Heartstone Inns Limited, which operates five sites, reported losses of £279,736 for the year (2011: loss of £225,540) on turnover up 3% to £3.5m. Sister company Heartstone Inns 2, which has four outlets, saw pre-tax losses widen from £105,945 to £405,592; turnover grew 4.5% to £2.3m. The businesses were merged in May 2013.
Heartstone said it was “pleased” with the rise in sales in both groups that came “despite the difficult economic conditions in the UK and the continual flow of depressing business and licensed trade news”.
Heartstone 1 reported earnings before pre-exceptional EBITDA of £310,823, or 8.9% of turnover.
Total investment in the estate was £873,490 during the year. It spend £750,000 developing the Hare & Hounds pub in Devon, which led to a 25% rise in like-for-like sales since reopening in June with a new 100-cover restaurant and other changes.
“Whilst the company did not make any acquisitions during the year the company benefited from the investment at the Hare & Hounds and continued to benefit from refurbishment projects completed in prior years.
“These investments teamed with stable management and ongoing improvements to purchasing and operations resulted in all the company’s public houses trading profitably during the year and achieving key performance indicators in line with industry norms. For example gross margins of 64.5%, direct staff costs of 33.6% and pub profits of 15.8% of sales were achieved.”
Heartstone 1 also received a management fee from its sister company of £39,515.
KPIs for Heartstone Inns 2 were “a little below expectations but not far adrift from industry norms”, the company said, as a result of “difficult trading conditions” in the year.
Gross margins of 66%, direct staff costs of 37% and pub profits of 6.4% of sales were achieved.
“Trade at both the Boatman in Guildford and the Walhampton Arms near Lymington was adversely affected by one of the wettest years on record. The Pelican Inn near Marlborough was extensively refurbished and with a new team in place is well positioned to grow the trade in the coming years. The Owl near Horsham enjoyed another good year with sales growing by 10% on the year before. The company is looking to develop the current estate and has secured planning permission to extend the Pelican Inn restaurant and to add eight letting rooms to the Owl.”
Pre-exceptional EBITDA ran at a loss of £26,230. The firm said: “It should be noted that the company is only in its third full year of opening and with greater stability to management and careful investment results should improve.”
The property portfolio of Heartstone Inns and Heartstone Inns 2 was valued at £7.5m and £5m respectively in October 2012. Net debt for the two companies was £3.3m (representing a loan to value ratio of c44%) and £1.1m (loan to value ratio of c21%).
A statement on the accounts of both companies said: “The directors believe that the quality, trading style and location of the company’s public houses puts the company in a strong position to meet the challenges of the current market, the local competition, the on-going impact of legislative changes and the continued pressure on direct costs and overheads.”