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

 

Preliminary results for the 52 weeks ended 28 March 2022

 

BACK TO PROFITABLE TRADING

 

Financial Highlights	2022	2021
	£m	£m
Revenue	309.0	88.0
Adjusted operating profit / (loss) (1) (2)	51.4	(33.2)
Adjusted profit / (loss) before tax(1) (2)	41.8	(43.2)
Adjusted EBITDA(1) (2)	82.5	(1.3)
Net debt	(173.8)	(248.7)
Net debt to EBITDA(3)	2.1	n/a -
Operating profit / (loss) (1)	51.7	(34.5)
Profit / (loss) before tax from continuing operations	42.1	(44.5)
Profit / (loss) before tax from discontinuing operations	9.8	(0.7)
Net assets	699.7	645.4
Net cash generated from operations	107.0	(23.0)
Adjusted basic earnings / (loss) per share(1) (2)	56.26p	(66.63)p
Basic earnings / (loss) per share(1)	58.83p	(68.23)p
Dividend per share	18.81p	-
(interim and recommended final)
Net assets per share(4)	£11.97	£11.04
(1)  The results exclude the impact of 56 sites which formed a majority of the Ram Pub Company and are disclosed as a discontinued operation in the current period. Prior period comparatives have been restated for the application of IFRS 5 to re-present financial information in relation to the discontinued operation (see notes 1 and 7). (2)  Reference to an "adjusted" item means that item has been adjusted to exclude a non-underlying credit of £0.3 million (2021: non-underlying costs of £1.3 million) (see note 3 for adjusting items and note 10 for earnings/(loss) per share). (3)  Net debt to EBITDA has been calculated based on the last 12 months' actual adjusted EBITDA (see notes 4 for adjusted EBITDA and 15 for net debt). (4)  Net assets per share are the group's net assets divided by the shares in issue at the period end. (5)  During the financial year, our pubs were fully open for 36 weeks, open with varying degrees of Covid related restrictions for 14 weeks and closed for two weeks.

 

PERFORMANCE HIGHLIGHTS

 

·  Total revenue for the period from continuing operations was £309.0 million, up 251.1% against the prior year.

 

·    Despite battling against varying levels of restrictions and Christmas trade being significantly impacted by the Omicron variant, managed house sales were up 2.9% on the two-year (2020) comparative.

 

·    During the year, we invested £73.7 million, including £24.7 million in our existing managed estate and £36.8 million adding nine new pubs, including the acquisition of six pubs and hotels from the Lucky Onion group in February.

 

·   In June, we completed the sale of 56 tenanted businesses for £53.0 million. Our group strategy is now entirely focused on the development of well invested, premium managed pubs and hotels in the south of England.

 

·      Net debt has reduced by £74.9 million to £173.8 million and, with adjusted EBITDA of £82.5 million, net debt to EBITDA is conservative at 2.1 times; Including cash balances this leaves us with £134.0 million of headroom on our committed bank facilities for future investment.

 

·    We are pleased to recommend the reintroduction of a final dividend of 10.26 pence, resulting in a total dividend for the year of 18.81 pence, this compares to 20.78p in respect of the year to 1 April 2019.

 

·    Sales since the period end have performed extremely well, with managed house revenue for the last 13 weeks, against the pre-pandemic levels of 2019, up 17.0% and for the last 5 weeks versus a year ago up 38.5%.

 

 

Patrick Dardis, Chief Executive of Young's, commented:

 

"I would like to thank the teams across the business who have worked so hard to deliver these great results, in another year of extraordinary circumstances. It has been a huge privilege to lead the group for the past six years, culminating in a year when Young's celebrated its 190th birthday. I owe enormous thanks to all my colleagues for their support, contribution and dedication that has made Young's the business it is today."

 

"We have found ourselves navigating challenges at nearly every turn, whether it be storms, floods and tube strikes, or the unwelcome arrival of the Omicron variant which hampered our Christmas trading. I am delighted to announce a strong set of results that marks a return to normalised profitability with unrestricted trading towards the end of the year." 

 

"After a quiet period on the acquisition front last year, we have made some exciting investments. The most significant of these was the acquisition of six pub and hotel assets from the Lucky Onion group in Cheltenham and the Cotswolds in February 2022. These predominantly freehold premium pubs and hotels perfectly complement our existing businesses in the area."

 

"It's been a great start to the new financial year, for the last 13 weeks revenue was up 17.0% versus pre-pandemic levels of 2019 and up 38.5% for the last 5 weeks against 2021. The Easter sunshine was a real boost, with some record weeks. We are looking forward to the extended Jubilee weekend where we hope to break more records. Young's are firmly back in business, with the firepower to deliver further growth."

 

"Having announced my intention to step down as Chief Executive after six years in the role, I am pleased to hand over the reins to my successor, Simon Dodd and the rest of the executive team, at the coming AGM in July. Simon was recruited three years ago with succession planning in mind, his excellent leadership skills, vision and operational experience will be great assets to Young's."        

