The Heavitree Brewery PLC

Trood Lane

 Matford

 Exeter EX2 8YP

Date:               15 February 2021

Contact:          Graham Crocker - Managing Director - 01392 217733

Nicola McLean - Company Secretary - 01392 217733

Patrick Castle /Anita Ghanekar - Shore Capital - 0207 408 4052

Following a Board Meeting held today, 15 February 2021, the Directors announce the preliminary statement of results for the year ended 31 October 2020.

ISIN: GB0004182720 for 'A' Limited Voting Ordinary Shares

ISIN: GB0004182506 for Ordinary Shares

Chairman's statement

At the half-year I reported a 61% reduction in operating profit as the fallout from the restrictions in trading and the first lockdown started to impact our financial results.  That impact has been felt over the second half of the year under review with a significant decrease in turnover, and obviously it will be felt moving into the next financial year as the Company continues to support all our tenants and leaseholders with rent concessions to help them to endure long periods of tier restrictions and full lockdowns.  Although the summer months allowed some level of trade the Board was under no illusions that a possible second wave of infection would inevitably bring further restrictions on the sector and we would need to do all that we could to support our pubs.  At the time of writing, it is now obvious that our concerns during the summer have become the reality.

The consequence is that turnover for the year under review has decreased by 33.32% from the previous year to £5,019,000.  In turn, the Group has returned an operating profit of £539,000, a decrease of 70.69% on the previous year.  The operating profit has been distorted by the IFRS 16 Lease Accounting calculation which has been applied to the rent concessions given to our tenants.  The accounting standards setters consider these waivers, rather peculiarly, to be 'incentives' and as a result the total rent over the full term of the tenancy has to be apportioned.  Accordingly, we are required to recognise a write back of rents totalling £333,000, money which we have not actually received or even charged during the period.  This has also attracted a corporation tax charge of £63,000. 

The Group results are also affected by an impairment cost of £279,000 relating to the Lysley Arms in Pewsham and the George and Dragon in Dartmouth.

DIVIDEND

The Directors do not recommend the payment of a dividend at the year-end.  When trading is back on a more even keel after restrictions are eased, the Board will be able to review future dividends.

SALE OF PROPERTY

I reported at the half-year that a small parcel of land had been sold in Christow realising a book profit of £15,000.  Further sales were achieved in the second half of the year.  Two further parcels of land, one in Strete and the other adjacent to our Kings Arms in Kingsteignton were sold realising book profits of £15,156 and £56,244 respectively.  Also, an outbuilding adjacent to the Sandygate Inn near Newton Abbot was sold realising £60,738.  Finally, the Bell Inn in Cullompton was sold realising £178,507.

After the end of the financial year, sales have been completed at The Maltster's Arms and the adjacent Bridge House in Harbertonford. These properties were held for sale throughout the year under review.  Further properties are the subject of offers and/or are being marketed for sale and I shall report further on these at the half-year.

Chairman's statement

W P TUCKER

After a period of ill health which started at the end of 2019 and which made it difficult for him to attend Board meetings, my father Bill Tucker offered to resign from the Board in August.  With obvious mixed feelings I accepted his resignation.  He joined the Company in 1954 and was appointed to the Board in 1955.  He became Managing Director in 1970 and oversaw, in the same year, the ceasing of our brewing operations.  In 1974 he took over as Chairman from my Grandfather and, from then, he was instrumental in shaping the future of the Company as an operator of an estate of quality pubs. He remains a shareholder with a keen interest in the Company, our pubs and especially our people. His wealth of knowledge about our business will always be only a phone call away. I am sure you all will want to join me in wishing him the happiest of (full) retirements.

PROSPECTS

In this third lockdown the strain on our hospitals and health system is being reported daily with harrowing and distressing images.  This is in spite of the restrictions to our normal daily lives that we have been and are currently living under.  Confronting this health crisis in the best way possible has also placed an incredible stress on the hospitality sector.  The situation remains fluid; there is hope following the fast rollout of the vaccination programme but also concerns about the various variant strains of Covid-19 that are appearing around the world.  With this backdrop, I am proud and grateful for the resilience and patience shown by our landlords and landladies and of the determination and morale shown by every one of our staff at head office.  It is a commendable achievement that since March 2020 we have had only three vacancies to fill.  One now has new tenants and the other two have approved interested parties working with our tenancy team to formalise agreements. We have continued to attract good candidates even while the industry is unable to trade.

Even though our cashflow forecasts have shown that we are able to trade within our banking facility, I am most grateful for the understanding shown by Barclays Bank.  The bank has formally agreed to waive the testing of our banking covenants until April 2022. As referred to in the Strategic Review, we have accelerated our programme of selling non-core assets to keep us well within our facility.

Since the first lockdown in March of last year, the one constant our tenants and leaseholders have been able to rely on is the consistent support from this Company.  We have cancelled rents during the lockdown periods and made fair concessions during the incredibly difficult trading environment that arose with the tier systems.  The detail of this was reported in our trading update released to the Stock Exchange on 22 December 2020.  The Board are also determined to look after our head office staff and to use the Government's Job Retention Scheme to help us retain and protect all jobs. We continue to conserve cash within the business and I feel the Company is as best placed as it can be to resume trading when permitted.

