Arkell's increases sales by more than 20%

The south-west based pub operator and family brewer reported that £12.1m came from its managed estate (2022: £9.6m) and £11.2m from the tied estate (2022: £9.9m).

Chairman James Arkell said, “For the first time since 2019, the company operated without any impact from Covid restrictions and sales increased by over 20%.”

“We have some really excellent licensees and pubs that are reflected in the increased turnover,” he said, adding that success came from ”quality of products on offer, outstanding level of service and the support that we give to our licensees and free trade customers.

Turnover in its managed houses grew by 24%, helped by the opening of the Strawberry Thief and the transfer of the Priory Inn, Tetbury from the tenanted estate.

Like for like sales in the managed houses increased by just over 9% and income from the tenanted estate increased by 13% as full rents were charged for the first time in several years.

Challenging year 

“Whilst sales were buoyant, the war in Ukraine was adversely impacting the price of utilities and food,” Arkell added.

“The labour market remained tight and employment costs increased significantly. These rising costs were further exacerbated by multiple increases in the Bank of England base rate. All of these factors made the past year very challenging with the pub and hospitality sector particularly badly affected.”

As a result, profits before property disposals and the exceptional item fell by just under £1.2 million with £500,000 of the reduction represented by additional borrowing costs, whilst labour costs increased by over £1 million.

During the year the company sold two freehold properties making a profit on disposal of £229,318.

Arkell’s borrowed an additional £4.3 million to purchase and refurbish The Eliot Arms, South Cerney, to complete the building of The Strawberry Thief at Tadpole, Garden Village and to purchase the property adjacent to Ye Olde Red Lion, Chieveley.

At the 31st March 2023 total bank debt had increased by £4,225,257.

Strong performance 

Looking forward, Arkell said turnover in the current financial year had increased again when compared with last year, with “a strong sales performance in the first quarter.”

Sales growth during July and August has been weaker due to poor weather although they remain above those achieved in the summer of 2022, he added. 

“A double digit increase in the national minimum wage from April. 2023 combined with increased borrowing costs continues to apply downward pressure on profits.

“We do, however, have some protection from the increased cost of energy having fixed our energy costs for the brewery and most of our managed houses for three years in the summer of 2021.”

The brewer is ”actively looking to acquire new sites” but these are likely to be funded by disposals rather than taking on any significant levels of additional debt.

“Under performing pubs will be sold or converted if it is believed that additional investment in them will not generate an appropriate return."