TIDMMARS
RNS Number : 1378I
Marston's PLC
10 December 2020
10 December 2020
MARSTON'S PLC
RESULTS FOR THE 53 WEEKSED 3 OCTOBER 2020*
DECISIVE MANAGEMENT DURING COVID-19, WELL PLACED AS MARKET
RECOVERS
Resilient trading performance post reopening, pubs outperformed market***
by 7%
* Full year 2020 sales impacted by the 15-week closure
of pubs from the end of March
* Q4 like-for-like sales** 90% of 2019, 7% ahead of UK
pub sector***
* Guest satisfaction scores up 11% compared to pre
COVID-19 levels
* Strong off-trade performance in Beer Company with
volumes up 23%
Response to COVID-19 prioritised safety, livelihoods, pub ambience,
financial sustainability
* Significant financial support to tenants, lessees and
retailers
* GBP2 million investment in "Inside-Out" schemes to
increase capacity in winter months
* Engaged with communities to provide support,
including to local authorities
* Very few notified instances of COVID-19 infection
from employees or guests
Lower debt - net borrowings before JV completion cGBP50 million lower
than 2019
* Net cash flow**** improved by GBP61 million including
GBP75 million disposals
* Government support areas: furlough scheme, VAT,
business rates, payment schedules
* Tight control of all costs, including capital
expenditure and no dividend in FY20
Transformational Carlsberg joint venture completed 30(th) October
* Marston's Beer Company valued at cGBP580 million
* GBP233 million of total equalisation payment of up to
GBP273 million received 30 October
* Retain 40% stake in a high-quality beer business with
significant synergy opportunity
* Net ongoing impact on Marston's PLC cash flow broadly
neutral post synergies
Future strategy: focused pub business well placed as market recovers
* Simplified Executive management structure - one pub
business with centralised support
* Further streamlining to come: GBP5 million overhead
reduction target, GBP3 million to be realised this
year
* Suburban pub estate well placed to take advantage of
trends emerging from COVID-19
* Three clear strategic pillars: Guest Obsessed, Raise
the Bar, We Will Grow
Significant cash headroom post JV completion, further debt reduction
targeted
* Bank facility of GBP280 million committed to 2024;
liquidity and profit covenants to July 2021
* Waivers provided by securitisation bondholders to
April 2021
* Target to reduce borrowings to below GBP1 billion by
2024 through operational cash flow
Current outlook post 2(nd) lockdown (November 2020)
* Near-term dependent on the development of
restrictions across England, Wales and Scotland
* Significant cash liquidity to absorb impact of
current restrictions
* Government support through reduced VAT, the business
rates holiday and other taxes remains necessary
* The adoption of recently announced vaccines, and the
lifting of restrictive measures affecting pubs, are
critical to the recovery of trade to normal levels
* Clear strategy, strong team well placed to take
advantage of return to normality
Financial Highlights
Underlying Total
2020 2019 2020 2019
------------ ------------- ------------- -------------
Total revenue GBP 821.0m GBP 1,173.5m GBP 821.0m GBP 1,173.5m
------------ ------------- ------------- -------------
Total (loss)/profit GBP( 22.0)m GBP 95.1m GBP( 397.1)m GBP (20.1)m
before tax
------------ ------------- ------------- -------------
(Loss)/earnings per
share (1.7)p 12.7p ( 56.8)p (2.8)p
------------ ------------- ------------- -------------
Net cash flow GBP 50.5m GBP( 10.5)m
------------ ------------- ------------- -------------
-- The financial performance for the year reflects the impact of
the closure of the pub estate for 15 weeks from 20 March. Our pubs
estate reopened on 4 July subject to social distancing restrictions
and further restrictions were introduced in September, most notably
a 10pm curfew on trading.
-- The statutory loss before tax reflects a non-cash impairment
charge of GBP305.7 million for goodwill and property, plant and
equipment, triggered by the COVID-19 situation.
-- The business has a strong balance sheet position. As at the
balance sheet date, the Group had drawn down GBP270 million of a
GBP360 million bank facility providing headroom of GBP90 million.
In October 2020 the Group received net proceeds of GBP233 million
in respect of the JV. Consequently, the facility, which is in place
to 2024, has been reduced to GBP280 million, but with significantly
improved liquidity relative to the 2020 year-end.
-- The financial figures above combine the total revenue and
earnings of both continuing and discontinued operations in the
period.
Commenting, Ralph Findlay, CEO said:
" 2020 has been an extraordinarily difficult year for the pub
and wider hospitality sector which has been particularly hard hit
by the pandemic. I would like to thank the entire team at Marston's
for their loyalty, dedication and hard work in such trying
circumstances.
"Whilst short-term uncertainty remains, we have taken swift
action to future-proof the business to withstand the challenges
presented by the pandemic and Marston's has emerged a significantly
stronger business, with a substantially strengthened balance sheet
and well placed to rebuild trading momentum when restrictions are
eased. The roll out of the vaccine is clearly critical to that, but
in the meantime the sector continues to face major challenges and
Government support will need to continue in order for many viable
businesses to survive.
"Looking forward, Marston's has entered the current year fit for
the future and excited about the next chapter in the Company's
development as a focussed pub and accommodation operator. We look
forward to realising the potential of the Group's brewing JV with
Carlsberg and wish the team at CMBC every success. There is clear
evidence that consumer demand for our pubs remains strong and our
geography, as a predominantly community pub operator with 90% of
our well invested, high quality pubs located outside city centres,
leaves Marston's well placed to leverage the market opportunities
available to us over the medium to longer term. "
*Prior year was a 52-week period to 28 September 2019
**Like-for-like sales is defined as sales this year compared to
sales in the previous year of the same pubs trading in both
periods, expressed as a percentage
***Peach Tracker
****Net cash flow is defined as the change in debt resulting
from cash flows
ENQUIRIES:
Marston's PLC Tel: 01902 329516 Instinctif Partners Tel: 020
7457 2010/2005
Ralph Findlay, Chief Executive Justine Warren
Officer
Andrew Andrea, Chief Financial Matthew Smallwood
and
Corporate Development Officer
NOTES TO EDITORS
-- Marston's is a leading pub operator with a 40% holding in
Carlsberg Marston's Brewing Company
-- It has an estate of 1,368 pubs situated nationally,
comprising managed, franchised and leased pubs
GROUP OVERVIEW
2020 PERFORMANCE OVERVIEW
The 2020 results were significantly impacted by the COVID-19
pandemic in March 2020, including a 15-week period of enforced
closure to 4 July, and various subsequent trading restrictions in
place since reopening. During the period of closure, our focus was
on supporting our people at a time of great uncertainty, ensuring
that our financial position was robust, delivering the joint
venture between Marston's Beer Company and Carlsberg and planning
for the reopening of our pubs on 4 July.
Following the transformational Beer Company transaction
described below, which completed on 30 October 2020, we have a
significantly strengthened balance sheet, a high-quality freehold
pub estate well placed to recover from the impact of the pandemic
and a 40% investment in the Carlsberg Marston's Brewing Company
with significant synergy and growth opportunities.
Following the disposal of the Beer Company we now have a clear,
simplified and focused pub strategy underpinned by three core
pillars: Guest Obsessed, Raise the Bar and We Will Grow, described
in more detail below. Our financial strategy continues to be
focused on debt reduction, with a revised target of net borrowings
(excluding lease obligations) to be below GBP1 billion by financial
year 2024.
Trading
Group sales for the 53 weeks ending 3 October 2020 were GBP821
million, 30% below last year. Total Pubs and Bars sales for the
year were GBP516 million, 34% below last year, principally
reflecting the 15-week closure period and the impact of the
disposal of 172 pubs for proceeds of GBP61 million in the first
half year. In Brewing, sales for the year were GBP306 million, 22%
below last year. Off trade volumes for the year were up 23%, driven
by exceptional demand during the period of pub closure. On trade
volumes (excluding the closure period) were 11% below last
year.
Overall, underlying trading prior to 16 March was solid,
including strong Christmas and New Year trading, despite the impact
of the severe and widespread flooding in November 2019, and again
in February this year. Like-for-like sales in pubs for the 24 weeks
to 14 March were down 1% and Beer Company earnings were in line
with expectations. In the week commencing 16 March, when the
Government issued COVID-19 guidance to the hospitality venues,
unsurprisingly trading deteriorated sharply. All pubs were
subsequently closed in line with Government guidance on 20
March.
Since 4 July, we had reopened approximately 99% of our pubs by
the year end, though a small number closed subsequently as revised
regulations were introduced in Scotland where we have 21 pubs.
Managed and franchised like-for-like sales averaged 90% of last
year over the 13-week period to 3 October. This represented
outperformance of approximately 7% relative to the UK pub sector
(CGA Peach Tracker) over the 13-week period, principally reflecting
the benefits of our balanced pub estate of wet-led and food-led
pubs, which are predominantly suburban and community based, with
limited exposure to city centres and only three pubs in Central
London.
The results for the period reflect the adoption of IFRS 16
'Leases', details of which are set out in note 11 of the accounts.
In summary, as previously announced, this change to the accounting
rules has no impact on cash flow but has increased the underlying
loss before tax by GBP3.2 million and increased reported total net
borrowings, as described below, to reflect lease obligations not
previously recognised as debt on the balance sheet.
The financial consequences of pub closures due to COVID-19, for
the duration of the 15-week period of enforced closure, subsequent
restrictions and local lockdowns in many areas across the country,
are reflected in significantly reduced profit. Underlying EBITDA
was GBP125.6 million (2019: GBP215.0 million), and total underlying
operating profit was GBP74.0 million (2019: GBP172.8 million). The
total underlying loss before tax was GBP22.0 million (2019: GBP95.1
million profit). The basic underlying loss per share for the period
was 1.7 pence per share (2019: 12.7 pence earnings per share).
On a statutory basis, the total loss before tax was GBP397.1
million (2019: GBP20.1 million), and the loss per share was 56.8
pence per share (2019: 2.8 pence per share). The difference between
underlying and statutory loss before tax is GBP375.1 million of
exceptional items, of which GBP338 million were non-cash items,
which are described in further detail below.
