Registered No 30800
The Heavitree Brewery PLC
Financial Statements
31 October 2017
The Heavitree Brewery PLC
Registered Number: 30800
Annual report and financial statements
Table of contents
Directors and other information
Notice of annual general meeting
Strategic report
: Chairman’s statement
: Strategic review
Directors’ report
Ten year review of profits and dividends
Statement of Directors’ responsibilities in respect of the financial statements
Independent auditor’s report
Group income statement
Group statement of comprehensive income
Group balance sheet
Group statement of changes in equity
Group statement of cash flows
Company balance sheet
Company statement of changes in equity
Company statement of cash flows
Notes to the financial statements
Page
2
3
5
7
9
13
14
15
19
20
21
23
25
26
28
30
31
1
The Heavitree Brewery PLC
Registered Number: 30800
Managing and Finance
Chairman
Trade
Directors
N H P Tucker
G J Crocker
T Wheatley
W P Tucker DL*
T P Duncan*
K Pease-Watkin*
*Non-executive
Secretary and registered office
N J McLean
The Heavitree Brewery PLC
Trood Lane
Matford
Exeter EX2 8YP
Bankers
Barclays Bank PLC
High Street
Exeter
Solicitors
Ford Simey LLP
Exeter
National Westminster Bank PLC
St Thomas
Exeter
Nominated advisor and broker
Shore Capital and Corporate Limited
14 Clifford Street
London
W1S 4JU
Shore Capital Stockbrokers Limited
14 Clifford Street
London
W1S 4JU
Auditor
PKF Francis Clark
Vantage Point
Woodwater Park
Pynes Hill
Exeter EX2 5FD
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Shareholders’ dedicated telephone number: 0370 707 1063
2
The Heavitree Brewery PLC
Registered Number: 30800
Notice of annual general meeting
NOTICE IS HEREBY GIVEN that the One Hundred and Twenty Eight Annual General Meeting of The
Heavitree Brewery PLC will be held at the Company’s offices, Trood Lane, Matford, Exeter on 11 April
2018 at 11.30am to transact the following business:
Ordinary business
1.
2.
3.
4.
5.
To receive and, if thought fit, adopt the financial statements of the Company for the year ended
31 October 2017 and the strategic report and the report of the Directors thereon.
To declare final dividends on the Ordinary Shares and the ‘A’ Limited Voting Ordinary Shares.
To re-elect G J Crocker as a Director of the Company.
To re-elect W P Tucker as a Director of the Company.
To re-appoint PKF Francis Clark as auditor of the Company for the period prescribed in section
489 of the Companies Act 2006.
6.
To authorise the Directors to determine the remuneration of the auditor.
Special business
To consider and, if thought fit, pass the following Resolutions.
7.
THAT the Company be hereby authorised to purchase up to an aggregate of 299,204 Ordinary
Shares of 5p each and/or 492,371 ‘A’ Limited Voting Ordinary Shares of 5p each in the capital of
the Company at a price (exclusive of expenses) which is:
(i)
(ii)
not more than £15 nor less than 5p per share; and
not more than 5% above the arithmetical average of business transacted (as derived from the
Daily Official List of The London Stock Exchange) for the ten business days next preceding
any such purchase;
AND THAT the authority conferred by this resolution shall expire on the date of the Company’s
Annual General Meeting in 2019 (except in relation to the purchase of shares the contract for
which was concluded before such date and might be executed wholly or partly after such date).
By Order of the Board
N J MCLEAN
Secretary
08 March 2018
Trood Lane
Matford
Exeter
EX2 8YP
3
The Heavitree Brewery PLC
Registered Number: 30800
Notice of annual general meeting
Notes:
1.
2.
3.
4.
Any member entitled to attend and vote at the above meeting may appoint one or more proxies to
attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company.
Only holders of Ordinary Shares and ‘A’ Limited Voting Ordinary Shares are entitled to attend and
vote at the meeting. On a poll the Ordinary Shares carry one vote for every £1 in nominal amount
and the ‘A’ Limited Voting Ordinary Shares carry one vote for every £10 in nominal amount.
The Directors’ service contracts will be available for inspection at the registered office of the
Company during normal business hours on any weekday, and at the place of the Annual General
Meeting for fifteen minutes prior to, and during, the meeting.
The dividend, if approved, will be paid on 20 April 2018 to shareholders on the register on 23
March 2018.
4
The Heavitree Brewery PLC
Registered Number: 30800
Strategic report
Chairman’s statement
I am pleased to report that operating profit for the year under review has increased by 25.21% (£358,000)
after a 2.01% increase in turnover on the previous year. About half of the development land in Houston in
which Heavitree Inc. holds a 5.26% interest was sold returning a profit of £104,000. Compensation and a
pay back of legal fees following a land dispute at one of our houses added £36,000 to the operating profit
line; as did a £107,000 reduction in the expense for bad debts. Our team, of course, always works hard
year on year on cash management, but this is a particularly impressive result and it is a most welcome
addition to an already strong contribution performance.
Results
Group Turnover increased by £144,000 to £7,299,000. Group Operating Profit has increased by £358,000
to £1,778,000.
Heavitree Inns has remained dormant throughout the year.
Heavitree Inc. generated an operating profit of £104,000 (2016 – loss of £16,000).
Key Performance Indicators
Adjusted operating profit before Taxation of £1,778,000 was up 25.21% on last year.
Interest costs were covered 10.16 times.
Dividend
The Directors recommend a 6.67 % increase in the final dividend to 4.00p per Ordinary and ‘A’ Limited
Voting Ordinary Share (2016 – 3.75p) making a total for the year of 7.675p. The dividend will be paid on
20 April 2018, subject to shareholder approval at the Annual General Meeting on 11 April 2018, to those
shareholders on the Register at 23 March 2018.
Sale of Property
The Pen and Quill in Taunton was sold generating a small loss in the year of £5,000. Impairments on this
site had been absorbed in the accounts of previous years. Since this year’s accounts were finalised The
King of Prussia in Bovey Tracey has been sold. This house was closed in 2009 with a small rental income
retained from the letting of the flat. The pub will be converted into a community facility.
At the time of writing a small residential property on Topsham Road in Exeter, The Crown and Sceptre in
Newton St.Cyres (which closed in June 2017) and The Kings Arms in Strete (which closed in September
2016) are on the market with sales agreed, subject to contract on the two pub sites. Also, four flats and a
house which are part of the residential development at the old St.Loye’s Hotel site in Exeter which was
completed in 2012 have been marketed for sale. Here too a sale has been agreed, subject to contract, for
all of these units. I shall report further on these at the Half-Year.
5
The Heavitree Brewery PLC
Registered Number: 30800
Strategic report
Capital Investments
I reported the successful completion of the development of the Dartmoor Halfway in Bickington at the
Half-Year. Further improvements to the camping facilities and caravan pitches have been carried out to
make the house ready for the season in 2018. No further major developments are planned for the present
year.
Pension Scheme
At the time of writing, draft figures for the triennial valuation which fell due on 1 January 2017 have been
received. The accounts that accompany this report include the previously signed off numbers and, as
stated before, the Company remains committed to the funding of its obligations to its closed final salary
scheme.
Repurchase of shares
The Company did not repurchase any of its own shares during the year under review but the Directors
intend to seek shareholder approval at the forthcoming Annual General Meeting for the continuing
authority to do so.
Outlook
I am extremely grateful to our team at Head Office and to all the personnel in each of our houses for the
hard work and innovation that has helped produce the numbers which are reported in these accounts. I
can report that the new year has started satisfactorily as well.
I look forward to reporting on the sales of the properties mentioned above. With uncertainty in the market
place caused by Brexit and interest rates beginning to rise, reduction of debt would seem the sensible way
forward.
N H P TUCKER
Chairman
14 February 2018
6
The Heavitree Brewery PLC
Registered Number: 30800
Strategic report
Strategic review
Business review
During the year the Group carried on the business of the lease and operation of public houses. Throughout
this period, we have worked hard at maintaining our business model through continuing support for our
estate, investment in the estate to maintain its quality, prudent management of its capital structure and
investment in overhead to improve services to our estate.
Heavitree Inc is a wholly-owned subsidiary owning land in the United States of America. Heavitree Inns
Limited is a dormant wholly-owned subsidiary company.
Group revenue for the year was £7,299,000 (2016: £7,155,000).
The combined result of sales of non-current assets and assets held for sale realised a profit before tax of
£6,000 (2016: £585,000).
Parent Company – operating profit after consolidation adjustments £1,674,000 (2016: £1,436,000).
Heavitree Inc. – operating profit £104,000 (2016: loss of £16,000).
Heavitree Inns Limited – dormant throughout the year.
For a further review of the business please see the Chairman’s statement on pages 5 and 6 which forms
part of this report.
Key performance indicators
The Directors measure the development, performance and position of the Group’s business by reference to
a number of factors including the following:
Adjusted operating profit before tax
This is the operating profit before tax adjusted to reflect continuing operations only. This provides useful
insight into the Group’s activities before allowing for finance costs.
Interest cover
This is the Group’s adjusted operating profit before tax, as detailed above, divided by the net finance
costs, adjusted to exclude finance costs relating to the valuation of the pension scheme under IAS19. This
is a useful tool in determining whether the Group can maintain its current level of debt and its capacity to
increase that level.
Principal risks and uncertainties
The Group is exposed to a variety of financial, operational, economic and regulatory risks and
uncertainties. The Group has risk management processes in place which are designed to identify and
evaluate these risks and uncertainties based on the probability of them occurring and the impact they may
have on the business. The Directors are aware that these risks and uncertainties may, either singularly or,
collectively, affect the Group’s revenue, costs, asset value, reputation or ability to meet its business
objectives.
Some of the risks the Group faces are external and therefore beyond our control. Some risks may not be
known at present or may be considered to be currently immaterial, but could develop into material risks in
the future. The risk management processes are therefore designed to manage the risks which may have a
material impact on our ability to meet our corporate objectives, rather than fully obviate all risks.
7
The Heavitree Brewery PLC
Registered Number: 30800
Strategic report
Strategic review
Principal risks and uncertainties (continued)
The Directors review the material or emerging risks on an ongoing basis. Our main risks and how we
manage them are shown below; however, this is not an exhaustive list of all the risks which we may face.
General economic conditions
The economic conditions over the past few years have affected both consumer confidence and the levels
of consumer spending across our industry. This can negatively impact the Group’s revenues and we
continue to look at ways of making varying economic conditions work in a positive way to minimise the
impact on our trading figures.
The Group carries out regular reviews of the impact of economic conditions on its budget.
When economic conditions dictate, we continue to consider and provide necessary support to our estate as
a whole, as well as providing support on a house by house basis where appropriate.
Property valuations
The UK property market continues to fluctuate and any variations in valuations due to market conditions
could reduce the value of the Group’s property portfolio over time. These economic factors could also
lead to a reduction in the value realised by the Group on the disposal of pubs, and have an impact on the
amount of property held as security for the loan facility.
The Group continues to realise appropriate returns from disposals by disposing of less sustainable or less
profitable pubs where appropriate. Where impairment indicators are identified, the Group carries out an
impairment review on an individual pub basis. The Group carries out regular reviews of the property
portfolio and is in regular contact with its debt provider.
Pensions
The Group operates a defined benefit pension scheme which must be funded to meet required benefit
payments. Although closed to new members since 18 July 2002 and also to any future accrual since 5
April 2006, the scheme is nevertheless still subject to risk regarding the relative amount of its assets,
which are affected by the value of investments and the returns generated by them, compared with its
liabilities, which are affected by changes in life expectancy, actual and expected price inflation, and
changes in corporate bond yields. The difference in value between scheme assets and scheme liabilities
may vary significantly in the short term, potentially resulting in an increased deficit being recognised on
the Group’s balance sheet. The Group makes contributions to the scheme which are determined by a
qualified actuary to meet its funding obligation; further details can be found in note 30.
