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Morning Briefing for pub, restaurant and food wervice operators

Tue 9th Apr 2024 - Stonegate seeing ‘material improvements in profitability’ as it reports full-year turnover increases to £1.7bn
Stonegate seeing ‘material improvements in profitability’ as it reports full-year turnover increases to £1.7bn: Stonegate Group, the UK’s largest pub company, has said it is now seeing “material improvements in profitability”. It comes as the group reported turnover increased 6% to £1,719,000 for the year ending 24 September 2023 compared with £1,611,000 the year before. Of the 2023 figure, the managed segment (799 sites) contributed £1,011,000 (2022: £976m from 844 sites); the leased and tenanted pubs, being pub partners and commercial property (3,033 sites), together contributed £427m (2022: £416m from 3,124 sites); and the operator-led segment (600 sites) contributed £281m (2022: £219m from 548 sites). Managed like-for-likes were up 3.0%, operator-led like-for-like increased 10.3% and leased and tenanted like-for-likes rose 5.5%. Further analysis showed revenue of £1,319,000 came from drink, £179m from food, £116m from rent, £56m from amusements and other machines, and £49m from admission, accommodation and other revenue. Adjusted Ebitda stood at £375m (2022: £400m). Pre-exceptional operating profit for the period was £293m (2022: £315m). Post-exceptional operating profit was £68m (2022: £118m). Loss before tax was £257m (2022: loss of £130m). Net assets stood at £601m (2022: net assets of £109m). Net decrease in cash and cash equivalents in the period was £41m (2022: decrease of £91m). At the period end, the group operated 4,432 sites (2022: 4,516 sites). In his report accompanying the accounts, chief financial officer David Ross stated: “The Great British pub continues to survive and thrive due in part to the public's fundamental need for social interaction, with the pub often at the very heart of local communities. In line with that trend, Stonegate's pub business remains very resilient with good like-for-like sales growth across the group, most notably in Craft Union, our fast-growing, operator-led business. We also have generated excellent profit growth in our leased and tenanted division and we are making good progress with our ongoing initiatives to improve overall run rate Ebitda. We've achieved this despite the impact that the difficult economic and trading environment has had across the industry, with higher costs posing a material ongoing challenge, while train strikes and the unseasonably wet weather impacted footfall over the summer. As a result we are in a strong position to deliver on our plan to create strong profit growth across the group in the year ahead. We remain very confident in our different operating models and formats, the quality of our overall estate, our outstanding people and our strategy that is now seeing material improvements in profitability. Sales for the 52 weeks to 24 September 2023 were favourable compared with the prior year, which included the negative impact of the Omicron covid-19 variant. While the macroeconomic environment continues to have an impact on the group and the cost-of-living crisis has led to lower profit and operating cash flows than would otherwise have resulted had these conditions not existed. Overall the group has delivered a highly respectable performance, further demonstrating the resilience of its high quality pub portfolio.” In the period the group spent £144m on expansionary, conversion and maintenance capital (2022: £140m). The group disposed of 68 trading sites, ten non-licensed and eight non-trading properties in the period for net proceeds of £49m (2022: 63 trading sites; two non-trading sites and four non-licensed properties for net proceeds of £46m), which also includes the sale of fixtures and fittings to publicans. Included in the number of disposals were nine lease hand backs for nil proceeds (2022: eight). In addition, net 16 sites moved from trading to non-trading (2022: net two sites moved from trading to non-trading and one additional leasehold site was acquired). During the period, £5m was incurred in relation to a group restructuring of its support function, including associated local and professional fees (2022: nil). The group did not receive any government grants (2022: £1m) but did receive business interruption insurance claims of £1m (2022: £4m). At the period end, the group had 18,023 employees (2022: 19,114). As previously reported, in December 2023, Stonegate completed a £638m refinancing of a 1,034-strong pub portfolio, with debt provided by US private equity firm Apollo Global Management. Stonegate features in the Premium Club Turnover & Profits Blue Book, the next edition of which will be released on Friday (12 April) and features 901 companies. Stonegate's turnover of £1,719,000 is the seventh highest in the database. The Blue Book ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription.


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