Admiral Taverns, the 1,300-strong tenanted pub company, wiped a further £76.7m off its debt in the year to May 2011, as it trimmed its estate by 16.3% and reported a 6.9% rise in turnover per pub.
The group, which is led by Jonathan Paveley, reduced its debts by 25.6% during the year to £223m, and has trimmed a further £28m of this figure since the year end.
It said that the year had been a “transformational” one for the group and that it was now in a strong position to withstand the difficult economic environment affecting the UK consumer, and to take advantage of the strategic opportunities that were now arising in the sector.
The company disposed of 477 sites during the period, raising £82.6m, giving an average sale price of just over £173,000 per pub. The majority of the funds raised were used to pay down debt. It has disposed of a further 164 sites since the end of May reducing the business to a "good quality core estate".
On the back of the disposals, turnover across the group fell by 12.6% to £106.7m during the year, while operating profit declined 15.1% to £30.6m.
The group said that despite the uncertain economic outlook, its performance had been “robust”, with the business remaining “significantly ahead” of budget, a trend, which it said had continued into its current financial year.
Operating profit per pub rose 4% during the year, this had climbed to 5% since the year end. Operating profit margins improved from 28.0% to 28.7%.
Paveley, executive chairman, said: “Our underlying trading continues to steadily improve. This can be seen in the level of cash flow generated from operations, which has enabled the group to significantly increase the level of annual capital expenditure, such that in the current year (to May 2012) the group will spend a total of £8m, £5m of which will be devoted to projects designed to develop and drive trade at its pubs – nearly a 300% increase on the year to May 2011.
“Admiral continues to make good progress towards its long-term objectives of improving the quality of its earnings and pub estate. This involves selling less sustainable sites, using the proceeds to repay debt, reinvesting cash generated from operations into those pubs with a good future and strengthening our team and all aspects of our operations.”
Average rent per Admiral pub stood at approximately £15-16,000, which the group said was a result of the “sound financial position of the business and its balance sheet”, that allowed it to identify appropriate, sustainable rental levels based on “a realistic assessment of the future performance of the pub, and not driven by group debt obligations”.
It said it continued to provide non-contractual support to its licensees by way of temporary rent concessions and additional beer discounts, as well as continuing to invest in pubs alongside licensees.
During the year, the annual value of such discounts and rent concessions was approximately £4m, while the level of capital investment was £5m, including £1.7m deployed to projects specifically designed to develop pubs and further drive trade.
Operating cash flow in the group of £32.4m was used to fund interest payments and loan issue costs of £10.9m and capital expenditure.
Net cash flow before financing, pub disposals and the acquisition of the 189-strong Piccadilly estate in December 2010, stood at £18.7m. Free cash generation was £13.8m, which the group used to further pay down debt.
The business was refinanced in November 2009 under the auspices of Lloyds Banking Group and the group said that its new strategy allowed it to perform ahead of the agreed refinancing plan, with debt repayment also well ahead.
The company’s ratio of net debt to Ebitda declined during the financial period from 7.91x to 6.92x, a level it said compared “favourably to peer group companies”, and which demonstrated that the business was “moving forward quickly”.
It said that the reduction would have been even more pronounced had it not been for the acquisition of Piccadilly, which served to add £17.4m of new debt to the group’s balance sheet. Stripping out the impact of Piccadilly, the ratio of net debt to Ebitda would have fallen to 6.64x.
The further reduction in its debt levels to £195m since the year end means that the ratio of net debt to Ebitda now equates to 6.36x.
Of the Piccadilly pubs acquired, more than 25% of the estate was not trading and a significant number were identified for disposal at the outset, with 33 sites sold during the year.
It said that the performance of the balance of the estate since acquisition had been very good, with the previous significant trading decline reversed into growth within three months of the purchase, and that the portfolio was now performing “well ahead of plan”.
