Manchester-based Hydes Brewery has reported a sharp drop in profits in its most recent year, after difficult times in its managed division and problems with its Boddington's cask ale production on behalf of InBev.
The company has now switched to a primarily tenanted estate to reduce volatility in the business. The company saw turnover of £27.3m in the year to 2 April 2006, in line with the year before, but profit before tax dropped from £1.53m to £1.28m.
A major restructuring of the managed house division in the final quarter means Hydes operates just 17 managed pubs compared to 40 less than two years ago. Hydes has also introduced food franchise arrangements with house managers in the bulk of the managed estate.
Managed house profits
were £3.13m against £3.39m the year before, accounted for by "poor like-for-like performance" and switches to tenancy. The company reported "great difficulty" in recruiting effective managers due to the "abundant offering of leased and tenanted properties" and other sectors' competition.
Hydes reported that managed pubs moved over to tenancy have "invariably delivered increased profit contribution", while electricity and gas costs for managed houses had risen 70%.
The company's 55-strong tenanted division saw profit grow £1.6m to £1.72m. Core free-trade profit contribution grew 8% to £708,000 and profit from contract brewing grew more than 20%.
On the Boddington's contract, Hydes stated in Companies House documents: "The return from contract brewing was very disappointing given the (start) of the contract with InBev to brew cask Boddington's.
"This seven-year contract is supported by a minimum volume commitment of 210,000 barrels. It was forecast that 52,000 barrels would be brewed in the year, but major difficulties experienced using the Boddington's yeast strain resulted in a sales decline."