Cheap Spirit does the job

Since demerging from Punch last year, most of management's efforts have gone into turning around 791 managed pubs, which accounted for two-thirds of group profits following a 13 per cent rise in operating profit to £73m. The rebranding of two-fifths of the estate helped power like-for-like sales growth of 4.8 per cent, which has continued into the new financial year despite tough comparatives. Cash profit margins have been rising, too, up by 250 basis points over the past two years, only 100 basis point shy of Spirit's improvement target.

The tenanted pubs were only fully transferred from Punch in March and much of the 4.9 per cent fall in net income per pub was caused by lowering rents to more sustainable levels, which means management can now focus on improving performance. Over 50 underperforming pubs have been sold so far and a further 100 are likely to be offloaded this year from the 487-pub tenanted estate.

Broker Numis expects current-year pre-tax profits of £56.6m, EPS of 6.5p and a 2.17p dividend (from £51.1m and 5.8p for 2012).