Young & Co.'s Brewery plc
Annual Report 2016

Plain-text annual report

18.1 MILLION 100 of managed estate using LED lights BurgerShack TOP 50 GASTRO PUB INNOVATION AWARD 3,735 employees 702,030 BURGERS BEST IDENTITY GOLD Creative Circle Awards 4 DESIGN AWARDS PINTS SOLD Windmill Clapham IN THE TOP 25 BEST UK HOTELS TripAdvisor Awards 2016 500k SOCIAL MEDIA FOLLOWERS CONTENTS STRATEGIC REPORT CHAIRMAN’S STATEMENT CHIEF EXECUTIVE’S REVIEW PRINCIPAL RISKS AND UNCERTAINTIES FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT GROUP INCOME STATEMENT 23 24 STATEMENTS OF COMPREHENSIVE INCOME 25 3 5 8 BUSINESS AND FINANCIAL REVIEW 10 BALANCE SHEETS DIRECTORS’ REPORT OUR BOARD COMMITTEES OTHER DISCLOSURES PREPARATION AND DISCLAIMER STATEMENTS OF CASH FLOW GROUP STATEMENT OF CHANGES IN EQUITY PARENT COMPANY STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS FIVE YEAR REVIEW 16 17 21 22 SHAREHOLDER INFORMATION NOTICE OF MEETING EXPLANATORY NOTES TO THE NOTICE OF MEETING YOUNG’S PUBS AND HOTELS SENIOR PERSONNEL, COMMITTEES AND ADVISERS SHAREHOLDER INFORMATION 26 27 28 29 30 60 61 65 66 68 68 FINANCIAL HIGHLIGHTS Strategic report Directors’ report Financial statements Shareholder information 2016 £m 2015 £m % CHANGE Revenue 245.9 227.0 Adjusted operating profit(1) Operating profit Adjusted profit before tax(1) Profit before tax 41.0 38.9 35.4 33.3 +8.3 +9.6 -6.3 37.4 41.5 32.0 +10.6 36.1 -7.8 Adjusted basic earnings per share(1) 57.20p 50.62p +13.0 Basic earnings per share 55.76p 55.17p Dividend per share (interim and recommended final) 17.45p 16.46p +1.1 +6.0 Net assets per share(2) £9.37 £8.40 +11.5 All of the results above are from continuing operations. (1) Reference to an “adjusted” item means that item has been adjusted to exclude exceptional items (see notes 9 and 10). (2) Net assets per share are the group’s net assets divided by the shares in issue at the period end. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 1 Filip – General Manager at the Clockhouse In 2010 I started working for Young’s as a kitchen porter. My General Manager and Operations Manager noticed my potential and provided me with the support I needed to become a deputy manager, a Guidance Guru and a Draught Master. My hard work has recently been rewarded with my first appointment as a General Manager. 2 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 CHAIRMAN’S STATEMENT Nicholas Bryan Chairman + 8.3% Revenue + 5.6% Managed house like-for-like revenue + 10.6% Adjusted profit before tax Strategic report Directors’ report Financial statements Shareholder information operation, the acquisition of Geronimo at the end of 2010, the development of a significant hotels operation and the revitalisation of the tenanted division under the Ram Pub Company brand. In Patrick Dardis, we have a very well qualified successor to Steve as Chief Executive. Patrick has spent his whole career in the pubs and brewing industry. He joined Young’s in 2002 and was appointed to the Board in 2003, since which time he has had overall responsibility for the Young’s managed estate. In July last year he also took over responsibility for Geronimo Inns. He knows our business inside out and is very well respected both at Young’s and throughout the industry. This therefore represents a smooth and effective succession and I have every confidence that the business is well set to deliver further profitable growth and attractive shareholder returns. On the back of our strong results for the year just ended, and our confidence in our future prospects, the Board is recommending a 6.0% increase in the final dividend to 9.07 pence, resulting in a total dividend for the year of 17.45 pence (2015: 16.46 pence). If approved by shareholders, this is expected to be paid on 7 July 2016 to shareholders on the register at the close of business on 10 June 2016, and would be the nineteenth consecutive year of dividend growth. Young’s is a business with a tremendous heritage, a very high quality and well-invested estate of premium pubs and hotels, a clear growth strategy, experienced management and a very bright future. On behalf of the Board, I thank everyone who has contributed to this success. N I C H O L AS B RYAN Chairman 18 May 2016 This has been another highly successful year for Young’s. Total revenue grew by 8.3%, as our core managed estate continued to thrive. Profit before tax was £33.3 million and once adjusted to exclude exceptional items increased by 10.6% on last year to £35.4 million. Importantly, as it demonstrates the strength of our underlying business, we have extended our record of strong like-for-like performances in our managed estate, this year generating growth of 5.6%. Our success depends largely on the quality of our people – our pub teams and those in head office – and they continue to serve both customers and shareholders very well. We also continue to benefit from the consistently high quality of our pub estate. During the course of the year we invested £41.9 million in our managed pubs and hotels and opened eight managed houses. Our total estate now comprises 251 pubs of which 171 (including 22 hotels) are managed houses, and 80 are within our tenanted division, the Ram Pub Company. The majority of this year’s acquisitions and investments have been funded by the business’s impressive cash generation. Our balance sheet remains robust, underpinned by our large portfolio of freehold property, which is predominantly in London. In March, we announced some significant Board changes. After 13 years as Chief Executive Steve Goodyear will be stepping down from this role at the AGM in July, but I am delighted that he will continue his involvement with Young’s by remaining on the Board as a Non-Executive Director. Steve joined Young’s over twenty years ago and during his tenure has overseen substantial changes to the business. These included the sale of the Ram Brewery in 2008, our subsequent exit from brewing altogether in 2011, the transformation of Young’s into a premium managed house YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 3 Andy – Operations Manager Having achieved great results at pub level assisted by a great deal of support from Young’s I realised my goal of becoming an Operations Manager. I like to challenge myself; I have done a couple of marathons and recently completed the Young’s sponsored Halow bike ride – 250 miles in 48 hours for charity. 4 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 CHIEF EXECUTIVE’S REVIEW Strategic report Directors’ report Financial statements Shareholder information In this, my final review as Chief Executive, I am delighted to report that revenue was up 8.3% to £245.9 million. This impressive revenue growth when combined with a further improvement in adjusted operating margin to 16.7% (2015: 16.5%), this resulted in a 10.6% increase in adjusted profit before tax to £35.4 million. Profit before tax was however down 7.8% to £33.3 million. Last year’s profit before tax principally benefited from a large non-cash exceptional item relating to a favourable property revaluation and this year did not benefit to the same extent. Adjusted basic earnings per share increased by 13.0% to 57.20 pence and over the past five years has more than doubled. Our strong performance was further evidenced by the improvement made in all our key performance indicators (see page 6). Established, expanding, highly consistent Our estate comprises 251 pubs, breaking through the 250 milestone for the first time. Of these, our managed division runs over two thirds, 171 pubs (including 22 hotels), whilst 80 are run under our tenanted division, the Ram Pub Company. We have added eight new pubs this year, all within our managed house division. Our strong performance is the result of good execution of our strategy, recent investments in our existing estate and through carefully selected acquisitions which complement and enhance our proposition. Over recent years we have delivered consistently robust growth from our existing estate. This is the result of effective operating disciplines, the dedication of our teams across the business and a number of transformative developments, including the expansion of our premium hotel offer. Over the past year we have invested £44.5 million on acquisitions and in our existing estate. In the first half of the year we opened three pubs acquired in earlier years following refurbishments: the Bull and Gate (Kentish Town), the Nine Elms Tavern and the Trafalgar Arms (Tooting). Also, in the first half we acquired the Canonbury (Islington) and the Grocer (Spitalfields Market), whilst in the second half we opened the Guard House (Woolwich Arsenal) and the Leman Street Tavern (Aldgate), and in late February, we acquired the historic Old Brewery (Greenwich), set within the grounds of the Old Royal Naval College. This charming and characterful building features an extensive outdoor terrace and is in an excellent location; the perfect spot for a refreshing summer drink and a bite to eat. The majority of these pubs can be found in north or east London, areas we have targeted in order to increase our customer reach. We have continued to expand in the new financial year. We have purchased the Woolpack (Bermondsey) and exchanged contracts on the Blue Boar (Chipping Norton), our second Cotswolds pub. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 5 Stephen Goodyear Chief Executive 131 (2015: 129) 40 (2015: 37) CYAN MAGENTA YELLOW BLACK SCALE MM: THIS RULER MEASURES 100MM WHEN ARTWORK IS 100% 0 1 0 2 0 3 0 4 0 5 0 A P P R O V A L D es ign S P E C I A L I N S T R U C T I O N S I M A G E S I N A / W P R I N T C O L O U R S CLIENT CONTACT JOB NUMBER PROJECT DESIGN DESIGNER / ARTWORKER PRODUCTION CONTACT AW APPLICATION COLOUR PROFILE DATE 1 ARTWORK VERSION No. Young’s Gill McLaren YOU145/05 Ram Pub Company Full Colour SL/GH Christie Nelson Illustrator CS5.1 jkr-operations (FOGRA39) 13/05/14 80 PL EA SE N OT E IF VIEWI NG TH IS A RT WOR K A S A PD F IT M A Y N OT B E T O SC A LE. TH E S CA L E OPP OSIT E WIL L GIV E A N IN D ICA T ION OF T HE RE DU C TIO N N.B. The colours on this artwork run out are for colour indication only. Refer to listed Pantone (PMS) specification or attached swatches where applicable for true colour representation. All artwork is approved by jkr as of the date given. Please double check ALL details with client prior to final production. ANY changes made after this date are the responsibility of the client. A/C management Production P L E A S E R E A D Date D ate 10 0 6 0 7 0 8 0 9 0 (2015: 80) F O N T S U S E D I N A / W • HELVETICA LT BOLD (LEGEND) • DELTA Date HOW WE PERFORMED We measure the development, performance and position of our business against a number of key indicators. Revenue £m This is our total group revenue, including both managed and tenanted businesses. 245.9 227.0 210.8 Like for like revenue % This is our revenue growth for this period compared with the previous period for our managed pubs and hotels that traded throughout both periods. 6.7 6.5 5.6 7 6 5 4 3 2 1 0 RevPAR £ This is our revenue per available bedroom; it is the average room rate achieved multiplied by the occupancy percentage. 62 60 58 56 54 52 50 52.02 60.01 56.82 2014 2015 2016 2014 2015 2016 2014 2015 2016 Adjusted EBITDA £m This is our adjusted earnings before interest, taxes, depreciation and amortisation. Adjusted profit before tax £m This is our profit before tax on continuing operations only, adjusted to exclude any exceptional items for the group. Adjusted earnings per share (pence) This is our adjusted profit before tax, but after tax has been deducted, divided by the weighted average number of ordinary shares in issue. 58.4 52.2 45.7 35.4 32.0 27.2 40 35 30 25 20 15 10 57.20 50.62 60 55 50 45 40 35 30 42.88 2014 2015 2016 2014 2015 2016 2014 2015 2016 Gearing % This is our net debt divided by our net assets (expressed as a percentage). Interest cover (times) This is our adjusted operating profit divided by our finance costs. Recycling (tonnes) This is the amount of waste we recycle and divert from landfill. 29.5 31.7 28.6 7.7 7.2 5.6 8 7 6 5 4 3 2 5,803 4,481 6,000 5,000 4,000 3,000 2,000 3,065 2014 2015 2016 2014 2015 2016 2014 2015 2016 250 240 230 220 210 200 190 60 55 50 45 40 35 30 50 40 30 20 10 0 6 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Jo – The Lamb Tavern Young’s Manager of the Year I love the way Young’s gives General Managers the freedom and autonomy to be truly creative. My goal for the next five years is to work in senior management roles within the company and one day become an Operations Director. Financial strength, predominantly freehold, progressive dividend policy The group has again generated strong cash flow which has funded the majority of this year’s acquisitions and investments. Operating cash flow was up 19.4% to £60.4 million and net debt increased slightly to £130.2 million, representing a 2.2 multiple of adjusted EBITDA. We remain well placed to continue our expansion strategy with long term debt facilities of £175 million in place, repayable between 2018 and 2023 and of which 76.8% is on fixed interest rates. Our balance sheet is underpinned by our portfolio of freehold property which is predominantly in London. The value of this property has increased to £665.8 million (2015: £617.3 million). Our estate provides the firm foundations for future growth as we continue to expand our reach, taking our premium offer to a wider customer base whilst aiming to make our pubs the first choice for discerning customers. Our commitment to generating shareholder value is unequivocal, combined with strong cash flow and record earnings this enables us to once more recommend increasing the final dividend, for the nineteenth year in succession. This time, we are increasing the final dividend by 6.0% to 9.07 pence, resulting in a total dividend for the year of 17.45 pence (2015: 16.46 pence). If approved, this is expected to be paid on 7 July 2016 to shareholders on the register at the close of business on 10 June 2016. STE P H E N G O O DYE AR Chief Executive 18 May 2016 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 7 PRINCIPAL RISKS AND UNCERTAINTIES The principal risks and uncertainties facing the group are listed below. It is not an exhaustive list of all significant risks and uncertainties; some may currently be unknown and others currently regarded as immaterial could turn out to be material. Further information on the group’s financial risk management objectives and policies are set out in note 22, starting on page 49. RISK/UNCERTAINTY POTENTIAL IMPACT MITIGATION D E T A L E R - R E M U S N O C I L A C N A N I F Our revenue is largely dependent on consumer spending in our managed houses. A consumer’s decision to spend his or her money can be affected by a broad range of matters (including confidence in the economy, the weather, fears of terrorist activity and improved awareness of the potential adverse health consequences associated with alcohol), all set against a background of an ever-increasing choice of where to go and what to do. Various factors may result in the amount we pay for our key supplies (including food, drink, gas and electricity) and labour being increased. In July 2015 the Government announced the introduction of a National Living Wage of £7.20 effective from April 2016 with annual stepped increases to follow. Increased costs could potentially make our offer less attractive to consumers if they are passed on. The pub industry is subject to a variety of taxes, including business taxes, duty on alcoholic beverages and property rates. Property rates on our estate are due to be revised upwards in April 2017 (based on a revaluation of our properties). The new rates would be impacted by any changes to the business rates regime (for example increased rates or reduced reliefs for large businesses). We operate a defined benefit pension scheme, the Young & Co.’s Brewery, P.L.C. Pension Scheme, which has to be funded to meet agreed benefit payments. The value of the scheme, and therefore its funding, is subject to changes in life expectancy assumptions, lower than anticipated performances of the stock market and by reduced bond yields. Our financial structure involves bank borrowings. The business therefore needs to generate sufficient cash to repay these debts with accrued interest. Interest rates are also subject to change. A reduction in our revenue could lead to lower profits. A reduction in revenue and/ or increased costs will have an impact on our margins and result in lower profits. Our pubs and hotels are spread throughout southern England, albeit the majority are within the M25. Through them we provide a hospitable and welcoming home from home, often at the heart of the local community. They benefit from customer-focussed designs, high service standards, quality food and market-leading drinks, all things that matter to the discerning consumer. By having a mix of excellent riverside, garden and city pubs and hotels, we seek to address the impact of seasonality and changes in consumers’ spending habits. Fixed-price arrangements are in place with some of our food and drink suppliers. Regarding utilities, we continually look at ways of reducing our levels of consumption; we also regularly review our energy needs and price changes in the market, and, where appropriate, we make forward purchases. Increased wages may result in consumers having greater capacity to absorb increased prices but any shortfall will need to be mitigated through greater labour and other efficiency gains. The introduction of new taxes and/or increases in the rates of existing taxes will result in lower profits. Through our membership of the British Beer and Pub Association, we seek to ensure that appropriate action is taken to minimise this risk. Variations in the difference in value between the assets of the scheme and its liabilities may increase the amount we are required to pay into it in order to account for past service benefit deficits and future service benefit accruals. Our ability to trade as a going concern depends on generating sufficient cash to meet these repayments. The scheme was closed to new entrants in 2003 and we make additional contributions over and above regular service contributions in order to address any funding deficit. We also maintain a close dialogue with the scheme’s trustee. To further limit the potential exposure, future service benefits accruing to remaining active members have been reduced from April 2016, with member contributions being increased in tandem. The board ensures the group’s debt profile is long dated, facilities are committed and debt is carefully managed within financial covenants. A mix of debt at fixed and variable interest rates is also maintained with interest rate swaps used to manage this exposure. 8 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information I S N O T A R E P O I N O T A L U G E R RISK/UNCERTAINTY POTENTIAL IMPACT MITIGATION We rely on a number of key suppliers to provide our pubs and hotels with food and drink. Supply disruption could affect customer satisfaction, leading to a reduction in our revenue and possibly lower growth rates. Food and drink is sourced from a number of suppliers. Informal arrangements are also in place such that substitute suppliers or products could be used if required. We regularly review our choice of suppliers. We, and particularly our managed estate, are reliant on information systems and technology for many aspects of our business (including communication, sales transaction recording, stock management, purchasing, accounting and reporting and many of our internal controls). Any failure of such systems or technology would cause some disruption, and any extended period of downtime, loss of backed up information or delay in recovering information could impact significantly on our ability to do business. Firewalls and anti-virus software are installed to protect our networks. Information is routinely backed up and arrangements are in place with a third party provider to assist with data recovery. An off-site disaster recovery facility is also available if anything major happens at our head office or to our systems. The IT needs of the business are regularly monitored and we invest in new technology and services as necessary. We are dependent on having the right people throughout our organisation, whether that is in our pubs and hotels or in our head office. Our ability to achieve our strategic and operational objectives could be affected if we are unable to attract and retain the right people with the right capabilities. We look to recruit and retain the best. The remuneration and reward packages we offer are competitive and designed to retain and motivate staff. We have training and development programmes in place intended to ensure that our people have the right skills to perform their jobs successfully and achieve their full potential. Part of our growth plan is built around us acquiring or developing more pubs and hotel rooms. If we do not acquire the right opportunities when planned, or at all, our desired future rate of growth will be delayed or reduced. We have relationships with a variety of third parties to ensure, as far as possible, that we are made aware of acquisition opportunities as and when they come up. We have provided a number of agents and landlords with details of our preferred site profile. We are required to meet a range of ever-increasing health and safety obligations in the operation of our business (including in the areas of food and fire safety). The Government will be introducing a statutory code to govern the relationship between tenants and large pub companies (owning more than 500 pubs). With 251 pubs, the code will not apply to us. A failure to comply could result in an accident or incident occurring involving injury, illness or even loss of life. This could damage our reputation, possibly leading to a reduction in our revenue and lower growth rates. Increases in the cost of compliance will have an impact on our margins and result in lower profits. The imposition on us of a statutory code (if things were to change) could increase the running costs of our tenanted business and reduce our revenue from it. Any increase in costs will result in lower profits and any reduction in revenue could lead to lower growth rates. Training programmes, processes and audits designed to promote and achieve compliance with health and safety legislation are in place. These audits are undertaken by a third party who also works with us to ensure changes in health and safety practices and procedures are incorporated into our business and reviewed on a regular basis. Insurance cover to help with any financial compensation that may be payable as a result of an accident or incident has been taken out. We have in place and follow a fully-accredited legally-binding code which meets the latest requirements of the UK pub industry framework code of practice on how tied agreements should operate in the pub trade; this is different from a statutory code. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 9 BUSINESS AND FINANCIAL REVIEW Managed houses Our managed estate comprises 131 Young’s pubs (including 22 hotels) and 40 Geronimo pubs. These pubs are designed to be community-led, well- invested with market leading products and high levels of customer service. The successful implementation of this strategy has resulted in a prolonged period of growth. In the past five years our managed house like-for-like performance has been consistently impressive at 6.0%, 4.6%, 6.7%, 6.5% and, this year, 5.6%. We met the challenge of last year’s tough comparative trading results and embraced the excitement generated from the Rugby World Cup, held in our London heartland last autumn. Our highly motivated team delivered revenue and profit growth. Total revenue was up 8.7%, underpinned by the like-for-like performance, and adjusted operating profit grew by 6.4% to £53.3 million. Revenue and profits We achieved like-for-like revenue growth across our three main product categories, with drink (5.2%), food (6.5%) and accommodation (8.0%) all performing well. During the first half, the drinks category performed well despite some tough comparatives, while mild but wet weather in the second half was balanced by both the Rugby World Cup and excellent Christmas trading. Draught beer sales are on an upward trend, with sales up 7.5%, driven almost evenly between volume, price and mix. Our high-end estate provides the perfect setting for our premium product portfolio and we enjoy the challenge of constantly refreshing our offer while still harbouring old favourites such as Young’s Bitter and Young’s Special. Following the success of Young’s London Stout we are delighted to have launched Young’s London IPA, an authentic English IPA with a new world twist. Wine sales have performed strongly. The trend to sparkling is not showing any signs of going flat with sales up over 25% for the third year in a row. Building on this solid base, we consolidated a number of suppliers. In partnership with Berkmann Wine Cellars we have created a truly special and premium wine offer for Young’s and Geronimo, including many exclusive private labels. This new handpicked list will provide plenty of variety for our customers to discover and explore and will complement our ever growing food offer. We have recently completed a comprehensive training programme across our pubs to launch this exciting new range of world class wines. Spirits have become very popular over recent years, with gin in particular selling well, up 76.3% over the last two years. We are now harnessing this trend with the introduction of a number of small craft whisky producers from Kyoto to New York to appeal to a new, curious whisky drinker. 