McMullen criticises statutory regulation of tenanted sector: Hertfordshire brewer and retailer McMullen has reported a rise in underlying profits on turnover up by 5.0% to £63.8m in the 52 weeks to 29 September compared to the year before. The company stated: “Profit before tax and exceptional items at £6.6m was below the previous year (£7,383,000) but this decline was distorted by a number of one off items in each year, in particular refunds in VAT and property rates along with pension fund adjustments. Without these distortions, there was a small increase in underlying profit for 2012. Total sales in managed houses were up 5.9% helped by successful developments of existing pubs and the opening of a new Baroosh in Bishops Stortford.” Chairman Charles Brim said: “Against the background of one of the wettest summers for a hundred years our growth in like-for like sales of 2.9% is creditable but it is barely enough to cover the increase in like-for-like costs in running pubs. Acquisitions of good long term sites is therefore very important so I am pleased to report that since the year end we have developed and re-opened the Britannia in Marlow which we acquired during the year. Also in Marlow, we opened, just before Christmas a new Baroosh in a former bank building that we acquired some years ago for this purpose.” Managing director Peter Furness-Smith said: “After a challenging start to the current financial year with like-for-like sales in managed houses up only 1.7% at the end of March we are pleased that the last ten weeks have seen some excellent performances to the extent that like-for-like sales are now up 3.4%. The outlook, however, continues to be uncertain as the Government is once again considering interfering in commercial agreements agreed between pub companies and their tenants. We all know that rent (in our case fixed cash rent combined with variable, performance related, tied income) represents a significant proportion of the cost of running any business. In the case of pubs, total rent pales into insignificance compared with the cost of Government, including taxation which amounts to over 40% of gross sales of a small community pub! In theory, the proposal will not affect regional brewers and pub companies such as McMullen but the prospect of politicians overriding commercial agreements and effectively setting rents in our sector is a very worrying development. If a Government, like the current one, with a stated commitment to reducing red tape is contemplating this sort of interference heaven help the prospects for investment by the private sector and therefore our economy. If any Government really wants to help pubs they need to reduce their pernicious levels of taxation. A small community pub contributes to Government coffers around five times the pub’s profit after rent! This is unsustainable and tinkering with the rent therefore is insignificant in comparison. McMullen therefore urges this Government to support the VAT Club Jacques Borel, which calls for a substantial reduction in VAT for pubs. This would give confidence to the beer and pub industry, a more level, therefore competitive, playing field with supermarkets and encourage investment. It is estimated that this will quickly generate more revenue for the Treasury and importantly lead to the creation of many jobs, particularly for the young throughout the country.”