Spirited performance spiced up by food drives sales at pub company

Spirit Pub Company – which has around 1,350 pubs, including Milnes Bar and the Malt Shovel in Edinburgh and the Central in St Andrews – said like-for-like sales increased by 6.2 per cent in the 16 weeks to 10 December.

That growth rate has accelerated since the first eight weeks of the period, helped by food sales being up by 7.9 per cent.

Demand for food at its traditionally drink-led pubs was boosted by the roll out of its “Flaming Grill” concept, which offers dishes such as “firecracker fajitas”, “flaming skillets” and “sweet-chilli salmon on sizzling onions”, to 68 pubs.

Spirit, which was de-merged from Punch Taverns in the summer, said the mild autumn weather also helped boost sales across the estate.

Punch Taverns, said the declines in like-for-like income at its core estate of 2,948 leasehold pubs improved in the period, although a better performance in the south of the UK was offset by declines in the north.

Food has become increasingly important for pubs in the wake of the smoking ban and the trend towards buying cheaper alcohol from supermarkets.

Spirit said it had refurbished 108 pubs in its first quarter, with a significant number of these understood to be conversions to the Flaming Grill brand. The firm said it has now largely completed the refurbishment of its 130 Chef & Brewer pubs and will shift its focus to its Fayre & Square, Flaming Grill and John Barras brands.

The group believes it is on track to deliver its full-year expectations even though it fears the economy will become more challenging.

Meanwhile, Punch said like-for-like net income at its core estate was down 1.5 per cent in the 16 weeks to 10 December, which was better than a 2.1 per cent decline in the previous 52 weeks.

Its turnaround division of 1,940 pubs also saw an improving trend, with like-for-like net income down 10.4 per cent compared to 13 per cent in the previous full-year.

It has sold 116 underperforming pubs over its first quarter, generating £31 million, and is on track to sell between 400 and 500 in the full-year.

Douglas Jack, an analyst at Numis Securities, believes like-for-like sales at Spirit will slow to 3.2 per cent over the full year but thinks it will continue to increase its profit margins.

He added that the pubs sold by Punch fetched an average of £267,000, which was more than he had expected.

James Dawson, an analyst at Charles Stanley stockbrokers, added: “Punch Taverns remains the option play on the sector.

“If a capital restructuring is achieved, this could provide the catalyst for the stock, however, without this, the group’s underlying estate performance is unlikely to improve dramatically in the near term.”

Dawson carries a “hold” recommendation on Punch and a “buy” rating on Spirit.