Final Results
Heavitree Brewery PLC
15 February 2006
The Heavitree Brewery PLC
Trood Lane
Matford
Exeter EX2 8YP
Telephone: 01392 217733
Contact: Mr G.J.Crocker - Finance Director and Company Secretary
Mr R.J.Glanville - Director
Date: 15 February 2006
Preliminary Notice of Results
Following a Board Meeting held today, 15 February 2006, the Directors announce
the preliminary results for the year ended 31 October 2005.
Chairman's Statement
Results
I would like to draw your attention to my opening remarks in last year's
statement. The first paragraph said this: 'The figures are distorted as costs of
some £200,000 authorised but not actually spent in 2004 have been reallocated to
2005. This money is part of the £400,000 which I mentioned in June 2004 as being
a minimum necessary spend to comply with the new regulations regarding
Disability Discrimination, Control of Asbestos and Licensing. The profit for
this year has benefited from this, but next year's will suffer the
consequences.'
This duly happened and the costs for this year under the above headings amount
to a total of £284,000.
The new Licensing Laws' procedural requirements have been completed in respect
of all of our pubs. Apart from the financial costs mentioned above, there has
been a heavy demand on the time of our senior management people, about seven
months' worth of this time in fact.
I find it hard, to say the least, to see any commensurate improvement or benefit
to anyone resulting from the new system.
The profit before tax for this year is £1,299,000 (2004 restated - £1,586,000)
which, in the circumstances, is satisfactory.
Other points to note are:
Core Company - operating profit of £1,506,000 (2004 restated - £1,994,000).
The Managed Houses (Heavitree Inns) - operating loss of £11,000 (2004 - loss
£45,000).
The American Subsidiary (Heavitree Inc) - operating loss of £6,000 (2004 - loss
£5,000).
Sales of Fixed Assets - a profit of £252,000 (2004 - £16,000).
Sales of Beer - up by 0.92% by volume.
Dividends
The Directors recommend an unchanged final dividend of 6p per Ordinary and 'A'
Limited Voting Ordinary Share. This together with the interim dividend of 3.5p
makes a total of 9.5p per share (2004 - 9.5p) for the year. If approved, the
final dividend will be paid on 7 April 2006 to shareholders on the Register at 3
March 2006.
Borrowing
At the AGM we will be seeking Shareholders' approval for a change in our
borrowing capacity as defined in the Memorandum & Articles of Association. The
proposal is fully described in the Directors' Report.
Although there is no intention of changing our present policy of borrowing
restraint, the proposal reflects the change in the real value of our pubs and
the rising cost of the vital programme of their regular refurbishment.
Heavitree Inns
The previous history of losses has been virtually eradicated. In future this
subsidiary will operate under rental arrangements more in keeping with the
accepted norm for our industry and accordingly will not be liable for a rent
charge.
Heavitree Inc
There have been no significant events during the year.
Property
The Lamb Inn, Sandford, Crediton was sold giving rise to a gross profit of
£293,000. We also purchased a cottage and a former village hall, both for the
expansion of our pub operations, at a cost of £439,000. Capital improvements
totalling £705,000 have been carried out at several of our pubs including The
Mount Pleasant Inn, Dawlish Warren; The Carpenters Arms, Ilsington; The New Inn,
Sampford Courtenay; The Crown & Sceptre, Newton St. Cyres; and The Golden Lion
Inn, Tipton St. John, with major alterations completed at The Maltsters Arms,
Clyst St. Mary and The Full Quart, Hewish, Weston-super-Mare.
Personnel
The whole team has worked tirelessly and every member of it has earned our
gratitude.
Prospects
Regulations and legislation will continue to be expensive without being
productive and there is now the possibility of a ban on smoking in every pub in
the Country. Sales in some of them could well suffer as a result. But these will
be overshadowed by the astonishing increase in costs which we will face in
honouring our pension obligations.
We started our pension scheme in 1963. Proper advice was taken and the cost of a
generous pension plan was well within our means. Longer life spans, exacerbated
by new rules about the balance of funds invested in equities as opposed to gilts
and Gordon Brown's tax raid on dividends received by pension funds, have led to
ever-increasing contributions required by the calculations of the Actuaries.
All this gives rise to a black hole which, in the course of the last few years,
has been variously estimated at £1.4 million at 1 January 2002, £4.2 million at
1 January 2005 (or £7.4 million in the event of cessation). And we still do not
have a definite figure.
We have followed professional advice on funding levels throughout the life of
the scheme and have never taken a contribution holiday.
This clearly is a very difficult situation to have to face and we continue to
take advice and consider all options. No doubt we will get through it but it is
bound to have an effect on our growth strategy. As a starting point we have
decided to adopt, one year early, FRS 17 the Accounting Standard that deals with
Retirement Benefits, thereby starting to reflect part of the problem on our
balance sheet, which at 31 October 2005 is carrying a net pension deficit of
£1,676,000.
On a brighter note, gross profits for 2006 will be boosted by some £800,000 as a
result of the sale of our shareholding in George Gale and Company Limited, which
was the subject of a successful cash offer from Fuller Smith & Turner PLC in
December 2005.
