Brewer and pub operator Greene King has announced a rise in profits and turnover.
Greene King boss Tim Bridge used the platform of his company's annual results to deliver a "state of the nation" appraisal of the pub industry.
Focusing on the managed house malaise, Mr Bridge said that sky-high leasehold sites and poorly defined brands had seen a number of managed companies on the high street topple over.
"The tribulations of the managed house sector have been brought about by the existence of many highly rented short leasehold properties and by over-investment in indifferent retail brands," observed Mr Bridge.
He also warned against assuming the tenanted sector represented a relative safe haven. "The current vogue for tenanted estates should not blind us to the fact that there can be potential pitfalls in the model."
He said pub companies should guard against unrealistically high rents, and that a lack of talented licensees "may become a problem in the future".
The chief executive of the Suffolk-based brewer and pub operator said the fundamental challenge facing the pub industry was the growth in other leisure pursuits and home entertainment (see below).
Overall Greene King reported an eight per cent rise in pre-tax profits to £75m for the year ending May 4, 2003. Turnover of the company was also up eight per cent to £535.6m.
The 571-strong managed division, which includes Old English Inns, saw turnover increase seven per cent to £328.3m.
Trading profit was up 10 per cent to £54.7m and like-for-like sales on an uninvested basis were up 0.9 per cent.
In the 1,122-strong tenanted division Pub Partners arm, led by David Elliott, turnover and trading profits each increased 17 per cent - to £111.7m and £43.8m respectively.
The acquisition of Morrells of Oxford added 77 tenanted pubs, increasing Pub Partners' footprint in the Thames Valley.
The company, which brews Greene King IPA, increased turnover in its brewing arm by four per cent to £95.6m and trading profits by 12 per cent to £13.3m.
Mr Bridge said: "All three of our businesses have participated fully in the achievement of these record results. The company is in good shape and we believe that our integrated strategy is sound, our assets and our financial structure prudent."
The company is searching for a new managing director for its managed pub business. Current boss Neil Gillis is leaving at the end of August to become chief executive of Esporta, the private health club business.
Greene King Brewing Company
The Brewing Company, headed by Rooney Anand (pictured), saw volumes of Abbot Ale rise by 21 per cent on the back of revised branding and marketing. Flagship ale Greene King IPA recorded a four per cent lift in volumes and Old Speckled Hen jumped 14 per cent. The company grew its share of the cask ale market in the UK to 15.4 per cent (2002: 13.4 per cent). In the combined TV regions of London, Anglia and the South East, it grew market share from 30.1 per cent to 31.9. Overall trading profit in the Brewing Company jumped 12 per cent to £13.3m on sales of £95.6m.
Results
- sales up eight per cent to £535.6m
- profits up eight per cent to £75m
- managed house uninvested like-for-like sales up 0.9 per cent
- tenanted pub uninvested like-for-like sales up 2.3 per cent.
Threats
Greene King boss Tim Bridge has warned that the fundamental threat to the pub industry, for brewers and pub groups alike, is the growth in alternative leisure pursuits and home entertainment: "Ever larger pub groups are not the long-term answer to this challenge nor is investment in expensive and undifferentiated concepts," he said. "Our answer to this consumer challenge in the pub trade is to offer more value to our customers, without price discounting, by:
- developing the calibre of our people
- improving the attractiveness of our properties
- concentrating on formats with proven and distinctive customer appeal
- innovating to stay in touch with changing consumer tastes
- spending investment capital effectively.
"This approach hinges upon doing the 'little things' right with the customer, such as providing quick, friendly service and supplying food and drink in the best possible condition. We are therefore organised into operating businesses which are small enough to stay close to their customers and sufficiently flexible to respond to changing market conditions."
Related articles:
Greene King sees pre-tax profits up eight per cent (3 July 2003)
GKPC boss heads for Esporta (18 June 2003)