Licensing
The Group is committed to ensuring that properties meet all required licensing and other property
regulatory requirements. The Group works closely with appropriate local Licensing Authorities to ensure
that all licensing requirements are met and any changes are closely monitored.
By Order of the Board
N J McLean
Secretary
14 February 2018
8
The Heavitree Brewery PLC
Registered Number: 30800
Directors’ report
The Directors have pleasure in submitting their report for the year ended 31 October 2017.
Results and dividends
The profit for the year, after taxation, attributable to shareholder’s amounts to £1,328,000 (2016:
£1,365,000). The total comprehensive income for the year is £1,688,000 (2016: £390,000)
The Directors propose a final dividend of 4.00p per share on the Ordinary and ‘A’ Limited Voting
Ordinary Shares. An interim dividend of 3.675p (2016: 3.675p) was paid in the year. The fixed dividend
of 11.5p per share was paid on the preference shares in the year.
Financial Instruments
As at 31 October 2017 the Group’s total borrowings were £7,592,000 (2016: £7,327,000).
The Directors continue to monitor and, where appropriate, take necessary action to minimise the Group’s
risk to interest rate exposure and to ensure sufficient working capital exists for the Group to operate
efficiently. Debt is kept at a manageable level, with gearing no higher than necessary, whilst still enabling
the Group to continue its investment strategy.
For further details of the Group’s policy on financial instruments and management of financial risk, please
refer to note 25.
The Group’s capital management strategy is to maintain gearing as low as possible while still ensuring
that borrowing requirements are sufficient to service its needs and allow it to invest in its houses at an
appropriate level.
When monitoring gearing, the Group uses the Directors’ valuation as the basis of its asset value.
The Group currently has no intention of formally re-valuing its assets and will continue to use the
Directors’ valuation in monitoring gearing.
Information on borrowings and strategies surrounding managing interest rate risk, liquidity risk, capital
risk and credit risk can also be found in note 25.
Future developments
The Group continues to concentrate fully on the running and development of its tenanted and leased estate
with the intention of maximising the full potential of its houses. This may include development for
alternative use where appropriate.
Further information in relation to the business activities, together with the factors likely to affect its future
development, performance and position is set out in the Chairman’s statement on pages 5 and 6.
Directors
The Directors of the Company during the year ended 31 October 2017 were those listed on page 2.
G J Crocker and W P Tucker are the Directors retiring by rotation under Article 14 and, being eligible,
offer themselves for re-election.
9
The Heavitree Brewery PLC
Registered Number: 30800
Directors’ report
Directors’ interests
The interests of the Directors and their spouses in the Company’s shares as at 31 October 2017 were as
follows:
Ordinary Shares
31 October 2017 31 October 2016
‘A’ Limited Voting
Ordinary Shares
31 October 2017
31 October 2016
W P Tucker
N H P Tucker
G J Crocker
T P Duncan
K Pease-Watkin
T Wheatley
53,750
742,215
-
150,335
27,088
-
53,750
742,215
-
150,335
27,088
-
184,480
79,385
47,214
196,992
50,638
51,335
184,480
79,385
42,258
196,992
57,138
47,050
–––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
All these interests are beneficial, save for the following non-beneficial interests:
(a) W P Tucker’s interest in 53,750 (2016: 53,750) Ordinary Shares; and
(b) N H P Tucker’s interest in 53,750 (2016: 53,750) Ordinary Shares.
Included in these interests are the following joint holdings:
(a) 53,750 (2016: 53,750) Ordinary Shares held jointly by W P Tucker and N H P Tucker.
Service contracts exist for each of the Executive Directors and contain either a one-year or a three-year
notice period. Non-Executive Directors are appointed by letter for a fixed term of three years.
Substantial interests
At 31 October 2017 the following interests of shareholders in excess of 3% of each class of ordinary share
capital, other than Directors, had been notified to the Company:
Ordinary
Ordinary
%
‘A’-Limited
Voting
Ordinary
‘A’ Limited
Voting
Ordinary
%
135,380
-
151,643
133,545
-
78,010
125,840
6.7%
-
7.6%
6.6%
-
3.9%
6.3%
270,740
101,369
177,611
186,637
109,000
178,205
-
8.2%
3.0%
5.4%
5.6%
3.3%
5.4%
-
——————
——————
——————
——————
P A Benett
R A Duncan
R H Duncan
J E M Duncan
S T Tucker
Mrs T C Yule
Mrs T D Tucker
Going concern
The Directors have considered the Group’s financial resources including a review of the medium-term
financial plan, and cash flow forecasts for at least 12 months from the date of approval of these financial
statements. The Board is satisfied that the Group’s forecasts and projections, taking account of reasonably
anticipatable changes in the trading performance of the Group, show that the Group will be able to operate
within the level of its current facilities for the foreseeable future. For this reason, the Group continues to
adopt the going concern basis in preparing its financial statements.
10
The Heavitree Brewery PLC
Registered Number: 30800
Directors’ report
Corporate governance
The Board of The Heavitree Brewery PLC is collectively accountable to the Company’s shareholders for
good corporate governance. As an AIM-listed company, The Heavitree Brewery PLC is not required to
comply with the UK Corporate Governance Code, but complies as far as is practicable and appropriate for
a public company of its size and nature.
Board of Directors
At 31 October 2017, the Board consisted of an Executive Chairman, two Executive Directors and three
Non-Executive Directors. The Directors periodically re-consider the structure of the Board and believe
the current structure remains appropriate.
N H P Tucker is the Executive Chairman; G J Crocker is the Managing Director and is also responsible
for the finance function; T Wheatley is the Estates Director and is responsible for the Group’s estate. W P
Tucker, T P Duncan and K Pease-Watkin are Non-Executive Directors and are considered to be
independent of management.
The business and management of the Group is the collective responsibility of the Board. At each meeting
the Board considers and reviews the Group’s financial and trading performance. It has a formal written
schedule of matters reserved for its review and approval. The Board meets every month with additional
meetings arranged as required. Formal agendas and reports are provided to the Board on a timely basis,
along with other information to enable it to discharge its duties.
Audit Committee
Given the size of the Group, the Board does not consider it appropriate to have a separate audit
committee. The Board considers matters relating to the reporting of results, financial controls, and the
cost and effectiveness of the audit process at the monthly board meetings, and meets at least once a year
with the auditors in attendance.
The Board is satisfied that the Group’s auditors, PKF Francis Clark, have been objective and independent
of the Group. The Group’s auditors performed non-audit services for the Group as outlined in Note 7 but
the Board is satisfied that their objectivity and independence were not impaired by such work.
Remuneration Committee
Given the size of the Group, the Board does not consider it appropriate to have a separate remuneration
committee. The Board considers and determines the remuneration of the Executive and Non-Executive
Directors. No Director is involved in setting his or her own remuneration.
Details of Directors Remuneration can be found in Note 10 to the financial statements.
Summary of Directors’ Attendance
N H P Tucker
G J Crocker
T Wheatley
W P Tucker
T P Duncan
K Pease-Watkins
Board Meetings
Entitled to attend
12
12
12
12
12
12
Attended
11
11
12
12
10
11
11
The Heavitree Brewery PLC
Registered Number: 30800
Directors’ report
Corporate governance (continued)
Shareholder Communication
The Company believes in good communication with shareholders and encourages shareholders to attend
its Annual General Meeting.
Internal Financial Control
The Board is responsible for ensuring that the Group maintains a system of internal financial controls.
The objective of the system is to safeguard Group assets, ensure proper accounting records are maintained
and that the financial information used within the business and for publication is timely and reliable. Any
such system can only provide reasonable, but not absolute, assurance against material loss or
misstatement.
Given the size of the Group, the Board does not consider it appropriate to have its own internal audit
function.
All the day to day operational decisions are taken initially by the Executive Directors, in accordance with
the Group’s strategy. The Executive Directors are also responsible for initiating commercial transactions
and approving payments, save for those relating to their own employment.
The key internal controls include specific levels of delegated authority and the segregation of duties; the
review of pertinent commercial, financial and other information by the Board on a regular basis; the prior
approval of all significant strategic decisions; and maintaining a formal strategy for business activities.
Directors’ statement as to disclosure of information to auditor
The Directors who were members of the Board at the time of approving the Directors’ report are listed on
page 2. Having made enquiries of fellow Directors and of the Company’s auditor, each of these Directors
confirms that:
•
•
to the best of each Director’s knowledge and belief, there is no information relevant to the
preparation of their report of which the Company’s auditor is unaware; and
each Director has taken all the steps a Director might reasonably be expected to have taken to be
aware of relevant audit information and to establish that the Company’s auditor is aware of that
information.
Auditor
A resolution to re-appoint PKF Francis Clark as the Company’s auditor will be put to the forthcoming
Annual General Meeting.
By Order of the Board
N J McLean
Secretary
14 February 2018
12
The Heavitree Brewery PLC
Registered number: 30800
Ten year review of profits and dividends
Year ended
31 October
Operating
profit
£000
Profit
before tax
£000
Earnings
per 5p share
p
Dividends
per 5p share
p
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Notes:
554
1,046
1,427
1,408
1,245
1,345
1,404
1,412
1,420
1,778
1,022
1,253
1,225
1,232
927
1,014
1,642
1,173
1,653
1,554
21.9
21.7
16.7
16.4
12.5
14.8
28.0
18.8
28.0
27.0
7.0
7.0
7.0
7.0
7.0
7.0
7.35
7.35
7.425
7.675
1. Dividends per 5p share for all years include interim dividends and dividends proposed or
subsequently declared in respect of the profits of each year.
2. The earnings per share figures are both basic and diluted.
13
The Heavitree Brewery PLC
Registered number: 30800
Statement of directors’ responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance
with applicable law and regulations. Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared the Group and Company financial
statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.
Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of affairs of the Group and the Company and of the profit or loss of the
Group and Company for that period. In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently
• Make judgements and accounting estimates that are reasonable and prudent
• State whether applicable IFRSs as adopted by the EU have been followed, subject to any material
departures disclosed and explained in the financial statements, and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and to enable them to ensure that the financial statement
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website.
14
The Heavitree Brewery PLC
Registered number: 30800
Independent auditor’s report
to the members of The Heavitree Brewery PLC
Opinion
We have audited the financial statements of The Heavitree Brewery PLC and its subsidiaries for the year ended
31 October 2017, which comprise the Group income statement, the Group statement of comprehensive income,
the Group and Parent Company balance sheet, the Group and Parent Company statement of changes in equity,
the Group and Parent Company statement of cash flows and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
October 2017 and of the Group’s profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are independent of the company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with those requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Use of our report
This report is made solely to the Company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken, so that we might state to the Company’s
shareholders those matters we are required to state to them in an audit report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
and the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have
formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements
in not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Company’s ability to continue to adopt the going concern basis of
accounting for at least twelve months from the date when the financial statements are authorised for
issue.
15
The Heavitree Brewery PLC
Registered number: 30800
Independent auditor’s report
to the members of The Heavitree Brewery PLC
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Risk: impairment of property
As detailed in the accounting policies and note 16, the Group has a large portfolio of trading properties with a
net book value of £15.9m (2016: £15.4m). Given the age of the portfolio the individual property carrying values
are relatively low. Notwithstanding this, given the size and value of the portfolio and the nature of the industry,
the key audit risk is the Group’s assessment of impairment of trading properties.
Our work focussed on management’s assessment of the need for any impairment on an individual property
basis. We paid particular attention to any closed houses in the year, being a potential indicator of impairment.
We reviewed and challenged the assumptions used by management in making their assessment, as well as
comparing their consideration of market value to the latest bank valuations, other external data and, for a sample
of properties, a comparison to our own value in use expectations. In addition, for certain closed pubs we
compared the marketed price of assets held for sale to their carrying values.
