SHEPHERD NEAME

INTERIM RESULTS FOR THE 26 WEEKS TO 26 DECEMBER 2020

Shepherd Neame, Britain's Oldest Brewer and owner and operator of 316 high quality pubs in Kent and the South East, today announces results for the 26 weeks ended 26 December 2020.

Financial performance to 26 December 2020

· The period under review included strong trading during the summer months, followed by ever changing levels of restriction and finally enforced closure again from November. The disruption had a significant impact on the financial results

· Turnover was £55.3m (H1 2020[1]: £79.0m)

· Underlying operating loss[2] of (£3.6m) (H1 2020: £8.0m profit)

· Statutory loss before tax was (£7.2m) (H1 2020: £5.4m profit)

· Underlying basic loss per share[3] of (32.6p) (H1 2020: earnings of 33.1p)

Financing and Financial Support

· Bottled beer volume growth of +25.7% and tight cost control have restricted underlying monthly cash burn to c.£1.5m to £2m while pub estate was closed

· Net debt as at 27 March 2021 was £96.5m (27 June 2020: £84.4m) giving headroom of £36.0m

· New waivers agreed with lenders on 20 April 2021. Normal covenant tests relaxed through to September 2022, replaced with minimum liquidity covenant. Ample liquidity for foreseeable future

Reopening our pubs

· Over 200 pubs gardens reopened on 12 April 2021. All pubs will be open on 17 May 2021. Initial trade levels are encouraging

· Targeted investment programme to optimise gardens and outside space and to maintain high standards of signage and decoration

· Strong marketing and social media push to drive footfall

Jonathan Neame, CEO of Shepherd Neame, said:

"We are delighted and excited to have opened over 200 pub gardens on 12 April and look forward to reopening the rest of our pubs in May with increasing confidence. There is significant pent up demand in the economy and the desire to go out for a drink or a meal is as strong as ever. Initial trade has been most encouraging.

There are still many challenges to face and a long road to full recovery, but the balance sheet remains strong and we have ample liquidity.

The relationship with our licensees is excellent and our reputation for beer and pubs is strong. We look forward with confidence to returning Shepherd Neame back to growth."

21 April 2021

Enquiries:

Shepherd Neame Tel: 01795 532206

Jonathan Neame, CEO

Mark Rider, Finance and IT Director

Instinctif Partners

Matthew Smallwood Tel: 020 7457 2005

Jack Devoy Tel: 020 7427 1445

CHAIRMAN'S STATEMENT

In reporting figures which are the most difficult in the Company's history, we nonetheless see bright sparks which give us plenty of optimism. The summer showed that people long to get back to pubs. We expect strong demand from our customers as we reopen. On 12 April we opened over 200 pubs out of 316 in our estate for outside trade and early demand has been encouraging. We are fortunate that such a high percentage of our estate has outside space to take advantage of the initial stage of opening. Our relations with licensees are good. We are raring to go.

In the last year the management team has had to adapt constantly to changes in circumstances. There has been a twin focus on getting through short-term adversity and recovering to flourish in the long-term.

This winter has been particularly tough on all our team members. We have done what we can to help them through this period with support for wellbeing and mental health. The Board is most grateful for, and impressed by, the resilience of our people. The spirit of Shepherd Neame is alive and well and will drive us to a new and successful chapter in our long history.

We remain grateful for the support of our customers, the hard work and determination of all our licensees, and the patience of shareholders who have given support and encouragement in spite of the immediate impact of COVID-19 and lockdown on their dividend and on the value of their shareholdings. We will strive to see that the Company rewards the faith of all its stakeholders.

BOARD OF DIRECTORS

Kevin Georgel was appointed to the Board at the Annual General Meeting in December, following the retirement of Miles Templeman. Miles had been chairman since 2005 and we have been grateful for his calm and wise leadership and counsel over the years, not least during the current crisis. Kevin, as chief executive of St Austell Brewery Company, is a leading figure in the industry and we are already grateful for the contribution he is making to the Board.

Glenda Flanagan has been appointed Company Secretary, ahead of Robin Duncan retiring in June 2021, and we are currently recruiting a new Head of People.

AUDIT AND ACCOUNTING STANDARDS

As indicated in our last Annual Report, we are making the transition from FRS 102 accounting standards to IFRS standards. We had intended to move to IFRS with these interim figures; in order to contain costs at a critical time, we decided to postpone this change until the year-end when the full year set of accounts will be prepared under IFRS. We remain committed to strong standards of governance of which the move to IFRS is an example.

We continually review aspects of our activities in which we could do better and have commenced a tender process for our audit which will be concluded by the year end.

DIVIDEND

Given the impact of the series of lockdowns on the business, we are not in a position to declare an interim or final dividend at the AGM in 2021. We remain acutely conscious of the importance that shareholders place on the dividend. We want to emphasise that we are intent on resuming distributions as soon as it is prudent to do so and that our planning for the future reflects this emphasis.

