Shepherd Neame Limited Class A · AQUIS:SHEP
Shepherd Neame Limited Class A — FY2010 Earnings Presentation
41 slides from Shepherd Neame Limited Class A's earnings presentation, Jun 26, 2010
Slide 1: Shepherd Neame Ltd Preliminary Results
Shepherd Sh h d Neame N Ltd Preliminary Results for the 52 weeks ended 26 June 2010 1
Slide 2: Overview
Overview • A successful year with … record turnover … record beer volume … strong net cash inflow … improved operating profit margin … improved i d returns t on iinvested t d capital it l • Good results from recent investments • Strong operational performance across the business The Coutts Prize for
Slide 3: Long term strategy
Long term strategy … • To build high quality integrated beer and pub business • By developing … … brewing and logistics operational excellence … the marketing of distinctive ale and speciality lager brands … a strong regional and national route to market … a freehold estate of traditional p pubs and
Slide 4: Growth in net assets and dividends for shareholders
… and growth in net assets and dividends for shareholders 25p Dividend per share Net Assets per share £10 20p £8 assets per share e Diviidend per share Net a 15p £6 10p £4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 4
Slide 5: Good results in 2010
Good results in 2010 +5 4% +5.4% +25 0% +25.0% +25 5% +25.5% +11 +11.6% 6% +2 +2.9% 9% Turnover Operating Profit before Earnings Dividend Profit before tax per share per share exceptionals 2010 £115.4m £11.9m £8.7m 49.9p 23.10p 2009 £109 £109.5m 5m £ 99.5m 5m £6 £6.9m 9m 44 44.7p 7p 22 22.45p 45p 5
Slide 6: EU renewal of Block Exemption and UK alcohol pricing review
We welcome EU renewal of the Block Exemption to 2022 and the UK Government review of Alcohol Pricing and Taxation Duty change 1997 1997-2009 2009 (adjusted for inflation) 15% Spirits p Cider 10% 5% 0% -5% 5% Beer Wine -10% -15% -20% -25% Source : BBPA 6
Slide 7: Financial Review
SHEPHERD NEAME Financial Review
Slide 8: Performance Indicators
Performance Indicators 2010 2009 Operating profit margin 10 3% 10.3% 8 7% 8.7% Interest cover 2.6x 2.5x Underlying tax rate 31.7% 28.8% Basic earnings per share 49.9p 44.7p Dividend cover 2.2x 2.0x Net assets pper share £9.20 £8.93 Gearing 56% 66% Debt to EBITDA 3.6 to 1 4.3 to 1 8
Slide 9: Operating profit
Operating profit 2010 £m 2009 £m Turnover 115 4 115.4 109 5 +5 109.5 +5.4% 4% – Beer volume up 4.8% mainly in Free Trade – Tied trade revenue up p 2.0% Operating costs (103.5) (100.0) – Bottling line commissioned – no sub contract production – Raw material unit costs down – Overheads controlled in l
Slide 10: Profit and Loss
Profit and Loss 2010 £m 2009 £m Operating Profit pre Exceptionals 11.9 9.5 Impairment charge (0.5) (0.5) SAP reorganisation and refinancing - (1 2) (1.2) Profit on sale of property 1.9 2.9 Net finance charge (4.6) (3.8) Profit before tax 87 8.7 69 6.9 Taxation (2.4) (1.2) Profit after tax 6.3 5.7 Di
Slide 11: Strong net cash inflow
Strong net cash inflow 2010 £m 2009 £m EBITDA before share based payment 18.7 16.3 Exceptional operating charges - (1.1) Working capital movements 1.6 (1.9) Net cash inflow from operations 20.3 13.3 Interest tax and dividends (8.8) (8.1) Free cashflow 11.5 5.2 Disposals 5.9 7.3 New pub additions - (
Slide 12: Expenditure to maintain the capital base is c.£7m pa
Expenditure to maintain the capital base is c.£7m pa 30 25 20 £m Internally generated free cash 15 10 New Pub Additions 5 Brewery and IT Modernisation 0 Maintenance Capex (pubs/brewery) ( b /b ) 2006 2007 2008 2009 2010 2011F Pubs acquired year to date Internally Generated Free Cash = Free cashflow
Slide 13: Robust long term financing
Robust long term financing Long term financing £85m £60m term loan to 2026 £15m term loan to 2014 £10m revolving credit facility to 2014 Committed overdraft facility £ 5m Total facility at year end £90m Net debt at year end £66.6m £60m term debt fixed on swap at weighted average rate 5.79% Post year
Slide 14: Assets, debt and shareholders' funds
Assets, debt and shareholders’ funds 2010 £m 2009 £m Fixed assets 186.4 190.6 Other assets and provisions (1.8) (0.8) Net assets 184.6 189.8 Debt net of cash (66 6) (66.6) (75 3) (75.3) Shareholders’ funds 118.0 114.5 Net assets per share £9.20 £8.93 Gearing (no revaluation since 1997) 56% 66% Debt
Slide 15: Financial summary
Financial summary • Improved p operating p gpprofit margin g • Improved interest and dividend cover • Increased earnings per share • Strong cash generation • Reduced gearing • Improved debt to EBITDA ratio • Good headroom on committed long term facilities • £60m of core funding to 2026 at fixed pric
Slide 16: Chief Executive's Review
SHEPHERD NEAME Chief Executive’s Review
Slide 17: Outcome of 2009 initiatives
Outcome of 2009 initiatives 2009 Issue Action 2010 Outcome Raw material unit New 3 year Raw material unit costs down costs up malt agreement in line with expectation Bottling capacity New line New line performance good. exceeded production commissioned No need to outsource High overhead cost Reorgan
