How now…..?

 Just over a year ago, Allied Irish Bank commissioned research which confirmed the serious challenges facing the licensed trade. Now, more than 12 months on, how do the banks view the health of the pub trade? Pat Nolan spoke to Brian Gallagher, Head of Licensed Trade for Corporate Banking and Mags Brennan, Head of Sectoral Strategy for Business Banking at AIB to see what prospects the bank – as one of only two remaining banks still supporting the pub sector - sees in today’s licensed trade.

About a year ago the AIB produced a sectoral report into the licensed trade in Ireland which found ‘very serious challenges’ facing the sector (see News page 5 of Drinks Industry Ireland, September 2013 or page 4246 online).

Amárach Research conducted the survey which found that a quarter of pubs had reduced their weekday opening hours over the previous 12 months. This rose to one in three in rural locations while one in six had reduced their weekend opening hours.

Now, just over 12 months on, word is that things continue on the up for the licensed trade – at least in the major conurbations. But what’s the real picture?

Apart from the trade associations themselves, if anyone should know it’s the banks.


‘Multi-site’ publicans

As Head of Licensed Trade for Corporate Banking at AIB Brian Gallagher looks after what he terms ‘multi-site’ publicans in Dublin, Galway and Cork.

The bank is “very much” supporting the licensed trade sector where debt levels are at the correct level (as applied to business) and which can support a payback over a reasonable period, he says.

“We’ve seen an improvement year-on-year,” he observes, “Last year things would have been good for Dublin City centre and Galway thanks to The Gathering.

“Drinking habits have changed. The level of discretionary spend is not necessarily going to be directed towards the pub sector but towards a wider leisure sector – but pubs that have put themselves on a sound footing are weathering the storm.

“Those not doing so are also being supported by us but with a level of equity being injected by the owner or an equity partner.”

This has been witnessed in a number of the pub deals that took place this year.

“Multiples are being achieved, even for pubs in a distressed sale, which are more in line with the norm,” he says.

Extraneous spaces such as car parks are no longer seen as being an asset with development potential, so pub groups with outlets in the right location and/or having the right business mix are achieving similar multiples to those witnessed in private treaty sales.


"Multiples are being achieved, even for pubs in a distressed state, which are more in line with the norm." - Brian Gallagher.

“Multiples are being achieved, even for pubs in a distressed state, which are more in line with the norm.” – Brian Gallagher.


Last year’s AIB report also found that 50% of publicans had experienced a decrease in turnover in the past year, particularly in rural areas.

How now?

Mags Brennan is Head of Sectoral Strategy for Business Banking at AIB. “Again, it comes down to location,” she responds, “From the bank’s perspective we’ve looked at pubs right across the country and in some urban towns such as Dundalk or Drogheda we’re seeing some improvement but improvement in general is driven by the operator finding other ways to bring the consumer in.

“It’s driven by tourism too in certain urban/rural locations and this has been good in the past year with the Gathering and this year with the Wild Atlantic Way.”

The bank is also seeing some improvement where the consumer has more money to spend “…. but this is still likely to be more along the lines of having a glass of wine at home first before going out a bit earlier to the pub,” she says.

Refinancing publicans has kept the AIB busy. Publicans have also been coming to the bank from prior arrangements with other banks that have now ceased operating in Ireland, looking for AIB to provide banking support.

“We’ve also customers coming to us with debt issues and one of the things we’ve been doing over the last 12 months has been restructuring SME debt including pubs who’d have been very leveraged, ensuring that the right level of debt is on the business going forward. The key to this is having a viable business with a good operator in a good location.”

So pubs are once again beginning to move – albeit mostly from the Receiver’s books but this might be changing.

Appetite for sale

“We’ve seen a lot of activity in the first half of this year,” notes Brian Gallagher, “Morrisseys and CBRE have found an appetite present in both the seller and the buyer. Again it comes down to location. People are being very choosy in terms of the pub itself. For an operator to come in there needs to be an upside in the business, the buyer needs to be able to see some value in the asset that they’re acquiring.

3rd Party Lease purchase

“We’re also supporting our customer base who’re paying a Third Party lease by helping them acquire that freehold where this is feasible.

“It’s a win-win for both the bank and the publican. The bank has line of sight in terms of ongoing trade for the business and the benefit of that asset for security.”

Mags Brennan adds, “The other thing to note is ‘succession’.”



Until now, many publicans didn’t know whether they’d be able to pass on the business to a son or daughter.

“We’ve been supporting the transfer of that pub business to the offspring, enabling the owner to exit with a cheque. They didn’t think they could do that when we published this report last year.

“One of the things we didn’t report on last year was the age level of today’s publicans being quite high – in their 50s or 60s – so we’re now supporting the transfer with the right level of finance.”

Brian summarises the bank’s view of the licensed trade today: “We’re quite positive about the industry. We do, however, recognise that outside of city centres publicans are finding it quite difficult to compete against other businesses such as supermarkets and are still suffering from the effects of the smoking ban, stronger drink-driving legislation, the change in drinking habits etc.

“The market is still finding its feet to a degree that towns with 14 or 15 pubs may find themselves down to just five or six as there’s not enough trade there to support the historic numbers.”

“We’ve been supporting the transfer of that pub business to the offspring, enabling the owner to exit with a cheque." - Mags Brennan.

“We’ve been supporting the transfer of that pub business to the offspring, enabling the owner to exit with a cheque.” – Mags Brennan.

New entrants to the trade

Apart from ‘new-to-bank customers’ who were with another bank and need to refinance their debt, a number of ‘newcomers’ have arrived, bringing equity to the table alongside a good solid pub manager. Such new businesses have also got the bank’s support.

“This has meant that we’re also seeing some new entrants into the pub market – which hasn’t happened for a while,” says Brian.

All of which must lend another dollop of optimism to a trade that’s been hard-pressed for the last good few years.

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