Stonegate doubles revenue to £1.6bn in ‘creditable performance’
The pub operator, which acquired Ei Group in 2020, achieved like-for-like sales growth within its managed estate, particularly strong trading from its Craft Union arm and is building momentum within its leased & tenanted (L&T) division as customers returned to Stonegate’s venues.
Revenue generated in the period reached £1.61bn (2021: £707m), which was more than double the previous year. Earnings before interest, taxation, amortisation and depreciation (EBITDA) was £465m (2021: £151m) while it posted a loss before tax of £130m (2021: loss of £233m), reflecting £196m of exceptional items driven by property impairment charges. Adjusted profit before tax (pre-exceptional items) was £66m (2021: loss of £320m).
Despite the effect of the Omicron Covid variant, which impacted 2021-22 Christmas trading, Stonegate saw a strong recovery in sales for the 52 weeks FY2022 period.
Energy caps welcomed
It said the cost-of-living crisis and the war in Ukraine have driven up energy and food prices and increased pressure on consumers so additional costs continue to be offset through initiatives including price rises, menu engineering and efficient labour scheduling.
It welcomed domestic and business energy price caps and while total energy and utility costs will increase significantly in the current year, the group has a number of initiatives to reduce energy consumption.
In the period, Stonegate invested £140m on expansionary and maintenance capital (2021: £53m) and it disposed of 69 individual pubs in the period for net proceeds of £46m at a multiple of 14.8x. At the 25 September 2022 year end, the group had 4,516 pubs (2021: 4,580).
Stonegate’s strategy going since its acquisition of Ei Group was to review every site and determine the optimum operating model for each pub. Since then, 24 Ei sites have been converted to managed and are delivering a return on investment (ROI) of 62%; 79 former L&T sites and nine former managed sites have been converted to Craft Union and are achieving ROIs of over 30%; and its capex programme continues to deliver over 40% ROI.
Strategic options
It added: “We continually evaluate the various strategic options open to us to maximise shareholder value and the disposal of certain non-core pubs remains one such option. Stonegate remains committed to retaining a sizeable L&T business.
“Any disposal would be subject to market conditions and the achievement of attractive value creation. The group remains well financed and is performing well with encouraging trading momentum as more normalised trading conditions have returned.”
Stonegate chief executive David McDowall, who joined in February this year following Simon Longbottom’s decision to step down, said: “As the year progressed, sales momentum grew across our different pub formats to deliver a creditable performance despite the well-publicised headwinds, which we have largely managed well.
“This momentum has continued into the current financial year with trading above pre-pandemic levels, confirming the enduring appeal of our pubs and customers’ desire to continue to go out.
“We are encouraged both by continuing consumer demand and early signs that inflationary pressures are beginning to abate. The investments we have made, and conversions to managed and operator-led formats, have shown strong returns, endorsing our pub optimisation strategy.”
