UK pub consolidation: whose round is next?
Third Bridge Forum spoke to a former C-level executive at Punch Taverns Ltd to understand the typical cyclical trends that affect the industry, and how it stands to fare in the aftermath of the pandemic. The expert started the Interview with an overview of the types of UK pubs — managed groups, free houses and tenanted pubs — and how the competitive landscape has changed since the late 1980s.
Moving on to the impact of COVID-19, many businesses with existing commercial weaknesses “are not going to survive,” even with the Job Retention Scheme. By contrast, those with strong balance sheets and the ability to reinvest in the post-pandemic era, “are really going to thrive”. However, whether consumers have enough cash to ensure positive cash flows across all operators remains to be seen.
In terms of liquidity, most pubs should have — even at reduced occupancy — good liquidity through early next year. At the same time, the expert anticipates there will be myriad opportunities for M&A, particularly among listed companies that have been able to refinance during this period.
When asked what he expects for top-line performance over the next 18 months, the specialist emphasised that if there was a second spike in COVID-19 cases, the situation would be “very, very different”. As with many other industries, consumer confidence is going to be a significant driver of performance.
The Interview also considered whether the pandemic might lead to a shift in operating models. “There may be a tweak around the edges, but I don’t see a wholesale change in the structure,” the expert said. “What you might see is the tenanted pub co taking over some of the free houses, opportunistically.”
To access all the human insights in Third Bridge Forum’s UK Pub Industry – Coronavirus Implications & 2020 Outlook Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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