130 whisky tasting experiences were held with our customers in our pubs from January to March, driving whisky sales up 10.2% year-on-year. Food remains an essential part of our business and sales this year have grown by 8.8%. This growth has been the result of our successful food strategy and recent investments to increase our pubs’ emphasis on food, which has in turn increased drink sales. Our food strategy remains focused on freshly prepared, seasonal British pub food, serving best-in-class classics and the ultimate Sunday roasts. We are, however, mindful that food trends are ever evolving and that, in order to stay ahead of the competition, innovation has to be a key part of our approach. This year we opened six ‘BurgerShacks’ within our pubs and in April 2016 we transformed our Firestables pub into the BurgerShack & Bar. This standalone site, in the heart of Wimbledon Village, features an enlarged menu and provides a stepping stone for extending this brand. We have also created a standalone website for the brand, www.burgershack.co.uk. Our maiden BurgerShack, at the Windmill (Clapham), was the proud winner of the Top 50 Gastro Pubs Innovation Award. Integral to this success is our chefs’ ability to create and deliver high quality food to our customers. We have expanded our Chef Academy to ensure we continue to retain, recruit and train highly skilled chefs and to combat the ongoing competition for this same talent. Those enrolled undertake a series of master classes, hosted by our in-house qualified team, to gain accreditation at intermediate (NVQ level 2 in professional cookery) and advanced (NVQ level 3 in hospitality management) levels. These courses are engaging, promote recipe creativity and give staff the right ingredients to succeed. We are delighted that the quality of our managed food operation was recognised by our peers at the 25th anniversary of the Publican Awards, where we were judged to have the Best Food Offer in the 51+ sites category. Our burgeoning hotel business, comprising 475 bedrooms, of which 229 (48%) are of boutique standard, surpassed the £10 million mark for accommodation sales for the first time this year, up 11.6% on last year. During the past year, we have upgraded another 54 rooms, spread across the Lamb Inn (Hindon), Red Lion (Radlett) and the Crown (Chertsey). These boutique rooms command an average room rate of £98.91 compared with £63.44 for our classic rooms. We also benefitted from the first full year of trade from the hotel operations at the Bell (Stow on the Wold), the Fox and Anchor (Smithfield Market), and the Lamb Inn. In total, RevPAR was up by 5.6% to £60.01, benefitting from a £3.48 improvement in room rates. We value customer feedback and use a variety of internal and external sources to gauge our performance. The Windmill was ranked in the Top 25 Best Hotels in UK in the TripAdvisor Awards 2016 based on hotel guest comments, a fantastic achievement which only adds to our growing reputation for providing excellence. Young’s managed revenue growth was 10.5% in absolute terms and 10 10 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 7.7% on a like-for-like basis, another very strong performance. Our smaller Geronimo estate grew by 3.2%, with the shortfall from the loss of the Tin Goose (Heathrow Terminal 1) in October of the prior year being offset by four new pubs as well as the full year benefit of the Fellow (King’s Cross) and Owl and Pussycat (Shoreditch). Adjusted operating profit in managed houses grew by 6.4% to £53.3 million but there was a small deterioration in operating margin to 22.9% (2015: 23.4%). This margin decline is due to the increasing prominence and quality of our food offer which has higher labour costs attached, short term operational expenses during the initial bedding in phase for new openings and acquisitions and the increased depreciation charges given recent investment. There has been no dilution in like-for-like operating margin. Investment During the course of the year we invested £41.9 million in our managed estate. We invested £25.4 million in Young’s pubs, with the acquisition of the Canonbury (Islington) and the Old Brewery (Greenwich). We also opened the much anticipated Bull and Gate (Kentish Town) and the Nine Elms Tavern. Major development work was carried out at the Albion (City of London), Dirty Dicks (City of London), Duke of Cambridge (Battersea), Founder’s Arms (Southwark), Grange (Ealing), Lock Keeper (Keynsham), Old Ship (Richmond), Penny Black (Leatherhead), Swan (Walton-on- Thames), Weyside (Guildford) and the Wood House (Dulwich). The Bull (Streatham) was built in 1768 and its transformational redevelopment has added style and finesse while still retaining elements of its proud history. Our hotels benefitted from £3.5 million of investment as we upgraded rooms and bar space at the Bear Inn (Esher), Bell at Stow (Stow on the Wold), Brewers Inn (Wandsworth), Bulls Head (Chislehurst) and the Lamb Inn (Hindon). Just after the year-end we added an extra 12 bedrooms at the Hand & Spear (Weybridge) which completed its transformation from pub to hotel, offering customers a comfortable stay within 45 minutes of London Waterloo. A further £13.0 million was invested in the Geronimo estate, including the purchase of the Grocer (Spitalfields) and the Leman Street Tavern (Aldgate). The Trafalgar (Tooting) and the Guard House (Woolwich) served their first pints following their recent redevelopments. Major projects were also completed at the Castle (Islington), Crown (Bow), Kings Arms (Chelsea), Northcote (Battersea), Owl and Pussycat (Shoreditch) and Prince Albert (Battersea). At the Clarence (Whitehall) we have created the new “Tin Belly” dining room named after its nearby neighbours; the Blues and Royals. The “Tin Belly” offers the ideal place to gather the troops and feast on a right royal dinner. Customer engagement As our discerning customers’ demands evolve we remain focused on ensuring the offer we provide meets or exceeds their expectations. This involves ensuring that we have an interesting and wide ranging food and drink portfolio, that our pubs have comfortable and stylish interiors and, increasingly, the quality and the convenience of the service we offer. The clever use of technology is vital in attracting trade and meeting customers’ needs. The vast majority of our pubs now have responsive websites allowing our customers to find their favourite pubs, view menus and book a table all from their preferred digital device. Our e-marketing platform’s database has exceeded 1,000,000 for the first time, and we have targeted our customers with over 30,000,000 emails over the last 12 months. This is amplified by the sophisticated use of social media which provides an important marketing platform to communicate with thousands of our customers on a regular and targeted basis. We now have over 500,000 followers across our social media profiles. Strategic report Directors’ report Financial statements Shareholder information As part of our “you stay there while we look after you” proposition, tablets are now installed in over half of our pubs and typically account for over 16.5% of our trade, with some pubs experiencing sales via tablet in excess of 50% of total trade. The Leman Street Tavern became our first pub to open entirely based around tablet service, with no floor tills installed. Faster payments are important for our customers’ experience and they are increasingly and efficiently facilitated through contactless cards. While technology plays an increasingly important role throughout our estate, it is the people that run our pubs and the vital part that they play in their local communities that is what makes us stand out. Our teams across the business are dedicated to ensuring that we are continually developing new ideas to engage with, communicate with, meet and harness the aspirations of our communities and customers alike. The Ram Pub Company The success of the Ram Pub Company is, as ever, based on our ability to forge close partnerships with our tenants, and we continually strive to provide them better support year after year. We have established a diverse and evolving product range designed to exceed our customers’ expectations. The long-term success of the Ram Pub Company is based on the tenants themselves being able to benefit from a reliable and sustainable income. Our experienced team provide practical business advice, sophisticated marketing and property expertise to all our partners where needed. This long-term approach has further improved the fortunes of this division in recent years. Revenue and profits The Ram Pub Company has 80 pubs and accounts for 5.2% of our group revenue (2015: 5.5%) and 7.8% of group adjusted operating profit at outlet level (2015: 7.9%). At the start of the year we transferred the Lord Palmerston YOUNG & CO.’S BREWERY, P.L.C. ANNUAL REPORT 2016 11 BUSINESS AND FINANCIAL REVIEW Continued Ramon – Assistant Manager at the Paternoster At Young’s you never stop learning new things. I am now a Draught Master and a member of the Wine Connoisseur Club which allows me to share my enthusiasm of beer and wine with customers and new members of staff. 12 12 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Carlos – Head Chef at the Fox & Anchor When I joined Young’s, my Operations Manager gave a motivational speech that reinforced my passion for food and my desire to learn more about it. With the company’s support I became Head Chef. I love working for Young’s, a company that cares about its employees and knows how to reward them. In my spare time I have a passion for making music, which I believe is very similar to cooking, it’s all about finding the right ingredients to create something special. (Tufnell Park) from Geronimo and at the end of the year transferred the Rose and Crown (Farnborough) from our Young’s managed houses. These replaced the New Town (Sutton), which was sold in July, and the Sekforde Arms (Clerkenwell), where we terminated our lease in August. This continual estate management has helped fulfil our strategic objective to improve the quality of our tenanted estate. Revenue grew by 1.0% on a like-for-like basis and 1.6% in total. This growth was mostly driven by increased barrelage and changes in mix to more premium products, with price increases kept to a minimum. Operating efficiencies, largely through better buying, have improved margins. The increased revenue and improved margin has resulted in the division’s adjusted operating profit rising by 4.7% to £4.5 million and by 2.1% on a like-for-like basis. Investment We invested £2.6 million in our tenanted business, with major developments at the Bristol Ram, Calthorpe Arms (Bloomsbury), Fountain Inn (Plumpton Green), Grey Horse (Kingston), Old Inn (Congresbury), Railway Telegraph (Thornton Heath) and the Waggon & Horses (Surbiton). The Rose and Crown transferred from Young’s managed on the penultimate day of the year following a major refurbishment. Tenant engagement The Ram Pub Company operates a portfolio of traditional tenancy agreements designed to attract and harness the entrepreneurial flair of today’s business partners. Our tenants pay a competitive, market rent, whilst benefitting from only limited responsibility for repairs and decoration to the pub. The Ram Pub Company provides agreements with plenty of choice, marketing and operational support as well as financial backing for trade-building initiatives. The Ram Pub Company also grants some leases instead of tenancies. In these cases the lessee assumes responsibility for all repairs and decorations to the pub. These leases can be for terms up to 20 years. We are beginning to enjoy the benefits of last year’s re-branding and new website, www.rampubcompany.co.uk, and are continuing to roll-out a package of distinctive signage. This captures the essence of the division, with the strapline “Everyone’s local”. Property, treasury, retirement benefits, exceptional items and tax Property At the year-end, in common with recent years, CBRE, an independent and leading commercial property and real estate services adviser, revalued 20% of our estate, with the remaining 80% revalued internally. The internal review was led by Andrew Cox, MRICS, our Director of Property and Tenancies. It used updated trading results together with management’s knowledge of each pub. This approach is in accordance with International Financial Reporting Standards (“IFRS”) and is common with other listed pub groups. The total estate is now valued at £665.8 million, a net upward revaluation of £23.3 million, which is the result of increasing demand for pubs in our London and south east heartland. In accordance with IFRS, individual movements in value, totalling £23.8 million (2015: £23.1 million), are reflected in the revaluation reserve in the balance sheet unless the valuation is below historic cost, in which case it is accounted for through the income statement. This year’s movement in the income statement classified as an exceptional charge totalled £0.5 million (2015: £4.2 million credit). All these adjustments are non-cash items. Treasury Once more this has been a year of record cash generation of £60.4 million, which has enabled us to invest £45.1 million in the business. Net debt increased by £1.2 million to £130.2 million but all of our important treasury measures have improved: gearing fell to 28.6% (2015: 31.7%), net debt to EBITDA is 2.2 times (2015: 2.5 times) and interest is covered 7.7 times (2015: 7.2 times) by adjusted operating profit. We have long term debt facilities of £175 million with the Strategic report Directors’ report Financial statements Shareholder information Royal Bank of Scotland and Barclays, repayable between 2018 and 2023. All this provides us with the necessary financial firepower to invest as and when attractive opportunities become available. Given these committed facilities, our freehold-backed balance sheet and the conservative financial ratios above, we have prepared these financial statements on a going concern basis. We have interest rate swaps in place to provide some protection from adverse movements in interest rates. In February we entered into a new £20 million swap, and as a consequence we now have interest rates fixed on £100 million of our £130.2 million net debt. These swaps, together with the bank’s margin and other costs, result in a blended cost of fixed interest debt of just below 4.5%. These swaps have maturities that match the underlying liabilities and have been designated as cash flow hedges for accounting purposes. Retirement benefits The deficit on our defined benefit pension scheme has reduced by £6.8 million to £6.3 million. This scheme was closed to new entrants in 2003, and also provides certain post-retirement medical cover. Gross liabilities fell by £10.7 million to £118.1 million, benefitting from both lower inflationary expectations and higher long-dated corporate bond yields. Our actuary uses these yields to determine the rate at which our liabilities are discounted. The assets decreased by £3.9 million to £111.8 million in value, mainly the result of unfavourable returns during this challenging year for investments offsetting the additional contributions made by Young’s. Exceptional Items Last year benefited from a £4.1 million exceptional profit, by contrast, this year we had an exceptional charge of £2.1 million. Most of the movements in exceptional items relate to property revaluations, acquisitions and disposals. This year we also had restructuring costs relating to the reorganisation of the group’s head office which were made up largely of severance costs and consultancy fees. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 13 BUSINESS AND FINANCIAL REVIEW Continued Tax Our effective corporation tax rate for the year, adjusted for exceptional items, was 21.5% (2015: 23.4%). The corporation tax charge for the year was £6.2 million. The lower effective rate arises from a lower standard rate of UK corporation tax. Corporate and social responsibility Our pubs play an integral role in their individual neighbourhoods; together we put great emphasis on running sustainable businesses that our communities can be proud of. This is about creating value that benefits not just our shareholders but the wider stakeholder group. This means on a global scale, aggressively reducing our carbon footprint year after year, while on a local one working with charities, making life better for the less advantaged members of our community. In terms of addressing our environmental impact, our recycling efforts have increased to 5,803 tonnes (2015: 4,481 tonnes) with only 1.4% of waste (2015: 2.0%) going to landfill. Thus, we avoided sending 117,949 cubic metres of waste to landfill, enough to fill over 1,000 double decker buses. All of our managed pubs now use LED lighting; this alone has prevented 1,601 tonnes of CO2 emissions being released into the atmosphere. Our Geronimo operation has again been recognised for its commitment to sustainability as it once more received a three star award, the highest available, from the Sustainable Restaurant Association. Last summer, leading up to the Rugby World Cup 2015, we teamed up with Wooden Spoon, the children’s charity of rugby that has helped over 1,000,000 disadvantaged and disabled under 25 year olds. Through various rugby-themed fund raising activities hosted by our pubs and staff, including serving 58,000 pints of specially brewed Wooden Spoon ale and 18 “Players at the Pumps” events, we raised over £130,000 Agnes – Team Finance I joined Young’s in 2009 as a waitress in one of our busiest hotels. In 2013, I moved to head office where I’ve experienced many roles within finance and I’m now on the graduate scheme studying for my professional qualification. I enjoy working in Team Finance; it’s the department where everybody counts. for the charity. These donations are already being put to good effect by Wooden Spoon through both the Premiership Rugby HITZ programme and the Oasis project. The multi award-winning HITZ programme based in South London uses rugby to increase young people’s resilience, self-reliance and confidence and gives them the skills to get back into education, apprenticeships and employment. Our staff took an active role in this programme. Shareholder returns The execution of our long-established strategy continues to deliver shareholder value through strong revenue and earnings growth which in turn allow us to pay a growing dividend. This year’s revenue growth of 8.3%, together with an extra 0.2% points added to our adjusted operating margin, has resulted in an increase in adjusted profit before tax of 10.6%. Earnings per share increased by 1.1% to 55.76 pence and our adjusted EPS was up 13.0% at 57.20 pence. Our dividend policy is designed to deliver year-on-year growth whilst allowing us to retain sufficient profits in the business to enable us to make the investments on which our long- term record depends. This year we are recommending increasing the final dividend, the nineteenth consecutive rise, by 6.0% to 9.07 pence, resulting, if approved by shareholders, in a total dividend for the year of 17.45 pence (2015: 16.46 pence). The dividend is covered 3.3 times by our adjusted earnings per share. We believe that together our robust balance sheet and growing profitability provide an excellent platform to continue to expand the business in the years ahead. Outlook Managed house revenue in the first seven weeks of the new financial year was up 8.1% in total and up 5.3% on a like-for-like basis. Looking at trading for the last 13 weeks which takes account both of the timing of Easter and of the University Boat Race, and 14 14 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Eddie – Head Chef at the Founder’s Arms Working for Young’s is like a new and exciting world. I quickly became Head Chef and have reached Chef Academy Level 3. I am always calm in the kitchen because I know I have a great team behind me. this year’s inclement spring, managed house revenue was up 8.0% in total and up 5.1% on a like-for-like basis. The new financial year will benefit from two recent acquisitions. The Woolpack (Bermondsey), a tenancy, was acquired on the first day of the new financial year and we have exchanged contracts on the Blue Boar (Chipping Norton), which will be added shortly to our managed portfolio. In addition we will enjoy the full year benefit of the eight pubs opened in 2015 along with the momentum of the investments made in the existing estate. We have embraced the newly introduced National Living Wage and shown commitment to our employees by extending this to everyone over the age of 18. As reported before, we estimate that the additional annual cost of implementing the living wage will be c. £2 million, although our recent head office restructuring and additional consolidation of suppliers has helped mitigate some of this impact. Europe will be centre stage next month. A good performance from the home nations in football’s European Championships may boost demand, but we are too experienced to rely on this. Neither will we judge the outcome of the EU referendum, although it could deliver a strong night of trade on 23 June. The Queen’s 90th birthday, a remarkable milestone, should set London alight with celebrations in June. With pubs having been granted extended hours for three consecutive nights, we are organising parties and preparing a special commemorative brew. Our trading environment continues to benefit from high employment levels, improving wages, and a period of longer than expected low inflation and interest rates. As a result we remain confident that by remaining resolutely focused on the execution of our long- term strategy, empowering the talent, commitment and passion of our teams across the business, and maintaining our strong financial profile, we are well positioned to deliver an excellent proposition to our customers as well as superior returns for our shareholders. In July, it will be last orders for me as Chief Executive, but I am delighted that I will be continuing my involvement with Young’s as a non- executive director. The energy and enthusiasm of our people has been the driving force behind the success we have achieved over the last decade and there is no one who better exemplifies these qualities than Patrick, who has been an integral part of our success. I have every confidence that Young’s will continue to thrive under his leadership. On behalf of the board STE P H E N G O O DY EA R Chief Executive 18 May 2016 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 15 DIRECTORS’ REPORT For the 52 weeks ended 28 March 2016 Welcome to our board of directors. All served throughout the period. No other person was a director during the period apart from Rupert Clevely, David Page and Ed Turner who stepped down from the board and left the company on 27 April, 7 July and 24 July 2015 respectively. Nicholas Bryan, B.A., F.C.A. NON-EXECUTIVE CHAIRMAN Appointed to the board in 2006 and as non-executive chairman in 2011. Chairman of the company’s remuneration committee, as well as a member of the company’s audit committee. Co-founder and chief executive of the Innserve Group. Has particular expertise in the hospitality, property and brewing sectors gained through various positions within Courage (including managing director of Courage UK (1992-95)). Has held other chairman and non-executive director roles while a management committee member of Investcorp (1995-2001). Began his career in finance as a chartered accountant and with positions at Lonrho and Hanson. Aged 63. Stephen Goodyear CHIEF EXECUTIVE Joined in 1995 as sales director. Appointed to the board in 1996 as sales and marketing director. Appointed chief executive in 2003. Will be stepping down as chief executive and become a non-executive director at the end of the company’s AGM in July. Previously worked for Courage Ltd (1974- 95) in a number of senior roles. Was recently the Master of the Brewers’ Company, one of the oldest Livery Companies in the City of London. Aged 60. Torquil Sligo-Young INFORMATION RESOURCES Joined in 1985. Held a number of senior positions in different areas of the company before being appointed to the board in 1997. Has overall responsibility for the group’s technological needs and for health and safety. Previously worked for stockbrokers, Bell, Lawrie, Macgregor & Co. Aged 56. Peter Whitehead, F.C.A. FINANCE Joined the company and the board as finance director in 1997. Qualified as a chartered accountant with KPMG in 1988, becoming a fellow of the Institute of Chartered Accountants in 1998. Previously worked for Fuller, Smith & Turner P.L.C. (1990-97). Aged 54. Patrick Dardis RETAIL Joined in 2002 and appointed to the board in 2003. Has overall responsibility for the operation of the managed estate (Young’s and Geronimo), as well as for managed house pub acquisitions and developments. Will be taking over as chief executive at the end of the company’s AGM in July. Previous positions have included director of retail operations at Wolverhampton & Dudley Breweries PLC (now Marston’s PLC), business development with Guinness Brewing and retail management with Whitbread PLC and Courage Ltd. Aged 57. Roger Lambert, M.A. NON-EXECUTIVE AND SENIOR INDEPENDENT Appointed to the board in 2008 and as senior independent director in 2011. Chairman of the company’s audit committee, as well as a member of the company’s remuneration committee. Chairman of Corporate Broking, Canaccord Genuity since 2010. Previously worked for 26 years in corporate finance at J.P. Morgan Cazenove where he was a senior managing director with responsibilities for corporate client coverage of the consumer sector. Having acted for more than 25 companies in the sector, has a wealth of relevant expertise in brewing, drinks and hospitality. Aged 57. 