Young & Co.'s Brewery, P.L.C.

 

Preliminary results for the 53 weeks ended 3 April 2017

 

	2017	2016
	53 weeks	52 weeks	%
	£m	£m	change
Revenue	268.9	245.9	+9.4
Adjusted operating profit(1) (2)	46.1	41.2	+11.9
Operating profit(2)	42.7	38.4	+11.2
Adjusted profit before tax(1) (2)	40.4	35.6	+13.5
Profit before tax(2)	37.0	32.8	+12.8
Net cash generated from operations	63.5	60.4	+5.1
Adjusted basic earnings per share(1) (2)	66.43p	58.44p	+13.7
Basic earnings per share(2)	61.51p	54.73p	+12.4
Dividend per share	18.50p	17.45p	+6.0
(interim and recommended final)
Net assets per share(3)	£10.10	£9.30	+8.6
All of the results above are from continuing operations.
(1)  Reference to an "adjusted" item means that item has been adjusted to exclude exceptional items (see notes 3 and 4). (2) The prior period comparatives have been restated for a non-cash adjustment in respect of the treatment of short leasehold premiums (see note 1). (3) Net assets per share are the group's net assets divided by the shares in issue at the period end.

PERFORMANCE HIGHLIGHTS

(All numbers below on a comparable 52 week vs 52 week basis)

 

•   Another very successful year's trading, continuing the consistent run of outperformance driven by our premium estate of differentiated, individual pubs and hotels;

 

·     Young's, Geronimo and Ram Pub Company revenues all in high single-digit growth;

 

·     Total managed house revenues up 7.0%, and up 4.7% like-for-like; operating profit up 9.8% to £58.4 million;

 

•   Ram Pub Company revenues up 7.1 % and up 3.2 % like-for-like; operating profit up 11.1 %;

 

•   Investment of £38.2   million in acquisitions, transformational developments and estate upgrades;

 

•   Record cash generation, with operating cash flow up 5.1 % to £ 63.5 million and year-end net debt representing a conservative 1.9 multiple of EBITDA;

 

•   Proposed 6.1 % increase in final dividend to 9.62 pence, resulting in a total dividend of 18.50 pence (2015: 17.45 pence); 20^th consecutive year of dividend growth;

 

•   Positive trading since the period end; managed house revenue in the first seven   weeks was up 6.1 % in total, and 4.7 % like-for-like.

      

Patrick Dardis, Chief Executive of Young's, commented:

 

"I am delighted with these results. Yet again we have outperformed the sector, and made progress on all key measures, with revenue, profit, margin, cash generation, investment, the value of our pub estate and shareholder returns all strongly ahead.  This is the reward for our consistent strategy of running high quality, differentiated, individual and well invested pubs, at the heart of the communities in which they sit, staffed by well-trained and motivated teams of people.

 

"The pub is now the most popular destination for eating out in the evening, and recent trading has been strong, with our ranges of craft beer, our "Cocktail Collective", and our brunch and Sunday lunch offerings all helping drive performance.  The good weather at the start of the year and the increase in 'staycations' during the Easter holidays ensured our pubs were busy, particularly those on the river and with large gardens.

 

"The broader economic and political environment remains uncertain and our sector faces unwelcome cost pressures on a number of fronts.  In response, we are working hard to ensure we are best placed for whatever is around the corner.  We have a reliable track record, a very clear strategy, a great team of people, and the financial muscle to continue to grow .   We will continue to surprise and delight our customers, and to grow our estate through carefully selected acquisitions and developments, all in pursuit of delivering superior returns for our shareholders."

 

For further information, please contact:

Young & Co.'s Brewery, P.L.C.	020 8875 7000
Patrick Dardis, Chief Executive
Steve Robinson, Chief Financial Officer
MHP Communications	020 3128 8100
John Olsen/James White/Gina Bell

 

 

PRELIMINARY RESULTS FOR THE 53 WEEKS ENDED 3 april 2017

 

I am delighted to announce that the 53 weeks ended 3 April 2017 has seen another strong performance. Revenue was up 9.4% to £268.9 million and within managed houses, which make-up 94.8% of our total sales, like-for-like sales were up 4.7%. Operating cash generation is at an all-time high at £63.5 million (2016: £60.4 million) which has allowed us to continue our investment plans, both through internal developments and acquisitions, while also reducing our net debt. At the year-end, our net debt to adjusted EBITDA ratio was 1.9 times (2016: 2.2).