We have extended the shareholder offers that accompanied the full year results to enable shareholders to access them when pubs re-open.

LOOKING FORWARD

Our immediate focus is to welcome back our customers as restrictions are lifted and to resume the delivery of best in class hospitality. We are ready. We have a high quality estate of managed and leased pubs and well-loved beer brands. Our management team and our people, our greatest asset, will be even more determined to delight our customers on their return. Given the strength of the Company's management, assets and people throughout the organisation and the prospects for recovery and growth in its heartland, the Board is confident in the future.

RICHARD OLDFIELD

Chairman

CHIEF EXECUTIVE'S REVIEW

OVERVIEW

At the time that we announced our full year results in early November 2020, we had just returned to lockdown after a good recovery over the summer months. Little did we know then that we would still be in lockdown through to April.

The resilience of the business is derived from our high quality freehold asset base and the three divisions of the business, each of which have their own financial and market characteristics. This has enabled us to maintain some revenue and cash generation even in these most trying of circumstances.

By the time we expect that pubs can re-open indoors on 17 May 2021, the majority of pubs will have been closed for a total of 297 days out of the preceding 423 days.

Inevitably this has had a severe impact on our numbers during this time.

FINANCIAL RESULTS

Turnover for the 26 weeks to 26 December 2020 fell to £55.3m (H1 2020: £79.0m), a decrease of 30.0%.

We recorded an underlying operating loss of (£3.6m) (H1 2020: profit £8.0m). Underlying basic loss per share was (32.6p) (H1 2020: earnings of 33.1p).

Statutory loss before tax was (£7.2m) (H1 2020: profit £5.4m).

No interim dividend will be paid (H1 2020: nil). Net assets per share[4] were £12.59 (at 28 December 2019: £14.07).

FINANCING AND FINANCIAL SUPPORT

The recovery plans we prepared for coming out of the first lockdown were inevitably undermined by the various different restrictions imposed on the business during the autumn 2020 and the subsequent lockdowns 2 and 3.

During the summer, we traded well and were cash positive, and so were able to pay down the liabilities we had deferred in agreement with HMRC. Since the further lockdowns, we have experienced an underlying monthly cash burn of between £1.5m and £2m. Net debt at the half year increased from £84.4m at 27 June 2020 to £92.4m at 26 December 2020 (H1 2020: £83.9m). Deferred liabilities decreased from £12.1m at 27 June 2020 to £4.1m at 26 December 2020. As a result total indebtedness[5] was the same at the end of December 2020, at £96.5m, as at the end of June 2020.

As at 27 March 2021, our net debt remains within our pre-COVID facility limits of £107.5m, at £96.5m, and we have not needed to use the additional £25m CLBILS (Coronavirus Large Business Interruption Loan Scheme) facility put in place in July 2020. As at 20 April 2021, we have renewed the arrangements with our banks who have agreed to relax normal covenant tests through to September 2022 to be replaced by a minimum liquidity covenant. As a result, we have sufficient liquidity to see our way out of this crisis and confidence that we can restore our financial health over the next 12 to 18 months.

We have supported our cash position by continuing with our programme of disposals of non-core assets, and have received good support from our landlords to manage our rental commitments. During the period, we have realised £1.2m from the sale of three pubs and three land holdings (H1 2020: £1.2m three pubs and three landholdings).

For the 26 weeks to 26 December 2020, we received a total of £5.7m in financial support from the Government, by way of Job Retention Scheme furlough payments, business grants and business rates relief.

The measures announced in the Budget in March 2021, were most welcome. Pubs will receive further business grants and furlough support through to September 2021 and an ongoing cut in business rates and VAT through to March 2022. These measures help to give us a strong platform from which to restore our balance sheet.

OPERATIONS

Throughout this crisis, we have focused on doing the right thing for our employees and for our licensees, and maintained tight cost control across the operations to protect the business. We have also reviewed all parts of our operation and used this time effectively to prepare the business to be stronger for the future.

We have been running at an average of 97% of our people on furlough, or flexi-furlough, with some doing one or two days per week to perform essential tasks.

We have continued to support our licensees by charging no rent during any period of enforced closure. As a consequence, almost all those licensees that were in our pubs at the start of the pandemic remain in situ and ready to re-open and rebuild their customer base, without a major financial burden overhanging them.

We are delighted to have scored so highly in the KAM Media industry benchmark survey of licensees, with improved ratings in almost every area including a high Net Promoter Score from our licensees. This is a testament to the excellent relationships we enjoy with them.

The brewery has maintained bottling production throughout and enjoyed good sales through the grocery and export channels. Our online shop, whilst small, has also performed well. Bottled beer sales have been strong as they were through the first period of lockdown and total volume was up +25.7%. During the period, export sales were good, but these have fallen in January and February 2021, in line with all UK-EU trade since Brexit.

We have continued to maintain our pubs to meet health and safety compliance and plan to carry out a limited external decorations and signage programme as we move towards the summer. We also plan a targeted investment programme to improve the presentation of outside space at our pubs, as this has become a key feature in attracting customers.

