RNS Number:1790F
Burtonwood PLC
15 November 2004
Burtonwood PLC - Interim Announcement
Burtonwood PLC, operator of managed and tenanted pubs, announces results for the
26 weeks to 2nd October, 2004.
HIGHLIGHTS
* Reported profit before tax up to #5.7 million (2003/4 #4.7 million).
* Underlying profit before tax up 9% to #5.1 million.
* Underlying earnings per share up 7 % to 16.1 pence.
* Interim dividend increased by 8% to 3.45 pence per ordinary share.
* 21 acquisitions and 10 disposals improved quality of the estate.
* Net assets per share up to 440 pence.
* Independent survey of tenants indicated encouraging levels of
satisfaction and business confidence.
Commenting on the results, Chairman, Richard Gilchrist, said
"I am pleased to report another set of strong results. Burtonwood is now focused
entirely on its good quality, traditional community pubs - a sector which
continues to perform well. Like for like sales grew on both the managed and
tenanted estates, despite the impact of the poor summer weather. We remain
confident of a successful year."
There will be a presentation today for analysts at the offices of Cazenove, 20
Moorgate, London EC2R 6DA. For invitations, contact Deborah Walter or Rebecca
Wyles at Gavin Anderson and Company on 020 7554 1400.
Enquiries:
Lynne D'Arcy Managing Director 07919 880 501
Nigel Wimpenny Finance Director 07919 880 502
City Press 0161 606 0260
CHAIRMAN'S STATEMENT
Results and dividend
It is with pleasure that I can report that your company continues to grow. The
first half of this financial year was always going to be challenging because of
the long, hot summer of 2003. Nevertheless, in the six months to 2nd October
2004, we increased sales by 5 % and, group operating profit by 7%.
Reported profit before tax rose from #4.7 million to #5.7 million; this includes
a property profit of #0.6 million so that underlying profit before tax rose by
9% to #5.1 million. In light of this result and our confidence in the rest of
the year, the interim dividend has been increased by 8% to 3.45 pence; this
dividend will be paid on 8th February 2005 to shareholders registered at the
close of business on 14th January 2005.
In my last report to shareholders, I stated that our strategy is to develop a
high quality estate of predominantly traditional, community pubs, run by tenants
or managers, which are capable of producing organic profit growth and capital
appreciation. Like for like sales grew on both the managed and tenanted pub
estates, despite the impact of inferior summer weather this year.
Number of pubs
Managed Tenanted Total
At start of period 41 408 449
Acquisitions 21 21
Disposals (10) (10)
Transfers (1) 1 -
-------- -------- -------
At end of period 40 420 460
-------- -------- -------
Tenanted pubs
Turnover and profit increased by 4% and 8% respectively. Like for like sales
excluding acquisitions, disposals and transfers to/from the managed estate in
both periods, increased by 2%. As we have improved the quality of our estate
over recent years, through investment and rationalisation, we have become more
active in making acquisitions. We bought 21 new pubs in the period, including a
package of 16 pubs in Yorkshire. These pubs, and our other acquisitions, are
performing in line with our forecasts. Investment in the core estate continued -
#1.1 million was spent on 13 major schemes. 10 low volume, unprofitable pubs
were sold realising property profits of #0.6 million: 8 of these were sold to
local pub operators at amounts in excess of book value; 2 pubs were sold for
development at a substantial profit.
I have said in the past that we seek to maximise our share of profits from our
tenancies to the extent that the business remains viable for the tenants. The
relationship between pub companies and their tenants/lessees has been the
subject of a recent inquiry by the Trade and Industry Select Committee. Although
I cannot comment on arrangements between tenants and other pub companies, I
believe that the tenanted business model is essentially fair. During the period
we have surveyed the opinions of our own tenants about their relationship with
Burtonwood, with the assistance of an independent market research agency. A good
response lends credibility to the findings. I am very pleased, though not
surprised, to report that the survey indicates a good level of satisfaction;
most of our tenants believe their arrangements with the company are fair and
intend to renew their agreement; there was an encouraging recognition of the
support provided to tenants, evidence that the tenanted model adds value to the
tenant's business. Furthermore, our tenants expressed confidence about their
prospects.