 

 

For further information, please contact:

 

Young & Co.'s Brewery, P.L.C.	020 8875 7000
Patrick Dardis, Chief Executive
Mike Owen, Chief Financial Officer
MHP Communications	020 3128 8742 / 8147
Tim Rowntree/Robert Collett-Creedy/Harry Clarke

 

 

PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 28 maRCH 2022

 

 

chief EXECUTIVE'S STATEMENT

 

 

With this, my final year as Chief Executive, I am delighted to announce a strong set of results that reflect a return to normalised profitability with unrestricted trading. In a period where our pubs remained closed for the first two weeks, followed by varying restrictions until 'freedom day' in July, we found ourselves navigating challenges at nearly every turn. Despite the storms, floods and tube strikes, or the unwelcome arrival of the Omicron variant which hampered our Christmas trading, our total revenue was up by 251.1% to £309.0 million (2021: £88.0 million), with managed house sales ahead of the two-year comparative by 2.9%. Total group adjusted operating profit from continuing operations was £51.4 million (2021: adjusted operating loss from continuing operations of £33.2 million), with operating profit from continuing operations of £51.7 million (2021: operating loss from continuing operations of £34.5 million).

 

GREAT TEAM EFFORT

 

I would like to thank the teams across the business who have worked so hard to deliver these great results in another year of extraordinary circumstances. It has been a huge privilege to lead the group for the past six years, culminating in a year when Young's celebrated its 190th birthday. I owe enormous thanks to all my colleagues for their support, contribution and dedication that has made Young's the business it is today.

 

STRONG FINANCIAL POSITION

 

During the period we were able to move on from measures introduced to steer us through the covid-19 pandemic. In May 2021, we began by repaying the £30.0 million borrowed under the Bank of England's Covid Corporate Financing Facility and then didn't need to extend the £20.0 million bilateral revolving credit facility with NatWest that matured in November. This marked an important step away from temporary finance support measures. 

 

The sale of most of the tenanted estate to Punch Pubs & Co for £53.0 million was a defining moment in our strategy to focus on operating predominantly freehold, individual, differentiated and premium managed pubs and pubs with rooms. The sale left us with seven tenanted pubs, three of which we have now sold. One of the remaining pubs, the Grand Junction Arms (Harlesden) now operates as a managed pub following a major investment. This significant strategic move gave us cash to further strengthen our balance sheet and extra capacity both to invest in our existing estate and capitalise on attractive acquisition opportunities that present themselves.

 

KEY ACQUISITIONS IN THE YEAR

 

After a quiet period on the acquisition front last year, we made some exciting investments. The most significant of these was the acquisition of six pub and hotel assets from the Lucky Onion group in Cheltenham and the Cotswolds during February 2022. These predominantly freehold premium pubs and hotels perfectly complement our existing businesses in the area. We also completed on three other single site acquisitions: the Bull (Ditchling, Sussex), Pheasant (Lambourn, Berkshire) and White Horse (Hascombe, Surrey).

 

 

 

 

INVESTING IN OUR ESTATE AND OUR NEW HEAD OFFICE

 

With our focus on returning to normalised trade there was a reluctance to close pubs for major projects. However, maintaining a premium and well-invested pub estate through continued investment is fundamental to our success, and we spent £30.4 million on our existing business and new head office. It has been a long-term strategic opportunity to maximise the potential of certain assets within our tenanted estate, and two standout examples were at the Grand Junction Arms (Harlesden) and Ship Inn (East Grinstead) following their transfer to our managed operation.

 

In line with our strategic objective to increase further our freehold mix, we have been busy this year building our new head office, Copper House, on the same site as the refurbished Spread Eagle hotel, back in the heart of Wandsworth. It is great to return to our spiritual home, directly opposite our old brewery site where the story began in 1831.

 

OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) STRATEGY

 

Young's is a company with a long heritage, and we are committed to building a business which nurtures and develops our people, respects the environment, and makes a lasting and positive contribution to the communities we operate in. We recognise that operating sustainably is fundamental to delivering long-term value for all our stakeholders and for the future success of Young's. Within our annual report, we have included our first sustainability report, detailing the many things we have achieved so far and the steps we are taking to embrace a more structured approach to sustainability going forward.

 

CURRENT TRADING AND OUTLOOK

           

It's been a great start to the new financial year, for the last 13 weeks revenue was up 17.0% versus pre-pandemic levels of 2019 and up 38.5% for the last 5 weeks against 2021. Our well invested gardens were perfectly primed to capitalise on the welcome sunshine over the Easter bank holiday, with some record takes. We look forward to the extended Jubilee weekend where we expect to break even more records.