Managing COVID-19
In response to the temporary closure of pubs mandated by
Government in March, our focus was to minimise the level of cash
burn within the organisation. Actions included:
- Reducing all expenditure, including capital spend, to essential spend only
- Taking advantage of the Government furlough scheme with 93% of
employees being furloughed and remaining employees taking a 20%
reduction in salary
- Securing covenant amendments and waivers in our bank and securitisation facilities
- Accessing Government grants and relief, including supporting
our tenants by assisting them to claim the relief
- Maintaining a mental wellbeing programme to support affected employees
In addition, and as previously announced, given the ongoing
uncertainty surrounding COVID-19 no dividends will be paid in
respect of financial year 2020.
Most importantly we would like to thank our teams for their
perseverance through this challenging time. Through their fantastic
efforts, we reopened in July and went the extra mile in providing
our guests with great experiences whilst ensuring we complied with
Government guidelines. As a consequence, we outperformed the market
in the final 13 weeks of the period and this is all down to
them.
Cash flow, Financing and Balance Sheet
Despite the trading challenges described above, prudent cash
management resulted in a net cash inflow for the period of GBP51
million, a GBP61 million improvement on 2019. In comparison with
2019, cash flow benefited from reduced capital investment
(including the cessation of new-build investment in 2019), GBP75
million of disposal proceeds from the sale of 172 pubs and the
suspension of dividends in 2020. Operating cash flow of GBP157
million reflected lower earnings, partially offset by improved
working capital including the agreed deferral of duty and VAT
payments to HMRC.
Net borrowings, excluding IFRS 16 lease commitments, was
GBP1,329 million (2019: GBP1,377 million), with the decrease driven
by the cash actions described above. Total net debt of GBP1,633
million includes lease obligations of GBP304 million following the
adoption of IFRS 16.
Following the enforced closure of pubs, we were successful in
reaching agreement with our bank syndicate and bondholders to make
appropriate covenant amendments in respect of certain financial
covenants, and to provide waivers where necessary. These included
strong support from bondholders for covenant waivers and amendments
to April 2021 and the adoption of liquidity and profit covenants
with banks and private placement providers to July 2021. This
collaborative approach was helped by open and constructive dialogue
in a period of great uncertainty and underlines the importance of
good, long-term relationships with all our stakeholders.
We have secure medium-term financing in place. At the period end
we had a GBP360 million bank facility available until 2024, of
which GBP270 million was drawn providing headroom of GBP90 million,
significantly better than our prudent forecasts. An additional
GBP70 million facility agreed in May 2020 to provide further
short-term liquidity remained undrawn and has now been cancelled as
it is not required. We also have a GBP40 million private placement
in place until 2024.
The joint venture between Carlsberg UK and Marston's Beer
Company completed on 30 October 2020 and on completion, we received
initial proceeds of GBP233 million which were used to further
reduce debt. The GBP360 million bank facility has been reduced to
GBP280 million, which remains available until 2024.
We also have secure long-term financing in place. We utilised
GBP15 million of the securitisation liquidity facility to satisfy
the July quarter-end principal and interest payments. However, for
the quarter to October 2020 we generated sufficient funds from
operations to make payments and to repay GBP5 million of the
liquidity facility, demonstrating that we are more than able to
meet securitised debt obligations despite the current trading
restrictions being in place.
In summary, we have significant headroom in our bank facility to
provide operational liquidity, and a securitisation liquidity
facility to protect bondholder payments for at least 18 months
should that be required in the event of further interruptions to
trading. Our cash preservation actions described below, together
with the government financial support on VAT and Business Rates,
mean our ongoing weekly cash burn in a full closure scenario (not
the part closedown we are now in) is estimated to be around GBP3-4
million per week.
Inevitably, in the event of additional restrictions in the
coming months it is possible that further covenant amendments may
be required depending on the nature of any restrictions introduced,
and their duration. Whilst there is no certainty that these
amendments will be granted (this has been disclosed as a material
uncertainty in the financial statements), given our experiences to
date we are confident of securing these where necessary.
Furthermore, the COVID-19 situation has triggered impairment
reviews of goodwill, property, plant and equipment and right-of-use
assets. The total value of these impairments, as described in the
notes to the accounts is GBP461 million. Clearly this has distorted
the net asset value of the Group in the short term at the balance
sheet date. However, a degree of this is purely a result of timing
as this will be significantly offset in 2021 by the positive impact
of the completion of the joint venture with Carlsberg reflecting
the cash received from the disposal of the Beer business into the
joint venture and the carrying value of the Group's share of the
joint venture moving forwards. The profit on disposal is estimated
to be around GBP280 million and the spot value of the contingent
payment on 4(th) December was around GBP20 million, which will
increase NAV per share by approximately 48 pence in the FY
2021.
Joint Venture with Carlsberg UK
On 22 May 2020, the Group announced that it had entered into an
agreement to contribute its brewing business, valued at up to
GBP580 million on a debt free/cash free basis, to a new UK brewing
joint venture with Carlsberg, the Carlsberg Marston's Brewing
Company, in return for 40 per cent of the equity in the joint
venture. Under the agreement, Carlsberg would also contribute its
UK brewing assets, valued at GBP200 million on a debt free/cash
free basis, in return for 60 per cent of the equity in the joint
venture.
On completion, the Group would realise up to GBP273 million in
the form of a cash equalisation payment, which is subject to
adjustment in respect of: (i) customary working capital and
debt/cash adjustments, and (ii) GBP5 million of other adjustments.
Of the up to GBP273 million equalisation payment, GBP34 million is
deferred for 12 months from completion with the amount payable
contingent on the extent of the recovery of the share price
performance of a pre-agreed basket of companies to pre-COVID-19
levels.
The transaction completed on 30 October 2020 with initial
proceeds of GBP233 million received on completion.
As stated above under Cash flow and Financing, the cash proceeds
have provided Marston's with significant liquidity to materially
reduce debt in line with our stated strategy, whilst at the same
time retaining a significant stake in the joint venture and being
able to benefit from significant synergy and growth
opportunities.
Outlook
Following the recent Government announcements on the Tier system
and criteria, the winter months will be both challenging and
uncertain and 780 pubs remain closed after the November
lockdown.
Our experiences from the Spring helped us to swiftly and
efficiently respond to the constantly moving restrictions imposed
since the year end, with pub teams furloughed where appropriate,
and the cessation of all non-essential spend. In addition, we have
been able to minimise the extent of stock losses given the slightly
longer notice period.
During the period of closure our focus is on the future.
Following the disposal of the Beer Company into the joint venture
with Carlsberg, we are singularly focused on operating a great pub
business. As described in the strategy section below, the initial
lockdown provided an opportunity to review all parts of our
business, from improving commercial efficiency through to
development of technology. In this current period of shutdown, this
gives us an opportunity to further develop and evolve those plans,
ensuring we are well placed to take advantage of the significant
trading opportunity that will emerge as restrictions are eased.
Looking forward, the outlook does look more positive. The Prime
Minister has strongly intimated that restrictions will ease in the
Spring and there is increasing confidence that an effective
vaccination programme can be implemented. Our c90% freehold pub
estate is predominately located outside of the challenged city
centres and our experiences of trading since 4 July demonstrate
that consumer demand is strong - our guests want to go out and
socialise and we are confident they will do as soon as they are
permitted. Importantly, with the development of the vaccine, the
more vulnerable groups, who are a key part of our business, should
have more confidence in returning to pubs.
Finally, and most importantly, we have an incredible team at
Marston's. We have worked hard to protect as far as possible the
livelihoods and wellbeing of our team members and our tenanted,
leased and other partners. Our focus on "doing the right thing" for
our people will pay dividends - we have a loyal, hardworking group
of people eager to welcome our guests back into our pubs and again
provide them with great experiences.
STRATEGIC PRIORITIES
MARKET ENVIRONMENT
Since reopening in July 2020, our priorities have been the
safety of our guests and employees, retaining ambience and high
levels of service, and being financially sustainable.
How behaviours change as the market 'normalises' remains to be
seen, but we expect that the trends below are likely to continue
for the foreseeable future. Marston's pub estate is well positioned
to take advantage of these trends over time.
Celebrating and socialising outside the home matters more :
during the lockdown, there was uncertainty about how and to what
extent people would resume 'old habits' when pubs reopened.
Following the 15-week closure period, consumer confidence increased
steadily throughout July, August and into September in both the
drinking-out and eating-out market. Community pubs performed
particularly strongly. There is no question that demand remains
strong as demonstrated by the performance of our pubs during the
Eat Out to Help Out campaign in August.
Convenience and functional reasons to visit matter less: these
are still important, but lockdown introduced home delivery from
supermarkets and restaurants on a much greater scale than had
previously been the case. Convenience dining at home has never been
easier: at the same time, when people do visit pubs, there is a
much higher expectation that the experience will make the effort
worthwhile.
Value for experience is replacing price discounting as the
motivation to visit pubs : the eating-out sector has been impacted
by extensive and severe price discounting in recent years. COVID-19
related capacity constraints to comply with social distancing
requirements have been a catalyst for an increased focus on
improved customer experience. Better quality in food and drink, and
improved service, are facilitating a move away from unsustainable
price promotion towards more premium offers.
On-trade supply in the eating-out market is falling: in recent
years capacity has expanded through an increase in casual dining
brands and restaurants despite the fact that demand in the
eating-out market has been relatively subdued. In recent months,
supply has contracted significantly, with financial distress
illustrated by high profile administrations and insolvencies and we
would expect this trend to continue over the remainder of the year.
Reduced supply is likely to benefit existing operators, and home
delivery.
Suburban pubs benefit from increased homeworking: ' lockdown'
has created a shift towards homeworking and the rapid growth in new
video conferencing applications. The extent to which this remains
in the future is not clear but both businesses and employees see at
least some benefits in retaining more flexible working patterns.
Our pub estate is primarily suburban, with relatively few city
centre locations, and is well placed to exploit this trend.