Managed pubs
We have said before that our managed estate comprises strongly performing pubs
demonstrating stable results. Turnover and profits rose by 8% and 5%
respectively. Like for like sales rose 3%. 38 pubs traded throughout the period,
with the 2 sites acquired last year - in Doncaster and Retford, Notts - opening
just before the half year after undergoing extensive development. Both
acquisitions are achieving forecast turnover, with the Retford site (a
destination outlet in a small market town) trading exceptionally well. Trading
margins were affected by the development of these 2 new pubs, our policy being
to write off set up costs, but remained steady across the like for like houses.
We continue to avoid the need to discount retail prices in order to grow sales.
We took advantage of the Euro 2004 football tournament across our managed
estate: on the 4 days when England played, wet sales rose 48% against the
comparable day from the previous year: however to put it in context, this adds
less than half of one percent to wet sales in the period. A greater influence on
trading performance is our continuous investment into the estate: #0.3 million
was spent, which included 2 major refurbishments. I am particularly pleased with
an investment at the Sportsmans Arms near Warrington: this community pub had
become the target of repeated anti-social behaviour, including incidents of
violence and drug abuse, causing the turnover to decline: an innovative
redevelopment of the pub has totally repositioned its offering in the market
place, bringing back the local residents and attracting new customers seeking a
convivial atmosphere, good food and facilities.
Finance Review
* Profit
Reported profit before tax rose to #5.7 million from #4.7 million last year.
Underlying profit before tax rose 9% to #5.1 million as shown below:-
2004/5 2003/4 Change
#000 #000
Reported profit before tax 5,665 4,676
Share of profit of associate - (25)
Profit on sale of properties (600) -
------- ------- -------
Underlying profit before tax 5,065 4,651 9%
======= ======= =======
* Cashflow
Operating cashflow rose from #8.5 million to #9.3 million. There was a net cash
outflow during the period of #2 million, leaving cash on deposit at the period
end of #5.4 million and net debt of #34.7 million: this produced a balance sheet
gearing ratio of 36%. The cash outflow reflects a high level of capital
expenditure including #7.9 million which was spent on the purchase of 21
tenanted pubs. Total capital expenditure is analysed in the table below. The
disposal of properties yielded proceeds of #2.5 million. Scheduled loan
repayments of #240,000 were received from Thomas Hardy Burtonwood Ltd.
Capital expenditure analysis
Managed Tenanted Other Total
#000 #000 #000 #000
Acquisitions 902 7,895 0 8,797
Refurbishments 286 1,072 0 1,358
Other Capital 0 0 183 183
-------- -------- ------- -------
Total 1,188 8,967 183 10,338
-------- -------- ------- -------
--------------- -------- -------- ------- -------
Number of major schemes 2 13 15
--------------- -------- -------- ------- -------
* Interest
The net interest charge is lower than last year because of interest earned on a
higher level of cash deposits.
* Taxation
Corporation Tax has been provided at an estimated rate of 26% of reported profit
before tax, or 30% of underlying profit before tax.
* Shareholder return
Basic earnings per share rose from 15.2 pence to 18.9 pence; underlying earnings
per share, excluding this year's property profit, rose by 7% from 15.1 pence to
16.1 pence. Ordinary shareholders' funds increased in the period by #3.4 million
to #95.4 million; this is equivalent to 440 pence per share. The share price
ranged from a low of 332.5 pence to a high of 395.0 pence. It started the period
at 340.5 pence and ended at 376.5 pence, giving a market capitalisation of #82
million on 2nd October 2004.
Outlook
I am confident in the future development of this business. The traditional,
community pub sector in which we trade has continued to fare well, whilst the
town centre, high street pub market remains in the doldrums. Despite the threat
of legislation to restrict smoking and ever increasing costs from the minimum
wage and the other government impositions I have always believed that community
pubs present opportunities for steady profit growth with low risk. With a loyal
and regular customer base, which is not dependent on passing footfall, and with
high barriers to entry, our business is stable. Burtonwood is now focused
entirely on its good quality pubs. It demonstrates good relationships with its
tenants and managers, is financially sound, has a well invested asset base and
is run on a prudent basis: for these reasons I believe that we will continue to
prosper during the remainder of this year.
