Earlier this week, Stonegate said it would be reducing its central support team to tackle rising costs and reflect growth across its leased & tenanted estate alongside a decrease in size of its managed division.
Commenting on the announcement, funding specialists Aurora Capital told The Morning Advertiser (The MA) this was a “big move” and a “warning sign” for the sector.
Aurora Capital managing director George Holmes said: “When the UK’s largest pub group is reducing its managed estate this much, it shows just how hard it is to keep running high-cost, centrally supported pub businesses.
“This isn’t just about saving money. Stonegate is shifting towards leased and operator-run pubs because they’re cheaper to run and carry less risk.
“But that also means less direct support for the people running these venues day-to-day, which can make things tougher on the ground.
Under pressure
“For the wider hospitality sector, this is a warning sign. Costs are rising, demand is unpredictable, and many smaller businesses are still dealing with debts from the pandemic.
“It’s getting harder to hold onto staff, and access to finance is limited. Unlike Stonegate, smaller operators don’t have the scale or resources to absorb these pressures.”
He added: “Without more support from the Government, we’ll see more job losses, more closures and more risk pushed onto independent hospitality businesses.
“Managed pubs are under pressure and what’s happening at Stonegate could well ripple out across the sector.”
Stonegate’s most recent trading update showed total revenue to the 53 weeks ended 29 September 2024 was £1.75bn compared to £1.72bn the same period in 2023.
Of the £1.75bn, the managed segment contributed £974m (52 weeks 2023: £1bn) while its leased and tenanted arm contributed £440m (52 weeks 2023: £427m) and the operator-led segment contributed £333m (52 weeks 2023: £281m).
In July last year, Stonegate agreed a debt refinancing deal with a £250m shareholder contribution from TDR Capital to strengthen its balance sheet.
Difficult time
The pubco, which operates some 4,000 sites, assured it was “committed to supporting colleagues” with care and fairness during this “difficult time”.
Following the announcement, Julie Palmer, partner at financial advisory firm Begbies Traynor told The MA: “Stonegate’s decision to axe 150 jobs is further evidence of the mounting pressure on the hospitality sector.
“All will be hoping that a positive summer can provide much-needed revenue as the difficult double blow of national insurance and minimum wage increases is felt.
“Data showing a rise in pub insolvencies in April, when the measures announced in the budget came into effect, paints a worrying picture for the sector and many will need to be taking a close and early look at their books to see how they can be balanced to prevent any distress spirals.”