16 16 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Trish Corzine NON-EXECUTIVE Appointed to the board in 2015. Having spent the majority of her career in the restaurant industry, has wide-ranging knowledge of the hospitality and leisure sector. Before her retirement from the board of The Restaurant Group plc in 2013, she spent 20 years with them, almost half of it as an executive director responsible for their concessions business. Aged 58. Strategic report Directors’ report Financial statements Shareholder information In this report reference to the “company” or to “Young’s” is to Young & Co.’s Brewery, P.L.C., and reference to the “group” is to the group of companies of which Young’s is the parent company. Corporate governance The board is committed to good corporate governance in the management and operation of the group’s business. Summarised below are its current corporate governance arrangements; no particular corporate governance code has been adopted. The role of the board The board is collectively responsible for the business and management of the group. Its role includes: • approving and monitoring the group’s long-term objectives, commercial strategy, major acquisitions and disposals and the group’s annual operating and capital expenditure budgets; • ensuring a sound system of internal control and risk management; and • overseeing the group’s operations, ensuring competent and prudent management, sound planning, adequate accounting and other records, and compliance with statutory and regulatory obligations. Board composition The board is made up of: • a non-executive chairman: Nicholas Bryan; • four executive directors: Stephen Goodyear, Torquil Sligo-Young, Peter Whitehead and Patrick Dardis; and • two further non-executive directors: Roger Lambert and Trish Corzine. Their roles and brief biographical details appear opposite. How the board works The board governs through its executive management and via committees. The board has a formal written schedule of matters reserved for its review and approval; this includes those matters described above as well as major financial and key operational issues. The board meets every two months, with additional meetings arranged as required; it met seven times during the year. Formal agendas and reports are provided to the board on a timely basis, along with other information to enable it to discharge its duties. Each of the executive directors and the company secretary updates the board at each meeting on matters for which they are responsible. This flow of information is in addition to information exchanged between and prior to board meetings, and regular meetings of non-executives with one or more of the executive directors outside of board meetings. The board has a procedure in place such that it can consider and, if it sees fit, authorise situations where a director has an interest that conflicts, or may possibly conflict, with the interests of the company. The board’s committees The board has four standing or permanent committees: executive, audit, remuneration and disclosure. The latter three committees have specific terms of reference which can be found in the investors section of www.youngs.co.uk. Executive committee Chairman: Stephen Goodyear Members: Executive directors It is responsible for the daily running of the group and the execution of approved policies and the business plan. It usually meets on a weekly basis, with members of the group’s senior management being invited to attend as appropriate. Patrick Dardis will become chairman of the committee when he takes over from Stephen Goodyear as chief executive at the end of the company’s AGM in July. Remuneration committee Chairman: Nicholas Bryan Members: Roger Lambert Trish Corzine Its primary function is to determine, on behalf of the board, the remuneration packages of the executive directors (see the Remuneration: executive directors box on page 19). YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 17 DIRECTORS’ REPORT Continued Audit committee Chairman: Roger Lambert Members: Nicholas Bryan Trish Corzine It assists the board in fulfilling its oversight responsibilities, with its primary functions being monitoring the integrity of the company’s financial statements and internal control systems (including risk management), overseeing the company’s relationship with its external auditor and reviewing the effectiveness of the audit process. The finance director usually attends the committee’s meetings, as do the external audit partner and audit manager when the business of the meeting relates to the full-year and half-year results. The committee meets separately with the group’s business risk assurance manager and with the external audit partner and audit manager without any other member of the group’s management present to give them the opportunity to raise any concerns they may have and any issues arising from their work. The committee has a meeting planner which sets out the basic items to be covered at its regular meetings. At its meeting in May, the committee reviews the company’s preliminary announcement, the report and accounts and the performance of the group’s external auditor; it also assesses whether the auditor continues to show the required level of independence. The focus of the November meeting is on reviewing the interim report and agreeing the scope for the next external audit, the audit plan and related fees. At each of its meetings there is an internal audit report from the group’s business risk assurance manager. Disclosure committee Chairman: Peter Whitehead Members: Executive directors It assists the company in making timely and accurate disclosure of any information required to be disclosed in order to meet legal and regulatory obligations. Other committees are established from time to time depending on the needs of the business. Balance of the board There is a clear division of responsibility between the chairman and the chief executive. The former is responsible for the effective running of the board; the latter has overall responsibility for the running of the business. Each of the executive directors has specific roles and responsibilities, and all of the non-executives are experienced business people who bring a wide range of skills and experiences to the board. In their roles the non-executive directors are required, amongst other things, to constructively challenge and contribute to the development of strategy, to scrutinise the performance of management in meeting agreed goals and objectives and to monitor the reporting of performance. Roger Lambert is the senior independent director. In his current role as chairman of Corporate Broking at Canaccord Genuity, he attends and advises at board meetings of corporate clients. Coupling this with his many years working in corporate finance at J.P. Morgan Cazenove, where he was a senior managing director with responsibilities for corporate client coverage of the consumer sector, including brewing, drinks and hospitality, he is able to provide knowledge, support and advice to the chairman and to the other members of the board. The directors consider that the board is a well-balanced one that has the right number of members for the size of the group. Board nominations and appointments In practice the chairman and the chief executive lead on the board nomination and appointment process. They consider the balance of skills, knowledge and experience on the board and make appropriate recommendations for consideration by it. This formal but unwritten process has been used effectively for a number of years and has led the board to remain of the view that it should continue to operate in this way rather than through a more formal nomination committee. Once appointed, the company’s articles of association ensure that any new board member is subject to re-appointment by the company’s voting shareholders at the first AGM after their appointment – this doesn’t apply to any director at this year’s AGM. They are then subject to a further re-appointment vote every third AGM after that – this applies to Nicholas Bryan, Stephen Goodyear and Patrick Dardis at this year’s AGM (and each of them is seeking re-appointment and their brief biographical details are on page 16). Stephen Goodyear will become a non-executive director if re-appointed. 18 18 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Subject to shareholder re-appointment, each of the executive directors has been appointed for an indefinite period and is generally entitled to not less than one year’s notice from the company if it wishes to terminate his appointment. In return, each of Stephen Goodyear, Torquil Sligo-Young and Peter Whitehead has to give not less than six months’ notice if he wishes to leave, and Patrick Dardis has to give at least one year’s notice. The non-executives have been appointed for fixed terms which are terminable earlier by them or the company giving notice and they are likewise subject to shareholder re-appointment. The expiry dates of their current fixed terms and their minimum periods of notice are as follows: Nicholas Bryan (11 July 2017 and three months), Roger Lambert (31 July 2017 and six months) and Trish Corzine (11 January 2018 and six months). The executive directors are expected to devote substantially the whole of their time, attention and ability to their duties, whereas, as one would expect, the non-executives have a lesser time commitment. Apart from the chairman, who has agreed to spend 30-50 days a year on work for the company, it is anticipated that each of the non-executives will dedicate 15 days a year. Copies of the executive directors’ service contracts and copies of the letters of appointment of the non-executive directors are available for inspection at the company’s registered office. Advice for the board Subject to certain limitations, all of the directors are entitled to obtain independent professional advice at the company’s expense; they also have access to the advice and services of the company secretary. Keeping up to date generally and particularly with the market From time to time the directors attend training courses and/or industry forums. They also attend relevant specialist briefings, some of which form part of board or executive committee meetings. The directors, executive and non-executive, regularly spend time out in the trade with fellow directors, colleagues and friends. This helps to keep them up to date with the group’s operations, developments in the market and the competition. Liability insurance cover for directors and officers The company maintains, at its own expense, insurance cover in respect of legal action against its directors and officers. Remuneration: executive directors The remuneration of the executive directors is determined by the remuneration committee in the context of the company’s reward policy, the principal objective of which is the recruitment and retention of officers with appropriate skills and qualities to drive the company’s strategy and deliver value for shareholders. Against this background, the remuneration committee has decided that total remuneration levels for the executive directors should be in line with the market for the performance achieved, with the variable element included in the total remuneration varying according to achievement of key performance measures. This variable element is currently delivered via deferred annual bonus awards which are dependent on certain performance targets being achieved. The terms of the awards are such that if any bonus is paid, half of it has to be settled in shares, with the other half being paid in cash except to the extent that the director elects to receive all or part of it in shares instead. For every share taken in place of cash, the director is allowed to subscribe at nominal value for one ‘matching’ share. None of the directors are generally free to sell any of the shares before the end of a restricted period which ordinarily will end three years after the shares have been acquired or, if earlier, the date on which their employment terminates by reason of illness, disability or redundancy. The ‘matching’ shares are subject to satisfaction of a further condition relating to the increase over a set period in the group’s adjusted earnings per ordinary share in respect of the group’s continuing operations. Any of the shares acquired, whether ‘matching’ or otherwise, are liable to forfeiture in certain circumstances. The remuneration committee believes that the company’s remuneration policy is consistent with the group’s risk management policy as it does not encourage inappropriate risks to be taken to achieve the performance targets; the focus is very much on a long-term remuneration model. Details of the remuneration of each executive director appear in note 8 on page 37. None of them are involved in deciding their own remuneration. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 19 DIRECTORS’ REPORT Continued Remuneration: non-executives The remuneration of the non-executives is determined by the executive committee, with the intention being that the fees paid are not out of line with the market and go some way towards rewarding the non-executives for the time they commit to their various roles. Accordingly all non-executive directors receive a basic fee; they do not participate in bonus schemes or share options and none of them are members of any group pension scheme other than for the purposes of complying with pensions auto-enrolment legislation. The non-executives are entitled to be reimbursed for certain business-related expenses. Details of the remuneration of each non-executive director appear in note 8 on page 37. Risk and internal control The board has overall responsibility for the group’s internal control system and for reviewing its effectiveness. The executive directors implement and maintain the risk management and internal control system, and the audit committee assists the board in fulfilling its oversight responsibilities by monitoring the system’s integrity. The system is designed to manage risk; it cannot eliminate it and therefore provides reasonable, not absolute, assurance against material misstatement or loss. As part of the system, the board regularly reviews its financial controls memorandum; this lengthy and detailed document seeks to: • mitigate risks which might cause the failure of business objectives; • help safeguard assets against unauthorised use or disposal; • ensure the maintenance and reliability of proper accounting records and financial information used within the business or for publication; and • help achieve compliance with applicable laws and regulations. The group’s business risk assurance manager regularly tests controls contained in the financial controls memorandum in order to assess their effectiveness. The results of his work are shared with the executive directors concerned and with the audit committee. With the approval of that committee, changes, as appropriate, are then made to the financial controls memorandum. The group, through its business risk assurance manager, carries out internal reviews of financial areas according to a programme set by the audit committee following input from the finance director, the head of finance and the group’s external auditor. The business risk assurance manager reports to the company secretary and is independent of the areas which he reviews. His reports, the management responses and the recommended actions are presented to the audit committee on a regular basis. Management may from time to time supplement the internal resource for these reviews with specialist external resources. The group also employs an in-house team of retail auditors who monitor the controls in place in the group’s managed pubs and hotels, in particular those covering stock and cash. This team reports to the finance director. The group has business continuity arrangements in place with third parties. It also has, and reviews annually, business continuity plans for each of the departments within the group’s head office. The group has a whistleblowing policy. This is overseen by the audit committee and allows staff to raise any concerns in confidence directly with the chairman of the audit committee, the company secretary or the group’s business risk assurance manager. Relations with shareholders Copies of the annual report and the interim report are sent to all shareholders and copies can be downloaded from the investors section of www.youngs.co.uk. Other information for shareholders and interested parties is also provided on that website. Written or e-mailed enquiries are handled by the company secretary. The company has an on-going programme of individual meetings with institutional shareholders and analysts following the preliminary and half-year results presentations to the City. These meetings allow the chief executive and the finance director to update shareholders on strategy and the group’s performance. Additional meetings with institutional investors and/or analysts are arranged from time to time. All members of the board receive copies of feedback reports from the City presentations and meetings, thus keeping them in touch with shareholder opinion. Shareholders are given the opportunity to ask questions and raise issues at the AGM; this can be done formally during the meeting or informally with the directors after it. 20 20 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Directors’ holdings and interests The holdings and interests of the directors who held office at the period end (and their immediate families) in the share capital of the company are shown in the table below; these are in addition to the interests shown in notes 8(d) and 8(e) on pages 38 and 39. Nicholas Bryan Beneficial and family Stephen Goodyear (i), (ii) Beneficial and family Torquil Sligo-Young (i), (ii), (iii) Beneficial and family Trustee Peter Whitehead (i), (ii) Beneficial and family Patrick Dardis (i), (ii) Roger Lambert Trish Corzine Beneficial and family Beneficial and family Beneficial and family As at 28 March 2016 30 March 2015 28 March 2016 30 March 2015 28 March 2016 30 March 2015 28 March 2016 30 March 2015 28 March 2016 30 March 2015 28 March 2016 30 March 2015 28 March 2016 30 March 2015 28 March 2016 30 March 2015 A shares 8,505 8,505 231,796 196,283 268,462 253,153 4,154,340 4,154,340 115,845 95,363 49,257 39,891 5,250 5,250 1,000 – Non-voting shares – – – – – 3,000 649,914 649,914 – – – – 5,000 5,000 5,000 – (i) Also interested in 554,077 (2015: 635,064) A shares held in trust by RBT II Trustees Limited – see note 29 on page 58. (ii) Also interested in 337,067 (2015: 387,541) A shares held in trust by Young’s Pension Trustees Limited – see note 29 on page 58. (iii) Torquil Sligo-Young and various members of his immediate family are discretionary beneficiaries under trusts holding 836,368 (2015: 836,368) of the A shares and 553,866 (2015: 553,866) of the non-voting shares in respect of which Torquil Sligo-Young is shown as trustee in the above table. Qualifying indemnity provisions The company’s articles of association contains an indemnity provision for the benefit of the directors; this provision, which is a qualifying third party indemnity provision, is in force at the date of this report and was also in force during the period for the benefit of those who were then directors of the company. Additional indemnity provisions for the benefit of Rupert Clevely, who stood down from the board and left the company during the period, are in force at the date of this report and were in force during the period; these provisions, which are qualifying third party indemnity provisions, are described in note 29 on page 58. AIM The company’s shares are traded on AIM. There are no other exchanges or trading platforms on which the company has applied or agreed to have its shares admitted or traded. Profit and dividends The profit for the period attributable to shareholders was £27.1 million. The directors recommend a final dividend for the period of 9.07 pence per share. Subject to approval at the AGM, this is expected to be paid on 7 July 2016 to shareholders on the register at the close of business on 10 June 2016. When added to the interim dividend of 8.38 pence per share, this will produce a total dividend for the period of 17.45 pence per share. AGM Notice convening the AGM and an explanation of the resolutions being proposed are set out on pages 61 to 64. Important events since the end of the period and likely future developments As permitted under section 414C(11) of the Companies Act 2006, the directors have chosen to include in the strategic report (on pages 1 to 15) particulars of important events affecting the group which have occurred since the end of the period and an indication of likely future developments in the group’s business. Financial instruments and related matters Included in note 22, starting on page 49, are the group’s financial risk management objectives and policies and an indication of the group’s exposure to certain risks. Employees Considerable importance is placed on communications with employees and so, within the limitation of commercial confidentiality and security, Young’s provided them with information concerning trading, development and other appropriate matters. It did this at many levels throughout the business, both formally and informally, including through management presentations. It also consulted YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 21 DIRECTORS’ REPORT Continued Strategic report Directors’ report Financial statements Shareholder information regularly with employees and their representatives thereby enabling the board to have regard to their views when making decisions likely to affect their interests; in connection with this, Young’s continued to operate an information and consultation committee with its members being drawn from departments based at its head office in Wandsworth. The company’s integrated appraisal and development process, designed to improve communications and company performance, remained in place, and the company continued to operate a bonus scheme for eligible employees. To encourage further involvement in the group’s performance, the company invited all employees of the group who had been continuously employed on and from 31 March 2013 to join the group’s savings-related share option scheme for 2015. After saving for a three-year period (through deductions from net salary), scheme members can then buy A shares in the company if they choose to do so at 1,013 pence per share, being a discount of about 20% to the market price at the time the invitations were issued. Young’s maintained its policy of giving full and fair consideration to all applications for employment, including those made by disabled people, taking account of the applicant’s particular aptitude and ability; of seeking to continue to employ anyone who becomes disabled while employed by the company and arranging training in a role appropriate to the person’s changed circumstances; and of giving all employees, including disabled employees, equal opportunities for training, career development and promotion. Notifications of major holdings of voting rights As at 28 March 2016 the company had been notified of the following holdings of 3% or more of the voting rights in the company: Torquil Sligo-Young James Young Caroline Chelton Lindsell Train Limited BlackRock Investment Management (UK) Ltd Octopus Investments Nominees Ltd Helena Young 14.82% 13.81% 11.70% 5.28% <5.00% 4.01% 3.12% No changes in those holdings, and no other holdings of 3% or more of the voting rights in the company, had been notified to the company between 29 March 2016 and 18 May 2016, both dates inclusive. Statement of certain responsibilities in relation to the financial statements and otherwise For each financial period the directors are required to prepare an annual report (made up of a strategic report and a directors’ report) and a set of financial statements. The latter must be prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) and applicable law, and must present fairly the financial position of the group and the financial performance and cash flows of the group for the relevant period. As regards the company’s financial statements (as opposed to the ones for the group), the directors have chosen to prepare them under IFRS too. In preparing the financial statements the directors make judgements and accounting estimates that are reasonable and prudent, select suitable accounting policies and then apply them consistently, and information, including accounting policies, must be presented in a manner that provides relevant, reliable and comparable information. There also has to be included a note that the group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements. Under the Companies Act 2006, the directors are responsible for keeping accounting records which disclose with reasonable accuracy, at any time, the financial position of the group and the company at that time and are such to enable them to ensure that the financial statements comply with that Act. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Disclosure of information to the auditor Each person who was a director at the time when this report was approved has confirmed that (a) so far as he or she was aware, there was no information needed by the company’s auditor in connection with preparing its report of which the company’s auditor was unaware; and (b) he or she had taken all the steps that he or she ought to have taken as a director to make himself or herself aware of any such information and to establish that the company’s auditor was aware of it. This paragraph is to be interpreted in accordance with section 418 of the Companies Act 2006. Preparation and disclaimer This annual report, together with the strategic report (on pages 1 to 15) and the financial statements for the period ended 28 March 2016, have been drawn up and presented for the purpose of complying with English law. Any liability arising out of or in connection with them will also be determined in accordance with English law. By order of the board ANTH O NY S C H RO E D E R Company Secretary 18 May 2016 22 22 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 INDEPENDENT AUDITOR’S REPORT For the 52 weeks ended 28 March 2016 Strategic report Directors’ report Financial statements Shareholder information Independent auditor’s report to the members of Young & Co.’s Brewery, P.L.C. We have audited the financial statements of Young & Co.’s Brewery, P.L.C. for the 52 week period ended 28 March 2016 which comprise the Group Income Statement, the Group and Parent Company Statements of Comprehensive Income, the Group and Parent Company Balance Sheets, the Group and Parent Company Statements of Cash Flow, the Group and Parent Company Statement of Changes in Equity and the related notes 1 to 32. 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 and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, 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 members those matters we are required to state to them in an auditor’s 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 members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 22, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements 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 28 March 2016 and of the group’s profit for the 52 week period then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion 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. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company 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. Andy Glover (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 18 May 2016 Notes: 1. The maintenance and integrity of the Young & Co.’s Brewery, P.L.C. website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 23 GROUP INCOME STATEMENT For the 52 weeks ended 28 March 2016 Revenue Operating costs before exceptional items Operating profit before exceptional items Operating exceptional items Operating profit Finance costs Other finance charges Profit before tax Taxation Profit for the period attributable to shareholders of the parent company Earnings per 12.5p ordinary share Basic Diluted Strategic report Directors’ report Financial statements Shareholder information Notes 6 7 9 11 24 12 2016 £m 245.9 (204.9) 41.0 (2.1) 38.9 (5.3) (0.3) 33.3 (6.2) 27.1 2015 £m 227.0 (189.6) 37.4 4.1 41.5 (5.2) (0.2) 36.1 (9.4) 26.7 Pence Pence 15 15 55.76 55.73 55.17 55.09 All of the results above are from continuing operations. The notes on pages 30 to 59 form part of these financial statements. The independent auditor’s report is set out on page 23. 24 24 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 STATEMENTS OF COMPREHENSIVE INCOME For the 52 weeks ended 28 March 2016 Strategic report Directors’ report Financial statements Shareholder information Profit for the period Other comprehensive income Group Company Notes 2016 £m 27.1 2015 £m 26.7 2016 £m 24.3 2015 £m 22.9 Items that will not be reclassified subsequently to profit or loss: Unrealised gain on revaluation of property Remeasurement of retirement benefit schemes Tax on above components of other comprehensive income 17 24 Items that will be reclassified subsequently to profit or loss: Fair value movement of interest rate swaps Tax on fair value movement of interest rate swaps 22 23.8 4.2 0.2 – (0.2) 28.0 19.6 (9.1) (0.7) (3.6) 0.7 6.9 23.1 4.2 (0.1) – (0.2) 27.0 17.6 (9.1) (0.4) (3.6) 0.7 5.2 Total comprehensive income for shareholders of the parent company 55.1 33.6 51.3 28.1 All of the results above are from continuing operations. The notes on pages 30 to 59 form part of these financial statements. The independent auditor’s report is set out on page 23. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 25 Strategic report Directors’ report Financial statements Shareholder information Group Company 2016 £m 20.6 665.8 – 6.2 692.6 2.6 6.4 13.2 22.2 2015 £m 20.9 617.3 – 7.7 645.9 2.7 5.5 0.2 8.4 2016 £m – 594.4 31.3 6.1 631.8 1.9 28.8 11.8 42.5 2015 £m – 546.3 31.3 7.6 585.2 2.0 27.6 0.2 29.8 714.8 654.3 674.3 615.0 – (3.1) (35.5) (3.2) (41.8) (143.4) (9.0) (57.4) (6.3) (1.0) (217.1) (258.9) 455.9 6.1 4.1 1.8 (9.8) 234.5 219.2 455.9 (5.0) (2.5) (29.2) (4.0) (40.7) (124.2) (9.5) (59.8) (13.1) – (206.6) (247.3) 407.0 6.1 2.7 1.8 (9.6) 209.6 196.4 407.0 – (3.1) (38.2) (2.2) (43.5) (143.4) (9.0) (50.5) (6.3) (1.0) (210.2) (253.7) 420.6 6.1 4.1 1.8 (9.8) 225.6 192.8 420.6 (6.0) (2.5) (27.9) (3.7) (40.1) (124.2) (9.5) (52.6) (13.1) – (199.4) (239.5) 375.5 6.1 2.7 1.8 (9.6) 201.7 172.8 375.5 Notes 16 17 18 23 19 20 22 22 21 22 22 23 24 25 26 BALANCE SHEET At 28 March 2016 Non-current assets Goodwill Property and equipment Investment in subsidiaries Deferred tax assets Current assets Inventories Trade and other receivables Cash Total assets Current liabilities Borrowings Derivative financial instruments Trade and other payables Income tax payable Non-current liabilities Borrowings Derivative financial instruments Deferred tax liabilities Retirement benefit schemes Provisions Total liabilities Net assets Capital and reserves Share capital Share premium Capital redemption reserve Hedging reserve Revaluation reserve Retained earnings Total equity Approved by the board of directors and signed on its behalf by: Nicholas Bryan Peter Whitehead 18 May 2016 Chairman Finance Director The notes on pages 30 to 59 form part of these financial statements. The independent auditor’s report is set out on page 23. 