Admiral Taverns, the tenanted pub operator, has reported a 3.8% increase in underlying EBITDA to £21.5m for the year to 31 May 2014, which it described as a “significant and successful period of development for the company and its licensees”.
The 985-strong group, which made no comment on the pubs code decision, saw EBITDA per pub climb 10.2% in the year, while revenue per pub rose 4.8%. Like-for-like income growth was ahead by 1.5% in the period.
The company said that the improved performance reflected the “improving quality” of its estate. During the 12 months it sold 124 sites, at an average of £172.6k a pub, generating proceeds of £21.4m.
It said that on the back of these disposals and a reduced pub estate, group turnover reduced by 9.6% to £76.7m.
The Cerberus-backed group said that its disposal programme was drawing to a close although it does expect to make some further disposals in the current year (to 31 May 2015).
The group said that its new financial year had started well, benefitting from the football World Cup in June and reasonable weather, with like-for-like income growth ahead 1.9% in the 22 weeks to 1 November.
Kevin Georgel, chief executive, said: “The year to May 2014 was one of solid operational and financial progress. During the period underlying EBITDA rose on the back of a series of business development initiatives, including capital investment and licensee recruitment and training.
“On the back of these business development initiatives, and combined with the benefit from disposing of uneconomic and less profitable pubs, EBITDA per pub rose 10.2%. At an underlying level, post tax profit was £10.2m.”
As part of the year-end process, the company commissioned an independent valuation of our estate. As a result of this exercise the carrying value of a number of pubs was revised upwards by £17.2m and the carrying value of a number of other pubs was reduced by £11.1m.
The overall valuation of the group’s core estate increased by 3%, which it said “reflected increased confidence in the wider pub sector amid recovering property values, and the overall improved operating performance across our estate”.
In line with UK accounting practice, the downward property revaluation is charged to the profit and loss account as an exceptional item, while the upward revaluation is not recognised in the profit and loss account but is transferred direct to the revaluation reserve. After property and exceptional items, including the property revaluation, the group’s loss after tax was £2.8m.
The number of pubs in the group’s estate at the end of the financial period was 906, down from 1,030 a year earlier. Taking into account further disposals since the year-end plus the acquisition of 111 pubs from Heineken UK, the estate currently comprises 985. Some 88% of the estate is let on a substantive agreement, up from 87% a year earlier. It is thought that the company paid c£30m for the 111 pubs from Heineken UK.
Georgel said: “During the period further capital investment was made in schemes designed to drive the trading capability of our pubs focusing on the breadth and presentation of the retail offer. Each project typically incurs investment of between £40,000 and £60,000. Admiral will not let a pub that we do not believe can generate a sustainable income for both the licensee running the business and also for Admiral. As such the company has sold a significant number of unviable pubs in recent years through its disposal programme, with the proceeds either reinvested in the core pub estate or used to pay down debt.
“In addition to continually seeking to develop our pubs and to improve the way we support our licensees, we also intend to continue to seek opportunities to develop the Admiral business by adding further high-quality community pubs to the estate. Therefore we were delighted to announce in September 2014 – after the financial year-end – the acquisition of 111 pubs from Heineken UK – from its Star Pubs & Bars tenanted pub division.
“These high-quality pubs are a great addition to the Admiral estate and fit well with our focus on community pubs. Alongside the transaction, which was completed in October, the two parties agreed that Heineken UK would continue to offer its market-leading ciders and beers to these pubs, and also agreed an improved supply contract to reflect the enlarged Admiral business.”
During the period, the group said it was able to use some of the operating cashflows of £20.8m plus the proceeds from pub disposals to significantly pay down debt.
It also successfully completed a refinancing with external bank debt partners, before returning to these same banks after the financial year-end in order to extend facilities to fund the acquisition from Heineken UK.
Georgel said: “The extension refinancing served to increase the group’s third party bank debt to £126m, on similar terms to its existing facility. The availability of this finance – used to fund the purchase price and the associated costs of the transaction, and to repay some 10-year loan notes put in place in January 2013 – in such a short timeframe, is testament to the growing reputation of the Admiral Taverns business.”
Georgel said that the company remains committed champions of the local community pub, which accounts for the vast majority of the Admiral estate.
He said: “Our aim is to be the best operator of such community pubs, and – importantly – to be recognised as the best. We aim to continue developing our pub estate and working closely with our licensees to help them optimise the profitability of their businesses. We will also continue to monitor the market for any opportunities that we believe fit our operating ethos and that enable us to further develop our pub estate.
“In addition, the business has also benefitted from improved terms with some drinks suppliers. Further, the integration of the 111 pubs acquired from Heineken UK, has gone smoothly and we are trading in line with our expectations.”
