Announcement of Interim Results 2018

Outperformance in managed pubs division
New financing facilities provide long-term funding and flexibility to capitalise on future opportunities

Shepherd Neame, Britain's Oldest Brewer and owner and operator of 322 high quality pubs in Kent and the South East, today announces results for the 26 weeks ended 29 December 2018.

Financial performance:

• Underlying profit before tax rose by +1.4% to £5.9m (2017: £5.8m). We have incurred a one-off exceptional charge of £10.8m associated with the refinancing of the business and the cancellation of the previous swap contracts. As a consequence, statutory loss before tax is £4.1m (2017: profit £5.5m).
• Underlying basic earnings per share are up +1.3% to 31.6p (2017: 31.2p)
• Net assets per share increased by +1.1% since June 2018 to £13.68
• Interim dividend per share is up +2.1% to 5.87p (2017: 5.75p)

Operational highlights:

• Managed and tenanted pubs have continued to deliver a strong performance:
  • Managed pubs account for nearly half of Group revenue. Managed divisional turnover grew by +7.7% to £35.5m (2017: £32.9m). Managed pubs like-for-like (LFL) sales grew by +4.1% (2017: +2.1%). Average EBITDAR per managed pub grew by +8.5% (2017: -3.5%). Despite ongoing cost inflation, underlying managed pub margin increased by 80 basis points to 15.1% (2017: 14.3%
  • Tenanted divisional turnover grew by +0.7% to £18.1m (2017: £18.0m). LFL EBITDAR grew by +2.2% (2017: +2.1%) and average EBITDAR per tenanted pub grew by +4.0% (2017: +5.7%)
• Brewing and brands remains in transition following the termination of the Asahi contract and certain private label contracts including the Hatherwood range in Lidl:
  • Own brand beer and cider volume reduced by -1.0%
  • Total volume of brewed beer is down -30.8% or 36,000 barrels in the period of which 32,000 barrels related to the Asahi and Lidl contracts. Due to these lower volumes turnover declined -31.4% to £22.2m

New financing structure:

• In October 2018 the Company put in place a new financing structure with £107.5m of committed long-term facilities
• The new financing structure provides certainty of funds, at a lower cost of debt and with an improved maturity profile, which allows the Company to continue to invest for the long term

Jonathan Neame, Chief Executive, commented:

“The business derives its long-term strength and resilience from its three operating divisions. The managed pub performance has been strong, offset by lower brewing and brands volumes. The tenanted pubs have continued their robust underlying performance.

Our managed pubs are the principal area of investment and of growth. The quality of this part of the business continues to rise with recent acquisitions and developments. The tenanted division is a well-balanced and high quality business that continues to attract great operators for us to partner. Brewing and brands is still in a period of transition and we are pursuing a number of good opportunities for future growth.

Since the half year, trade has continued to be good, with same outlet like-for-like managed pub sales up +3.7% for the 35 weeks to 2 March 2019, like-for-like tenanted pub EBITDA up +2.6% and own brand beer and cider volumes up +0.4%.

The new financing package gives us the platform to capitalise on the significant infrastructure and population growth that is planned in our Kent heartland over the next decade.

In spite of the risks associated with imminent departure from the EU, we remain confident that our long-term strategy positions the company well for the future.”