 

Young's is well placed to manage the impact of the current inflationary environment on our cost base, with the ability to flex our menus, our utilities hedged until March 2024 and having recently renegotiated a large proportion of our drinks contracts. However we are mindful of the potential impact that this inflationary environment could have on consumer sentiment and ultimately consumer spending.

 

In April, we launched our exciting new beer range including a number of first-to-market products demonstrating that Young's continues to be at the forefront of product innovation. Our investment programme continues at pace, with the transformational scheme at the Phoenix in Victoria due to complete later this month. Also in May, we completed the freehold purchase of the Bedford Arms hotel in Buckinghamshire, extending the Young's business into another new territory.

 

Having announced my intention to step down as Chief Executive after six years in the role I am pleased to hand over the reins to my successor, Simon Dodd, and the rest of the executive team, at the coming AGM in July. Simon was recruited three years ago with succession planning in mind, his excellent leadership skills, vision and operational experience will be great assets to Young's. It's been 20 wonderful years at Young's and I am leaving behind a fantastic business in a strong financial position ready for the next chapter. I am confident in Young's proven strategy to deliver profitable returns for our shareholders.

 

business and financial review

 

MANAGED HOUSES

 

In what has been another extraordinary year, once again we began the period with the UK economy in a full lockdown due to the pandemic, and all our pubs closed to the public. It was good to see all our pubs and beer gardens full again from mid-July, as restrictions were relaxed, removing limits on social contact and allowing for larger events. The quintessential pubs' firm place in the heart of English culture was more important than ever this year and we were in the perfect position to capitalise as people looked to make up for lost time. Despite the setback of Omicron significantly curtailing sales during the Christmas period, trading was ahead of expectations with total managed house revenue up by 253.7% to £307.7 million (2021: £87.0 million).

 

Initially, our focus was firmly on how we could safely welcome back as many customers as possible when restrictions eased in April. There was a real feel-good factor for both our customers and teams, with the pent-up demand evident as bookings for our gardens, huts and external spaces flooded in ahead of re-opening. The sense of excitement and anticipation triggered several weeks of frantic trade, despite restrictions allowing only outdoor trading and the irony that on day one we were greeted with snowfall. This did not hold us back as incredible customer support meant total revenue was just 13% lower than the whole estate in 2019 for the first six weeks, despite a quarter of our estate remaining closed. It was not until 17 May, when the restrictions on trading inside were finally lifted, that our remaining pubs reopened.

 

With the UK holiday market capitalising on domestic travel, our pubs and hotels in typical 'staycation' locations exceeded expectations, although the wet and dull weather through July and August somewhat curtailed our progress. The warm and sunny weather in September was welcome, helping us celebrate 190 years of Young's - an event marked at every Young's pub, from Cambridge to Devon. In London, our famous dray horses took to the streets for 'The Great Greenwich Tour', starting at the Richard the First and ending at one of our newest pubs on the banks of the River Thames, Enderby House. As the year progressed, we started to see more people return to the office, at least for part of the week, and for our pubs in the City of London trade was back to 80% of pre-pandemic levels by the end of September.

 

As expectations were building for a bumper December with encouraging numbers of bookings in the diary, the arrival of covid-19's fast-spreading Omicron variant saw widespread cancellations, wasted turkey dinners, and people return to home-working as they sheltered away to protect their own family holidays. This continued through to New Year with celebrations more muted than we would expect to see. The spread of Omicron also affected our teams as we battled staffing challenges that rivalled the 'pingdemic' from earlier in the year. What relatively few bookings we had in the Christmas period had now become harder to operate as managing rotas across the business became a daily challenge.

 

Sales in the final quarter bounced back strongly. The mild weather in January and February was punctuated once or twice by severe storms that hit the UK, but these early months of the year marked the start of events season beginning with Burn's Night where pubs held unique Scottish themed events. In February, it was the return of the Six Nations rugby, with Guinness supporting us with events in almost every pub alongside a number of selective one-off special events hosted by England rugby legends such as Will Greenwood and Danny Care.

 

In March, having completed the acquisition of the pubs and hotels from the Lucky Onion group just a couple of weeks prior, we experienced our first Cheltenham Festival racing week. The newly acquired No. 38 The Park, the last stop before you reach the racecourse, ensured racegoers didn't go thirsty with a specially erected outside bar serving premium drinks for the four-day festival.

 

 

There is no doubt that food sales were the big winner in the period, even if you disregard the benefit received from a reduced rate of VAT when compared to drink sales. In the early months, table service was a requirement and customers saw the return to the pub as a chance to treat themselves to the dining out experience that had been lacking for most of the last year. Our Young's app played a pivotal role in the customer journey, accounting for 40% of food and drinks sales in the early part of our year. While the app is less important now that normal bar service has resumed, it still proves a very useful tool, offering customers the ability to independently browse menus, order food and drink direct to their table and pay the bill.