26 26 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 STATEMENTS OF CASH FLOW For the 52 weeks ended 28 March 2016 Operating activities Net cash generated from operations Interest received Tax paid Net cash flow from operating activities Investing activities Sale of property and equipment Purchases of property and equipment Business combinations, net of cash acquired Acquisition of subsidiaries, net of cash acquired Net cash used in investing activities Financing activities Interest paid Issued equity Equity dividends paid Increase in borrowings (Decrease)/increase in short term borrowings Net cash flow used in financing activities Increase/(decrease) in cash Cash at the beginning of the period Cash at the end of the period Notes 28 17 13 18 14 Strategic report Directors’ report Financial statements Shareholder information Group Company 2016 £m 2015 £m 2016 £m 2015 £m 60.4 – (7.8) 52.6 3.6 (41.6) (3.5) – (41.5) (4.4) 0.5 (8.2) 19.0 (5.0) 1.9 13.0 0.2 13.2 50.6 – (7.1) 43.5 3.3 (32.4) (18.5) – (47.6) (4.9) – (7.7) 9.5 5.0 1.9 (2.2) 2.4 0.2 55.4 0.5 (6.4) 49.5 3.5 (38.8) (3.5) – (38.8) (4.4) 0.5 (8.2) 19.0 (6.0) 0.9 11.6 0.2 11.8 40.0 1.0 (4.7) 36.3 3.3 (30.1) (6.6) (7.0) (40.4) (4.8) – (7.7) 9.5 6.0 3.0 (1.1) 1.3 0.2 The notes on pages 30 to 59 form part of these financial statements. The independent auditor’s report is set out on page 23. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 27 GROUP STATEMENT OF CHANGES IN EQUITY At 28 March 2016 Strategic report Directors’ report Financial statements Shareholder information At 31 March 2014 7.7 1.8 (6.7) 193.1 183.8 379.7 Capital Share redemption capital (1) reserve £m £m Notes Hedging Revaluation reserve £m reserve £m Retained earnings £m Total equity £m Total comprehensive income Profit for the period Other comprehensive income Unrealised gain on revaluation of property Remeasurement of retirement benefit schemes Fair value movement of interest rate swaps Tax on above components of other comprehensive income Total comprehensive income Transactions with owners recorded directly in equity Share capital issued Dividends paid on equity shares Revaluation reserve realised on disposal of properties Share based payments Tax on share based payments At 30 March 2015 Total comprehensive income Profit for the period Other comprehensive income Unrealised gain on revaluation of property Remeasurement of retirement benefit schemes Fair value movement of interest rate swaps Tax on above components of other comprehensive income Total comprehensive income Transactions with owners recorded directly in equity Share capital issued Dividends paid on equity shares Revaluation reserve realised on disposal of properties Share based payments Tax on share based payments – – – – – – – 1.1 – – – – 1.1 8.8 – – – – – – – 1.4 – – – – 1.4 17 24 22 12 14 27 23 17 24 22 12 14 27 23 – – – – – – – – – – – – – – – 26.7 26.7 – – (3.6) 0.7 (2.9) (2.9) – – – – – – 19.6 – – (2.5) 17.1 17.1 – – (0.6) – – (0.6) – (9.1) – 1.8 (7.3) 19.4 – (7.7) 0.6 0.2 0.1 (6.8) 19.6 (9.1) (3.6) – 6.9 33.6 1.1 (7.7) – 0.2 0.1 (6.3) 1.8 (9.6) 209.6 196.4 407.0 – – – – – – – – – – – – – – – 27.1 27.1 – – – (0.2) (0.2) (0.2) – – – – – – 23.8 – – 1.6 25.4 25.4 – – (0.5) – – (0.5) – 4.2 – (1.4) 2.8 29.9 – (8.2) 0.5 0.5 0.1 (7.1) 23.8 4.2 – – 28.0 55.1 1.4 (8.2) – 0.5 0.1 (6.2) At 28 March 2016 10.2 1.8 (9.8) 234.5 219.2 455.9 (1) Total share capital comprises the share capital issued and fully paid of £6.1 million (2015: £6.1 million) and the share premium account of £4.1 million (2015: £2.7 million). Share capital issued in the period comprises the nominal value of £nil million (2015: £0.1 million) and share premium of £1.4 million (2015: £1.0 million). The notes on pages 30 to 59 form part of these financial statements. The independent auditor’s report is set out on page 23. 28 28 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY At 28 March 2016 Strategic report Directors’ report Financial statements Shareholder information At 31 March 2014 7.7 1.8 (6.7) 186.9 164.0 353.7 Capital Share redemption capital (1) reserve £m £m Notes Hedging Revaluation reserve £m reserve £m Retained earnings £m Total equity £m Total comprehensive income Profit for the period Other comprehensive income Unrealised gain on revaluation of property Remeasurement of retirement benefit schemes Fair value movement of interest rate swaps Tax on above components of other comprehensive income Total comprehensive income Transactions with owners recorded directly in equity Share capital issued Dividends paid on equity shares Revaluation reserve realised on disposal of properties Share based payments Tax on share based payments At 30 March 2015 Total comprehensive income Profit for the period Other comprehensive income Unrealised gain on revaluation of property Remeasurement of retirement benefit schemes Fair value movement of interest rate swaps Tax on above components of other comprehensive income Total comprehensive income Transactions with owners recorded directly in equity Share capital issued Dividends paid on equity shares Revaluation reserve realised on disposal of properties Share based payments Tax on share based payments – – – – – – – 1.1 – – – – 1.1 8.8 – – – – – – – 1.4 – – – – 1.4 17 24 22 23 14 27 23 17 24 22 23 14 27 23 – – – – – – – – – – – – – – – 22.9 22.9 – – (3.6) 0.7 (2.9) (2.9) – – – – – – 17.6 – – (2.2) 15.4 15.4 – – (0.6) – – (0.6) – (9.1) – 1.8 (7.3) 15.6 – (7.7) 0.6 0.2 0.1 (6.8) 17.6 (9.1) (3.6) 0.3 5.2 28.1 1.1 (7.7) – 0.2 0.1 (6.3) 1.8 (9.6) 201.7 172.8 375.5 – – – – – – – – – – – – – – – 24.3 24.3 – – – (0.2) (0.2) 23.1 – – 1.3 24.4 – 4.2 – (1.4) 2.8 23.1 4.2 – (0.3) 27.0 (0.2) 24.4 27.1 51.3 – – – – – – – – (0.5) – – (0.5) – (8.2) 0.5 0.5 0.1 (7.1) 1.4 (8.2) – 0.5 0.1 (6.2) At 28 March 2016 10.2 1.8 (9.8) 225.6 192.8 420.6 (1) Total share capital comprises the share capital issued and fully paid of £6.1 million (2015: £6.1 million) and the share premium account of £4.1 million (2015: £2.7 million). Share capital issued in the period comprises the nominal value of £nil million (2015: £0.1 million) and share premium of £1.4 million (2015: £1.0 million). The notes on pages 30 to 59 form part of these financial statements. The independent auditor’s report is set out on page 23. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 29 NOTES TO THE FINANCIAL STATEMENTS For the 52 weeks ended 28 March 2016 1. G ENERAL IN FORMATI ON The group and parent company financial statements of Young & Co.’s Brewery, P.L.C. for the period ended 28 March 2016 were authorised for issue by the board of directors on 18 May 2016. Young & Co.’s Brewery, P.L.C. is a public limited company incorporated and domiciled in England and Wales. The company’s shares are listed on the Alternative Investment Market of the London Stock Exchange. The nature of the group’s operations and its principal activities are set out in note 5 and in the strategic report on pages 1 to 15. The current period and prior period relate to the 52 weeks ended 28 March 2016 and 30 March 2015 respectively. The financial statements are presented in pounds sterling and all values are rounded to the nearest hundred thousand (£0.1 million) except where otherwise indicated. 2. BASIS OF PR EPARATION The consolidated financial statements of the group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. IFRS includes the application of International Financial Reporting Standards including International Accounting Standards (IAS) and related Interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and Interpretations of the Standing Interpretations Committee (SIC). During the period, new IFRS and amendments to existing IFRS were issued by the International Accounting Standards Board (IASB). The impact and, if applicable, the adoption of these standards is described below in “New Accounting Standards, Amendments and Interpretations”. No separate income statement is presented for the company, as permitted by section 408(3) of the Companies Act 2006. The company’s profit after tax for the period was £24.3 million (2015: £22.9 million). New Accounting Standards, Amendments and Interpretations The group has adopted the following new accounting standard during the period. IAS 19: Defined Benefit Plans: Employee Contributions (Amendments): clarifies the treatment of employee and third party contributions which are independent of the number of years of service. The amendment was effective for the full period ended 28 March 2016 but has had no impact. The group has also applied, for the first time, the Annual Improvements to IFRSs: 2010–2012 Cycle and 2011–2013 Cycle. These improvements did not have any impact on the current period, prior period or expected to affect future periods. The directors also intend to adopt the Standards, Amendments and Interpretations listed in the table below when they become effective. The directors do not expect that adoption in future periods will have a material impact except the following: IFRS 9: Financial instruments: replaces IAS 39 and introduces new requirements for classifying and measuring financial instruments. The standard introduces a new hedge accounting model designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures. Early adoption is permitted. The group is yet to assess the full impact of the new standard. IFRS 16: Leases: replaces IAS 17 and requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use-asset in respect of virtually all leases currently classified as operating leases. The balance sheet will affectively be ‘grossed up’ but with no impact to net assets at the inception of each lease. The income statement impact will be a new interest charge and a decrease in the amount charged to operating costs. Early adoption is permitted. The group is yet to assess the full impact of the new standard. IAS 1 Disclosure Initiative (Amendment) IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments) IAS 19 IAS 34 IFRS 5 IFRS 7 IFRS 15 IFRS 9 IFRS 16 Employee Benefits Interim Financial Reporting Non-Current Assets Held for Sale and Discontinued Operations Financial Instruments: Disclosures Revenue from Contracts with Customers Financial Instruments Leases Effective date 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2016 1 January 2018 1 January 2018 1 January 2019 30 30 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 3. SUMMARY OF S I GN I FI CA N T A C C OUNT ING POL ICI ES The significant accounting policies adopted are set out below and, except as noted above, have been applied consistently in presenting the group and parent company financial information. (a) Basis of consolidation The group’s financial statements consolidate the financial statements of Young & Co.’s Brewery, P.L.C. with the entities it controls, its subsidiaries and a special purpose entity, drawn up to the period end. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The special purpose entity is Ram Brewery Trust II, an Employee Share Ownership Plan (ESOP) Trust. The results of subsidiaries acquired or disposed of during the period are included in the group income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The financial statements of the subsidiaries and special purpose entity are consolidated on a comparable period basis, using consistent accounting policies. All inter company balances and transactions, including unrealised profits arising on them, are eliminated. (b) The parent company’s investments in subsidiaries In its separate financial statements, the parent company recognises its investments in its subsidiaries on the basis of the direct equity interest method. Investments are therefore held at cost less provision for impairment. Income is recognised from these investments in relation to distributions received. (c) 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 and VAT. The following criteria must also be met before revenue is recognised: Sale of goods Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Rental income Rental income arising from operating leases on properties is accounted for on a straight line basis over the lease term. Interest income Revenue is recognised as interest accrues (using the effective interest method). (d) Exceptional items Exceptional items are items which due to their material and non-recurring nature have been classified separately in order to draw them to the attention of the reader of the financial statements. They are included in the adjustments that, in management’s judgement, are required in order to show more accurately the business performance of the group in a consistent manner and to reflect how the business is managed and measured on a day to day basis. (e) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred and the amount of any non-controlling interest in the acquiree. The consideration transferred is measured at acquisition date fair value. The non-controlling interest is measured as the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in operating exceptional items. Goodwill arising on acquisition represents the excess of the cost of acquisition over the fair value of the net identifiable assets acquired and liabilities assumed at the date of acquisition. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. (f) Property and equipment Properties, including land and buildings, and fixtures, fittings and equipment are held at fair value and are revalued by qualified valuers on a sufficiently regular basis using open market values so that the carrying value of an asset does not differ significantly from its fair value at the balance sheet date. The valuation is assessed on the basis of the highest and best use. When the necessary requirements have been met in respect of assets identified for disposal and revalued immediately prior to transfer to non-current assets held for sale, the highest and best use for a market participant may reflect an alternative use for the asset. Surpluses which arise from the revaluation exercise are included within other comprehensive income (in the revaluation reserve) unless they are reversing a revaluation adjustment which has been recognised in the income statement previously. Where the revaluation exercise gives rise to a deficit, this is reflected directly in other comprehensive income (in the revaluation reserve) to the extent that a surplus exists against the same asset. Any further decrease in value is recognised in the income statement as an exceptional expense. The carrying amount of an asset, less any residual value, is depreciated on a straight line basis over the asset’s useful life or lease term if shorter. The residual value, useful life and depreciation method applied to each asset are reviewed annually. The group does not depreciate freehold land and the residual value of its freehold and long leasehold buildings. Useful lives: Freehold and long leasehold buildings Short leasehold buildings Fixtures, fittings and equipment 50 years Shorter of the estimated useful life and the lease term 3-10 years An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 3(g)). The gain arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset, and is recognised in the income statement. Pub fixtures, fittings and equipment are treated as disposals in the period following completion of their write down. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 31 NOTES TO THE FINANCIAL STATEMENTS Continued 3 . S U M M A RY O F S I G N I F I C A N T AC C O U N T I N G P O L I C I E S (C O NTI N U E D) (g) Impairment of assets The carrying values of investments, property and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is mandatorily assessed for impairment on an annual basis or more frequently if there are indications that the carrying value may be impaired. Impairment is assessed on the basis of either each individual asset, each individual cash generating unit (an individual pub), or, in the case of goodwill, the group of cash generating units associated with it. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group’s cash generating units (or groups of cash generating units) that are expected to benefit from the combination. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Value in use is assessed by reference to the estimated future cash flows which are discounted to present value using an appropriate pre-tax discount rate. Impairment losses are recognised in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the group income statement unless the impairment loss relates to goodwill in which case it is not reversed. (h) Leases (1) Where the group is the lessee Assets held under finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease, with a corresponding liability being recognised for the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. 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. (2) Where the group is the lessor Assets leased out under operating leases are included in property 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. (i) Inventories Inventories are valued at the lower of cost and net realisable value. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost formula used is equivalent to a ‘First in, First out’ method. (j) Cash Cash in the balance sheet comprises cash at banks and in hand. For the purpose of the group and parent company cash flow statements, cash is net of outstanding bank overdrafts. Cash and cash equivalents include only deposits which mature in less than three months. (k) Trade and other payables Trade and other payables are recognised initially at fair value and subsequently at amortised cost. When applicable, trade and other payables are analysed between current and non-current liabilities on the face of the balance sheet, depending on when the obligation to settle will crystallise. (l) Interest bearing loans and borrowings All loans and borrowings are recognised initially at fair value. Directly attributable transaction costs are capitalised and amortised over the life of the facility using the effective interest method through finance expense. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. (m) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The current tax payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the income statement because the former excludes items of income or expense that are taxable or deductible in other years and also excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using UK tax rates that have been enacted under UK law and that are applicable to the period. The current tax expense is recognised in the income statement unless it relates to items that are credited or charged to equity, in which case it is credited or charged directly to equity. Deferred tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts, with the following exceptions: • where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; • in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and • deferred income tax assets are recognised only to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. 32 32 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Where capital gains have been rolled over for tax purposes, a deferred tax liability is recorded on the rolled over gain to reflect the tax that may be due on this amount at a future date. Where there has been an upward revaluation of an asset and the asset is expected to be realised through disposal, a deferred tax liability is recorded based on the difference between the indexed cost of the asset less any capital gains which have been rolled over against the asset and the revalued amount. Deferred tax is measured on an undiscounted basis at the UK tax rates that are expected to apply on reversal of the underlying temporary differences, based on tax rates and laws enacted or substantively enacted at the balance sheet date. (n) Accounting for the ESOP Trust The capital gains tax liability that may arise on the allocated shares in the Ram Brewery Trust II when they are transferred to employees on retirement is recognised as a provision in the financial statements under trade and other payables. (o) Derivative financial instruments and hedging The group uses derivative financial instruments such as interest rate swaps to hedge its risk associated with interest rate fluctuations. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how its effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective. Where cash flow hedge accounting is not applied, the movement in the fair value of the derivative is recognised immediately in the income statement. Where cash flow hedge accounting is applied, as in the case of the interest rate swaps held by the group, the effective portion of the gain or loss on the hedging instrument is recognised in the statement of comprehensive income, while the ineffective portion is recognised in the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs, at which point they are immediately expensed. If the related transaction is not expected to occur, the amount held in equity is immediately expensed. (p) Pensions and other post retirement benefits The company operates one defined benefit pension scheme, namely the Young & Co.’s Brewery, P.L.C. Pension Scheme, a defined contribution pension scheme and a post retirement health care scheme. Contributions to the defined contribution scheme are recognised in the income statement in the period in which they become due. For the defined benefit scheme, the actuarial cost charged to the income statement in the period consists of the current service cost, net interest on the net defined benefit liability or asset, past service cost and the impact of any settlements or curtailments. Remeasurements of defined benefit pension and post retirement health care schemes are recognised in full in the statement of comprehensive income in the period in which they occur. The net defined benefit pension liability or asset in the balance sheet comprises the present value of the defined benefit obligations less the fair value of scheme assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is restricted to the sum of the present value of any amount the group expects to recover by way of refunds from the scheme or reductions in the future contributions. Post retirement health care benefits are provided for certain employees and certain directors. Entry to the scheme is on a discretionary basis. The annual premium for providing cover is determined by BUPA. This information is taken by qualified actuaries who then assess the reserve required to provide this benefit for participants’ future lifetimes, using IAS 19 assumptions. The liability for new entrants is recognised through the income statement in the period in which the benefit is granted. Remeasurements of health care benefits are recognised in full directly in the statement of comprehensive income. (q) Trade and other receivables Trade receivables are recognised and carried at the lower of their original invoice value and recoverable amount. A provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an impairment provision. Impaired debts are derecognised when they are assessed as irrecoverable. (r) Share based-payments The group operates two types of share based payment arrangements: a senior management deferred bonus scheme (“DBS”) and a Save-As-You- Earn (“SAYE”) scheme. Under the DBS scheme directors and senior management are encouraged to receive bonus payments in the form of shares instead of cash. Directors and senior management are encouraged to do this by being offered ‘Matching’ shares (see note 27). The ‘Matching’ shares constitute shares with non-market performance based vesting conditions over three years. The group has used the "grant date model" as its valuation model for recording the fair value of these equity instruments at the date when it was originally granted. The fair value of equity represents the market value of the shares at grant date, less the nominal value which the employees will pay. Under the SAYE scheme, eligible employees are allowed to purchase shares at a discount (see note 27). The group uses the “Black-Scholes model” as its valuation model for valuing awards at fair value. The fair value cost of both schemes is expensed to the income statement with a corresponding credit in equity on a straight line basis over the vesting period. The cumulative expense also takes account the group’s estimate of the number of shares that will ultimately vest. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 33 NOTES TO THE FINANCIAL STATEMENTS Continued 3. S UM MARY O F S I G N I F I CA N T AC C O U N TI N G PO L I C I E S (C O NTI N U E D) (s) Use of estimates The preparation of financial information in conformity with IFRS requires management to make certain judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period affected. The areas involving a higher degree of judgement or complexity, or where the most sensitive estimates and assumptions are significant to the financial statements, are set out in note 4. 4. K EY AC C O U N TI N G E S TI MAT E S AN D J U D G E M E NTS The following are the key estimates and judgements that management have made in the process of applying the group’s accounting policies and that have the most significant effect on the amounts presented in the financial statements. (a) Valuation of property and equipment The group is required to value property and equipment on a sufficiently regular basis using open market values to ensure the current carrying value does not differ significantly from the fair value. The valuation, performed by qualified valuers, is based on market observations and estimates on the selling price in an arms’ length transaction, and includes estimates of future income levels and trading potential for each pub, as well as taking into account other factors such as location, tenure and current income levels. See note 17. (b) Impairment of goodwill The group considers annually whether goodwill has suffered any impairment in accordance with the accounting policy set out in note 3(g). The recoverable amounts of cash generating units have been determined based on value in use calculations. This calculation requires the use of estimates including growth rates, capital maintenance expenditure and pre-tax discount rates. See notes 3(g) and 16. (c) Business combinations When assets are acquired, management determines whether the assets form a business combination. A fair value exercise of both the consideration and the net assets acquired is performed once it is determined that a business combination has taken place. If the fair value of the consideration is in excess of the fair value of the net assets acquired, the difference is recognised as goodwill. If the opposite occurs, the difference is recognised in the income statement. The group makes judgements and estimates in relation to the fair value of the consideration, the net assets acquired and whether the purchase represents a business combination. See notes 3(e), 13, 16 and 17. (d) Depreciation Depreciation is provided so as to write down the assets to their residual values over the estimated useful lives. The selection of these residual values and estimated lives requires the exercise of management’s judgement. See notes 3(f) and 17. (e) Defined benefit pension obligations Measurement of defined benefit pension obligations requires an estimate of future changes in salaries and inflation, as well as mortality rates, the expected return on assets and the selection of a suitable discount rate. These have been determined on advice from an independent qualified actuary. See notes 3(p) and 24. (f) Taxation The group reviews potential tax liabilities and benefits to assess the appropriate accounting treatment. Tax provisions are made if it is probable that a liability will arise. Tax benefits are not recognised unless it is probable that they will be recovered. Assessing the outcome of uncertain tax positions requires judgements to be made based on past experience and the current tax environment. See notes 3(m), 12 and 23. 