Amber Taverns, the fast-growing managed operator of wet-led freehold community pubs, has reported a 3% rise in like-for-like sales for the year to 29 January 2012, as it opened 14 sites across the North of England during the year.
Founded six years ago and acquired by LGV Capital in a management buyout in October 2010, the 77-strong group reported a 37% increase in revenue for the year, with pre-tax profit standing at £3.2m against a loss of £400k in the previous 12 months.
Company EBITDA climbed 55% to £5.1m, while unit EBITDA increased 37% over the period to £6.4m.
A revaluation of the business during the year, led to an uplift of £11.3m to £45m. It invested £7m on capex during the 12 months.
The group, which is led by chairman Clive Preston and managing director James Baer, plans to acquire a further 12-14 pubs this year as it grow towards a target of 100 pubs by 2014. Primarily located in the North of England spanning Wolverhampton to Newcastle on Tyne, the company is now beginning to expand its portfolio into the Midlands.
The company, which secured £5m of additional funding from Lloyds Bank and LGV Capital last year, reported resilient trading across its core estate, where positive like-for-like sales “were not at the expense of operating margin”.
Amber said that the 14 new pubs all traded well following extensive refurbishment and that every unit within its portfolio was profitable.
The group said that trading in the current year had begun well, with like-for-like sales up 2.2% over the last nine weeks, and that it now had a “scalable platform from which to leverage”.
It said that recent acquisitions were performing well with most delivering “industry-leading returns”.
Preston said: “I am delighted to report on an excellent year for Amber. We have continued to demonstrate that wet-led community pubs can be great businesses, great assets for their local communities and a much needed engine for growth in the wider economy through the work and jobs created by our investment in previously unloved and under-managed pubs.
“We attribute our success to providing a first class environment, a consistent value for money proposition and well incentivised operators who run our pubs on Amber’s innovative Operator Agreement.
“The new financial year has started well with positive like for like sales, a strong pipeline of acquisitions identified and the positive impact of events such as Euro 2012 and the Queen’s Diamond Jubilee to come. The directors remain confident for the year ahead.”
The exception to the perception
Comment by M&C Report editor Mark Wingett
Every unit within Amber Tavern’s portfolio is profitable. How many companies with a similar sized estate as Amber can say that?
Add in the fact that the group’s estate is built on what were closed or distressed freehold community pubs across the North of England and the Midlands, and that performance is remarkable. And one worth taking a closer look at.
The group typically spends £150k-£400k on acquiring sites in high street locations with good visibility, on drinking circuits in high density areas and low cost housing. 25% of each acquisition is funded from Amber’s cash flow.
The company, which was the highest placed pub operator in the inaugural Zolfo Cooper Profit Tracker in association with M&C Report, invests £200k-250K on a typical refurbishment, creating a single room open plan layout, which they want to be “better than the front room” for customers. Indeed, the group doesn’t shy away from competition in local markets, but is determined to become the standout destination for local consumers.
The results are average weekly sales of £8-9k with average unit EBITDA at over £100k, while it reports c600 barrels per unit per annum. It’s worst performing site is still producing annual EBITDA of around £25k.
At the heart of its success has been its innovative Operator Agreement, whereby the operator is paid a percentage of net wet sales and responsible for all staffing, while Amber pays for all the other costs and keeps all retail profit.
It creates the entrepreneurial drive of a successful tenant, allied to the controls and infrastructure and disciplines of a managed house. It is a model that has now been adopted under similar guises by a number of other groups, Marston’s and Punch to name two.
The group is also picky when its comes to sites it takes on, all four of the head office team have to agree on a new acquisition, while it has been known to pick just one pub out of a list of over 100 being passed around by a pubco. Although, it hasn’t ruled out bolt on acquisitions, after the success of a raft of pubs it acquired from the administrators of Cains Beer Company back in 2009.
The group plans to invest around £6m a year over the next three years as it looks to expand its estate pass the 100 mark. It will have 84 online by the end of this year, with sites in Halifax, Horwich and Bingley in the pipeline. The group’s growth should be underpinned by the need of pubcos to bring further sites to the market over the coming years.
Surprisingly, the group has received no approaches from trade buyers, although LGV is not looking at an exit for the foreseeable future.
The figures are impressive, but there is a final one that stands out and underlines Amber’s success. The group’s site in Barrow-in-Furness does c2,000 barrels a year. There are companies with larger estates located in more fashionable locations that struggle to match that number and underlines again how Amber is challenging the current perception that there isn’t a future for community, wet-led pubs.
