The pub sector is a broad church, and few represent the virtue of the community, wet-led, value-end of the market as well as Admiral Taverns.
The pub company is rated consistently highly for its licensee-centric approach in industry benchmarks.
And that virtuous circle seems to be paying off, with turnover up 18% year-on-year to £182m, in recently published accounts up to May 2023.
That figure, spread across nearly 1,500 pubs, is largely for rent and beer charged to licensees, with the exception of the Proper Pubs division.
With EBITDA a good-looking £55.8m, CEO Chris Josey credits the performance with its harmonious and supportive relationship with its publicans.
“Fundamentally, if they can’t get their business to grow, then we can’t grow either”, he tells MCA. “There’s that imperative to help them grow their top line and bottom line.
“It’s a virtuous circle. The more we can generate in terms of turnover and profit and the more we can reinvest in those pubs and those licensees.”
With licensees at the heart and soul of the business, Admiral has seen strong interest from prospective landlords looking to take on their local pub.
Applications are up 45% year-on-year, something Jowsey suggests represents a post-Covid step change, as people seek the job satisfaction of a position in the heart of their community.
A year of two halves
While trading has been strong, the 2023 financial year was marked by two fairly distinct periods, with the first half proving robust for Admiral, helped by a good summer of trading.
Things took a turn from November 2022 onwards however, as cost of living pressures began to bite.
With energy costs and inflation also causing a strain on the pub trade, Admiral has again leaned into its supportive strategy, which can be traced from the pandemic, through to the current economic challenges.
“We did our bit to try and help licensees get through it and support them through the difficult times,” he explains.
“That working together, collaboration and support has paid off, and where we could help licensees, we have done.”
While energy prices and inflation have softened, Admiral has delivered below-inflation price rises to tenants.
While many of agreements with licensees were tied to the retail price index (RPI) measure of inflation, about a year ago this was capped at 6% - despite inflation rising to 12% during some period.
“It’s helped to motivate them to keep going, it shows we’re in it together. We’re not trying to exploit the inflationary pressures.”
Equally on beer, Admiral raised prices more than usual last April, but kept the cost to licensees the “lowest of anyone” in the sector.
While retail pricing is up to licensees, they have been encouraged to make increases were necessary.
“If everybody else in the marketplace is going up, then we’ve said you should go up too, and there’s been very little resistance to that.
“Most consumers understand that there is inflation around and costs are rising for pubs and licensees, so they’ve been relatively understanding whenever the retail prices have gone up.”
That said, Jowsey is keenly aware Admiral operates in communities that aren’t always flash with cash.
“Everybody’s trying to do the right thing and mitigate the increase as well as they can, but they’ve had to go up.”
Compared to market average price increases of about 12% across the sector, Jowsey says Admiral’s are closer to 8%.
In Proper Pubs, its operator managed division, prices have risen by just 6 or 7%.
“We’ve been trying to make sure that we service the value end of the market and make sure we’re still an affordable treat to go out for a pint.”
Despite the pressures on personal budgets, premiumisation is still a trend seen in Admiral’s community pubs, as customers grow accustomed to trading up.
“That helps grow the revenue line as well because they may not be going out as frequently as they were, but they’re willing to spend when they do go out.
The company has continued with its usual programme of estate management and disposals, Jowsey acknowledges that when a pub “comes to the end of its life” some 95% are converted into something else like residential after it is sold.
“We quite often buy pubs that other pub companies don’t want, and we nurture them, we invest in them, we extend their life.
“But sometimes the pub just reaches the end of its life, the demographic changes, people move away, local businesses change.
“Inevitably, you have to have some disposals, unless you’re very fortunate to have a fantastic, top-end estate, but often that’s not the case with us.
Indeed, with smaller, local businesses, Jowsey is proud the company can sustain those pubs where no one else would.
“We’re very proud of the fact that we sustain an awful lot of pubs and in communities that otherwise wouldn’t have a pub.
“We sustain Community focused business that helps to keep the whole community together and but it’s not possible to do that in every case unfortunately.
In terms of acquisitions, the sweet-spot for Admiral is between 1,500-2,000, with the company currently just below 1,500.
However good opportunities for growth are limited at the moment.
“There are economies of scale with pubs, but there is also diseconomies of scale. I don’t want to become too large just for its own sake.
“At the minute I can’t see very many opportunities, probably because interest rates are high and people don’t necessarily want to sell, because they’re worried about the price they might get in a high interest rate environment.”
