Shepherd Neame Ltd AGM 2014 Miles Templeman Chairman 2014: - PowerPoint PPT Presentation

BY APPOINTMENT TO: HIS ROYAL HIGHNESS THE PRINCE OF WALES SUPPLIER OF SPECIALIST ORDERS SHEPHERD NEAME LTD FAVERSHAM KENT Shepherd Neame Ltd AGM 2014

Miles Templeman Chairman

2014: Building a strong platform for the business to grow and develop  Growth in turnover of 2.8%  Growth in profits and earnings per share  Operating profit before exceptional items up 5.5% to £13.4m  Basic EPS up 12.9% and EPS before exceptional items up 16.9%*  Statutory profit before tax up 8.7%  Proposed final dividend of 20.75p per share taking total dividends for the year up 3.0%  Implementation of Business, Board and Share Capital reorganisations * 2013 restated for share capital reorganisation

2014: Successful implementation of changes to the Business and Board  Business reorganisation - Transfer of warehousing and logistics to KNDL October 2013 - Phased exit from contract brewing from October 2013 to December 2014  Board reorganisation around two trading divisions Graeme Craig – Brewing and Brands Director - January 1 st 2014 Nigel Bunting – Retail and Tenanted Operations Director - July 1 st 2014 George Barnes - Property and Services Director - July 1 st 2014

Share capital reorganisation completed to align the economic and voting rights of all shareholders  Approved June 2014 - 11,457,500 ‘A’ shares and 68,000,000 ‘B’ shares converted to new structure of 14,857,500 50p ordinary shares  New shares listed on ISDX Growth Market and CREST with simplified governance structure  Improved marketability of shares whilst retaining low cost dealing facility and tax advantages for shareholders  All EPS and net assets per share metrics for previous years restated as if new share structure was always in place

Key metrics restated for impact of share capital reorganisation Dividend Net Basic EPS Dividend Cover Assets EPS Pre Per Share Pre Per Exceptionals Exceptionals Share Pence Pence Times £ Pence As reported in 2013 25.15 1.9 9.81 43.0 48.1 Impact of share capital reorganisation (5.9) (6.6) - (0.3) (1.34) 2013 restated for new share structure 37.1 41.5 25.15 1.6 8.47 2014 41.9 48.5 25.90 1.9 8.67 +0.3x Growth +12.9% +16.9% +3.0% +2.4%  Target dividend cover pre exceptionals in medium term is 2.0 times

A year of further growth in net assets per share and dividend 35p Dividend per share Net Assets per share at book value* £14 30p £12 Net assets per share Dividend per share 25p £10 20p £8 15p £6 10p £4 2010 2011** 2012 2013 2014 * Restated for share capital reorganisation ** In 2011 a market valuation of licensed property indicated a £68m surplus over book value at that time

Mark Rider Finance & IT Director

Performance highlights 2014 2013 % £m £m Before exceptional items Turnover 138.7 134.9 2.8 Operating Profit 13.4 12.7 5.5 Net Finance Costs (4.6) (4.7) 1.1 Profit before Tax 8.8 8.0 9.3 Tax Rate (%) 18.5 23.8 EPS* (pence) 48.5 41.5* 16.9 Full Year Dividend per ordinary share (pence) 25.9 25.2 3.0 Reconciliation to statutory profit Total Exceptional Items (1.1) (0.9) Statutory Profit Before Tax 7.7 7.1 8.7 * Restated for share capital reorganisation

Key drivers of trading performance Tenanted revenue +2.2% Pub Turnover +10.8% Managed revenue Core own and licensed +6.1% Brands (excluding contract) Beer Volume Total own brewed volume (Kingfisher volume went -0.3% from 18.6% to 13.5% of output)

Operating profit* impacts from strategic initiatives 2014 2015 Business and Board +£0.8m +£1.2m reorganisation Additional water -£0.5m -£0.5m recovery costs Increased investment -£0.3m in brand marketing Increased investment -£0.3m -£0.3m in property repairs and decorations * Before exceptional items

Exceptional items: No further costs expected on reorganisations 2014 2013 £m £m Business and Board reorganisation (0.5) (1.2) Share capital reorganisation (0.7) - Property impairment (0.1) - Total exceptional costs (1.3) (1.2) Property profits 0.2 0.3 No of pubs disposed 4 6 Total Exceptional Items (1.1) (0.9)

Balance Sheet strengthened through reduced debt and leverage 2013 2014 £m £m Fixed Assets 202.7 202.5 Other assets and Liabilities (2.4) 1.7 Net debt (71.5) (78.4) Shareholders Funds 128.8 125.8 Net Debt : EBITDA 3.5 4.0 Balance Sheet Gearing 56% 62%  £60m term debt to 2026 remains fixed to end of term  Flexible medium term debt facility to 2017 of £28m remains at floating rate

