Profits at Bewley's coffee group fell by 68% last year
Profits at Irish coffee company Campbell Bewley Group declined by 68 per cent last year to €495,000, largely due to substantial losses recorded at its cafe on Grafton Street.
Bewley’s chief executive John Cahill said yesterday that the Grafton Street cafe made a loss of about €700,000 on turnover of €6 million last year. This was due to a “grossly excessive rent” of €1.5 million a year that is paid to landlord Ickendel Ltd, a company controlled by property developer Johnny Ronan.
Ickendel’s loans have been transferred to the National Asset Management Agency.
A legal dispute has broken out between the parties regarding a five-year rent review that was due on January 1st 2012. Bewley’s lease includes an upward-only rent review clause.
Bewley sought to resolve the matter via arbitration and has initiated legal proceedings in the High Court against Ickendel relating to the matter. The dispute was before the court in November and is listed to be heard again on March 21st next. Bewley’s rent in Grafton Street rose in January 2007 to €1.46 million from €750,000 in 2002.
This was just before the property bubble burst and Mr Cahill said the current rent level is no longer sustainable or fair. “You are looking at a 50 to 55 per cent reduction in market rents since the peak in 2007 – that’s well documented. We are losing about €700,000 a year on the property and you can attribute all of that to the last rent review.
“The shareholders of the company are committed to Grafton Street but equally they are committed to only paying a fair, market rent. The current rent is not equitable.”
Bewley is controlled by businessman and sculptor Patrick Campbell.
Mr Cahill said Bewley’s had reduced its headcount in Grafton Street by 16 per cent – or 25 staff – over the past four years. “We have done everything we can in terms of the costs we control and the cafe still is not profitable.”
He added that turnover in the cafe has declined by 1 per cent this year and while footfall through the building is up, the average spend by customers has reduced.
Bewley achieved group sales of €85.4 million in 2011, up 10 per cent on the previous year. Its profit was €1 million lower than in 2010.
Sales in Ireland were flat at €35.2 million.