Shepherd Neame Ltd

AGM

October 2013

Miles Templeman

Chairman

1

2013: A solid performance in difficult market

conditions

Performance to 29 June 2013 highlights include:

• Growth in turnover of 1.4%

– 52 week year against a 53 week comparative

• Operating profit before exceptional items level at £12.7m

• Strong retail like for like sales and average EBITDAR growth per

pub

• Volume growth in core brands

• Business and Board reorganisation leading to a £1.2m exceptional

charge 2

A year of further growth in net asset per share and

dividend

3

• Final dividend per £1 share proposed at 20.15p, resulting in full year

dividend 25.15p (2012: 24.5p) up 2.7%

• Net asset value per £1 share of £9.81 (2012: £9.61) up 2.1%

Business and Board reorganisation

• Beer Business key initiatives

– Phased exit of contract brewing to best utilise plant capacity

– Ten year logistics arrangement entered with Kuehne & Nagel

Drinkflow Logistics

• Reorganise Board around two divisions

– Brewing and Brands

– Retail and Tenanted Pubs

4

Business and Board reorganisation

Executive Board 2014

Jonathan Neame

Chief Executive

Graeme Craig

Brewing &

Brands

Director

January 2014

Nigel Bunting

Retail &

Tenanted

Operations

Director

July 2014

George Barnes

Property &

Services

Director

July 2014

Mark Rider

Finance & IT

Director 5

Brewing &

Brands Division

Retail & Tenanted

Pubs Division

Tom Falcon

Production &

Distribution Director

Leaves December 2013

Bill Brett

Non-Executive

Director

Started September

2013

Mark Rider

Finance and IT Director

6

Performance

Turnover 134.9 133.0

2013

£m

2012

£m

1.4

%

Operating Profit 12.7 12.7 -

Net Finance Costs (4.7) 4.3

Profit before Tax 8.0

Statutory Profit Before Tax

(0.9) 0.6

(8.9)

Tax Rate (%)

7.1 9.1

EPS (pence)

23.8 24.6

(21.6)

Full Year Dividend per £1 share (pence)

48.1 49.8

(0.8)

2012/13 was a 52 week year. 2011/12 was a 53 week year

8.4

( )

Total exceptional Items

24.5

7

25.2

(3.4)

2.7

Before exceptional items

Reconciliation to statutory profit

(4.5)

0.6

Exceptional Items

Property Profits(1.2)

0.6

2013

£m

2012

£m

Number of Pubs Disposed0.3

12

Impairment Charge

6

-

Total Exceptional Items

-

2012/13 was a 52 week year. 2011/12 was a 53 week year

8

Business Reorganisation -

(0.9)

)

(7.7)

Cash flows

EBITDA 19.6 19.8

2013

£m

2012

£m

Cash flow from operations 19.0 19.9

Interest and tax

Dividends and purchase of own shares (3.6)

Disposal proceeds 3.5

Internally Generated Free Cash 11.8 12.1

Core Capex (7.7

Acquisitions (3.6) (15.6)

(3.1)

(10.2)

(2.0)Net cash (outflow) (11.2)

2012/13 was a 52 week year. 2011/12 was a 53 week year

2.7

9

(6.8)

125.8 123.2

9.81

4.0

(75.8)

Balance Sheet

Fixed Assets 202.4 198.6

2013

£m

2012

£m

Other assets and Liabilities 1.8 0.4

Net debt

Shareholders Funds

Net Debt : EBITDA 3.8

Gearing 62% 62%

Net asset per £1 share 9.61

(78.4)

