Spirit reports like-for-likes up 4.4% and PBT of £110m: Spirit Pub Company has reported its managed division saw like-for-like sales rise by 4.4% in the 53 weeks until 23 August (the previous financial year had 52 weeks). Ebitda was £142m (2013: £144m) and profit before tax was £110m (2013: £69m) thanks to net pre-tax profit impact from exceptional items of £50m (2013: £14m). Ebitdar margin was up 30 basis points. Its leased division “stabilised and was in growth” with like-for-like net income up 4.2% and average Ebitda per pub up 10.0%, meaning four consecutive quarters of like-for-like net income growth. The company acquired 22 pubs for its managed division “which is well-positioned for further growth” and has £75m cash available to fund estate expansion. In the six weeks to 4 October 2014, managed like-for-like sales were up by 2.6%, and leased like-for-like net income was up at 4.6% with “the cold and wet August bank holiday weekend being offset by more favourable weather in September”. Chief executive Mike Tye said: “It’s been a strong year for Spirit, driven by effective execution of our clear and consistent strategy. Our Managed division continues to outperform the market with its strong portfolio of brands, while our Leased division is delivering market-leading performance and is in growth. We ended the year with a healthy balance sheet and strong earnings and dividend growth, underpinned by good cash generation. Looking to the future, the business is well positioned for further progressive growth, both organically from our existing portfolio and through acquisitions. We see significant opportunity to roll out our successful brands and currently have £75m to fund expansion. While the consumer environment remains volatile, we are confident that our customer proposition and sustained focus on delivering hospitality excellence for our guests will provide the necessary firepower to grow market share and continue to deliver value for all our stakeholders.” The company saw a £71.6m gain from the revaluation of properties and a £18.2m profit on the sale of properties.

Of its managed division, the company stated: “Our managed pubs have delivered strong results throughout the year with continued outperformance of the industry benchmark, the Coffer Peach Business Tracker. Like-for-like sales were up 4.4% (for the 52 week period) which represents an improvement of 10.8% over a three year period. While we benefitted from better weather in the first half of the year, we faced tougher weather comparatives over the summer months and the underlying health of our brands and the strength of our estate helped increase our average weekly sales by a further 5% to £18,100. Driven by strong sales growth, Ebitda increased by 8.1% and Ebitdar margin improved by 30 basis points, giving a total Ebitdar margin improvement of 160 basis points over a three year period. Some of the efficiency gains have been partially offset by increases in the carbon reduction tax and the cost of introducing BT Sport into the estate. The strong performance has also resulted in higher bonus costs than in the prior year, with the majority of these bonuses being paid to pub employees. Our focus remains on disciplined capital investment to drive returns and innovation to ensure that we have compelling brands and pubs which appeal to our guests. In the first half of the year we focused on trialing schemes to determine if we could identify more effective brands for our uninvested local pubs. As a result of these pilots we have identified opportunities for a further roll-out of our Flaming Grill brand and have developed a new quality local offer, Golden Oak Inns, which we have successfully trialed in seven pubs in the year. Golden Oak Inns is well suited to smaller but demographically well sited pubs and offers excellent food, drink and service in a contemporary environment. We see a significant roll-out opportunity for this concept across our Locals estate. We completed 24 Flaming Grill investments in the year with an average spend of £140,000 per pub, with five of these pubs being transferred from our Leased estate. A further two pubs from the Leased estate have been converted to our Fayre & Square brand and we commenced our expansion program with the acquisition and conversion of two freehold pubs into our Flaming Grill brand. A third pub was acquired in the year and opened for trading as a Flaming Grill in September 2014, shortly after the year-end. We also completed 13 major Taylor Walker investments, including the conversion of four unbranded pubs and optimising the use of previously redundant space, such as installing cellar bars and function rooms. We continue to seek opportunities to expand our Wacky Warehouse brand by investing in under-utilised space. Our ambition is to have a Wacky Warehouse play area associated with all of our Fayre & Square pubs. The proportion of our estate invested and branded is now 89% and we continue to achieve an average return on investment in excess of 25%. We have now commenced the refreshment phase of our capital investment programme for pubs that previously had major investment spend between three and five years ago. We have completed 37 of these sparkle spends in the year, at an average cost of £37,000, predominantly in the Taylor Walker estate. During the year we have further strengthened our digital and CRM capability, enabling us to better understand and communicate with our guests using a combination of both digital and traditional marketing. The launch of our loyalty scheme in our Fayre & Square estate has enabled us to increase both the frequency and the value of visits by appropriately incentivising guests with tailored rewards.” 

Of its leased division, the company stated: “The Leased estate is firmly in growth, with like for like sales growth of 2.8% and like for like net income increasing by 4.2%. Average net income per pub of £104,000 (2013: £96,000) demonstrates the high quality of our Leased estate which delivered total operating profit growth of 2% (on a 52 week basis), despite having 6% fewer pubs. Like for like beer volumes are in growth and have been consistently ahead of the market throughout the year (Source: BBPA). Like for like rent is also in growth and the percentage of pubs on substantive leases has increased from 94% to 96% at the year end. Our focus has remained on improving the quality of the estate through investment, innovation and selective disposals and we have continued to generate returns from investment in excess of our 25% hurdle rate. We have continued our Leased innovation trials during the year and these have evolved from the more restrictive franchise type agreements towards more flexible, fixed and variable turnover based rent. This is a natural evolution of our approach in providing targeted support to our licensees to share with them the skills, experience and insight which our Managed estate provides us with.”