 

Our profitability is also improving, with basic earnings per share increasing by 12.4% to 61.51 pence (2016: 54.73 pence) and adjusted basic earnings per share by 13.7% to 66.43 pence.

 

CREATING AN EXPERIENCE IS KEY

 

The pub is now the most popular destination for eating out in the evening, with 37% of Britons visiting pubs more regularly than restaurants and fast food outlets. Furthermore, spend in pubs is growing, outstripping the increase in overall national consumer spending.

 

We operate in the premium pub sector and the resilience of this segment's more affluent customer base has, so far, been particularly encouraging. Consumers, when they do go out, are looking for an experience, and going to a Young's pub is seen as an affordable lifestyle choice - a treat but not an extravagance.

 

Our well-invested, well-positioned pub estate is geared up to deliver those experiences through our highly motivated and talented staff and our premium and evolving product range. 

 

The estate now stands at 252 pubs; we acquired four pubs during the period, sold one and two leases expired. Its value has increased again, now to £689.1 million (2016: £649.8 million), and this firm foundation allows us to look for further opportunities to expand, whether that be on an individual pub purchase basis or groups.     

 

Proven TRACk RECORD, READY FOR ChaLLENGES AHEAD

 

Our performance in recent times has been highly consistent; the outperformance of our managed estate has been the reward for our consistent strategy of running differentiated, individual pubs at the heart of the communities in which they reside.    

 

However, we live in interesting times with both economic uncertainty and the political environment becoming unpredictable as a result of the snap UK General Election.

 

Looking forward, there will be some impact to our margins due to   the significant hike in business rates, the next instalment of the National Living Wage and the introduction of the Apprenticeship Levy, as well as by a predicted period of cost inflation. Business rates have been a contentious subject for the retail sector and it is with cautious optimism that we greeted the Government's acknowledgement of the issue and the Chancellor's announcement that it would commit to reform. We believe that there must be a better method to calculating business rates to level the playing field between physical and online based companies and would welcome and support any initiative to achieve this.   

 

Additionally, the Government's surprising recent increase in alcohol excise duty by almost 4% has not helped an industry that invested over £2bn and contributed over £23bn overall to the British economy in 2016, and currently employs over 900,000 people. 

 

Despite that backdrop, we remain positive and will channel our efforts into our proposition and continue to deliver great customer service. Superior productivity, aided by our investment and innovation in technology, will mitigate some cost pressures. We are also mindful that pubs are people businesses and are enjoyable places to work; therefore maintaining the morale and motivation of our staff is paramount.    

 

We have a strong track record; a very clear and consistent strategy; the financial muscle to continue to grow and an engaged team of people that are our main competitive advantage. Despite the headwinds, we look forward to continuing to surprise and delight our customers, and will work hard to continue to grow our estate through carefully selected acquisitions and development opportunities, all key ingredients in delivering superior returns for our shareholders.

 

PROGRESSIVE DIVIDEND POLICY  

 

The board is delighted to recommend our 20th consecutive final dividend increase, this time by 6.1% to 9.62 pence. If approved by shareholders, this will result in a total dividend for the year of 18.50 pence (2016: 17.45 pence). The final dividend is expected to be paid on 13 July 2017 to shareholders on the register at the close of business on 9 June 2017.

 

 

MANAGED HOUSES

2017 financial figures are on a 53 week basis unless specified (2016: 52 weeks).

 

Our managed houses delivered another strong performance in 2017. After five highly successful years, the comparable figures were always going to be tough.  However, we relish a challenge at Young's and see the delivery of results that consistently outperform the industry average as the reward for the work ethic that runs throughout our organisation and for the consistent execution of our clearly defined strategy. Ultimately, it is our people and our proposition that underpin our achievements.