Technology has become mainstream: our desire to operate safely
led to an acceleration in the implementation of table ordering apps
(and Track & Trace systems), at a pace that would not have been
thought possible prior to the pandemic. Not only have these systems
been implemented quickly, they have been positively embraced by
guests.
FINANCIAL STRATEGY
In 2019 we set out a target to reduce net borrowings to below
GBP1.2 billion. Following the completion of the joint venture
between Carlsberg UK and Marston's Beer Company, and the
corresponding receipt of GBP233 million in October 2020, our
borrowings are significantly reduced.
Our debt structure is mainly long term, secured on our high
quality, 91% freehold estate, with interest rate exposure hedged
using interest rate swaps.
We have further reviewed our financial strategy and have
concluded that our aim to reduce debt should continue and we have
set a revised target to reduce net debt before IFRS 16 lease
obligations to below GBP1 billion by financial year 2024.
This target is expected to be achieved through:
- Cash from operations, including the benefit of cGBP5 million
per annum of overhead savings to be implemented in 2021.
- A more focused approach to capital allocation, targeting
enhanced returns on the existing estate. This includes the
suspension of new openings for the foreseeable future.
- Tight control of capital expenditure of GBP40-45 million per
annum including GBP10 million of growth capital.
- Disposal of non-core assets of around GBP10 million per annum.
- Reduced interest payments as a result of lower borrowings.
- Lower levels of dividend payment reflecting the dividend considerations described below.
- Receipt of dividends from the Carlsberg Marston's Brewing Company.
As part of our response to the COVID-19 crisis we suspended
dividend payments and a decision has not yet been made regarding
the timing of reinstatement of dividends. Our dividend policy
moving forwards will be based on cash cover, rather than on
historical earnings cover, and it is likely that any dividends paid
should be covered by underlying cash flow after principal
repayments of securitised bonds.
OPERATIONAL STRATEGY - 'GUEST AT THE HEART'
Clearly, as described above, COVID-19 has significantly changed
the dynamics of the market and in the last year our focus has been
on the immediate responses to the challenges presented by the
crisis.
Following the sale of Marston's Beer Company into the joint
venture with Carlsberg UK, we have become a focused pub operator
for the first time in the Group's long history. We have taken this
opportunity to revisit our operational strategy, which can be
summarised as developing a culture which places 'Guests at the
heart of everything we do'. That has involved an internal
reorganisation of our pub management structure which is outlined
below.
There are three core pillars to our strategy as described
below.
PILLAR 1: BEING GUEST OBSESSED
Ways of Working
Embedding a guest obsessed people strategy across the business
and all disciplines in a consistent manner as a single and
consistent cultural message is central to realising our vision. At
the same time, we are seeking to simplify processes and streamline
structures across the business to support the delivery of that
guest obsessed culture.
To that end, from 1 October 2020, we centralised support
structures including marketing, procurement, finance and HR which
had supported our Destination, Taverns and Premium businesses, and
brought those businesses together under the single umbrella which
is Marston's Pubs. Our Executive is now comprised of a team with
long service within Marston's and the pub sector generally.
Marston's Pubs has two Operations Directors who are responsible
for food-led and wet-led pubs respectively. The Premium pubs &
bars business, which includes Revere, has been consolidated within
this structure. We have also created a single Marketing and
Commercial Director role for Marston's Pubs. This role is central
to the development of guest insight and the strategic direction for
marketing, as well as procurement, menu development and food and
drink quality.
Guest Satisfaction
In seeking to ensure that our decisions are based on insight,
guest satisfaction and the evaluation and improvement of
satisfaction scores over time, is a key performance indicator. This
year we have invested in new feedback systems across our estate,
and we are also implementing rigorous issues management processes
which will more clearly define how guest comments are handled and
resolved.
PILLAR 2: RAISE THE BAR
Value for Experience
Focusing on 'value for experience' recognises that, as described
above under our Strategic Priorities, value is measured in a range
of ways, and experience is likely to be just as important as price
when considering which pub to go to. Those experiences can relate
to celebration, socialising, teams, community engagement, music,
service - but they provide reasons to make 'going out' worthwhile
and memorable.
Clearly, value for money remains very important, but higher
quality food and drink and investment in improved service and
ambience are critical in competing with the convenience of home
delivery. The eating-out sector has suffered from unsustainable
price promotion in recent years, partly due to overcapacity in
casual dining, but recent trends indicate that consumers are
willing to pay more if the experience is good enough and
sufficiently differentiated.
In assessing our current position in relation to value for
experience, we are already strong in wet-led and community pubs,
but need to make further improvements in our food-led pubs. The
input of the new Marketing and Commercial team will be key to
determining the next steps towards improved food and drink quality
in food-led pubs. Our objective is very clear: to create a pub
estate that is locally loved by our guests throughout the
country.
Property - clear investment strategy, regular maintenance
Our property plans will ensure that each of our pubs and bars is
maintained to a high standard and retains a characterful pub
ambience.
Operational excellence
In 2019, and in the first half of this year, we made progress in
improving Guest Satisfaction scores, EHO ratings, and our own food
hygiene scores. This has been achieved by enhanced operational
focus (including the incorporation of these measures into bonus
schemes) and the creation of four new roles in the centre to assist
in improving standards.
We have been encouraged that, since reopening in July, we have
made further improvements on all these measures and achieved very
high scores in relation to COVID-19 safety measures. This included
achieving very high compliance with Track & Trace requests in
our food-led pubs.
The simplification of our management structure detailed under
Ways of Working above will, we believe, enable us to achieve better
and more consistent operating standards across the business, to
align our people around the guest obsessed culture, and further
improve standards.
PILLAR 3: WE WILL GROW
The market backdrop described above highlights the significant
opportunities for organic growth in the medium term. As such we are
instilling into our organisation belief that growth is achievable,
and that we will invest in our people, pubs and offers to achieve
it. There are four key areas of focus:
More from existing guests and welcoming new guests
As described above the market and social dynamics that have
emerged from the COVID-19 crisis present opportunities for our
well-positioned estate and (post the creation of the joint venture
with Carlsberg UK) our refocused business to target increased
frequency of guest visits and increased 'spend per head'.
More from our People
We have made steady progress in developing our teams in the last
couple of years, which has involved both internal development and
external recruitment. However, in order to exploit future growth
opportunities, we will be more rigorous in developing our teams
across the organisation, including the coaching and development of
senior management, and in succession planning.
More from simplification
Simplification of the business is not just a measure to improve
efficiency and reduce costs. Through maintaining a philosophy of
simplicity, we will constantly challenge ourselves that we are
doing fewer things delivered to an excellent standard, with the aim
of driving higher guest satisfaction.
More from capex
We have allocated modest levels of growth capex into our
medium-term plans, ensuring these funds are deployed to generate
maximum return. We have made it clear to our teams that consistent
delivery of high return on organic growth capex will ensure the
allocation of additional spend in future years.
Clearly, it is difficult to set out quantitative evidence of
progress on the above from our 2020 results, but we will update on
progress on our pillars once the sector has returned to more
normalised levels of trade.
PERFORMANCE AND FINANCIAL REVIEW
Revenue Underlying Underlying
operating profit operating margin
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm % %
Pubs and Bars 515.5 784.2 84.7 167.5 16.4 21.4
Brewing 305.5 389.3 17.3 32.6 5.7 8.4
Group Services - - (28.0) (27.3) (3.4) (2.3)
----------------- ------------------- ------------- ------------- --------- ---------
Group 821.0 1,173.5 74.0 172.8 9.0 14.7
----------------- ------------------- ------------- ------------- --------- ---------
Pubs and Bars
Total revenue decreased by 34.3% to GBP515.5 million principally
reflecting the impact of COVID-19 as described above and the impact
of the disposal of 172 pubs. Total like-for-like sales were 3.6%
behind last year.
Underlying operating profit was GBP84.7 million (2019: GBP167.5
million). Reported underlying operating margin of 16.4% is below
last year reflecting the weaker turnover.
Brewing
Total revenue decreased by 21.5% to GBP305.5 million. Underlying
operating profit was GBP17.3 million (2019: GBP32.6 million).
Underlying operating margin of 5.7% was below last year again
reflecting the impact of the weaker turnover.
Taxation
The total underlying rate of taxation of 52.3% in 2020 (2019:
15.7%) is above the standard rate of corporation tax. This means
that the tax credit is higher than expected due to a prior year
adjustment to deferred tax in respect of the net book value of
assets qualifying for capital allowances.
Non-underlying items
There is a net non-underlying charge of GBP349.1 million after
tax, of which GBP324.7 million relates to continuing operations and
GBP24.4 million relates to discontinued operations.
The charge in respect of continuing operations primarily relates
to the goodwill impairment of GBP200.6 million and the impairment
review of the pub estate in the period, which resulted in a
GBP105.1 million charge to the income statement.
There is also a GBP22.4 million loss on disposal and associated
costs from portfolio disposals of smaller wet-led leased, tenanted
and franchised pubs and associated properties, and GBP18.5 million
of associated costs/charges from COVID-19, principally comprising
bad debt provisions, stock write-offs and financing costs.
In addition, there are net credits of GBP4.2 million in respect
of VAT claims, a charge of GBP0.9 million from the write-off of
acquisition and development costs, a charge of GBP0.6 million in
respect of the net interest on the net defined benefit pension
asset/liability and a GBP6.4 million net loss in respect of
interest rate swap movements. There is a credit of GBP23.8 million
relating to the tax on non-underlying items and a credit of GBP1.8
million in relation to the change in corporation tax rate.
The charge in respect of discontinued operations relates to the
impact of COVID-19, disposal costs and the impairment of central
assets associated with discontinued operations.
Capital expenditure and disposals
Capital expenditure was GBP63.7 million in the year (2019:
GBP133.8 million). We expect that capital expenditure will be
around GBP40-45 million in 2021.