 

The continued investment in our covered and heated gardens proved vital in winter as well as for the restricted first few months. Ahead of re-opening we had expanded our Burger Shack offering - focusing on innovation - updating the menu with the addition of monthly and seasonal special burgers. These ranged from a 'Lambslide' for spring to the 'Dirty Vegan' for January in partnership with Matt Pritchard, a notorious vegan chef. The strong trend for dining out and meeting up with friends continued throughout the year as food sales ended the period 20.3% ahead of two-year prior comparative.  

 

It has been quite a year for the Guinea which celebrated a position of 7th in Estrella Damm's top 50 Gastro pubs in the UK, finishing as the highest ranked London pub on the list. A local Mayfair institution dating back to 1423, we opened our restaurant, the Guinea Grill, in 1953. The food has grown from a long legacy of impeccably sourced British steaks and other produce such that it now often requires a reservation months in advance. Indicating the importance of seizing opportunities when they present themselves, this year we were able to increase the trading space, at least in the short term, doubling our covers whilst maintaining the all-important true Guinea experience.

 

For our drinks sales, the initial restrictions on vertical drinking and the need for people to be sat at a table, limited pub capacities. Following months of lockdown, customers were keen to treat themselves, driving further premiumisation across most categories and we saw significant volume growth compared to two years prior in our Champagne and sparkling wine, up by 53.9%, and cocktails up by 85.6%. In the first half of the period the 'sit down' environment encouraged the restaurant feel which resulted in a drop to the mix of draft sales as people traded into wines. However, following the return to more normalised trading in the second half, volumes and mix of draught sales bounced back with Guinness leading the way, its volumes were ahead of the comparative period by 11.5%. In total, drink sales finished the period 3.7% behind the two-year prior comparative.

 

Our success has not been without its challenges. There have been well documented issues in the supply chain, whilst chef recruitment remains difficult for the whole of the industry. We have looked to combat this by offering a comprehensive and unique career pathway for all skill levels in the kitchen to match the scheme for our front of house teams. Inspirational chef experiences that offer the opportunity to learn all there is to know about our local British seasonal ingredients is just another way that we look to train and retain our people.

 

In response to the ongoing challenges with recruitment and agency costs, this year we launched the Ram Agency which aims to give employees the power to pick their working hours. This in-house agency brings together people with the skills we need across the group, in a range of roles, from chefs to front and back of house team members. Members of the agency can choose the shifts they want and create their own working rota to give themselves the flexibility to achieve their goals. With the aim of filling shifts with people who know the Young's way of working, and trained to Young's standards, this will reduce our reliance on agency staff going forward.

 

The performance of hotels was largely dependent on their geography. Our 'staycation' hotels revelled with the regular influx of domestic visitors as overseas travel remained challenging, whereas city hotels felt the negative impact of the pandemic more acutely as business travel and London tourism took longer to return. This was reflected in the overall hotel stats for the year, with total occupancy at 56.9% despite a respectable average room rate of £97.61, resulting in a RevPAR of £55.50.

 

It has been a year where we have had to combat varying trading restrictions alongside the other challenges that we have faced set against the backdrop of increasing costs. Despite these factors, and supported by the VAT reduction, our managed house profitability returned to more normalised levels, with an adjusted operating profit of £72.1 million (2021: adjusted operating loss of £18.6 million).

 

INVESTMENT

 

Our investment impact in the year goes back to last winter's lockdown when we were busy actively adding more stretch tents and huts, ensuring the additional covers in our external spaces were tradeable all year round. When we came out of lockdown last spring, we were ready to capitalise on the pent-up demand as trade bounced back strongly. However, in the interest of ensuring we returned to profitable trade and conserving cash, we delayed the majority of our major projects until January 2022.

 

During the year, we spent £24.7 million on our existing estate including exciting schemes at the King's Head (Winchmore Hill) and Chequers (Walton-on-the-Hill), both designed to offer a more premium environment all year round. With beautiful interiors featuring open fires, wood-paneled dining rooms, traditional snug areas, bright, elegant garden spaces, and accompanying stunning gardens these two investments are going to be firm favourites with their local communities. Elsewhere we have carried out smaller refurbishments of much-loved pubs across the estate, including the Castle (Islington), Orange Tree (Richmond), and the Alma (Wandsworth). We also remain on site at the Phoenix (Victoria) which will open later this month following an extensive scheme creating 34 additional covers on a new mezzanine terrace.  

 

In the last couple of years, we have transferred a number of pubs from our tenanted division, all with their own unique style and opportunity to managed houses, and this year was no different. Firstly, the Grand Junction Arms (Harlesden) opened in January following a complete refurbishment. This sleeping giant features canal-side huts and seating for more than 500 people in its three-tiered garden, fully equipped with outside bar and Burger Shack. Similarly, the Ship Inn (East Grinstead) is home to a new Burger Shack with 200 covers across a multitude of outside spaces that include two covered 'boat cabins'. Meanwhile, investment at the Spread Eagle (Wandsworth) has been ongoing throughout the year, restoring this previous tenancy to its former glory with traditional features that include stylish etched glass, heritage colours and brass fittings whilst adding a modern twist to this classic Victorian pub with 21 boutique bedrooms. Finally, we have just completed a light touch update to the Royal Oak (Bethnal Green) after trading throughout the post-covid period.