R.A. Gilchrist
Chairman
15th November, 2004
Group profit and loss account
For the 6 months ended 2nd October, 2004
Notes 26 weeks to 26 weeks to 53 weeks to
02/10/04 27/9/03 3/4/04
#000 #000 #000
Turnover -
including
share of
associate 26,171 27,217 55,586
Less: share
of associate - (2,300) (5,169)
------------------------------- ------ -------- ------- -------
Group Turnover 2 26,171 24,917 50,417
------------------------------- ------ -------- ------- -------
Group
operating
profit 2 6,219 5,835 12,342
Share of
operating
profit/(loss)
of associate - 65 (195)
------------------------------- ------ -------- ------- -------
Total
operating
profit 6,219 5,900 12,147
Profit on
disposal of
fixed assets 600 - 855
Loss on sale
of shares in
associate - - (330)
------------------------------- ------ -------- ------- -------
Profit on
ordinary
activities
before
interest and
taxation 6,819 5,900 12,672
Net interest
payable 3 (1,154) (1,224) (2,302)
------------------------------- ------ -------- ------- -------
Profit on
ordinary
activities
before
taxation 5,665 4,676 10,370
Taxation 4 (1,550) (1,400) (2,917)
------------------------------- ------ -------- ------- -------
Profit on
ordinary
activities
after taxation 4,115 3,276 7,453
Dividends -
preference (16) (16) (32)
- ordinary (748) (688) (2,245)
------------------------------- ------ -------- ------- -------
---
Retained
profit 3,351 2,572 5,176
------------------------------- ------ -------- ------- -------
Basic earnings
per share 5 18.9p 15.2p 34.5p
Diluted
earnings per
share 5 18.6p 14.9p 34.0p
Underlying
earnings per
share 5 16.1p 15.1p 32.3p
Ordinary
dividend per
share 3.45p 3.2p 10.4p
The above results are derived from continuing activities.
Group balance sheet
At 2nd October 2004
At 02/10/04 At At
27/9/03 3/4/04
Notes #000 #000 #000
Fixed assets
Tangible assets 139,306 129,589 133,117
Investments 4,230 5,039 4,086
----------------------------- ------ -------- -------- ---------
143,536 134,628 137,203
----------------------------- ------ -------- -------- ---------
Current assets
Stock 1,021 1,039 949
Debtors 2,750 2,878 2,795
Cash at bank and in hand 5,412 7,504 7,397
----------------------------- ------ -------- -------- ---------
9,183 11,421 11,141
Creditors - due within one year (10,678) (9,891) (9,595)
----------------------------- ------ -------- -------- ---------
Net current (liabilities)/assets (1,495) 1,530 1,546
----------------------------- ------ -------- -------- ---------
Total assets less current liabilities 142,041 136,158 138,749
Creditors - due after more than one (41,848) (42,149) (42,043)
year
Provision for liabilities and charges (4,329) (4,408) (4,279)
----------------------------- ------ -------- -------- ---------
Net assets 95,864 89,601 92,427
----------------------------- ------ -------- -------- ---------
Capital and reserves
Called-up share capital 5,872 5,821 5,860
Reserves 89,992 83,780 86,567
----------------------------- ------ -------- -------- ---------
Shareholders' funds (including
non-equity 6 95,864 89,601 92,427
interests) ------ -------- -------- ---------
-----------------------------
R.A. Gilchrist
Chairman
15th November, 2004
Group cash flow statement
For the 6 months ended 2nd October, 2004
26 weeks to 26 weeks to 53 weeks to
02/10/04 27/9/03 3/4/04
#000 #000 #000
Net cash
inflow from
operating
activities(i) 9,322 8,489 16,034
Returns on
investments
and servicing
of finance(ii) (981) (1,411) (2,419)
Taxation (1,034) (1,097) (2,652)
Capital
expenditure
and financial
investment(iii)
(7,410) (901) (5,296)
Equity
dividends paid (1,558) (1,380) (2,083)