34 34 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 5. S EGMENTAL REPORTIN G The group is organised into the reporting segments referred to below. These segments are based on the different resources and risks involved in the running of the group. The executive board of the group internally reviews each reporting segment’s operating profit or loss before exceptional items for the purpose of deciding on the allocation of resources and assessing performance. The group has three operating segments: Young’s managed houses, Geronimo managed houses and the Ram Pub Company. Both Young’s and Geronimo managed houses operate pubs. Revenue is derived from sales of drink, food and the provision of accommodation. Due to common economic characteristics, similar product offerings and customers, the Young’s managed houses and Geronimo managed houses operating segments have been reported below as a single reportable segment, managed houses. The Ram Pub Company consists of pubs owned or leased by the company and leased or sub leased to third parties. Revenue is derived from rents payable by, and sales of drink made to, tenants. Unallocated relates to head office costs. Total segment revenue is derived externally with no intersegment revenues between the segments in either period. The group’s revenue is derived entirely from the UK. Income statement 2016 Total segment revenue Operating profit/(loss) before exceptional items Operating exceptional items Operating profit/(loss) 2015 Total segment revenue Operating profit/(loss) before exceptional items Operating exceptional items Operating profit/(loss) Managed houses £m 232.9 Ram Pub Company £m Segments total £m 12.7 245.6 53.3 0.1 53.4 214.2 50.1 3.4 53.5 4.5 (1.2) 3.3 12.5 4.3 0.7 5.0 57.8 (1.1) 56.7 226.7 54.4 4.1 58.5 The following is a reconciliation of the operating profit to the profit before tax: Unallocated Total £m 0.3 (16.8) (1.0) (17.8) 0.3 (17.0) – (17.0) 2016 £m 38.9 (5.3) (0.3) 33.3 £m 245.9 41.0 (2.1) 38.9 227.0 37.4 4.1 41.5 2015 £m 41.5 (5.2) (0.2) 36.1 Operating profit Finance costs Other finance charges Profit before tax Balance sheet 2016 Segment assets Deferred tax assets Cash Total assets Other segmental information Depreciation Additions to non-current assets Net downwards movements in property valuation (note 17) 2015 Segment assets Deferred tax assets Cash Total assets Other segmental information Depreciation Additions to non-current assets Net upward movements in property valuation (note 17) Managed houses £m 625.8 – – 625.8 (15.7) 41.9 0.5 581.3 – – 581.3 (13.3) 48.5 3.5 Ram Pub Company £m 62.3 – – 62.3 (1.4) 2.6 (1.0) 57.7 – – 57.7 (1.2) 2.1 0.7 Segments total £m 688.1 – – 688.1 (17.1) 44.5 (0.5) 639.0 – – 639.0 (14.5) 50.6 4.2 Unallocated Total £m 7.3 6.2 13.2 26.7 (0.3) 0.6 – 7.4 7.7 0.2 15.3 (0.3) 0.3 – £m 695.4 6.2 13.2 714.8 (17.4) 45.1 (0.5) 646.4 7.7 0.2 654.3 (14.8) 50.9 4.2 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 35 NOTES TO THE FINANCIAL STATEMENTS Continued 6. R EV ENUE Sales of goods Rental income Revenue Revenue shown above is from continuing operations. 7. O PERATING COS TS BEFORE E XC EP TION AL IT EMS Changes in inventories of finished goods and raw materials Raw materials, consumables and finished goods used Employment costs (note 8(a)) Depreciation (note 17) Other operating costs Other operating costs include: Operating lease rentals: minimum lease payments sublease payments Auditor’s remuneration to main group auditor: audit of the group financial statements audit of subsidiaries’ accounts audit related assurance services taxation advisory services all other services 8. EM PLO YMENT (a) Costs and employee numbers Wages and salaries Social security Pension and health care schemes Employment costs before exceptional items Employment costs in exceptional items: capital gains tax on ESOP Trust allocated shares Share-based payments (note 27) The average monthly number of employees was 3,735 (2015: 3,496). 36 36 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 2016 £m 231.6 14.3 245.9 2016 £m 0.1 61.8 76.1 17.4 49.5 2015 £m 214.0 13.0 227.0 2015 £m (0.1) 58.7 71.3 14.8 44.9 204.9 189.6 5.8 0.6 6.4 0.2 – – – – 0.2 2016 £m 69.8 5.0 1.3 76.1 – 0.5 76.6 5.5 0.6 6.1 0.2 – – – – 0.2 2015 £m 65.1 5.1 1.1 71.3 0.2 0.2 71.7 Strategic report Directors’ report Financial statements Shareholder information 8. E M PLOYM E NT ( C O NT I N U E D ) (b) Directors’ emoluments Nicholas Bryan Stephen Goodyear (iii) Torquil Sligo–Young (iii) Peter Whitehead (iii) Patrick Dardis (iii), (vi) Edward Turner (left 24 July 2015) (iii), (iv) Roger Lambert David Page (left 7 July 2015) Rupert Clevely (left 27 April 2015) (v) Trish Corzine Total 2016 Total 2015 Basic salary and fees £ Benefits (i) £ Bonus (ii), (vi) £ Total excluding pension costs 2016 £ 87,432 321,198 129,072 234,779 245,040 57,463 39,825 10,722 2,929 39,063 – 18,947 28,148 5,907 2,218 3,311 – – 618 – – 87,432 267,501 607,646 125,667 282,887 179,366 420,052 226,720 473,978 – – – – – 60,774 39,825 10,722 3,547 39,063 Total excluding pension costs 2015 £ 85,300 623,254 269,153 431,050 428,250 315,745 39,253 39,253 48,363 8,764 1,167,523 59,149 799,254 2,025,926 1,304,773 74,268 909,344 2,288,385 (i) These relate primarily to the provision of private medical insurance and car-related benefits. (ii) Bonuses were receivable by the executive directors in connection with performance targets set during the period. At the outset, it was agreed that if any bonus were to be paid, half of it would be settled in shares, with the other half being paid in cash except to the extent that the director elected to receive all or part of it in shares instead. The values of these parts of the bonus awards were capped at 100% of the directors’ basic annual salaries (but for these purposes the basic annual salaries of certain directors were adjusted). For every share taken in place of cash, the director would be allowed to subscribe at nominal value for one ‘matching’ share. Each of Stephen Goodyear, Torquil Sligo-Young, Peter Whitehead and Patrick Dardis has elected to take his cash element in shares and is therefore entitled to subscribe for ‘matching’ shares. None of the directors are generally free to sell any of the shares before the end of a restricted period which ordinarily will end three years after the shares have been acquired or, if earlier, the date on which his employment terminates by reason of illness, disability or redundancy. The ‘matching’ shares are subject to satisfaction of a further condition relating to the extent to which the group’s adjusted earnings per ordinary share in respect of the group’s continuing operations for the financial period ending on or around 31 March 2019 exceeds the same measure for the financial period ended 30 March 2015. Any of the shares acquired, whether ‘matching’ or otherwise, are liable to forfeiture in certain circumstances. The number of shares to be issued to each director in order to fulfil his entitlement will be calculated with reference to the market price of the company’s A ordinary shares as shown in the Financial Times (online version) published on the date on which the issue is made (which is expected to be mid-June 2016). The amounts shown in the Bonus column reflect the cash value of the bonuses receivable by the directors, excluding the cash value of any ‘matching’ shares. The cash value of the ‘matching’ shares to be awarded to Stephen Goodyear is £133,750 (2015: £143,658), to Torquil Sligo-Young is £62,833 (2015: £57,459), to Peter Whitehead is £89,683 (2015: £96,284) and to Patrick Dardis is £93,360 (2015: £nil). (iii) Note 8(e) on page 38 sets out the gains made on the exercise of share options. (iv) Ed Turner also received £226,337 by way of compensation for loss of office. Of this, £7,470 was paid into a defined contribution scheme operated by the company and £3,000 was paid to the law firm that advised him in connection with the cessation of his directorship and employment. (v) Rupert Clevely also received a further £326. This arose because Rupert’s non-executive director fee for the month of April 2015 was processed for payment before he stepped down from the board on 27 April 2015, and both he and the company agreed that neither would insist on the notice period under his letter of appointment having to be worked. (vi) Included within the bonus total for Patrick Dardis is the sum of £40,000. This was an ex gratia payment falling outside of the bonus plan referred to in (ii) and was in respect of the additional responsibility taken on by him following Ed Turner leaving the group. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 37 NOTES TO THE FINANCIAL STATEMENTS Continued 8. E M PLOYM E NT ( C O NT I N U E D ) (c) Retirement benefits Defined benefit pension scheme The company operates a defined benefit pension scheme, namely the Young & Co.’s Brewery, P.L.C. Pension Scheme. All active members in this pension scheme contribute to it, with contributions (for the year ended 28 March 2016) being at the rate of 5.0% of pensionable earnings. With effect from 6 April 2016, member contribution rates were increased to 6% or 7% of pensionable earnings, dependent on each member’s accrual rate. This pension scheme invests largely in managed funds. As at 28 March 2016, only one director, Patrick Dardis, was accruing benefits under the defined benefit pension scheme in respect of qualifying service. His pension entitlement (being that which would be paid annually on retirement under the terms of his service agreement based on service to 28 March 2016) is £43,582 (2015: £39,741) and his normal retirement date will be reached when he is 60. Net of member contributions, the value of the increase in his accrued pension during the year to 28 March 2016 was £59,809 (2015: £42,710) – this value was calculated using appropriate methodology prescribed under relevant legislation: for example, this included applying a factor of 20 to the increase in accrued pension over the year (net of the required allowance for inflation). This method of valuation is different from using the scheme’s normal cash equivalent transfer value basis. The company accounts for retirement benefits in accordance with IAS 19 and detailed disclosures covering this are set out in note 24. As at 1 April 2015, defined benefit accrual had ceased for each of Stephen Goodyear, Torquil Sligo-Young and Peter Whitehead. Since the year end, future pension accrual has also ceased for Patrick Dardis. Defined contribution pension scheme The company also operates a defined contribution pension scheme. As at 28 March 2016, the three directors that stepped down during the year (i.e. Ed Turner, David Page and Rupert Clevely) were in such a scheme. For the year ended 28 March 2016 the company paid contributions of £2,730 (2015: £7,290), £88 (2015: £335) and £28 (2015: £323) respectively into a defined contribution pension arrangement for them in respect of qualifying service. An additional contribution of £7,470 was paid by the company in respect of Ed Turner during the year (see note 8b(iv)) – this was not in respect of qualifying service and is not therefore included in the preceding figure. Post retirement health care In addition, the company bears the cost of post retirement health care premia for certain employees and ex-employees. (d) Profit sharing schemes Share allocations made up to and including those for the company’s financial period that ended on 2 April 2005, which were based on a member’s individual entitlement after deductions of income tax and national insurance, are held in the Ram Brewery Trust II. On retirement, members receive the market value of their accrued entitlement to shares, in the form of cash or shares as the company determines. If they leave the company’s employment before reaching normal retirement age, they continue to receive the income accruing to them by virtue of their membership of the scheme prior to them leaving, and their allocation to the date of leaving is held on their behalf until normal retirement age. The accrued entitlement to A shares under the scheme of each of the directors who served during the period is as follows (and there is no further accrual): Stephen Goodyear (22,680), Torquil Sligo-Young (31,412), Peter Whitehead (20,816) and Patrick Dardis (6,696). None of the other directors who served during the period have an accrued entitlement under the scheme. (e) Savings-related share option scheme The company operates a savings-related share option scheme. From year to year eligible employees of the group are invited to join the scheme and be granted options to buy shares in the company. Employees must normally have been employed throughout the two years preceding the financial year in which they are invited to join, and they must agree to save a fixed monthly amount with a savings institution through deductions from net salary and usually over a three-year period. The amount to be saved determines the number of shares over which an option is granted. If the board chooses, options are granted at a discount of up to 20% of the market price of a share at the time invitations are sent out to join the scheme for that year. There are no performance conditions other than continued employment. The entitlement to A shares under the scheme of each of the directors who served during the period is as follows: Stephen Goodyear Torquil Sligo-Young Peter Whitehead Patrick Dardis Edward Turner (iii) At 30 March 2015 1,844 1,071 – 1,844 1,071 1,844 1,071 1,844 1,071 – 1,844 1,071 – Granted Exercised Lapsed – – 888 – – – – – – 888 – – 888 (1,844) – – (1,844) – (1,844) – (1,844) – – (1,844) (505) (123) – – – – – – – – – – – (566) (765) At 28 March 2016 – 1,071 888 – 1,071 – 1,071 – 1,071 888 – – – Exercise price (pence per share) (i) 488 840 1,013 488 840 488 840 488 840 1,013 488 840 1,013 Exercisable from 01.09.15 01.09.17 01.09.18 01.09.15 01.09.17 01.09.15 01.09.17 01.09.15 01.09.17 01.09.18 01.09.15 01.09.17 01.09.18 Exercisable to 28.02.16 28.02.18 28.02.19 28.02.16 28.02.18 28.02.16 28.02.18 28.02.16 28.02.18 28.02.19 28.02.16 28.02.18 28.02.19 Gains made on exercise of share options (£) (ii) 13,037 – – 13,037 – 13,037 – 13,037 – – 13,056 1,389 125 38 38 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Notes: (i) The exercise prices are at a discount of not more than 20% to the market price of an A share at the time invitations to join the scheme were issued. (ii) The figures appearing in the Gains made on exercise of share options column are calculated by taking the difference between the exercise price and the market price of an A share on the day the option was exercised, and then multiplying that by the number of A shares in respect of which the option was exercised. (iii) After he left the company Edward Turner continued to save privately under the scheme. He then bought a reduced number of shares within six months of leaving. This was allowed per the scheme’s early leaver provisions. The exercise prices of 488 pence per share, 840 pence per share and 1,013 pence per share represent a discount of not more than 20% to the market price of an A share at the time the relevant invitations to join the scheme were issued, being 610 pence per share, 1,050 pence per share and 1,265.5 pence per share respectively. 9. EXC E PT I O NAL ITE M S Amounts included in operating profit: Upward movement on the revaluation of properties(1) (note 17) Downward movement on the revaluation of properties(1) (note 17) Acquisition costs(2) Net profit on sale of properties(3) Restructuring costs(4) Goodwill impairment(5) Capital gains tax on ESOP Trust allocated shares(6) Pension settlement gain(7) Exceptional tax: Tax attributable to above adjustments Change in corporation tax rate Total exceptional items after tax 2016 £m 2015 £m 2.8 (3.3) (0.4) 0.1 (1.0) (0.3) – – (2.1) (0.6) 2.0 1.4 (0.7) 6.4 (2.2) (1.0) 0.9 – – (0.2) 0.2 4.1 (1.9) – (1.9) 2.2 (1) The movement on the revaluation of properties is a non-cash item that relates to the revaluation exercise that was completed during the period. The revaluation was conducted at an individual pub level and identified an upward movement of £2.8 million (2015: £6.4 million) representing reversals of previous impairments recognised in the income statement and a downward movement of £3.3 million (2015: £2.2 million) representing downward movements in excess of amounts recognised in equity. These resulted in a net downward movement of £0.5 million (2015: £4.2 million net upward) which has been taken to the income statement. The downward movement for the period ended 28 March 2016 was split between land and buildings of £0.2 million downwards (2015: £4.5 million upward) and fixtures and fittings of £0.3 million downwards (2015: £0.3 million downward). See note 5 for segmental information. (2) The acquisition costs relate to the purchases of the Canonbury (Islington) and the Old Brewery (Greenwich). They include legal and professional fees and stamp duty. The prior period acquisition costs related to the purchase of the Bull & Gate (Kentish Town), Fox & Anchor (Smithfield Market) and the White Bear (Kennington). (3) The profit on sale of properties relates to the difference between the cash, less selling costs, received from the sale or lease termination of the Seven Stars (Brighton), New Town (Sutton) and Sekforde Arms (Clerkenwell) and the carrying value of the assets on the date of sale. In the prior period, sales of properties include the Elephant (City of London), Tin Goose (Heathrow Airport), Tamworth Arms (Croydon) and the Bunch of Grapes (Bradford upon Avon). (4) Restructuring costs relate to a reorganisation of the group’s head office functions. These are largely made up of severance costs and consultancy fees. (5) The goodwill impairment is a non-cash item and relates to the Lord Palmerston (Tufnell Park) which was transferred out of the Geronimo group of cash generating units (which are pubs under the Geronimo concept) and falls within the Geronimo managed houses segment. (6) In the prior period, the capital gains tax on ESOP Trust allocated shares relating to shares held within the Ram Brewery Trust II on behalf of the closed profit sharing scheme was recognised within exceptional items. This charge is now reflected within operating costs. (7) The pension settlement gain, in the prior period, related to members who have left the scheme. There was no such settlement gain in the current period. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 39 NOTES TO THE FINANCIAL STATEMENTS Continued 10. OT H E R F I NAN C IAL M EAS U R E S The table below shows how adjusted group EBITDA, operating profit and profit before tax have been arrived at. These alternative performance measures have been provided as the board believes that they give useful additional measures of the group’s underlying performance. Details of the exceptional items can be seen in note 9. All the results below are from continuing operations. 2016 Exceptional items £m Unadjusted £m 56.8 (17.9) 38.9 (5.3) (0.3) 33.3 1.6 0.5 2.1 – – 2.1 Adjusted £m Unadjusted £m 58.4 52.1 (17.4) (10.6) 41.0 (5.3) (0.3) 35.4 41.5 (5.2) (0.2) 36.1 EBITDA Depreciation and net movement on the revaluation of properties Operating profit Net finance costs Other finance charges Profit before tax 11 . FINANCE COSTS Bank loans and overdrafts Finance lease interest 12 . TAXATI ON Tax charged in the group income statement Current tax Current tax expense Adjustment in respect of current tax of prior periods Deferred tax Origination and reversal of temporary differences Change in corporation tax rate Adjustment in respect of deferred tax of prior periods Tax expense Deferred tax in the group income statement Property revaluation and disposals Capital allowances Retirement benefit schemes Share based payments Tax (credit)/expense Deferred tax in the group statement of comprehensive income Property revaluation and disposals Retirement benefit schemes Interest rate swaps Change in corporation tax rate Tax expense 40 40 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 2015 Exceptional items £m Adjusted £m 0.1 (4.2) (4.1) – – (4.1) 2016 £m 5.2 0.1 5.3 2016 £m 7.1 (0.1) 7.0 1.9 (2.0) (0.7) (0.8) 6.2 (0.6) (0.1) 0.2 (0.3) (0.8) 2.4 0.9 – (3.3) – 52.2 (14.8) 37.4 (5.2) (0.2) 32.0 2015 £m 5.1 0.1 5.2 2015 £m 7.6 0.3 7.9 1.6 – (0.1) 1.5 9.4 1.8 (0.3) 0.2 (0.2) 1.5 2.5 (1.8) (0.7) – – Strategic report Directors’ report Financial statements Shareholder information A reconciliation of the tax expense applicable to the profit from operating activities before tax at the statutory rate to the actual tax expense at the group’s effective tax rate for the periods ended 28 March 2016 and 30 March 2015 respectively is as follows: Profit before tax Total profit before tax at corporation tax rate of 20% (2015: 21%) Tax effects of: Expenses not deductible for tax purposes Recognition of property revaluation, rollover claim and other property movements Non-assessable income Remeasurement of deferred tax – change in corporation tax rate Prior period adjustment – current tax Prior period adjustment – deferred tax Total tax expense 2016 £m 33.3 6.7 0.5 1.7 0.1 (2.0) (0.1) (0.7) 6.2 2015 £m 36.1 7.6 0.7 1.8 (0.9) – 0.3 (0.1) 9.4 Changes to the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and then to 18% (effective 1 April 2020), were substantively enacted into law on 26 October 2015. It is not expected that deferred tax balances will be realised or settled between 1 April 2017 and 1 April 2020; therefore the 19% rate has not been applied. Consequently, the deferred tax balances have been remeasured from 20% to 18%. 13. BUSINESS COMBINATIONS The group and company acquired the Canonbury (Islington) and the Old Brewery (Greenwich) as business combinations in the current period for considerations totalling £3.5 million. The aggregated fair value of the identifiable assets and liabilities of the acquired businesses was property and equipment of £3.5 million and inventories of £nil. The group incurred £0.4 million of costs associated with the acquisitions, which have been recorded as operating exceptional items. Between the date of acquisition and the balance sheet date, the Canonbury and Old Brewery contributed £1.4 million of revenue and £0.1 million of operating loss. If the acquisitions of the two pubs had been completed on 31 March 2015, group revenues for the period would have increased by £1.9 million and the group operating profit would have increased by £0.4 million. Prior period business combinations 580 Group On 16 October 2014 the group acquired the entire issued share capital of 580 Limited for consideration of £10.4 million on a debt and working capital free basis. 580 Limited, through its four subsidiaries, owned and operated four pubs in prime London locations: the Defector’s Weld (Shepherds Bush), John Salt (Islington), Owl and Pussycat (Shoreditch) and the Fellow (King’s Cross). The transaction was part of our strategy of adding carefully selected high-quality managed houses to our Young’s and Geronimo estates. The fair value of the identifiable assets and liabilities of the acquired business at the date of acquisition was as follows: Assets and liabilities acquired: Property and equipment Inventories Cash Trade and other receivables Overdrafts and loans Trade and other payables Deferred taxation on fair value adjustments Net assets Goodwill arising on acquisition (note 16) Total consideration for share capital Cash flow on acquisition: Cash acquired Overdrafts and loans acquired and repaid Net working capital acquired and repaid Cash paid for share capital Net cash outflow Fair value £m 10.4 0.1 0.8 0.1 (3.6) (0.8) (0.9) 6.1 0.9 7.0 0.8 (3.6) (0.6) (7.0) (10.4) In addition, the group incurred £0.5 million of costs associated with the acquisition, paid in cash, which have been recorded as an operating exceptional item in the prior period. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 41 NOTES TO THE FINANCIAL STATEMENTS Continued 13. B U S I N E S S C O M B I NATI O N S (C O NT I N U E D) The Bell at Stow Limited On 7 January 2015 the group acquired the entire issued share capital of The Bell at Stow Limited for consideration of £1.5 million on a debt and working capital free basis. The Bell at Stow owned and operated a pub and hotel in the Cotswolds which, together with the newly acquired and adjacent Stuart House (see below), added a further 13 high quality boutique hotel rooms to the Young’s estate. The fair value of the identifiable assets and liabilities of the acquired business at the date of acquisition was as follows: Assets and liabilities acquired: Property and equipment Trade and other receivables Overdrafts and loans Trade and other payables Deferred taxation on fair value adjustments Net assets Goodwill arising on acquisition (note 16) Total consideration for share capital Cash flow on acquisition: Cash acquired Overdrafts and loans acquired and repaid Net working capital acquired and repaid Cash paid for share capital Net cash outflow Fair value £m 1.5 0.1 (0.4) (0.3) (0.2) 0.7 0.2 0.9 – (0.4) (0.2) (0.9) (1.5) In addition, the group incurred £0.1 million of costs associated with the acquisition, paid in cash, which have been recorded as an operating exceptional item in the prior period. The goodwill that arose on the acquisitions of 580 Limited and The Bell at Stow Limited included deferred taxation of £0.9 million and £0.2 million respectively, which arose on the fair value adjustment of property and equipment. None of the goodwill was deductible for income tax purposes. In the prior period, between the date of acquisition and the balance sheet date, the 580 Group and the Bell at Stow Limited contributed £3.2 million of revenue and £0.7 million of operating profit. If the acquisitions of the 580 Group and the Bell at Stow Limited had been completed on 1 April 2014, group revenues for the prior period would have increased by £4.2 million and the group operating profit would have increased by £0.7 million. Cash flow from business combinations 580 Group The Bell at Stow Limited Other business combinations Total net cash outflow 2016 £m – – (3.5) (3.5) 2015 £m (10.4) (1.5) (6.6) (18.5) 42 42 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 14. D I VI D E N D S O N E Q U I T Y S H AR E S Final dividend (previous period) Interim dividend (current period) 2016 Pence 8.56 8.38 2015 Pence 8.07 7.90 16.94 15.97 2016 £m 4.1 4.1 8.2 2015 £m 3.9 3.8 7.7 In addition, the Board is proposing a final dividend in respect of the period ended 28 March 2016 of 9.07 pence per share at a cost of £4.4 million. If approved, it is expected to be paid on 7 July 2016 to shareholders who are on the register of members at the close of business on 10 June 2016. 