Spirit aiming for £1bn a year' food sales goal

by The PMA Team

Managed operator Spirit Group has set a target of increasing its food sales by 150% to £1bn a year by 2010. At the moment, food accounts for 30% of its £1.356bn annual turnover ­ around the £400m mark.

The company refers to its plan to add £120m of food sales each year for the next five years ­ it would require growth of around 30% in year one ­ as its "big hairy audacious goal".

Chief executive Karen Jones said the £1bn a year target was a way of "galvanising the organisation" by creating a goal that was a definite "stretch". The target figure for food sales at Spirit was revealed during a presentation to City analysts last week.

The company revealed that Spirit's estate, 38% old Spirit and 62% formerly S&N Retail pubs, were taking an average of £12,800 per week in the year ending 31 August 2004. Ebitda for the year was £318.6m.

It also told analysts that with "significant integration activity" throughout the year, the total head office count had reduced from 1,250 to 870 since the S&N Retail takeover in October 2003.

More than 70% of capital expenditure is focused on the company's three drive brands, Chef & Brewer, Two for One and John Barras, where return on investment was 28%, 46% and 32% respectively in the first year. Two for One has grown to 150 sites since Jones founded the concept in 1999 ­ 60 new sites will have been opened in the current financial year, which ends in August.

Spirit also told analysts that it had undertaken more than 400 sparkle jobs in the past nine months ­ with an aver-age spend of £34,000 achieving average returns of 40% plus.

Jones told analysts that there was a huge "turnaround underway" in the former S&N Retail estate with volume in growth. Beer volumes in the S&N Retail estate were down by 6% when the estate was acquired ­ while they were 4% up in Spirit.

The company also revealed that average weekly takings in the Spirit estate, which is 72% freehold, were £9,900 at the time of takeover ­ com-pared to £14,000 in S&NR.

Finance director Benedict Smith told analysts that Spirit's mergers and acquisitions activity has raised £1.555m of proceeds in 2004 at a blended 11 times Ebitda.