N H P TUCKER
Chairman

15 February 2021

Group income statement

for the year ended 31 October 2020

Group statement of comprehensive income

for the year ended 31 October 2020

Group balance sheet

at 31 October 2020

Group statement of cash flows

for the year ended 31 October 2020

Group statement of changes in equity

for the year ended 31 October 2020

Equity share capital

The balance classified as share capital includes the total net proceeds (nominal amount only) arising or deemed to arise on the issue of the Company's equity share capital, comprising Ordinary Shares of 5p each and 'A' Limited Voting Ordinary Shares of 5p each.

Capital redemption reserve

The capital redemption reserve arises on the re-purchase and cancellation by the Company of Ordinary Shares.

Treasury shares

Treasury shares represent the cost of The Heavitree Brewery PLC shares purchased in the market and held by The Heavitree Brewery PLC Employee Benefits Trust and Employee Share Option Scheme ('EBT').

At 31 October 2020 the Group held 183,719 Ordinary Shares and 254,153 'A' Limited Voting Ordinary Shares (2019: 179,053 Ordinary Shares and 300,002 'A' Limited Voting Ordinary Shares) of its own shares. During the year there were purchases of 4,666 Ordinary Shares and 2,500 'A 'Limited Voting ordinary Shares  and sales of 48,349 'A; Limited Voting Ordinary Shares.

Fair value adjustments reserve

The fair value adjustments reserve is used to record differences in the year on year fair value of the investment classified as fair value through other comprehensive income.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Notes to the preliminary announcement

1.  Basis of preparation

These figures do not constitute full accounts within the meaning of Section 396 of the Companies Act 2006. They have been extracted from the statutory financial statements for the year ended 31 October 2020. The statutory financial statements have not yet been delivered to the Registrar of Companies.

The auditors, PKF Francis Clark, have reported on the accounts for the years ended 31 October 2020 and 31 October 2019. Their audit reports in both years were unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006 in respect of those accounts.

The financial information in this statement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union.  The accounting policies have been consistently applied and are described in full in the statutory financial statements for the year ended 31 October 2020, which are expected to be mailed to shareholders on 12 March 2021.  The financial statements will also be available on the Group's website www.heavitreebrewery.co.uk.

Going concern

With the uncertain nature of the current Covid-19 pandemic the Directors have considered the Group's financial resources including a review of the medium-term financial plan, along with a range of cash flow forecasts for 12 months from the date of approval of these financial statements, the Group has positive cash generation from its operations and the gearing remains low. These forecasts include continued rent concessions for Tenants and factoring in a possible lockdown until the end of May 2021 and the tier restrictions still being in place over the summer trading months. The mitigation measures which were put in place in March 2020 and are detailed on page 9 are still in place in order to protect the cash position of the business and these have been incorporated into the forecasts for future cash positions. The forecast for capital receipts in 2021 include non-core asset sales of £2m. These forecasts leave the Group with headroom of over £1.1m on an overdraft facility of £3m.  The Board has looked at the ability to sustain cashflow if  lockdown continued into the summer and will continue to review cashflows as guidance from Government changes.

Since the year end, the Board also made the decision to accelerate the paying down of its current £4.5m term loan by the selling of non-core assets to secure its current position and the long term trading position of the Group. The board has identified up to 15 non-core assets with a value of between £5m and £7m to be realised over a period of 2 to 3 years, these include unlicensed properties and developments with permissions which are already within the Estate.

The Board has engaged with the bank regarding its current facilities and forward trading, this has included the securing of the overdraft facilities and the waiving of covenant testing until April 2022 along with the agreement on paying down of loan facilities. The bank is satisfied that the Group's forecasts and projections, which take account of the anticipated changes which will come about as a direct result of the Covid-19 pandemic and shows that the Group will be able to operate within its facilities. The current trading performance of the Group also shows that it will be able to operate within the level of its facilities for the foreseeable future. With the value in the Estate being realised over time and with the support from the bank there are no material uncertainties. For this reason, the Group continues to adopt the going concern basis in preparing its financial statements.

2.  Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of Ordinary shares and 'A' Limited Voting Ordinary shares outstanding during the year.

The following reflects the income and shares data used in the basic and diluted earnings per share

Computation:

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

3. Dividends paid and proposed

4.  Segment information

 Primary reporting format - business segments

During the year the Group operated in one business segment - leased estate.

Leased estate represents properties which are leased to tenants to operate independently from the Group, under tied and free of tie tenancies.

Secondary reporting format - geographical segments

The following tables present revenue, expenditure and certain asset information regarding the Group's geographical segments for the years ended 31 October 2020 and 2019. Revenue is based on the geographical location of customers and assets are based on the geographical location of the asset.

5. General information

The 2020 Annual Report and Financial Statements will be published and posted to shareholders on 12th March 2021 Further copies may be obtained by contacting the Company Secretary at The Heavitree Brewery PLC, Trood Lane, Matford, Exeter EX2 8YP. The 2020 Annual Report and Financial Statements will also be available on the Company's website at http://www.heavitreebrewery.co.uk/financial/

The Annual General Meeting will be held at the Registered Office on 15 April 2021 at 11.30am.

Ends.