 

The vast majority of our managed estate (160 out of 173 pubs) is on a like-for-like basis. Our run of managed house like-for-like sales performance is a beacon of consistency at 6.0%, 4.6%, 6.7%, 6.5% and 5.6%, averaging 5.7%. This year's 4.7% was especially satisfying as last year's results included the Rugby World Cup which was played out within our heartland and where we maximised revenue opportunities both in the lead-up to and throughout the tournament. 

 

REVENUE AND PROFITS

 

Our two managed house brands, Young's and Geronimo, have both delivered strong performances. Total managed sales were up 7.0% on a 52 week basis.  This year, Young's managed houses delivered like-for-like sales growth of 5.0% and we are confident that we can continue to outperform the sector with more opportunities to drive further growth.

 

The turnaround in our Geronimo performance has been equally pleasing. From a decline of 1.0% in sales on a like-for-like basis last year, the business has bounced back to deliver 3.8% like-for-like sales growth this year. This achievement has been realised by focussing on the individuality of each pub, restoring the menu to the Best of British and re-energising the service teams.

 

Although food sales have been gaining product share from drink over the past few years, drink sales remain almost two thirds (65.6%) of our managed house sales mix. With our strong London weighting (86% of our pubs are within the M25), the proximity of our pubs to public transport and our premium, ever-evolving drinks range, we expect this ratio to remain at around the current level. At Young's, we believe in "best in class" and are proud of the diversity we are able to offer our customers. We have great partnerships with our suppliers which allow us to be flexible with both global and local brands to ensure we represent current trends and tastes. Thankfully, Young's Bitter is a wonderful beer and more than holds its own in the ever competitive world of craft ales.

 

We are pleased to welcome back Guinness, after a three year absence, in a partnership which will strengthen our rugby association, especially in our backyard of South West London. This draught stalwart has been joined by exciting new brands such as Beavertown Neck Oil, Twickenham Grandstand and Founders All Day IPA.

 

This year-end marks the first anniversary of our partnership with Berkmann Wine Cellars. This relationship has borne fruit in the past year and we hope will only get better with age. Through the introduction of a refreshed wine menu design, wine pairing events and better informed staff through our jointly run "Grape Masters" programme, we have seen a shift away from traditional "house wines" to New World wines. The bubble has yet to burst on our customers' thirst for sparkling wine, with volume up 11.4% in the last year alone and up 121% over a three-year period.

 

Spirit sales are also in strong growth, with volumes up 3.7%. Gin's remarkable resurgence continues and we are well placed to further expand into this market. Through the creation of the Young's "Cocktail Collective", we have refreshed and reinvigorated our training and support to allow our pubs to offer a range of on-trend cocktails to our discerning customers. Drink sales were up 7.1% in total and up 4.8% on a like-for-like basis.            

    

Food sales were up 7.4% in total and up 4.9% on a like-for-like basis. The standout success story within our food offering has been our Ultimate Sunday Lunch; our customers are welcome to grab a comfy corner, read the papers, play a board game and enjoy a roast with all the trimmings. Even our Mayfair institution, the Guinea Grill, which has been serving ales since 1423, is opening on Sundays again to meet this growing demand. The Guinea Grill is a founding member of the Scotch Beef Club and the pub and its team won the award for Best Steaks and Grills in Harden's London Restaurant Awards 2016.

 

Having increased the roll-out of our innovative and successful BurgerShack concept, including its little sister, 'Shack-in-a-Box', which can pop up to maximise sunny days in smaller gardens, we now have 25 'shacks', an increase of 13 over the year. BurgerShacks allow us to offer a fast, convenient service to our customers, taking pressure off our kitchens during busy times, while delivering an indulgent treat to satiate our nation's growing hunger for better burgers.