As a result of the procedures performed, we are satisfied with the Group’s assessment that trading properties are
not impaired.
Risk: revenue recognition
The Group’s primary income streams are outlined in the accounting policies. The Group derives most of its
income from wet sales to and rent receivable from licenced premises. Based on our understanding of the
business and the environment in which it operates, we identified completeness and cut-off as the key audit risks
for these income streams. We also considered other industry relevant areas of potential misstatement such as
volume rebates and lease incentives.
Our work on completeness and cut-off included substantive analytical procedures on the main income streams,
tests of detail on a sample of transactions, including those around the year end, and a review of post year end
credit notes. We also reviewed the level of volume rebates and lease incentives and concluded these are not
material to the financial statements.
As a result of the procedures performed, we are satisfied that revenue has been correctly recorded.
Risk: valuation of the defined benefit pension obligation
As detailed in the accounting policies and note 30, the Group operates a defined benefit pension scheme with a
deficit at 31 October 2017 of £1.3m (2016: £2.1m). The scheme is closed to new members and future accrual.
The valuation is complex and dependent on external market conditions as well as the application of significant
assumptions such as discount rates, life expectancies and inflation predictions. Management, using the support
of third party actuaries, are required to make judgements in determining the valuation and therefore it is
regarded as a key audit risk.
We considered the consistency of judgements with previous years and the appropriateness of any changes. We
then reviewed and benchmarked the key actuarial assumptions used against external market data. We also
compared the disclosures in the financial statements to the IAS19 report prepared by the actuary.
16
The Heavitree Brewery PLC
Registered number: 30800
Independent auditor’s report
to the members of The Heavitree Brewery PLC
As a result of the procedures performed, we are satisfied that the methodology and assumptions used in
determining the pension valuation are appropriate.
Our application of materiality
Misstatements, including omissions, are considered to be material if individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements. Materiality is applied in planning the scope of our audit, determining the nature, timing and extent
of our audit procedures and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Performance materiality: £78k (2016: £84k)
Basis for determination: 6% of profit before tax, excluding profits or losses on property disposals. This also
represents 1% of turnover and 0.7% of equity.
Rationale for the benchmark applied: We consider adjusted profit before tax to be the most appropriate measure
for materiality as it best reflects the Group’s underlying trading profitability and is a key metric used by both
management and other stakeholders in assessing the Group’s performance.
An overview of the scope of our audit
We planned and performed our audit by obtaining an understanding of the Group and its environment, including
the accounting processes and controls, and the industry in which it operates. The Group comprises one trading
entity and a dormant subsidiary in the UK, with an immaterial subsidiary in the US. The US subsidiary
represents nil% of Group turnover and 0.7% of Group total assets. Accordingly, our audit work is focussed on
the trading entity, The Heavitree Brewery PLC, and the detailed scope in relation to the key audit matters is
explained above. We performed a limited amount of work on the US subsidiary, Heavitree Inc, which included
agreement of any significant transactions to source documentation.
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the Directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the strategic report and the Directors’ report have been prepared in accordance with applicable legal
requirements.
17
The Heavitree Brewery PLC
Registered number: 30800
Independent auditor’s report
to the members of The Heavitree Brewery PLC
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified any material misstatements in the strategic
report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement [set out on page 14], the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the Directors determine is necessary to enable the preparation of
the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Group or Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
GLENN NICOL (Senior Statutory Auditor)
For and on behalf of
PKF Francis Clark
Statutory Auditor
Vantage Point
Woodwater Park
Pynes Hill
Exeter
EX2 5FD
14 February 2018
18
The Heavitree Brewery PLC
Registered number: 30800
Group income statement
For the year ended 31 October 2017
Revenue
Change in stocks
Other operating income
Purchase of inventories
Staff costs
Depreciation of property, plant and equipment
Other operating charges
Group operating profit
Profit on sale of property, plant and equipment
Movements in valuation of estate and related assets
Group profit before finance costs and taxation
Finance income
Finance costs
Other finance costs – pensions
Profit before taxation
Tax expense
Profit for the year attributable to equity holders of the parent
Basic earnings per share
Diluted earnings per share
All amounts in 2017 and 2016 relate to continuing operations.
Notes
Total
2017
£’000
Total
2016
£’000
3
7,299
–––——
7,155
––––——
-
-
5
384
241
(2,968)
(2,955)
10
(1,353)
(1,301)
(248)
(208)
(1,336)
(1,512)
––––——
(5,521)
––––——
(5,735)
6
8
9
11
30
1,778
1,420
6
-
––––——
1,784
585
(163)
––––——
1,842
7
(182)
(55)
––––——
(230)
6
(152)
(43)
––––——
(189)
1,554
1,653
12a
13
13
(226)
––––——
1,328
(288)
––––——
1,365
══════ ══════
27.0p
28.0p
══════ ══════
28.0p
══════ ══════
27.0p
19
The Heavitree Brewery PLC
Registered number: 30800
Group statement of comprehensive income
for the year ended 31 October 2017
Profit for the year
Items that will not be reclassified to profit or loss
Actuarial gains/ (losses) on defined benefit pension plans
Tax relating to items that will not be reclassified
Items that may be reclassified to profit or loss
Cash flow hedges
Fair value adjustment
Exchange rate differences on translation of subsidiary undertaking
Tax relating to items that may be reclassified
Other comprehensive income for the year, net of tax
Total comprehensive income attributable to:
Equity holders of the parent
Notes
30
12a
25
27
12a
2017
£’000
1,328
2016
£’000
1,365
–––––––––––––––
–––––––––––––––
428
(74)
(1,195)
203
–––––––––––––––
354
–––––––––––––––
(992)
-
6
-
-
-
7
10
-
–––––––––––––––
6
1,688
–––––––––––––––
17
390
–––––––––––––––
–––––––––––––––
1,688
390
–––––––––––––––
–––––––––––––––
20
The Heavitree Brewery PLC
Registered Number: 30800
Group balance sheet
at 31 October 2017
Non-current assets
Property, plant and equipment
Investment property
Financial assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Income tax payable
Non-current liabilities
Other payables
Financial liabilities
Deferred tax liabilities
Defined benefit pension plan deficit
Total liabilities
Net assets
Notes
2017
£’000
17,022
1,094
2016
£’000
16,700
1,312
–––––––––––––––
18,116
–––––––––––––––
18,012
16
18
12c
46
221
40
359
–––––––––––––––
18,383
–––––––––––––––
18,411
–––––––––––––––
–––––––––––––––
19
20
21
10
1,696
56
10
1,585
57
–––––––––––––––
1,762
–––––––––––––––
1,652
–––––––––––––––
890
17
–––––––––––––––
219
–––––––––––––––
21,035
–––––––––––––––
20,282
–––––––––––––––
–––––––––––––––
22
23
(871)
(1,624)
(190)
(980)
(1,332)
(149)
–––––––––––––––
(2,685)
–––––––––––––––
(2,461)
–––––––––––––––
–––––––––––––––
22
23
12c
30
(256)
(6,045)
(345)
(1,300)
(274)
(6,057)
(335)
(2,111)
–––––––––––––––
(7,946)
–––––––––––––––
(8,777)
–––––––––––––––
(10,631)
–––––––––––––––
(11,238)
–––––––––––––––
10,404
–––––––––––––––
9,044
–––––––––––––––
–––––––––––––––
21
The Heavitree Brewery PLC
Registered Number: 30800
Group balance sheet
at 31 October 2017
Capital and reserves
Equity share capital
Capital redemption reserve
Treasury shares
Fair value adjustments reserve
Currency translation
Retained earnings
Total equity
Notes
27
27
27
27
27
27
2017
£’000
264
673
(1,223)
27
17
10,646
2016
£’000
264
673
(1,254)
21
17
9,323
–––––––––––––––
10,404
–––––––––––––––
9,044
–––––––––––––––
–––––––––––––––
The notes on pages 31 to 62 form part of the financial statements.
These accounts were approved by the Board of Directors and authorised for issue on 14 February 2018
and were signed on its behalf by
N H P TUCKER )
G J CROCKER ) Directors
22
The Heavitree Brewery PLC
Registered Number: 30800
Group statement of changes in equity
for the year ended 31 October 2017
Equity
share
capital
£’000
Capital
redemption
reserve
£’000
Treasury
shares
£’000
Fair value
adjustment
reserve
£’000
Currency
translation
£’000
Cash
flow
hedge
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
264
673
(1,235)
-
-
-
14
-
7
-
-
-
9,307
9,030
1,365
1,365
-
–––––
-
–––––
-
–––––
7
–––––
10
––––––
-
––––––
(992)
–––––
(975)
––––
-
–––––
-
–––––
-
–––––
7
–––––
10
–––––
-
–––––
373
–––––
390
––––
-
-
-
-
40
(58)
-
(1)
-
-
-
-
-
-
-
-
-
-
40
-
1
(58)
-
-
–––––
-
–––––
-
–––––
-
–––––
-
––––––
-
––––––
(358)
–––––
(358)
––––
264
––––––
673
––––––
(1,254)
––––––
21
––––––
17
––––––
-
––––––
9,323
––––––
9,044
––––
At 1 November
2015
Profit for the
year
Other
comprehensive
income for the
year, net of
income tax
Total
comprehensive
income for the
year
Consideration
received by
EBT on sale of
shares
Consideration
paid by EBT on
purchase of
shares
Loss by EBT on
sale of shares
Equity
dividends paid
At 31 October
2016
23
The Heavitree Brewery PLC
Registered Number: 30800
Group statement of changes in equity
for the year ended 31 October 2017
Equity
share
capital
£’000
Capital
redemption
reserve
£’000
Treasury
shares
£’000
Fair value
adjustment
reserve
£’000
Currency
translation
£’000
Cash
flow
hedge
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
264
673
(1,254)
21
17
-
9,323
9,044
1,328
1,328
-
-
6
-
-
354
360
–––––
–––––
–––––
–––––
––––––
––––––
–––––
––––
-
-
6
-
-
1,682
1,688
–––––
–––––
–––––
–––––
––––––
––––––
–––––
––––
-
-
-
-
-
-
-
–––––
264
═══
-
–––––
673
═══
49
(15)
(3)
-
–––––
(1,223)
════
-
-
-
-
-
-
-
-
-
-
-
3
49
(15)
-
-
–––––
27
════
-
––––––
17
════
-
––––––
-
════
(362)
–––––
10,646
════
(362)
––––—
10,404
═════
At 1 November
2016
Profit for the
year
Other
comprehensive
income for the
year, net of
income tax
Total
comprehensive
income for the
year
Consideration
received
by EBT on sale
of shares
Consideration
paid by EBT on
purchase of
shares
Gain by EBT on
sale of shares
Equity
dividends paid
At 31 October
2017
Details of the reserves can be found in note 27.