In spite of the challenges imposed by working from home, we have continued to engage with our customers in all channels and communicate with them regularly on account matters and our plans for the future. We have secured some high profile new business over this period and will re-open with a larger on-trade account base.

We have also spent the time preparing brand plans and marketing initiatives for the future. We have launched Noughty Bear 0.5% low alcohol beer and Truly Hard Seltzer, alcoholic sparkling water, part of the Boston Beer range.

We have made good progress developing our digital and online capability, with the roll out of mobile Order and Pay in our managed pubs, the launch of an online ordering system for our trade customers and further progress in aligning all customer data.

Underpinning our strategy is a drive to do the right thing for our communities and the environment. We have made progress during this year against our objectives and will continue to develop this agenda through the remainder of the financial year.

The strength and core purpose of our business lies in the deep roots we have within our individual communities. During the year in which pub life has been largely missing, people have appreciated all the more how much pubs are at the heart of their communities.

We aim to build on these connections to strengthen the relationship we have with our customers. In this regard, we have retained a high profile throughout the pandemic and succeeded in growing our audience materially on social media networks. We have kept licensees and team members throughout the Company connected as best as possible by remaining active in our communications and providing updates and guidance.

ACHIEVING RECOGNITION

Even though our pubs have been closed for much of last year, our efforts have been recognised in many different spheres.

We were finalists for the second year running in the 2021 Publican Awards as Best Tenanted/Leased Pub Company. Sarah Simmonds, licensee of the Three Mariners at Oare, was shortlisted for Outstanding Industry Contribution. We also won six awards at the International Beer Awards 2020, and were named as Brewery of the Year 2021 by the Good Pub Guide.

These are all significant accolades and show that the team continues to perform exceptionally well and meet the highest standards in spite of the enormous pressures on the business.

RESTRICTIONS AND ROADMAP TO RE-OPENING

At the end of last summer, we were buoyed by the positive response we had received from our customers after opening on 4 July, and in particular by comments on how safe they felt in our pubs. We were disappointed, therefore, by the increasing restrictions imposed on hospitality, culminating in lockdowns 2 and 3. Powerful arguments were made not to distinguish between Hospitality and Non-Essential Retail, but they were not accepted.

On 22 February 2021, it was announced that we could open our pubs for outdoor service no earlier than 12 April and for indoor service no earlier than 17 May.

Although these dates are later than we may have wished for, this gives us welcome clarity on the roadmap out of this crisis, such that we can re-mobilise our teams with a degree of certainty.

THE FUTURE

We are delighted to have opened over 200 pub gardens on 12 April, two thirds of our estate, and look forward to reopening the rest of our pubs in May with great excitement and with increasing confidence.

Many customers have returned to our pubs in the first week to enjoy great hospitality in a relaxed and safe environment. Although it is early days, trade levels so far have been above expectation.

We can now move forward to focus again on our core operations. Our teams did an excellent job last summer. The experience our customers received then exceeded their expectations, and the trading levels we enjoyed exceeded ours.

There is significant pent up demand in the economy. The consumer savings ratio is at high levels, and all indications are that the demand for events, for festivals, for live sport, for going out for a meal and for socialising with friends is as strong as ever. Furthermore, with the ongoing restrictions in place on international travel, most people will choose to holiday in the UK this year. As a result, we believe that our recovery will be strong through late summer and autumn 2021.

There are still many challenges to face before the pandemic is over, and there is a long road to full financial recovery. But we can now say with a degree of certainty that that recovery will come. Further, as a consequence of the actions we have taken over the last year to protect our pubs and our people, our reputation is as strong as ever and our brand recognition is high. We have every reason to believe that we will benefit from this goodwill towards the Company and our licensees.

JONATHAN NEAME

Chief Executive

CONSOLIDATED PROFIT AND LOSS ACCOUNT

26 weeks ended 26 December 2020

		Unaudited 26 weeks ended 26 December 2020			Unaudited 26 weeks ended 28 December 2019			Audited 52 weeks ended 27 June 2020
	note	Underlying Results £'000	Items excluded from underlying results £'000	Total Statutory £'000	Underlying Results £'000	Items excluded from underlying results £'000	Total Statutory £'000	Total Statutory £'000
Turnover	4	55,321	-	55,321	79,035	-	79,035	123,619
Operating charges		(58,925)	(1,015)	(59,940)	(71,020)	(648)	(71,668)	(131,757)
Operating (loss)/profit	4	(3,604)	(1,015)	(4,619)	8,015	(648)	7,367	(8,138)
Finance costs	3,5	(2,212)	(202)	(2,414)	(1,843)	-	(1,843)	(4,042)
Fair value movements on financial instruments charged to profit and loss	3,5	-	(87)	(87)	-	(112)	(112)	35
Net finance costs	3,5	(2,212)	(289)	(2,501)	(1,843)	(112)	(1,955)	(4,007)
Profit/(loss) on disposal of property	3	-	37	37	-	280	280	(6)
Investment property fair value movements	3	-	(114)	(114)	-	(297)	(297)	50
(Loss)/profit before taxation		(5,816)	(1,381)	(7,197)	6,172	(777)	5,395	(12,101)
Taxation	6	1,003	262	1,265	(1,297)	104	(1,193)	351
(Loss)/profit after taxation		(4,813)	(1,119)	(5,932)	4,875	(673)	4,202	(11,750)
(Loss)/earnings per 50p ordinary share	7
Basic				(40.2)p			28.5p	(79.8)p
Diluted				(40.2)p			28.3p	(79.8)p
Underlying basic				(32.6)p			33.1p	(17.8)p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

