SHEPHERD NEAME LTD AGM 13 OCTOBER 2017 MILES TEMPLEMAN CHAIRMAN - - PowerPoint PPT Presentation

SHEPHERD NEAME LTD AGM 13 OCTOBER 2017

CHAIRMAN MILES TEMPLEMAN

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2017: A STRONG SET OF RESULTS AND A YEAR OF SIGNIFICANT INVESTMENT

• Strong underlying performance in all operating divisions
• Period of significant acquisition investment
• Excellent progress made against strategic objectives
• Development work to enhance own beer portfolio, modernise

brewing operation and streamline management roles

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A YEAR OF FURTHER GROWTH IN NET ASSETS AND DIVIDEND PER SHARE

• Proposed final dividend of 22.73p taking total dividend to 28.35p
• This represents underlying cover of 2.1 times.
• Cover consistent with policy stated at share capital reorganisation in 2014
• Underlying cover at or above 2 times
• Annual dividend increased from £3.2m to £4.2m since share capital

reorganisation

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FINANCE DIRECTOR MARK RIDER

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PERFORMANCE HIGHLIGHTS

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Turnover 156.2 139.9 2017 £m 2016 £m % Operating Profit 15.3 14.2 7.2 Net Finance Costs (4.1) (3.9) Profit before Tax 11.2 Statutory Profit Before Tax 0.6 4.1 (5.0) Tax Rate (%) 11.8 14.4 Earnings Per Share (pence) 21.8 21.8 Full Year Dividend per share (pence) 59.1 54.7 10.3 Total Items excluded from underlying results 27.50 28.35 8.0 3.1

Underlying results Reconciliation to statutory profit

8.0 11.7 (18.0)

DIVISIONAL PERFORMANCE: MANAGED PUBS

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LFL sales growth +8.1% +4.4% 2017 2016* % Turnover (£m) 60.7 48.1 Divisional operating profit (£m) 9.0 7.6 18.0 26.2

Underlying results

• Fastest growing operating division following continued investment
• Division has increased in size to 66 pubs (2016: 54 pubs)
• 6 pubs acquired including VGR purchase
• 8 pubs transferred from Tenanted including UES purchase
• 2 pubs transferred to Tenanted

*Segmental disclosure reflects how management monitor the performance of each division which has resulted in a re-statement of the 2016 disclosure

DIVISIONAL PERFORMANCE: TENANTED PUBS

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LFL EBITDAR** growth +1.6% +2.7% 2017 2016* % Turnover (£m) 34.4 33.5 Divisional operating profit (£m) 13.0 12.7 2.4 2.8

Underlying results

• Good growth on 14 fewer pubs
• Underlying operating profit reflects increased turnover offset by higher

repairs and decorations and depreciation

*Segmental disclosure reflects how management monitor the performance of each division which has resulted in a re-statement of the 2016 disclosure ** LFL earnings before interest, tax, depreciation, amortisation and rent payable

DIVISIONAL PERFORMANCE: BREWING AND BRANDS

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Own brewed volume ex contract growth +3.9% +0.3% 2017 2016* % Underlying divisional EBITDA (£m) 59.8 57.3 Turnover (£m) 1.6 1.6 4.4

Underlying results

Divisional operating profit (£m) 3.9 4.0

(1.4) (3.3)

• Own beer output grew ahead of market** underpinned by a strong and

diverse brand portfolio

• Underlying operating profit impacted by additional water recovery costs

*Segmental disclosure reflects how management monitor the performance of each division which has resulted in a re-statement of the 2016 disclosure ** Source: BBPA

BALANCE SHEET: STRONG BALANCE SHEET SUPPORTS RECORD CAPITAL INVESTMENT

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191.1 183.9 3.3 (60.1) Fixed Assets* 306.6 280.2 Other Assets and Liabilities (37.4) (36.2) Net Debt Shareholders Funds Net Debt : Underlying EBITDA 2.8 Balance Sheet Gearing 41% 33% 2017 £m 2016 £m Net assets per share £12.86 £12.38 (78.1)

• Long term £60m loan remains unchanged to 2026
• Further revolving credit facility of £45m in place to 2020

* Includes 87% freehold pub estate and £6.8m of investment property

CHIEF EXECUTIVE JONATHAN NEAME

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• We have outperformed the market
• LFL managed pub sales +8.1% vs

Peach Tracker Index of +1.4%

• Own beer ex contract volume

growth of +3.9% vs market -0.2%

• Whilst the weather conditions have

been favourable, with a long hot summer in 2016 and sunshine in spring 2017, market conditions have become progressively harder