 

We completed a number of projects within our hotel division this year. We started the year by putting the finishing touches to our new 12-bedroom boutique hotel at the Hand and Spear (Weybridge) which increased our total room stock to 486 rooms. During late spring and early summer 2016, we transformed the trading space and kitchen at the Brook Green (Hammersmith) and the 21 rooms at the Greyhound (Carshalton) into stylish retreats of calm and relaxation. Finally, throughout the final quarter of the financial year, we temporarily closed the City Gate (Exeter) to completely overhaul the pub and its 14 bedrooms to boutique standard. 53% (255) of our room stock is now of boutique standard with an average room rate of £97.02 compared with £64.50 for our classic rooms. Despite the disruption caused by these investments and tough comparatives as a result of the excellent work we did to maximise returns during the Rugby World Cup in September and October 2015, accommodation revenue was up 2.8% driven by occupancy rate, up 2.0% to 74.9%. As a result, RevPAR was £60.86 (2016: £60.01)             

 

The combination of the impact of the new wine deal, tight control over labour costs and the fixed nature of some other costs has resulted in a 0.8% point improvement in our managed house adjusted operating profit margin to 24.6%. Coupled with the rising sales performance, managed house adjusted operating profit grew by 9.8% to £58.4 million on a 52 week basis. Full year profits were £59.7 million. 

 

INVESTMENT

 

We run a well-invested managed pub estate and have a clear and consistent investment plan that underpins our growth. This year we have invested £35.7 million, spread over acquisitions, transformational developments and day-to-day maintenance to preserve the quality to which our customers have grown accustomed.       

 

We acquired three freehold properties and opened one leasehold during the year, spending £12.0 million in the process. The Blue Boar at the gateway to the Cotswolds in Chipping Norton reopened after a major refurbishment in October. The Woolpack (Bermondsey) transferred from the Ram Pub Company in October, having spent six months trading under the previous tenant following its purchase at the start of the financial year. The Riverstation, anchored on Bristol's beautiful and historic harbourside, landed in November. Finally, the Station Tavern (Cambridge) signalled our broadening appetite for destination market towns.

 

Within the existing estate, we invested £23.7 million (2016: £25.6 million) on refurbishing the Brook Green (Hammersmith), Bear (Oxshott), Coach and Horses (Barnes), County Arms (Wandsworth), Devonshire (Balham), Eagle (Shepherd's Bush), Fentiman Arms (Vauxhall), Fox and Anchor (Smithfield Market), Greyhound (Carshalton), Hammersmith Ram, Hand and Spear (Weybridge), Hare and Hounds (Sheen), Old Brewery (Greenwich), Trinity Arms (Brixton) and the Victoria (Surbiton). The White Bear (Kennington) was this year's largest investment and is a stunning example of traditional pub meets modern design, with an eclectic collection of artwork and bric-a-brac overlooking the original wooden bar. On the total internal investments we made in the prior year we have delivered a 25.0% return on capital in the current year. 

 

CUSTOMER ENGAGEMENT AT THE HEART OF WHAT WE DO

 

The hospitality sector as a whole has seen a recent renaissance of people considering it to be a career instead of a stepping stone to something else. At Young's, we understand the importance of nurturing talent within our organisation and we are proud to have seen the number of Pub Manager vacancies filled through internal appointments grow to 61%. The vast majority of these promoted Deputy Managers have completed our internally run Management Academy, which is now in its third rotation. We ensure the programme is demanding enough to set participants up for success, living the Young's values and culture and they then, themselves, start succession planning to identify and develop the next generation of talent for the Academy.

 

Just before Christmas, we launched our own white label mobile app - Young's On Tap - which is available to download for free on iPhone and Android from the App Store.  The Young's App seeks to facilitate our customers' digital journey by enabling them to find a pub, book a table, pay or split the bill, or just change the music in their local; all of these things are aimed at growing engagement, driving loyalty and enhancing customers' experiences. From dray horses to digital pioneers, Young's On Tap represents the next generation in our technological journey. By the year-end we already had over 30,000 downloads and all our staff have embraced Young's On Tap by becoming "Appbassadors". The app is just one of the ever-growing social media tools we have at our disposal to interact with our customers.