Notes:
-Prior period was a 52-week period to 28(th) September 2019
-Revenue and earnings numbers reflect the combination of both
continuing and discontinued operations
GROUP INCOME STATEMENT
For the 53 weeks ended 3 October 2020
2019
2020 (Restated)
Non- Non-
underlying underlying
(note (note
Underlying 3) Total Underlying 3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---- ----------- ------------ -------- ----------- ------------ --------
Continuing operations
Revenue 515.5 - 515.5 784.2 - 784.2
Operating expenses (458.8) (342.2) (801.0) (644.0) (59.3) (703.3)
Operating profit/(loss) 56.7 (342.2) (285.5) 140.2 (59.3) 80.9
-------------------------------- ----------- ------------ -------- ----------- ------------ --------
Finance costs (96.1) (2.7) (98.8) (77.2) (0.6) (77.8)
Finance income 1.0 1.0 2.0 0.4 0.5 0.9
Interest rate swap
movements - (6.4) (6.4) - (48.7) (48.7)
-------------------------------- ----------- ------------ -------- ----------- ------------ --------
Net finance costs (95.1) (8.1) (103.2) (76.8) (48.8) (125.6)
--------
(Loss)/profit before
taxation (38.4) (350.3) (388.7) 63.4 (108.1) (44.7)
Taxation 14.6 25.6 40.2 (8.8) 16.1 7.3
-------------------------------- ----------- ------------ -------- ----------- ------------ --------
(Loss)/profit for
the period from
continuing operations (23.8) (324.7) (348.5) 54.6 (92.0) (37.4)
Discontinued operations
Profit/(loss) from
discontinued operations 13.3 (24.4) (11.1) 25.6 (5.9) 19.7
-------------------------------- ----------- ------------ -------- ----------- ------------ --------
(Loss)/profit for
the period attributable
to equity shareholders (10.5) (349.1) (359.6) 80.2 (97.9) (17.7)
-------------------------------- ----------- ------------ -------- ----------- ------------ --------
2019
2020 (Restated)
(Loss)/earnings per share: p p
---------------------------------------------- ---- ------- ------------
Basic (loss)/earnings per share
Total (56.8) (2.8)
Continuing (55.1) (5.9)
Discontinued (1.8) 3.1
Basic underlying (loss)/earnings per share
Total (1.7) 12.7
Continuing (3.8) 8.6
Discontinued 2.1 4.0
Diluted (loss)/earnings per share
Total (56.8) (2.8)
Continuing (55.1) (5.9)
Discontinued (1.8) 3.1
Diluted underlying (loss)/earnings per share
Total (1.7) 12.7
Continuing (3.8) 8.6
Discontinued 2.1 4.0
---------------------------------------------------- ------- ------------
The comparative information for the 52 weeks ended 28 September
2019 has been restated for the prior period adjustments detailed in
note 9 and the asset class split detailed in note 10. The
comparatives have also been represented to show discontinued
operations separately from continuing operations.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the 53 weeks ended 3 October 2020
2019
2020 (Restated)
GBPm GBPm
------------------------------ ------------------------------ ---- -------- ------------
Loss for the period (359.6) (17.7)
-------------------------------------------------------------- ---- -------- ------------
Items of other comprehensive income that may subsequently
be reclassified to profit or loss
Losses arising on cash flow hedges (3.8) (20.5)
Transfers to the income statement on cash flow
hedges 21.3 11.2
Tax on items that may subsequently be reclassified
to profit or loss (0.3) 1.5
-------------------------------------------------------------- ---- -------- ------------
17.2 (7.8)
-------------------------------------------------------------- ---- -------- ------------
Items of other comprehensive income that will not
be reclassified to profit or loss
Remeasurement of retirement benefits (6.5) (54.7)
Unrealised surplus on revaluation of properties - 2.8
Reversal of past revaluation surplus (151.2) (25.1)
Tax on items that will not be reclassified to profit
or loss 17.7 10.6
-------------------------------------------------------------- ---- -------- ------------
(140.0) (66.4)
-------------------------------------------------------------- ---- -------- ------------
Other comprehensive expense for the period (122.8) (74.2)
-------------------------------------------------------------- ---- -------- ------------
Total comprehensive expense for the period attributable
to equity shareholders (482.4) (91.9)
-------------------------------------------------------------- ---- -------- ------------
Other comprehensive expense for the current and prior period
relates wholly to continuing operations.
GROUP CASH FLOW STATEMENT
For the 53 weeks ended 3 October 2020
2019
2020 (Restated)
GBPm GBPm
---------------------------------------------------------- ---- -------- --- ------------
Operating activities
Underlying operating profit 74.0 172.8
Depreciation and amortisation 51.6 42.2
---------------------------------------------------------------- -------- --- ------------
Underlying EBITDA 125.6 215.0
Non-underlying operating items (367.0) (66.4)
---------------------------------------------------------------- -------- --- ------------
EBITDA (241.4) 148.6
Working capital movement 71.9 10.3
Non-cash movements 334.1 52.1
Increase/(decrease) in provisions and other non-current
liabilities 1.0 (3.4)
Difference between defined benefit pension contributions
paid and amounts charged (7.3) (3.0)
Income tax paid (1.8) (9.0)
---------------------------------------------------------------- -------- --- ------------
Net cash inflow from operating activities 156.5 195.6
---------------------------------------------------------------- -------- --- ------------
Investing activities
Interest received 1.5 0.5
Sale of property, plant and equipment and assets
held for sale 74.9 49.8
Purchase of property, plant and equipment and
intangible assets (63.7) (133.8)
Movement in trade loans 1.2 0.3
Finance lease capital repayments received 1.5 -
Net transfer from other cash deposits - 118.0
Net cash inflow from investing activities 15.4 34.8
---------------------------------------------------------------- -------- --- ------------
Financing activities
Equity dividends paid (30.4) (47.5)
Interest paid (91.0) (74.4)
Arrangement costs of bank facilities - (1.1)
Proceeds from sale of own shares - 0.1
Repayment of securitised debt (33.4) (31.7)
Repayment of bank borrowings (60.7) (0.7)
Advance of bank borrowings - 48.6
Capital element of lease liabilities repaid (8.3) (7.5)
Advance/(repayment) of other borrowings 55.0 (120.0)
Net cash outflow from financing activities (168.8) (234.2)
---------------------------------------------------------------- -------- --- ------------
Net increase/(decrease) in cash and cash equivalents 3.1 (3.8)
---------------------------------------------------------------- -------- --- ------------
GROUP BALANCE SHEET
As at 3 October 2020
28 September 29 September
3 October 2019 2018
2020 (Restated) (Restated)
GBPm GBPm GBPm
---------------------------------- ---- ------------ --- --------------- --- ---------------
Non-current assets
Goodwill - 230.3 230.3
Other intangible assets 32.5 88.5 70.0
Property, plant and equipment 2,038.3 2,306.1 2,361.6
Other non-current assets 17.5 9.3 9.6
Deferred tax assets 16.7 5.8 -
Retirement benefit surplus - - 15.6
2,105.0 2,640.0 2,687.1
--------------------------------------- ------------ --- --------------- --- ---------------
Current assets
Inventories 10.4 43.6 44.6
Trade and other receivables 16.2 90.9 104.9
Current tax assets 8.0 - -
Other cash deposits 2.0 2.0 120.0
Cash and cash equivalents 40.6 37.6 41.4
---------------------------------------- ------------ --- --------------- --- ---------------
77.2 174.1 310.9
Assets held for sale 349.7 1.7 2.3
---------------------------------------- ------------ --- --------------- --- ---------------
426.9 175.8 313.2
--------------------------------------- ------------ --- --------------- --- ---------------
Current liabilities
Borrowings (64.7) (54.9) (158.4)
Derivative financial instruments (37.0) (19.9) (14.6)
Trade and other payables (222.1) (248.3) (252.2)
Current tax liabilities - (1.7) (4.0)
Provisions for other liabilities
and charges (1.1) (2.6) (2.8)
---------------------------------------- ------------ --- --------------- --- ---------------
(324.9) (327.4) (432.0)
Liabilities held for sale (111.0) - -
(435.9) (327.4) (432.0)
--------------------------------------- ------------ --- --------------- --- ---------------
Non-current liabilities
Borrowings (1,610.9) (1,383.4) (1,389.0)
Derivative financial instruments (187.4) (215.6) (162.9)
Other non-current liabilities (3.9) (2.6) (1.5)
Provisions for other liabilities
and charges (7.7) (19.7) (22.5)
Deferred tax liabilities - (56.5) (73.8)
Retirement benefit obligations (37.2) (36.4) -
(1,847.1) (1,714.2) (1,649.7)
--------------------------------------- ------------ --- --------------- --- ---------------
Net assets 248.9 774.2 918.6
Shareholders' equity
Equity share capital 48.7 48.7 48.7
Share premium account 334.0 334.0 334.0
Revaluation reserve 430.6 573.4 600.2
Merger reserve 23.7 23.7 23.7
Capital redemption reserve 6.8 6.8 6.8
Hedging reserve (108.7) (125.9) (118.1)
Own shares (111.9) (112.0) (112.3)
Retained earnings (374.3) 25.5 135.6
---------------------------------------- ------------ --- --------------- --- ---------------
Total equity 248.9 774.2 918.6
---------------------------------------- ------------ --- --------------- --- ---------------
GROUP STATEMENT OF CHANGES IN EQUITY
For the 53 weeks ended 3 October 2020
Equity Share Capital
share premium Revaluation Merger redemption Hedging Own Retained Total
capital account reserve reserve reserve reserve shares earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- ------------ --------- ----------- --------- -------- --------- --------
At 29 September
2019 (as
originally
reported) 48.7 334.0 598.9 23.7 6.8 (125.9) (112.0) 36.9 811.1
Prior period
adjustment - - - - - - - 3.6 3.6
Adjustment for
asset class
split - - (29.9) - - - - (14.4) (44.3)
Tax impact of
asset class
split - - 4.4 - - - - (0.6) 3.8
------------------ -------- -------- ------------ --------- ----------- --------- -------- --------- --------
At 29 September
2019 (as
restated) 48.7 334.0 573.4 23.7 6.8 (125.9) (112.0) 25.5 774.2
Adjustment for
adoption of IFRS
16 - - - - - - - (15.9) (15.9)
Tax impact of
IFRS 16
adjustment - - - - - - - 3.0 3.0
At 29 September
2019 (as
adjusted) 48.7 334.0 573.4 23.7 6.8 (125.9) (112.0) 12.6 761.3
Loss for the
period - - - - - - - (359.6) (359.6)
Remeasurement
of retirement
benefits - - - - - - - (6.5) (6.5)
Tax on
remeasurement
of retirement
benefits - - - - - - - 2.0 2.0
Losses on cash
flow hedges - - - - - (3.8) - - (3.8)
Transfers to the
income statement
on cash flow
hedges - - - - - 21.3 - - 21.3
Tax on hedging
reserve
movements - - - - - (0.3) - - (0.3)
Property
impairment - - (151.2) - - - - - (151.2)
Deferred tax on
properties - - 15.7 - - - - - 15.7
Total
comprehensive
(expense)/income - - (135.5) - - 17.2 - (364.1) (482.4)
------------------ -------- -------- ------------ --------- ----------- --------- -------- --------- --------
Share-based
