Spirit sees full-year turnaround in pre-tax profit

By Luke Nicholls

- Last updated on GMT

Related tags: Minimum wage

The Staffordshire-based firm reported a 1.6 per cent rise in like-for-like sales
The Staffordshire-based firm reported a 1.6 per cent rise in like-for-like sales
Spirit Pub Company has entered the new financial year with good momentum in the business, having reported a major turnaround in pre-tax profits over the past 12 months – up to £72m after a £589m loss this time last year.

The Staffordshire-based firm, which owns the Chef & Brewer, Fayre & Square and Flaming Grill brands, saw like-for-like sales for its managed arm increase by 1.6 per cent for the 52 weeks to 17 August 2013.

The year included exceptional items amounting to £17.4m, compared to £640m for the previous 12 months. Without these exceptional items, EBITDA grew by 2 per cent to £150m and profit before tax increased by 6 per cent to £54.3m.

“I am pleased with the further progress we have made this year in what have been tough trading conditions,” said Spirit’s chief executive Mike Tye. “Our continued focus on the execution of our strategy to deliver hospitality excellence for our guests has delivered a strong financial performance with growth of 6 per cent in profit before tax and earnings per share up 9 per cent.

“As a result of this performance the Board is recommending an increase in the full year dividend of 5 per cent. Our strong portfolio of Managed brands has achieved further growth in sales which, coupled with sustained productivity and efficiency gains, has driven significant expansion of Managed margin.

“The performance of our Leased pubs has stabilised and, through a combination of investment and innovation in our operating agreements, we are confident of returning the Leased estate to growth in the year ahead.

“We have entered the new financial year with good momentum in the business and remain confident in our strategy for future growth.”

Debt refinancing

In its annual financial results statement, released today, Spirit said it was looking to renegotiate with lenders over its £705.8m debt. The firm was due to begin repaying the money in August of this year, but it is keen to keep hold of as much as possible to continue with its refurbishment programme. 

It announced a further move in its debt re-profiling in relation to its £150m A1 and £250m A3 bonds.

“Bondholders are being asked to tender their existing A1 and A3 bonds which will be settled by the issue of new A6 and A7 bonds respectively,” reads the statement. “It is proposed that these new bonds will have a slightly higher coupon, which will increase the group’s interest cost (the quantum of the increase being dependent on participation level) and a longer amortisation profile which will provide greater short and medium term financial flexibility.

“In addition, the terms of the new bonds will provide greater visibility to further financing opportunities for the group over the next five years.”

In good Spirits

Despite facing on-going cost challenges driven by the increasing national minimum wage and rising raw material and energy costs, Spirit is confident in achieving further progress for the year ahead, with plans to add to its estate in 2013/14.

“Focus for 2013/14 will be on a continuation of our innovation trials in both estates alongside our managed refresh programme. We therefore expect capital expenditure, excluding pub acquisitions, to be between £40m and £45m which represents the on-going cost of evolving our brands and offers whilst maintaining our estate and infrastructure in excellent condition.

“In 2013/14 we intend to begin adding pubs to our estate to both supplement organic growth and leverage our highly scalable overheads. Our preference is for freehold assets that will be suitable for Fayre & Square or Flaming Grill, both of which are strong food-led value brands with a nationwide appeal. We expect to begin the acquisition programme in our second quarter.”

Spirit Pub Company was formed in August 2011 following a demerger from Punch Taverns. The group sold 38 pubs in the year and has now sold 90 since taking control of the estate.

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