24
The Heavitree Brewery PLC
Registered Number: 30800
Notes
Group statement of cash flows
For the year ended 31 October 2017
Operating activities
Profit for the year
Tax expense
Net finance costs
Profit on disposal of non-current assets and assets held for sale
Depreciation and impairment of property, plant and equipment
Exchange (gain/loss) on cash, liquid resources and loans
Difference between pension contributions paid and amounts
recognised in the income statement
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Income taxes paid
Interest paid
Net cash flow from operating activities
Investing activities
Interest received
Proceeds from sale of property, plant and equipment and assets held for sale
Payments to acquire property, plant and equipment
Net cash outflow from investing activities
Financing activities
Preference dividend paid
Equity dividends paid
Consideration received by EBT on sale of shares
Consideration paid by EBT on purchase of shares
Capital element of finance lease rental payments
Net movement in long-term borrowings
Net cash flow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the year end
2017
£’000
1,328
151
231
(6)
248
(3)
(438)
(76)
(170)
2016
£’000
1,365
288
189
(585)
371
4
(538)
(226)
238
–––––––––––––––
1,265
(110)
(182)
–––––––––––––––
973
–––––––––––––––
1,106
(79)
(152)
–––––––––––––––
875
–––––––––––––––
–––––––––––––––
6
193
(1,117)
6
1,205
(1,275)
–––––––––––––––
(918)
–––––––––––––––
(64)
–––––––––––––––
–––––––––––––––
14
21
21
(1)
(333)
49
(15)
(21)
-
(1)
(358)
40
(58)
(2)
-
–––––––––––––––
(321)
–––––––––––––––
(266)
(1,270)
–––––––––––––––
(1,536)
–––––––––––––––
(379)
–––––––––––––––
432
(1,702)
–––––––––––––––
(1,270)
–––––––––––––––
–––––––––––––––
25
The Heavitree Brewery PLC
Registered Number: 30800
Company balance sheet
at 31 October 2017
Non-current assets
Property, plant and equipment
Investment property
Financial assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Financial liabilities
Income tax payable
Non-current liabilities
Other payables
Financial liabilities
Deferred tax liabilities
Defined benefit pension plan deficit
Total liabilities
Net assets
Notes
2017
£’000
16,989
1,094
2016
£’000
16,667
1,312
–––––––––––––––
18,083
–––––––––––––––
17,979
16
18
12c
114
221
91
359
–––––––––––––––
18,418
–––––––––––––––
18,429
–––––––––––––––
–––––––––––––––
19
20
21
10
1,576
56
10
1,585
57
–––––––––––––––
1,642
–––––––––––––––
1,652
–––––––––––––––
890
17
–––––––––––––––
219
–––––––––––––––
20,950
–––––––––––––––
20,300
–––––––––––––––
–––––––––––––––
22
23
(871)
(1,624)
(190)
(980)
(1,332)
(149)
–––––––––––––––
(2,685)
–––––––––––––––
(2,461)
–––––––––––––––
–––––––––––––––
22
23
12c
30
(256)
(6,045)
(345)
(1,300)
(274)
(6,057)
(335)
(2,111)
–––––––––––––––
(7,946)
–––––––––––––––
(8,777)
–––––––––––––––
(10,631)
–––––––––––––––
(11,238)
–––––––––––––––
10,319
–––––––––––––––
9,062
–––––––––––––––
–––––––––––––––
26
The Heavitree Brewery PLC
Registered Number: 30800
Company balance sheet
at 31 October 2017
Capital and reserves
Equity share capital
Capital redemption reserve
Treasury shares
Fair value adjustments reserve
Cash flow hedging reserve
Retained earnings
Total equity
Notes
27
27
27
27
27
27
2017
£’000
264
673
(1,223)
27
-
10,578
2016
£’000
264
673
(1,254)
21
-
9,358
–––––––––––––––
10,319
–––––––––––––––
9,062
–––––––––––––––
–––––––––––––––
The notes on pages 31 to 62 form part of the financial statements.
These accounts were approved by the Board of Directors and authorised for issue on 14 February 2018
and were signed on its behalf by
N H P TUCKER )
G J CROCKER ) Directors
27
The Heavitree Brewery PLC
Registered Number: 30800
Company statement of changes in equity
for the year ended 31 October 2017
Equity
share
capital
£'000
264
-
-
–––––
-
–––––
-
-
-
-
–––––
264
––––––
Capital
redemption
reserve
£’000
673
-
-
–––––
-
–––––
-
-
-
-
–––––
673
––––––
Fair value
adjustment
reserve
£’000
14
-
Cash
flow
hedge
reserve
£’000
-
-
Total
Retained
equity
earnings
£’000
£’000
9,326
9,042
1,381 1,381
7
–––––
-
–––––
(992)
–––––
(985)
––––
7
–––––
-
–––––
389
–––––
396
––––
-
-
-
-
-
-
40
(58)
-
-
–––––
21
––––––
-
-
–––––
-
––––––
1
(358)
–––––
9,358
––––––
-
(358)
––––
9,062
––––
Treasury
shares
£’000
(1,235)
-
-
–––––
-
–––––
40
(58)
(1)
-
–––––
(1,254)
––––––
At 1 November 2015
Profit for the year
Other comprehensive
income for the year, net of
income tax
Total comprehensive
income for the year
Consideration received by
EBT on sale of shares
Consideration paid by
EBT on purchase of shares
Loss by EBT on sale of
shares
Equity dividends paid
At 31 October 2016
28
The Heavitree Brewery PLC
Registered Number: 30800
Company statement of changes in equity
for the year ended 31 October 2017
Equity
share
capital
£’000
264
-
Capital
redemption
reserve
£’000
673
-
Treasury
shares
£’000
(1,254)
-
Fair value
adjustment
reserve
£’000
21
-
-
-
-
6
Cash
flow
hedge
reserve
£’000
-
-
-
Retained
earnings
£’000
9,358
1,225
Total
equity
£’000
9,062
1,225
354
360
–––––
–––––
–––––
–––––
–––––
–––––
––––
-
–––––
-
-
-
-
–––––
264
––––––
-
–––––
-
-
-
-
–––––
673
––––––
-
–––––
6
–––––
-
–––––
1,578
–––––
1,585
––––
49
(15)
(3)
-
–––––
(1,223)
––––––
-
-
-
-
-
-
49
(15)
-
-
–––––
27
––––––
-
-
–––––
-
––––––
3
(362)
–––––
10,578
––––––
-
(362)
––––
10,319
––––
At 1 November 2016
Profit for the year
Other comprehensive
income for the year, net of
income tax
Total comprehensive
income for the year
Consideration received by
EBT on sale of shares
Consideration paid by
EBT on purchase of shares
Gain by EBT on sale of
shares
Equity dividends paid
At 31 October 2017
Details of the reserves can be found in note 27.
29
The Heavitree Brewery PLC
Registered Number: 30800
Notes
Company statement of cash flows
for the year ended 31 October 2017
Operating activities
Profit for the year
Tax expense
Net finance costs
Profit on disposal of non-current assets and assets held for sale
Depreciation and impairment of property, plant and equipment
Difference between pension contributions paid and amounts
recognised in the income statement
Decrease/increase in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Income taxes paid
Interest paid
Net cash flow from operating activities
Investing activities
Interest received
Proceeds from sale of property, plant and equipment and assets held for sale
Payments to acquire property, plant and equipment
Payments to acquire fixed asset investments
Receipts from fixed asset investments
Net cash outflow from investing activities
Financing activities
Preference dividend paid
Equity dividends paid
Consideration received by EBT on sale of shares
Consideration paid by EBT on purchase of shares
Capital element of finance lease rental payments
Net movement in long-term borrowings
Net cash flow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the year end
2017
£’000
1,225
151
231
(6)
248
(438)
42
(171)
2016
£’000
1,381
288
189
(585)
371
(538)
(226)
237
–––––––––––––––
1,282
(110)
(182)
–––––––––––––––
990
–––––––––––––––
1,117
(79)
(152)
–––––––––––––––
886
–––––––––––––––
–––––––––––––––
6
193
(1,117)
(17)
-
6
1,205
(1,273)
(13)
-
–––––––––––––––
(935)
–––––––––––––––
(75)
–––––––––––––––
–––––––––––––––
14
21
21
(1)
(333)
49
(15)
(21)
-
(1)
(358)
40
(58)
(2)
-
–––––––––––––––
(321)
–––––––––––––––
(266)
(1,270)
–––––––––––––––
(1,536)
–––––––––––––––
(379)
–––––––––––––––
432
(1,702)
–––––––––––––––
(1,270)
–––––––––––––––
–––––––––––––––
30
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
1. Authorisation of financial statements
The financial statements of The Heavitree Brewery PLC and its subsidiaries (the “Group”) for the year
ended 31 October 2017 were authorised for issue by the board of Directors on 14 February 2018. The
Heavitree Brewery PLC is a public company incorporated and domiciled in England. The Company’s
ordinary shares are traded on the AIM market of the London Stock Exchange.
2. Accounting policies and statement of compliance
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union and as regards the Parent Company financial statements, as
applied in accordance with the Companies Act 2006.
The financial statements have been prepared on the historical cost basis except for certain items that are
measured at fair value at the end of each reporting period as explained in the accounting policies below.
The accounting policies which follow set out those policies which apply in preparing the financial
statements for the year ended 31 October 2017 and are presented in Sterling. All values are rounded to
the nearest thousand pounds (£’000) except when otherwise indicated.
No income statement or statement of comprehensive income is prepared by the Company as permitted by
Section 408 of the Companies Act 2006.
The financial statements have been prepared on a going concern basis. In determining the appropriate
basis of preparation of the financial statements, the Directors are required to consider whether the Group
and the Company can continue in operational existence for the foreseeable future. The Directors are of the
opinion that the Group and the Company has adequate resources to continue in operational existence for
the foreseeable future and continue to adopt the going concern basis in preparing this annual report and
financial statements.
Further information on principal risks and uncertainties and financial instruments can be found in the
Strategic Report, Directors’ Report and in note 25.
Basis of consolidation
The Group financial statements consolidate the financial statements of The Heavitree Brewery PLC and
its subsidiaries drawn up to 31 October each year.
All intragroup balances and transactions, including unrealised profits arising from them, are eliminated on
consolidation.
The assets of the Employee Share Option Scheme and the Employee Benefits Trust are fully consolidated
within the financial statements.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration
received, excluding discounts, rebates, VAT and other sales taxes. The following criteria must also be
met before revenue is recognised:
Drink and food sales (Revenue)
Revenue in respect of drink and food sales is recognised at the point at which the goods are provided, net
of any discounts or volume rebates allowed.
31
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
2. Accounting policies (continued)
Revenue recognition (continued)
Rents receivable from licenced properties (Revenue) and Rents receivable from investment properties
(Other operating income)
Rents receivable are recognised on a straight-line basis over the lease term.
Machine income (Revenue)
The Group’s share of net machine income is recognised in the period to which it relates.
Interest (Finance income)
Revenue is recognised as interest accrues using the effective interest method. The effective interest rate is
the rate that exactly discounts estimated future cash receipts through the expected life of the financial
instrument to its net carrying amount.
Property, plant and equipment
Buildings, furniture and fittings, equipment and vehicles are stated at cost less accumulated depreciation
and accumulated impairment losses.
Depreciation is provided on all property, plant and equipment, other than freehold land, on a straight-line
basis at rates calculated to write off the cost less estimated residual value of each asset over its expected
useful life, as follows:
Fixtures and fittings
• Buildings
-
•
-
• Computer equipment -
• Office equipment
-
• Motor vehicles
-
2%
10% to 20%
20% to 331/3%
20%
25%
Freehold land and assets under construction are not depreciated.
An annual assessment of residual values is performed and there is no depreciable amount if residual
values are the same as, or more than, book value. Residual values are based on the estimated amount
which would be currently obtainable from disposal of the asset net of disposal costs if the asset were
already of the age and condition expected at the end of its useful life.
Useful lives and residual values are reviewed annually and where adjustments are required these are made
prospectively.
Investment property
Property held to earn rental income is classified as investment property and is recorded at cost less
accumulated depreciation and any recognised impairment loss. The depreciation policy is consistent with
that described for property, plant and equipment.
Non-current assets held for sale
Properties identified for disposal which are classified in the Balance Sheet as non-current assets held for
sale are held at the lower of carrying value on transfer to non-current assets held for sale, as assessed at
the time of transfer, and fair value less costs to dispose. The fair value less costs to dispose is based on the
net estimated realisable disposal proceeds (ERV) which are provided by third party property agents who
have been engaged to sell the properties. Licensed land and buildings are classified as held for sale when
they have been identified for disposal by the Group. They must be available for immediate sale in their
present condition and the sale should be highly probable. These conditions are met when management are
committed to the sale, the property is actively marketed, and the sale is expected to occur within one year.
Licensed land and buildings held for sale are not depreciated.
