Harveys, the Sussex brewer and pub operator, is considering the future of some of its country pubs that are proving to be less viable businesses, joint managing director Hamish Elder has told M&C Report.
The company has reported an 8% fall in pre-tax profits to £2.2m in 2012, a year in which beer volumes again declined. Turnover for Harveys, which operates c50 pubs, fell 4.7% to £18.4m and operating profits declined 3.7% to £2.3m.
Harveys said in spite of the reduced profits, directors feel dividends can be maintained due to “healthly cash balances” even after an investment in freehold properties of £1.65m in the year; cash in the bank and in hand totalled £2.4m at the year end (2011: £3.3m).
Elder described trading for the company as “difficult”. “It’s a difficult year for pubs generally.”
Harveys bought two pubs last year: the Cat’s Back in Wandsworth, London, and Lincoln’s Bar in its home town of Lewes. “I don’t discount the possibility that we shall be looking for others but there’s nothing specific on the horizon,” said Elder.
He said Harveys is “possibility contemplating the disposal of certain country sites that are proving difficult [in terms of] viability”. He said it was “pubs that require a clear shift towards food” that the company is “considering the future of”.
Elder added: “So much of it depends on the success of the individual tenant.”
He described progressive beer duty (PBD), the system of tax breaks for smaller brewers, as Harveys’ “single biggest problem”. Elder said PBD “has enabled 100s of microbrewers to spring up, and they are all in our market place”.
“They are a distraction, clearly, in terms of our business efforts. That’s clearly made a dent in our sales.
“There’s a concern that the general customer who tends to favour cask ale might find that some of the inconsistencies with some of the new beers might reflect negatively on the whole sector.”
Elder said Harveys has been “extremely supportive” of its tenants since the economic decline began in 2008, adding that the company is “quite paternalistic” in how it treats its licensees. “We’ve held rents fairly static in every respect and we’ve supported tenants through their tenure.”
Rental income for Harveys in the year to 31 December 2012 increased from £305,018 to £309,203.
Since the year end, Harveys has agreed to sell its depot site in Pinwell Road to a Charitable Trust that plans to create a permanent four-screen cinema.