W P Tucker
Chairman
15 February 2006
Group profit and loss account
for the year ended 31 October 2005
As restated
2005 2004
Note £000 £000
Turnover 12,891 12,487
Operating profit 1,489 1,944
Profit on sale of fixed assets 252 16
Income from other fixed asset investments 13 13
Profit on ordinary activities before interest
and taxation 1,754 1,973
Other interest receivable 9 9
Interest payable (379) (298)
Other finance charges - FRS 17 (85) (98)
Profit on ordinary activities before taxation 1,299 1,586
Taxation on profit on ordinary activities (308) (495)
Profit attributable to shareholders 991 1,091
Dividends - equity and non-equity 3 (513) (510)
Profit retained for the financial year 478 581
Basic and diluted earnings per share 4 18.4p 20.1p
All revenues and costs relate to continuing operations.
Group balance sheet
at 31 October 2005
As restated
2005 2004
£000 £000
Fixed assets
Tangible assets 15,836 14,839
Investments 195 195
16,031 15,034
Current assets
Stocks 149 143
Debtors 1,299 1,608
Cash at bank and in hand 520 700
1,968 2,451
Creditors: amounts falling due within one year (9,188) (9,116)
Net current liabilities (7,220) (6,665)
Total assets less current liabilities 8,811 8,369
Creditors: amounts falling due after more than one year (272) (270)
Provisions for liabilities and charges
Deferred taxation (282) (264)
Net assets excluding pension liability 8,257 7,835
Pension liability (1,676) (1,519)
6,581 6,316
Capital and reserves
Called up share capital 291 291
Capital redemption reserve 658 658
Other reserves 72 72
Own shares reserve (730) (595)
Profit and loss account 6,290 5,890
6,581 6,316
Attributable to non-equity interests 11 11
Attributable to equity interests 6,570 6,305
Total shareholders' funds 6,581 6,316
Group statement of cash flows
for the year ended 31 October 2005
2005 2004
Note £000 £000
Net cash inflow from operating activities 5 2,616 1,785
Returns on investments and servicing of finance
Interest Paid (431) (246)
Interest received 9 9
Dividends received 13 13
Preference dividend paid (1) (1)
Net cash outflow from returns on investments
and servicing of finance (410) (225)
Taxation
Corporation tax paid (632) (330)
Return of overpayment of corporation tax - 26
(632) (304)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,786) (1,609)
Receipts from sales of tangible fixed assets 470 154
Receipts from repayment of fixed assets investments - 9
(1,316) (1,446)
Equity dividends paid (510) (502)
Financing
Consideration received by EBT on sale of shares 39 203
Consideration received by EBT on exercise of share options - 147
Consideration paid by EBT on purchase of shares (163) (595)
Repayment of directors' loans (21) (23)
Loans from directors 17 22
(128) (246)
Decrease in cash (380) (938)
Notes to the preliminary announcement
1 These figures do not constitute full accounts within the meaning of
S.240 of the Companies Act 1985. They have been extracted from the statutory
accounts for the year ended 31 October 2005, on which the auditors have issued
an unqualified audit report. The statutory accounts have not yet been delivered
to the Registrar of Companies.
2 The 2004 results have been restated following the implementation of
FRS 17 'Retirement Benefits'.
3 Dividends
2005 2004
£000 £000
Non-equity interests:
£1 11.5% Preference 1 1
Equity interests:
Interim 3.5p per Ordinary and 'A' Limited Voting
Ordinary share (2004 - 3.5p) - paid 195 199
Proposed final 6p per Ordinary and 'A' Limited Voting
Ordinary share (2004 - 6p) 335 335
Less dividends on shares held within employee share schemes (18) (25)
512 509
513 510
4 Basic and diluted earnings per share
The calculation of basic earnings per ordinary share is based on earnings of
£990,000 (2004 restated: £1,090,000), being profit after taxation for the year
of £991,000 (2004 restated - £1,091,000) less preference dividends of £1,000
(2004 - £1,000), and on 5,369,929 (2004 - 5,414,935) shares being the weighted
average number of Ordinary and 'A' Limited Voting Ordinary Shares in issue
during the year 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.
The diluted earnings per share is equal to the basic earnings per share because
the share options within the Employee Share Option Scheme are considered to be
non-dilutive potential ordinary shares.
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.
5 Group statement of cash flows
Reconciliation of operating profit to net cash inflow from operating activities:
2005 2004
£000 £000
Operating profit 1,489 1,944
Depreciation 571 503
Increase in stocks (6) (1)
Decrease/(increase) in operating debtors 309 (516)
Increase in operating creditors 241 12
Exchange gains on cash - 3
Increase in other provisions 157 15
Net pension change (145) (175)
Net cash inflow from continuing operating activities 2,616 1,785
6 Copies of the 2005 Annual Report & Accounts will be posted to shareholders
on 7 March 2006. Further copies may be obtained by contacting the Company
Secretary at The Heavitree Brewery PLC, Trood Lane, Matford, Exeter EX2 8YP. The
Annual General Meeting will be held at the Registered Office on 6 April 2006.
Ends.
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