Improvement in performance of its pubs sees Wadworth return to FY profit: Brewer and retailer Wadworth has said that a “significant improvement” in the performance of its managed house division helped it return to profit in 2023, as it built on the “positive momentum” experienced in the previous 12 months. The company, which operates 19 managed pubs and 128 tenanted pubs, posted turnover for the year to 30 December 2023 of £39,154,000 (2022: £36,319,000), with Ebitda of £4,644,000 (2022: £3,644,000) and a pre-tax profit of £815,000 (2022: pre-tax loss of £5,380,000). The company said that the improved Ebitda was primarily due to a significant improvement in the performance of its managed house division and a solid performance across its tenanted estate, supplemented by immediate production cost benefits arising in its new brewery. Simon Townsend, the former chief executive of Ei Group, and Wadworth’s non-executive chairman, said: “High utility costs hampered the early part of the year but we have now secured much better rates which are locked in until Q4 2025. In the financial year, we repaid £1m against one of our revolving credit facilities, which is in line with our strategy· of reducing our overall debt gradually over time. There has been a large movement in non-current liabilities to current liabilities on our balance sheet as a large proportion of debt is due for refinancing in September 2024. The discussions with our banking ·partners have been positive and we are close to extending these facilities. We completed the move to the new brewery site, at Folly Road Brewhouse, in September 2023. It is an enormous credit to the whole Wadworth team to have delivered a project of this magnitude on time and on budget, especially after such a turbulent few years. The forecast cost savings arising from efficient and modern equipment are already coming through and these will be even more apparent in 2024. We are well-placed to launch a number of new, exciting products throughout 2024, to give our pubs a distinctive competitive advantage with which to delight their customers. Beer volumes in the tenanted division were broadly similar to the prior year which, given the cost headwinds facing consumers, is a credible performance under the circumstances. However inflationary pressures have also impacted our tenants’ profits, especially utility costs, and this led to a number of tenants choosing not to renew their existing agreements with us. Fortunately, the quality of our tenanted pub estate does mean that we have been able to attract some great ·new operators to join us as tenants in recent years. This is now starting to come through in terms of pub performance, but we are under no illusions as to the time, and investment, required to ensure that our tenanted estate can sustainably grow earnings for both our tenants and ourselves. We have entered 2024 with fewer pubs to let but still a challenging economic environment. The managed house division saw sales up by 13% on 2022 along with significantly improved food margin across the estate. The majority of this growth was organic with some very impressive turnaround performances in sites with new management teams who have clearly delivered a renewed focus on the customer experience and an increase in the number of larger events held throughout the year. We are planning to increase capital expenditure across both the managed and tenanted pubs for 2024 and beyond and are excited by the potential for profit improvement that carefully targeted investment will bring. We identified four pubs for disposal during the year which did not fit our strategic plan for the estate, and where we had concluded that they were not capable of delivering attractive and sustainable returns compared to their realisable value. I’m pleased to say that these were all sold by the year end and realised their combined net book value. The proceeds of disposal were partly used to repay a proportion of debt, as mentioned above, with the balance being retained to reinvest into the estate. We will continue to review the estate to ensure we are optimising returns from it. 2024 is set to be another year of change with the anticipated completion of the planning process at Northgate Brewery triggering a number of subsequent events. The current Brewery Tap & Shop closed at ‘the end of March 2024, and we have secured a new location in the centre of Devizes which we expect to open by the middle of the year. The financial results of the business are undoubtedly heading in the right direction, and it is essential that we continue to grow our Ebitda and free cashflow generated as a result. Whilst the modest level of profit on ordinary activities delivered in 2023 is a clear improvement on the results of recent years, the environment in which we are operating remains extremely challenging and consumer sentiment is fragile. The board has therefore concluded that it would be imprudent to reinstate a dividend on ordinary shares at this time. We are clear that we must continue to invest in the estate in order to attract consumers to our pubs and to drive sustainable earnings, growth, and we must continue to reduce the level of debt in the business. Both outcomes will deliver returns for shareholders over time. The last year has undoubtedly been one of enormous change for Wadworth, and it is a privilege, for me to become chair at such a momentous time in the company’s history. We are looking forward with both ambition and confidence.”