Spirit pre-tax profits rise by 16%

15-Oct-2012 - Last updated on 16-Oct-2012 at 09:02 GMT

Spirit Pub Company has reported a 5% rise in full-year EBITDA to £146m and a 16% rise in pre-tax profit to £51m, both before exceptional items, with like-for-like managed sales up 4.8% and like-for-likes in its leased division down 4.9%.

Pre-exceptional earnings per share grew 21% to 5.8p in the year to 18 August and the company recommended a final dividend of 1.30p per share. Exceptional items included £595m relating to a revaluation of its property portfolio. Including exceptionals, Spirit reported a full year loss before tax of £589m.

In its managed arm, Spirit completed 178 refurbishments, taking the proportion of its estate that’s branded to 79%. Average returns on investment continue to exceed 25%. It completed the refurbishments of Chef & Brewer and Taylor Walker, with Fayre & Square and Flaming Grill “close to completion”.

Spirit said it aims to complete its CAPEX programme next year with the focus on John Barras and Original Pub Company.

Spirit said its performance in the leased division was expected, with the decline driven by rent re-basing and falling beer volumes. EBITDA (pre-exceptionals) for the leased business declined 10% to £38m, within the context of a 5% reduction in average pub numbers.

“Over a third of our year end leased estate underwent a rent review during this financial year. As these reviews are typically on a five year cycle, the initial rents were set at the peak of the market in 2006/7 and there has thus been a significant downward revision on many of the current rent settlements. This has been exacerbated by the cessation of rent premia on those leases which were amortised across the initial five year term.”

Spirit said 91% of the leased estate is now on substantive agreements, compared with 84% at the half year.

The company said it had disposed of 52 of the 100 underperforming pubs that it plans to dispose of, raising £26m.

Overall CAPEX in the year was £94m, with the majority, £81m, invested in its managed brands, plus £5m in the leased arm and £7m in infrastructure projects, and £1m on acquiring a pub for conversion to Chef & Brewer.

Spirit said: “We expect to finish the primary cycle of our managed estate investment programme in the next financial year with around a further 130 pubs to be invested and branded. With trials of our leased pubs underway and the completion of our managed infrastructure roll-out we expect capital expenditure to be between £65m and £70m for the coming year before normalising at between £40m and £45m in 2013/14 which represents the ongoing cost of maintaining our estate and infrastructure in excellent condition.”

Mike Tye, chief executive, said: “I am delighted with the progress we have made during our first year as an independent business. Profit before tax is up 16%, earnings per share are up 21% and we have commenced the payment of dividends.

“We have delivered further strong growth in managed sales through continued investment in our brands, estate, infrastructure and people while cost control has been robust in the face of inflationary pressures, enabling continued expansion of managed margin. Our leased pubs have performed in line with our expectations this year and we have now laid the foundations from which to drive performance improvement.

“The consumer environment remains tough but our ongoing focus on delivering retail excellence sees us well placed to make further progress in the year ahead.”

Spirit said its managed estate “continues to perform well”, with like for like sales up by 4.8% in the first four weeks of the new financial year.