Young’s, the London-based pub operator and brewer, this morning reported a 7.1% rise in annual operating profit, with managed pub sales buoyed by the 26 new Geronimo sites and profits up in the tenanted division.
Operating profit, adjusted to exclude exceptional items, was £21.746m, with adjusted pre-tax profit up 7.2% to £20.819m for the 53 weeks to 4 April. Revenue was up 11.8% to £142.597m for the company, which this morning announced that current non-executive director Nick Bryan is to replace Chris Sandland as non-executive chairman on 12 July.
Adjusted basic earnings per share were up 13.7% to 32.65p - the non-adjusted increase was 42.2% (36.97p) - while dividend per share was up 2% to 13.26p.
As well as the £60m investment in Geronimo, Young’s spent a further £15.2m on its existing business and £3.4m on Geronimo post-acquisition. It disposed of four pubs for £3.3m at a profit of £0.5m.
Managed house revenue, which benefited from the extra 26 Geronimo sites, increased 13.2% to £127.8 million. Same outlet like for like revenue up 1.9%, and operating profit up 11.1% to £29.2m.
Drink and food sales both increased in the division but the biggest growth was in the hotel business, with accommodation revenue up 15.2% and revenue per available room up 14.2% to £44.11. Young’s said this was aided by fresh investment including upgrades to the rooms and on-line booking systems. Its Alma hotel in Wandsworth, opened in December, is “achieving high occupancy and room rates”.
In total £12.6m was invested in the managed estate. Of this, £3.6m was invested in its two new managed pubs - the Dial Arch in Woolwich Arsenal and the Surprise in Chelsea - and £5.5m on existing ones. Hotel investment was £3.5m.
For the 16 weeks since the Geronimo acquisition, the Geronimo business has “traded well and in line with expectations”, the firm said. Overall, developments in the managed division since March 2010 demonstrate a 26.9% return on investment based on an increase in ebitda.
In the 97-strong tenanted estate, like-for-like operating profit was up 1.9% and sales up 1.2% (£5.4m). Revenue was £14.4m.
The company said the tenanted market is “undoubtedly proving much tougher than the managed one in the current economic climate with high vacancy rates suffered by many of our peers”.
“Whilst it is not immune, our southern, principally London estate, provides some protection from the worst impact of these problems.”
Young’s also cited the “flexible packages” it offers to tenants, with its range of beers and training courses that “have also proved popular with tenants”.
Young’s invested in total £1.5m on “a number of our existing pubs” and £0.8m on one new acquisition, the White Hart in Witley. “This year’s developments included the Abercorn Arms in Teddington, Queen’s Arms in Kilburn and the Grand Union pub in Wandsworth and each has made a promising start post investment.”
The company also disposed of the Cock Inn in Boughton Monchelsea, the Wheatsheaf in Wandsworth and the Shakespeare in Richmond, and transferred two sites to the managed estate.
Wells & Young’s, of which Young’s has a 40% stake, contributed £2.6m to the London company’s adjusted profit before tax. Young’s described the performance as “good” but warned: “Its future profitability will be impacted..by the management of the Corona Extra and Red Stripe brands moving back to their respective brand owners.”
The company said the Geronimo acquisition is expected to have a “much bigger impact” on next year’s profits because it would have benefited from a full year’s trading, plus head office and other synergies would have been worked through.
The £5m of exceptional costs included £2m legal and professional fees and stamp duty for the Geronimo purchase and integrated costs of £1.1m to combine the Young’s and Geronimo businesses.
The company expects to open three new sites in the coming year - the Cow in Stratford’s Westfield centre (a Geronimo pub), plus the Plough in Clapham Junction and the Wheatsheaf in Borough Market.
Net debt increased by £60m, reflecting the Geronimo acquisition.
Chief executive Stephen Goodyear said: “This has been a productive and exciting year for Young’s both with the trading improvements we are seeing in our business and the acquisition of Geronimo in December.
“Despite the ongoing backdrop of constrained consumer spending, the group has delivered a good set of results for the period whilst retaining our premium position and has seen strong momentum since the year end.
“We continued to invest in our managed and tenanted pubs during the period, and our recent investment in our hotel business is now clearly bearing fruit.
“Overall, Young’s is in very good shape. The integration of Geronimo is proceeding as planned and the synergies we envisaged at the time of the acquisition are coming through. Our strategy is focussed on developing our existing sites to their full potential, whether as a Young’s or Geronimo pub, and on continuing to grow our managed estate. We are very excited about the potential for both brands.
“Although consumer spending is likely to remain under pressure in the near term, we are cautiously optimistic about the outlook for the current year as a whole. Overall, we believe that the quality and growth potential of our estate will help us to mitigate the effect of what remains a very fragile economic recovery.”
