Spirit Pub Company credited refurbished pubs and food for driving strong fourth-quarter sales yesterday, in its maiden update since it demerged from Punch Taverns last month.
Ian Dyson, the chief executive of Spirit, which manages 804 pubs directly and has a further 548 leased outlets, said it had "outperformed the market" but said he expected the consumer spending environment to remain tough.
The operator said it refurbished 56 pubs in its fourth quarter, in what it described as an "intensive period of investment". This brought the total that Spirit has refurbished over the year to 215. It has now refurbished 60 per cent of its estate, as it focuses on expanding its better-performing Chef & Brewer, Fayre & Square and Flaming Grill brands.
At Spirit and across much of the wider industry, managed houses have largely outperformed leased or tenanted outlets during the downturn, as they have more freedom to be flexible on pricing and promotions.
Reflecting this, Spirit said it had kicked off the conversion of up to 100 leased pubs to its managed outlets, in an attempt to accelerate its growth.
Paul Hickman, an analyst at Peel Hunt, struck a positive tone on Spirit's investment programme. He said: "Its sound balance sheet is adequate to finance the rest of its investment programme, while its main competitor, Mitchells & Butlers, is in danger of becoming demoralised."
Over the 12 weeks to 20 August, Spirit's like-for-like sales rose by 3.8 per cent. While this represented a mild slowdown in growth from 5.2 per cent over the 52 weeks, its food sales actually accelerated to 7.9 per cent in the final quarter. The company said: "Growth in food continued at the healthy levels experienced in the last two quarters, driven by innovation and investment in our brands."
This focus on food continues to benefit profit margins at Spirit, with management adding they had made "real progress" over the last period after a jump of 130 basis points in the first half.
Mr Dyson, who was the finance director of Marks & Spencer until last year, said: "We are pleased with the continued progress we have made in the business. We have delivered another quarter of strong growth and have again outperformed the market."
Despite the dire consumer spending environment, Spirit did not increase its promotional activity in the 12 weeks. Spirit's drinks sales were flatter and rose by just 1.2 per cent over the period, compared with 4 per cent growth over the year.
However, the pub operator said its drinks performance had suffered from being up against the football World Cup in the fourth quarter last year. Sales were also hit by last month's riots, which forced the closure of up to 40 sites on the worst days.
The continuing woes of its leased division were reflected in a 3.3 per cent fall in Spirit's fourth quarter net income, although this represented a slight uptick compared with the 4.1 per cent decline over the 52 weeks.
Mr Dyson said: "While the economic and consumer outlook remains challenging, we believe we have the right plans in place to enable us to make further progress in the coming year."
Punch Taverns finds breaking up is hard to do
Punch Taverns is continuing to struggle since its more profitablemanaged pubs unit split off as Spiritlast month. The operator of more than 5,000 leased pubs posted a 5 per cent slump in its gross profit in the 12 weeks to 20 August.
Punch tried to put a brave face on its performance by touting that its average net income per pub rose by 0.9 per cent over the 52 weeks, thanks to disposals. It added this momentum had been carried through into the fourth quarter, when the impact of last year's football World Cup is stripped out.
The group plans to divest 2,053 pubs in its "turnaround division" over the next five years in order to focus on a core portfolio of about 3,000 of its most profitable tenanted pubs.