 

On the acquisition front, soon after last period end we completed the freehold acquisition of the former Greenwich Union pub next door to our own Richard the First (Greenwich). We then designed a scheme and obtained the necessary permissions to bring the two businesses together, later re-opening as a bigger, better pub just ahead of the Easter weekend. In line with our strategic objective to add premium freehold pubs, we were also able to purchase the freehold of existing managed house, the Lamb (Bloomsbury), which is located between Holborn and Russell Square tube stations.

 

During the period we have invested a further £36.8 million in the acquisition of nine new pubs and hotels. In December, we purchased The Bull (Ditchling) in East Sussex, which dates back to the 16th century and has six bedrooms. The following month we acquired the Pheasant Inn, popular with the local racing community in Lambourn, featuring 14 bedrooms. Then in March purchased the freehold of the White Horse (Hascombe), an attractive 16th century village pub sitting in the Surrey Hills Area of Outstanding Natural Beauty.

 

The most significant acquisition was made in February when we purchased six pub and hotel assets from the Lucky Onion group. The acquisition included three properties in Cheltenham, and three other Cotswolds pubs thereby expanding our presence in the area, whilst also adding 73 hotel rooms to the estate. Five out of the six properties are freehold. Included in the group are No. 38 The Park, a boutique 13-bedroom hotel set in a Georgian townhouse in Cheltenham, the George - a 46-bedroom hotel also located in the Gloucestershire town - and the Wheatsheaf, a 17th century coaching inn in Northleach, which features 14 premium bedrooms.

 

Finally, this spring saw the completion of a long-awaited project; the relocation of our company head office back to the centre of Wandsworth. Our new base, Copper House, adjoins the fabulous Spread Eagle hotel and will be instrumental in bringing our teams back together as we set off on the next phase of our journey.

 

The only disposal within the managed house division was the Waverley (Bognor Regis), where in March, we exited the lease following the decision not to renew. We finished the period with 219 managed pubs and hotels (2021: 210).

 

TENANTED BUSINESS

The disposal of 56 of our tenanted pubs in July, for a total cash consideration of £53.0 million to Punch Pubs & Co cemented our move away from operating a tenanted model. In the period, we also disposed of the Grove House (Camberwell) and Lord Wargrave (Marylebone), agreed an early exit from our lease at the Prince William Henry (Blackfriars) and transferred the Grand Junction Arms to our managed house division, leaving us with just three tenancies. 

 

Continuing business revenue was £1.0 million (2021: £0.7 million) and an adjusted operating profit of £0.4 million (2021: £0.0 million). Due to the small nature of the continuing business, this will be the final period in which we report on the tenanted division separately.

 

 

 

 

 

OTHER KEY AREAS

 

PROPERTY

Our balance sheet strength is underpinned by our predominantly freehold estate in many highly desirable locations. 182 of our 222 pubs are freehold or are long leaseholds with peppercorn rents. Our total estate, including freehold and fixtures and fittings on leaseholds, is now valued at £808.0 million (2021: £773.7 million). The carrying value of property leases, including long leaseholds, is separately recognised as right-of-use assets in note 12. We have continued to add value through major developments to improve our existing pub values and hand-picked acquisitions, primarily focussing on freehold assets.

 

Each year we revalue our pub estate to reflect current market values. Despite our return to profitable trade, the ongoing implication of covid-19 on our estate had to be considered on an individual basis as some pubs continue to build back to pre-pandemic levels. Savills, an independent and leading commercial property adviser, has revalued all our freehold properties. The valuation method used several inputs and the sustainable level of trade of each pub remained key.

 

In accordance with International Financial Reporting Standards, individual increases in value have been reflected in the revaluation reserve on the balance sheet (except to the extent that they had previously been revalued downwards) and individual falls in value below depreciated cost have been accounted for through the income statement. None of these adjustments have a cash impact.

 

Continued optimism in the pub property market has remained throughout the year and has been reflected by increased activity and property prices; as a result we have seen a net upward revaluation movement of £29.5 million. This is comprised of an upward movement of £28.7 million (2021: £9.0 million upward movement) reflected in the revaluation reserve and an upward movement of £0.8 million (2021: £1.8 million upward movement) recognised as an adjusting item in the income statement.

 

TREASURY AND GOING CONCERN

 

At 28 March 2022, the group had cash in bank of £34.0 million and committed borrowing facilities of £235.0 million, of which £135.0 million was drawn down. The drawn facilities are all fully interest rate hedged. In addition to these committed facilities, we have a £10.0 million overdraft with HSBC. Net debt including lease liabilities was £173.8 million.