payments - - - - - - - 0.4 0.4
Sale of own
shares - - - - - - 0.1 (0.1) -
Transfer
disposals
to retained
earnings - - (8.1) - - - - 8.1 -
Transfer tax to
retained
earnings - - 0.8 - - - - (0.8) -
Dividends paid - - - - - - - (30.4) (30.4)
------------------ -------- -------- ------------ --------- ----------- --------- -------- --------- --------
Total
transactions
with owners - - (7.3) - - - 0.1 (22.8) (30.0)
------------------ -------- -------- ------------ --------- ----------- --------- -------- --------- --------
At 3 October 2020 48.7 334.0 430.6 23.7 6.8 (108.7) (111.9) (374.3) 248.9
------------------ -------- -------- ------------ --------- ----------- --------- -------- --------- --------
GROUP STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 28 September 2019
Equity Share Revaluation Capital Retained Total
share premium reserve Merger redemption Hedging Own earnings equity
capital account (Restated) reserve reserve reserve shares (Restated) (Restated)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
At 30 September
2018 (as
originally
reported) 48.7 334.0 627.2 23.7 6.8 (118.1) (112.3) 147.6 957.6
Prior period
adjustment - - - - - - - 3.6 3.6
Adjustment for
asset class
split - - (31.6) - - - - (14.9) (46.5)
Tax impact of
asset class
split - - 4.6 - - - - (0.7) 3.9
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
At 30 September
2018 (as
restated) 48.7 334.0 600.2 23.7 6.8 (118.1) (112.3) 135.6 918.6
Adjustment for
adoption of
IFRS
9 - - - - - - - (6.7) (6.7)
Tax impact of
IFRS 9
adjustment - - - - - - - 1.2 1.2
At 30 September
2018 (as
adjusted) 48.7 334.0 600.2 23.7 6.8 (118.1) (112.3) 130.1 913.1
Loss for the
period - - - - - - - (17.7) (17.7)
Remeasurement
of retirement
benefits - - - - - - - (54.7) (54.7)
Tax on
remeasurement
of retirement
benefits - - - - - - - 9.3 9.3
Losses on cash
flow hedges - - - - - (20.5) - - (20.5)
Transfers to
the
income
statement
on cash flow
hedges - - - - - 11.2 - - 11.2
Tax on hedging
reserve
movements - - - - - 1.5 - - 1.5
Property
revaluation - - 2.8 - - - - - 2.8
Property
impairment - - (25.1) - - - - - (25.1)
Deferred tax on
properties - - 1.3 - - - - - 1.3
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
Total
comprehensive
expense - - (21.0) - - (7.8) - (63.1) (91.9)
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
Share-based
payments - - - - - - - 0.3 0.3
Tax on
share-based
payments - - - - - - - 0.1 0.1
Sale of own
shares - - - - - - 0.3 (0.2) 0.1
Transfer
disposals
to retained
earnings - - (6.8) - - - - 6.8 -
Transfer tax to
retained
earnings - - 1.0 - - - - (1.0) -
Dividends paid - - - - - - - (47.5) (47.5)
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
Total
transactions
with owners - - (5.8) - - - 0.3 (41.5) (47.0)
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
At 28 September
2019 (as
restated) 48.7 334.0 573.4 23.7 6.8 (125.9) (112.0) 25.5 774.2
---------------- -------- -------- ------------ --------- ----------- -------- -------- ----------- -----------
NOTES
1 Accounting policies
Basis of preparation
The financial information for the 53 weeks ended 3 October 2020
(2019: 52 weeks ended 28 September 2019) has been extracted from
the audited financial statements, which have been prepared in
accordance with International Financial Reporting Standards (IFRS)
and IFRS Interpretations Committee and Standing Interpretations
Committee interpretations adopted by the European Union and with
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been prepared
under the historical cost convention as modified by the revaluation
of certain items, principally effective freehold land and
buildings, certain financial instruments, retirement benefits and
share-based payments.
Prior period adjustments
The Group has identified adjustments to prior periods regarding
the amount of deferred tax recognised in respect of land and
buildings which were held under finance leases under IAS 17
'Leases' and the split of derivative financial instruments between
non-current and current liabilities. As such the comparatives for
the 52 weeks ended 28 September 2019 have been restated in
accordance with IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors'. Full details are provided in note 9.
Asset class split
The Group has split the land and buildings asset class within
property, plant and equipment into an effective freehold class,
held under the revaluation model, and a leasehold class, held under
the cost model. This change has been applied retrospectively in
accordance with IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors' and as such the comparatives for the 52 weeks
ended 28 September 2019 have been restated. Full details are
provided in note 10.
Adoption of IFRS 16 'Leases'
The Group has adopted IFRS 16 'Leases' in the current period
using the modified retrospective approach in paragraph C5(b) of the
standard, whereby comparative amounts have not been restated and
the cumulative effect of initially applying the standard has been
recognised as an adjustment to opening retained earnings at 29
September 2019. IFRS 16 introduces an 'on balance sheet' model for
lessees and as such the Group has recognised a lease liability
within borrowings in respect of the majority of its previous
operating leases along with either a right-of-use asset in
property, plant and equipment or a finance lease receivable (for
some sublet properties). The rental payments/receipts previously
charged/credited to the income statement are treated as repayments
of the lease liability/finance lease receivable and the income
statement now includes depreciation of the right-of-use asset and
interest on the lease liability/finance lease receivable. Further
details of the adoption of IFRS 16 are provided in note 11.
Going concern
The impact of COVID-19 on the economy and the hospitality
industry has resulted in heightened uncertainty about the future
financial performance of the Group and the Company, which could
cast significant doubt over the Group's ability to trade as a going
concern. The COVID-19 pandemic has resulted in a variety of
temporary operating restrictions and it is not clear when these
restrictions, such as social distancing measures and reduced pub
opening times, will be removed and whether any further local or
national lockdowns will be required.
The Directors have performed an assessment of the going concern
assessment period, being the period of 12 months from the date of
signing these financial statements, including capital expenditure
and cash flow forecasts, to assess the adequacy of the Group's
financial resources. In performing their assessment, the Directors
considered the Group's financial position and exposure to principal
risks, including the ongoing impact of COVID-19. The Group's
forecasts assume that sales will gradually recover to pre-COVID-19
levels over the next year, with social distancing measures reducing
from April 2021. The Directors have also considered a severe but
plausible downside scenario, which incorporates a further lockdown
and pub opening restrictions at a national level for a two month
period in January and February 2021. The conclusion of this
assessment was that the Directors are satisfied that the Group has
sufficient liquidity to withstand such a severe but plausible
downside scenario. The completion of the disposal of the Group's
brewing operations in October 2020 has improved the Group's
liquidity significantly, with an initial cash payment of GBP232.7
million received on 30 October 2020.
However, under this severe but plausible downside scenario,
further covenant waivers/amendments would be required.
The Group has secured waivers from its bondholders in respect of
the free cash flow covenant up to April 2021 and has agreed with
its other lenders to replace existing financial covenant tests with
a liquidity and profit covenant from 3 October 2020 up to July
2021. There is a material uncertainty as to whether the financial
covenants will be met or whether the Group's lenders will agree to
further waivers if required. The Group will continue to have
regular communication with its lenders throughout this period.
Considering the above, the Directors are satisfied that the
Group and the Company have adequate resources to continue in
operational existence for the foreseeable future, being at least 12
months from the date of signing these financial statements. For
this reason, the Directors continue to adopt the going concern
basis of accounting in preparing these financial statements.
However, a material uncertainty exists, in particular with respect
to the ability to achieve further covenant waivers or amendments if
required, which may cast significant doubt on the Group's ability
to continue as a going concern and, therefore, to continue
realising its assets and discharging its liabilities in the normal
course of business. The financial statements do not include any
adjustments that would result from the basis of preparation being
inappropriate.
2 Segment reporting
2019
2020 (Restated)
Revenue by segment GBPm GBPm
-------------------------------------- -------- ------------
Pubs and Bars 515.5 784.2
Brewing 305.5 389.3
Group Services - -
-------------------------------------- -------- ------------
Total revenue 821.0 1,173.5
Revenue from discontinued operations (305.5) (389.3)
-------------------------------------- -------- ------------
Revenue from continuing operations 515.5 784.2
-------------------------------------- -------- ------------
2019
2020 (Restated)
Underlying operating profit by segment GBPm GBPm
---------------------------------------------------------- -------- ------------
Pubs and Bars 84.7 167.5
Brewing 17.3 32.6
Group Services (28.0) (27.3)
Underlying operating profit 74.0 172.8
Underlying operating profit from discontinued operations (17.3) (32.6)
---------------------------------------------------------- -------- ------------
Underlying operating profit from continuing operations 56.7 140.2
Non-underlying operating items (342.2) (59.3)
---------------------------------------------------------- -------- ------------
Operating (loss)/profit (285.5) 80.9
Net finance costs (103.2) (125.6)
---------------------------------------------------------- -------- ------------
Loss before taxation from continuing operations (388.7) (44.7)
---------------------------------------------------------- -------- ------------
In the prior period the Group had four distinguishable operating
segments being Destination and Premium, Taverns, Brewing and Group
Services. Following a reorganisation of the pub operational and
commercial structure, the pub business has now merged into one
segment and is no longer operated as Destination and Premium and
Taverns. Since the start of the current period the results of the
merged operations have been presented as one combined 'Pubs and
Bars' segment in the reporting to the chief operating decision
maker and management decisions are now made on a combined basis.
