Last updated: October 16, 2012 10:22 pm

Spirit lifts profits despite demand fall

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Value-conscious consumers eating out at their local have boosted full-year profits for Spirit Pub Company, in spite of a fall in beer sales at its leased hostelries.

The owner of the Flaming Grill and Chef & Brewer chains said like-for-like sales at its 800 managed pubs increased 4.8 per cent in the year ending August 18, compared with the previous year.

But a drop in beer sales saw net income from its 500 tenanted pubs – the money Spirit receives from outlets that are leased to landlords – decrease by 4.9 per cent in the year to August 18, compared with the previous year.

Mike Tye, Spirit’s chief executive, said a combination of investment and robust cost control had helped boost sales at the managed pubs.

“We’ve managed to outperform the market in the managed side of business and grow earnings significantly,” he said. “But we’re not sitting back on our laurels . . . we’ve still got 20 per cent of the managed estate to invest in and on the leased side we’re only six months into a turnround programme.”

But while pubs are closing at a slower rate than a few years ago, it remains a difficult time for the industry. Spirit said it had sold 52 leased pubs that it deemed to be underperforming, raising £26m, and plans to sell about another 50 pubs.

Earnings before interest, tax, depreciation and amortisation rose to £150.6m, from £118.2m the previous year, despite poor summer weather and a quieter than expected period during the London Olympics.

However pre-tax losses widened to £588.9m from £206.6m as the company was hit by a £595.2m non-cash depreciation charge on its property.

Net debt – much of it inherited from the demerger – stood at £710m. While that was slightly up from last year, higher earnings allowed it to trim its net debt to ebitda ratio to 4.9 times, from 5.0 times in the same period last year.

Spirit said it would pay out a full-year dividend of 1.95p a share, building on its maiden dividend earlier this year of 0.65p a share.

Shares in Spirit fell 1.25 per cent to 59.25p on Tuesday.

FT Comment

Pity the landlords. While Spirit’s managed pubs outperformed many of its peers’, in terms of like-for-like sales, the traditional tenanted boozers continue to have a torrid time. Food, not ale, is increasingly the key ingredient: the company believes that its value-led branded pubs should continue to benefit from wallet-conscious diners during the recession. Spirit’s shares, trading on just over 9 times 2013 earnings, compared with rival Greene King’s shares on 10 times, could prove equally good value if the trend in pub dining grows.

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