The Capital Pub Company Plc

('Capital Pub Company' or 'the Group')

Preliminary Results for the year to 28 March 2009

The Capital Pub Company Plc owns and operates an estate of predominantly freehold, free-of-tie, managed pubs in greater London. Its portfolio comprises 25 unbranded free houses, each of which caters specifically for its local market. The majority of the Group's pubs are liquor-led, although a number also provide high quality food. Today, the Group announces preliminary results for the year to 28 March 2009.

Highlights

Clive Watson, Chief Executive of Capital Pub Company Plc, said:

'This is an encouraging set of results in what has remained a relatively resilient London trading market. The Group's pubs have performed well across the estate. With the entire estate now refurbished and the addition of The Bishop in Dulwich to our portfolio, we are confident of another year of progress for the Group. We remain focussed on maximising the returns from the existing portfolio in order to reduce net debt and be in a position to acquire additional pubs when the time is right.'

30 June 2009

Enquiries:

  Chairman's Statement

I am pleased to report successful results of The Capital Pub Company Plc for the year to 28 March 2009. The Group now has a fully refurbished estate of 25 high quality, predominantly freehold, free-of-tie pubs based entirely in London. It continues to perform well despite the uncertain economic conditions and has produced a robust set of results in what has been a challenging time for the pub industry.

Financial Results 

The Board is delighted with the performance of the Group over the last 12 months.  

• Revenue increased 5% to £19.8m (2008: £18.8m)

• Adjusted EBITDA increased 9% to £4.9m (2008: £4.5m)

• Adjusted pre-tax profits increased 7% to £2.1m (2008: £1.9m)

• Adjusted diluted earnings per share increased 37% to 11.0p (2008: 8.0p)

• Cash generated from operating activities increased 47% to £1.7m (2008: £1.2m)

Throughout this document reference to an 'adjusted' item means it has been adjusted to exclude impairment of goodwill, movement in fair value of interest rate swaps, share option charges and additional exceptional charges. A reconciliation to reported earnings is provided in note 4 of the accounts.

This improved performance has met Directors' expectations for the year and is a result of continued management focus on further enhanced retailing at pub level as well as more effective cost control.

After due consideration, the Board maintains that it is in the best interests of shareholders for the Group to continue to preserve internally generated cash for debt reduction and for financing future acquisitions rather than to pay a dividend at this stage. 

Operations and Management

The Group continues to focus on wet-led operations which account for nearly 80% of total sales. The Group has been able to further improve its margins on both liquor and food as a result of better purchasing and also by being able to increase sales without resorting to discounting. 

The Group benefits from a high quality portfolio of well established, neighbourhood pubs which serve their local customers. The Group offers its pub managers a high degree of autonomy and the opportunity to run each pub in an individual, entrepreneurial style which caters to the local clientele. Together with the attractive performance-related bonus packages offered to the managers, this has helped the business to attract and retain excellent calibre pub managers which is essential for the continued successful growth of the business and the strong trading performance of our pubs.

The Board would like to take this opportunity to thank the staff at all the pubs for their hard work over the financial year and acknowledge their contribution to these results.

In March 2009, Nicholas Collins was appointed Finance Director. Nicholas has helped to improve systems, controls and reporting deadlines in addition to assisting Clive Watson, the Chief Executive, to manage the business.

David Lees resigned as Non-Executive Director on 6 March 2009 and the Board would like to thank David for his contribution and wish him the best in his current ventures.

Acquisitions and Developments 

During the year the Group has completed its investment programme, investing over £1m including the refurbishment of four pubs within the estate.  The Boaters In Kingston upon Thames and The Merchant in Battersea both reopened in April 2008 and The Peer (formerly Wellesley Arms) and The Southern Belle (formerly The Puzzle, Fulham) reopened in June 2008. Overall these outlets are trading significantly better than prior to development.

In April 2009 the Group acquired The Bishop, based in Dulwich, for an initial consideration of £400,000 and a further earn-out consideration of up to a maximum of £350,000 subject to the pub's profit targets being reached during the first year of ownership. The Bishop achieved record sales across the estate in its first full week of trading in April 2009 and has continued to trade well since then which is extremely encouraging.

Balance Sheet and Funding 

The Group remains securely funded with a largely freehold, high quality, asset-backed pub estate. With all major refurbishments completed there is no significant planned capital expenditure and the business is now strongly cash generative. This will enable the Group to continue to reduce its debt and remain comfortably within its banking facilities. 