The results for the 52 weeks ended 28 September 2019 have been
restated to reflect the merging of these two segments.
3 NON-Underlying items
2019
2020 (Restated)
GBPm GBPm
---------------------------------------------------------- ------ ------------
Non-underlying operating items
Impact of change in rate assumptions used for provisions - 2.3
Reorganisation and integration costs - 1.0
Impairment of freehold and leasehold properties 105.1 37.6
Write-off of EPOS equipment - 3.9
Write-off of acquisition and development costs 0.9 9.9
Past service cost in respect of Guaranteed Minimum
Pension equalisation - 4.6
Impairment of goodwill 200.6 -
Portfolio disposals 22.4 -
Impact of COVID-19 16.4 -
VAT claims (3.2) -
---------------------------------------------------------- ------ ------------
342.2 59.3
---------------------------------------------------------- ------ ------------
Non-underlying non-operating items
Net interest on net defined benefit asset/liability 0.6 (0.5)
Swap recouponing fees - 0.6
Interest on VAT claims (1.0) -
COVID-19 financing costs 2.1 -
Interest rate swap movements 6.4 48.7
---------------------------------------------------------- ------ ------------
8.1 48.8
---------------------------------------------------------- ------ ------------
Total non-underlying items for continuing operations 350.3 108.1
---------------------------------------------------------- ------ ------------
Impairment of freehold and leasehold properties
In light of the COVID-19 outbreak the Group undertook a detailed
valuation review of its pub estate in the current period, which
resulted in the impairment of a number of these properties.
In the prior period, due to changes in the market and pub
performance, the Group undertook a detailed valuation review of its
Destination and Premium estate and subsequently impaired a number
of these properties.
The revaluation adjustments in respect of the above relate
wholly to the Pubs and Bars segment and were recognised in the
revaluation reserve or income statement as appropriate.
Write-off of acquisition and development costs
In the prior period the Group decided to focus its capital
expenditure upon its existing estate and as such acquisition and
development costs of GBP9.9 million in respect of sites which the
Group no longer intended to acquire and/or develop were written
off. Further costs in respect of these sites of GBP0.9 million were
incurred in the current period.
Impairment of goodwill
The Group has fully impaired the goodwill allocated to the Pubs
and Bars segment in the current period. The inputs to the value in
use calculation were significantly impacted by the COVID-19
outbreak.
Portfolio disposals
As part of its debt reduction strategy, the Group disposed of
two portfolios of smaller wet-led leased, tenanted and franchised
pubs and associated properties in the current period. The net loss
on disposal and associated costs have been classified as a
non-underlying item, together with dilapidations costs from a
previous portfolio disposal.
Impact of COVID-19
In order to mitigate the spread of COVID-19 the UK government
required the closure of all pubs from 21 March 2020 to 3 July 2020
and has introduced various other social distancing measures and
restrictions. This has had a significant impact on the Group's
business and its customers. Certain associated costs/charges, which
primarily comprise bad debt provisions and stock write-offs, have
been classified as a non-underlying item.
VAT claims
In the current period the Group has recognised a net credit of
GBP3.2 million in respect of VAT claims, along with the associated
interest of GBP1.0 million. This comprises credits received from HM
Revenue & Customs (HMRC) in relation to VAT on gaming machine
income, following HMRC's decision not to further appeal the case
brought by The Rank Group Plc, net of the reversal of amounts
previously recognised in respect of VAT on pension scheme
management expenses.
Net interest on net defined benefit asset/liability
The net interest on the net defined benefit asset/liability in
respect of the Group's defined benefit pension plan was a charge of
GBP0.6 million (2019: credit of GBP0.5 million).
COVID-19 financing costs
As a result of the COVID-19 outbreak and the consequential
impact on its trading ability, the Group obtained additional
financing facilities and certain waivers from its lenders,
primarily in respect of covenants. The costs related to this have
been classified as a non-underlying item.
Interest rate swap movements
The Group's interest rate swaps are revalued to fair value at
each balance sheet date. For interest rate swaps which were
designated as part of a hedging relationship a loss of GBP3.8
million (2019: GBP20.5 million) has been recognised in the hedging
reserve in respect of the effective portion of the fair value
movement and GBP6.7 million (2019: GBP7.7 million) has been
reclassified from the hedging reserve to underlying finance costs
in the income statement in respect of the cash paid in the period.
The ineffective portion of the fair value movement has been
recognised within the income statement. The cash paid of GBP1.7
million (2019: GBP1.8 million) has been recognised within
underlying finance costs to ensure that underlying finance costs
reflect the resulting fixed rate paid on the associated debt. The
remainder of the ineffective portion of the fair value movement, a
gain of GBP0.5 million (2019: GBP1.5 million), has been recognised
within non-underlying items. In addition GBP14.6 million (2019:
GBP3.5 million) of the balance remaining in the hedging reserve in
respect of discontinued cash flow hedges has been reclassified to
the income statement within non-underlying items.
For interest rate swaps which were not designated as part of a
hedging relationship the fair value movement has been recognised
within the income statement. The net cash paid of GBP11.4 million
(2019: GBP1.3 million received) has been recognised within
underlying finance costs to ensure that underlying finance costs
reflect the resulting fixed rate paid on the associated debt. The
remainder of the fair value movement, a gain of GBP7.7 million
(2019: loss of GBP46.7 million), equal to the change in the
carrying value of the interest rate swaps in the period, or from
when hedge accounting ceased to be applied, has been recognised
within non-underlying items.
As a result of the recouponing of the interest rate swap that
fixes the interest rate payable on the floating rate elements of
the Group's A1, A2, A3 and B securitised notes on 27 March 2019,
the hedging relationship between this interest rate swap and the
associated debt ceased to meet the qualifying criteria for hedge
accounting. The cumulative hedging loss existing in equity at 27
March 2019 remained in equity and is being recognised when the
forecast transactions are ultimately recognised in the income
statement. Fair value movements in respect of this interest rate
swap after 27 March 2019 have been recognised wholly within the
income statement.
Impact of taxation
The current tax credit relating to the above non-underlying
items amounts to GBP3.2 million (2019 (restated): GBP1.4 million).
The deferred tax credit relating to the above non-underlying items
amounts to GBP20.6 million (2019 (restated): GBP14.7 million). In
addition, there is a non-underlying deferred tax credit of GBP1.8
million (2019: GBPnil) in relation to the change in corporation tax
rate.
Prior period non-underlying items
The update of the discount rate assumptions used in the
calculation of the Group's property lease provisions resulted in an
increase of GBP2.3 million in the total provision in the prior
period.
During the prior period the Group incurred reorganisation and
integration costs of GBP1.0 million.
Due to the rollout of the Group's new EPOS system the assets
relating to the old system were written off in the prior
period.
On 26 October 2018 a High Court ruling indicated that Guaranteed
Minimum Pensions must be equalised for men and women. This
requirement was reflected in the calculation of the Group's net
defined benefit asset/liability at 28 September 2019 and the
resulting additional past service cost was presented as a
non-underlying item in the prior period.
In the prior period the Group incurred fees of GBP0.6 million in
relation to the above swap recouponing undertaken in the
period.
4 Taxation
2019
2020 (Restated)
Income statement GBPm GBPm
Current tax:
Current period (2.9) 5.5
Adjustments in respect of prior periods (0.3) (0.7)
Credit in respect of tax on non-underlying items (3.2) (1.4)
(6.4) 3.4
---------------------------------------------------- ------- ------------
Deferred tax:
Current period (4.3) 6.0
Adjustments in respect of prior periods (7.1) (2.0)
Credit in respect of tax on non-underlying items (20.6) (14.7)
Non-underlying credit in relation to the change in
tax rate (1.8) -
(33.8) (10.7)
---------------------------------------------------- ------- ------------
Taxation credit for continuing operations reported
in the income statement (40.2) (7.3)
---------------------------------------------------- ------- ------------
5 DISCONTINUED OPERATIONS
In June 2020, the Company's shareholders approved a joint
venture transaction involving the disposal of the Group's brewing
operations. The transaction was subject to the approval of the
competition authorities, which was obtained on 9 October 2020. The
transaction subsequently completed on 30 October 2020.
The Brewing segment was not previously classified as held for
sale or within discontinued operations. As such the income
statement for the 52 weeks ended 28 September 2019 has been
represented to show discontinued operations separately from
continuing operations.
Results of discontinued operations
2020 2019
Non- Non-
Underlying underlying Total Underlying underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- ------------ -------- ----------- ------------ --------
Revenue 305.5 - 305.5 389.3 - 389.3
Operating expenses (288.2) (24.8) (313.0) (356.7) (7.1) (363.8)
-------------------------- ----------- ------------ -------- ----------- ------------ --------
Operating profit/(loss) 17.3 (24.8) (7.5) 32.6 (7.1) 25.5
Net finance costs (0.9) - (0.9) (0.9) - (0.9)
--------
Profit/(loss) before
taxation 16.4 (24.8) (8.4) 31.7 (7.1) 24.6
Taxation (3.1) 0.4 (2.7) (6.1) 1.2 (4.9)
-------------------------- ----------- ------------ -------- ----------- ------------ --------
Profit/(loss) for the
period attributable
to equity shareholders 13.3 (24.4) (11.1) 25.6 (5.9) 19.7
-------------------------- ----------- ------------ -------- ----------- ------------ --------
Non-underlying operating items in the current period relate to
the impact of COVID-19, disposal costs and the impairment of
central assets associated with discontinued operations.
