Large pub groups focus on ‘efficient-to-operate’ units to offset operational pressures

The Lost Coin, Haverfordwest

The operational pressures now heaped on large pub groups is prompting many to focus on “purpose-built” sites that they can control more closely when seeking expansion.  

That’s according to property specialist Christie & Co, which has released its latest assessment of the pub market following a busy first six to seven months.

Paul Chaplin, head of pubs and restaurants and Christie, said that following decades of contraction, pub supply is now broadly balanced with good demand, with the rate of pub closures having stabilised to nearly nil, despite negative publicity to the contrary.

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“Christie & Co has continued to see confidence manifest in investment, as established operators from industry stalwarts, such as Marston’s, McMullen & Sons and Everards continue to build new pubs,” he said. “With operational pressures having increased, it is these purpose-built, efficient-to-operate units that many of the bigger players consider to be the future of the sector.”

At the other end of the market, meanwhile, the private free house segment has continued to bounce back, with some return in lifestyle buyers.

“Growth aspirations amongst the most successful of these smaller operators has seen the number of multiple operators grow, many of whom continue to drive demand from a transactional perspective through their thirst for expansion,” remarked Mr Chaplin. “Private equity and investor interest remains strong, with those familiar with the sector able to differentiate between the well-publicised challenges faced by the restaurant sector and a vastly more structurally resilient pub sector.”

Looking ahead, Mr Chaplin said that overleveraged and underinvested businesses are still at risk and some casualties are still expected in the second half of the year and into 2019.

But he added that, generally speaking, top lines have continued to perform well, which has allowed leading operators to hold bottom-line profitability flat or even make marginal gains on a like-for-like basis.

“A number of businesses are operating defensively and looking to hold margins flat through the remainder of 2018. The most successful are targeting marginal EBITDA growth, which combined with some movement in multiples could result in an increase in asset prices of between four and eight per cent for the year.

“This growth is anticipated across the regions, driven by expanding multiple operators. The focus for many of these fast-growing businesses will remain on the talent agenda, namely recruiting and retaining the right talent to sustain their growth, and in doing so build a culture that allows their businesses to thrive.”

He concluded: “As we move into 2019, eyes will be focused on the National Living Wage’s April 2019 uplift and the still incredibly uncertain impact of Brexit, although long term prospects for 2020 and beyond are currently very positive.”

Tags : Christie + CoPubs
Andrew Seymour

The author Andrew Seymour

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