10

Jonathan Neame

Chief Executive

11

Overview

• A satisfactory performance in the face of challenging market

conditions

– Strong like for like retail sales

– Average EBITDAR growth in managed and tenanted

– Volume growth in core brands

• Positive actions taken

– Beer portfolio development

– New export opportunities

– Business reorganisation and agreement with KNDL

– Investment in estate, particularly to drive food and

accommodation sales

– Additional support services for licensees

• Industry Matters

– First Duty cut since 1959

– DBIS consultation on Statutory Code of Practice

12

Portfolio development: To focus capacity on own

beer and licensed brands where there are growth

opportunities

13

Heritage Mainstream Discovery/Craft

Connoisseur Beers

For Special OccasionsRegular

Beers

Premium, World,

Craft Beers

New product development

14

Classic Collection

Discovery/Craft

Investment in brands

15

Comedy Duo Armstrong & MillerGround naming rights

Movember Partnership

Soul 2 Soul Watergate

Bay ConcertVarsity Match Twickenham

Serpentine Gallery

Future Contemporaries

Party

Core brand performance: Ahead of the market

Volume Growth

2013

5.7%

2012

2.3%

2011

Volume Growth

2013

20.4%

2012

16.8%

2011

Volume Growth9.4%

2013

(9.1)%

2012

3.9%

2011

2012/13 growth rates on a 52 week comparable basis. 2011/12 was a 53 week year

* Own beer volume adjusted to exclude contract brewing16

1.0%

2.7%

Phased exit of Kingfisher contract mitigated by

new growth opportunities

• Phased exit from contract

brewing Kingfisher lager

– 18.6% of own beer 2013

– Brewing ends December

2014

• We expect discontinued

contract volume will be

covered by new brand and

sales initiatives

• New export agreement into

North America

17

Business reorganisation

• March 2013 - 15 roles in

Beer Business consolidated

• July 2013 - 10 year agreement for

distribution and warehousing services

• Shepherd Neame continue to own site

which becomes key part of KNDL

network

• Increased expansion opportunities

outside heartland

• Transfer of operations in October

2013. Limited redundancies

anticipated

18

Progress against long term pub strategy

Objective Progress

Improve quality and average

earnings of pub and hotel estate

• 26 pubs and hotels acquired, 51

sold since 2008

• Strong average EBITDAR per pub

growth

Build retail mix • Retail turnover 30% higher in 2013

than 2008

Grow accommodation business • 501 letting rooms (2008: 372)

across managed and tenanted

pubs and hotels

• Now 10.1% of retail turnover

Develop food offer • Strong retail food growth

• Now 29.5% of retail turnover

• Tenanted catering development

support

Increase licensee support • 9 new initiatives in 2013

Attract quality operators • Applicants in 2013 double those of

2008

19

20

We own many of the best freehold pubs in Kent,

London and South East.

• Total investment in pubs £9.9m

(2012: £20.6m)

- Acquisitions £3.6m

(2012: £15.4m)

- Maintenance/development

Capex £4.6m (2012: £3.7m)

- Repairs £1.7m (2012: £1.5m)

- Disposals £2.7m (2012: £3.5m)

• Over last 5 years average EBITDAR

per managed pub up 42.9%

• Average EBITDAR per tenanted

pub up 11.1%

Pub performance robust in difficult On Trade

market conditions

21

• UK market On Trade volumes down -4.9% (2012: -3.4%)

-Wet and dull Summer in 2012. Cold Spring in 2013

- Olympics 2012 below expectations

- Consumer caution

• Retail liquor LFL 2.0% (2012: 6.2%)

Food offer development has driven an increase in

customer numbers

Food LFL 5.0%

2013

Ave spend / head £11.23

Spend / head growth -

Managed Houses

22

Hotel investment strategy

23

• Acquisition of Royal Wells Hotel

and Beau Nash for £3.6m

• Redevelopment of Marine Hotel, Tankerton

- £1.4m spend in 2013

• Major bedroom upgrades

- The Royal Hotel, Deal

- The Dog & Bear Hotel, Lenham

- The Sun Inn, Faversham

• 2014 – 15 investment plans

- The Bell Hotel, Sandwich

- The Fayreness, Kingsgate

(to be renamed The Botany Bay Hotel)

- The Royal Wells, Tunbridge Wells

Room refurbishment has supported an increase in

occupancy and RevPAR

Accommodation LFL 7.9%

Occupancy 73%

Occupancy Growth 7%

Managed Houses

• 501 letting rooms at year end:

– Managed Houses

– Tenanted

24

RevPAR £48

RevPAR Growth 11.6%

2013

270

231

Tenanted investment strategy

25

• Total investment in our tenanted estate

£3.1m (2012: £2.6m)

• We provide turnkey service to develop

pub design interiors, provide fixtures &

fittings with pre and post opening

training & support

Supporting our Licensees

• We have evolved our tenanted support with 9 new initiatives and services,

for example

– Catering advisory, menu design

and bespoke coffee supply package

– Enhanced range of national lagers

and guest beers

– New induction programme for

for licensees and online training

• Upward trend in demand for our pubs from high quality applicants

– Lowest number of pubs to let for 5 years

– Double number of applicants compared to 2008

– High licensee satisfaction scores

26

Summary

• Challenging year but creditable performance

• Decisive action to position the business for higher returns

• Current trade strong…..