------------------------------- --------- -------- --------
Net cash
(outflow)/infl
ow before
financing (1,661) 3,700 3,584
Financing(iv) (324) (222) (213)
------------------------------- --------- -------- --------
(Decrease)/inc
rease in cash
in the period (1,985) 3,478 3,371
------------------------------- --------- -------- --------
Reconciliation of net cash flow to movement
in net debt
(Decrease)/inc
rease in cash
in the period (1,985) 3,478 3,371
Loan
repayments 392 318 597
Finance lease
repayments 18 17 35
------------------------------- --------- -------- --------
Change in net
debt resulting
from cash
flows (1,575) 3,813 4,003
Amortisation
of debenture
issue costs (5) (5) (10)
Opening net
debt (33,164) (37,157) (37,157)
------------------------------- --------- -------- --------
Closing net
debt (34,744) (33,349) (33,164)
------------------------------- --------- -------- --------
Analysis of changes in net debt
At 3/4/04 Cash flow Non cash flow At 2/10/04
item
#000 #000 #000 #000
Cash at bank and in
hand 7,397 (1,985) - 5,412
Borrowings repayable
within one year (864) - 94 (770)
Borrowings repayable
after more than one
year (39,643) 392 (99) (39,350)
Finance lease (54) 18 - (36)
-------- -------- ---------- --------
(33,164) (1,575) (5) (34,744)
-------- -------- ---------- --------
Group cash flow statement
For the 6 months ended 2nd October, 2004
26 weeks to 26 weeks to 53 weeks to
2/10/2004 27/9/03 3/4/04
#000 #000 #000
i) Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 6,219 5,835 12,342
Depreciation 1,948 2,005 4,047
Increase in trade loan provision - - 282
(Increase)/decrease in stocks (72) 23 113
(Increase)/decrease in debtors (361) 176 259
Increase/(decrease) in creditors 1,588 450 (1,009)
---------------------------- --------- -------- --------
Net cash inflow from operating 9,322 8,489 16,034
activities --------- -------- --------
----------------------------
Analysis of cash flows from headings netted
in the cash flow statement
ii) Returns on investments and servicing of
finance
Interest received 91 62 307
Interest paid (1,053) (1,454) (2,688)
Dividends paid on non equity shares (16) (16) (32)
Interest element of finance lease (3) (3) (6)
---------------------------- --------- -------- --------
Net cash outflow from returns on (981) (1,411) (2,419)
investments and servicing of finance --------- -------- --------
----------------------------
iii) Capital expenditure and financial
investment
Purchase of tangible fixed assets (10,169) (3,138) (9,426)
Proceeds on sale of tangible fixed assets 2,497 2,838 4,789
Repayment of loans by Thomas Hardy 240 - -
Burtonwood Limited
Decrease/(increase) in trade loans and 22 (601) (659)
bonds --------- -------- --------
----------------------------
Net cash outflow from capital expenditure (7,410) (901) (5,296)
and financial investment --------- -------- --------
----------------------------
iv) Financing
Issue of ordinary share capital 86 29 251
Loan repayments (392) (318) (597)
Repayment of loans by associate - 84 168
Capital element of finance lease (18) (17) (35)
---------------------------- --------- -------- --------
Net cash outflow from financing (324) (222) (213)
---------------------------- --------- -------- --------
NOTES
1 Accounting policies
The interim results, which are unaudited, have been prepared on the basis of the
accounting policies set out in the 2004 Annual Report. The comparative figures
for the year ended 3rd April, 2004 are extracted from the full financial
statements for that year, which received an unqualified audit report and which
have been delivered to the Registrar of Companies.
