Hydes targets acquisitions; swings into the black
The company returned to the black in the year to 31 March, reporting a pre-tax profit of £1.5m against a pre-tax loss of £2.7m in the previous year, in which it incurred business re-organisation costs of £4.1m and the loss of its freetrade business.
Turnover fell from £23.2m to £17m due to the operational restructuring of the business, said chairman Peter Johnson. Operating profits grew 25.4% to £1.42m – “a creditable result given the demand of the business restructure over this period”.
Business is now 'far more streamlined'
Johnson said: “Following the restructure, the business is now far more streamlined and very focused on the development of the company’s pub estate.
“We believe the managed houses provide the greatest potential for the future and we have developed two successful trading styles: a high quality food-led proposition and a traditional wet-led offer with ancillary food.
“We are currently rolling out the food-led proposition. We now have four sites in this category and we anticipate at least six by the end of 2013. The Coach and Four in Wilmslow is currently being refurbished as the latest addition to this group.
“We also intend to test out a value dining concept this year with a view to establishing a third trading style and we are actively seeking high quality acquisitions that will grow our managed business.”
The figures
Like-for-like sales in Hydes’ managed houses grew 1.3%, which was “lower than we hoped” due to the “exceptionally cold weather” in Q3 and snow in December. Two tenanted sites were transferred to managed and became pub restaurants, with helped grow food sales across the managed arm by 19% - food accounted for 21.7% of overall sales.
Like-for-like profit fell 6.8% to £1.45m, which Johnson attributed to that fact that “traditional pub drinking” in its wet-led tenancies is “still taking a hit from cheaper alcohol available in supermarkets”.
Johnson said: “We have continued to provide support to our tenanted businesses and have been able to offer managed house buying prices in a number of key areas while continuing to invest in refurbishments, support competitive pricing with discounts on selective products and assist with rates and utility reviews.
“We are also providing support to establish catering operations in houses with potential for food sales.”
He said Hydes continued its policy of disposing of under-performing sites, selling four in the year, and also transferring “better” sites to the managed division – two more have been transferred since the year end.
Hydes sold its Grade II-listed brewery in Moss Side in February and the company has a six-month option to acquire the adjoining land on the western side of the site.
New brewery
The company entered its new brewery last December. It was due to move in October but a delay caused by the upgrade of its electricity supply cost Hydes more than £100,000.
The business restructure has led to the departure of marketing director David Safiruddin, who is due to leave in July to set up his own consultancy.
Hydes spent £1m upgrading and refurbishing its pubs and realised £729,000 from disposals. It spent £704,000 on the new brewery and invested £1.4m on the brewery plant, fixtures and fitting.
The company’s borrowings from the Royal Bank of Scotland increased by £1.4m over the course of the year, Johnson said the level of debt (£6.5m) “Is very sustainable having regard to the value of our sites and forecast future cash flows”.
Johnson said: “Having sold the free trade operation, closed the old Queens Brewery and opened our new cask brewery in the last 18 months, we are now able to place greater focus on the operation of the company’s pubs. We accordingly expect to achieve a healthy increase in profitability.”