 

 

RAM PUB COMPANY

 

It has been a strong year for our tenanted estate, further underlining the decisions made in previous years to focus on the long-term opportunities that a smaller and better supported operation can deliver. We want to build and maintain healthy working relationships with our tenants so that both parties can prosper. The Ram Pub Company tenants benefit from the same contemporary and diverse product range as our managed pubs, in addition to "local heroes" specific to their communities. Together with the business advice, training and sales expertise our in-house team provide, we believe we have the right ingredients to attract and retain entrepreneurs who can operate a flourishing business.            

 

REVENUE AND PROFITS

In total, on a 53 week basis, revenue was up 8.7%. On a comparable 52 week basis, revenue was up 7.1% in total and up 3.2% on a like-for-like basis. The first six months of the year benefitted from the Woolpack (Bermondsey) before it was transferred from the Ram Pub Company to our Young's managed estate. Our like-for-like business has benefitted from the capital investments made in the previous year and the new wine deal that refreshed the range available to our tenant partners and their customers. This better buying has led to operating efficiencies which have generated enhanced margins. The combination of increasing sales and improving margins has resulted in the division's adjusted, both for the 53rd week and exceptional items, operating profit rising to £5.0 million, up 11.1% and up 4.5% on a like-for-like basis.

 

At year end, the Ram Pub Company's estate stood at 79 pubs and generated 5.1% of our group revenue (2016: 5.2%). Although a small part of our overall business, the Ram Pub Company is important to us; it is cash generative and offers us a different route to market both as a day-to-day business and through acquisitions that may already have tenants in situ.  

 

INVESTMENT

The investment in our tenanted estate has continued throughout the financial year. Major developments have been completed at the Grand Junction Arms (Harlesden), Malt Shovel (Dartford), O'Connors (Chelmsford), Pig and Whistle (Wandsworth), Robin Hood (Sutton) and the Ship (East Grinstead). 

 

In May 2016, we sold the Lord Napier, a small tenancy in Thornton Heath. Just after the current year end we sold the Kings Arm's (Epsom) and the Bell Inn (Illminster). All three sites were at the lower end of the estate and failed to meet our internal returns criteria.  

 

TENANT ENGAGEMENT

The rebadging of the Ram Pub Company is well underway, offering our pubs and tenants a refreshed identity that will serve us well for many years to come. The new-look signage captures the essence of the tenanted business, with the strapline "Everyone's local".

 

The Ram Pub Company offers tenants the chance to run their own highly successful individual businesses while having the financial, operational and marketing support that being part of an established group presents. The tenanted model has challenges for both pubcos and tenants, but we believe in operating these as sustainable businesses that fairly reward the risk that both partners face.

 

 

PROPERTY, TREASURY, RETIREMENT BENEFITS, EXCEPTIONAL ITEMS AND TAX

 

PROPERTY

Our property estate remains the foundation for our growth and healthy operating cash generation. In total, we have 252 pubs, with the vast majority in prime locations and 82% inside the M25. Being based in Wandsworth, South West London remains our stronghold, but in recent years we have been expanding our reach by acquiring pubs in similarly affluent areas. We have the desire and scope to increase our expansion rate, but we will not make acquisitions for the sake of it and all new opportunities must meet our returns criteria and complement our existing estate.  

 

We have a predominantly freehold backed estate (194) with a number of long leaseholds with peppercorn rents (16). In accordance with International Financial Reporting Standards ("IFRS"), these properties are revalued each year to reflect their current market values. This exercise is undertaken using a combination of an independent and leading commercial property adviser, Savills, who revalue 20% of the estate annually, and an internal review of the remainder led by Andrew Cox, MRICS, our Director of Property and Tenancies. The valuation method uses a number of inputs of which deriving the sustainable trade of each pub is key. 

 

The review has resulted in a net upward movement of £22.6 million, driven by our improving trade and continued strong demand for pubs in prime London and South East locations. In gross terms and in accordance with IFRS, individual movements in value, totalling £23.1 million (2016: £20.0 million), are reflected in the revaluation reserve in the balance sheet, while £0.5 million of downward movement (2016: £1.2 million) has been charged to the income statement under exceptional items. All these adjustments are non-cash items.

