NewRiver Retail deal helps Punch drive profits across its estate

By Emily Sutherland

- Last updated on GMT

Profit per pub is up 3% in the weeks leading up to 5 March
Profit per pub is up 3% in the weeks leading up to 5 March

Related tags Profit Punch

Punch's £53.5m disposal of 158 pubs to NewRiver Retail has helped to drive up profits across its estate, chief executive Duncan Garrood has said.

Punch announced average profit per pub grew by 3% in the 28 weeks leading up to 5 March, which Garrood said had been driven by like-for-like sales growth, disposal of its non-core estate and the early success of its new retail agreement.

"We sold 158 pubs to NewRiver Retail in the first week of the financial year, which is included in these numbers and have since sold about 100 pubs. This means that the quality of the estate has continued to increase and drive up profit," he said.

In its latest set of results, Punch said profit and sales in its new 50-strong Falcon retail division are performing ahead of expectations and the company is on track to have 100 pubs under the operating format open by the end of the year.

The Falcon agreement sees licensees paid a percentage of weekly sales, out of which they must pay for staff costs, council tax, insurance and licenses, while Punch picks up all other costs.

Both parties benefit

Garrood told the Publican's Morning Advertiser​ the success of the model came down to 'true working together'.

"The publican remains a self-employed entrepreneur, they employ staff and take a share of the turnover generated, and Punch retains the rest of the sales. It's the first arrangement where Punch is jointly sharing the outcome from driving up sales and, therefore, both parties benefit. It's a different model - we specify the types of drinks, type of food, promotion planning, prices, the type of hospitality. It's a much more specified collaboration."

Turnaround division

The Punch chief executive also shed more light on the company's new turnaround division Mercury Pubs, which is being headed by former operations Paul Pavli.

Read: Paul Pavli - Let businesses shine by empowering staff

"We've found that for our non-core pubs, a more hands-on management with more frequent visits and small investments, like improved decoration, has led to an increase for like-for-like sales. These tend to be primarily wet-led community pubs at the lower end of our profitability and we came to the conclusion that this is a good model to manage this kind of pub and we don't intend to dispose of them.

"For example, we have a pub called the Stag Inn in Huddersfield where we invested £7,000 on decoration, which is a modest amount and we've seen an 80% uplift in sales. If we work collaboratively with the publican and invest a little bit of money, the pub customers react very positively."

Transition concerns

He added Punch was pleased that the Government has outlined the final version of the pubs code​ but reiterated concerns about the lack of a transition period after the legislation is introduced at the end of May.

"There's nothing more unsettling than uncertainty and I'm glad that period is at end and we can start to understand the regulations and get on with it. We absolutely want to get on with implementing the regulations and working with the adjudicator, the concern is that it is being done over a very short period of time.

"We've known a form of regulation has been coming for a long time, but we only found out the detail of it – how it will operate, the paperwork required for a new publican to take on a new let and the nature of MRO (market rent-only option) last week. We have to train every single member of our staff on the detailed nature of things that will have to change in the very short time before the new regulations come in."

Related topics Punch Pubs & Co

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