Bob Ivell, former chairman and chief executive of S&N Retail, oversaw the £2.51bn sale of its 1,406 pubs to Spirit last year. PAUL CHARITY met him to hear about his time at S&N Retail, the sale and his future plans After 12 years of involvement in S&N's pubs division, Bob Ivell has had much more free time in the past few months. Sure, there's been a consultancy role at Spirit on the go, but, by his own admission, that's not been an onerous job. A chance then, perhaps, to enjoy time at his holiday home in Portugal or work on his golf swing. Maybe even do a Tim Martin, and take in a spot of travelling. He admits to enjoying a quiet Christmas not spent worrying about sales figures. "It was pleasant, but also quite odd because you see the results of your work in the sales line." But that's about the extent of the kicking back so far. A self-confessed workaholic, Ivell seems busier than ever as he maps out his next move. Last week, the first of an anticipated series of non-executive positions was unveiled a job at the Restaurant Group. He still has a connection with Scottish & Newcastle, representing the company on the board of the Next Generation fitness chain, of which S&N holds a 14.9% stake. But there are likely to be bigger things afoot, with opportunities in the pub, restaurant and hotel sectors all being sized up. "I like the idea of going plural' and getting involved in a number of businesses. I like growing businesses. I love the hospitality sector it's where my heart is and where my skills are. I'm not going to overpay [for a new business] but, who knows, I may try and create another S&N Retail. Never say never. I'm 51 and I feel like there's another big adventure in me or a lot of little ones." That Ivell is planning his next move so soon after the sale of S&N Retail is a partly a function of the extent his personal reputation was enhanced by the sale. Ivell, and his management team, achieved a handsome price indeed for the pub estate the pubs sold for £1.79m each (£200,000 per pub more than the book value). The sale price reflected success with the biggest challenge in the sale process maintaining sales and earnings amid the multiple distractions (they grew by 9.4% in the half year up to the point of sale). There are those who think Ivell and his team have created the best managed pub estate in the business: turnover per site per week of £14,300, full year Ebitda of £285m, and profit margins per site of around 28%. This record, combined with the departure of virtually the entire S&NR board after the sale, has created excitement among the moneymen. "The City thinks we achieved a very good price for the business," says Ivell. "That's encouraged an awful lot of people to want to back us from private players to venture capitalists to banks. It's quite unique for a whole board of a business like ours to leave. So that's excited quite a few institutions." Although Ivell and his team are clearly not short of offers, the current situation does have its ironies. The acquisition of S&N Retail by Spirit saw, many argue, a First Division pub team taking over a Premiership one. Ivell is a model of diplomacy as to his views on the quality of the Spirit estate and its strategy going forward. "Spirit will have different aspirations and objectives. At the end of the day everyone runs businesses differently. You only know if it's right when it delivers the proof of the pudding will be in the eating." But asked whether he would have considered buying either Spirit or the sale runner-up Laurel, he says without pausing: "No. Those businesses wouldn't have added the necessary value. The target we wanted to buy was Mitchells & Butlers (merger talks did at one stage take place). There were synergy benefits, greater closeness in the concepts and quality of sites. We were looking to add to our food business the biggest food business was Mitchells & Butlers." The biggest irony, of course, is that as good as Ivell and his management team were, they are no longer running the business. You do wonder how much of a wrench the decision to sell the pub estate was for him. Did he argue hard against selling what amounted to one of S&N's best-performing assets? He insists the logic of a sale became irresistible. "Some time ago, S&N decided to grow its international beer business. The board was very keen to stay in retail. As a board director, I had to recognise the group could not pursue both strategies the resources of the business would not allow it. My view was that the group was going to need more cash going forward to really play a part in the consolidation of the beer industry. It was the right decision at the right time." It's clear that one compensatory consideration at the time was that the pub estate might well be sold to a financial buyer that would retain Ivell and his team. In the event, trade buyers bid highest, their offers buoyed by the synergies achieveable by merging pub estates. One obvious synergy invariably a euphemism for "cuts" was the removal of the top tier of management at S&NR. But was there ever serious talk of Ivell moving over to join Spirit after the sale? "The reality is that one has to keep independent distance from a lot of the purchasers because my job as a director was to manage the sale process and get the best result for the company. We were courted by a number of the bidders through the process, particularly some of the venture capitalists. But it was always inevitable that if a trade player bought the estate, we, as a team, would come out." Given the level of interest in the sale, Ivell's record at S&NR over 12 years is worth picking over. He takes greatest pride in the creation of a business focused on food and accommodation with Chef & Brewer and Premier Lodge the jewels in the crown. Ivell took the strategic decision to reduce exposure to the high street a few years ago when he sold 900 pubs Noble House took many of the 170 high-street sites the company off-loaded. S&N Retail had just 60 high-street sites by the time of the Spirit sale. "We did the smart thing and got out of that market and some pretty onerous leases. Food and accommodation were the two growth markets as far as we were concerned. We wanted to operate at the premium end and not the discount market." He dismisses the suggestion that the decision was an obvious one in view of the comparative failure of its high-street brands, such as Rat and Parrott. "In its heyday, Rat and Parrott did very well one of the first café bars in the market and paid back all the necessary returns. We sold a lot of the Rat and Parrotts in 2000 and kept the high quality sites; the rest of our high-street sites, like Henry's, we took down the food route. "We sold 900 pubs in total, but retained 85% of our profits and we never looked back from there." One secret to maintaining S&NR margins in the past few years of heavy discounting and marketing blitzes has been to hold corporate nerve. "So many organisations get hung up on like-for-like sales, but let their profit drop out the bottom. Our attitude was that we wouldn't discount, we wouldn't over-promote. We may lose a bit of volume, but retain margins and profitability. Our view was that we should build the business by reputation otherwise you devalue your offer." Some observers have claimed that as many as 5,000 more managed pubs could disappear in the coming five or so years as margins are squeezed by legislative and cost burdens. Ivell thinks the argument is overdone and the managed sector is in pretty robust health. "Big quality pubs will always deliver very good returns. There will always be churn, but I think some people have put managed pubs on the too difficult' pile and got rid of them when they should have worked harder. I don't think the number of managed pubs will drop dramatically." He thinks the widely-held belief that a managed pub needs to take £10,000 a week to be viable is too absolutist. "We had pubs in London doing £8,000 a week that were packed all the time and produced returns of up to