26 weeks ended 26 December 2020

	Unaudited 26 weeks ended 26 December 2020	Unaudited 26 weeks ended 28 December 2019	Audited 52 weeks ended 27 June 2020
	£'000	£'000	£'000
(Loss)/profit after taxation	(5,932)	4,202	(11,750)
Gains/(losses) arising on cash flow hedges during the period	625	426	(96)
Gains arising on revaluation of tangible fixed assets	15	-	17
Tax relating to components of other comprehensive income	(119)	(83)	(490)
Other comprehensive gains/(losses)	521	343	(569)
Total comprehensive (loss)/income	(5,411)	4,545	(12,319)

CONSOLIDATED BALANCE SHEET

As At 26 December 2020

	Unaudited	Unaudited	Audited
	26 December 2020	28 December 2019	27 June 2020
	£'000	£'000	£'000
Fixed assets
Intangible fixed assets	490	775	557
Tangible fixed assets	305,807	317,019	309,363
Investments and loans	5	6	5
	306,302	317,800	309,925
Current assets
Stocks	6,145	8,004	8,230
Debtors	12,274	15,999	9,968
Deferred tax asset	1,235	975	1,354
Cash at bank and in hand	63	3,270	9,861
	19,717	28,248	29,413
Creditors: amounts falling due within one year
Bank loans and overdrafts	(92,483)	-	(94,262)
Creditors	(21,703)	(26,474)	(27,846)
	(114,186)	(26,474)	(122,108)
Net current (liabilities)/assets	(94,469)	1,774	(92,695)
Total assets less current liabilities	211,833	319,574	217,230
Creditors: amounts falling due after more than one year
Bank loans	-	(87,211)	-
Derivative financial instruments	(6,591)	(6,739)	(7,107)
Deferred lease liability	(2,766)	(2,620)	(2,693)
Provisions for liabilities	(15,460)	(13,956)	(15,184)
Net assets	187,016	209,048	192,246
Capital and reserves
Called-up share capital	7,429	7,429	7,429
Share premium account	1,099	1,099	1,099
Revaluation reserve	69,637	71,394	70,409
Own shares	(1,031)	(1,367)	(1,328)
Hedging reserve	(4,457)	(4,647)	(4,963)
Profit and loss account	114,339	135,140	119,600
Equity shareholders' funds	187,016	209,048	192,246

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

26 weeks ended 26 December 2020

	Called-up share capital	Share premium account	Revaluation reserve	Own shares	Hedging reserve	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 27 June 2020	7,429	1,099	70,409	(1,328)	(4,963)	119,600	192,246
Loss for the period	-	-	-	-	-	(5,932)	(5,932)
Gains arising on cash flow hedges during the period	-	-	-	-	625	-	625
Gains on revaluation of fixed assets	-	-	15	-	-	-	15
Tax relating to components of other comprehensive income	-	-	-	-	(119)	-	(119)
Total comprehensive income/(loss)	-	-	15	-	506	(5,932)	(5,411)
Revaluation reserve realised on disposal of properties	-	-	(787)	-	-	787	-
Accrued share-based payments	-	-	-	-	-	176	176
Distribution of own shares	-	-	-	104	-	(99)	5
Unconditionally vested share awards	-	-	-	193	-	(193)	-
Balance at 26 December 2020	7,429	1,099	69,637	(1,031)	(4,457)	114,339	187,016

	Called-up share capital	Share premium account	Revaluation reserve	Own shares	Hedging reserve	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 29 June 2019	7,429	1,099	71,858	(1,551)	(4,990)	134,252	208,097
Profit for the period	-	-	-	-	-	4,202	4,202
Gains arising on cash flow hedges during the period	-	-	-	-	426	-	426
Tax relating to components of other comprehensive income	-	-	-	-	(83)	-	(83)
Total comprehensive income	-	-	-	-	343	4,202	4,545
Ordinary dividends paid	-	-	-	-	-	(3,573)	(3,573)
Revaluation reserve realised on disposal of properties	-	-	(464)	-	-	464	-
Accrued share-based payments	-	-	-	-	-	256	256
Purchase of own shares	-	-	-	(290)	-	-	(290)
Distribution of own shares	-	-	-	314	-	(301)	13
Unconditionally vested share awards	-	-	-	160	-	(160)	-
Balance at 28 December 2019	7,429	1,099	71,394	(1,367)	(4,647)	135,140	209,048