 

As highlighted at the half year, we have changed our approach to recording our short leasehold properties (17% of our total number of pubs). In the prior period, this resulted in a non-cash decrease in the carrying value of our property and equipment and an increase in lease premiums, split between non-current and current assets (see note 1).

 

The total estate, at the period end, is now valued at £689.1 million.

 

TREASURY

Our business model is highly cash generative. Increasing sales, strong improving operating margins and our high proportion of freehold pubs provide increasing operating cash flow, this year £63.5 million (2016: £60.4 million). After paying interest, taxation and other costs, we are left with three options for our cash: invest it, repay our debt or return it to our shareholders. This year we have done all three. The vast majority, £38.2 million, was re-invested to continue our strong success in future years. Our net debt has decreased by £3.6 million to £126.6 million, with gearing falling to 25.7% (2016: 28.8%) and our net debt to EBITDA ratio dropping to 1.9 times (2016: 2.2 times).  Our proposed final dividend per share of 9.62p, as recommended to our shareholders, represents an increase of 6.1% and the 20th consecutive annual increase.

 

GOING CONCERN

Just after the year-end we extended £20 million of our £175 million long-term debt facility to 2024. Our facility is now held across three banks - Royal Bank of Scotland, Barclays and HSBC - and is repayable between 2019 and 2024. £100 million of our £126.6 million net debt is on fixed interest rates through a combination of different interest rate swaps which provide some protection from possible adverse interest rate movements in future years. Given these committed facilities, our freehold-backed balance sheet, significant free cash flow and the conservative financial ratios above, we have prepared these financial statements on a going concern basis.

 

RETIREMENT BENEFITS

Like many UK companies with defined benefit pension schemes, we have seen the balance sheet value of our pension deficit move significantly throughout the year. The volatility in the economic climate, both in the short-term and long-term, has caused corporate bond yields to decrease dramatically during the first six months of the year and then to increase slightly in the second half of the year. We use these corporate bond yields as a basis to discount our future pension liabilities to present values which can cause large non-cash movements in net pension deficit. At the end of last year, our pension deficit was £6.3 million, by the half year it had increased to £23.4 million and at the current year-end date it had fallen back to £12.8 million. We have a strong relationship with the pension trustees and continue to work with them to ensure the pension fund is adequately funded.

 

EXCEPTIONAL ITEMS

In the current year, we purchased the Woolpack (Bermondsey) in a two-stage process. On the first day of the financial year, we purchased the freehold interest. The pub had, at the time, a tenant in situ with an unexpired agreement for a number of years. In October, both parties decided to terminate the agreement early, allowing us to bring the pub into our managed house estate. Although included in our internal investment decision from the outset, the compensation paid to the former tenants, under IFRS, has been expensed and is included within exceptional items.

 

This year's exceptional items also include a £0.7 million loss flowing from the expiry of our own leases with Heathrow for the Three Bells and Five Tuns, with the majority reflecting the write-off of goodwill recognised on the initial acquisition of Geronimo in December 2010.

 

The remaining exceptional items relate to the estate management of our properties which, as mentioned previously, includes the £0.5 million (2016: £1.2 million) downward movement in the property valuation and £0.2 million (2016: £0.4 million) of acquisition costs associated with business combinations.

 

TAX

The corporation tax charge for the year was £7.0 million, with our effective corporation tax rate for the year, adjusted for exceptional items, at 19.8% (2016: 20.5%). Next year we expect our effective rate to decrease as the UK's headline corporation tax rate falls from 20% to 19%.

 

 

CORPORATE AND SOCIAL RESPONSIBILITY

 

Our pubs aim to be at the centre of their communities; to us, a socially responsible business is one that enriches the area in which it operates. Our pubs offer jobs and training to local people, build partnerships with local suppliers and provide the perfect venues for people to be neighbourly. There has been no finer example of our approach this year than the Alexandra (Wimbledon). The pub and its managers, Mick and Sarah Dore, became internet sensations over the festive period when they offered a full turkey dinner and a beer to anyone alone on Christmas Day. The pub has opened its arms to those on their own at Christmas for a number of years but this past year, a few tweets led to the story trending on social media and hitting the national press. Mick explained "It's not just about a free plate of food but making a fuss of them and introducing them to each other so they can chat and hopefully make some new friends." 

