Stonegate sell-off
I mentioned in the previous edition that Stonegate, the country’s largest pub company, were selling off a relatively small tranche of pubs. Just after we went to print reports started coming through that subsequently they were considering the sale of a much larger part of their estate. This is the so-called Premium portfolio of 1,034 leased and tenanted pubs, valued at £1 billion. This group of pubs is ring-fenced as security for a £638 million loan from the private equity firm Apollo. They are spread across England and Wales and are all freehold. Financial consultants have been called in to advise not only on possible sale but also on a restructuring of the company which, following its various acquisitions, has become very complicated. The company has promised to involve its publicans in what happens, saying that it is committed ‘to a constructive and consensual approach with our landlord community’.
Stonegate is itself owned by a private equity firm, TDR Capital. In their financial year ended 29 September 2024, the company had a turnover of £1,747 million (up from £1,719 million the previous year), yet it reported a pre-tax loss of £216 million. It has debts of £3.2 billion. It may not be a coincidence that it paid £3 billion for the Ei Group in 2020.
Here is an interesting point from the sales brochure for the earlier tranche of pubs. For pubs where the freehold is subject to an existing lease, it says, ‘This lease requires the tenant to purchase all drinks from the landlord. The purchaser can set up a supply agreement with a supplier, such as Molson Coors, who will supply to the tenant. This will then provide an income from the sale of drinks’. In other words, Stonegate are transferring the benefit of the tie with the freehold. This cannot be right.
Young’s news
Young’s had a prosperous summer, with the 26 weeks ended 29 September bringing in revenue of £263.6 million, an increase of 5.4% on the previous half-year. Sales volume increased by 3.9%. In addition, Christmas bookings were up by 25% from 21% last year, although, on bookings generally, chief executive Simon Dodd said, “we will always drive spontaneity first; the importance of just walking into a pub for a pint with your newspaper,” He added that Thursdays are still ‘the big night out’ in London and the City but, now that workers are mostly back in the office four days a week, they could see growth returning to London pubs.
Mr Dodd also gave an interesting geographic analysis to the Propel business newsletter, “We’re really pleased that every geographic region we trade in was in growth at the half year and tracking way ahead of the CGA Tracker (a market analyst). Central London was in 5.2% growth but you move to the West Country and that was up 6.6%. The Home Counties are up 4.6% and Thameside, which is our pubs by the river, was up 10.4%. North London was up 10.6%, so we are growing in every region.” Their programme of pub refurbishments continues, with five reopening in the run-up to Christmas.
As regards the budget, Mr Dodd said that what he had wanted to see most of all was certainty. He had hoped for meaningful business rates reform for the whole of the hospitality industry and a freeze on alcohol duty. He also thought that it was ‘really time to look at VAT’. Sadly, he was as disappointed as most of us.
Young’s have subsequently announced like-for-like sales in the three weeks to 5 January rose by 11.2 per cent.
Guinness Open Gate Brewery
Further to the report in the previous edition, Diageo’s £73 million tourist venture in Old Brewer’s Yard, Covent Garden did finally open on 11 December. It has a microbrewery producing limited edition beers but the stout itself is the regular product imported from Ireland. There are two restaurants plus a pie van and two merchandise shops. There is also an event space for hire. They run tours and the ‘Guinness Experience’ for which you have to book and pay.
Meanwhile, further afield, Diageo have sold their 65% stake in East African Breweries Ltd (EABL), the brewery that produces Guinness in Kenya, to Japanese multi-national Asahi. The deal, worth $2.3 million, includes associated distilling and import companies. EABL will continue to brew draught Guinness, a rare example of Diageo allowing the brewing of the ‘black stuff’ out of their control.
Wetherspoon’s news
Readers may recall that JDW had applied to the City of Westminster for planning permission to open a pub at 11 Strand, close to Charing Cross mainline station. This was refused. JDW then appealed to the Planning Inspectorate who overruled the decision. The council had argued that the type and size of the pub was ‘inappropriate to its location’ but the inspector said that there were no ‘material considerations’ that prevented the site being used as a pub. The council granted JDW a premises licence in December. The pub will trade on two floors. There is no word yet as to its name or opening date.
The Coombe Lodge in Lloyd Park, reported in the last edition, is being operated as a franchise by the Papas Group. This is believed to be the first franchise in the south of the country.
The latest report on the Barking Dog is that the rebuilding of Trocoll House should be completed in early 2027. I’m sure that JDW will then reopen the pub as soon as they can but fitting out what will be an empty shell will take some time.
Like-for-like sales were up 6.1% in the last quarter and 8.8% over the three week Christmas period.
Urban Pubs & Bars – further acquisitions
UP&B continue to grow. Before Christmas they acquired four sites from Brunning & Price, the pubs arm of the Restaurant Group. There are two in Chiswick: the Roebuck (W4 1PU) and the Steam Packet plus the fabulous Grade II*-listed Queens in Crouch End and a café-bar, Coco Momo, in South Kensington. In addition, they have acquired the lease of the Prince Regent in Herne Hill from an independent operator and, as we go to print, they have announced the purchase of the Birdcage in Bethnal Green from BrewDog. This brings their estate to 66 and they now claim to be ‘the capital’s leading independent pub operator’.
Chris Hill, their managing director, told the Propel newsletter, “Well-run, well-positioned businesses are thriving in the capital. We’re seeing robust demand across our estate and strong like-for-like growth which gives us the confidence to keep investing. These latest acquisitions are exactly the kind of sites we look for and we’re excited about the opportunities they present as we continue to grow our London estate.” It’s encouraging that they take this view. Trading throughout December was significantly ahead of last year, with like-for-like sales growth of 14.5% and a 40% increase in total covers.