McMullen grows in 2013 – slams taxation and bureaucracy

McMullen’s results for the 52 weeks to 28^th September 2013 have been released and show Profit before exceptional items and tax up by 15% compared with 2012, with  Chairman Charles Brims commenting that “This encouraging increase in profit is mainly driven by successful pub acquisitions and by growth in like for like sales in our retail pub estate.”

However, MD Peter Furness-Smith expressed (below) dismay with the new Statutory Code, and current ‘obscene levels of taxation and bureaucracy, questioning why  anyone would want to own or invest in tenanted pubs.

Managed houses

Like for like sales in managed houses were up 4.2% with total sales up 7.8%: “We are also pleased with the performance of the three new sites opened in the year, the Britannia and Baroosh both in Marlow and the Coach & Horses in Bishop’s Stortford,” said Charles Brims.

Tenanted

The Tenanted division had a challenging year as overall support for tenants continued but the acquisition of the Kings Arms and Old Crown, both in central London, improved the average barrelage and quality of the estate:   “The eight pubs run under our Pub Operator Agreement produced a material uplift in profitability which gives us another option when determining the most profitable way to operate our pubs.”

Current trading

The current financial year has started well, helped by very good weather compared with the same period last year, whilst  two recent acquisitions have opened, following development – the Prince George in Milton Keynes and the Kingfisher (formerly the  Quays) near Camberley.  The Old Bank of England in Central London has also been acquired.

“Like-for-like sales in managed houses are up by 6.7% in the first half of this year to the end of March 2014 which is a commendable performance, particularly for a mixed pub estate outside the M25,” said Managing Director, Peter Furness-Smith.

Disappointment with ‘remarkable’ Government new Statutory Code

“However, we are disappointed that the Government has decided to press ahead and legislate to interfere with agreements made willingly between landlords and their tenants.

“The new Statutory Code is remarkable in that it is proposing to make landlords liable for business risks normally the responsibility of a tenant.  For example in the event that the Government decides to increase business rates, regulatory costs, employment costs and general taxation such as duty and VAT (both have increased materially over the past decade) these operational trading risks will become the Landlords burden as these events are “outside the tenants’ control”!  Likewise if there is a spike in the wholesale gas market and the tenants costs go up the tenant will be able to negotiate his rent downwards and landlords will have to pay for these through the rent review mechanism.

Why own or invest in tenanted pubs?

“If that is not a big enough disincentive to invest in tenanted pubs, a future Secretary of State could easily introduce even more draconian measures without further legislation,” said Peter.  “It raises the question as to why anyone would want to own and more importantly invest in tenanted pubs when operational risks are left with the Landlord and an ‘agreement’ can be overridden at the whim of a politician.

Reduce obscene levels of taxation and bureaucracy

“Sadly those supporting interference into this market are missing the critical point that if they want more pubs to thrive they should focus their efforts on trying to reduce both the obscene levels of taxation and bureaucracy.

“We know in our own small community pubs that total rent (cash rent and tied wholesale profit) is almost insignificant compared with the cost of Government, including taxation which amounts to over 40% of gross sales!

“For this Government therefore to legislate so as to be able to override commercial agreements rather than reduce their pernicious levels of taxation simply demonstrates their failure to understand the real issues or the positive benefits of the Tied pub model.

“Despite the reduction in duty a small community pub is still contributing to Government coffers around 5 times the pub’s profit!  This is unsustainable and combined with this latest interferrence is a recipe for starving tenanted pubs of investment, investment which is needed to make them more relevant to consumers and thereby to give a lot of them a chance of becoming sustainable businesses,” concluded Peter.