Town & City Pub Company (T&C), the managed pub operator, which merged with Stonegate in June, reported a 26% fall in pre-tax profit to £2.83m for the year to 27 February 2011. The operator of the Slug & Lettuce and Yates chains, experienced a 23.2% fall in profit to £2.816m for the year, largely as a result of receiving a £5.835m interest payment in the previous year (2011: £18,000). Turnover increased 5.3% to £149.075m. The group, which had 151 sites trading in the financial year, also incurred an exceptional loss of £4.454m in 2011 following the refinancing of its bank debt prior to the merger, and it incurred a higher impairment charge on fixed assets (£2.458m against £1.98m in 2010). Operating profit increased 14.2% to £2.83m, which the group said “reflects the dilution of costs due to higher sales and gross margin as well as a strong control of administration costs that reduced by £2.745m on the comparable 52 week period”. The group said that the increase in operating profits “significantly improved” the cash generation of the group, which enabled it to offer earlier settlements to its key suppliers. Net cash inflow from operating activities at the year end was £9.725m (2010: £5.011m). Spending on new projects during the period increased from £3.115m to £3.572m, with return on investment up from 37% to 45%. The company also invested £3.668m in acquiring five sites from sister companies in the period. Net liabilities at the year end stood at £2.38m (2010: £5.664m). A loan balance of £70.63m, a current liability at the year end, has subsequently been refinanced and is now due for repayment in June 2013. Town & City, which was owned by Kaupthing and Commerzbank, until its sale to TDR-backed Stonegate, said its directors were “extremely pleased with the progress of the business, both in the 52 weeks and since its inception in 2008”. In accounts filed at Companies House, the group said: “Since its creation the business has repeatedly grown sales by an average rate of 23% per annum through organic growth. This recession-beating performance is attributed to the strong operators delivering our compelling value-led offers.” The company said it created 205 new jobs and paid £51.869m in tax and duties to the Government in the year. “This further supports our belief that the pub industry is a key component of economic recovery,” the firm said. Meanwhile, the highest paid director’s salary increased from £204k to £297k. Average staff numbers increased by 207 to 2,983, with staff costs up 6.2% to £35.328m.