32
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
2. Accounting policies (continued)
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If
any such indication exists, the Group makes an estimate of the asset’s recoverable amount. Where the
carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount. Impairment losses are recognised immediately in the income
statement in those expense categories consistent with the function of the impaired asset.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the
contractual provisions of the instrument and are initially measured at fair value.
Trade receivables and trade payables
Trade receivables and trade payables are held at amortised cost.
Preference shares
Preference shares are measured at amortised cost and recognised as a liability in the balance sheet, net of
transaction costs. Preference shares are classified as a financial liability measured at amortised cost until
they are extinguished on redemption. The corresponding dividends on those shares are charged as
finance costs in the income statement.
Interest-bearing loans and borrowings
Obligations for loans and borrowings are recognised when the Group becomes party to the related
contracts and are measured initially at the fair value of consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest method.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are
recognised respectively in finance income and finance cost.
Fair value measurement
The fair value of quoted investments is determined by reference to bid prices at the close of business on
the balance sheet date.
Leases – Lessee accounting
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the group at their fair value or, if lower, at the
present value of the minimum lease payments, each determined at the inception of the lease. The
corresponding liability to the lessor is included in the balance sheet as finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are
recognised immediately in profit or loss.
33
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
2. Accounting policies (continued)
Leases – lessor accounting
Leases where the lessor retains a significant portion of the risks and benefits of ownership of the asset are
classified as operating leases and rentals payable are charged in the income statement on a straight line
basis over the lease term.
Assets leased out under operating leases are included in property, plant and equipment and depreciated
over their estimated useful lives. Rental income, including the effect of lease incentives, is recognised on
a straight line basis over the lease term.
Where the Group transfers substantially all the risks and benefits of ownership of the asset, the
arrangement is classified as a finance lease and a receivable is recognised for the initial direct costs of the
lease and the present value of the minimum lease payments. As payments fall due, finance income is
recognised in the income statement so as to achieve a constant rate of return on the remaining net
investment in the lease. Where the Group determines an arrangement, that does not take the legal form of
a lease but conveys a right to use an asset, or contains a lease, that arrangement is accounted for in
accordance with IAS 17 Leases.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance
sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are discussed below.
Pension benefits
The cost of defined benefit pension plans are determined using actuarial valuations. The actuarial
valuation involves making assumptions about discount rates, expected rates of return on assets, future
salary increases, mortality rates and future pension increases. Due to the long term nature of these plans,
such estimates are subject to significant uncertainty. The net employee liability at 31 October 2017 was
£1,300,000 (2016: £2,111,000). Further details are given in note 30.
Valuation of financial instruments
As described in note 25, the Group uses valuation techniques that include inputs that are not based on
observable market data to estimate the fair value of certain types of financial instruments. Note 25
provides detailed information about the key assumptions used in the determination of the fair value of
financial instruments. The Directors believe that the chosen valuation techniques and assumptions used
are appropriate in determining the fair value of financial instruments.
Impairment of assets
As discussed in the accounting policies above, the Group assesses at each reporting date, on a property by
property basis, whether there is an indication that an asset may be impaired.
Pensions and other post-retirement benefits
The Group has both defined contribution and defined benefit pension arrangements.
The cost of defined contribution payments is charged to the income statement as incurred.
The Group provides discretionary additional post-retirement benefits to retired employees. The benefits,
which are entirely discretionary, are reviewed on an annual basis and charged to the income statement
during the year in which they are made available.
34
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
2. Accounting policies (continued)
Pensions and other post-retirement benefits
As described in note 30, the Group maintains a defined benefit pension scheme that was closed to new
members on 18 July 2002 and there has been no future accrual since 5 April 2006.
In respect of the defined benefit pension scheme the amount recognised in the Balance Sheet comprises
the difference between the present value of the scheme’s liabilities and the fair value of the scheme’s
assets determined by qualified actuaries using the projected unit credit method. The financing charge is
determined by applying the discount rate used to measure the defined benefit obligation to both the
scheme liabilities and plan assets, and is recognised within net finance costs. Remeasurement gains and
losses are recognised in full in the period in which they occur in Other Comprehensive Income.
Income taxes
The tax expense comprises both the tax payable based on taxable profits for the year end deferred tax.
Deferred tax is provided using the balance sheet liability method in respect of temporary differences
between the carrying value of assets and liabilities for accounting and tax purposes. Deferred tax assets
are recognised to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised.
Income tax is charged or credited to equity or to other comprehensive income if it relates to items that are
charged or credited to equity or to other comprehensive income. Otherwise income tax is recognised in
the income statement. Tax is calculated using tax rates and laws that are enacted or substantively enacted
at the balance sheet date.
Foreign currency
There are no transactions in currencies other than the individual entity’s functional currency.
On consolidation, the financial statements of the overseas subsidiary undertaking are translated at the year
end rate of exchange, with the results translated at the average rate. Exchange differences arising on
consolidation are dealt with in the currency translation reserve, and reported in Other Comprehensive
Income.
Treasury shares
The cost of own shares held by The Heavitree Brewery PLC Employee Benefits Trust and Employee
Share Option Scheme are deducted from shareholders’ equity until the shares are cancelled, re-issued or
disposed of. Consideration received for the sale of such shares is also recognised in shareholder’s equity.
No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of own
shares held.
New standards, interpretations and amendments to existing standards
There are no material impacts arising from standards and interpretations applicable for the first time to
these financial statements, as detailed in the prior year financial statements.
The Directors have considered all IFRS and IFRIC interpretations issued but not yet in force, IFRS9
Financial Instruments and IFRS15 Revenue Recognition will apply to the Group’s 2019 financial
statements. The impact is not expected to be material but a detailed review will be undertaken in 2018.
IFRS 16 Leases will apply to the Group’s financial statements and a review of the impact will be
undertaken in due course.
35
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
3. Revenue
Revenue recognised in the income statement is analysed as follows.
Sale of goods
Rents from licensed properties
2017
£’000
5,074
2,225
2016
£’000
4,984
2,171
–––––––––––
7,299
–––––––––––
7,155
——————
——————
Sale of goods comprises the invoiced values of beers and ciders supplied by the Group to tenants,
together with gaming machine revenue. All revenue is derived from the United Kingdom.
4. Segment information
Primary reporting format – business segments
During the year the Group operated in one business segment - leased estates.
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 2017 and 2016. Revenue is based on the
geographical location of customers and assets are based on the geographical location of the asset.
36
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
4. Segment information (continued)
Secondary reporting format – geographical segments
Year ended 31 October 2017
Revenue
Sales to external customers
Other segment information
Segment assets
Total assets
Capital expenditure
Property, plant and equipment
Year ended 31 October 2016
Revenue
Sales to external customers
Other segment information
Segment assets
Total assets
Capital expenditure
Property, plant and equipment
5. Other operating income
Rents from unlicensed properties
Heavitree Inc
UK
£’000
7,299
══════
20,885
––––——
20,885
══════
1,117
══════
UK
£’000
7,155
══════
20,249
––––——
20,249
══════
1,275
══════
United
States
£’000
-
══════
150
––––——
150
══════
-
══════
United
States
£’000
-
══════
33
––––——
33
══════
-
══════
Total
£’000
7,299
══════
21,035
––––——
21,035
══════
1,117
══════
Total
£’000
7,155
══════
20,282
––––——
20,282
══════
1,275
══════
2017
£’000
266
118
2016
£’000
241
-
––––––––
384
══════
–––––––––
241
══════
37
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
6. Operating profit
This is stated after charging:
Depreciation of property, plant and equipment
Impairment of estate assets
Repairs and maintenance of properties
2017
£’000
248
-
720
══════
2016
£’000
208
163
776
══════
Cost of inventories recognised as an expense (included in purchase of inventories) 2,968
══════
2,955
══════
7. Auditors’ remuneration
The Group paid the following amounts to its auditors in respect of the audit of the financial statements
and for other services provided to the Group.
Audit of the group financial statements
Other fees to auditors
- audit of the group pension scheme
- tax compliance services
- other services
2017
£’000
2016
£’000
41
40
–––––––––––––––
2
6
4
–––––––––––––––
12
–––––––––––––––
53
–––––––––––––––
2
5
4
–––––––––––––––
11
–––––––––––––––
51
–––––––––––––––
–––––––––––––––
Other services relate to a review of the Group’s Interim Report of £4,000 (2016: £4,000)
8. Profit on sale of property, plant and equipment
Profits on sale of property, plant and equipment
2017
£’000
6
══════
2016
£’000
585
══════
Profit on disposal of non-current assets represents gains/(losses) on disposal of property, plant and
equipment. They are classified as exceptional on the basis that they arise from transactions to dispose of
assets other than at the end of their expected useful lives or at values significantly different to their
previously assessed residual value.
38
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
9. Movements in valuation of estate and related assets
Write down of non-current assets held for sale
to fair value less costs to sell (note 17)
10. Staff costs and Directors’ emoluments
(a) Staff costs
Wages and salaries
Social security costs
Other pension costs (note 30)
2017
£’000
2016
£’000
-
══════
(163)
══════
2017
£’000
1,069
115
169
––––——
1,353
══════
2016
£’000
1,018
111
172
––––——
1,301
══════
Included in other pension costs is £48,550 (2016: £49,291) in respect of the defined contribution scheme.
The average monthly number of employees during the year was made up as follows:
Average monthly number of employees
(b) Directors’ emoluments
2017
No.
14
2016
No.
14
══════
══════
N H P Tucker
G J Crocker
T Wheatley
W P Tucker
T P Duncan
K Pease-Watkin
Basic Performance
salary and
fees
£’000
Total
Pension
related
bonus Benefits contributions 2017
£’000
£’000 £’000
£’000
165
142
153
26
16
16
––––——
518
––––——
20
27
24
13
20
12
2
-
-
-
-
-
––––—— ––––——
66
––––—— ––––——
52
-
-
-
-
-
-
––––——
-
––––——
212
179
185
28
16
16
––––——
636
––––——
Total
2016
£’000
206
171
178
27
16
16
––––——
614
––––——
39
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
10. Staff costs and Directors’ emoluments (continued)
(b) Directors’ emoluments (continued)
The performance-related bonuses comprise payments under the Company’s bonus scheme and are
dependent upon the level of profits.
The emoluments (excluding pension contributions) of the highest paid Director totalled £212,000
(2016: £206,000).
Three of the Directors are accruing pension benefits. The highest paid Director has an accrued pension
entitlement of £89,180 as at 31 October 2017 (2016: £89,180), arising from past membership of the
defined benefit scheme which is no longer active.
