Strategic plan keeps Ei Group progressing to decent results

Pub owner and operator Ei Group announced its results for the year ended 30 September on Tuesday, reporting further growth in its net asset value to £3.34 per share, from £3.13 per share at the end of 2017.

The FTSE 250 company said its underlying EBITDA was level at £287m, perfectly in line year-on-year, and in line with expectations.

It said that was helped by a “great summer” for pubs given the success of the England football team at the FIFA World Cup, and prolonged periods of good weather.

Underlying profit before tax totalled £122m, up marginally from £121m, while the firm’s statutory profit after tax rose to £72m from £54m, after non-underlying finance costs of £6m, down from £30m; and non-underlying property charges of £25m, up from £24m.

Basic earnings per share were 15.2p, rising from 11.2p, which, adjusting for non-underlying items, delivered underlying earnings per share of 21.2p, an increase from 20.5p.

The board also announced a further share buyback programme of up to £20m, starting with immediate effect, following the completion of the previous £20m share buyback in March.

On the operational front, Ei said it saw “positive momentum” in its operating divisions, with like-for-like net income up 1.2% among its publican partnerships, down from 2.3% growth year-on-year, though the board said it did see growth across all geographic regions.

Average net income per pub was ahead 2.3% to £81,400, from £79,600 in the 2017 financial year.

Looking at its commercial property portfolio, the board said its total portfolio stood at 412 at year end, up from 331, generating net annualised rental income of £29m, which was an increase from £23m year-on-year.

Average net income per property was 8.2% higher at to £72,300, from £66,800.

Ei Group said it was exploring monetisation of its commercial property portfolio, which could include the disposal of all or part of the portfolio, the board said.

In its managed pubs operations, the board said like-for-like sales growth was 7.1%, improving from 2.4% across its largely wet-led managed house businesses.

The company said it was “building scale and performance”, with its growth on track at 308 pubs trading within its 100%-owned managed operations division, up from 226, with 54 trading within its Bermondsey operation, rising from 48, and 254 within its drinks-led ‘Craft Union’ operation, an increase from 178.

Ei’s managed investments division continued its progress with 47 pubs trading within the operation, up from 30, with 11 specialist partners.

The pubco said it maintained a “stable and robust” balance sheet and cash flows, with its annual property estate valuation stable for the third consecutive year.

Operating cash flows were described as “strong” at £271m, up from £261m, with disposal proceeds standing at £66m, down from £100m.

Its funded capital investment was £81m, up slightly from £80m, with the board claiming reduced debt.

The company had sufficient available bank facilities to repay the £100.5m corporate bonds, due 6 December.

Net debt reduced to £2.0bn from £2.1bn, which was equivalent to a loan-to-value ratio of 56%.

“2018 has been a notable year for the group, as the strategic plan we launched in 2015 has evolved and matured to the extent that our implementation of the strategy is now ‘business as usual’,” said chief executive officer Simon Townsend.

“We are very pleased to have maintained positive momentum in our leased and tenanted business whilst at the same time transitioning selected assets into the alternative formats and operating models of our other business units.”

Townsend said the positive investment returns Ei was achieving upon conversion to managed operations had been maintained, and the like-for-like sales performance of the enlarged managed business had been “very encouraging” throughout the year.

“Our commercial property estate has grown substantially in quality and scale and, consistent with our objective to consider monetising the value of all or part of this business, we have received indications that this attractive, diverse, well-located, income-yielding portfolio of assets is of considerable interest to potential acquirers.

“We welcome the Chancellor of the Exchequer's decisions in the Autumn Budget to freeze beer duty and to reduce the burden of business rates for small businesses which are important gestures of support for the role that UK pubs and publicans play at the heart of their local communities.”

Notwithstanding the wider uncertainty prevailing across the UK currently, Townsend said Ei’s strategy and its flexible business models provided it with the confidence that it could continue to deliver like-for-like net income growth for the current year in its publican partnerships and commercial properties businesses, and like-for-like sales growth in its expanding managed businesses.

“We continue to take appropriate steps to ensure that the group's capital structure enables and supports our objective to deliver attractive and sustainable returns for shareholders, as demonstrated by today's announcement to initiate a further share buyback programme of up to £20m.

“Our strategic plan is on track and we remain focussed on driving long-term growth in shareholder value.”