Cheer at Surrey Free Inns as profits leap 72%

Surrey Free Inns justified its sparkling performance on the Alternative Investment Market since the middle of 1995 with a 72 per cent jump in pre-tax profits in the half-year to November. The creator of the Litten Tree chain of pubs slipped 7.5p to 422.5p on profit-taking yesterday but the shares have still risen more than six-fold in 18 months from a low of 70p.

Tony Hill, managing director, said: "We have had an excellent start to the year, demand at all our new sites is meeting expectations and our development programme is on track."

Pre-tax profits of pounds 1.04m compared with pounds 600,000 in the comparable period in 1995, struck from a 19 per cent increase in sales to pounds 6.9m. Earnings per share increased by 45 per cent to 8.7p and the interim dividend rose 25 per cent to 1.25p.

Mr Hill said Surrey Free Inns, which started life 10 years ago as a property- based BES scheme investment, was piloting a branded cafe concept to be called Bar Med to run alongside the Litten Tree pubs. He said running out a second brand would allow the company to double its exposure in fashionable areas such as Chelsea and Fulham, where the market could not sustain two of its large-scale pubs.

A move up from AIM to the main market is planned for this year to distance the company from a market which has underperformed the main market in recent months.

Mr Hill said tax relief enjoyed by some Surrey shareholders would not be affected by the move.

The Litten Tree pubs, described as a cross between JD Wetherspoon and Yates Wine Lodges, have succeeded in generating high returns on capital employed by segregating its aircraft hangar-sized outlets into different areas to cater for drinking, eating, watching television and business meetings at different times of the day.

Throughout the day the atmosphere and lighting are changed so that a room used for drinking coffee in the morning might become a dancing venue for a younger crowd in the evening. By constantly shifting activities in the pub, Surrey aims to maximise the number of customers passing through a fairly fixed-cost base.

According to Mr Hill, trading continues strong at both outlets and the new sites opened over the past year.

He said Surrey was well on the way to achieving its target of at least eight new developments during 1997.