11. Finance costs
Interest on bank loans and overdrafts
Interest on other loans (including cumulative preference shares)
Total finance costs
12. Taxation
(a) Tax on profit on ordinary activities
Tax expensed in the income statement
Current income tax:
UK corporation tax
(Over)/under provision of tax in prior years
Tax paid by Employee Benefits Trust
Total current income tax
Deferred tax:
Origination and reversal of temporary differences
Total deferred tax
Tax expense in the income statement
2017
£’000
176
6
2016
£’000
146
6
–––––––––––––––
182
–––––––––––––––
152
–––––––––––––––
–––––––––––––––
2017
£’000
190
(50)
11
2016
£’000
123
-
9
–––––––––––––––
151
–––––––––––––––
132
–––––––––––––––
–––––––––––––––
75
156
–––––––––––––––
75
–––––––––––––––
226
–––––––––––––––
156
–––––––––––––––
288
–––––––––––––––
–––––––––––––––
40
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
12. Taxation (continued)
(a) Tax on profit on ordinary activities (continued)
Tax relating to items expensed or credited to equity
Deferred tax:
Deferred tax on defined benefit pensions scheme
Deferred tax on fair value re-measurement of hedging
instruments entered into for cash flow hedges
Total deferred tax
Tax expense in the statement of comprehensive income
(b) Reconciliation of the total tax expense
2017
£’000
2016
£’000
(74)
-
(203)
-
–––––––––––––––
(74)
–––––––––––––––
(74)
–––––––––––––––
(203)
–––––––––––––––
(203)
–––––––––––––––
–––––––––––––––
The tax expense in the income statement for the year is lower than the standard rate of corporation tax in
the UK of 19.41% (2016: 20%). The differences are reconciled below:
Accounting profit before income tax
Accounting profit multiplied by the UK standard rate of
corporation tax of 19.41 % (2016: 20%)
Expenses not deductible for tax purposes
Other
Tax paid by Employee Benefits Trust
Capital gain rebasing/indexation
Total tax expense reported in the income statement
(c) Deferred tax
The deferred tax included in the balance sheet is as follows:
Deferred tax liability
Accelerated capital allowances
Rolled over gain
Deferred tax asset
Pension plans
Cash flow hedges
2017
£’000
2016
£’000
1,554
1,653
–––––––––––––––
–––––––––––––––
302
37
(16)
11
(108)
330
5
40
9
(96)
–––––––––––––––
226
–––––––––––––––
288
–––––––––––––––
–––––––––––––––
2017
£’000
2016
£’000
218
127
204
131
–––––––––––––––
345
–––––––––––––––
335
–––––––––––––––
–––––––––––––––
221
-
359
-
–––––––––––––––
221
–––––––––––––––
359
–––––––––––––––
–––––––––––––––
41
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
12. Taxation (continued)
(c) Deferred tax (continued)
The deferred tax asset has been provided for on the basis that it will be relieved against future profits
anticipated to arise in the foreseeable future.
The deferred tax included in the Group income statement is as follows:
Deferred tax in the income statement
Accelerated capital allowances
Pension plans
Rolled over gain
Deferred income tax expense
2017
£’000
2016
£’000
14
65
(4)
(1)
126
31
–––––––––––––––
75
–––––––––––––––
156
–––––––––––––––
–––––––––––––––
A potential deferred tax asset of £23,000 (2016: £26,000) in respect of overseas losses incurred by
Heavitree Inc has not been recognised as it is not anticipated that these losses will be fully utilised in the
foreseeable future.
13. 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 earnings per share computation:
Profit for the year
2017
£’000
2016
£’000
1,328
1,365
–––––––––––––––
–––––––––––––––
2017
No.
(‘000)
2016
No.
(‘000)
Basic weighted average number of shares (excluding treasury shares)
4,877
4,879
There have been no other transactions involving ordinary shares between the reporting date and the date
of completion of these financial statements.
–––––––––––––––
–––––––––––––––
42
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
14. Dividends paid and proposed
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2016: 3.75p (2015: 3.675p)
First dividend for 2017: 3.675p (2016: 3.675p)
Less: dividends on shares held within employee share schemes
Dividends paid
Proposed for approval at AGM (not recognised as a liability as at 31 October)
Final dividend for 2017: 4.00p (2016: 3.75p)
Cumulative preference dividends
2017
£’000
2016
£’000
198
194
(30)
194
194
(30)
–––––––––––––––
362
–––––––––––––––
358
–––––––––––––––
–––––––––––––––
211
198
–––––––––––––––
–––––––––––––––
1
1
–––––––––––––––
–––––––––––––––
15. Profit attributable to members of the parent company
The profit dealt with in the financial statements of the parent company is £1,225,000 (2016: £1,381,000).
16. Property, plant and equipment
Group
Cost:
At 1 November 2015
Additions
Transfer to assets held
for sale
Transfer to assets under
construction
Transfer to investment
property
Disposals
Land and Furniture Equipment Assets under
buildings and fittings and vehicles construction
£’000
£’000
£’000
£’000
14,148
856
3,723
174
8
1,975
(849)
(317)
-
-
-
(8)
436
203
-
-
-
(150)
2,022
120
-
(1,975)
-
-
Investment
properties
£’000
463
-
-
-
849
-
Total
£’000
20,792
1,353
8
-
-
(475)
––––––––––––––
15,821
263
(574)
––––––––––––––
3,889
191
-
–––––––––––––
489
52
-
–––––––––––––––
167
630
-
–––––––––––––––
1,312
18
(236)
–––––––––––––––
21,678
1,154
(810)
At 31 October 2016
Additions
Transfer to assets held
for sale
Transfer from assets under
construction
Transfer to from current assets
Disposals
797
-
-
-
11
-
-
-
(29)
(797)
-
-
-
-
-
-
11
(29)
-
At 31 October 2017
––––––––––––––
16,307
––––––––––––––
4,091
–––––––––––––
512
–––––––––––––––
-
–––––––––––––––
1,094
–––––––––––––––
22,004
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
43
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
16. Property, plant and equipment (continued)
Group
Land and Furniture Equipment Assets under
buildings and fittings and vehicles construction
£’000
£’000
£’000
£’000
Investment
properties
£’000
Depreciation and impairment:
At 1 November 2015
Provided during the year
Disposals
427
-
-
2,821
135
(5)
302
73
(87)
-
-
-
-
-
-
Total
£’000
3,550
208
(92)
At 31 October 2016
Provided during the year
Disposals
At 31 October 2017
Net book value
At 31 October 2017
Net book value at
31 October 2016
Net book value at
31 October 2015
––––––––––––––
427
-
-
––––––––––––––
2,951
177
-
–––––––––––––
288
71
(26)
––––—— ––––—— ––––——
333
427
3,128
–––––––––––––––
-
–––––––––––––––
-
-
––––——
-
-
––––——
-
–––––––––––––––
3,666
248
(26)
––––——
3,888
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
––––––––––––––
15,880
963
179
-
1,094
18,116
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
15,394
938
201
167
1,312
18,012
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
13,721
902
134
2,022
463
17,242
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
In the Directors’ opinion the investment properties have a fair value as at 31 October 2017 of £2,265,000
(2016: £2,238,000). The investment properties were valued by the Directors based on current market
prices for similar properties within a similar area. The fair value disclosure of investment property is
categorised as a level 2 recurring fair value disclosure in accordance with IFRS 13.
44
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
16. Property, plant and equipment (continued)
Company
Cost:
At 1 November 2015
Additions
Transfer to assets held
for sale
Transfer to assets
under construction
Transfer to investment
property
Disposals
Land and Furniture Equipment Assets under
buildings and fittings and vehicles construction
£’000
‘£000
£’000
£’000
14,123
848
3,723
174
8
1,975
(849)
(317)
-
-
-
(8)
436
203
-
-
-
(150)
2,022
120
-
(1,975)
-
-
Investment
properties
£’000
463
-
-
-
849
-
Total
£’000
20,767
1,345
8
-
-
(475)
At 31 October 2016
Additions
Transfer to assets held
for sale
Transfer from assets
under construction
Transfer from current assets
Disposals
––––––––––––––
15,788
263
––––––––––––––
3,889
191
–––––––––––––
489
52
–––––––––––––––
167
630
–––––––––––––––
1,312
18
–––––––––––––––
21,645
1,154
(574)
797
-
-
-
-
11
-
-
-
-
(29)
-
(236)
(810)
(797)
-
-
-
-
-
-
11
(29)
At 31 October 2017
––––––––––––––
16,274
––––––––––––––
4,091
–––––––––––––
512
–––––––––––––––
-
–––––––––––––––
1,094
–––––––––––––––
21,971
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
45
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
16. Property, plant and equipment (continued)
Company
Land and Furniture Equipment Assets under
buildings and fittings and vehicles construction
£’000
£’000
£’000
£’000
Investment
properties
£’000
Depreciation and impairment:
At 1 November 2015
Provided during the year
Impairment
Disposals
427
-
-
-
2,821
135
-
(5)
302
73
-
(87)
-
-
-
-
-
-
-
-
Total
£’000
3,550
208
-
(92)
At 31 October 2016
Provided during the year
Disposals
––––––––––––––
427
-
-
––––––––––––––
2,951
177
-
–––––––––––––
288
71
(26)
–––––––––––––––
-
-
-
–––––––––––––––
-
-
-
–––––––––––––––
3,666
248
(26)
––––––––––––––
––––––––––––––
–––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
At 31 October 2017
427
3,128
333
-
-
3,888
––––––––––––––
––––––––––––––
–––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
Net book value at
At 31 October 2017
Net book value at
31 October 2016
Net book value at
1 November 2015
15,847
963
179
-
1,094
18,083
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
15,361
938
201
167
1,312
17,979
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
13,696
902
134
2,022
463
17,217
––––––––––––––
–––––––––––––– ––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
In the Directors’ opinion the investment properties have a fair value as at 31 October 2017 of £2,265,000
(2016: £2,238,000). The investment properties were valued by the Directors based on current market
prices for similar properties within a similar area. The fair value disclosure of investment property is
categorised as a level 2 recurring fair value disclosure in accordance with IFRS 13.
17. Non-current assets held for sale
Group and Company
At 1 November
Transfer (to)/from property, plant and equipment (note 16)
Additions
Disposals
Impairment
Transfer (to)/from current assets
At 31 October
2017
£’000
2016
£’000
219
810
11
(185)
-
35
645
(8)
5
(260)
(163)
-
–––––––––––––––
890
–––––––––––––––
219
–––––––––––––––
–––––––––––––––
As at 31 October 2017 five properties were being actively marketed for sale (2016 – two properties).
46
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
18. Financial assets
Group
Financial assets – non-current
Available-for-sale financial assets
2017
£’000
46
2016
£’000
40
–––––––––––––––
–––––––––––––––
Available-for-sale financial assets consist of an investment in ordinary shares of a company listed on
PLUS markets.
Company
Cost:
At 1 November 2016
Loan advance
At 31 October 2017
Amounts provided:
At 1 November 2016
Revaluation
At 31 October 2017
Net book value:
At 31 October 2017
At 31 October 2016
Subsidiary
undertakings
£’000
Unlisted
investments
£’000
69
17
50
-
Total
£’000
119
17
–––––––––––––––
86
–––––––––––––––
50
–––––––––––––––
136
(18)
-
(10)
6
(28)
6
–––––––––––––––
(18)
–––––––––––––––
(4)
–––––––––––––––
(22)
–––––––––––––––
–––––––––––––––
–––––––––––––––
68
46
114
–––––––––––––––
–––––––––––––––
–––––––––––––––
51
40
91
–––––––––––––––
–––––––––––––––
–––––––––––––––
The Company’s subsidiary undertakings are as follows:
Name of Company
Country of
registration (or
incorporation)
and operation
Holding
Proportion
held
Nature of
business
Heavitree Inc
USA
Common Stock
100%
Ownership of
freehold land
Heavitree Inns Limited
England and Wales
Ordinary shares
100%
Dormant
Each subsidiary undertaking is directly owned by the Company.
47
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
19. Inventories
Group and Company
Fine wines
Merchandising inventory
20. Trade and other receivables
Group
Trade receivables
Prepayments and accrued income
Other receivables
Finance leases
Company
Trade receivables
Prepayments and accrued income
Other receivables
Finance leases
2017
£’000
6
4
2016
£’000
6
4
–––––––––––––––
10
–––––––––––––––
10
–––––––––––––––
–––––––––––––––
2017
£’000
2016
£’000
839
378
139
340
841
329
34
381
–––––––––––––––
1,696
–––––––––––––––
1,585
–––––––––––––––
–––––––––––––––
2017
£’000
2016
£’000
839
378
19
340
841
329
34
381
–––––––––––––––
1,576
––––––––
–––––––––––––––
1,585
––––––––
Trade receivables are all denominated in sterling.
