ILT profit plunges 91%, prices may go up

Inflation and the cost of living are thought to be behind a massive drop in profit for the Invercargill Licensing Trust (ILT) during January, its chief executive says.

ILT’s year-on-year profit before tax has dropped 91%, from $315,000 in January 2023 to $27,000 in January this year.

Chief executive Chris Ramsay said that even though the trust had predicted it to be a tough month, “it was tougher than we forecast”.

“There are other cost pressures that are about to hit us from other suppliers in the next month or two that are going to further constrain our margins.

“Like every other business, we’re going to be forced to adjust our pricing accordingly. Inflation is still rearing its head – it’s very clear.”

A report presented to the ILT board on Thursday said the trust’s total sales for the month were $7.2 million, down 8% on the same period last year.

Ramsay said the total sales figures and revenues for December and January combined were more than expected.

“But there’s no denying, [with] an 8% decline in sales, that our bottom line was negatively affected by a significant drop in revenue and an increase in costs that the majority of people that have insurance are facing,” he said.

The trust’s accommodation sales were also down, owing to the “very slow return” of business travellers this year, “coupled with fewer leisure travellers as compared with post-Covid domestic travel”.

In December, the ILT announced that it would close two of its establishments – Waxy’s Irish Pub and Lone Star – for one day a week in January, to help the trust cope with the “effects of the cost of living crisis” on its restaurants.

Ramsay said that while this was a good decision, the trust “could have and should have closed more”, given the level of demand that existed.

Asked about the performance of its liquor stores for the rest of the year, Ramsay said he expected the businesses to remain quiet compared with 2023.

“We don't see this year getting any easier. It won’t be as rough as January was, but ... when you look at the factors that influence our revenues, like events and conferencing, we are a bit light from the rest of this year. We can see a bit of a slowdown since Christmas.”

February earnings would be “a lot better” than January’s, he said. “That's purely off the back of improved revenues,” he said, in large part because of the Burt Munro Challenge and Waimumu Field Days events.

Ramsay said the impact of inflation on grocery items meant people had less money to spend in bars and restaurants.

However, there was money in the economy for key events.

“The Pink concert in Dunedin and Burt Munro proved it. But in those down periods where there aren’t [any events], people are being very mindful where they spend.

“The rules of hospitality haven’t changed – give people plenty of reasons to come out, and they’ll come out. But I will caution that by saying that it’s not easy out there.”

For the rest of the year, Ramsay predicted that there would be an improvement in sales as the financial year wore on, and he urged people to support their local retailer or hospitality business.

“We see a really positive return to conferencing and events from early 2025.”

The trust’s year-to-date total sales were $90m, 5.3% up on sales in the same period the previous year.

However, its operating expenses were 11.5%, or $143,000, higher in January 2024 compared with January 2023.

Ramsay said the trust did not have problems with staffing. “Staff levels are great, and the calibre of applicants for available roles is better than ever.”