• Customers seeking value and quality

experience

MARKET CONTEXT

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OUR STRATEGIC OBJECTIVES

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TO DRIVE FOOTFALL TO OUR PUBS TO DEVELOP OUR OFFER TO ENHANCE THE CUSTOMER EXPERIENCE TO ATTRACT, RETAIN AND DEVELOP THE BEST PEOPLE TO CREATE DEMAND AND BUILD AWARENESS FOR OUR BRANDS OUR STRATEGIC OBJECTIVES

FIVE YEAR REPOSITIONING OF ESTATE: CONTINUED ACTIVE PROPERTY MANAGEMENT

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Tenanted Managed Total 2012 Acquisitions Disposals 2017 Investment properties Transfers Average EBITDAR per pub growth 310 9 (18) (48) 253 +25.4% 44 13 9

• 66

+30.5%

• 9

(1) 8 354 22

• (49)

327

• 2017 pub ownership profile: 87% freehold

FIVE YEAR REPOSITIONING OF BRAND PORTFOLIO: CONTINUED DEVELOPMENT

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BUILDING BRAND IDENTITY AND AWARENESS

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FIVE YEAR REPOSITIONING OF BUSINESS: BUILDING A SUCCESSFUL MANAGED PUB BUSINESS

• Significant investment over five

years to build a successful managed pub business

• Food sales now represent 33% of

managed pub sales

• Accommodation 10% of managed

turnover from a total of 294 bedrooms in the managed estate

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TO DRIVE FOOTFALL TO OUR PUBS

We aim to drive footfall by designing and developing unique pubs and hotels with a ‘wow’ factor

DRIVING FOOTFALL TO OUR PUBS: STRONG UNDERLYING PERFORMANCE

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DRIVING FOOTFALL TO OUR PUBS: ACQUISITION OF EIGHT NEW PUBS FROM EI GROUP PLC

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Kings Head, Guildford Crown and Anchor, Shoreham The Farmhouse, West Malling Sussex Oak, Warnham

DRIVING FOOTFALL TO OUR PUBS: ACQUISITION OF FIVE NEW PUB RESTAURANTS FROM VGR

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Old Mill, Kennington Swan and Dog, Great Chart Oak on the Green, Bearsted Chequers on the Green. High Halden

DRIVING FOOTFALL TO OUR PUBS: MAJOR INVESTMENT IN MANOR FARM BARN, OSTRICH AND MINNIS BAY

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Manor Farm Barn, Southfleet Ostrich, Colnbrook Minnis Bay Bar and Brasserie, Birchington

DRIVING FOOTFALL TO OUR PUBS: TRANSFORMING THE LOOK & FEEL OF OUR TENANTED ESTATE THROUGH CONTINUED INVESTMENT

• Total spend on managed and

tenanted existing estate £10.7m (2016: £9.5m)

• Major tenanted investments at East

Kent, Whitstable, Plough, Farnham and Old House at Home, Dormansland

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Old House at Home, Dormansland East Kent, Whitstable

DRIVING FOOTFALL TO OUR PUBS: LOOKING AHEAD TO 2017/18

• Pier Five opened July 2017 at

Chatham Maritime

• Earls at Maidstone, acquired in

2017 year, will transfer from tenanted to managed estate

• Transformational investments

due to be carried out at the Anchor, Yalding and the Spitfire, West Malling

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TO DEVELOP OUR OFFER TO ENHANCE THE CUSTOMER EXPERIENCE

We aim to enhance the customer experience in our pubs by delivering great fresh food, providing accommodation of character and

• ffering an interesting range of products

DEVELOPING OUR OFFER TO ENHANCE THE CUSTOMER EXPERIENCE: CONSISTENT STRONG TRADING

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DEVELOPING OUR OFFER TO ENHANCE THE CUSTOMER EXPERIENCE: GREAT FRESH FOOD

• UES transaction transfers five pubs and

management team from tenanted to managed

• Acquisition of UES and VGR brings new

skills and ideas

• Successful new food offers at Minnis

Bay Bar and Brasserie, and Ship and Trades, Chatham Maritime

• Pubs continue to be recognised for

their excellence: three pubs in UK’s top 50 gastropubs

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DEVELOPING OUR OFFER TO ENHANCE THE CUSTOMER EXPERIENCE: ACCOMMODATION OF CHARACTER

• Development at Ostrich,

Colnbrook added 11 new bedrooms

• Refurbishment of 37 bedrooms at

Bell, Sandwich and Botany Bay, Kingsgate

• Occupancy grew to 79% (2016:

78%) and REVPAR* continues to grow to £66 (2016: £63)

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Bell Hotel, Sandwich Ostrich, Colnbrook *Revenue Per Available Room

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TO ATTRACT, RETAIN AND DEVELOP THE BEST PEOPLE

We aim to attract, retain and develop the best people by understanding the potential in everyone, inspiring them to achieve their goals and building the loyalty and engagement of our licensees, through the professionalism of the support we provide