Trade receivables are non-interest bearing and are generally on 30 days’ terms and are shown net of a
provision for impairment. As at 31 October 2017, trade receivables at nominal value of £498,000 (2016:
£512,000) were impaired and fully provided for. Movements in the provision for impairment of
receivables were as follows:
At 1 November
Charge for the year
Amounts written off
At 31 October
2017
£’000
512
(14)
-
2016
£’000
436
76
-
–––––––––––––––
498
–––––––––––––––
512
–––––––––––––––
–––––––––––––––
48
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
20. Trade and other receivables (continued)
As at 31 October, the analysis of trade receivables that were past due but not impaired is as follows:
Neither past
due nor
impaired
£’000
Total
£’000
Past due but
not impaired
30-90 days
£’000
0-30 days
£’000
90+ days
£’000
2017
2016
839
841
529
589
133
109
61
13
116
130
Management estimates the provision for doubtful debts based on a review of all individual receivable
accounts, experience and known factors at the balance sheet date, taking into account any form of security
or collateral held, which is quantified. Receivables are written off against the doubtful debt provision
when management deems the debt no longer recoverable.
21. Cash and cash equivalents
Group and Company
Cash at bank and in hand
2017
£’000
2016
£’000
56
57
–––––––––––––––
56
–––––––––––––––
57
–––––––––––––––
–––––––––––––––
For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the
following at 31 October:
Cash at bank and in hand
Bank overdrafts
2017
£’000
2016
£’000
56
(1,592)
57
(1,327)
–––––––––––––––
(1,536)
–––––––––––––––
(1,270)
–––––––––––––––
–––––––––––––––
49
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
22. Trade and other payables
Group and Company
Current
Trade payables
Other taxation and social security
Accruals
Other payables
Non-current
Other payables - tenants’ deposits
2017
£’000
408
210
240
13
2016
£’000
387
160
231
202
–––––––––––––––
871
–––––––––––––––
980
–––––––––––––––
–––––––––––––––
256
274
–––––––––––––––
–––––––––––––––
Tenants’ deposits mature when the tenant leaves the property or if trading terms are altered at which point
they are repaid. Interest is based on the base rate and an appropriate margin.
23. Financial liabilities
Group and Company
Current
Bank overdrafts
Finance lease liabilities
Non-current
11.5% cumulative preference shares (note 26)
Bank loan
Finance lease liabilities
2017
£’000
1,592
32
2016
£’000
1,327
5
–––––—— –––––——
1,624
1,332
–––––––––––––––
–––––––––––––––
2017
£’000
11
6,000
34
2016
£’000
11
6,000
46
–––––—— –––––——
6,045
6,057
The bank loan and overdraft are secured over certain of the Group’s freehold properties by a first legal
charge to the value of £ 15,125,000 (2016: £15,125,000).
–––––––––––––––
–––––––––––––––
50
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
Obligations under finance leases
Amounts payable under finance lease:
Within one year
Within two to five years
After five years
Present value of lease obligation
2017
£’000
2016
£’000
5
46
-
–––––—— –––––——
32
35
-
67
51
–––––––––––––––
–––––––––––––––
It is the Group’s policy to lease certain motor vehicles under finance leases. The Group’s obligations
under finance lease are secured over leased assets.
24. Operating lease agreements where the group is a lessor
Group and Company
The Group is a lessor of licensed properties to tenants. The leases have various terms, escalation clauses
and renewal rights.
Future minimum rentals receivable under non-cancellable operating leases are as follows:
Not later than one year
After one year but not more than five years
After five years
2017
£’000
252
715
444
2016
£’000
253
791
670
–––––––––––––––
1,411
–––––––––––––––
1,714
–––––––––––––––
–––––––––––––––
The above figures are based on current rents which are generally subject to three-yearly reviews. Leases
have between one year and fifteen years remaining but are subject to the Landlord and Tenant Act. All
figures quoted are for assignable leases. No figures are quoted for non-assignable leases (tenancies) as the
complexity of the varying terms of notice under these agreements make it impossible to calculate future
life expectancy for these properties.
25. Financial instruments and derivatives
Group and Company
The Group’s principal financial instruments comprise cash, tenants’ deposits, loans, investments and its
own non-equity share capital. The principal purpose of these financial instruments is to provide finance
for the Group’s operations. The Group has various other financial instruments such as trade receivables
and trade payables that arise directly from its operations.
Short-term trade receivables and trade payables
Short-term trade receivables and trade payables have been excluded from the numerical disclosures on
fair values below.
51
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
25. Financial instruments and derivatives (continued)
Interest rate risk
As the Group has no significant interest-bearing assets, other than cash and cash equivalents, the Group’s
income and operating cash flows are substantially independent of changes in market interest rates.
Income and cash flows from cash and cash equivalents fluctuate with interest rates.
The Group finances its operations through a mixture of equity shareholders’ funds, preference shares and
a secured term loan and overdraft.
Cash and borrowings are denominated in sterling and interest is paid on cash and borrowings at a floating
rate. The interest rate risk exposure is managed by the use of interest rate swap contracts when considered
appropriate, and the Group continually monitors its interest rate risk exposure. The following table
demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held
constant, of the Group’s profit before tax (through the impact on cash and floating rate borrowings).
There is no impact on the Group’s equity.
The sensitivity analysis of interest rates on bank borrowings is as follows. 100 basis points has been used
as movements are linear.
2017
Sterling
Sterling
2016
Sterling
Sterling
Increase/
decrease in
basis points
Effect on
profit
before tax
£000
+100
-100
+100
-100
(76)
76
(75)
75
Interest rate risk profile of non-equity shares
The Company has in issue 11,695 £1 cumulative preference shares with a fixed coupon rate of 11.5%.
These represent the remaining preference shares in issue following the offer made by the Company in
1996 to repurchase these shares. They are no longer listed on any public market and have no fixed
maturity date.
Liquidity risk
The Group is primarily financed by equity shareholders’ funds and a secured term loan, subject to
relevant covenants being met.
Cash flow forecasts are produced to assist management in identifying liquidity requirements and are
stress tested for possible scenarios. Cash balances are invested in the short-term such that they are readily
available to settle short-term liabilities or fund capital additions.
52
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
25. Financial instruments and derivatives (continued)
The table below summarises the maturity profile of the Group’s financial liabilities at 31 October 2017
and 2016 based on contractual undiscounted payments.
Year ended 31 October 2017
Bank loan/overdraft
Tenants’ deposits
Trade payables
Finance leases
Less than
On demand 3 months
£’000
-
-
-
-
£’000
1,592
-
408
32
3-12
months
£’000
-
-
-
-
1-5 years
£’000
6,000
256
-
34
More
than
5 years
£’000
-
-
-
-
Total
£’000
7,592
256
408
66
––––––––––
––––––––––
–––––––––––
–––––––––––
–––––––––––
––––––––––
Year ended 31 October 2016
Less than
On demand 3 months
£’000
-
-
-
-
£’000
1,327
-
387
5
3-12
months
£’000
-
-
-
-
1-5 years
£’000
6,000
274
-
46
More
than
5 years
£’000
-
-
-
-
Total
£’000
7,327
274
387
51
––––––––––
––––––––––
–––––––––––
–––––––––––
–––––––––––
––––––––––
Bank loan/overdraft
Tenants’ deposits
Trade payables
Finance leases
Capital Risk
The Group’s capital structure is made up of net debt, issued share capital and reserves. These are
managed effectively to minimise the Group’s cost of capital, to add value to shareholders and to service
debt obligations, ultimately ensuring that the Group continues as a going concern.
The securitised debt is monitored by a variety of measures which are reported to debt providers on a
quarterly basis. The Group assesses the performance of the business; the level of available funds and the
short to medium-term plans concerning capital spend as well as the need to meet financial covenants.
Such assessment influences the level of dividends payable.
Credit risk
There are no significant concentrations of credit risk within the Group. The maximum credit risk
exposure relating to financial assets is represented by their carrying value as at the balance sheet date.
Trade and other receivables, as shown on the consolidated balance sheet, comprise a large number of
individually small amounts from unrelated customers and are shown net of a provision for doubtful debts.
The Group has established procedures to minimise the risk of default on trade receivables including,
when considered appropriate, undertaking detailed credit checks before a customer is accepted. The credit
quality of counterparts is assessed through the use of credit agencies at the outset of the business
relationship.
Monthly checks are made and credit terms altered where appropriate. Historically, these procedures have
proved effective in minimising the level of impaired and past due debtors.
53
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
25. Financial instruments and derivatives (continued)
Foreign currency risk
As a result of the investment in operations in the United States, the Group’s financial statements can be
affected by movements in the exchange rate between sterling and the US dollar. This risk has been
considered by the Group and is not deemed significant enough to warrant the extra cost of hedging the
risk as foreign currency exposure is not material to the Group.
The Group does not face transactional currency exposure as all transactions are denominated in the
functional currency.
Fair values of financial assets and liabilities
Set out below is a comparison by category of book values and fair values of all the Group’s financial
assets, financial liabilities and non-equity shares as at 31 October:
Hierarchical
classification
Financial assets
Cash
Available-for-sale investments
Level 1
Level 1
Book
value
2017
£’000
56
46
Fair
value
2017
£’000
56
46
Book
value
2016
£’000
57
40
Fair
value
2016
£’000
57
40
–––––––––––––––
102
–––––––––––––––
102
–––––––––––––––
97
–––––––––––––––
97
–––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
Financial liabilities
Bank loan/overdraft
Interest-bearing loans and borrowings:
Floating rate borrowings
Tenants’ deposits
Cumulative preference shares
Finance leases
Level 2
(7,592)
(7,592)
(7,327)
(7,327)
Level 3
Level 3
Level 2
(256)
(11)
(66)
(256)
(11)
(66)
(274)
(11)
(51)
(274)
(11)
(51)
–––––––––––––––
(7,925)
–––––––––––––––
(7,925)
–––––––––––––––
(7,663)
–––––––––––––––
(7,663)
–––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
The fair value of financial assets and liabilities are included at the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than in a forced liquidation or sale.
The following methods and assumptions were used to estimate the fair values:
The fair value of short-term loans and overdrafts approximates to the carrying amount because of the
short maturity of these instruments.
The carrying value of tenants’ deposits and cumulative preference shares are assumed to approximate
their fair value.
The fair value of available-for-sale investments is based on market value (see note 18).
Valuation techniques and assumptions applied for the purposes of measuring fair value
The fair values of financial assets and financial liabilities with standard terms and conditions and traded
on active liquid markets are determined with reference to quoted market prices.
54
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
25. Financial instruments and derivatives (continued)
Hierarchical classification of financial assets and liabilities measured at fair value
IFRS 13 requires that the classification of financial instruments at fair value be determined by reference
to the source of inputs used to derive fair value.
The classification uses the following three-level hierarchy:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – other techniques for which all inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly.
Level 3 – techniques which use inputs which have a significant effect on the recorded fair value that are
not based on observable market data.
During the years ending 31 October 2017 and 31 October 2016 there were no transfers between level 1, 2
or 3 fair value measurements.
26. Authorised and issued share capital
Group and Company
(i) Ordinary shares
Authorised
Ordinary shares of 5p each
‘A’ limited voting ordinary shares of 5p each
Unclassified shares of 5p each
2017
£
2016
£
99,735
164,124
924,446
99,735
164,124
924,446
–––––––––––––––
1,188,305
–––––––––––––––
1,188,305
–––––––––––––––
–––––––––––––––
Allotted, called up and fully paid
2017
No.
2016
No.
2017
£
2016
£
Ordinary Shares of 5p each
At 1 November
Purchases
At 31 October
1,994,699
-
1,994,699
-
99,735
-
99,735
-
–––––––––––––––
1,994,699
–––––––––––––––
1,994,699
–––––––––––––––
99,735
–––––––––––––––
99,735
–––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
55
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
26. Authorised and issued share capital (continued)
2017
No.
2016
No.