 

We have returned to delivering strong positive cash flows. Our operating cash flow was £107.0 million (2021: cash outflow £23.0 million), with our predominantly freehold estate and premium business back to unrestricted trading. Young's has returned to being conservatively financed. We have moved away from all financing measures introduced to steer us through the covid uncertainty which, combined with the strong positive cash flow, result in a net debt to adjusted EBITDA of 2.1 times.

 

Whilst the group's entire pub estate is trading well, it remains prudent to recognise a degree of uncertainty ahead due to any potential on-going impact of covid-19 and to acknowledge the impact of the current cost inflation that could influence future profitability.  As part of the directors' consideration of the appropriateness of adopting the going concern basis, the group has modelled several scenarios for the going concern period. The key judgements applied are the extent of any potential future disruption to trading as a result of covid-19, and the inflationary cost pressures that the hospitality industry is currently facing. The base case model assumes we continue to trade as now, with no restrictions and a confident market with trade continuing to build in line with Young's growth strategy. The general reduction in trade scenario looks at a decline of 20% in sales and 24% in profit across the period. This aims to capture the return of certain restrictions such as table service only or a recommendation to work from home and any potential slowdown in consumer spending influenced by the current cost of living crisis. The cost inflation scenario includes an average 15% increase in the food cost base for the period with no retail price increases. Utility pricing has been held at the base case rates given the group has forward bought utilities to March 2024. We have assumed capital expenditure levels will continue at historical levels and no structural changes to the business will be needed in any of the scenarios modelled. Further details are set out in note 1 of the attached financial statements.

 

Based on these forecasts and sensitivities, coupled with the current debt levels and the ongoing debt structure in place, the board has a reasonable expectation that the group is able to manage its business risks and to continue in operational existence until at least 27 June 2023. Accordingly, the board continues to adopt the going concern basis in preparing the consolidated financial statements.

 

RETIREMENT BENEFITS

 

We have a defined benefit pension scheme which has been closed to new entrants since 2003. During the year our pension deficit of £6.1 million has moved into a net surplus of £12.2 million. This has been largely driven by a movement in the discount rate contributing to a £21.9 million decrease in liabilities. We have continued our commitment with another year of special contributions, totalling £1.2 million, and remain fully committed to ensuring the pension scheme is adequately funded.

 

ADJUSTING ITEMS

 

Total adjusting items from continuing operations were in a credit position of £0.3 million in the period, the majority of which relate to the estate management of our properties. We agreed an early termination of the lease at the Prince William Henry and recognised £2.2 million profit on disposal. During the period, we also exited one managed house lease - the Waverley (Bognor Regis), and sold two tenanted pubs, the Grove House (Camberwell) and the Lord Wargrave (Marylebone) for a net gain of £0.2 million. As previously mentioned, there was a net upward movement in property revaluation for the period of £0.8 million.

 

Following the transfer of the Grand Junction Arms (Harlesden) to our managed house division in September, compensation cost of £0.2 million were agreed to terminate the lease agreement early.

 

The most significant cost relates to our acquisition of nine pubs where purchase costs of £2.7 million were incurred relating to property taxes and associated professional and legal fees.

 

TAX

 

A tax charge of £17.5 million (2021: £6.9 million tax credit) was recognised for the year. The effective tax rate was 33.7% (2021: negative 15.2%) compared to the statutory rate of 19.0% with the difference primarily driven by the re-measurement of deferred tax liabilities as a result of the increase in the future substantively enacted tax rates from 19.0% to 25.0%.  Further detail can be found in note 8.

 

The group's tax strategy for the accounting period ended 28 March 2022 has been published on the Young's website in accordance with UK tax law.

 

 

 

SHAREHOLDER RETURNS

Having started life in 1831, Young's is a long-standing business, and we are determined to maintain our long-term, sustainable growth story.

 

Our top-line trading performance has flowed through to strong profit conversion and cash generation. Our adjusted earnings per share was at 56.26 pence, compared to an adjusted loss per share of 66.63 pence in the prior period. On an unadjusted basis, the profit per share increased to 58.83 pence. As a result, we are pleased to recommend a final dividend of 10.26 pence and, if approved by shareholders, this will give a total dividend for the year of 18.81 pence (2021: nil).  

