Stimulus helps pub group Redcape pour a profit jump as pokies boom

The pub group’s empire of Sydney properties is performing strongly as gaming revenues rise.

Redcape chief executive Dan Brady.

Pub owner the Redcape Hotel Group is riding the boom in pub values and gaming with its profits jumping almost 46 per cent to $25.4m as punters flock back to pokies.

The pub group, which operates many of the largest venues in Sydney’s western heartland, lifted distributable earnings by 24.6 per cent to $32.9m, defying restrictive operating conditions.

The uplift was driven by a 9.7 per cent increase in like-for-like revenue across its portfolio in suburban and regional locations and it still lifted earnings despite selling two large pubs.

Redcape now has 36 pubs in NSW and Queensland and benefited from government stimulus that has given punters cash to pump into its pubs. Gaming revenue jumped from $102.68m to $110.98m.

Despite increased COVID-19 related costs, equating to about $3.1m, the company grew with the purchase of the Gladstone Hotel in Dulwich Hill in Sydney’s inner west, and O’Donoghues in Emu Plains, Penrith. It also made two Brisbane acquisitions, the Shafston and Aspley Hotels.

Redcape chief executive Dan Brady said the business had been able to not just survive but thrive during 2020.

“We have a high level of confidence in the future performance of our business and our strengthened balance sheet positions us well to maximise our pub performance, seek acquisition opportunities and to deliver sustainable growth in future periods,“ he said.

Redcape had pre-guided to a substantial portion of the result in its December trading update but operating earnings of $40.9m and distributable earnings of $32.9m were ahead of guidance.

Debt declined to $359m and the company is below its target range of 35 per cent to 45 per cent, giving it the firepower to expand.

The pub company said it was committed to targeting new acquisitions and business opportunities as Sydney’s night time economy comes back to life.

“This was a very solid performance in light of prevailing operating restrictions over the period,” Ord Minnett said. “Redcape remains well positioned to explore acquisitions with gearing below its targeted range.

“The strong uplift in Net Asset Value is the key here and illustrates the overall resilience of Redcape’s pub network. At an NAV of $1.22, Redcape is trading at a material discount. We expect this to unwind.”

Redcape shares added 2.5c to 95c.