Yates turns radical to repair finances
Yates Group, the owner of the Yates's and Ha!Ha! Bar & Canteen chains, has announced the appointment of a new chief executive and claims that radical changes have helped the group turn a corner after disappointing results in the last financial year.
Mark Jones, currently managing director at Pizza Hut, will join the group in mid-September to work alongside executive chairman Mike Hennessy. Jones, 41, was previously managing director of the Hogshead Pub Co when it was part of Whitbread.
Group sales for the year to 31 March increased by 3.6% to £161.7m, against £159.2m a year earlier. Before exceptional items, pre-tax profit dropped to £12.1m, compared with £13.8m in 2001.
But once exceptionals were included the figures looked much worse, with pre-tax profit down by 86% to £2.2m. One reason was the sale of several pub sites at a big loss.
Hennessy, who came in last July, said that redundancies, the sale of poorly performing sites, and strict control over capital expenditure had saved costs in the second half-year and would have a major impact on future cost savings.
Debt was cut by £10m to £71m as cash-flow improved.
Despite the sale of 11 under-performing sites for £4.7m, the group made a loss of £4.4m on them compared with what it paid for them. Yates expects to lose £3.7m on another seven sites for sale.
The group spent £907,000 on its reorganisation and £1.24m on redundancy payments related to 50 job losses. Combined exceptional costs came to £10m.
A new menu at Yates's saw like-for-like food sales increase by 6.8% in the second half of the year, while drinks prices were cut to generate sales growth.
Ten new branches, five of each brand, were opened in the first half of the year before Hennessy halted further openings because of the poor quality of sites chosen and the prospect of dwindling returns on capital employed.
The group again wants to expand, and is looking for sites that can command weekly sales of about £20,000 in cities such as Edinburgh, Belfast and uncovered parts of London.
Hennessy believes Yates's has the potential to expand to about 200 pubs from its present 127, while Ha!Ha! - 10 of whose bars are being refurbished - could increase from 18 to 45.
But Nigel Popham, leisure analyst at stockbroker Teather & Greenwood, downplayed Yates Group's expansion plans. He said: "The opening of sites will be modest - a maximum of six - for the coming year. They dramatically overtraded a year ago, opening pubs without doing their homework, and they've paid the penalty."
He concluded: "They're only getting back to their profitability levels of three years ago. It's still recovery rather than growing the business."
by Ben Walker
