It also reported profit after tax stood at £10.8m (2021: £6.2m) in its 53 weeks to 1 October 2022 results. The business’s turnover rose by 88% to £101.4m from £53.8m in 2021.
Chairman Charles Brims explained: “While I can report a pleasing increase in turnover, with the company achieving over £100m in annual turnover for the first time in its history, the ability to convert this turnover into profit has been eroded by cost inflation.
“The war in Ukraine, together with continuing labour shortages, has materially increased our utility costs, as well as our labour and associated recruitment and retention costs.
“As was the case during Covid, the company has managed to remain profitable but our ambition to return to, and then grow from, our pre-Covid 2019 performance has been delayed by these external factors.”
He added the initial outlook for 2022 was optimistic but the company’s full-year performance ended “somewhere between the optimistic and pessimistic perspectives”. He added: “This time we are going into the new financial year aware that inflation is running at a 40-year high with the potential for more to come.”
Labour issues
Although some of the initial shock of Russia’s invasion of the Ukraine has faded as supply chains adjust, McMullen sees the main persistent driver of inflation is likely to come from labour negotiations.
Persistent inflation is a major challenge for businesses, Brims said, adding its customers have less disposable income and therefore profit margins are squeezed and it becomes more difficult to justify investment and acquisitions.
On the future Brims added: “The company has a strong balance sheet, well-invested freehold pubs, and strong senior management so it is well placed to meet these challenges.”
McMullen’s retail division benefited from three pubs acquisitions: Old Bank of England, Kings Arms and Traitors’ Gate, all in central London.
Meanwhile, it also acquired Horse & Guardsman in Whitehall and the Cambridge Tap in Cambridge, plus the newly built Warbler on the Wharf in Milton Keynes and “opened to levels of sales materially exceeding expectations”.
Wet sales up in retail division
Despite the re-emergence of Covid over Christmas 2021 and the related significant impact on pre-Christmas London sales in particular, retail finished the year with turnover of £94.2m compared to pre-Covid turnover of £84.7m.
Wet sales reached £54.4m versus £49.4m in 2019 and food sales, partly enhanced by VAT reduced to 12.5% for half the year, reached £34.8m versus £31.8m on a 52-week basis. Price increases and new pubs were the main drivers of growth with underlying demand being more of a challenge.
In its tenancy division, it added the Dusty Miller pub from its pub operator agreement model and disposed of the Jolly Bargeman in Ware.
With its brewery tie on beer and cider, barrelage grew 62% on a 52 week basis versus 2021, it still remains behind 2019.
Brims said: “Rebuilding the tenancy division will be dependent on attracting and retaining the best possible tenants in pubs that have the scale and surrounding demographics sufficient to ensure a sustainable future.”