The current level of debt of £29m represents gearing of just under 90% which the Board is comfortable with given the quality and the predominantly freehold nature of the estate. The Group currently has unutilised facilities of around £3m. Over the next year the net debt position will continue to improve as the significant levels of cash flow generated from the estate will be used to repay long-term bank borrowings. Under the terms of the loan agreements capital repayments commence in December 2009 until final settlement of the loan in 2017. 

Shareholder Information

Shareholders who wish to keep up to date with news about the Group should visit our recently enhanced website www.capitalpubcompany.com which includes details of our portfolio of pubs, corporate information and promotional activity. 

Current Trading and Outlook

Current trading continues to remain healthy in what is a relatively resilient London market. The Group has maintained the high quality of its pubs and its main priority is to continue to increase turnover in its existing operations coupled with an ongoing focus on tight cost control. The Group remains cautiously optimistic for the remainder of 2009.

The continuing objective is to focus on managing the business through the current economic situation and to reduce bank borrowing as outlined above. The Group will also continue to monitor acquisition opportunities, and when the time is right will consider acquiring further pubs. The Directors remain confident that The Capital Pub Company is well placed to continue to maximise returns for the Shareholders from its pub portfolio.

J Bruxner CBE
Chairman

30 June 2009

  Consolidated income statement for the year ended 28 March 2009

Earnings per share 

  Consolidated balance sheet as at 28 March 2009

  Consolidated balance sheet as at 28 March 2009

  Consolidated statement of changes in equity for the year ended 28 March 2009

  Consolidated cash flow statement for the year ended 28 March 2009

  Notes to the financial statements for the year ended 28 March 2009

1.BASIS OF PREPARATION

The financial information set out above does not constitute the company's statutory accounts for the years ended 29 March 2009 or 30 March 2008.   Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (I) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and applied in accordance with the Companies Act 1985. This is the second annual reporting date at which we are required to use IFRS adopted by the EU.  

These financial statements have been prepared on a historic cost basis, except for the revaluation of certain properties and derivative financial instruments that have been measured at fair value.

2. ANALYSIS OF OPERATIONS

The above note re-states for the prior year as Sold those pubs which were disposed of during the year, for comparative purposes, those defined as Ongoing were held for that entire period and those called Acquired were bought during that period. There were no acquisitions or purchases in the current period.

3. TAXATION 

  The relationship between the expected tax expense based on the tax rate of 28% and the tax expense actually recognised in the income statement can be reconciled as follows:

4. EARNINGS PER SHARE

The table below reconciles reported earnings to Adjusted Earnings which highlight the underlying performance of the business. The calculation of the basic and fully diluted earnings per share is based on this data:

  5. PROPERTY, PLANT AND EQUIPMENT

All land and buildings were revalued by HLL Humberts Leisure in February 2007. The properties were valued as operational entities, taking into account their trading potential. As a result, the value of the property portfolio was uplifted by £11,563,000. The Directors have considered the fair value of the freehold properties and are comfortable, given both the quality of the estate and the continued quality of trading, that carrying values are not materially different from the market value.

If freehold land and buildings had not been re-valued, they would have been included on the historical cost basis at the following amounts:

  6. SHARE CAPITAL

126,035 ordinary shares were issued during the year. The nominal value of these shares was £63,018. In 2008, 177,729 ordinary shares were issued at a nominal value of £88,865.

7. DIVIDENDS

There is no proposed final dividend for the year.

8. DERIVATIVES AND FINANCIAL INSTRUMENTS

During the first six months of the year changes in the fair values of the instruments have been recognised in the Income Statement. Following a change of accounting policy from the 28 September 2008 onwards the Group has elected to hedge account for movements in fair value of derivative financial instruments and these are subsequently shown in the Cash Flow Hedge Reserve as a component of equity on the Balance Sheet.

9. POST BALANCE SHEET EVENTS

On 1 April 2009 the Group purchased the entire share capital of Terisco Ltd, owner of The Bishop Public House in East Dulwich, for an initial consideration of £400,000. Further consideration will be payable on an earn-out based on performance of the acquired business over the period to 31 March 2010. The maximum earn-out consideration is capped at £350,000 and will be settled in cash. Accounting for the business combination is incomplete at the date of this report.

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