Jonathan Neame Chief Executive

Market context  Marketplace has improved with total UK beer volume up 3.8% - greater consumer confidence - improved weather - lower taxation on beer  Market for pubs has improved - drinkers and diners returning to pubs - atmosphere, product range and great fresh food key drivers - objective is to provide a memorable experience  Consumer increasingly motivated by beer - wider flavour profiles and new styles of beer - renewed interest in craft and local production

Overview of 2014  A strong trading performance - record EBITDA and strong cash flow - strong growth in tenanted LFL EBITDAR and managed LFL sales - volume growth from core own and licensed beer excluding contract volume  Good progress against strategy - Continued investment in estate and disposal of non sustainable assets  Cost savings from Business reorganisation reinvested in marketing, brand support and pub repairs and decorations  Beer portfolio development

Our strategic objectives ATTRACTING AND DRIVING RETAINING FOOTFALL TO CUSTOMERS TO OUR PUBS OUR QUALITY BEERS OUR STRATEGIC OBJECTIVES PROVIDING A ATTRACTING AND DISTINCTIVE RETAINING THE RANGE OF BEST PEOPLE COMPLEMENTARY PRODUCTS

Driving footfall to our pubs: Continued investment in improving the estate Managed Pubs and Hotels LFL Turnover growth  We have invested £5.1m (2013: 8.9% 7.6% £4.6m) improving the look and feel of our pubs and £2.0m (2013: £1.7m) in repairs and 3.3% decorations. Total £7.1m (2013: £6.3m) 2012 2013 2014  The Botany Bay Hotel, Kingsgate and The Bell Hotel, Tenanted and Leased Pubs LFL EBITDAR growth Sandwich were successfully 4.4% redeveloped in the year  We disposed of 4 pubs that did not fit with our long term 0.3% (0.5)% strategy 2012 2013 2014

Driving footfall to our pubs: Hotel investment  Continued success of Marine Hotel following redevelopment in 2013  The Botany Bay Hotel and The Bell Hotel redeveloped in 2014  Royal Wells Hotel development due in 2015 at a cost of around £2m

Driving footfall to our pubs: Increase in investment of £0.6m to £3.7m in Tenanted estate

Evolution of pub estate 2007 Acquisitions Transferred Disposals 2014 Tenanted 328 21 12 (62) 299 49 11 (12) 0 48 Managed Total 377 32 0 (62) 347  87% freehold  100% in London and the South East

Attracting and retaining the best people  Improvements in recruitment and induction process  Greater investment in bespoke training and business support  Flexible agreements, good commercial propositions  Matched investment schemes  Resulting in - Tenanted applications up - Tenanted estate fully let at year end - Licensee satisfaction scores up

Providing a distinctive range of complementary products: leveraging retail skills  Continued focus on food offer through food development team - We influence > 100 Tenanted sites  New Coffee and Ale House brand launched - Improved machines, ingredients, quality audits  Wine list strengthened, around 75% of wine sales in our pubs are exclusive to Shepherd Neame

Providing a distinctive range of complementary products: Strong managed pubs and hotel performance  Food LFL +10.4% (2013: +5.0%) - Footfall +8.3% - Spend per head £11.48 (2013: £11.23)  Increased accommodation marketing  Accommodation LFL +9.7% (2013: +7.9%) - Occupancy 76% (2013: 73%) - RevPAR £52 (2013: £48)

Attracting and retaining customers to our quality beers  Successful re-launch of Whitstable Bay range  Re-launch of seasonal ale range  Occasional and event beers launched under No 18 Yard Brewhouse branding  Phased exit from contract brewing to focus production on core own and licensed brands

Attracting and retaining customers to our quality beers: Evolution of beer portfolio Heritage Core Discovery Growth Growth Growth +7.7% +1.1% +0.1% New Developments 2015

Attracting and retaining customers to our quality beers: Increased investment in brand activity  Increase in marketing spend of £0.3m behind Armstrong and Miller  Increased digital and social media presence  KNDL deal has enabled geographical expansion  National sales force strengthened and Head Office functions realigned to give single business focus  Good export growth - Turnover +24% - We export to 35 countries

Summary and current trading  Strong trading year  Cost saving from reorganisations reinvested  Good start to new year against very strong comparable period - Tenanted LFL EBITDAR to 30 August 2014 up 2.6% - Managed house LFL sales to 6 September 2014 up 4.1% - Total beer volume to 6 September 2014 down 13.5%. Expected to flatten out during the year