Capital Pub Co determined to remain independent

David Bruce, chief executive of the burgeoning Capital Pub Company (CPC), has said he would "put up quite a fight" should a potential bidder threaten the London-based managed pubco's independence.

Bruce, who founded CPC with Clive Watson as an Enterprise Investment Scheme (EIS) funded operation in 2000, was speaking today as the group reported its first annual results since floating on the Alternative Investment market (AIM) last month.

"We're passionate about our independence and would put up quite a fight to retain it," he said.

"We're freetraders, we offer choice to our customers and that choice would disappear if we sold to a regional brewer like a Fuller's or a Marston's and became a boring old tied operator," he added.

Explaining the group's move to becoming a publicly-listed company, Bruce said the AIM float had been designed to provide liquidity for its EIS investors and offer access to funds in the future, should the need arise.

He said that as little as five per cent of the group's shares had exchanged hands since its June 4 listing, suggesting investors were happy with the group's progress.

CPC announced that sales across its 23-site estate had grown 47 per cent in 2007 to £14.22m, with pre-tax profits excluding flotation costs up 41 per cent to £1.65m.

Operating margins rose 4.6 percentage points to 26 per cent, while underlying earnings per share rose 23 per cent to 7.14p.

CPC said it would be recommending a total dividend for the year of 3p, an increase of 50 per cent on the previous year.

The group had the financial clout to buy anywhere up to 10 more pubs in the coming year, provided the price met the group's investment criteria, said Clive Watson - whose appointment as the group's managing director was announced at the same time as its results.

But the group "would not be swayed into buying outside the Greater London area", added Bruce. "We've an eclectic group of pubs across London that caters for a range of different customer markets throughout the capital."

Bruce admitted that CPC would like to buy Capital 2 - the second EIS operation whose nine pub estate CPC manages for an annual fee of £600,000 - but this was unlikely to happen for a while, due to tax implications for its investors.

Clive Watson noted the group was able to realise profits from selling floor space above pubs they had acquired to property developers. He said CPC had made around £2.5m from such sales.

"We're not buying pubs for the upper parts space, but we do want to optimise what non-retail property development exists on a given site," he added.

At an 80/20 wet/food sales split, CPC was clearly a liquor-led operation, Bruce said, "whose pubs served great food". He added that the estate's barrelage had doubled in the last two years and that thanks to good procurement terms from a range of suppliers gross margins on wet sales were as high as 70 per cent.

"Brewers are desperate for market share and we can show them great sales profiles in some fantastic locations," he said.