Pub profit forecasts set fair
It is striking that both of the big boy tenanted operators, Punch Taverns and Enterprise Inns, have now given up trying to estimate average annual incomes for their tenants.
It was Enterprise Inns that first started doing this five or six years ago. Punch Taverns, I'm informed, felt compelled to follow suit, a little surprised Enterprise seemed to get away with it.
Both Marston's and Greene King regarded it as an exercise to avoid, thinking the average figure was rather meaningless because, by definition, a lot of licensees were a long way above or below. What's for sure is the figure would have been embarrassing this year and more misleading than ever.
At Morning Advertiser's Tenanted Trade Summit in June a well-known regional brewery boss told Enterprise's Colin Pedrick that nobody in the trade actually believed the figure. Tenants of average income pubs have seen earnings badly dented by declining beer volumes and rising costs.
Figures I've seen indicate that someone taking £5,000 a week will make £16,000 a year excluding live-in benefits — down by 30%-plus over the past two years.
At Punch, 40% of licensees saw beer volumes go up in the past year, but far fewer will have seen actual earnings rise because of a welter of cost increases.
Some Punch licensees will earn more than last year, most will be substantially down and some will be losing money. Sensibly, Punch decided it should avoid publishing its average income estimate last month at results.
It was all eyes on Enterprise this week to see whether it would persist with its estimate. Sensibly again, it took the Fifth.
I know of one Enterprise tenant whose pub earns £400,000 pre-tax profit a year. That 1,800 pubs in the estate have been in need of special help, passing through a kind of Enterprise intensive care, means there will be a lot of pubs making hardly any profit at all.
The stark polarisation in performance in the past 18 months rendered the average earnings figure particularly misleading.
Both companies have seen licensees group into "haves" (still in profit to lesser or greater extent) and "have nots" (struggling to keep their heads above water with some drowning).
It's unlikely that the average earnings figure will return until both companies achieve much more equanimity of performance across their estates (if ever).
What we have instead, more usefully, is Punch giving a very exact indication of the profit that can be expected at individual pubs it is letting.
The front page of last week's Morning Advertiser used an example from the Punch website that prompted a forensic examination on our website.
The boss of another tenanted pub company rang us to say the example didn't seem to make sense.
That's the wonderful thing about this kind of transparency — a pubco's assumptions can be properly challenged for its own benefit and that of licensees.