Slide 18: Benefits of brewery and IT modernisation
Benefits of brewery and IT modernisation Brewery and systems modernisation has enabled Beer Business to meet demand - with increased availability - higher stock turns - improved customer satisfaction - fresher beer - better buying - improved capacity utilisation - better and faster information flow
Slide 19: Raw material unit costs have fallen in line with expectation
Raw material unit costs have fallen in line with expectation 150 140 130 120 110 100 2005/06 2006/07 2007/08 2008/09 2009/10 19
Slide 20: We have continued to outperform the national beer market
We have continued to outperform the national beer market Total beer volume UK Market * Shepherd Neame 2006/07 -4.7% +2.6% 2007/08 -2.8% -2.7% 2008/09 -7.0% +6.3% 2009/10 -1.4% +4.8% 2010/11 Q1 +0.6% * Source : BBPA 20
Slide 21: Sales team focus on driving distribution
Sales team focus on driving distribution • Total beer volume +4.8% - off trade +10.2% - local free trade +6.2% - tied ti d ttrade d -1.3% 1 3% • Own beer volume +3.8% Total 233 233,000 000 barrels • Key brand performance - Spitfire -0 0.9% 9% - Bishops Finger +18.9% - Asahi +5.0% ((keg g +32.4%)) 21
Slide 22: We have increased marketing investment on Spitfire
We have increased marketing investment on Spitfire … - # 4 Premium Bottled Ale - new website - Operation Landlord - RAF Licensed Partner 22
Slide 23: … and on Asahi - draught distribution roll out
… and on Asahi - draught distribution roll out - sponsorship of arts, entertainment, fashion - rated as one of ‘the most stylish b beers and d llagers around’ d’ 23
Slide 24: … and on developing an E-marketing strategy
… and on developing an E-marketing strategy • New company site launch October 2010 • Pub micro sites will drive footfall and loyalty • Enhanced customer database functionality • Improved social networking • ‘Web ‘W b to t print’ i t’ facility f ilit will ill enhance menu and promotional development
Slide 25: We continue to make selective high quality acquisitions
We continue to make selective high quality acquisitions q in Kent, London and South East … Tenanted/ Managed Additions Disposals Total Leased 2006/07 327 49 12 7 376 2007/08 328 47 5 7 375 2008/09 331 49 15 10 380 2009/10 320 45 0 15 365 2010/11 Q1 316 45 2 6* 361 Freehold 322 * Sold or under offer
Slide 26: … and to position our pubs as leaders in their local market
… and to position our pubs as leaders in their local market • Total Capex £3.8m • Disposals of 15 small pubs for £5.2m • Increased expenditure on maintenance and decorations • Recruitment enquiries +33% vs. 2009 and vacancies slightly down • Cask ale volume up +0.6%, 36% of total beer in pubs 26
Slide 27: The Conningbrook, Ashford
27 The Conningbrook, Ashford
Slide 28: The Star Inn, Guildford
The Star Inn, Guildford 28
Slide 29: Ship & Trades, Chatham Maritime
Ship & Trades, Chatham Maritime 29
Slide 30: Ship & Trades, Chatham Maritime
30 Ship & Trades, Chatham Maritime
Slide 31: Managed performance
Managed performance Same outlet like for like sales Revenue Mix 2011 Q1 2010 2009 2010 2009 Liquor +1.5% -0.7% +2.8% 63% 64% Food +7.2% +3.9% +0.4% 29% 28% Accommodation +6.2% +0.1% -4.1% 8% 8% Total +3.5% +0.7% +1.6% 100% 100% Average EBITDAR per managed pub +2.4% 31
Slide 32: Key retail initiatives
Key retail initiatives • Food - Ongoing menu development - Head Development Chef appointed i t d - Customer footfall +8.2%, spend per head -1.8% • Accommodation - Improved online booking g facility y - Higher quality available room - RevPAR £35 (2009 : £33) 32
Slide 33: Tenanted trade performance
Tenanted trade performance Like for Like EBITDAR per pub Total Core Estate 2006/07 +6.2% 2007/08 -2.2% 2008/09 -3.3% 3 3% -2.0% 2 0% 2009/10 -3.8% -2.8% • Average EBITDAR per tenanted pub +1.3% • Total re revenue en e +1 +1.8% 8% • Majority of pubs in income growth or level • No wholesale price incr
Slide 34: Key tenanted initiatives
Key tenanted initiatives • Good performance from 2009 Punch pubs • 15 small pub disposals • 2 hi high h quality lit additions dditi since i year end d • Code of Practice accreditation • Tenanted Trade Operations Manager appointed • HIM! OnTrack Survey Best Pub Retailer for Quality of Serve Best Pub
Slide 35: Cock Inn, Boughton Monchelsea
Cock Inn, Boughton Monchelsea35
Slide 36: Cock Inn, Boughton Monchelsea
Cock Inn, Boughton Monchelsea36
Slide 37: The Parrot, Canterbury
37 The Parrot, Canterbury
Slide 38: The Parrot, Canterbury
The Parrot, Canterbury 38
Slide 39: Continued good progress in the new year
We have made continued good progress in the new year 2010/11 Q1 Beer volume +0.6% Like for like retail sales +3.5% 39
Slide 40: Outlook and prospects for 2010/11
Outlook and prospects for 2010/11 • Brand portfolio well regarded and in growth • Pubs enjoy premium positioning and consistent performance • Cashflow C hfl and dbbalance l sheet h t strong t • Annual base business capex requirement c.£7m • Company is well financed for the long term and with headroo
Slide 41: Questions?
Q Questions? ti ? 41