Wolverhampton& Dudley Breweries PLC
27 September 2001
THE WOLVERHAMPTON & DUDLEY BREWERIES, PLC
* Current trading in line with July profit forecast
* Good progress made in implementing re-focused strategy
* Disposals programme progressing
In accordance with its usual practice, the Board of W&DB
reports on trading for the 47-week period ended 25 August 2001
prior to the announcement of its preliminary results for the
52 weeks ending 29 September 2001 later this year.
During the year we have steadily progressed our strategy to
focus on our core community estate and two core ale brands. We
have achieved higher operating margins and improved trading
momentum throughout our business.
Group turnover in the 47 weeks ended 25 August 2001 was £515.4
million, compared with £535.4 million last year, reflecting
the tighter focus of the business: the disposal of non-core
pubs, the transfer of smaller managed pubs to tenancy, and the
concentration on higher margin business within our Brands
Division. Overall, trading conditions have been fair, with
stronger trading in the second half-year to date.
In the Retail Division, like for like sales in our core
community pub estate of 550 pubs were 2.2% ahead of last year
in the 47-week period ended 25 August 2001. In the second half-
year, trading has been strong: like for like sales were 3.8%
ahead of last year in the three months to the end of June
2001, 2.3% ahead in July 2001 and 3.1% ahead in August 2001.
Including pubs to be sold, like for like sales for the whole
estate were 1.8% ahead of last year in the 47-week period
ended 25 August 2001.
We are pressing ahead with our development plan for community
pubs - the 'Bostin Local' format. Seven were opened during
the year, and the average return on incremental capital
achieved is in excess of 25 per cent.
In the Union Pub Company, like for like sales across the
tenanted estate were 1.2% below last year in the 47-week
period ended 25 August 2001. After a slow first half-year, the
summer trading period improved: like for like sales were level
with last year in the three months to the end of June 2001,
4.5% ahead in July 2001 and 1.2% ahead in August 2001.
The Brands Division is performing in line with our
expectations given that our focus on margin and return on
capital has taken priority over volumes. Nevertheless, in the
twelve months to the end of June 2001, market share for
Banks's increased by 0.6% to 19.9% in the draught standard ale
market in the Midlands, whilst Pedigree increased share by
0.2% to 12.0% in the draught premium ale market nationally.
Group operating margins have improved as a result of changes
to the mix of businesses, tight control of costs, and improved
The trading results are expected to be in line with the profit
forecast announced on 23 July 2001.
The brewery rationalisation plan announced in April 2001
includes the disposal of Camerons brewery and the closure of
Mansfield brewery. The Camerons brewery has been sold to
Castle Eden Brewery Limited, subject to planning approvals in
relation to the Castle Eden site near Hartlepool, and the
Mansfield brewery will cease production by the end of December
2001. As previously announced, the cost savings associated
with these changes are estimated to be £4 million per year,
and approximately £16 million of capital will be released
through the disposal of sites and surplus land.
We have realised £61.8 million from the sale of pubs and sites
in this financial year to date, including the sale of 50 pubs
to Barracuda Group for £37.3 million announced on 20 September
As previously reported, the planned return of £100 million to
shareholders by the end of December 2001 is conditional on
shareholder approval and on achieving £65 million from
disposals made after 23 July 2001 out of a total of
approximately 170 pubs and sites identified for disposal.
Since 23 July 2001 we have made good progress towards our
target for disposals, having sold 68 pubs and sites for
proceeds of £44.5 million, and we are in discussions with a
number of interested parties in respect of the remaining pubs
to be sold, including Pitcher & Piano.
As indicated in July, exceptional costs (excluding those
incurred in relation to the strategic review and bid defence)
of approximately £11 million are expected to be incurred this
Defence costs incurred over the twelve-month offer period were
£9.2 million, and refinancing costs were £2.5 million.
The accounting implications of the brewery reorganisation and
disposals will be set out in the full year results.
Net debt is expected to be approximately £460 million at the
year-end, a reduction of over £200 million from a peak of £664
million in January 2000 after the acquisition of Mansfield.
This reduction reflects the strong underlying cash flow of our
businesses and the progress made towards our strategic
objective of re-focusing the business.
In the Brands Division, a focus on better quality business
resulted in a cash inflow from the free trade loan book of
£28.3 million by 25 August 2001.
We have made steady progress in restructuring the Group's
activities, notwithstanding the uncertainties and distraction
caused by Pubmaster's bid.
The planned transfer of approximately 200 smaller pubs from
the managed estate to tenancy this year is complete. In the
Union Pub Company, which now comprises 1,090 tenanted pubs,
there are future improvements in profitability that we aim to
achieve through applying uniform policies across the original
Banks's, Camerons, Marston's and Mansfield estates. Around 40
pubs have been identified for disposal.
The Retail Division is now made up of 550 core community pubs
and 67 pubs to be sold. The plans for developing the community
pub estate are underway - we now have 18 'Bostin Locals', and
37 pubs identified for conversion next year.
Although some costs are rising, notably the minimum wage,
which increases by 10.8% to £4.10 per hour from 1 October
2001, we expect further margin improvements to be made next
year. Prices in the Retail estate increased on 24 September
Commenting, Ralph Findlay, Chief Executive, said 'This has
been a year of significant progress for W&DB. The basic
integration of Marston's and Mansfield is complete. The
restructuring of the Brands Division, and of the pub
businesses, is well underway. As a result of this activity, we
have a focused group with regional strength and high quality
assets. We will continue to work hard to improve the
performance of those assets.
Our current trading is satisfactory, and we expect to meet our
previously forecast profit before taxation, exceptional items
and goodwill amortisation of £76 million - 16.9% higher than
last year. We are making good progress towards the
operational and financial targets set for each trading
We have not seen any significant impact on trading following
the atrocities in the United States on 11 September 2001, but
we will continue to monitor the markets carefully. Our
businesses are in stable markets with defensive
characteristics, and we remain confident of prospects.'
The Wolverhampton & Dudley Breweries, PLC
Ralph Findlay, Chief Executive
Jim Taylor, Finance Director
Tel: 020 7796 4133 on 27 September 2001; 01902 711811 thereafter
Keith Hann / Andrew Hayes
Tel: 020 7796 4133