Brakspear sees 11% turnover boost despite “relentless” rise in costs

J T Davies & Sons, the parent company for Henley-based pub operator and brewer Brakspear, increased its turnover last year to more than £28.3 million, but says some earnings are being squeezed by business rates and “relentless” rises in employment costs.

Tom Davies, Brakspear chief exec. (Photo: Brakspear)

The firm released its financial results for 2017 on Tuesday 14 August.

Despite increasing turnover by 11% last year, earnings before interest, taxes, depreciation, and amortization (EBITDA) amounted to £7.7 million, down just over 7% from 2016.

The earnings drop came from “higher costs affecting most operators across the pub industry, namely business rates and the relentlessly increasing costs of employment,” according to an emailed statement.

In September the Campaign for Real Ale (CAMRA) warned that UK pubs are facing a “ticking time bomb” due to rising business rates, revealing that the number of pubs has reduced by a third since the 1970s. Figures released by the trade body last week found that, in the UK, pubs are now closing at a rate of more than 18 per week.

According to the government’s website, the rateable value of a pub is determined based on the “annual level of trade (excluding VAT) that it is expected to achieve if operated in a reasonably efficient way”. The government refers to this as “fair maintainable trade” which is determined by the type of pub or premises, the area it is located in and the services it offers.

According to the government’s website, pubs in England are entitled to £1,000 off their business rates bill if they have a rateable value of less than £100,000.

The relief is available for both the 2017-2018 and 2018-2019 tax years.

Rising employment costs were also blamed for the squeeze on EBITDA earnings.

However, the Brakspear also said it has invested a total of £6.9m in its pub estate during 2017, which also caused profit margins to suffer.

Brakspear invested “a similar amount to the previous year”, it said, in a number of areas including a managed house acquisition, refurbishments and maintenance.

Brakspear acquired the Lion at Wendlebury, near Bicester, last year, as well as the Leicester Arms in Penshurst, in Kent, a coaching inn with 12 bedrooms, which joined the T&L estate.

Elsewhere in the managed estate, the Little Angel in Henley was transferred from the leased estate as was the Dog & Duck in Wokingham which re-opened in Q4 after a significant development.

Three T&L sites were sold during the year as part of Brakspear’s pub disposal programme, two of which were sold to local pub operators.

Sales growth from the 13-strong managed house division amounted to £3 million, giving an annual turnover of £11.8 million for managed houses. This was a result of like-for-like sales growing by 5% to reach £500,000,

Chief executive Tom Davies said 2017 was “a satisfactory year for Brakspear. Our core tenanted and leased business continues to trade well. I believe we have some of the best pubs in the T&L sector, run by some of the most talented operators.

“Our managed estate is developing in line with expectations, despite cost pressures impacting the 2017 result. We have recently invested in our managed operations teams and I am confident that this will lead to further improved service, sales and profitability.”