… but we do not expect it to continue at this rate of growth

through winter

– Managed House LFL for first 10 weeks up 10.2%

– Tenanted LFL EBITDAR up 1.7%

– Total beer volume up 9.3%, own beer volume up 11.9%

• Acquisition of George, Soho

– Leasehold site, minimal earnings impact in 2014, anticipated

capex of £0.3m

• 2014 – year of transition to consolidate business and Board

reorganisation27

Questions?

28

Resolutions

29

Resolution 1

To receive the Annual Report and Accounts

30

Resolution 1

To receive the Annual Report and Accounts

31

No of No of

Shareholders Votes %

For + Discretion 306 42,003,750 99.77

Against 1 79,400 0.19

Other Discretion 12 15,530 0.04

100.00

Withheld 2 220

52.98% of total votes cast by proxy

Resolution 2

To declare a Final Dividend

32

Resolution 2

To declare a Final Dividend

33

No of No of

Shareholders Votes %

For + Discretion 307 42,003,749 99.77

Against 1 79,400 0.19

Other Discretion 12 15,530 0.04

100.00

Withheld 1 221

52.98% of total votes cast by proxy

Resolution 3

To propose the re-election of Jonathan Neame as a Director

34

Resolution 3

To propose the re-election of Jonathan Neame as

a Director

35

No of No of

Shareholders Votes %

For + Discretion 301 33,594,190 89.12

Against 3 4,085,129 10.84

Other Discretion 12 15,530 0.04

100.00

Withheld 5 4,404,051

47.44% of total votes cast by proxy

Resolution 4

To propose the re-election of James Leigh-Pemberton

as a Director

36

Resolution 4

To propose the re-election of James Leigh-Pemberton

as a Director

37

No of No of

Shareholders Votes %

For + Discretion 300 29,936,820 79.42

Against 5 7,742,565 20.54

Other Discretion 12 15,530 0.04

100.00

Withheld 4 4,403,985

47.44% of total votes cast by proxy

Resolution 5

To propose the re-election of George Barnes as a Director

38

Resolution 5

To propose the re-election of George Barnes

as a Director

39

No of No of

Shareholders Votes %

For + Discretion 299 29,931,641 71.11

Against 7 12,145,817 28.85

Other Discretion 12 15,530 0.04

100.00

Withheld 4 5,912

52.98% of total votes cast by proxy

Resolution 6

To propose the election of Bill Brett as a Director

40

Resolution 6

To propose the election of Bill Brett as a Director

41

No of No of

Shareholders Votes %

For + Discretion 298 29,931,299 71.11

Against 8 12,146,294 28.86

Other Discretion 12 15,530 0.03

100.00

Withheld 4 5,777

52.98% of total votes cast by proxy

Resolution 7

To reappoint the Auditors

and to authorise the Directors to fix their remuneration

42

Resolution 7

To reappoint the Auditors and to authorise the

Directors to fix their remuneration

43

No of No of

Shareholders Votes %

For + Discretion 302 38,342,873 91.09

Against 5 3,736,991 8.88

Other Discretion 12 15,530 0.03

100.00

Withheld 3 3,506

52.98% of total votes cast by proxy

Resolution 8

To authorise the Company to make market

purchases of ‘A’ Ordinary Shares

44

Resolution 8

To authorise the Company to make market

purchases of ‘A’ Ordinary shares

45

No of No of

Shareholders Votes %

For + Discretion 297 37,933,292 90.22

Against 9 4,094,876 9.74

Other Discretion 12 15,530 0.04

100.00

Withheld 3 55,202

52.91% of total votes cast by proxy