Revenue grew 6.0% to £1,042.7m from a 1.4% smaller estate. The main drivers were our Destination Pubs and Brewing and Brands divisions. Our continued focus on controlling costs and generating cash helped us to offset £3.4m more than the £9.0m increase in non-wage costs and inflation, particularly in liquor, food and utilities. Central costs include an additional £1.8m share-based payment charge for the year.
Operating margin was down 20bps to 21.3%, delivering operating profit before exceptionals of £222.0m, up 5.0% on last year. Adverse divisional mix was 40bps, of which half was mitigated in the year through operational actions. Underlying core profit growth was 2.5%. All pub businesses grew profits on a per pub basis, while Brewing and Brands achieved strong profit per barrel growth.
Interest costs of £82.0m were 7.1% lower than the same period last year, as a result of strong cash flow management and a smaller IFRS pension interest charge of £0.2m. Profit before tax and exceptionals was £140.0m, an increase of 13.8% on last year. The tax charge before exceptional items of £36.4m equates to an effective tax rate of 26.0%.
Earnings per share of 48.2p is up 11.1%, notwithstanding the slightly higher effective tax rate and a small increase in the average number of shares in issue.
Continuing to focus on generating strong cash flows is the key to providing options and flexibility for the group. We delivered EBITDA of £276.6m, up 4.6% on last year, from 1.4% fewer pubs. With another year of strong working capital management delivering a cash inflow of £15.9m, we have further improved our cash platform, allowing us to maintain investment levels in the core estate for both maintenance and expansionary purposes, to pay down debt (comfortably ahead of our normal amortisation) and to pay increasing dividends to shareholders. This remains a consistent part of our long-term financial strategy.
Capital expenditure across the group, excluding investment in acquired sites, was £71.9m, slightly ahead of last year. This investment, across over 383 schemes in the year, benefited our business in both the short-term and the long-term by delivering a return on investment in excess of 20% in Retail and over 30% in Pub Partners. We completed the disposal of 108 trading and non-trading assets, realising £27.8m net proceeds at a net profit of £3.6m over book value. The disposed and transferred pubs would have delivered an annualised EBITDA of £1.2m in Pub Partners. These actions helped to increase group ROCE by 40bps over last year.
On 28 January 2011, we completed the purchase of Cloverleaf Restaurants for £55.7m. This bought us 12 high quality, food-led, freehold trading sites across the north of England and the Midlands and on an annualised outlet EBITDA multiple of 8.7x. Cloverleaf will open a further ten sites from its pipeline by the end of FY13 at what is expected to be a higher level of EBITDA per site than the average for the existing twelve. This pipeline earmarks a further c.£25m of investment, which will comfortably deliver returns ahead of our cost of capital.
On 27 April 2011, we acquired Realpubs for £52.2m, which brought 14 premium London pubs, all but one freehold, into our Retail estate. Its well developed premium offer is expected to deliver average EBITDA per site of £450k, with returns ahead of our cost of capital in year one.
We also exchanged on four greenfield sites for development into food-led retail pubs, in addition to the Cloverleaf pipeline, which will begin trading in 2011/12.
Net debt at the year-end was £1,410.2m, an increase of £62.1m from the previous year-end, having invested £131.2m in expanding Retail with new and greenfield sites.
Our high quality and primarily freehold assets support £1,355m of securitised bonds with a flat debt service profile and amortisation of £24.9m in the year.
On 4 April 2011, we announced a new five-year, £400m, revolving, credit facility with our banking partners, starting in April 2011. This replaced the existing £400m facility, which was due to expire in April 2012, and is fully available for five years. At the year-end, and following our recent acquisitions, this was £110m drawn.
The new facility, alongside our securitised debt, gives an expected blended average interest rate of 6.1%. This continued financial flexibility underpins the ongoing retail expansion and growth strategy.
During the period, there was a further improvement in our overall credit metrics, with interest rate hedges in place for 98% of the variable rate debt. Fixed charge cover improved to 2.6x, up from 2.4x at the last year-end, and interest cover likewise improved to 2.7x from 2.4x. Annualised net debt/EBITDA of 5.1x remains in our target area; it will continue to improve as cash outflows are invested ahead of the earnings stream they generate. Our securitised vehicle had a free cash flow debt service cover ratio of 1.5x at the year-end, giving 27% headroom.
A recommended final dividend of 16.8p per share will be paid on 12 September to all shareholders on the register at the close of business on 12 August. The total dividend for the year is up 7.4% at 23.1p. The board continues to adopt a dividend policy targeting dividend cover of around two times underlying full year earnings.
The group maintains a defined contribution scheme which is open to all new employees. The group's three defined benefit schemes were all closed to new entrants by 2005. Under IAS19, the net pension liability was £45.7m, compared with £78.7m at the previous balance sheet date. As previously reported, the triennial valuations have been completed and, following constructive dialogue with the scheme trustees, the group has agreed to increase its cash contribution by £6.6m to £13.6m per annum, comfortably within the cash flow expectations for the group.
We recorded £23.2m of exceptional charges during the year, as a result of their nature or size. We continue to review the pubs in the tail of our estate and recognised an impairment of £29.4m against the net book value of a small proportion of our estate, demonstrating the overall quality of our estate, while recognising some minor adjustments around specific sites.
We achieved profit over book value on disposed pubs and other properties of £3.6m during the period.
There is an additional £2.9m of charges for restructuring and acquisition, and a one-off exceptional gain of £5.5m for a pension credit. The pension credit has resulted following the curtailment of discretionary pension payments to members of the defined benefit pension scheme.
We invested in 383 schemes in the year, benefiting our business in both the short-term and the long-term by delivering a return on investment in excess of 20% in Retail and over 30% in Pub Partners.
The board's dividend policy is to target dividend cover of around two times underlying full year earnings.
Westgate Brewery
Bury St Edmunds
Suffolk IP33 1QT
Tel: +44 (0) 1284 763222
Company registration no: 24511
