Top-up needed, Capital tells Fuller's

21st Jun 2011 08:04

Bid target The Capital Pub Company added a few million quid to its price tag after a set of sparkling full year results.Revenue rose 24% to £27.2m in the 52 weeks to 26 March from £22.0m the year before, with like-for-like sales topping 7%. Sales were bang in line with market expectations.Adjusted pre-tax profits surged 48% to £4.1m from £2.7m the year before while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 18% to £6.8m from £5.8m. The market had been expecting profits before tax of £4.0m.Net debt came down by £7.1m during the course of the year to £21m, reducing gearing to around 50%. As expected, the company has resumed paying dividends, and has been more generous than expected, with the payment of a 2.25p divi, versus expectations of a pay-out of 2.1p.Sales growth has tapered off a tad in the new financial year; having risen by 24% last year, sales in the first 10 weeks of fiscal 2011/12 are up by a still impressive 20%.The London-focused pubs group said the market in the capital remains very strong and is likely to remain to right through to the 2012 London Olympics."The UK has a two speed economy with London a very buoyant market place from which Capital, with its larger estate, will benefit further in the future particularly coming into an Olympic year," said Clive Watson, chief executive of Capital."We have a strong pipeline of acquisitions and with our new banking facilities are well positioned to execute our strategy to continue to generate excellent value for shareholders," Watson added.Turning to the rejected offer from fellow London-focused pubs group Fuller, Smith & Turner, the company noted that it represents the last remaining independent freehold London-based pub company following the sales of Geronimo Inns and Realpubs. "Capital Pub Company is therefore a scarce and valuable asset," the company claimed.The 200p per share offer from Fuller's values The Capital Pub Company at 8.9 times EBITDA for fiscal 2010/11, compared to the 9.8 times historic EBITDA paid by Young & Co for Geronimo Inns and the 8.4 times forecast EBITDA paid by Greene King for Realpubs. In the view of the board of Capital, the group should demand a substantial premium over these two recent deals as the group's estate contains a larger proportion of freehold assets (85%) than the Geronimo estate (38% freehold) and more than twice the number of freehold assets than the entire Realpubs estate (14 sites). On top of that, Capital's board believe there is also the potential for strong EBITDA growth from recent additions to the group's portfolio."As Fuller's are themselves a London pub operator and brewer, the board believes they would be able to extract significant synergies from beer supply and cost savings. The board believes these synergy benefits are not reflected in the 200p indicative offer proposal," the company statement said. --jh