2 Segmental information
Turnover Operating profit
26 weeks to 2/10/04 26 weeks to 53 weeks to 26 weeks to 26 weeks to 53 weeks to
27/9/03 3/4/04 2/10/04 27/9/03 3/4/04
#000 #000 #000 #000 #000 #000
Tenanted pubs 17,347 16,607 33,784 7,027 6,525 13,586
Managed pubs 8,727 8,088 16,281 1,866 1,781 3,321
Wholesale
trade 59 172 252 36 74 108
Brewery,
distribution
and site 38 50 100 (260) (246) (493)
Central costs - - - (2,450) (2,299) (4,180)
------------------- --------- --------- -------- -------- -------- --------
Group total 26,171 24,917 50,417 6,219 5,835 12,342
------------------- --------- --------- -------- -------- -------- --------
3 Net interest payable
26 weeks to 26 weeks to 53 weeks to
2/10/04 27/9/03 3/4/04
#000 #000 #000
Group:
6 1/2% Debenture
2024 812 812 1,625
Bank loans,
overdrafts and
interest rate
swaps 430 419 872
Finance leases 3 3 6
Less: interest
receivable (91) (50) (296)
----------- ---------- ---------
Group net
interest
payable 1,154 1,184 2,207
Share of
interest of
associate - 40 95
----------- ---------- ---------
Total 1,154 1,224 2,302
=========== ========== =========
4 Taxation on profits for the period
Taxation on the profits for the period:
26 weeks to 26 weeks to 53 weeks to
2/10/04 27/9/03 3/4/04
#000 #000 #000
UK Corporation
Tax at 30%:
current year 1,500 1,300 3,053
: prior year - - (107)
Deferred
taxation:
current year 50 100 82
: prior year - - (111)
--------------------------- ---------- ---------- ----------
Total 1,550 1,400 2,917
--------------------------- ---------- ---------- ----------
5 Earnings per share
Basic and underlying earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders, as calculated below, by the weighted
average number of shares in issue during the period of 21,657,961 (September
2003: 21,482,655; March 2004: 21,514,903).
26 weeks to 26 weeks to 53 weeks to
2/10/04 27/9/03 3/4/04
#000 #000 #000
Profit after
taxation 4,115 3,276 7,453
Preference
dividend (16) (16) (32)
---------- ---------- ----------
Basic earnings 4,099 3,260 7,421
Share of
(profit)/loss
of associate - (25) 290
Profit on
disposal of
fixed assets (600) - (855)
Loss on sale
of shares in
associate - - 330
Prior year tax
credits - - (218)
---------- ---------- ----------
Underlying
earnings 3,499 3,235 6,968
---------- ---------- ----------
26 weeks to 26 weeks to 53 weeks to
2/10/04 27/9/03 3/4/04
Pence pence pence
Basic earnings
per share 18.9 15.2 34.5
Share of
(profit)/loss
of associate - (0.1) 1.3
Profit on
disposal of
fixed assets (2.8) - (4.0)
Loss on sale
of shares in
associate - - 1.5
Prior year tax
credits - - (1.0)
---------- ---------- ----------
Underlying
earnings per
share 16.1 15.1 32.3
---------- ---------- ----------
Underlying earnings per share shows more clearly the performance of the group.
Diluted earnings per share is the basic earnings per share after allowing for
the dilutive effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the period of 423,007 (September
2003: 338,055; March 2004: 339,966).
6 Movements in shareholders' funds
At 2/10/04 At 27/9/03 At 3/4/04
#000 #000 #000
Opening equity shareholders' funds 91,977 86,550 86,550
Profit earned for ordinary shareholders 4,099 3,260 7,421
Dividends (748) (688) (2,245)
Share capital issued 86 29 251
---------- ----------- ----------
Closing equity shareholders' funds 95,414 89,151 91,977
Non equity shareholders' funds 450 450 450
---------- ----------- ----------
Total closing shareholders' funds 95,864 89,601 92,427
---------- ----------- ----------
Financial calendar
Interim dividend Ex dividend date 12th January 2005
Record date 14th January 2005
Payment date 8th February 2005
Preliminary announcement of results
for the 2004/5 financial year 8th June 2005
Annual General Meeting 14th July 2005
This information is provided by RNS
The company news service from the London Stock Exchange
END
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