Non-underlying operating items in the prior period related to
reorganisation and integration costs.
6 Earnings per ordinary share
Basic earnings per share are calculated by dividing the
profit/loss attributable to equity shareholders by the weighted
average number of ordinary shares in issue during the period,
excluding treasury shares and those held on trust for employee
share schemes.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. These represent share options
granted to employees where the exercise price is less than the
weighted average market price of the Company's shares during the
period.
Underlying earnings per share figures are presented to exclude
the effect of non-underlying items. The Directors consider that the
supplementary figures are a useful indicator of performance.
2019
2020 (Restated)
Per share Per share
Earnings amount Earnings amount
GBPm p GBPm p
------------------------------------ ---- ---- --------- ---------- ----------- ----------
Basic (loss)/earnings per
share:
Total (359.6) (56.8) (17.7) (2.8)
Continuing (348.5) (55.1) (37.4) (5.9)
Discontinued (11.1) (1.8) 19.7 3.1
Diluted (loss)/earnings
per share:
Total (359.6) (56.8) (17.7) (2.8)
Continuing (348.5) (55.1) (37.4) (5.9)
Discontinued (11.1) (1.8) 19.7 3.1
Underlying (loss)/earnings
per share figures
Basic underlying (loss)/earnings
per share:
Total (10.5) (1.7) 80.2 12.7
Continuing (23.8) (3.8) 54.6 8.6
Discontinued 13.3 2.1 25.6 4.0
Diluted underlying (loss)/earnings
per share:
Total (10.5) (1.7) 80.2 12.7
Continuing (23.8) (3.8) 54.6 8.6
Discontinued 13.3 2.1 25.6 4.0
------------------------------------------------ --------- ---------- ----------- ----------
2019
2020 (Restated)
m m
------------------------------------------- ------ ------------
Basic weighted average number of shares 632.7 632.6
Dilutive potential ordinary shares - -
------------------------------------------- ------ ------------
Diluted weighted average number of shares 632.7 632.6
------------------------------------------- ------ ------------
In accordance with IAS 33 'Earnings per Share' the potential
ordinary shares are not dilutive as their inclusion would reduce
the loss per share.
7 Net debt
Non-cash
Classified movements Adjustment
as and deferred for adoption
held for issue of IFRS
2020 sale Cash flow costs 16 2019
Analysis of net
debt GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ---------- ----------- ------------ -------------- -------------- ----------
Cash and cash
equivalents
Cash at bank and
in hand 40.6 (0.1) 3.1 - - 37.6
40.6 (0.1) 3.1 -- - 37.6
--------------------- ---------- ----------- ------------ -------------- -------------- ----------
Financial assets
Other cash deposits 2.0 - - - - 2.0
2.0 - - - - 2.0
Debt due within
one year
Bank borrowings 0.7 2.3 21.7 (1.8) - (21.5)
Securitised debt (34.9) - 33.4 (35.4) - (32.9)
Lease liabilities (15.9) 1.6 8.3 (11.7) (13.3) (0.8)
Other lease related
borrowings 0.4 - - 0.1 - 0.3
Other borrowings (15.0) - (15.0) - - -
(64.7) 3.9 48.4 (48.8) (13.3) (54.9)
--------------------- ---------- ----------- ------------ -------------- -------------- ----------
Debt due after
one year
Bank borrowings (268.2) 5.1 39.0 1.0 - (313.3)
Securitised debt (677.2) - - 35.0 - (712.2)
Lease liabilities (288.2) 12.2 - 2.7 (282.0) (21.1)
Other lease related
borrowings (337.2) - - (0.5) - (336.7)
Other borrowings (40.0) - (40.0) - - -
Preference shares (0.1) - - - - (0.1)
--------------------- ---------- ----------- ------------ -------------- -------------- ----------
(1,610.9) 17.3 (1.0) 38.2 (282.0) (1,383.4)
Net debt (1,633.0) 21.1 50.5 (10.6) (295.3) (1,398.7)
--------------------- ---------- ----------- ------------ -------------- -------------- ----------
Other cash deposits comprises deposits securing letters of
credit for reinsurance contracts. Included within cash and cash
equivalents is an amount of GBP6.0 million (2019: GBP6.6 million)
relating to collateral held in the form of cash deposits. These
amounts are both considered to be restricted cash. In addition, any
other cash held in connection with the securitised business is
governed by certain restrictions under the covenants associated
with the securitisation.
2020 2019
Reconciliation of net cash flow to movement in net
debt GBPm GBPm
----------------------------------------------------- ---------- ----------
Increase/(decrease) in cash and cash equivalents in
the period 3.1 (3.8)
Decrease in other cash deposits - (118.0)
Cash outflow from movement in debt 47.4 111.3
----------------------------------------------------- ---------- ----------
Change in debt resulting from cash flows 50.5 (10.5)
Non-cash movements and deferred issue costs (10.6) (2.2)
Classified as held for sale 21.1 -
----------------------------------------------------- ---------- ----------
Movement in net debt in the period 61.0 (12.7)
Net debt at beginning of the period (1,398.7) (1,386.0)
Adjustment for adoption of IFRS 16 (295.3) -
Net debt at end of the period (1,633.0) (1,398.7)
----------------------------------------------------- ---------- ----------
2020 2019
GBPm GBPm
-------------------------------------- ---------- ----------
Net debt excluding lease liabilities (1,328.9) (1,376.8)
Lease liabilities (304.1) (21.9)
Net debt (1,633.0) (1,398.7)
-------------------------------------- ---------- ----------
8 Ordinary dividends on equity shares
2020 2019
Paid in the period GBPm GBPm
--------------------------------------------------------- ----- -----
Final dividend for 2019 of 4.8p per share (2018: 4.8p
) 30.4 30.4
Interim dividend for 2020 of nil per share (2019: 2.7p) - 17.1
--------------------------------------------------------- ----- -----
30.4 47.5
--------------------------------------------------------- ----- -----
A final dividend for 2020 has not been proposed.
9 PRIOR PERIOD ADJUSTMENTS
The Group has identified adjustments to prior periods regarding
the amount of deferred tax recognised in respect of land and
buildings which were held under finance leases under IAS 17
'Leases' and the split of derivative financial instruments between
non-current and current liabilities. These adjustments have been
corrected by retrospective restatement in accordance with IAS 8
'Accounting Policies, Changes in Accounting Estimates and
Errors'.
The impact of this retrospective restatement on the Group
balance sheet as at 28 September 2019 and 29 September 2018 has
been set out below. There was no impact on the Group income
statement, Group statement of comprehensive income, Group cash flow
statement or loss per share for the 52 weeks ended 28 September
2019. The adjustments shown below are before those made in respect
of the asset class split detailed in note 10.
As at 28 September 2019
Deferred
As originally tax Derivatives Restated
stated adjustment adjustment amount
Impact on the Group balance sheet GBPm GBPm GBPm GBPm
------------------------------------------------ -------------- ------------ ------------ ---------
Derivative financial instruments - current
liabilities (184.2) - 164.3 (19.9)
Derivative financial instruments - non-current
liabilities (51.3) - (164.3) (215.6)
Deferred tax liabilities (63.9) 3.6 - (60.3)
Other assets and liabilities 1,110.5 - - 1,110.5
------------------------------------------------ -------------- ------------ ------------ ---------
Net assets 811.1 3.6 - 814.7
------------------------------------------------ -------------- ------------ ------------ ---------
Retained earnings 36.9 3.6 - 40.5
Other capital and reserves 774.2 - - 774.2
------------------------------------------------ -------------- ------------ ------------ ---------
Total equity 811.1 3.6 - 814.7
------------------------------------------------ -------------- ------------ ------------ ---------
As at 29 September 2018
Deferred
As originally tax Derivatives Restated
stated adjustment adjustment amount
Impact on the Group balance sheet GBPm GBPm GBPm GBPm
------------------------------------------------ -------------- ------------ ------------ ---------
Derivative financial instruments - current
liabilities (28.9) - 14.3 (14.6)
Derivative financial instruments - non-current
liabilities (148.6) - (14.3) (162.9)
Deferred tax liabilities (81.3) 3.6 - (77.7)
Other assets and liabilities 1,216.4 - - 1,216.4
------------------------------------------------ -------------- ------------ ------------ ---------
Net assets 957.6 3.6 - 961.2
------------------------------------------------ -------------- ------------ ------------ ---------
Retained earnings 147.6 3.6 - 151.2
Other capital and reserves 810.0 - - 810.0
------------------------------------------------ -------------- ------------ ------------ ---------
Total equity 957.6 3.6 - 961.2
------------------------------------------------ -------------- ------------ ------------ ---------
10 ASSET CLASS SPLIT
In order to provide more reliable and relevant information in
respect of its property assets the Group has split the land and
buildings asset class within property, plant and equipment into an
effective freehold class and a leasehold class.
The effective freehold class comprises land and buildings which
are either freehold or are in substance freehold assets. This
includes leasehold land and buildings with a term exceeding 100
years at acquisition/commencement of the lease or where there is an
option to purchase the freehold at the end of the lease term for a
nominal amount. The leasehold class comprises all other leasehold
land and buildings.
It is considered that the two groupings above comprise assets
which have a different nature and use within the Group's operations
and as such it is appropriate to classify them as separate asset
classes under IAS 16 'Property, Plant and Equipment'. Leasehold
assets derive their value solely from generating income over the
lease term and their use/development can be restricted, whereas
with effective freehold assets there is additional value from the
underlying property asset (including alternative uses and
development potential), the assets can be used as security and the
value of the property asset is generally maintained over time. It
is considered that providing information separately for these two
different classes will provide more reliable and relevant
information.
The Group has adopted the revaluation model for the effective
freehold class and the cost model for the leasehold class. The land
and buildings asset class has been held under the revaluation model
and as such the measurement basis for assets in the leasehold class
has changed. This has been treated as a change in accounting policy
and has been applied retrospectively in accordance with IAS 8
'Accounting Policies, Changes in Accounting Estimates and Errors'
and as such the comparatives for the 52 weeks ended 28 September
2019 have been restated.