CONSOLIDATED CASH FLOW STATEMENT

26 weeks ended 26 December 2020

	Unaudited		Unaudited		Audited
	26 weeks ended		26 weeks ended		52 weeks ended
	26 December 2020		28 December 2019		27 June 2020
	£'000	£'000	£'000	£'000	£'000	£'000
Net cash flows from operating activities (note 9)		(4,589)		10,347		15,253
Cash flows from investing activities
Proceeds of sale of tangible fixed assets	1,179		1,230		1,752
Purchase of tangible fixed assets	(2,257)		(7,985)		(12,025)
Purchase of intangible fixed assets	-		(92)		(92)
Customer loan redemptions	1		1		2
Acquisition of subsidiaries	-		(151)		(151)
Net cash flows from investing activities		(1,077)		(6,997)		(10,514)
Cash flows from financing activities
Dividends paid	-		(3,573)		(3,573)
Interest paid	(2,306)		(1,413)		(3,211)
Repayment of loans	(3,000)		-		-
New loans	-		6,000		13,000
Purchase of own shares	-		(290)		(290)
Share option proceeds	5		13		13
Net cash flows from financing activities		(5,301)		737		5,939
Net (decrease)/increase in cash and cash equivalents		(10,967)		4,087		10,678
Cash and cash equivalents at beginning of the period		9,861		(817)		(817)
Cash and cash equivalents at end of the period		(1,106)		3,270		9,861

NOTES TO THE ACCOUNTS

26 December 2020

1 INTERIM STATEMENT

The financial information contained in this interim statement, which is unaudited, does not constitute statutory accounts as defined in s434 of the Companies Act 2006. Statutory accounts for the 52 weeks ended 27 June 2020, upon which the auditors issued an unqualified opinion, have been filed with the Registrar of Companies. The financial information comprises the results of Shepherd Neame Limited (the Company) and its subsidiaries (the Group).

2 ACCOUNTING POLICIES

The consolidated interim accounts have been prepared under FRS 104 Interim Financial Reporting and on the basis of the accounting policies set out in the statutory accounts for the 52 weeks ended 27 June 2020.

3 NON-GAAP REPORTING MEASURES

Certain items recognised in reported profit or loss before tax can vary significantly from year to year and therefore create volatility in reported earnings which does not reflect the underlying performance of the Group. The Directors believe that the "underlying operating profit", "underlying profit before tax", "underlying basic earnings per share", "underlying earnings before interest, tax, depreciation, and amortisation" presented, provide a clear and consistent presentation of the underlying performance of ongoing business for shareholders. Underlying profit is not defined by FRS 102 and therefore may not be directly comparable with the "adjusted" profit measures of other companies. The adjusted items are:

• Profit or loss on disposal of properties;

• Investment property fair value movements;

• Operating and finance charges which are either material or infrequent in nature and do not relate to the underlying performance; and

• Fair value movements on financial instruments charged to profit and loss.

	Unaudited 26 weeks ended 26 Dec 2020	Unaudited 26 weeks ended 28 Dec 2019	Audited 52 weeks ended 27 June 2020
	£'000	£'000	£'000
Underlying EBITDA[6]	531	12,198	9,656
Depreciation and amortisation	(4,114)	(4,167)	(8,493)
Free trade loan discounts	-	(3)	(3)
Loss on sale of assets (excluding property)	(21)	(13)	(216)
Underlying operating (loss)/profit	(3,604)	8,015	944
Net underlying finance costs	(2,212)	(1,843)	(3,857)
Underlying (loss)/profit before taxation	(5,816)	6,172	(2,913)

Profit/(loss) on disposal of properties	37	280	(6)
Investment property fair value movements	(114)	(297)	50
Operating charges - items excluded from underlying results	(1,015)	(648)	(9,082)
Costs related to putting in place CLBILS loan	(202)	-	(185)
Ongoing fair value movements on financial instruments charged to profit and loss	(87)	(112)	35
(Loss)/profit before taxation	(7,197)	5,395	(12,101)

Operating charges - items excluded from underlying results during the period comprises

a) An impairment charge of £417,000 in relation to six licensed properties.

b) A charge of £709,000 in respect of loss of office costs for redundancies made as a result of the COVID-19 pandemic.

c) A recovery of £111,000 in relation to previously disclosed unlawful activity carried out by an employee (see below).

Finance costs - items excluded from underlying results during the period comprises

a) £87,000 in respect of the ineffective portion of the movement in fair value of interest rate swaps.

b) £202,000 of fees in relation to putting in place a CLBILS loan to support liquidity following the COVID-19 outbreak.