15. EARNING S PER OR DINAR Y S HARE (a) Earnings Profit attributable to equity shareholders of the parent Operating exceptional items Tax attributable to above adjustments Change in corporation tax rate Adjusted earnings after tax Basic weighted average number of ordinary shares in issue Dilutive potential ordinary shares from outstanding employee share options Diluted weighted average number of shares (b) Basic earnings per share Basic Effect of exceptional items and other adjustments Adjusted basic (c) Diluted earnings per share Diluted Effect of exceptional items and other adjustments Adjusted diluted 2016 £m 27.1 2.1 0.6 (2.0) 27.8 2015 £m 26.7 (4.1) 1.9 – 24.5 Number Number 48,598,203 26,324 48,397,275 69,303 48,624,527 48,466,578 Pence 55.76 1.44 57.20 Pence 55.73 1.44 57.17 Pence 55.17 (4.55) 50.62 Pence 55.09 (4.54) 50.55 The basic earnings per share figure is calculated by dividing the profit attributable to equity shareholders of the parent for the period by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share have been calculated on a similar basis taking into account 26,324 (2015: 69,303) dilutive potential shares under the SAYE scheme (see notes 8(e) and 27). Adjusted earnings per share are presented to eliminate the effect of the exceptional items and the tax attributable to those items on basic and diluted earnings per share. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 43 NOTES TO THE FINANCIAL STATEMENTS Continued 16. G O O DW I LL 2016 Geronimo The Bell at Stow Limited 580 Limited 2015 Geronimo The Bell at Stow Limited 580 Limited Group At 30 March 2015 Acquisitions £m £m Disposal £m At 28 March 2016 £m 19.8 0.2 0.9 20.9 – – – – (0.3) – – (0.3) 19.5 0.2 0.9 20.6 At 31 March 2014 £m Acquisitions £m At 30 March 2015 £m Disposal £m 20.4 – – 20.4 – 0.2 0.9 1.1 (0.6) – – (0.6) 19.8 0.2 0.9 20.9 The opening goodwill of £20.9 million arose on the acquisition of Geronimo Group Limited and the prior period acquisitions of 580 Limited and The Bell at Stow Limited. The goodwill was allocated for impairment testing purposes to the Geronimo group, the individual pubs within the 580 Group and the Bell at Stow respectively; these are the cash generating units. The Geronimo group of cash generating units is the pubs trading under the Geronimo concept. All three cash generating units fall within the managed houses segment. During the current period the Lord Palmerston transferred out of the Geronimo group and the managed houses segment and into our Ram Pub Company segment. The relative value of the goodwill associated with the Lord Palmerston, £0.3 million, has been expensed through exceptional items. The group tests goodwill annually for impairment or more frequently if there are indicators that goodwill may have been impaired. There will be an impairment if the recoverable amount is lower than carrying value. Recoverable amount is value in use. The value in use is calculated using the three year business plan approved by the Board. Cash flows beyond this period assume 2.0% growth (2015: 2.0%) which is below the industry long-term average growth rate. The pre-tax discount rate applied to cash flow projections is 8.7% (2015: 9.1%). The calculation is most sensitive to revenue assumptions and the pre-tax discount rate, however the Board believes that the assumptions used are reasonable. The Board has conducted a sensitivity analysis on the impairment test and neither a 10% decline in cash flow nor a 1% increase in the discount rate would lead to the impairment of the goodwill in the period ended 28 March 2016 and is therefore comfortable that presently no reasonably possible change in key assumptions would give rise to an impairment. 44 44 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 17. PR OPER TY AND EQUIPME N T Group Fixtures, fittings & equipment £m Land & buildings £m Cost or valuation At 31 March 2014 Additions Business combinations Disposals Fully depreciated assets Revaluation(1) – effect of upward movement in property valuation – effect of downward movement in property valuation At 30 March 2015 Additions Business combinations Disposals Fully depreciated assets Revaluation(1) – effect of upward movement in property valuation – effect of downward movement in property valuation 562.6 10.7 17.0 (2.0) (0.8) 24.9 (5.3) 607.1 16.6 2.3 (4.2) – 29.3 (5.5) 93.4 21.7 1.5 (0.1) (9.7) – – 106.8 25.0 1.2 (1.5) (12.7) – – Total £m 656.0 32.4 18.5 (2.1) (10.5) 24.9 (5.3) 713.9 41.6 3.5 (5.7) (12.7) 29.3 (5.5) Strategic report Directors’ report Financial statements Shareholder information Company Fixtures, fittings & equipment £m Land & buildings £m 503.4 11.7 5.4 (2.0) – 22.7 (5.1) 536.1 18.0 2.3 (4.1) – 27.5 (4.4) 83.4 18.4 1.2 (0.1) (9.2) – – 93.7 20.8 1.2 (1.1) (10.1) – – Total £m 586.8 30.1 6.6 (2.1) (9.2) 22.7 (5.1) 629.8 38.8 3.5 (5.2) (10.1) 27.5 (4.4) At 28 March 2016 645.6 118.8 764.4 575.4 104.5 679.9 Depreciation and impairment At 31 March 2014 Depreciation charge Disposals Fully depreciated assets Revaluation(1) – effect of downward movement in property valuation – effect of upward movement in property valuation At 30 March 2015 Depreciation charge Disposals Fully depreciated assets Transfers Revaluation(1) – effect of downward movement in property valuation – effect of upward movement in property valuation 46.8 2.3 (0.2) (0.8) 1.9 (6.4) 43.6 2.5 (0.9) – (1.0) 3.0 (2.8) 50.0 12.5 (0.1) (9.7) 0.3 – 53.0 14.9 (1.3) (12.7) – 0.3 – 96.8 14.8 (0.3) (10.5) 2.2 (6.4) 96.6 17.4 (2.2) (12.7) (1.0) 3.3 (2.8) 40.1 1.3 (0.2) – 1.3 (5.6) 36.9 1.6 (0.8) – (1.0) 2.5 (2.3) 45.0 10.9 (0.1) (9.2) – – 46.6 13.0 (1.0) (10.1) – 0.1 – 85.1 12.2 (0.3) (9.2) 1.3 (5.6) 83.5 14.6 (1.8) (10.1) (1.0) 2.6 (2.3) At 28 March 2016 44.4 54.2 98.6 36.9 48.6 85.5 Net book value At 31 March 2014 At 30 March 2015 515.8 563.5 43.4 53.8 559.2 617.3 463.3 499.2 38.4 47.1 501.7 546.3 At 28 March 2016 601.2 64.6 665.8 538.5 55.9 594.4 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 45 NOTES TO THE FINANCIAL STATEMENTS Continued 17. PR OPER TY AND EQUIPME N T (C O NTI N U E D) (1) The group’s net book value uplift due to revaluation of £23.3 million (2015: £23.8 million) comprises a net upward movement of £23.8 million (2015: £19.6 million) shown in the statements of comprehensive income plus a net downward revaluation of £0.5 million (2015: £4.2 million reversal of downward revaluation) in the income statement. The company’s net book value uplift due to revaluation of £22.7 million (2015: £21.9 million) comprises an upward movement of £23.1 million (2015: £17.6 million) shown in the statements of comprehensive income plus downward revaluations of £0.3 million (2015: £4.3 million reversal of downward revaluation) in the income statement. (a) Revaluation of property and equipment On an annual basis, a portion of the group’s property estate is valued externally by CBRE Ltd, independent Chartered Surveyors, in accordance with the provisions of the RICS Valuation – Professional Standards January 2014 (Revised April 2015) (‘the Red Book’), which takes account of the properties’ highest and best value. The remaining portion of the estate is valued internally, based upon the information supplied by the group’s external valuers and by Andrew Cox MRICS, the group’s director of property and tenancies and a Chartered Surveyor. The valuation is based on information, such as current and historic levels of turnover, gross profit, wages and overheads and resultant EBITDA. The valuers have then applied a multiplier to the EBITDA based upon the relative risks associated with the trading format, tenure and property. In a number of cases the value of the property derived purely from an income approach understates the underlying property value. In these cases the valuers have applied a spot value to the property rather than a value derived from a multiple applied to the income. EBITDA represents a key unobservable input. In addition, the valuation was based on the valuer’s assumptions and models. Each individual pub is valued as a fully equipped operational entity after taking into account its trading potential, location, tenure, size and condition and other factors such as recent market transactions. Changes in these variables and assumptions could materially impact the valuations. The external valuations made are consistent and in support with the values derived by Andrew Cox. These valuations and the assumptions used are reviewed by the Board and the auditor. The highest and best use of the group’s properties do not differ materially from their current use. These techniques are consistent with the principles in IFRS 13 Fair Value Measurement and use significant unobservable inputs such that the fair value measurement of each property within the portfolio has been classified as Level 3 in the fair value hierarchy. The key inputs to valuation on property and equipment are as follows: Tenure Freehold and long leasehold Leasehold Concession Freehold and long leasehold Leasehold EBITDA multiple range High Low 6.0 1.3 Spot 6.0 1.5 12.0 4.0 Spot 10.0 3.0 Freehold and long leasehold Leasehold Concession Freehold and long leasehold Leasehold 6.0 1.5 Spot 6.0 2.0 12.0 3.5 Spot 9.5 3.0 Segment 2016 Managed houses Managed houses Managed houses Ram Pub Company Ram Pub Company Segment total Unallocated Total net book value at 28 March 2016 2015 Managed houses Managed houses Managed houses Ram Pub Company Ram Pub Company Segment total Unallocated Total net book value at 30 March 2015 Number of pubs 137 31 3 70 10 251 – 251 139 28 3 69 11 250 – 250 Value of pubs £m 566.6 30.5 0.1 59.5 1.2 657.9 7.9 665.8 531.3 22.1 0.3 55.8 0.2 609.7 7.6 617.3 In addition to the 3 concessions held at spot rate, 27 (2015: 25) freehold and leasehold properties in the managed houses segment and 33 (2015: 33) leasehold properties within the Ram Pub Company segment are held at spot value. If, at 28 March 2016, the property estate had been carried at historic cost less accumulated depreciation and impairment losses, its carrying amount would have been approximately £419.5 million (2015: £393.7 million). The revaluation surplus represents the amount by which the fair value of the estate exceeds its historic cost. A sensitivity analysis has been conducted on the property estate to give an indication of the impact of movements in the most sensitive assumption, EBITDA. The analysis considers this single change with the other assumptions unchanged. In practice changes in one assumption may be accompanied by changes in another. Changes in market values may also occur at the same time as any changes in assumptions. This information should not be taken as a projection of likely future valuation movements. Decreasing the EBITDA used in the revaluation by 10% would decrease the valuation by £53.2 million (2015: £50.0 million). Increasing the EBITDA used in the revaluation by 10% would increase the valuation by £53.2 million (2015: £50.0 million). 46 46 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 (b) Assets held under finance leases The net book value of assets held under finance leases was: Land and buildings held under finance leases (c) Capital commitments Capital commitments not provided for in these financial statements and for which contracts have been placed amounted to: 18. INVEST MENTS I N S UBS ID I A RI E S Cost and net book value At 31 March 2014 Additions At 30 March 2015 Additions At 28 March 2016 Group subsidiary undertakings Geronimo Inns Limited Geronimo Airports Limited 580 Limited 587 Limited (1) 588 Limited (1) 591 Limited (2) 592 Limited (1) The Bell at Stow Limited (1) Strategic report Directors’ report Financial statements Shareholder information 2016 £m 29.9 2015 £m 28.7 9.5 10.6 Company £m 24.3 7.0 31.3 – 31.3 Country of incorporation and registration Country of principal operations % of equity and votes held England England England England England England England England England England England England England England England England 100 100 100 100 100 100 100 100 During the period, each of the following companies successfully applied to be struck off and dissolved, namely 587 Limited, 588 Limited, 591 Limited, 592 Limited and The Bell at Stow Limited. Prior to that, each of these entities was directly or indirectly a 100% subsidiary of the company. (1) An application has been made to strike off and dissolve these companies. The strike off was effective from 5 April 2016. (2) An application has been made to strike off and dissolve 591 Limited. The effective date remains pending at year end. 19. INVENT ORI ES Finished goods and raw materials Group Company 2016 2015 2016 £m 2.6 £m 2.7 £m 1.9 2015 £m 2.0 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 47 NOTES TO THE FINANCIAL STATEMENTS Continued 20. T R AD E AN D OTH E R R E C E I VAB LE S Trade receivables Other receivables Prepayments and accrued income Amounts due from subsidiaries Group Company 2016 £m 2.6 0.5 3.3 – 6.4 2015 £m 1.8 0.5 3.2 – 5.5 2016 2015 £m 2.1 0.4 2.5 23.8 28.8 £m 1.7 0.3 2.5 23.1 27.6 Trade receivables are denominated in sterling, are non-interest bearing and are generally on 0-20 days’ terms. The above carrying values are shown net of a provision for impairment and equate to fair value. At 28 March 2016, trade receivables with a nominal value of £0.8 million (2015: £0.7 million) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows: 2016 2015 Opening balance Charge for period Amounts written off £m 0.7 0.2 (0.1) 0.8 The amounts written off in the period were specific debts which proved irrecoverable. The analysis of trade receivables at 28 March 2016 is as follows: Neither past due Total nor impaired £m 2.6 1.8 £m 1.6 0.6 <31 days £m 0.5 0.4 31-60 days £m 0.4 0.6 61-90 days £m 0.1 0.1 2016 2015 £m 0.7 0.2 (0.2) 0.7 91+ days £m – 0.1 Of the trade receivables that are neither past due nor impaired by value, 10.3% (2015: 7.8%) reflects new customers with no previous history of default, 45.3% (2015: 51.0%) represents existing customers with no history of default and 44.4% (2015: 41.2%) represents existing customers with some history of default. 21. TR AD E AN D OTH E R PAYA B LE S Trade payables Other related parties: Ram Brewery Trust II Other tax and social security Other creditors Accruals and deferred income Amounts due to subsidiaries Group Company 2016 £m 14.7 – 7.9 7.3 5.6 – 2015 £m 12.1 – 6.2 6.7 4.2 – 2016 £m 14.6 – 7.5 6.6 5.0 4.5 2015 £m 11.7 0.2 6.0 6.2 3.8 – 35.5 29.2 38.2 27.9 All trade payables are payable on demand and the carrying values above equate to fair value. Other creditors mainly consist of employee and property related creditors. 48 48 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 22. CAPIT AL MAN AG EMEN T A N D FIN AN CIAL INST RUME NT S The group’s capital management objective is to maintain an optimal structure, measuring investment opportunities against returning capital to shareholders, but with an appropriate level of gearing. This provides a platform from which the group can seek to maximise shareholder value. The Board monitors its capital using gearing ratios, such as net debt as a multiple of EBITDA and interest cover. The group finances the business with a mixture of equity (note 26) and debt (note 28). The group’s principal treasury objective is to manage financial risks and provide secure and competitively priced funding for the group’s activities. When appropriate, the group uses financial instruments and derivatives to manage these risks. The borrowing requirements are met largely by bank debt and, to a very small extent, finance leases. Other sources of funding arise directly from trading activities, such as trade and other payables. The main financial risks relate to interest rates, credit, liquidity and cash flow. Other risks that the group faces are referred to in the principal risks and uncertainty section starting on page 8. The Board seeks to manage the financial risks in the following manner: Interest rate risk The objective is to minimise the group’s interest cost and provide protection from adverse movements in interest rates. The Board does this by maintaining a mix of debt at fixed and variable interest rates. Interest rate swaps are used to help manage this exposure by fixing interest rates whilst matching the maturity profile and cash flows of the underlying debt. These swaps are designated as cash flow hedges. The following table demonstrates the sensitivity of the group’s profit before tax to a change in interest rates, with all other variables held constant. 2016 2015 Increase/ decrease in % Effect on profit before tax £m +1.0 –0.5 +1.0 –0.5 (0.300) 0.150 (0.490) 0.245 Credit risk The objective is to minimise the group’s credit risk. Credit risks include counterparties defaulting on their debts or other obligations which would impair the group’s ability to recover the carrying value of that asset. The group has financial control policies which it follows before entering into arrangements with a new counterparty or when there is a substantial change in the existing relationship. Any potential impairments are monitored and, where appropriate, provision is made for any irrecoverable balances. The company is not considered to have any exposure to credit risk from amounts due from subsidiaries. Liquidity and cash flow risk The objective is to ensure that the group has sufficient financial resources to develop its existing business and exploit opportunities as they arise. The Board manages liquidity risk by ensuring that the group’s debt profile is long dated, facilities are committed and the group does not rely unduly on short term borrowings. The group’s borrowings are dependent on certain financial covenants being met. If these were breached, funding could be withdrawn, leaving the group with insufficient working capital and if the group were unable to find other alternative sources of funding it may not be possible to continue trading in its current form. The Board is vigilant in managing the business, assessing and monitoring acquisitions and investments, and forecasting the group’s profit and cash flows. The funding position of the group is continuously reviewed against the headroom in the group’s borrowing facilities. (a) Derivative financial instruments: interest rate swaps Current liabilities Non-current liabilities Total financial liability Group and company 2016 £m (3.1) (9.0) (12.1) 2015 £m (2.5) (9.5) (12.0) Fair value movement of interest rate swaps – (3.6) The group has a number of interest rate swaps that fix future interest cash flows on the variable interest rate bank loans. These instruments result in the group paying fixed interest rates on the notional amount for each swap’s life. The swaps are being used to hedge the exposure to changes in the group’s cash flows on its variable rate loans due to changes in LIBOR. The secured loans and the interest rate swaps have the same critical terms over their relevant period. The duration of each swap, and its respective interest rates once combined with the bank’s margin and other costs, are detailed in part (b) of this note. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 49 NOTES TO THE FINANCIAL STATEMENTS Continued 22. CAPITAL MANAG E M E NT A N D F I NAN C I AL I N S TRUM E NT S (C O NTI N U E D) (b) Loans, borrowings, interest rates and fair values 2016 Secured £20 million loan swapped into fixed rate £30 million loan swapped into fixed rate £20 million loan swapped into fixed rate £30 million loan swapped into fixed rate £75 million revolving credit facility Unsecured Finance leases Non-current financial liabilities Current borrowings Non-current financial liabilities Financial liabilities 2015 Secured £20 million loan swapped into fixed rate £30 million loan swapped into fixed rate £20 million loan £30 million loan swapped into fixed rate £75 million revolving credit facility Unsecured Finance leases Non-current financial liabilities Current borrowings Non-current financial liabilities Financial liabilities Group and company Term or expiry date Effective interest rate Period rate fixed March 2018 March 2021 March 2021 March 2023 March 2019 4.58% 4.34% 2.23% 5.97% Variable 2 years 5 years 5 years 7 years None Group and company Term or expiry date Effective interest rate Period rate fixed March 2018 4.58% March 2021 3.76% to 4.34% Variable March 2021 5.97% March 2023 Variable March 2019 3 years 6 years None 8 years None Fair value 2016 £m 21.3 32.7 19.8 38.0 43.1 Book value 2016 £m 20.0 29.8 19.9 30.0 43.1 154.9 142.8 0.6 143.4 Group Company 2016 £m – 2016 £m – 143.4 143.4 143.4 143.4 Fair value 2015 £m 21.6 32.3 19.9 37.8 23.9 Book value 2015 £m 20.0 29.8 19.8 30.0 23.9 135.5 123.5 0.7 124.2 Group Company 2015 £m 5.0 124.2 129.2 2015 £m 6.0 124.2 130.2 The secured borrowings are secured on the assets of the group. The fair values of borrowings and interest rate derivatives are estimates based on prevailing market rates of interest and expected future cash flows arising from those instruments. Bank overdrafts Bank overdrafts are used for day to day cash management. The group has a £10 million overdraft facility with interest linked to the base rate. Bank loan The group has a bilateral £50 million term loan with the Royal Bank of Scotland and a £50 million syndicated facility with the Royal Bank of Scotland and Barclays. The bilateral loan is repayable as to £20 million on 28 March 2018 and as to £30 million on 28 March 2023. The syndicated loan is repayable on 17 March 2021. Interest rate swaps have been entered into in respect of some of these bank loans which result in the effective interest charge being fixed at the rates disclosed above. 50 50 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Revolving credit facility The group has a £75 million revolving credit facility with the Royal Bank of Scotland and Barclays of which £43.5 million was drawn at the period end. Final repayment of the total drawn down balance is due as one payment on 17 March 2019. This is a committed facility which permits drawings of different amounts and for different periods. These drawings carry interest at a margin above LIBOR with a commitment payment on the undrawn portions. Interest is payable at each loan renewal date. (c) Maturity of the group’s financial liabilities and expiry of facilities 2016 Borrowings Trade and other payables Derivative financial instruments 2015 Borrowings Trade and other payables Derivative financial instruments Maturity of financial liabilities Within one year £m 1.0 22.6 3.7 27.3 Within one year £m 6.0 18.3 2.9 27.2 Between one and two years £m Between two and five years £m 21.0 – 3.2 24.2 Between one and two years £m 1.3 – 3.1 4.4 96.2 – 7.5 103.7 Between two and five years £m 48.0 – 8.2 56.2 After five years £m 30.0 – 3.0 33.0 After five years £m 82.6 – 5.0 87.6 Total £m 148.2 22.6 17.4 188.2 Total £m 137.9 18.3 19.2 175.4 The above maturity table includes contractual gross undiscounted cash flows of the borrowings, related interest, net derivatives, finance leases, trade payables and contractual accruals. (d) Fair value hierarchy for instruments measured at fair value Financial liabilities at fair value Interest rate swaps Financial liabilities at fair value Interest rate swaps Group and company Fair value 2016 £m Level 1 2016 £m Level 2 2016 £m Level 3 2016 £m 12.1 12.1 – – Fair value 2015 £m Level 1 2015 £m 12.0 12.0 – – 12.1 12.1 Level 2 2015 £m 12.0 12.0 – – Level 3 2015 £m – – Level 1 Fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Fair values measured using inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly or indirectly. Interest rate swaps are accounted for at their fair value calculated using a discounted cash flows method. Actual and estimated cash flows are discounted by applying discount factors derived from observable market data and by considering the credit risk. Level 3 Fair values measured using inputs for the asset or liability that are not based on observable market data. (e) Financial assets and other financial liabilities Financial assets and other financial liabilities of the group and the company are not included in this note because their book value approximates their carrying value. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 51 NOTES TO THE FINANCIAL STATEMENTS Continued 23. DEF ERR ED TAX Deferred tax relates to the following: Deferred tax assets Interest rate swaps Retirement benefit schemes Decelerated capital allowances Capital losses Share based payments Group Company 2016 £m 2015 £m 2016 £m 2015 £m 2.2 1.2 1.1 0.9 0.8 6.2 2.4 2.8 1.1 0.9 0.5 7.7 2.2 1.2 1.0 0.9 0.8 6.1 2.4 2.8 1.0 0.9 0.5 7.6 Deferred tax liabilities Rolled over gains and property revaluations (57.4) (59.8) (50.5) (52.6) Net deferred tax liabilities (51.2) (52.1) (44.4) (45.0) Opening balance Tax credit/(expense) in the income statement Tax (expense)/credit in the statement of comprehensive income Tax credit recognised directly in equity Deferred tax acquired in business combinations Closing balance Group Company 2016 £m (52.1) 0.8 – 0.1 – (51.2) 2015 £m (49.6) (1.5) – 0.1 (1.1) (52.1) 2016 £m (45.0) 0.8 (0.3) 0.1 – (44.4) 2015 £m (43.6) (1.6) 0.3 0.1 (0.2) (45.0) The deferred tax assets and liabilities at the balance sheet date are calculated at the substantively enacted rate of 18%. The group has realised capital losses of £6.9 million (2015: £6.1 million), which are available indefinitely to offset against future capital gains. A deferred tax asset has not been recognised in respect of £1.6 million (2015: £1.6 million) of these losses because at present it is unclear whether suitable gains will arise in the foreseeable future to utilise them. The company has realised capital losses of £5.3 million (2015: £4.5 million). A deferred tax asset has been recognised in respect of these losses in both the current and the prior period. In addition, the group has unrealised capital losses of £16.4 million (2015: £15.2 million). No deferred tax asset has been recognised in respect of these losses (2015: £nil) because it is uncertain whether they will be utilised. The company has unrealised capital losses of £14.1 million (2015: £12.8 million). No deferred tax asset has been recognised in respect of these losses (2015: £nil). 