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Morning Briefing for pub, restaurant and food wervice operators

Wed 2nd Mar 2016 - Shepherd Neame reports managed sales up 6.5% in First Half
Shepherd Neame reports managed sales up 6.5% in First Half: Shepherd Neame, the Kent-based brewer and pub operator, has reported turnover increased by 0.3% to £73.7m (2014: £73.5m) with total own beer volumes excluding contract up 0.1% in the 26 weeks ended 26 December 2015. Underlying operating profit was up 2.9% to £7.2m (2014: £7.0m). Managed pub like-for-like sales were up 6.5% (2014: +6.8%), with liquor up 5.2%, food up 7.4% and accommodation up 11.2%. Tenanted like-for-like Editdar grew by 2.7% (2014: +3.4%) and average Editdar per pub was up 7.2% (2014: +4.0%). Statutory profit before tax was up to £8.7m (2014: £4.9m) with the increase driven by one-off disposal of land. Chief executive Jonathan Neame said: “I am pleased to report that our half year results have been characterised by a sustained and strong trading in our pub business, positive operating cash flows and significant proceeds from property disposals. Our consistent investment in our brand and pub assets to align them to today’s consumer demand has resulted in the sustained quality and performance of the business in a highly competitive marketplace. We remain cautious about the outlook for consumer spending, however I am confident we have the right strategy to succeed and the skills to deliver it.” Chairman Mile Templeman said: “During this period the consumer economy has remained relatively robust with high employment levels and increasing real earnings, but the weather has been less favourable than in 2014 with persistent heavy rain in the late summer and throughout the autumn. The Rugby World Cup provided a modest benefit in October and Christmas trade was particularly strong. The company’s performance has been characterised by sustained and strong trading in our pub business, positive operating cash flows and significant proceeds from property disposals. Our beer business has performed less well than last year in challenging market conditions and margins have continued to be squeezed as a result of volume reduction from the exit from contract brewing and higher water treatment costs. This is our first report under the FRS 102 accounting standard, and results in us having to re-state some prior year comparatives prepared under previous UK GAAP accounting rules. There are four principal areas of change: the valuation of our assets; reporting by business segment; and different accounting treatment for both lease commitments and for interest rate swaps. The specific impacts of these changes are set out in the transition document in the Appendix to this document. As part of this process, the company has carried out a revaluation of some of its assets as at 28 June 2014 and incorporated this into our balance sheet. This has increased net assets and reduced balance sheet gearing. This revaluation was of the Company’s licensed freehold assets only and excludes licensed leasehold assets and the brewery site. Unlicensed assets that are held for rental income are valued separately as investment property. During the period we acquired two new outlets to be operated as managed pubs: the Minnis Bay Bar and Restaurant and the Anchor, Hampstead Lock, Yalding. In January 2016, we have acquired a further outlet to be operated under tenancy, the Coastguard at St Margaret’s Bay. All three of these outlets enjoy exceptional beach or waterfront locations and emphasise our strategy to acquire sites with unique character in landmark or high footfall locations. During the period we have realised proceeds from property sales of £8.8m (2014: £0.7m). The principal disposal was 10 acres of land, remaining from the company’s farming business, on Brogdale Road in Faversham, which was sold with planning permission for residential dwellings for £7.4m. The Company continues to own 44 acres of land and buildings on the edge of Faversham as a long term investment. In addition we disposed of five (2014: two) tenanted pubs and other assets for £1.4m. These disposals have realised a property profit over the revalued net book value of £3.6m (2014: £0.1m). As a result of these cash proceeds and cash flow from operations, net debt at the half year stands at £61.4m (2014: £72.1m).”

AB InBev to sell SABMiller’s stake in Chinese joint venture: AB InBev has entered into an agreement to sell SABMiller’s 49% interest in its Chinese joint venture, China Resources Snow Breweries to China Resources Beer (Holdings) Co Ltd (CRB) for US$1.6 billion. CRB currently owns 51% of the joint venture. The sale agreement is in line with AB InBev’s commitment to proactively address potential regulatory considerations relating to its recommended acquisition of SABMiller. The proposed transaction with CRB is conditional on, and expected to close in conjunction with, the completion of AB InBev’s acquisition of SABMiller. This is currently expected to occur in the second half of 2016. In addition, the agreement with CRB is subject to any applicable regulatory approval in China, and AB InBev and CRB will work closely together through any such process. Alan Clark, chief executive of SABMiller said: “Our CR Snow joint venture was established in 1994 and the Snow brand was developed in the same year. Since then, Snow has grown to become the world’s largest beer brand by volume, selling more than 100 million hectolitres last year. Since forming the joint venture we have enjoyed a mutually beneficial partnership with CRB and together we have achieved great things in the Chinese beer market over the last 22 years.”

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