During the 26 weeks ended 28 December 2019, operating charges - items excluded from underlying results, comprised

a) An impairment charge of £156,000 in respect of one property transferred from tenanted pubs to investment property in the period.

b) A one-off net charge of £492,000 relating to the correction of erroneous charges made against certain accounts as a result of unlawful action by one employee, acting independently.

These entries were made in the period July 2008 to September 2019 and the majority of the charges related to previous accounting periods. Since the sums involved, although significant cumulatively, were not significant in any single year, and are not in aggregate material in the context of the Company's overall finances, the directors felt that it was appropriate to recognise the charge within items excluded from underlying results, during the period.

3 NON-GAAP REPORTING MEASURES CONTINUED

The gross value of the erroneous charges amounted to £861,000. However, this exposure was reduced by £369,000 in respect of the net write-off of associated debt not recovered by the Company in the prior accounting periods. The net balance represents repayments due.

The non-underlying finance charges for the 26 weeks ended 28 December 2019 comprised £112,000 in respect of the ineffective portion of the movement in fair value interest rate swaps.

For the 52 weeks ended 27 June 2020, the non-underlying operating charges comprised the amounts noted above for the correction of the erroneous charges along with interest of £107,000 and additional charges of £347,000 in respect of fees relating to this matter (total net charge £946,000). In addition, there was an impairment charge of £7,638,000 in relation to 26 licensed properties and a provision of £498,000 in respect of potential charges relating to an enquiry opened by HMRC relating to the provision of uniforms and training to employees.

The non-underlying finance charges for the 52 weeks ended 27 June 2020 comprise £185,000 for fees in relation to putting in place the CLBILS loan following the COVID-19 outbreak offset by £35,000 credited in respect of the ineffective portion of the movement in fair value interest rate swaps.

4 SEGMENTAL REPORTING

The Group has three operating segments, which are largely organised and managed separately according to the nature of the products and services provided and the profile of the customers:

• Brewing and Brands which comprises the brewing, marketing and sales of beer and other products;

• Managed Pubs; and

• Tenanted Pubs which comprises pubs operated by third parties under tenancy or tied lease agreements.

Transfer prices between operating segments are set on an arm's length basis.

	Brewing and Brands	Managed Pubs	Tenanted Pubs	Unallocated	Total
26 weeks ended 26 December 2020	£'000	£'000	£'000	£'000	£'000
Turnover	22,635	21,554	10,234	898	55,321
Underlying operating (loss)/profit	(971)	(883)	1,587	(3,337)	(3,604)
Items excluded from underlying results	-	(321)	(96)	(598)	(1,015)
Divisional operating (loss)/profit	(971)	(1,204)	1,491	(3,935)	(4,619)

Net underlying finance costs					(2,212)
Finance costs excluded from underlying results					(202)
Fair value movements on ineffective element of cash flow hedges					(87)
Profit on disposal of property					37
Investment property fair value movements					(114)
Loss before taxation					(7,197)

Other segment information
Capital expenditure - tangible and intangible fixed assets	531	1,008	549	56	2,144
Depreciation and amortisation	827	1,705	1,364	218	4,114
Underlying divisional EBITDA	(132)	830	2,953	(3,120)	531
Number of pubs	-	69	232	15	316

	Brewing and Brands	Managed Pubs	Tenanted Pubs	Unallocated	Total
26 weeks ended 28 December 2019	£'000	£'000	£'000	£'000	£'000
Turnover	23,027	36,962	18,355	691	79,035
Underlying operating profit	366	5,353	6,690	(4,394)	8,015
Items excluded from underlying results	-	-	(156)	(492)	(648)
Divisional operating profit	366	5,353	6,534	(4,886)	7,367

Net underlying finance costs					(1,843)
Fair value movements on ineffective element of cash flow hedges					(112)
Profit on disposal of property					280
Investment property fair value movements					(297)
Profit before taxation					5,395

Other segment information
Capital expenditure - tangible and intangible fixed assets	832	4,103	2,401	552	7,888
Depreciation and amortisation	842	1,724	1,324	277	4,167
Underlying divisional EBITDA	1,215	7,089	8,001	(4,107)	12,198
Number of pubs	-	69	239	12	320

4 SEGMENTAL REPORTING CONTINUED
	Brewing and Brands	Managed Pubs	Tenanted Pubs	Unallocated	Total
52 weeks ended 27 June 2020	£'000	£'000	£'000	£'000	£'000
Turnover	41,724	55,108	25,224	1,563	123,619
Underlying operating (loss)/profit	(307)	2,367	6,979	(8,095)	944
Items excluded from underlying results	-	(6,771)	(1,161)	(1,150)	(9,082)
Divisional operating (loss)/profit	(307)	(4,404)	5,818	(9,245)	(8,138)

Net underlying finance costs					(3,857)
Finance costs excluded from underlying results					(185)
Fair value movements on ineffective element of cash flow hedges					35
Loss on disposal of property					(6)
Investment property fair value movements					50
Loss before taxation					(12,101)