52 52 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 24. R ETI R E M E NT B E N E F IT S C H E M E S The company operates one defined benefit pension scheme, namely the Young & Co.’s Brewery, P.L.C. Pension Scheme, a defined contribution pension scheme and a post retirement health care scheme. The aggregate contribution to the defined contribution scheme was £0.8 million (2015: £0.5 million). Independent, professionally qualified actuarial advice is sought to determine the liabilities arising from the defined benefit scheme, using the projected unit credit method. The scheme is formally valued every three years. The obligations under the scheme consist mainly of a final salary scheme which provides members with benefits based on length of service and salary. Through its defined benefit scheme and post retirement health care scheme the group is exposed to a number of risks which are referred to in the principal risks and uncertainties section starting on page 8. The employer contribution to the defined benefit scheme for the period ended 28 March 2016 was £3.2 million (2015: £2.4 million) plus premiums of £0.2 million (2015: £0.2 million) to the post retirement health care scheme. The current arrangement as regards contribution rates is described in the relevant Schedule of Contributions. Future employee contribution rates are projected to be between 6% and 7% of pensionable earnings. Future employer contribution rates are projected to be 18% of pensionable earnings. The total contributions to the defined benefit scheme in the 2017 financial period are expected to be £1.5 million which includes a special contribution of £1.2 million. The total contributions to the post retirement health care scheme in the 2017 financial period are expected to be £0.2 million. The defined benefit scheme is closed to new entrants. In the prior period a settlement gain of £0.2 million was recorded within the pension scheme in relation to members who have left the scheme. There was no such settlement gain in the current period. Financial assumptions Pension Health care Rate of increase in salaries Discretionary pension increases Rate of revaluation of deferred pensions Discount rate Inflation General medical expenses inflation Mortality assumptions The life expectancies underlying the valuation are as follows: Current pensioners (at age 65) – males Current pensioners (at age 65) – females Future pensioners (at age 65) – males Future pensioners (at age 65) – females 2016 % 3.00 3.00 2.00 3.50 3.00 N/A 2015 % 3.20 3.20 2.20 3.30 3.20 N/A 2016 % N/A N/A N/A 3.50 3.00 9.00 2016 Years 22.8 24.9 25.0 27.2 2015 % N/A N/A N/A 3.30 3.20 9.00 2015 Years 22.7 24.8 24.8 27.1 At the period end date the average age of current pensioners was 72 years (2015: 71 years) and for future pensioners was 53 years (2015: 53 years). The weighted average duration of liabilities for the current period was 18.6 years (2015: 18.7 years). A one percentage point change in the assumed rate of increase in health care costs would have the following effects: Effect on the aggregate service cost and interest cost Effect on defined benefit obligation Increase £m Decrease £m – 0.4 – (0.4) The sensitivities regarding the principal assumptions used to measure the schemes’ liabilities are set out below. The illustrations consider the single change shown with the other assumptions assumed to be unchanged. In practice changes in one assumption may be accompanied by changes in another assumption. Changes in market values may also occur at the same time as the changes in assumptions and may or may not offset them. Assumption Discount rate Rate of inflation Life expectations Change in assumption Increase/decrease by 0.5% Increase/decrease by 0.5% Increase by 1 year Impact on scheme liabilities Decrease/increase by 9.0% Increase/decrease by 8.0% Increase by 4.0% YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 53 NOTES TO THE FINANCIAL STATEMENTS Continued 24. R ETIREMENT BENEFI T S C HE ME S (CONTINUED) Pension scheme and health care scheme assets and liabilities Equities Diversified growth fund Absolute return Corporate bonds Insured pensions Other Total fair value of assets Present value of retirement benefit liabilities Scheme deficit Group and company Assets and liabilities 2015 £m 2016 £m 28.6 9.8 12.1 51.7 10.6 (1.0) 29.8 10.4 12.0 53.3 11.2 (1.0) 111.8 (118.1) 115.7 (128.8) (6.3) (13.1) The pension scheme assets includes some of the company’s A shares with a fair value of £3.9 million (2015: £3.8 million). There are no property assets of the scheme occupied by the company. Of the above assets, £102.2 million are quoted securities. Movement in scheme deficits in the period 2016 Health care scheme £m Pension scheme £m (a) Changes in the present value of the schemes are as follows: Opening deficit Current service cost Settlement gain Contributions Other finance charges Remeasurement through other comprehensive income Closing deficit (b) Recognised in the income statement Current service cost included in operating costs Settlement gain (8.6) (0.5) – 3.1 (0.2) 4.0 (2.2) (0.5) – (0.5) (4.5) – – 0.3 (0.1) 0.2 (4.1) – – – Group and company Pension scheme £m 2015 Health care scheme £m (1.5) (0.6) 0.2 2.4 – (9.1) (8.6) (0.6) 0.2 (0.4) (4.5) – – 0.2 (0.2) – (4.5) – – – Total £m (13.1) (0.5) – 3.4 (0.3) 4.2 (6.3) (0.5) – (0.5) Total £m (6.0) (0.6) 0.2 2.6 (0.2) (9.1) (13.1) (0.6) 0.2 (0.4) Net interest expense (0.2) (0.1) (0.3) – (0.2) (0.2) (c) Recognised in the statement of comprehensive income Experience gains arising on the scheme liabilities (Loss)/gain from change in demographic assumptions Gain/(loss) from change in financial assumptions Remeasurement of obligations Return on scheme assets (less amounts included in the net interest expense) Net remeasurement recognised 2.5 – 8.0 10.5 (6.6) 3.9 0.2 – 0.1 0.3 – 0.3 2.7 – 8.1 10.8 (6.6) 4.2 0.9 – (17.0) (16.1) 7.0 (9.1) 0.3 – (0.3) – – – 1.2 – (17.3) (16.1) 7.0 (9.1) 54 54 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 2016 Health care scheme £m Pension scheme £m Group and company Total £m Pension scheme £m 2015 Health care scheme £m (d) Movements in the present value of scheme obligations during the period Opening defined benefit obligations Current service cost Interest on obligations Contributions by scheme members Remeasurement of obligations Benefits paid (124.3) (0.5) (4.0) (0.1) 10.5 4.4 (4.5) – (0.1) – 0.3 0.2 (128.8) (0.5) (4.1) (0.1) 10.8 4.6 (106.8) (0.4) (4.8) (0.1) (16.1) 3.9 Present value of scheme liabilities (114.0) (4.1) (118.1) (124.3) (e) Change in fair value of scheme assets Opening fair value of scheme assets Interest on scheme assets Return on scheme assets (less amounts included in the net interest expense) Contributions by employer Contributions by scheme members Benefits paid 115.7 3.8 (6.6) 3.2 0.1 (4.4) – – – 0.2 – (0.2) 115.7 3.8 (6.6) 3.4 0.1 (4.6) 105.3 4.8 7.0 2.4 0.1 (3.9) Fair value of scheme assets 111.8 – 111.8 115.7 (4.5) – (0.2) – – 0.2 (4.5) – – – 0.2 – (0.2) – Total £m (111.3) (0.4) (5.0) (0.1) (16.1) 4.1 (128.8) 105.3 4.8 7.0 2.6 0.1 (4.1) 115.7 25. PR OVI S I O N S At 31 March 2014 and 30 March 2015 Created At 28 March 2016 Analysed as: Current liabilities Non-current liabilities At 28 March 2016 Group £m Company £m – 1.0 1.0 – 1.0 1.0 – 1.0 1.0 – 1.0 1.0 The provisions created in the current period relate to four property leases where the expected operating income does not cover the rents payable. The rent payable commitments range from 14 to 55 years. 26. S HAR E CAPI TA L AN D R E S E RV E S Issued and fully paid shares – 12.5p each Opening balance Issued under employee share schemes 2016 Shares 2016 £000 2015 Shares 2015 £000 48,453,599 6,057 48,290,292 6,036 215,892 27 163,307 21 Closing balance 48,669,491 6,084 48,453,599 6,057 Of the opening balance of 48,453,599 shares, 29,293,599 are A shares and 19,160,000 are non-voting shares (2015: 29,130,292 A shares, 19,160,000 non-voting shares). Of the closing balance of 48,669,491 shares, 29,509,491 are A shares and 19,160,000 are non-voting shares (2015: 29,293,599 A shares, 19,160,000 non-voting shares). The A shares issued in the current period relate to directors’ emoluments (see note 8(b)) and the share awards (see note 27). The two classes of shares are equal in all respects except that the non-voting shares do not carry the right to receive notices of general meetings or to attend, speak or vote at them. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 55 NOTES TO THE FINANCIAL STATEMENTS Continued 27. SHARE AWARDS The group operates two types of share based payment arrangements: a senior management deferred bonus scheme (“DBS”) and a Save-As- You-Earn (“SAYE”) scheme. (a) DBS This scheme is designed to incentivise directors and certain other senior management to deliver long-term superior shareholder returns. For the directors, half of any bonus is to be settled in shares, with the other half being paid in cash except to the extent that the director elects to receive all or part of it in shares instead. The values of these parts of the bonus awards are capped at 100% of the directors’ basic annual salaries (but for these purposes the basic annual salaries of certain directors are adjusted). For the senior management, there is no requirement for them to take any of their bonus in shares, but they may elect to take up to half in this way. For every share taken in place of cash, the individual is allowed to subscribe at nominal value for one ‘matching’ share. None of the individuals are generally free to sell any of the shares before the end of a restricted period which ordinarily will end three years after the shares have been acquired or, if earlier, the date on which his employment terminates by reason of illness, disability or redundancy. The ‘matching’ shares are subject to satisfaction of a further condition relating to the extent to which the group’s adjusted earnings per ordinary share in respect of the group’s continuing operations for a particular performance period exceeds the same measure for an earlier financial period. Any of the shares acquired, whether ‘matching’ or otherwise, are liable to forfeiture in certain circumstances. The number of shares to be issued to an individual in order to fulfil his entitlement is calculated with reference to the market price of the company’s A ordinary shares as shown in the Financial Times (online version) published on the date on which the issue is made. The following table summarises the shares issued under the DBS. These shares are registered in the relevant individual’s name and, save as explained above, are fully vested. Date of award Matching shares (Y/N) At 30 March 2015 Awarded during the period Restrictions ceased to apply during the period Forfeited during the period* At 28 March 2016 Issue price (pence per share) Stephen Goodyear Torquil Sligo-Young Peter Whitehead Patrick Dardis Edward Turner June 2013 June 2013 September 2014 September 2014 June 2015 June 2015 June 2013 September 2014 September 2014 June 2015 June 2015 June 2013 June 2013 September 2014 September 2014 June 2015 June 2015 June 2013 September 2014 September 2014 June 2015 September 2014 June 2015 June 2015 Rupert Clevely June 2013 Senior management employees June 2013 June 2013 September 2014 September 2014 June 2015 June 2015 N Y N Y N Y N N Y N Y N Y N Y N Y N N Y N N N Y N N Y N Y N Y 18,487 9,243 32,478 16,239 – – 5,284 12,599 6,299 – – 12,365 6,182 21,744 10,872 – – 6,801 21,744 10,872 – 8,854 – – 3,081 2,416 1,208 10,547 10,547 – – – – – – 22,446 11,223 – – – 8,977 4,488 – – – – 15,044 7,522 – – – 7,522 – 9,529 4,764 – – – – – 11,103 11,103 – – – – – – – – – – – – – – – – – – – – – (8,854) (9,529) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (3,081) – – – – – – 18,487 9,243 32,478 16,239 22,446 11,223 5,284 12,599 6,299 8,977 4,488 12,365 6,182 21,744 10,872 15,044 7,522 6,801 21,744 10,872 7,522 – – 4,764 – 2,416 1,208 10,547 10,547 11,103 11,103 827.5 12.5 960.0 12.5 1,280.0 12.5 827.5 960.0 12.5 1,280.0 12.5 827.5 12.5 960.0 12.5 1,280.0 12.5 827.5 960.0 12.5 1,280.0 960.0 1,280.0 12.5 827.5 827.5 12.5 960.0 12.5 1,280.0 12.5 227,862 113,721 (18,383) (3,081) 320,119 * These shares were forfeited. As a result, they were transferred on 22 June 2015 to the Ram Brewery Trust II, an employee benefit trust designed by the company. The transfer was at 827.5p per share. The performance period for the award dated June 2013 was from April 2013 to March 2016. The performance periods for the awards dated September 2014 and June 2015 are from April 2014 to March 2017 and from April 2015 to March 2018 respectively. 56 56 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information The group’s adjusted earnings per share performance conditions set a range for the adjusted earnings per share for the relevant period; they are not disclosed due to commercial sensitivity. Based on the recent performance of the group and assuming this performance continues, it is anticipated that the maximum target for the adjusted earnings per share performance conditions will be met. A charge of £0.4 million (2015: £0.1 million) was made to the group and company income statements in respect of the outstanding 110,562 ‘matching’ shares held by the company at nominal value at 28 March 2016. (b) SAYE The scheme enables eligible directors and eligible employees to acquire options over A shares of the company. The options are issued at a discount of up to 20% of the market price of an A share at the time invitations to join the scheme for the relevant year are issued, with the proceeds of a related SAYE savings contract then being used to acquire shares at a later date if the option holders choose to do so. All employees who have worked for the minimum qualifying period on an invitation date are eligible to join the scheme. Options granted under the SAYE scheme are not subject to performance conditions other than continued employment. These options are all equity settled. In the current period, options over 47,864 A shares (2015: 43,023 A shares) were granted under the SAYE scheme on 10 July 2015 at an exercise price of 1,013.0p per share (2015: 840.0p per share). Subject to the participants remaining in the employment of the group and making 36 monthly contributions, these options will be exercisable between 1 September 2018 and 28 February 2019. Options over 169,950 A shares were outstanding at the beginning of the period. During the period, a total of 13,145 options lapsed. A further 99,912 options were exercised at 488.0p per share, 1,245 options were exercised at 662.0p per share, 891 options were exercised at 840.0p per share and 123 options were exercised at 1,013.0p per share, resulting in an increase in share capital of £12,771 and an increase in share premium of £491,771. A charge of £0.1 million (2015: £0.1 million), valued using the Black-Scholes option pricing model, was made to the group and company income statements in respect of these options in the period. As at 28 March 2016 options over 102,498 A shares remain outstanding. 28. NET CA SH GENER ATED FROM OPER AT ION S AND AN ALYSI S O F N ET DEBT Group Company Profit before tax on continuing operations Net finance cost Other finance charges Operating profit on continuing operations Depreciation Movement on revaluation of properties Net profit on sales of property and associated goodwill Pension scheme settlement gain Goodwill impairment Difference between pension service cost and cash contributions paid Share based payments Provision for capital gains tax on ESOP Trust allocated shares Movements in working capital - Inventories - Receivables - Payables Net cash generated from operations Analysis of net debt Cash Current borrowings – bank overdraft Non-current borrowings – loan capital and finance lease Net debt 2016 £m 33.3 5.3 0.3 38.9 17.4 0.5 (0.1) – 0.3 (2.9) 0.5 – – (0.9) 6.7 60.4 2015 £m 36.1 5.2 0.2 41.5 14.8 (4.2) (0.9) (0.2) – (2.0) 0.2 0.2 (0.1) 0.4 0.9 50.6 2016 £m 28.4 4.8 0.3 33.5 14.6 0.3 (0.1) – – (2.9) 0.5 – – (1.2) 10.7 55.4 2015 £m 30.9 4.1 0.2 35.2 12.2 (4.3) (1.5) (0.2) – (2.0) 0.2 0.2 – (0.9) 1.1 40.0 Group Company 2016 £m 13.2 – (143.4) 2015 £m 0.2 (5.0) (124.2) 2016 £m 11.8 – (143.4) (130.2) (129.0) (131.6) 2015 £m 0.2 (6.0) (124.2) (130.0) YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 57 NOTES TO THE FINANCIAL STATEMENTS Continued 29. R ELAT ED PARTY TRANSA C TI ONS Balances and transactions between the company and its wholly owned subsidiaries have been eliminated on consolidation and are not disclosed in this note; they were on an arm’s length basis and are disclosed in note 20. The transactions in the current period were £4.4 million (2015: £3.9 million) and mostly relate to the provision of payroll and administration recharges. Directors Directors’ emoluments and retirement benefits are disclosed in notes 8(b) and (c). Directors’ shareholdings and interests are disclosed or referred to on page 21 and in notes 8(d) and (e) and 27. Rupert Clevely and his wife, Jo Clevely: • reside from time to time, free of charge, in accommodation above one of the group’s pubs in London – the value of the benefit was £618* (2015: £10,253) and is included in the Benefits column for Rupert Clevely in note 8(b); • are lessees of a property in London from which the group operates one of its pubs – they hold the property on trust for two companies within the group jointly and, as part of that arrangement, those companies have agreed to indemnify Rupert and Jo Clevely in respect of certain liabilities relating to the property and the lease under which it is held; and • are entitled to be reimbursed for certain liabilities, costs and expenses that may be incurred by them pursuant to or in connection with certain pub-related guarantees given by them – the guarantees are not expected to be called on. Rupert Clevely and four other members of his family own a 50% share of Rogers and Rufus Pty Limited, an Australian wine producer. That company provides wine to the group for sale in its pubs via an intermediary wine supplier on an arm’s length basis. Goods purchased by the group totalled £5,346* (2015: £55,010). No amount was outstanding at 28 March 2016 (2015: £nil). Jo Clevely Design Limited, a company owned and controlled by Jo Clevely, provides interior design services for some of the group’s pubs. For these services (and inclusive of expenses and reimbursement for items purchased on behalf of the group) that company received £7,449* (2015: £132,942). No amount was outstanding at 28 March 2016 (2015: £10,674). * This is for the period up to and including 27 April 2015, being the date on which Rupert Clevely ceased to be a director of the company. No other transactions requiring disclosure have been entered into with the directors. Pension scheme and trusts The Young & Co.’s Brewery, P.L.C. Pension Scheme provides pensions and other benefits to employees of the group and certain other individuals. It is managed by a corporate trustee, Young’s Pension Trustees Limited (“YPTL”). Torquil Sligo-Young, a director of the company, and two other individuals, neither of whom is a director of the company, are the directors of YPTL. As at 28 March 2016, the pension scheme held 337,067 A shares (2015: 387,541), being 1.14% of the class. In 2008 the Ram Brewery Trust II was established. It holds assets for the benefit of employees and former employees, principally reflecting their accrued entitlement to A shares under the group’s now closed profit sharing scheme – see note 8(d). The shares are all fully vested and are not therefore disclosed as an investment in own shares in the group’s financial statements. The Ram Brewery Trust II is managed by a corporate trustee, RBT II Trustees Limited (“RBT II”). Torquil Sligo-Young, a director of the company, and Roy Summers, a former non-executive director of the company, are the directors of RBT II. As at 28 March 2016, the trust held 554,077 A shares (2015: 635,064), being 1.88% of the class. Key management The group considers key management personnel to be solely the directors of the company as they are the only people with authority and responsibility for planning, directing and controlling the activities of the group. The compensation provided to the directors is detailed in note 8. In addition, the group made employers national insurance contributions of £0.2 million (2015: £0.2 million) and incurred a share based payment charge of £0.3 million (2015: £0.1 million). 58 58 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information 30. O BLIGATION S UNDER LEAS E S (a) Obligations under finance leases Finance leases for property are for terms ranging from 50 to 999 years. Minimum lease payments for most leases are nominal amounts. Leases do not have a purchase option but most are renewable at the lessee’s option at the end of the lease term. Future minimum lease payments under finance leases are as follows: Future minimum lease payments due: - Not later than one year - Later than one year and not later than five years - Later than five years Less: finance charges allocated to future years The present value of minimum lease payments is analysed as follows: - Not later than one year - Later than one year and not later than five years - Later than five years Group Company 2016 £m 2015 £m 2016 £m 2015 £m – 0.2 2.5 2.7 (2.1) 0.6 – – 0.6 0.6 0.1 0.2 2.5 2.8 (2.1) 0.7 – – 0.7 0.7 – 0.2 2.5 2.7 (2.1) 0.6 – – 0.6 0.6 0.1 0.2 2.5 2.8 (2.1) 0.7 – – 0.7 0.7 Future minimum rentals receivable from non-cancellable subleases on the above properties as at 28 March 2016 were £0.2 million (2015: £0.2 million). (b) Operating lease agreements where the group is lessee Operating leases for property are for terms ranging from one to 49 years. Minimum lease payments are typically reviewed every five years and are based on a percentage of turnover or a negotiated rate per square foot. Most property leases are renewable at the lessee’s option at the end of the lease term. Equipment is leased over terms of up to four years. Future minimum rentals payable under non-cancellable operating leases are as follows: - Not later than one year - Later than one year and not later than five years - Later than five years 6.7 22.1 38.5 67.3 6.2 19.8 35.1 61.1 3.1 10.8 21.1 35.0 3.0 10.5 19.9 33.4 Future minimum rentals receivable from non-cancellable subleases on the above properties as at 28 March 2016 were £0.9 million (2015: £1.2 million). (c) Operating lease agreements where the group is lessor The group leases licensed properties to third party tenants. These non-cancellable leases are over terms varying from one to 19 years. Future minimum rentals receivable under non-cancellable operating leases are as follows: 3.4 - Not later than one year 5.8 - Later than one year and not later than five years 8.0 - Later than five years 3.6 5.9 9.4 3.3 5.8 8.0 17.2 18.9 17.1 3.4 5.9 9.4 18.7 31. PO ST BALANC E S HEET EV E N TS There were no post balance sheet events apart from the acquisition of the Woolpack (Bermondsey). We also exchanged contracts for the acquisition of the Blue Boar (Chipping Norton). 32. CONTIN GENT LIABI LITIES There were no contingent liabilities at the current or prior period balance sheet dates. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 59 FIVE YEAR REVIEW Strategic report Directors’ report Financial statements Shareholder information Revenue 245.9 227.0 210.8 193.7 2016 £m 2015 £m 2014 £m 2013 £m Operating profit before exceptional items Operating exceptional items Net finance costs and other finance charges Profit/(loss) before tax Taxation (charge)/credit Profit/(loss) from continuing operations Loss from discontinued operation Profit/(loss) for the period Adjusted profit before tax Net assets employed Non-current assets Current assets and assets held for sale Current liabilities Non-current liabilities Financed by Share capital Reserves 2012 £m 179.0 26.1 (28.8) (4.8) (7.5) 2.1 (5.4) (1.1) (6.5) 21.3 526.9 16.2 (28.5) (196.9) 41.0 (2.1) (5.6) 33.3 (6.2) 27.1 – 27.1 35.4 37.4 4.1 (5.4) 36.1 (9.4) 26.7 – 26.7 32.0 33.2 (0.6) (6.0) 26.6 (4.5) 22.1 – 22.1 27.2 28.9 (1.8) (5.7) 21.4 (5.0) 16.4 – 16.4 23.2 692.6 22.2 (41.8) (217.1) 645.9 8.4 (40.7) (206.6) 584.4 10.9 (32.4) (183.2) 543.4 17.6 (36.7) (189.8) 455.9 407.0 379.7 334.5 317.7 6.1 449.8 455.9 6.1 400.9 407.0 50.9 6.0 373.7 379.7 33.6 6.0 328.5 334.5 20.5 6.0 311.7 317.7 25.6 Purchase of fixed assets and business combinations 45.1 Net debt (130.2) (129.0) (112.0) (112.6) (118.1) Per 12.5p ordinary share Adjusted basic earnings from continuing operations Basic earnings/(loss) from continuing operations Dividends – paid in period 57.20 55.76 16.94 50.62 55.17 15.97 42.88 45.72 15.06 36.34 33.78 14.27 33.41 (11.13) 13.58 Pence Pence Pence Pence Pence Gearing 28.6% 31.7% 29.5% 33.7% 37.2% Average number of employees 3,735 3,496 3,357 3,242 2,985 60 60 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 NOTICE OF MEETING Strategic report Directors’ report Financial statements Shareholder information If you hold any A shares, this notice is important and requires your immediate attention. If you are in any doubt as to any aspect of the proposals referred to in this notice or as to the action you should take, you should seek your own advice from a stockbroker, solicitor, accountant or other professional adviser. If you have sold or otherwise transferred all of your shares, please pass this copy of the annual report, and any proxy form and business reply envelope that came with it, to the purchaser or transferee, or to the person who arranged the sale or transfer so they can pass it or them to the person who now holds the shares. If you hold any A shares, you should have received a proxy form for use at the meeting. Guidance notes on how to complete it, and on other matters, are given on the form itself and in the notes to this notice. Whether or not you propose to attend the meeting, please complete and submit the proxy form; it must be received by Computershare Investor Services PLC by 11.30am on Sunday, 3 July 2016. Appointing a proxy does not stop you from attending the meeting and voting. An admission card is attached to the proxy form; please bring this with you to the meeting. If you do not hold any A shares, this notice is for information purposes only. Notice is hereby given that the 127th annual general meeting of Young & Co.’s Brewery, P.L.C. (the “Company”) will be held in the Civic Suite in Wandsworth Town Hall, Wandsworth High Street, Wandsworth, London, SW18 2PU on Tuesday, 5 July 2016 at 11.30am for the following purposes: Ordinary resolutions To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions: 1. To receive the Company’s annual accounts for the financial year ended 28 March 2016, together with the strategic report, directors’ report and the auditor’s report on those accounts and reports. 2. To declare a final dividend of 9.07p per share for the financial year ended 28 March 2016. 3. That Ernst & Young LLP be, and is hereby, re-appointed as the Company’s auditor to hold office from the conclusion of this meeting until the conclusion of the next general meeting of the Company at which the Company’s annual accounts and reports are laid in accordance with section 437 of the Companies Act 2006. 4. That the directors be, and are hereby, authorised to fix the remuneration of the Company’s auditor. 5. That Nicholas Bryan be, and is hereby, re-appointed as a director. 6. That Stephen Goodyear be, and is hereby, re-appointed as a director. 7. That Patrick Dardis be, and is hereby, re-appointed as a director. 8. That the Company and all companies that are subsidiaries of the Company at any time during the period for which this resolution has effect be, and are hereby, authorised to: (a) make political donations to political parties, not exceeding £50,000 in total; (b) make political donations to political organisations other than political parties, not exceeding £50,000 in total; and (c) incur political expenditure, not exceeding £50,000 in total; in each case at any time during the period starting with the date this resolution is passed and ending at the end of next year’s annual general meeting (or, if earlier, at the close of business on 30 September 2017) but the aggregate amount of political donations and political expenditure that may be made and incurred by the Company and its subsidiaries pursuant to this authority must not exceed £50,000. Note: for the purposes of this resolution, “political donation” has the meaning given in section 364 of the Companies Act 2006, “political expenditure” has the meaning given in section 365 of the Companies Act 2006 and reference to a “political party” or to a “political organisation” is to a party or to an organisation to which Part 14 of the Companies Act 2006 applies. 