The impact of this retrospective restatement on the Group income
statement, Group statement of comprehensive income, Group cash flow
statement, Group balance sheet and loss per share for the 52 weeks
ended 28 September 2019, and on the Group balance sheet as at 29
September 2018, has been set out below. The adjustments, where
applicable, are after the restatements detailed in note 9.
52 weeks ended 28 September 2019
Representation
As originally of discontinued Restated
stated operations Adjustment amount
Impact on the Group income statement GBPm GBPm GBPm GBPm
-------------------------------------- -------------- ----------------- ----------- ---------
Revenue 1,173.5 (389.3) - 784.2
Operating expenses (1,067.0) 363.8 (0.1) (703.3)
-------------------------------------- -------------- ----------------- ----------- ---------
Operating profit 106.5 (25.5) (0.1) 80.9
Net finance costs (126.5) 0.9 - (125.6)
-------------------------------------- -------------- ----------------- ----------- ---------
Loss before taxation (20.0) (24.6) (0.1) (44.7)
Taxation 2.0 4.9 0.4 7.3
-------------------------------------- -------------- ----------------- ----------- ---------
Loss for the period from continuing
operations (18.0) (19.7) 0.3 (37.4)
Profit from discontinued operations - 19.7 - 19.7
-------------------------------------- -------------- ----------------- ----------- ---------
Loss for the period attributable to
equity shareholders (18.0) - 0.3 (17.7)
-------------------------------------- -------------- ----------------- ----------- ---------
As originally Restated
stated Adjustment amount
Impact on the Group statement of comprehensive
income GBPm GBPm GBPm
--------------------------------------------------------- -------------- ----------- ---------
Loss for the period (18.0) 0.3 (17.7)
--------------------------------------------------------- -------------- ----------- ---------
Items of other comprehensive income that may
subsequently be reclassified to profit or loss (7.8) - (7.8)
--------------------------------------------------------- -------------- ----------- ---------
Remeasurement of retirement benefits (54.7) - (54.7)
Unrealised surplus on revaluation of properties 2.8 - 2.8
Reversal of past revaluation surplus (27.4) 2.3 (25.1)
Tax on items that will not be reclassified to
profit or loss 11.1 (0.5) 10.6
--------------------------------------------------------- -------------- ----------- ---------
Items of other comprehensive income that will
not be reclassified to profit or loss (68.2) 1.8 (66.4)
--------------------------------------------------------- -------------- ----------- ---------
Other comprehensive expense for the period (76.0) 1.8 (74.2)
--------------------------------------------------------- -------------- ----------- ---------
Total comprehensive expense for the period attributable
to equity shareholders (94.0) 2.1 (91.9)
--------------------------------------------------------- -------------- ----------- ---------
As originally Restated
stated Adjustment amount
Impact on the Group cash flow statement GBPm GBPm GBPm
---------------------------------------------------------- -------------- ----------- ---------
Operating activities
Underlying operating profit 178.7 (5.9) 172.8
Depreciation and amortisation 43.2 (1.0) 42.2
---------------------------------------------------------- -------------- ----------- ---------
Underlying EBITDA 221.9 (6.9) 215.0
Non-underlying operating items (72.2) 5.8 (66.4)
---------------------------------------------------------- -------------- ----------- ---------
EBITDA 149.7 (1.1) 148.6
Working capital movement 10.3 - 10.3
Non-cash movements 51.0 1.1 52.1
Decrease in provisions and other non-current
liabilities (3.4) - (3.4)
Difference between defined benefit pension contributions
paid and amounts charged (3.0) - (3.0)
Income tax paid (9.0) - (9.0)
---------------------------------------------------------- -------------- ----------- ---------
Net cash inflow from operating activities 195.6 - 195.6
---------------------------------------------------------- -------------- ----------- ---------
As stated
following
prior
period Restated
adjustments Adjustment amount
Impact on the Group balance sheet GBPm GBPm GBPm
----------------------------------- ------------- ----------- ----------
Property, plant and equipment 2,350.4 (44.3) 2,306.1
Deferred tax liabilities (60.3) 3.8 (56.5)
Other assets and liabilities (1,475.4) - (1,475.4)
------------------------------------ ------------- ----------- ----------
Net assets 814.7 (40.5) 774.2
------------------------------------ ------------- ----------- ----------
Revaluation reserve 598.9 (25.5) 573.4
Retained earnings 40.5 (15.0) 25.5
Other capital and reserves 175.3 - 175.3
------------------------------------ ------------- ----------- ----------
Total equity 814.7 (40.5) 774.2
------------------------------------ ------------- ----------- ----------
As originally Restated
stated Adjustment amount
Impact on loss per share p p p
-------------------------- -------------- ----------- ---------
Basic loss per share (2.8) - (2.8)
Diluted loss per share (2.8) - (2.8)
--------------------------- -------------- ----------- ---------
As at 29 September 2018
As stated
following
prior
period Restated
adjustments Adjustment amount
Impact on the Group balance sheet GBPm GBPm GBPm
----------------------------------- ------------- ----------- ----------
Property, plant and equipment 2,408.1 (46.5) 2,361.6
Deferred tax liabilities (77.7) 3.9 (73.8)
Other assets and liabilities (1,369.2) - (1,369.2)
------------------------------------ ------------- ----------- ----------
Net assets 961.2 (42.6) 918.6
------------------------------------ ------------- ----------- ----------
Revaluation reserve 627.2 (27.0) 600.2
Retained earnings 151.2 (15.6) 135.6
Other capital and reserves 182.8 - 182.8
------------------------------------ ------------- ----------- ----------
Total equity 961.2 (42.6) 918.6
------------------------------------ ------------- ----------- ----------
11 ADOPTION OF IFRS 16 'LEASES'
The Group has adopted IFRS 16 'Leases' in the current period
using the modified retrospective approach in paragraph C5(b) of the
standard, whereby comparative amounts have not been restated and
the cumulative effect of initially applying the standard has been
recognised as an adjustment to opening retained earnings at 29
September 2019.
Impact on transition
For leases previously classified as operating leases under IAS
17 'Leases' the lease liability at 29 September 2019 has been
recognised at the present value of the remaining lease payments
discounted using the Group's incremental borrowing rate at 29
September 2019. The Group has applied the practical expedient in
IFRS 16 to apply a single discount rate to a portfolio of leases
with reasonably similar characteristics. The Group has taken the
option to recognise all of the associated right-of-use assets at
their carrying amounts had IFRS 16 always been applied, discounted
using the Group's incremental borrowing rate at 29 September 2019,
less any impairment required under IAS 36 'Impairment of
Assets'.
For leases where the Group is the intermediate lessor the
subleases have been reassessed at 29 September 2019 to determine
whether the sublease should be classified as a finance lease or an
operating lease based on the remaining contractual terms and
conditions of the head lease and sublease at that date. Subleases
that were classified as operating leases under IAS 17 but are
required to be accounted for as finance leases under IFRS 16 have
been treated as new finance leases entered into at 29 September
2019 and a finance lease receivable has been recognised instead of
a right-of-use asset. The finance lease receivable has been
recognised at the present value of the remaining lease payments
discounted at the discount rate used for the head lease.
For leases previously classified as finance leases under IAS 17,
the carrying amount of the lease liability and right-of-use asset
at 29 September 2019 has been taken as the carrying amount of the
IAS 17 lease liability and lease asset immediately before that
date. These liabilities and assets have subsequently been accounted
for by applying the requirements of IFRS 16.
The impact on the balance sheet upon transition to IFRS 16 at 29
September 2019 is as follows:
29 September
2019
GBPm
----------------------------------------------- -------------
Other intangible assets (0.7)
Property, plant and equipment 244.6
Finance lease receivables 20.2
Lease liabilities (295.3)
Property lease provisions 14.6
Trade and other receivables/payables 0.7
------------------------------------------------ -------------
(15.9)
Deferred tax 3.0
Total adjustment to opening retained earnings (12.9)
------------------------------------------------ -------------
The weighted average incremental borrowing rate applied to the
lease liabilities recognised in the balance sheet at 29 September
2019 was 5%.
29 September
2019
GBPm
------------------------------------------------------ -------------
Operating lease commitments at 28 September 2019 as
previously disclosed 592.9
------------------------------------------------------- -------------
Discounted using the incremental borrowing rate at
29 September 2019 297.4
Commitments relating to short-term leases and leases
of low-value assets (2.1)
Lease liabilities recognised in the balance sheet at
29 September 2019 295.3
------------------------------------------------------- -------------
12 EVENTS AFTER THE BALANCE SHEET DATE
On 4 October 2020 the Group transferred its brewing operations
into a wholly-owned subsidiary, Marston's Beer Company Limited. On
30 October 2020 the Group sold Marston's Beer Company Limited to
Carlsberg Marston's Brewing Company Limited in exchange for an
initial cash receipt of GBP232.7 million and a 40% shareholding in
Carlsberg Marston's Brewing Company Limited. The initial profit on
disposal, excluding working capital adjustments and deferred
contingent consideration, is estimated to be around GBP280
million.
Notes:
(a) The financial information contained in this preliminary
announcement does not constitute the Group's statutory accounts
within the meaning of Section 434 of the Companies Act 2006. The
financial information has been extracted from the audited statutory
accounts of the Group for the 53 weeks ended 3 October 2020, which
will be filed with the Registrar of Companies in due course. The
independent auditor's report on these accounts is unqualified and
does not contain any statements under section 498 (2) or (3) of the
Companies Act 2006. The statutory accounts for the 52 weeks ended
28 September 2019 have been delivered to the Registrar of
Companies.
(b) The Annual Report and Accounts for the 53 weeks ended 3
October 2020 will be posted to shareholders on 24 December 2020.
The Annual Report and Accounts can be downloaded from the Marston's
PLC website: www.marstons.co.uk . Alternatively, copies will be
obtainable from the Group Secretary, Marston's PLC, Marston's
House, Brewery Road, Wolverhampton, WV1 4JT.
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