Other segment information
Capital expenditure - tangible and intangible fixed assets	1,126	6,730	3,894	720	12,470
Depreciation and amortisation	1,702	3,551	2,712	528	8,493
Underlying divisional EBITDA	1,423	5,998	9,755	(7,520)	9,656
Number of pubs	-	69	234	16	319

5 NET FINANCE COSTS				26 weeks ended 28 Dec 2019 Total statutory	52 weeks ended 27 June 2020 Total statutory
	26 weeks ended 26 Dec 2020
	Underlying results	Excluded from underlying results	Total statutory
	£'000	£'000	£'000	£'000	£'000
Interest payable: Bank loans and overdrafts	2,245	-	2,245	1,829	3,833
Other interest (receivable)/ payable	(22)	-	(22)	-	32
Investment expense/(income) from fixed asset investments	2	-	2	-	(12)
Other finance income: Unwinding of discounts on provisions	(13)	-	(13)	14	4
Cost relating to putting in place CLBILS loan	-	202	202	-	185
Ongoing fair value movements on financial instruments charged/(credited) to profit and loss	-	87	87	112	(35)
Net finance costs	2,212	289	2,501	1,955	4,007

6 TAXATION							52 weeks ended 27 June 2020 Total statutory
	26 weeks ended 26 December 2020			26 weeks ended 28 December 2019
	Underlying results	Excluded from underlying results	Total statutory	Underlying results	Excluded from underlying results	Total statutory
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Corporation tax	(860)	(151)	(1,011)	1,420	(110)	1,310	(178)
Deferred tax	(143)	(111)	(254)	(123)	6	(117)	(173)
Total tax (credited)/charged to profit and loss account	(1,003)	(262)	(1,265)	1,297	(104)	1,193	(351)

Taxation on the underlying result has been provided at 17% (2019: 21%) based on the current best estimate of the effective tax rate for the 52 weeks to 26 June 2021. The average statutory rate of corporation tax for the 52 weeks to 26 June 2021 is expected to be 19% (52 weeks to 27 June 2020: 19%).

7 EARNINGS PER SHARE
	26 weeks ended	26 weeks ended	52 weeks ended
	26 Dec 2020	28 Dec 2019	27 June 2020
	£'000	£'000	£'000
(Loss)/profit attributable to equity shareholders	(5,932)	4,202	(11,750)
Items excluded from underlying results	1,119	673	9,122
Underlying (loss)/earnings attributable to equity shareholders	(4,813)	4,875	(2,628)

	Number	Number	Number
Weighted average number of shares in issue	14,751	14,725	14,733
Dilutive outstanding options	-	122	-
Diluted weighted average share capital	14,751	14,847	14,733
(Loss)/earnings per 50p ordinary share
Basic	(40.2)p	28.5p	(79.8)p
Diluted	(40.2)p	28.3p	(79.8)p
Underlying basic	(32.6)p	33.1p	(17.8)p

The earnings per share calculation is based on earnings from continuing operations and on the weighted average ordinary share capital which excludes shares held by trusts in respect of employee incentive plans and options.

8 DIVIDENDS
	26 weeks ended	26 weeks ended	52 weeks ended
	26 Dec 2020	28 Dec 2019	27 June 2020
	£'000	£'000	£'000
Final dividend for 2020: nil (2019: 24.21p) per ordinary share	-	3,573	3,573
Dividends paid	-	3,573	3,573

9 NOTES TO THE CASH FLOW STATEMENT
a Reconciliation of operating profit to cash generated by operations
	26 weeks ended 26 Dec 2020			26 weeks ended	52 weeks ended
	Underlying results	Excluded from underlying results	Total	28 Dec 2019 Total	27 June 2020 Total
	£'000	£'000	£'000	£'000	£'000
Operating (loss)/profit	(3,604)	(1,015)	(4,619)	7,367	(8,138)
Adjustment for:
Depreciation and amortisation	4,114	-	4,114	4,167	8,493
Impairment of tangible fixed assets	-	417	417	156	7,498
Impairment of intangible fixed assets	-	-	-	-	140
Share-based payments expense	176	-	176	256	318
Decrease/(increase) in stocks	2,085	-	2,085	(893)	(1,119)
(Increase)/decrease in debtors and prepayments	(1,311)	-	(1,311)	(3,096)	3,027
(Decrease)/increase in creditors and accruals	(5,443)	(47)	(5,490)	2,559	4,990
Free trade loan discounts	-	-	-	3	3
Loss on sale of assets (excluding property)	21	-	21	13	216
Interest received	-	-	-	-	10
Income tax received/(paid)	18	-	18	(185)	(185)
Net cash (outflow)/inflow from operating activities	(3,944)	(645)	(4,589)	10,347	15,253

b Reconciliation of movement in cash to movement in net debt

	26 weeks ended 26 Dec 2020	26 weeks ended 28 Dec 2019	52 weeks ended 27 June 2020
	£'000	£'000	£'000
Opening cash and overdraft	9,861	(817)	(817)
Closing cash and overdraft	(1,106)	3,270	9,861
Movement in cash in the period	(10,967)	4,087	10,678
Cash from increase in bank loans	-	(6,000)	(13,000)
Cash used to repay bank loans	3,000	-	-
Movement in loan issue costs	(52)	(51)	(102)
Movement in net debt resulting from cash flows	(8,019)	(1,964)	(2,424)
Net debt at beginning of the period	(84,401)	(81,977)	(81,977)
Net debt at end of the period	(92,420)	(83,941)	(84,401)