ATTRACTING, RETAINING AND DEVELOPING THE BEST PEOPLE

• Continued high performance in

independent survey of licensees

• Recognition from BII* as one of the top

licensed trade training providers

• All managed pub staff have personal

development programmes, 500 offline and 1700 online courses delivered

• Increased investment in support at

Head Office

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TO CREATE DEMAND AND BUILD AWARENESS FOR OUR BRANDS

We aim to create demand and build awareness of our brands by developing a range of distinctive beers, instilling a passion for quality and having great engagement with our customers

BREWING AND BRANDS: 2017 MARKET VOLUME OUTPERFORMANCE

• Own beer volume ex contract

up 3.9%

• Exciting brand launches
• Investment of £0.7m in restoring

fabric and infrastructure of historic site

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CREATING DEMAND AND BUILDING AWARENESS FOR OUR BRANDS: EXTENSION OF SUCCESSFUL BRANDS

• Whitstable Bay collection grew 20.5% (2016:

19.5%) and represents 10% of own beer ex contract volumes

• Spitfire range has returned to growth of 2.2%

(2016: -3.7%) and represents 22% of own beer ex contract volumes

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CREATING DEMAND AND BUILDING AWARENESS FOR OUR BRANDS: DEVELOPMENT OF PREMIUM BRITISH BRANDS

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BREWING AND BRANDS: WE ARE BUILDING A SMALLER, HIGHER QUALITY BUSINESS FOLLOWING STRATEGIC REVIEW

• Asahi licence to end in 2018
• Modernise plant, drive cost

efficiency and productivity, and allocate more of limited capacity to own brands

• Streamline management structure.

Director role no longer required. Graeme Craig leaving the business

• Focus on parts of the market with

competitive advantage or strong position

• Volumes and turnover will fall,

targeting divisional underlying EBITDA of £3.5m

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SUMMARY AND CURRENT TRADING

• Good year for company
• Underlying performance strong
• High level of pub acquisition and brand

activity

• Quality of operations continues to improve
• Steady progress since year end against tough

comparatives

• LFL growth in managed pubs and hotels

+1.5% to 2 September 2017

• LFL EBITDAR in tenanted pubs +0.6% to 26

August 2017

• Own brand volume ex contract +4.4% to 2

September 2017

• A high quality and sustainable platform for the

long term

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RESOLUTIONS

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RESOLUTION 1

To receive the Annual Report and Accounts

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RESOLUTION 1 TO RECEIVE THE ANNUAL REPORT AND ACCOUNTS

No of Shareholders

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No of Votes % For + Discretion Against Withheld 273 7

• 2,948,790

99.23%

• 22,873

0.77% 100.0% 20.00% of total votes cast by proxy

RESOLUTION 2

To declare a final dividend

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RESOLUTION 2 TO DECLARE A FINAL DIVIDEND

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No of Shareholders No of Votes % For + Discretion Against Withheld 280

• 2,971,663 100.00%
• 0.00%

100.0% 20.00% of total votes cast by proxy

RESOLUTION 3

To re-elect Mr N J Bunting as a Director

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RESOLUTION 3 TO RE-ELECT MR N J BUNTING AS A DIRECTOR

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No of Shareholders No of Votes % For + Discretion Against Withheld 273 5 2 2,943,315 99.47% 12,729 15,619 0.53% 100.0% 19.92% of total votes cast by proxy

RESOLUTION 4

To re-elect Mr M H Templeman as a Director

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RESOLUTION 4 TO RE-ELECT MR M H TEMPLEMAN AS A DIRECTOR

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No of Shareholders No of Votes % For + Discretion Against Withheld 267 7 6 2,935,129 99.06% 8,816 27,718 0.94% 100.0% 19.94% of total votes cast by proxy

RESOLUTION 5

To re-appoint Deloitte LLP as the auditor of the Company and authorise the Directors to determine their remuneration

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RESOLUTION 5 TO RE-APPOINT DELOITTE LLP AS THE AUDITOR AND AUTHORISE THE DIRECTORS TO DETERMINE THEIR REMUNERATION

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No of Shareholders No of Votes % For + Discretion Against Withheld 270 8 2 2,942,403 99.03% 579 28,681 0.97% 100.0% 20.00% of total votes cast by proxy

RESOLUTION 6

To authorise the Company to make market purchases of ordinary shares of 50 pence each

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RESOLUTION 6 TO AUTHORISE THE COMPANY TO MAKE MARKET PURCHASES OF ORDINARY SHARES OF 50 PENCE EACH

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No of Shareholders No of Votes % For + Discretion Against Withheld 266 13 1 2,917,314 98.30% 4,015 50,334 1.70% 100.00 19.97% of total votes cast by proxy