Exclusive: Stonegate Group – ‘transformation strategy delivering results’, ‘on track for material profit growth in FY26’: Stonegate Group, the UK's largest pub company, saw its group profit grow 7.5% in the 16 weeks to 18 January 2026, with margin expansion up 3%, driven by the increasing contribution from its leased and tenanted estate and Craft Union business, Propel has learned. The David McDowall-led, TDR Capital-backed business, said its transformation towards “higher margin, capital-light partnership models” continues to reshape the earnings profile of the group. For the period, the group’s circa 3,070-strong leased and tenanted estate saw like-for-like sales increase 1.1%, versus a 0.8% decline the previous year, and against a 0.5% increase in the previous quarter. Across its circa 650-strong Craft Union estate, like-for-like sales in the period climbed 5.4% versus a 2.8% decline the previous year, and against a 2.5% increase in the previous quarter, helped by improved margins and “disciplined cost control”. Across its managed circa 200-strong managed pub business, like-for-like sales increased 1% versus a 2.9% increase the previous year, and against a 1.2% increase in the previous quarter. The company said its managed performance was stabilising as the estate is reshaped and “operational initiatives improve underlying performance”. Across its 127-strong bars and venues estate, like-for-like sales in the period declined 4.9% versus a 3.9% decline the previous year, and against a 7.1% decline in the previous quarter. The company said although its bars and venues division was in year-on-year sales and profit decline, that decline has slowed and is on “an improving trend”. Stonegate said the transformation strategy continues at pace, with the reduction of 357 managed sites since the 2023 financial year and the expectation of circa 320 by end of the 2026 financial year, reducing managed profit to circa 15% of the group. Total revenue was £476m compared with £505m the previous year. Of the £476m, the managed segment contributed £226m (16 weeks 2025: £274m), reflecting site transitions out of the managed segment. The group’s leased and tenanted pubs, Pub Partners and commercial property, together contributed £137m (16 weeks 2025: £129m) and the operator-led segment (Craft Union) contributed £113m (16 weeks 2025: £102m). For the 16 weeks to 18 January 2026, the leased and tenanted estate demonstrated profit growth consistent with previous quarters of 6.8% on the equivalent period in the prior year. Craft Union delivered profit growth of 20.5% and the managed estate showed a decline of 4.9% across the period, again reflecting the reduced managed estate size. During the 16-week period, the group achieved adjusted Ebitda of £115m (16 weeks 2025: £107m), while adjusted Ebitda margin was up 3% to 24.2%. The operating profit was £94m (16 weeks 2025: £82m), while the pre-tax loss was £24m (16 weeks 2025: £37m). The business said 56 sites were converted from managed to leased and tenanted during the 16-week period. This is on track to delivering circa 200 sites in the 2026 financial year. The company said its managed to leased and tenanted conversions were delivering more than 300% return on investment, demonstrating the “strong capital efficiency of the transformation strategy”. Stonegate said £7m had been spent on expansionary schemes in the first quarter, generating a blended return on investment of 26%. The highest returns are coming from leased and tenanted at 60%. In the 16-week period, the group spent £32m (first quarter 2025: £37m) on expansionary, conversion and maintenance capital. Stonegate said 31 freehold sites were disposed of in the quarter for £28m proceeds. This included £24m of proceeds for 23 profitable sites at 15.8 times multiple. The company said group profit growth has continued in its current trading quarter, with leased and tenanted performance in line with the first quarter to date, while operator-led profit performance remains in double-digit growth. Stonegate said trading “slightly softened” in its managed operations during January and February, but this was in-line with the market. The business said a favourable business rates outcome (freeze and continued relief) provides a circa £2m group P&L benefit and “supports publican liquidity across the estate”. Group cash stood at £170m at the end of the period, while net debt stood at £3.003bn. (fourth quarter 2025 financial year: £3.062bn). McDowall said: “We have been clear for some time – by positioning every site for long term success through our estate transformation strategy, combined with delivering operational efficiencies at the group level, Stonegate is well placed for long-term, sustainable success. Our first quarter results clearly show that our strategy is delivering, with a material uplift in our margin increasing our profit as we transition sites into our Pub Partners business. This positive profit growth trajectory has continued into the second quarter. A lot of work has been done by our brilliant team at Stonegate, and by the entrepreneurial operators and publicans that we partner with, to get us to this point, but there is more to do. Over the next year, you will see Stonegate continuing to deliver against our strategy, building an estate of pubs that is more resilient, community-driven and adaptable to evolving guest behaviour.” McDowall talks to Propel chief operating officer – editorial, Mark Wingett, about a pivotal year for the business in today’s (Friday, 27 March) Propel Premium Opinion, which will be sent to Premium Club subscribers at 6pm. Also in Premium Opinion, Geof Collyer, founder of Lavender Bank Partners, looks at the downfall of BrewDog, and that the business should have been aware of some “big red flags”. Flo Graham-Dixon, founder of sector advisory business Juniper Strategy, explores what the Iran conflict means for UK operators looking to launch in the Middle East, while Propel’s editorial advisor, Katherine Doggrell, looks at the role of cool in capitalism and why BrewDog should remind us just how uncool we all are. A Premium Club subscription costs an annual sum of £495 plus VAT for operators and £595 plus VAT for suppliers. Companies can have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or supplier. A new Premium Unlimited Plus option, which costs £1,995 plus VAT per annum, has some amazing additional benefits including four free tickets to Propel’s paid-for conferences – Excellence in Pub & Bar (19 May), Operational Excellence (9 July) and Talent & Training (15 October) – and the opportunity to run one free sponsored message or situation vacant notice during the year on the newsletter. Email kai.kirkman@propelinfo.com today to sign up.