9 NOTES TO THE CASH FLOW STATEMENT CONTINUED

c Analysis of net debt

	June 2020	Cash flow	Repayment of loans	Amortisation of issue costs	December 2020
	£'000	£'000	£'000	£'000	£'000
Cash	9,861	(9,798)	-	-	63
Bank overdraft	-	(1,169)	-	-	(1,169)
Cash and cash equivalents	9,861	(10,967)	-	-	(1,106)
Debt due in less than one year	(94,262)	-	3,000	(52)	(91,314)
Total	(84,401)	(10,967)	3,000	(52)	(92,420)

10 CAPITAL EXPENDITURE AND COMMITMENTS

In the 26 weeks ended 26 December 2020, there were additions to tangible and intangible fixed assets on an accruals basis of £2,144,000 (2019: £7,888,000). In the financial period, there were disposals of tangible fixed assets with a net book value of £1,163,000 (2019: £963,000). As at 26 December 2020, capital commitments contracted, but not provided for by the Group, amounted to £164,000 (2019: £1,077,000).

11 RELATED PARTY TRANSACTIONS

Jonathan Neame, Chief Executive of Shepherd Neame Limited, was Chairman of Visit Kent Limited until March 2020 therefore only comparative figures are disclosed for related party transactions. During the 26 weeks ended 28 December 2019, fees and sponsorship activity paid to Visit Kent Limited amounted to £6,000 including VAT. As at 28 December 2019, Shepherd Neame Limited was owed £2,000 including VAT, by Visit Kent Limited and Shepherd Neame owed a balance of nil to Visit Kent Limited.

George Barnes is an executive director of Shepherd Neame Limited. Mr A J A Barnes, a close member of George Barnes' family, was up until 31 December 2019 a partner of Clarke Barnes Solicitors LLP and since 1 January 2020 has been a partner at Barnes Solicitors LLP, which both provided legal services in respect of Group properties. During the period £31,000 including VAT and disbursements to third parties was paid to Barnes Solicitors LLP (2019: £13,000 paid to Clarke Barnes Solicitors LLP). No balance was owed to either partnership by Shepherd Neame Limited as at 26 December 2020 (2019: nil).

Nigel Bunting, an executive director of Shepherd Neame Limited, is also a director of Davy and Company Limited. During the period, the Group did not purchase any goods (2019: nil) but made sales to the value of £6,000 (2019: £97,000) to Davy and Company Limited and its associated companies. At 26 December 2020, the balance owed by Shepherd Neame Limited to the Davy Group of companies was nil (2019: nil) and the balance owed to the Group by the Davy Group of companies, including VAT, was nil (2019: £21,000).

All the transactions referred to above were made in the ordinary course of business and outstanding balances were not overdue. There is no overall controlling party of Shepherd Neame Limited.

12 BORROWINGS

Due to the Business not being able to trade fully through lockdowns it has not been able to meet the technical terms and covenants associated with the loan notes and bank loans. As a result of these technical breaches the loans have been classified as short term on the balance sheet. The lenders have supported the Business through this period and have provided a waiver of covenants through to September 2022 and amended them in the interim with a replacement covenant around minimum liquidity.

[1] H1 2020 is the first half of the financial period of the 52 weeks to the 27 June 2020. This first half equated to the 26 weeks ended 28 December 2019 which were announced on 11 March 2020.

[2] (Loss)/profit before net finance costs, any profit or loss on the disposal of properties, investment property fair value movements and operating charges which are either material or infrequent in nature and do not relate to the underlying performance (see note 3).

[3] Underlying (loss)/profit less attributable taxation divided by the weighted average number of ordinary share in issue during the period (see note 7).

[4] Net assets at the balance sheet date divided by the number of shares in issue being 14,857,500 50p shares.

[5] Net debt plus deferred liabilities

[6] Underlying profit before tax pre net finance costs, depreciation, amortisation, profit or loss on sale of fixed assets excluding property and free trade loan discounts.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

1 INTERIM STATEMENT

2 ACCOUNTING POLICIES

The consolidated interim accounts have been prepared under FRS 104 Interim Financial Reporting and on the basis of the accounting policies set out in the statutory accounts for the 52 weeks ended 27 June 2020.

3 NON-GAAP REPORTING MEASURES

3 NON-GAAP REPORTING MEASURES CONTINUED

4 SEGMENTAL REPORTING

Other segment information

4 SEGMENTAL REPORTING CONTINUED