 

 

 

 

 

 

 

Patrick Dardis

Chief Executive

18 May 2022

 

GROUP INCOME STATEMENT

For the 52 weeks ended 28 March 2022

 

			Restated
		2022	2021
	Notes	£m	£m
Continuing operations
Revenue	5	309.0	88.0
Other income	6	5.0	4.7
Operating costs before adjusting items		(262.6)	(125.9)
Adjusted operating profit/(loss)		51.4	(33.2)
Adjusting items	3	0.3	(1.3)
Operating profit/(loss)		51.7	(34.5)
Finance costs		(9.5)	(9.8)
Finance charge for pension obligations	13	(0.1)	(0.2)
Profit/(loss) before tax		42.1	(44.5)
Income tax (expense)/credit	8	(17.2)	6.9
Profit/(loss) for the period from continuing operations		24.9	(37.6)
Profit/(loss) for the period from discontinued operations1	7	9.5	(0.7)
Profit/(loss) for the period attributable to shareholders of the parent company		34.4	(38.3)
1 A gain on disposal of £9.0 million was recognised and has been recorded within adjusting items (see note 3).

 

		Pence	Pence
Earnings/(loss) per 12.5p ordinary share
Basic	10	58.83	(68.23)
Diluted	10	58.80	(68.23)
Earnings/(loss) per 12.5p ordinary share for continuing operations
Basic	10	42.58	(66.98)
Diluted	10	42.56	(66.98)

 

Prior period comparatives have been restated for the application of IFRS 5 to re-present financial information in relation to discontinued operations (see note 7).

 

 

 

 

 

 

 

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the 52 weeks ended 28 March 2022

 

			Restated
		2022	2021
	Notes	£m	£m
Profit/(loss) for the period		34.4	(38.3)
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Unrealised gain on revaluation of property	11	28.7	9.0
Remeasurement of retirement benefit schemes	13	17.2	0.9
Tax on above components of other comprehensive income	8	(25.3)	(4.0)
Items that will be reclassified subsequently to profit or loss:
Net movement of interest rate swaps - cash flow hedge		5.2	2.5
Tax on fair value movement of interest rate swaps	8	(1.1)	(0.5)
		24.7	7.9
Total comprehensive income/(loss) attributable to shareholders of the parent company
		59.1	(30.4)
Total comprehensive income/(loss) attributable to shareholders of the parent company from continuing operations
		49.6	(30.9)
Total comprehensive income attributable to shareholders of the parent company from discontinued operations1
		9.5	0.5
1 A gain on disposal of £9.0 million was recognised and has been recorded within adjusting items (see note 3).

 

 

 

BALANCE SHEETS

At 28 March 2022

 

		Group		Company
		2022	2021	2022	2021
	Notes	£m	£m	£m	£m
Non-current assets
Goodwill		32.5	32.5	31.0	31.0
Property and equipment	11	808.0	773.7	803.5	769.1
Right-of-use assets	12	147.0	158.0	139.4	149.2
Investment in subsidiaries		-	-	14.3	14.3
Deferred tax assets		4.1	8.6	4.1	8.6
Derivative financial instruments		2.2	-	2.2	-
Retirement benefit schemes	13	14.3	-	14.3	-
		1,008.1	972.8	1,008.8	972.2
Current assets
Inventories		4.7	2.6	4.7	2.6
Trade and other receivables		8.9	10.4	9.7	11.3
Income tax receivable		6.2	5.8	6.3	6.0
Cash		34.0	4.7	34.0	4.7
		53.8	23.5	54.7	24.6
Asset held for sale		-	1.2	-	1.2
Total assets		1,061.9	997.5	1,063.5	998.0
Current liabilities
Borrowings		(30.0)	(29.8)	(30.0)	(29.8)
Lease liabilities	14	(4.9)	(4.9)	(4.1)	(4.1)
Derivative financial instruments		(0.3)	(1.8)	(0.3)	(1.8)
Trade and other payables		(43.7)	(15.8)	(55.8)	(27.5)
		(78.9)	(52.3)	(90.2)	(63.2)
Non-current liabilities
Borrowings		(103.8)	(143.4)	(103.8)	(143.4)
Lease liabilities	14	(69.1)	(75.3)	(63.6)	(69.1)
Derivative financial instruments		-	(1.4)	-	(1.4)
Deferred tax liabilities		(108.3)	(73.6)	(108.1)	(73.4)
Retirement benefit schemes	13	(2.1)	(6.1)	(2.1)	(6.1)
		(283.3)	(299.8)	(277.6)	(293.4)
Total liabilities		(362.2)	(352.1)	(367.8)	(356.6)
Net assets		699.7	645.4	695.7	641.4
Capital and reserves
Share capital		7.3	7.3	7.3	7.3
Share premium		7.7	7.6	7.7	7.6
Capital redemption reserve		1.8	1.8	1.8	1.8
Hedging reserve		1.7	(2.4)	1.7	(2.4)
Revaluation reserve		249.4	253.6	240.2	244.4
Retained earnings		431.8	377.5	437.0	382.7
Total equity		699.7	645.4	695.7	641.4

 

 

STATEMENTS OF CASH FLOW

For the 52 weeks ended 28 March 2022

 

