Heavy weather and investment dent Robinson’s profits

BREWER Frederic Robinson is entering into what chairman Peter Robinson describes as “an exciting time” in its history as it redevelops its 90-year old brewhouse at its Unicorn Brewery in Stockport.

The company said that phase one of the multi-million pound refit of its brewhouse, which involved the installation of various tanks and electrical equipment, had already been completed. Phase two began last month.

“This is an extremely exciting time as we move away from a labour-intensive, energy-sapping 1920s brew house to one that will mostly be automated, with a predicted energy saving of 60%,” said chairman Peter Robinson in a statement accompanying newly-filed accounts. “This emphatically demonstrates that we are investing for the long term as we continue to evolve our business.”

The firm also said that construction of a new 12,500 sq ft depot at Backbarrow near Lake Windermere was scheduled to start in May after it gained planning approval for a new warehouse site last year and completed a purchase of the required land in January. The company had been operating from an old brewery site in Ulverston, but this was deemed to be insufficient for modern use.

Such investments have dragged down the company’s profits for 2010, though. The company blamed investments such as this – and the £1.1m spent upgrading 11 pubs in its existing estate – for a drop in operating profits, which fell from £1.9m to £387,000.

However, a £1.6m gain made on the sale of £2m worth of pubs which the firm no longer required meant it achieved an overall pre-tax profit of £2.5m (2009: £3.2m).

Turnover dropped by £2.4m to £53.4, which Peter Robinson said had been achieved “against extremely challenging trading conditions”.

The poor weather experienced at the end of 2010 “decimated” trade at many of the company’s food-led pubs and led to lots of Christmas party cancellations.

“Coupled with the continued effect of the recession on our customers’ disposable income, it is pleasing to report that turnover was virtually static compared with the previous year, and although beer sales nationally were again down, the figure for our own products were better than the national average.”

The company said that it had loaned more than £1.5m to new tenants to allow them to take over pub tenancies “due to the banks’ continued reluctance to lend to small businesses”.

It has also brought in a new marketing team to support tenants and to develop the company’s brand – not least in the off-trade where it continues to sell speciality beers to supermarkets and other major multiples.

Moreover, the £1.1m spent on its existing estate led to 11 pubs being transformed, including The Castle in Manchester’s Northern Quarter, The Duke of York, Puss in Boots and The Armoury in Stockport and The Cock at Whaley Bridge in Derbyshire.

He also argued that the firm expected 2011 to be tough due to cuts in public spending, job losses  and lower disposable incomes.

“But with the continuing heavy investment in our pubs and the benefits that will occur from the new brew house, there are good reasons to believe that we will come through these difficult times as a stronger, successful company.”

During the year, net assets increased by £1.7m to £74.1m.

A new report by Jones Lang LaSalle states that the UK’s pub sector is continuing its long-term decline, with 45% of owners reporting a drop in trade and around 25 pubs closing their doors across the UK every week.

Pubs which only sell alcohol (‘wet’ pubs) are facing a much sharper decline in trading performance than those with food on offer. Around 63 percent of public houses which sell food recorded an increase in sales over the last year, compared to a 66 percent decline in ‘wet’-led pubs.

Steven Tasker, associate director in the Licensed Leisure and Hotels team in Jones Lang LaSalle’s Manchester office, said:  “Financing remains a real concern; there is little appetite for banks to provide cash due to perceived risks. Loan-to-value ratios are typically at only 50 percent, which is stifling growth in the market.

“Social factors, such as the trend towards drinking at home, together with the general reduction in consumers’ disposable income, are also subduing the sector. However, if a public house is well located, well run and offers something extra such as food, the outlook is relatively positive.”