Our key strategic objective is to optimise value for every asset in our portfolio through:
Recruiting and retaining the best people
People are at the heart of our business and pivotal to our success. Our annual ‘My Opinion’ employee engagement survey confirms that we are doing the right things by our people, and highlights the areas we could target to do more.
We launched new values at the end of 2016 and are striving to embed these into everything we do to bind the Group’s shared goals, values and behaviours. Whilst the business is evolving its operating models the number of people we employ, in particular on site in our managed pubs, is growing rapidly and we are investing in recruitment, training and development of our employees to ensure that we attract and retain the best people.
We appreciate that publicans and operators are an important element of our strategy and directly influence the success of each of our assets. We offer support to our publicans and continually reassess our offer to ensure that both the nature of our contractual agreements and the range of support we provide is competitive and impactful.
Identifying the appropriate capital allocation to enhance returns
Underpinning our strategic evolution, our capital strategy aims to utilise excess cash to optimise returns. We have established a returns-based approach to the utilisation of our future cash flows. Our capital allocation framework determines whether the best use of cash is to:
• reduce debt; or
• invest in our assets; or
• make returns to shareholders.
In our build phase, our focus for cash has been on deleveraging and investing in assets to strengthen our balance sheet and opportunistic returns to shareholders through our share buyback programmes. Our capital allocation framework will continue to be utilised throughout our acceleration phase and into monetisation to ensure that we have a sustainable capital structure, we continue to optimise cash returns and we can make regular returns to shareholders. These returns can be by way of dividends or share buybacks. Where the share price is at a significant discount to net asset value per share, management believe it is more accretive to shareholder value to buyback shares rather than to pay a dividend.
Our Strategy - In action
As we move through our strategic evolution, the indicative shape of our estate changes. Our target mix of operating models for 2020 was set within the context of the mix of retail propositions in our estate in 2015.
We continue to review that target based on our progress and our experience, and now believe that although our managed house business will still comprise c.800 pubs by 2020, the mix between operating models may be slightly different, and the speed at which our commercial properties business grows will depend, to some extent, on MRO take up.