Sat 23rd Jul 2022 - Stonegate invests £4m in Peckwater Brands, group ‘continues to trade well Stonegate invests £4m in Peckwater Brands, group ‘continues to trade well’: Stonegate Group, the UK’s largest pub operator, invested £4m to acquire its minority stake in Peckwater Brands, the virtual brand company, Propel has learned. Last month, the Simon Longbottom-led business confirmed it had taken a minority stake in and participated in a £15m fundraising round for Peckwater. It came on the back of a trial which has seen Peckwater’s brands – mostly Seoul Chikin and Flip the Bird – made available for delivery out of 30 of Stonegate’s managed sites. Propel has now learned that the Stonegate Pub Company Limited provided a £4m loan to a newly formed entity, Stonegate Pub Company Kitchens Limited, in relation to the minority investment in Peckwater Brands. The loan will charge interest at a rate of 8.5% and expires in 2029. It comes as the circa 4,500-strong Stonegate said like-for-like sales in the managed estate were down 2.3% in the 28 weeks to 10 April 2022 (2021: 28-week period to 11 April 2021). Total revenue for the period was £827m compared to £128m in the prior year and £707m in the 52 weeks ended 26 September 2021. Of the £827m, the managed segment contributed £504m (28 weeks 2021: £56m, 52 weeks 2021: £393m), while the leased and tenanted pubs, being Publican Partnerships and Commercial Properties, together contributed £214m (28 weeks 2021: £59m, 52 weeks 2021: £228m) and the operator-led segment, comprising Craft Union and Vixen, contributed £109m (28 weeks 2021: £13m, 52 weeks 2021: £86m). Drink revenue in the period stood at £648m, comprising £149m from its tenanted estate, £399m from managed, and £100m from operator-led sites. Food revenue was £80m, with £79m from managed estate and £1m from operator-led. Rent revenue from its tenanted estate stood at £61m (2021: £22m). During the 28 weeks to 10 April 2022, the group achieved adjusted Ebitda of £195m (28 weeks 2021: loss of £54m, 52 weeks 2021: £72m) and operating profit of £152m (28 weeks 2021: loss of £107m, 52 weeks 2021: £59m). It posted a pre-tax loss for the 28-week period of £1m (28 weeks 2021: loss of £275m, 52 weeks 2021: loss of £233m). Capital expenditure in the 28-week period was £49 million (28 weeks 2021: £15m, 52 weeks 2021: £53m) which the company said has been primarily focused on maintenance capital. During the period, on 10 January 2022, the group acquired the remaining 25% of shares in the 12-strong Hippo Inns, a joint venture, for £1.8m. The group also disposed of 39 sites for net proceeds of £27m, which also includes the sale of fixtures and fittings to publicans (28 weeks 2021: 61 sites for net proceeds of £26m, 52 weeks 2021: 151 sites for net proceeds of £66m). Included within the 39 sites, during the period, the group completed on the remaining two sites of the 42 it was required to dispose under Competition & Markets Authority guidelines following the acquisition of Ei Group in March 2020. The company said it had a strong balance sheet at 10 April 2022, with net assets of £234m (11 April 2021: net assets of £214m, 26 September 2021: net assets of £237m). Group cash at the quarter end is £144m (11 April 2021: £123m, 26 September 2021: £224m), of which £68m is held within the Unique securitisation, and the business has access to a further £165m from its revolving credit facility and a further £25m overdraft facility. The company said: “Rising covid-19 cases during December and the introduction of the government’s ‘Plan B’ restrictions meant that the group’s Christmas trading period was negatively impacted. On 21 February, the government set out its ‘Living with Covid’ plan, which included the recommendation from 1 April 2022 that certain venues no longer use the NHS covid pass. The group has recognised £1m from government grants within other income during the period (28 weeks 2021: £75m in relation to the Coronavirus Job Retention Scheme and £11m from government grants, 52 weeks 2021: £83m in relation to the Coronavirus Job Retention Scheme and £11m from government grants). The current cost-of-living crisis, exacerbated by the war in Ukraine driving up energy and food prices in particular, has put continued pressure on consumers and the trading environment. However, sales have continued to recover well since reopening last year. Energy costs in the managed estate are hedged until October 2022, and additional costs are being offset as much as possible by price rises, menu engineering and operational productivity. However, the industry as a whole will undoubtedly feel the impact of increased costs in the short to medium term.” Simon Longbottom, chief executive of Stonegate Group, said: “The group continues to trade well despite the challenging economic backdrop. Pubs have proven their resilience throughout history and we remain confident that this time will be no different. Our customers’ need to socialise remains absolute and we have a great business with the scale and operational prowess to succeed, as we continue to grow our market share. The group has excellent liquidity. We remain focussed on implementing our stated strategy and delivering our capex programme, continuing to invest in our organic estate and progress our conversion plans to optimise each and every asset within our pub portfolio. While cognisant of the inflationary pressures in the immediate term, we are working hard to address these as much as we can and remain optimistic for the future opportunity of Stonegate Group.”