It said that like-for-like net income growth has been sustained in the first seven weeks of the current financial year.
EBITDA before exceptional items stood at £313m down from £340m, which the company said primarily reflected the impact of its disposal programme. Turnover for the year fell from £692m to £639m. Profit before tax and exceptional items £121m (2012: £137m).
Disruption
The group said that in the second half of the financial year it delivered a 1.8% decline in like-for-like net income with the third quarter facing tough comparatives against the prior year due to the timing of Easter, a positive impact from the Euro 2012 football championship and the Queen’s Diamond Jubilee celebrations.
In the final quarter of the year it said it received some benefit from a hot spell of weather in July but were also adversely impacted in the final weeks of the year by disruption caused to beer deliveries by the industrial action of employees of KNDL, it national distributor.
Weather impact
Chief executive Ted Tuppen, who is due to stand down next February, said: “Within the year there has been steady improvement in the underlying trading performance. In the first half of the year we reported a 4.2% decline in total estate like-for-like net income as trading was adversely impacted by heavy snow in January and the coldest March for many years.
“In addition, the cessation of trading on 1 October 2012 of Waverley, our wines and spirits distributor, adversely impacted the business as we were unable to supply these products to publicans, resulting in a direct loss of nearly £2m of trading income. We now have a new two-year distribution agreement for wines and spirits which has been operational throughout the second half and has enabled us to return to a normalised level of trading for these categories of products.”
Pub estate
The company said that it estate in the South, representing 42% of total net income, contracted by 1.5% as the weaker trade across the country was partially offset by the effects of a stronger London economy.
Tuppen said: “The agenda for our southern team is a growth strategy, prioritising return generating investment opportunities and ensuring our publican selection process leads to optimal performance.
“In the North and the Midlands our teams face a different set of challenges. Whilst our business building activities apply across all geographic regions a much greater proportion of our publican support is focused on the North and Midlands where economic pressures provide difficult conditions for publicans and their customers. Improvements in trading performance have been experienced across all geographies in the final quarter of the year, with the South returning to net income like-for-like growth.”
Disposals
Total net proceeds received from the company’s disposal programme in the year amounted to £150m, from the disposal of 428 properties during the period. It said that the majority of these pubs, 400, were considered to be underperforming tail end pubs which generated net proceeds on disposal of £116m, at an average value of £290,000, with an additional 28 properties considered to be exceptional generating net proceeds of £34m at an average multiple of 14 times income.
Tuppen said: "Following the issue of a convertible bond during the year, we now intend to reduce our disposal programme to focus purely on the underperforming element of the estate to generate sufficient cash proceeds each year to fund the annual capital investment in the retained business to enhance its income potential.
"Total disposal proceeds for the year to 30 September 2014 are expected to be in the region of £70m of which some £20m is expected from our Unique estate."
The group said that strong operational cash generation combined with £150m net proceeds from disposal programme has reduced net debt by £216m to £2.5bn.
At the year end, the company had 185 trading Beacon pubs, the majority of which have traded as Beacons for over 12 months and it said that these pubs increased their like-for-like net income by 8% in the year.
The group said it continued to invest in enhancing the quality of its estate with £62m of capital investment during the year.
Improving quality
Tuppen said: "After a difficult start, we ended the 2013 financial year with an improving trend in our trading performance. Current and foreseeable market conditions remain volatile and challenging, economic confidence is returning but consumer spending remains restrained, with cost inflation exceeding income growth.
"To have delivered like-for-like net income growth in such conditions in our final quarter is pleasing and to have continued this into the first seven weeks of the current financial year is encouraging.
"We are confident that the improving quality of our pub estate, the innovation and resilience of our publicans, the dedication of our team and proactive actions we are taking provide the appropriate foundations for delivering sustainable net income growth which will generate significant cash flows and value for shareholders."