2017
£
2016
£
‘A’ Limited Voting Ordinary Shares of 5p each
At 1 November
Purchases
At 31 October
3,282,478
-
3,282,478
-
164,124
-
164,124
-
–––––––––––––––
3,282,478
–––––––––––––––
3,282,478
–––––––––––––––
164,124
–––––––––––––––
164,124
–––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
The Ordinary Shares and ‘A’ Limited Voting Ordinary Shares are entitled equally to dividends, and rank
equally on a winding up, after the Cumulative Preference Shares. The Ordinary Shares carry one vote for
every £1 in nominal amount and the ‘A’ Limited Voting Ordinary Shares carry one vote for every £10 in
nominal amount. There are no Unclassified Shares in issue; shares purchased by the Company become
authorised (but unissued) Unclassified Shares.
(ii) Preference shares classified as non-current liability
Authorised
11.5% Cumulative Preference Shares of £1 each
2017
£
2016
£
11,695
11,695
–––––––––––––––
–––––––––––––––
Allotted, called up and fully paid
2017
No.
2016
No.
2017
£
2016
£
11.5% Cumulative Preference Shares of £1 each
11,695
11,695
11,695
11,695
–––––––––––––––
–––––––––––––––
–––––––––––––––
–––––––––––––––
The Cumulative Preference Shares are entitled to a fixed cumulative preferential dividend at 11.5% per
annum. On a return of capital on a winding up, these shares will rank first for their nominal amount and
any arrears of dividend. The Cumulative Preference Shares do not normally carry voting rights.
An explanation of the Group’s capital management process and objectives is set out in the discussion of
financial instruments on page 9 in the Directors’ report.
27. Reconciliation of movements in equity
Group and Company
The reconciliations of movements in equity are shown in the group statement of changes in equity and the
company statement of changes in equity on pages 23 and 28 respectively.
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.
56
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
27. Reconciliation of movements in equity (continued)
Capital redemption reserve
The capital redemption reserve arises on the repurchase 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 2017, the Group held 142,082 Ordinary Shares and 252,097 ‘A’ Limited Voting Ordinary
Shares (2016: 142,082 Ordinary Shares and 268,652 ‘A’ Limited Voting Ordinary Shares) of its own
shares. During the year there were purchases of 6,846 and sales of 23,401 ‘A’ Limited Voting Ordinary
Shares.
Fair value adjustments reserve
The fair value adjustments reserve is used to record differences in the market value of the available-for-
sale investment year on year.
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.
28. Financial Commitments
Group and Company
At 31 October, the Group and Company had total commitments under non-cancellable operating leases
that expire as follows:
Other
Other
Within one year
Within two to five years
29. Capital commitments
Group and Company
2017
£’000
9
20
2016
£’000
9
29
––––——
––––——
29
38
══════
══════
At 31 October 2017, amounts contracted for but not provided in the financial statements amounted to £nil
(2016: £nil).
57
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
30. Pensions and post-retirement benefits
Group and Company
(i)
Optional pension payments
During the year the Group made discretionary pension payments of £35,026 (2016: £26,526) directly to
past employees.
(ii)
Defined contribution schemes
From 1 January 2003, the Company has also operated an employer-sponsored personal pension
arrangement. The assets of the arrangement are held separately from those of the Company in an
independently administered fund. The pension charge for the period was £48,550 (2016: £49,291).
(iii) Defined benefit scheme
The Company sponsors the plan which is a funded defined benefit arrangement. This is a separate trustee
administered fund holding the pension plan assets to meet long term pension liabilities for past and
present employees. The scheme is subject to the funding legislation outlined in the Pensions Act 2004
which came into force on 30 December 2005. This, together with documents issued by the Pensions
Regulator, and Guidance Notes adopted by the Financial Reporting Council, set out the framework for
funding defined benefit occupational pension plans in the UK.
The scheme was closed to new members on 18 July 2002 and there has been no future accrual since
5 April 2006.
The Trustees of the scheme are required to act in the best interest of the scheme’s beneficiaries. The
appointment of the Trustees is determined by the scheme’s trust documentation. It is policy that one third
of all Trustees should be nominated by the members and there must be a minimum of one such trustee.
A full actuarial valuation was carried out as at 31 December 2013 in accordance with the scheme funding
requirements of the Pensions Act 2004 and the funding of the scheme is agreed between the Company
and the Trustees in line with those requirements. These in particular require the surplus/deficit to be
calculated using prudent, as opposed to best estimate actuarial assumptions.
This actuarial valuation showed a deficit of £4,878,000. The Company has agreed with the Trustees that
it will aim to eliminate the deficit over a period of 8 years and 2 months from 31 December 2013 by the
payment of annual contributions of £507,000 increasing at 3% p.a., in respect of the deficit, with the first
increase applying on 1 March 2014. In addition and in accordance with the actuarial valuation, the
Company has agreed with the Trustees that it will meet expenses of the scheme and levies to the Pension
Protection Fund.
For the purposes of IAS 19 the actuarial valuation as at 31 December 2013, which was carried out by a
qualified independent actuary, has been updated on an approximate basis to 31 October 2017. There have
been no changes in the valuation methodology adopted for this period’s disclosure compared to the
previous period’s disclosures.
58
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
30. Pensions and post-retirement benefits (continued)
Amounts included in the Balance Sheet
31 October 31 October 31 October
2015
£’000
2016
£’000
2017
£’000
Fair value of plan assets
6,670 8,761
6,979
Present value of defined benefit obligation
(7,970) (10,872)
(8,390)
Surplus/(deficit) in scheme
–––––––––––––––
(1,300)
–––––––––––––––
(2,111)
–––––––––––––––
(1,411)
–––––––––––––––
–––––––––––––––
–––––––––––––––
The present value of scheme liabilities is measured by discounting the best estimate of future cash flows
to be paid out by the scheme. The value calculated in this way is reflected in the net liability in the
balance sheet as shown above.
The present value of scheme liabilities is measured by discounting the best estimate of future cash flows
to be paid out by the scheme. The value calculated in this way is reflected in the net liability in the
balance sheet as shown above.
All actuarial gains and losses will be recognised in the year in which they occur in other comprehensive
income.
Reconciliation of the impact of the asset ceiling
The Company has reviewed the implications of the guidance provided by IFRIC 14 and has concluded
that it is not necessary to make any adjustments to the IAS 19 figures in respect of an asset ceiling or
Minimum Funding requirement as at 31 October 2017.
Reconciliation of opening and closing present value of the defined benefit obligation
As at 1 November
Current service cost
Interest cost
Actuarial losses due to scheme experience
Actuarial gains due to changes in demographic assumptions
Actuarial losses due to changes in financial assumptions
Benefits paid
Past service costs
At 31 October
2017
£’000
10,872
-
280
277
(1,226)
245
(2,594)
116
2016
£’000
8,390
-
318
-
-
2,198
(34)
-
–––––––––––––––
7,970
–––––––––––––––
10,872
–––––––––––––––
–––––––––––––––
There have been no plan amendments, curtailments or settlements in the accounting period.
59
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
30. Pensions and post-retirement benefits (continued)
Reconciliation of opening and closing values of the fair value of plan assets
As at 1 November
Interest income
Return on plan assets (excluding amounts included in interest income)
Employer contributions
Benefits paid
At 31 October
2017
£’000
8,761
225
(276)
554
(2,594)
2016
£’000
6,979
275
1,003
538
(34)
–––––––––––––––
6,670
–––––––––––––––
8,761
–––––––––––––––
–––––––––––––––
The actual return on the plan assets over the period ended 31 October 2017 was £51,000.
Defined benefit costs recognised in profit or loss
Past service cost
Net interest cost
Defined benefit cost recognised in profit or loss
2017
£’000
116
55
2016
£’000
-
43
–––––––––––––––
171
–––––––––––––––
43
–––––––––––––––
–––––––––––––––
Defined benefit costs recognised in Other Comprehensive Income
Return on plan assets (excluding amounts included in net interest cost) – (loss)/gain
Experience losses arising on the defined benefit obligation
Effects of changes in the demographic assumptions - gain
Effects of changes in the financial assumptions - loss
2017
£’000
(276)
(277)
1,226
(245)
2016
£’000
1,003
-
-
(2,198)
Total amount recognised in other comprehensive income
–––––––––––––––
428
–––––––––––––––
(1,195)
–––––––––––––––
–––––––––––––––
Plan assets
Corporate Bonds
Government Bonds
Cash
Insured Contract
Total assets
31 October 31 October 31 October
2015
£’000
5,978
734
157
110
2016
£’000
7,067
899
661
134
2017
£’000
4,440
588
1,608
34
–––––––––––––––
6,670
–––––––––––––––
8,761
–––––––––––––––
6,979
–––––––––––––––
–––––––––––––––
–––––––––––––––
60
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
30. Pensions and post-retirement benefits (continued)
None of the fair values of the assets shown above include any of the Company’s own financial
instruments or any property occupied by, or other assets used by, the Company. All of the scheme assets
have a quoted market price in an active market with the exception of the Trustee’s bank account balance.
It is the policy of the Trustees and the Company to review the investment strategy at the time of each
funding valuation. The Trustees’ investment objectives and the processes undertaken to measure and
manage the risks inherent in the plan investment strategy are documented in the scheme’s Statement of
Investment Principles.
The Trustees have secured deferred annuities with Zurich for certain members which are secured in the
name of the scheme.
Significant Actuarial Assumptions
Rate of discount
Allowance for commutation of pension
for cash at retirement
31 October 31 October 31 October
2015
% per annum % per annum % per annum
3.80
2017
2016
2.80
2.90
N/A
N/A
N/A
The mortality assumptions adopted as at 31 October 2017 are 100% of the standard tables PCxA00, Year
of Birth, no age rating for males and females, projected using Long Cohort converging to 1.00% p.a.
These imply the following life expectancies
Life expectancy at age 65
(Years)
22.9
Male retiring in 2017
24.7
Female retiring in 2017
24.3
Male retiring in 2037
26.2
Female retiring in 2037
Analysis of the sensitivity to the principal actuarial assumptions of the present value of the defined
benefit obligation
Discount rate
Rate of mortality
Change in assumption
Decrease of 0.25% p.a.
Increase by 1 year
Impact on scheme liabilities
Increase by 2.7%
Increase by 3.6%
The sensitivities shown above are approximate. Each sensitivity considers one change in isolation. The
average duration of the defined benefit obligation at the period ending 31 October 2017 is 26 years.
The scheme typically exposes the Company to actuarial risks such as investment risk, interest rate risk,
mortality risk and longevity risk. A decrease in corporate bond yields or an increase in life expectancy
would result in an increase to scheme liabilities. This would detrimentally impact the balance sheet
position and may give rise to increased charges in profit or loss in future. This effect would be partially
offset by an increase in the value of the scheme’s bond holdings.
The best estimate of contributions to be paid by the Company to the plan for the period commencing 1
November 2017 is £571,000.
61
The Heavitree Brewery PLC
Registered Number: 30800
Notes to the financial statements
for the year ended 31 October 2017
31. Related party transactions
Group and Company
During the year the Group entered into transactions, in the ordinary course of business, with other related
parties.
Two of the licensed properties are tenanted by close family members of two of the Directors.
Transactions with these related parties are as follows:
31 October 2017
31 October 2016
Sales to
related parties
£’000
317
332
from related
Trading amounts Purchases
owed from
related parties parties
£’000
£’000
-
26
-
34
During the year the company repaid a loan of £189,000 together with accrued interest at 2.5% made in the
prior year by a close family member of one of the Directors.
Terms and conditions of transactions with related parties
Sales and purchases between related parties are made on normal commercial terms. Outstanding balances
with entities other than subsidiaries are unsecured, interest free and cash settlement is expected within 30
days of month end. Terms and conditions for transactions with subsidiaries are the same, with the
exception that balances are placed on intercompany accounts with no specified credit period. The Group
has not provided or benefited from any guarantees for any related party receivables or payables. During
the year ended 31 October 2017, the Group has not made any provision for doubtful debts relating to
amounts owed by related parties (2016: £nil).
Compensation of key management personnel (including Directors)
The only key management personnel are Directors and their compensation is disclosed in note 10.
62