9. That the directors be, and are hereby, authorised to allot shares in the Company and to grant rights to subscribe for, or to convert any security into, shares in the Company: (a) up to a nominal amount of £2,027,895 (such amount to be reduced by the nominal amount allotted or granted under paragraph (b) below in excess of such sum); and (b) comprising equity securities (as defined in section 560(1) of the Companies Act 2006) up to a nominal amount of £4,055,790 (such amount to be reduced by the nominal amount allotted or granted under paragraph (a) above) in connection with an offer by way of a rights issue: (i) to holders of ordinary shares in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities as required by the rights of those securities or as the directors otherwise consider necessary, and so that the directors may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter, such authorities to apply until the end of next year’s annual general meeting (or, if earlier, until the close of business on 30 September 2017) but, in each case, during this period the Company may make offers and enter into agreements which would, or might, require shares to be allotted or rights to subscribe for, or to convert securities into, shares to be granted after the authority ends and the directors may allot shares or grant rights to subscribe for, or to convert securities into, shares under any such offer or agreement as if the authority had not ended. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 61 NOTICE OF MEETING Continued Special resolutions To consider and, if thought fit, to pass the following resolutions which will be proposed as special resolutions: 10. That if resolution 9 is passed, the directors be, and are hereby, given power to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the authorities given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such power to be limited: (a) to the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority granted under paragraph (b) of resolution 9, by way of a rights issue only): (i) to holders of ordinary shares in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities as required by the rights of those securities or as the directors otherwise consider necessary, and so that the directors may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and (b) in the case of the authority granted under paragraph (a) of resolution 9 and/or in the case of any sale of treasury shares for cash, to the allotment (otherwise than under paragraph (a) above) of equity securities or sale of treasury shares up to a nominal amount of £304,184, such power to apply until the end of next year’s annual general meeting (or, if earlier, until the close of business on 30 September 2017) but during this period the Company may make offers and enter into agreements which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the directors may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended. 11. That the Company be, and is hereby, authorised for the purposes of section 701 of the Companies Act 2006 to make one or more market purchases (as defined in section 693(4) of the Companies Act 2006) of its ordinary shares of 12.5p each (“Ordinary Shares”), such authority to be limited: (a) to a maximum number of 4,866,949 Ordinary Shares (which may be all A shares, all non-voting shares or a mix); and (b) by the condition that, in each case exclusive of expenses, the minimum price that may be paid for an Ordinary Share is the nominal amount of that share and the maximum price that may be paid for an Ordinary Share is an amount equal to 5% above the average of the middle market quotations for that share as derived from the AIM appendix to the Daily Official List of the London Stock Exchange for the five business days immediately preceding the day on which that share is contracted to be purchased, such authority to apply until the end of next year’s annual general meeting (or, if earlier, until the close of business on 30 September 2017) but during this period the Company may enter into a contract to purchase Ordinary Shares which would, or might, be executed wholly or partly after the authority ends and the Company may purchase Ordinary Shares pursuant to any such contract as if the authority had not ended. By order of the board ANTH O NY S C H RO E D E R Company Secretary 18 May 2016 Young & Co.’s Brewery, P.L.C. Registered office: Riverside House, 26 Osiers Road, Wandsworth, London SW18 1NH Registered in England and Wales No. 32762 62 62 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Strategic report Directors’ report Financial statements Shareholder information Notes Entitlement to attend, speak and vote at the meeting To be entitled to attend, speak and vote at the meeting (and for the purpose of determining the number of votes you may cast), your name must be entered in that part of the register of members relating to holders of A shares at 7am on Monday, 4 July 2016 (or, in the event of any adjournment, at 7am on the day before the day of the adjourned meeting). What you need to bring If you come to the meeting, please bring with you the admission card attached to the proxy form. Appointment of proxies If you hold any A shares, you may appoint a proxy to exercise all or any of your rights to attend and to speak and vote on your behalf at the meeting. You can do this by completing the proxy form which came with this document. If you did not receive a proxy form and believe that you should have one, or if you require additional forms, please contact the Company’s registrars. To be valid, your proxy form must be received by the Company’s registrars no later than 11.30am on Sunday, 3 July 2016. Who to appoint as a proxy A proxy does not have to be a member of the Company but must attend the meeting for your vote to be counted and to otherwise represent you. Your proxy could be the chairman of the meeting, a director of the Company or someone you know personally who has agreed to attend and represent you. If you appoint a proxy, you may still attend the meeting. Multiple proxies You may appoint more than one proxy in relation to the meeting provided each proxy is appointed to exercise the rights attached to a different A share or different A shares held by you. A space has been included in the proxy form to allow you to specify the number of A shares in respect of which that proxy is appointed. If you return the proxy form duly executed but leave this space blank, you will be deemed to have appointed the proxy in respect of all of your holding of A shares. If you wish to appoint more than one proxy in respect of your A shares, you should contact the Company for further proxy forms or photocopy the form as required; you should also read the notes on the proxy form relating to the appointment of multiple proxies. The following principles apply in relation to the appointment of multiple proxies: (a) The Company will give effect to your intentions and include votes wherever and to the fullest extent possible. (b) Where a proxy does not state the number of A shares to which it applies (a “blank proxy”) then, subject to the following principles where more than one proxy is appointed, that proxy is deemed to have been appointed in relation to the total number of A shares registered in your name (“your entire holding”). If there is a conflict between a blank proxy and a proxy which does state the number of A shares to which it applies (a “specific proxy”), the specific proxy will be counted first, regardless of the time it was sent or received (on the basis that as far as possible the conflicting forms of proxy should be judged to be in respect of different A shares) and remaining A shares will be apportioned to the blank proxy (pro rata if there is more than one). (c) Where there is more than one proxy appointed and the total number of A shares in respect of which proxies are appointed is no greater than your entire holding, it is assumed that proxies are appointed in relation to different A shares, rather than that conflicting appointments have been made in relation to the same A shares; that is, there is only assumed to be a conflict where the aggregate number of A shares in respect of which proxies have been appointed exceeds your entire holding. (d) When considering conflicting proxies, later proxies will prevail over earlier proxies, and which proxy is later will be determined on the basis of which proxy is last sent (or, if the Company is unable to determine which is last sent, last received). Proxies in the same envelope will be treated as sent and received at the same time to minimise the number of conflicting proxies. (e) If conflicting proxies are sent or received at the same time in respect of (or deemed to be in respect of) your entire holding, none of them will be treated as valid. (f) Where the aggregate number of A shares in respect of which proxies are appointed exceeds your entire holding and it is not possible to determine the order in which they were sent or received (or they were all sent or received at the same time), the Company’s registrars or the Company will take steps to try to clarify the situation with you should time permit. If this is not possible, none of your proxies will be treated as valid. (g) If you appoint a proxy or proxies and then decide to attend the meeting in person and vote in person, then the vote in person will override any proxy vote. If the vote in person is on a poll and is in respect of your entire holding then all proxy votes will be disregarded. If, however, you vote at the meeting on a poll in respect of less than your entire holding, then if you indicate on your poll card that all proxies are to be disregarded, that shall be the case; but if you do not specifically revoke proxies, then the vote in person will be treated in the same way as if it were the last received proxy and earlier proxies will only be disregarded to the extent that to count them would result in the number of votes being cast exceeding your entire holding. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 63 NOTICE OF MEETING Continued Strategic report Directors’ report Financial statements Shareholder information (h) In relation to paragraph (g), if you do not specifically revoke proxies, it will not be possible for the Company to determine the intentions of you in this regard. However, in light of the aim to include votes wherever and to the fullest extent possible, it will be assumed that earlier proxies should continue to apply to the fullest extent possible. Changing proxy instructions To change your proxy instructions, you need to submit a new proxy appointment – further copies can be obtained from the Company. However, in doing so, you should be aware of the principles that apply to multiple proxies – see the note headed Multiple proxies. If you are in any doubt as to what to do where you wish to change your proxy instruction, please contact the Company’s registrars or your stockbroker, solicitor, accountant or other professional adviser. Termination of proxy appointments If you wish to revoke your proxy instruction, you must send to the Company’s registrars a signed hard copy notice clearly stating your intention to revoke your proxy appointment. If you are a corporation, the revocation notice must be executed under your common seal or signed on your behalf by an officer of you or an attorney for you. Any power of attorney or any other authority under which the revocation notice is signed (or a notarially certified copy of such power or authority) must be included with the revocation notice. The revocation notice must be received by the Company’s registrars before the start of the meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject as follows, your proxy appointment will remain valid. Appointing a proxy does not stop you from attending the meeting and voting. If you appoint a proxy and attend the meeting, your proxy appointment will automatically be terminated. Multiple corporate representatives If you are a corporation, you may appoint one or more corporate representatives who may exercise on your behalf all your powers as a member provided they do not do so in relation to the same A shares. Name and address of the Company’s registrars The Company’s registrars are Computershare Investor Services PLC. They can be contacted at The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ. Display documents The following will be available for inspection at the Company’s registered office during normal business hours (Saturdays, Sundays and public holidays excepted) from the date of this notice until 10am on the day of the meeting: • copies of the executive directors’ service contracts; and • copies of the letters of appointment of the non-executive directors. After 10am on the day of the meeting, these documents will be available for inspection in the Civic Suite in Wandsworth Town Hall, Wandsworth High Street, Wandsworth, London SW18 2PU until the end of the meeting. Communication Any address or number used for the purpose of sending or receiving documents or information by electronic means that is referred to in the Company’s 2016 annual report or any proxy form for the Company’s 127th annual general meeting may not be used to communicate with the Company for any purpose other than any expressly stated. 64 64 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 EXPLANATORY NOTES TO THE NOTICE OF MEETING Strategic report Directors’ report Financial statements Shareholder information Notice of the 127th annual general meeting of Young & Co.’s Brewery, P.L.C. (the “Company”) to be held on Tuesday, 5 July 2016 is set out on pages 61 to 64. The directors consider that all the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole; accordingly, the Company’s board of directors will be voting in favour of them and unanimously recommends that all A shareholders do so as well. Resolutions 1 to 9 are ordinary resolutions; this means that for each of those resolutions to be passed, more than half of the votes cast must be in favour. Resolution 1: annual accounts and reports The directors have to lay copies of the Company’s annual accounts, the strategic report, directors’ report and the auditor’s report on those accounts and reports before you at a general meeting; this is a legal requirement. Resolution 2: final dividend An interim dividend of 8.38p per share was paid in December 2015. The directors are recommending a final dividend of 9.07p per share for the year ended 28 March 2016, bringing the total dividend for the year to 17.45p per share. Subject to approval being given, the final dividend is expected to be paid on 7 July 2016 to shareholders on the register at the close of business on 10 June 2016. Resolution 3: re-appointment of auditor An auditor is required to be appointed for each financial year of the Company. Ernst & Young LLP, the Company’s current auditor, has agreed to serve for the current financial year and its re-appointment is therefore being proposed. Resolution 4: auditor’s remuneration In accordance with normal practice, the directors are asking for your authority to determine the auditor’s remuneration. Resolutions 5-7: re-appointments of directors Each of Nicholas Bryan, Stephen Goodyear and Patrick Dardis will be retiring automatically from the office of director at the meeting; this is because he held that position at the last two annual general meetings and did not retire at either of them. All of these individuals are seeking re-appointment and their brief biographical details are on page 16. Resolution 8: political donations etc. This resolution seeks renewal of the existing authority for the Company and its subsidiaries to make or incur certain political donations and political expenditure. Although there is no intention to make or incur such donations or expenditure, the legislation is very broadly drafted and may catch activities such as funding seminars and other functions to which politicians are invited and supporting certain bodies involved in policy review and law reform. The authority given by this resolution will be capped at £50,000 in total. Resolution 9: general authority to allot This resolution effectively seeks renewal of the directors’ existing authority to allot shares and grant rights. Paragraph (a) of this resolution would give the directors the authority to allot shares or grant rights to subscribe for, or to convert any securities into, shares up to an aggregate nominal amount equal to £2,027,895 – this amount represents approximately one-third of the Company’s issued share capital as at 17 May 2016 (but would be reduced by the nominal amount of any shares allotted or rights granted under paragraph (b) of this resolution in excess of £2,027,895). In line with guidance issued by the Investment Association, paragraph (b) of this resolution would give the directors authority to allot shares or grant rights to subscribe for, or to convert any securities into, shares in connection with a rights issue in favour of shareholders up to an aggregate nominal amount equal to £4,055,790, as reduced by the nominal amount of any shares allotted or rights granted under paragraph (a) of this resolution – this amount (before any reduction) represents approximately two-thirds of the Company’s issued share capital as at 17 May 2016. Therefore the maximum nominal amount of shares and rights that may be allotted or granted under this resolution is £4,055,790. The authorities sought under paragraphs (a) and (b) of this resolution will expire at the end of next year’s annual general meeting (or, if earlier, the close of business on 30 September 2017). The directors have no present intention of exercising either of the authorities sought under this resolution other than in respect of any one or more of the Company’s share schemes. As at the date of the notice, no shares are held by the Company in treasury. Resolutions 10 and 11 are special resolutions; this means that for each of those resolutions to be passed, at least three-quarters of the votes cast must be in favour. Resolution 10: general power to disapply This resolution effectively seeks renewal of the directors’ existing power to allot shares (or sell any shares which the Company elects to hold in treasury) for cash without first offering them to existing shareholders in proportion to their existing shareholdings. This authority would be, similar to previous years, limited to allotments or sales in connection with pre-emptive offers and offers to holders of other equity securities if required by the rights of those shares or as the directors otherwise consider necessary, or otherwise up to an aggregate nominal amount of £304,184. This aggregate nominal amount represents approximately 5% of the Company’s issued share capital as at 17 May 2016. The power sought under this resolution will expire at the end of next year’s annual general meeting (or, if earlier, the close of business on 30 September 2017). Resolution 11: authority to undertake market purchases of own shares This resolution effectively seeks renewal of the Company’s existing authority to make market purchases of not more than 4,866,949 of its shares, being no more than 10% of its issued share capital as at 17 May 2016. The authority sought under this resolution will expire at the end of next year’s annual general meeting (or, if earlier, the close of business on 30 September 2017). The directors have no present intention of exercising the authority to make market purchases, however the authority provides the flexibility to allow them to do so in the future. The directors will exercise this authority only when to do so would be in the best interests of the Company, and of its shareholders generally, and could be expected to be earnings enhancing. Any shares purchased pursuant to this authority will be held in treasury or be cancelled. The minimum price, exclusive of expenses, that may be paid for a share is its nominal value. The maximum price, exclusive of expenses, that may be paid for a share is an amount equal to 105% of the average of the middle market quotations for that share for the five business days immediately preceding the date of the purchase. As at 01 May 2016, there were options outstanding over 98,241 A shares, representing 0.2% of the Company's issued share capital at that date. If the Company were to purchase its own shares to the fullest possible extent of its existing authority and of the authority sought pursuant to this resolution, these would then represent 0.25% of the Company's issued share capital. No warrants to subscribe for shares are outstanding. YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 65 PUBS AND HOTELS London and the surrounding areas Stow on the Wold Bell at Stow H Oxford Angel & Greyhound King’s Arms Greenford Bridge Hotel H Kew Coach & Horses H Richmond Lass O’Richmond Hill Marlborough Old Ship Orange Tree H Red Cow T Shaftesbury Waterman’s Arms T White Cross Kingston Albert Bishop Grey Horse T Spring Grove Surbiton Black Lion T Victoria Waggon & Horses T Heathrow Airport Five Tuns G Three Bells G Isleworth Castle T Coach & Horses Twickenham Alexander Pope H Teddington Abercorn Arms T Staines Bells T Walton-on-Thames Royal George T Swan Chertsey Crown Hotel H Weybridge Hand & Spear H Esher Bear Inn H Claygate Foley H Oxshott Bear Southern England Radlett Red Lion Hotel H Hendon Beaufort Greyhound T Kilburn Queen’s Arms T Maida Vale Prince Alfred Harlesden Grand Junction Arms T Ealing Grange New Inn T Shepherd’s Bush Bull (Westfield) G Eagle G Defector’s Weld Hammersmith Brook Green Hotel H Butchers Hook T Hammersmith Ram Old Ship Mortlake Jolly Gardeners T East Sheen Hare & Hounds Barnes Bull’s Head G Coach & Horses White Hart Putney Boathouse Coat and Badge G Duke’s Head Green Man Half Moon G Spotted Horse Roehampton Angel T King’s Head Wimbledon Alexandra Bayee Village T Crooked Billet Dog & Fox H BurgerShack & Bar Hand in Hand Rose & Crown H Epsom King’s Arms T Rising Sun T Walton-on-the-Hill Chequers Paddington Porchester Bayswater Mitre Chelsea Builder’s Arms G Chelsea Ram G Cooper’s Arms Hollywood Arms King’s Arms G Phoenix G Surprise G Battersea Duke of Cambridge Nine Elms Tavern Northcote G Plough Prince Albert G Clapham Clapham North T Windmill H Balham Devonshire Grove Nightingale Tooting Castle Trafalgar Arms G Mitcham King’s Arms T Carshalton Greyhound H Notting Hill Duke of Wellington Elgin G Kensington Britannia Curtains Up G Duke of Clarence G Fulham Cock Tavern Duke on the Green Waterside Wandsworth Alma H Armoury T Brewers Inn H County Arms East Hill G Gardeners’ T Grand Union T Grapes T Old Sergeant T Pig & Whistle T Queen Adelaide Ship Spread Eagle T Waterfront Earlsfield Halfway House Leather Bottle Sutton Lord Nelson T Robin Hood T Burnham-on-Sea Dunstan House Inn H Congresbury Old Inn T Wrington Plough Inn T Broadway, Nr Illminster Bell Inn T Somerton Unicorn T Exeter City Gate H Double Locks Exmouth Grove Sidmouth Swan T 66 66 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 Sherston Rattlebone T Littleton-on-Severn White Hart Bristol Bristol Ram T Highbury Vaults Horts Rope Walk T Keynsham Lock Keeper Castle Cary Horse Pond T Barnet Lord Nelson T Hampstead Flask Roebuck Primrose Hill Queens Marylebone Lord Wargrave T Westminster Buckingham Arms Clarence G Morpeth Arms Phoenix G Royal Oak T Pimlico Fox & Hounds T Rising Sun T Winchmore Hill Kings Head G Tufnell Park Lord Palmerston T Kentish Town Bull & Gate Lion & Unicorn G Camden Spread Eagle Euston Square Tavern T Fitzrovia Adam & Eve G One Tun Mayfair Guinea Windmill Islington Canonbury Castle G Duchess of Kent G John Salt King’s Head Marquess Tavern T Narrowboat King’s Cross & St Pancras Station Betjeman Arms G Curious Pig G Fellow G Bloomsbury Calthorpe Arms T Lamb Covent Garden Marquess of Anglesey Strategic report Directors’ report Financial statements Shareholder information Chelmsford O’Connor’s T Riverside Inn T Clapton Princess of Wales G Bethnal Green Royal Oak T Stratford Cow (Westfield) G Bow Coborn Crown G Stepney Queen’s Head T Aldgate Leman Street Tavern G Shoreditch Owl & Pussycat G City of London Albion Boisdales T Dirty Dick’s Finch’s Grocer G Fox & Anchor H Lamb Tavern Oyster Shed G Paternoster Three Lords T White Horse G Kennington White Bear Camberwell Grand Union T Southwark Founder’s Arms Mulberry Bush Prince William Henry T Borough Market Bunch of Grapes Wheatsheaf Bermondsey Woolpack T Dartford Court House T Malt Shovel T Peckham Rye Clock House Dulwich Wood House Norwood Hope T Railway Bell T Greenwich Cutty Sark Old Brewery Richard the First Woolwich Dial Arch Guardhouse G Rotherhithe Ship T Catford Catford Ram T Bromley Two Doves T Lee Crown Chislehurst Bull’s Head Hotel H Vauxhall Fentiman Arms G Riverside Stockwell Surprise T Brixton Trinity Arms Grand Union T Streatham Bull Thornton Heath Lord Napier T Railway Telegraph T Wallington Duke’s Head H Croydon Dog & Bull T Beddington Plough Key Young’s managed house unless marked Tenanted Geronimo Hotel T G H Sherfield-on-Loddon White Hart Fetcham Bell Leatherhead Penny Black Effingham Plough T Betchworth Dolphin Hindon Lamb Inn H Shaftesbury Mitre Guildford Weyside Witley White Hart T Emsworth Sussex Brewery T Dorking Falkland Arms T Old House at Home T Stonebridge Royal Oak T Southampton Mavericks T Chichester Crown & Anchor Bognor Regis Waverley Redhill Home Cottage William IV T Farnborough Rose & Crown T Blindley Heath Red Barn G Lingfield Greyhound T East Grinstead Ship T Plumpton Green Fountain Inn T YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 67 SENIOR PERSONNEL, COMMITTEES AND ADVISERS Strategic report Directors’ report Financial statements Shareholder information Directors Nicholas Bryan, B.A., F.C.A. Non-executive Chairman Stephen Goodyear Chief Executive Torquil Sligo-Young Information Resources Peter Whitehead, F.C.A. Finance Patrick Dardis Retail Roger Lambert, M.A. Non-executive Senior Independent Trish Corzine Non-executive Company Secretary Anthony Schroeder Audit committee Roger Lambert (Chairman) Nicholas Bryan Trish Corzine Remuneration committee Nicholas Bryan (Chairman) Roger Lambert Trish Corzine Auditor Ernst & Young LLP 1 More London Place London SE1 2AF Bankers Royal Bank of Scotland Group plc Corporate Banking London 280 Bishopsgate London EC2M 4RB Barclays Bank plc 1 Churchill Place London E14 5HP Nominated adviser J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP Stockbrokers J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP Panmure Gordon (UK) Ltd One New Change London EC4M 9AF Solicitors Slaughter and May One Bunhill Row London EC1Y 8YY Gowling WLG (UK) LLP Two Snowhill Birmingham B4 6WR SHAREHOLDER INFORMATION Registrar Shareholder offers Proposed financial diary 2016 The company’s registrar is Computershare Investor Services PLC. If you have questions about your shareholding or if you require other guidance (e.g. to notify a change of address or to give instructions for dividends to be paid directly into a bank account), please contact Computershare. All requests to amend account details must be made in writing. Computershare’s contact address is: The Pavilions Bridgwater Road Bristol BS99 6ZZ Their telephone no. is 0370 707 1420. Shareholders can manage their Young’s shareholding online at: www.investorcentre.co.uk Details of shareholder discounts and offers are mailed to shareholders from time to time. Any shareholder who does not wish to receive details of such offers should write to the Company Secretary at the registered office. Registered office and company number Riverside House 26 Osiers Road Wandsworth London SW18 1NH Registered number: 32762 Further information Please visit: www.youngs.co.uk 9 June 2016 Ex-dividend date for final dividend 10 June 2016 Record date for final dividend 5 July 2016 Annual general meeting 7 July 2016 Payment of final dividend 10 November 2016 Interim results announcement 24 November 2016 Ex-dividend date for interim dividend 25 November 2016 Record date for interim dividend 9 December 2016 Payment of interim dividend 68 68 YOUNG & CO.’S BREWERY, P. L .C. ANNUAL REPORT 2016 

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