earnings

£000

£000

£000





Profit from continuing operations

8,391 

6,077 

1,225 

Profit from discontinued operation

849 

Profit for the period

8,391 

6,077 

2,074 





Profit from continuing operations

8,391 

6,077 

1,225 

Operating exceptional items

510 

10,519 

Share of associate's exceptional items

215 

264 

3,740 

Tax attributable to above adjustments

(42)

(260)

(3,917)

Tax adjustments on phasing out of industrial buildings allowances




- group

472 

472 

- share of associate

1,279 

1,279 

Adjusted earnings after tax from continuing operations

8,564 

8,342 

13,318 






Number

Number

Number





Weighted average number of ordinary shares in issue

48,128,692 

47,913,594 

47,951,096 

Add: the notional exercise of the weighted average number




of ordinary share options outstanding during the period

85,687 

Diluted weighted average number of ordinary shares in issue

48,128,692 

47,999,281 

47,951,096 





(b) Basic earnings per share

Pence

Pence

Pence





Basic from continuing operations

17.43 

12.68 

2.55 

Effect of exceptional items and other adjustments listed above

0.36 

4.73 

25.22 

Adjusted basic from continuing operations

17.79 

17.41 

27.77 





Basic from continuing operations

17.43 

12.68 

2.55 

Basic from discontinued operation

1.78 

Basic

17.43 

12.68 

4.33 





(c) Diluted earnings per share

Pence

Pence

Pence





Diluted from continuing operations

17.43 

12.66 

2.55 

Effect of exceptional items and other adjustments listed above

0.36 

4.72 

25.22 

Adjusted basic from continuing operations

17.79 

17.38 

27.77 





Diluted from continuing operations

17.43 

12.66 

2.55 

Diluted from discontinued operation

1.78 

Diluted

17.43 

12.66 

4.33 


The comparative figures for September 2008 have been restated as detailed in note 10(a).


The weighted average number of shares in issue excludes the group's investment in its own shares. 





7. Ordinary dividends on equity shares



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09






Pence

Pence

Pence





Final dividend (previous year)

6.63 

6.50 

6.50 

Interim dividend (current year)

6.12 


6.63 

6.50 

12.62 







8. Net cash generated from operations



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09


£000

£000

£000





Profit before tax on continuing operations

11,462 

9,398 

4,213 

Net finance costs

1,347 

1,798 

3,566 

Other finance charge/(income)

98 

(143)

(285)

Share of associate's post tax results

(909)

627 

2,533 

Operating profit on continuing operations

11,998 

11,680 

10,027 

Depreciation

4,111 

3,980 

8,105 

Impairment of properties

1,461 

10,671 

Profit on sales of properties

(961)

(925)

Difference between pension service cost and cash contributions paid

(816)

353 

133 

Allocation of shares to employees

Provision for capital gains tax on ESOP allocated shares

10 

90 

Movements in working capital




Inventories

(112)

(209)

Receivables

500 

(556)

179 

Payables

(3,796)

(3,268)

(1,633)

Net cash generated from operations

12,006 

12,593 

26,438 






  

9. Adjusted profit before tax


The table below shows how adjusted group profit before tax has been arrived at. This alternative performance measure has been provided as the board believes that it gives a useful additional indication of underlying performance.



26 weeks

26 weeks

52 weeks


to

to

to


26 Sept 09

27 Sept 08

28 March 09


£000

£000

£000









Profit before tax

11,462 

9,398 

4,213 

Operating exceptional items

510 

10,519 

Share of associate's operating exceptional items

215 

264 

3,740 

Share of associate's tax expense

665 

1,731 

685 

Adjusted profit before tax

12,342 

11,903 

19,157 







10. Restatement of comparative figures


In line with the restatements of the comparative figures in the statutory accounts to 28 March 2009, the comparative figures for September 2008 have been restated as follows:


(a) In the group income statement, the tax charge has been credited with £409,000 in respect of the release of deferred tax on impairment of properties for the prior period. In the group balance sheet, deferred tax liability and retained earnings have been restated accordingly.


(b) In the group balance sheet, the deferred tax liability has been reduced, and retained earnings have been increased, by £2,329,000 in respect of the release of deferred tax on impairment of properties and brands up to 29 March 2008.


(c) In the group balance sheet, the comparative figure relating to retirement benefit schemes has been restated. The net deficit on the three schemes has been split to show the deficit on the staff and works and healthcare schemes among non current liabilities and the surplus on the Ram Brewery Trust scheme among non current assets. This prior year adjustment corrects the classification of the pension schemes on the group balance sheet. Net assets are unaffected by this change in presentation.



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