 

We also work hard to improve the environment in which we operate. In the current year, we have raised our recycling efforts by more than 16% to 6,768 tonnes (2016: 5,803 tonnes) and reduced the waste going to landfill to 1.0% (2016: 1.4%). We sent enough litres of used cooking oil to be recycled into biofuel to power a London taxi ride to the moon and back twice over. Both our Young's and Geronimo operations have been awarded two stars by the Sustainable Restaurant Association.

 

Our pubs work with many local charities in their communities, but as a company we decided to support the children's charity of rugby, Wooden Spoon, for a second year. Wooden Spoon funds around 70 projects each year that support disadvantaged and disabled children. One of these projects is the Oasis Children's venture based on our doorstep in Stockwell, London. Oasis has a simple aim of improving the lives of children, young people and the local community. Many of our staff have spent volunteer days with Oasis, helping maintain the freshness and fun side of the nature garden, adventure playground and karting track.    

 

 

SHAREHOLDER RETURNS

 

As a business, we focus on long-term sustainable growth, each year investing in our estate through a structured refurbishment/redevelopment plan that harnesses opportunities on a consistent basis. Our estate, as a result, remains well-invested which is reflected in our strong balance sheet; our major investments in the previous year have fuelled a return of 25.0% in the current year. The combination of revenue growth of 9.4% and improved operating profit margins has increased our adjusted profit before tax by 13.5% and our adjusted earnings per share by 13.7% to 66.43 pence. Unadjusted earnings per share rose by 12.4% to 61.51 pence.   

 

We are very proud of our dividend record and are pleased to be recommending raising the final dividend for the 20th consecutive year, a feat that few companies can claim. This year, the recommended increase is 6.1% to 9.62 pence, which will result, if approved by shareholders, in a total dividend for the year of 18.50 pence (2016: 17.45 pence). The dividend is covered 3.6 times by our adjusted earnings per share and 3.3 times by our unadjusted earnings per share.  

 

 

OUTLOOK

 

Managed house revenue in the first seven weeks of the new financial year was up 6.1% in total and up 4.7% on a like-for-like basis. The mild and dry weather during April and the increase in "staycations" during the Easter holidays drove footfall, however this was dampened by a comparatively wet May.

 

This year, we will benefit from a full year's trade at the Station Tavern in Cambridge which opened in March, and from the two high turnover pubs added to our managed house estate in October last year: the Woolpack (Bermondsey) and the Riverstation (Bristol). All are stunning examples of our acquisition strategy which will enhance our portfolio. Just after the year end, we exchanged contracts of the Bull (Bracknell) and transferred three pubs from our Ram Pub Company to managed houses; namely the King's Arms (Wandsworth), the Hope and Anchor (Brixton) and the Grove (Camberwell). We also sold the Kings Arm's (Epsom) and the Bell Inn (Illminster) both from our Ram Pub Company.

 

In the short-term, the impact on consumer confidence from the prospect of Brexit has not been as harsh as some expected, being softened by a combination of falling sterling, low interest rates and the resilience of the British consumer. In the longer-term, we remain busy, while the broader economic environment remains uncertain, to ensure we are best placed for whatever is around the corner.        

 

As previously announced in the interim results, the new business rates are expected to increase our cost base by roughly £1.8 million in the 2018 financial year. Together with the next instalment in the National Living Wage and the introduction of the Apprenticeship Levy, there are challenges ahead.

 

We remain confident in our strategy and our ability to meet and exceed our customers' expectations. The team we have has the wherewithal to deliver on a 'best in class' proposition, both in our current footprint and in new locations, and we expect this combination to provide our shareholders with superior returns.      

 

Patrick Dardis

Chief Executive

24 May 2017