		Group		Company
		2022	2021	2022	2021
	Notes	£m	£m	£m	£m
Operating activities
Net cash generated from operations	15	107.0	(23.0)	106.3	(23.9)
Tax paid		(5.1)	-	(5.1)	-
Net cash flows from/(used in) operating activities		101.9	(23.0)	101.2	(23.9)
Investing activities
Proceeds from disposal of property and equipment1		59.7	0.4	59.7	0.4
Purchase of property and equipment	11	(36.9)	(19.1)	(36.9)	(19.1)
Business combinations, net of cash acquired		(36.9)	-	(36.9)	-
Net cash used in investing activities		(14.1)	(18.7)	(14.1)	(18.7)
Financing activities
Interest paid		(9.7)	(9.8)	(9.5)	(9.4)
Issued equity, net of transaction costs		0.1	84.9	0.1	84.9
Equity dividends paid		(5.0)	-	(5.0)	-
Payment of principal portion of lease liabilities		(4.1)	(4.3)	(3.6)	(3.8)
Repayment of borrowings2		(39.8)	(115.5)	(39.8)	(115.5)
Proceeds from borrowings		-	90.0	-	90.0
Net cash flows (used in)/from financing activities		(58.5)	45.3	(57.8)	46.2
Net increase in cash		29.3	3.6	29.3	3.6
Cash at the beginning of the period		4.7	1.1	4.7	1.1
Cash at the end of the period		34.0	4.7	34.0	4.7
1 £53.0 million related to the sale of the Ram Pub Company (see note 7). The remaining balance related to other disposals of tenanted sites.
2 In the current period, the group repaid the £30.0 million Covid Corporate Financing Facility debt (net of £0.2 million fees) and the £10.0 million Revolving Credit Facility debt. During the prior period, repayments of borrowings related to £65.5 million of Revolving Credit Facility debt and £50.0 million of syndicated facility with RBS and Barclays.

 

GROUP STATEMENT OF CHANGES IN EQUITY

At 28 March 2022

 

			Capital
		Share	redemption	Hedging	Revaluation	Retained	Total
		capital1	reserve	reserve	reserve	earnings	equity
Notes		£m	£m	£m	£m	£m	£m
At 30 March 2020		13.6	1.8	(4.4)	248.4	331.4	590.8
Total comprehensive income
Loss for the period		-	-	-	-	(38.3)	(38.3)
Other comprehensive income
Unrealised gain on revaluation of property	11	-	-	-	9.0	-	9.0
Remeasurement of retirement benefit schemes	13	-	-	-	-	0.9	0.9
Net movement of interest rate swaps - cash flow hedge		-	-	2.5	-	-	2.5
Tax on above components of other comprehensive income
	8	-	-	(0.5)	(3.8)	(0.2)	(4.5)
		-	-	2.0	5.2	0.7	7.9
Total comprehensive loss		-	-	2.0	5.2	(37.6)	(30.4)
Transactions with owners recorded directly in equity
Share capital issued2		1.3	-	-	-	83.6	84.9
Share based payments		-	-	-	-	(0.1)	(0.1)
Movement in shares held by The Ram Brewery Trust II		-	-	-	-	0.2	0.2
		1.3	-	-	-	83.7	85.0
At 29 March 2021		14.9	1.8	(2.4)	253.6	377.5	645.4
Total comprehensive income
Profit for the period		-	-	-	-	34.4	34.4
Other comprehensive income
Unrealised gain on revaluation of property	11	-	-	-	28.7	-	28.7
Remeasurement of retirement benefit schemes	13	-	-	-	-	17.2	17.2
Net movement of interest rate swaps - cash flow hedge		-	-	5.2	-	-	5.2
Tax on above components of other
comprehensive income	8	-	-	(1.1)	(22.8)	(2.5)	(26.4)
		-	-	4.1	5.9	14.7	24.7
Total comprehensive income		-	-	4.1	5.9	49.1	59.1
Transactions with owners recorded directly in equity
Share capital issued		0.1	-	-	-	-	0.1
Dividends paid on equity shares		-	-	-	-	(5.0)	(5.0)
Revaluation reserve realised on disposal of properties		-	-	-	(10.1)	10.1	-
Share based payments		-	-	-	-	0.1	0.1
		0.1	-	-	(10.1)	5.2	(4.8)
At 28 March 2022		15.0	1.8	1.7	249.4	431.8	699.7
1 Total share capital comprises the nominal value of the share capital issued and fully paid of £7.3 million (2021: £7.3 million) and the share premium account of £7.7 million (2021: £7.6 million). Share capital issued in the period comprises the nominal value of £nil million (2021: £1.2 million) and share premium of £0.1 million (2021: £0.1 million).
2 During the prior period the group raised equity, generating proceeds of £84.8 million, net of transaction costs. A cash box structure was used in such a way that merger relief was available under Companies Act 2006, section 612, and thus no share premium was recorded. As the redemption of the cash box entity's preference shares was in the form of cash, the transaction was treated as qualifying consideration and the premium was therefore considered to be a realised profit.