Banking

on success Alan Bowes was a banker for 10 years before working in marketing for Belhaven in the 1980s.

In 1996, he founded London and Edinburgh Inns.

Eight years later, his company has become the UK's largest independent pubco.

The PMA Team met him Flamboyantly dressed and sporting a haircut with more than a hint of rock 'n' roll, Alan Bowes is one of life's characters.

Spend an evening with him over a glass or three of red wine and the stories flow thick and fast.

Bowes, born in Newcastle, speaks with a fairly standard Home Counties accent (from his banking days when he was encouraged to adopt a more "refined" accent).

But the later it gets the more his natural Geordie accent is deployed for comic effect.

There are off-the-record stories galore: about his challenging days as a football club chairman (Berwick), how he helped save a brewer (not Belhaven) from an outside buyer, and the dark days of the early 1990s when interest rates were sky-high.

"He's a nice bloke, but no-one's fool," says one industry figure who has known him for years.

The early 1990s had seen him running a single Whitbread lease, although he quickly built a sizeable company, Kingston Inns, that was sold in 1995.

"I've taken the fag ends out of urinals with my Marigolds on," he says.

Another industry source says: "When he began buying loads of pubs I thought this can't be the same Alan Bowes who was at Belhaven in the 1980s.

Lo and behold it was.

I can't get to the bottom of how he's achieved what he has."

Bowes founded London & Edinburgh Inns with a single temporary tenancy in 1996.

Within two years, it was running 80 outlets having bought back Kingston Inns with its 40 pubs.

Last year, L&E, of which Bowes is the majority shareholder, spent in excess of £150m, doubling its size to about 700 pubs and hotels.

In deal-making terms he popped up all over.

He bought 330-odd pubs and hotels in six packages plus a host of individual acquisitions.

The smaller packages were: six sites from Regent Inns (£2.5m), six from Buzzworks (£4m), eight from Clark Pub Company in Edinburgh (£3.3m), and 10 from JD Wetherspoon (£6.55m).

Another 40 hotels and pubs were bought during the year on a site-by-site basis.

In July 2003, 13 Swallow Hotels were acquired from Whitbread for £57m. L&E bought the brand name and operating business for about £13m. The coup de grace came at the end of the year when Bowes moved double-quick to pick up 252 pubs from Punch Taverns in a £57m deal.

These pubs, costing £226,000 each, were sites Punch had to off-load by the end of last month to satisfy the competition authorities.

L&E faced stiff competition from nine other bidders, all sensing that the urgency of the sale would mean a good price (they were eventually sold at a 5% discount to the 8.5 times earnings that Punch paid for the Pubmaster estate).

One figure involved in the sale process says the following about how Bowes and his team clinched the deal: "They were clever about it.

L&E came to us the earliest prepared to sign contracts at a price we thought was acceptable.

They came to us three days before the deadline on 18 December and said: Right, here we are'."

Bowes thinks the Punch pubs were an unmissable opportunity.

"There are not so many freeholds around these days.

It wasn't the bottom end of the Punch estate ­ not their worst 250 pubs.

We've got some good community pubs, some high barrelage pubs, some good food pubs ­ a cross-section of the whole Punch estate.

"There were some big players [wanting to buy the pubs].

I understand there were one or two higher bidders.

But they couldn't confirm they could complete by 30 January 2004, which we were able to do.

Maybe cash talked."

The deal was secured thanks to L&E's joint venture with Logical Properties, a partnership between William Pears and the Khalastchi family.

L&E has a one-third share of the freehold interest in the former Punch properties, plus 35-year leases.

(The joint venture was formed in November 2000 when 47 properties were bought from Greene King.)

Bowes says: "We do a lot of sale and leaseback, have bank funding and buy things out of our own profits.

We are probably the largest independent pub company in the country and our main investor, Logical, is one of the largest independent property companies in the country.

The partnership is a good one.

We don't have a board of directors as such ­ therefore decision making is quick."

Last year's spending spree will mean L&E is set to turn over £100m.

And Bowes has another £100m in his war chest to snap up pubs and hotels this year.

The L&E estate is as varied as any in the industry: 500-plus tenancies and leases, 105 managed pubs and a 70 hotels offering 3,500 beds (the Swallow deal alone added 1,300 beds).

"I'm probably a bit bolder than most," says Bowes.

"A long as we get more right than wrong, we're not frightened by taking on pubs that we have to work at."

His tenanted division is currently offering to pay licensees' Stamp Duty on new leases, a move that could cost the company £500,000 this year.

There's also an offer of £110 discount on Foster's or Carlsberg at pubs that are proving harder to let.

"The way forward is finding the right people for the right pubs," he says.

"We tell tenants it's going to be hard work ­ running a tenanted pub is a way of life not a living.

There's a waiting list for some pubs and others we're finding difficult to let we give the £110 discounts.

My view is we should be giving bigger discounts generally.

I think generally that rents will go up and discounts will increase.

It's the way of the future ­ what the market and tenants want."

L&E's managed division comprises a range of outlets, from community pubs in less fashionable areas to ex-Whitbread Beefeaters and Scottish & Newcastle managed houses.

Before the JD Wetherspoon acquisition, the company owned little on the high street.

Even here, though, Bowes feels there is good value to be had at the moment.

He argues that the Wetherspoon sites ­ bought for £655,000 each and turning over around £13,000 a week ­ would have been 50% more if they had been on the market 18 months earlier.

(He had been pipped by Laurel Pub Company to the 17 pubs that JD Wetherspoon sold earlier in 2003.)

"We weren't high-street animals until last year.

We've always had a few pubs on the high street, but the price of sites has been too high.

Today, I feel there's an opportunity anywhere if the price is right.

Wetherspoon spent £10m on those 10 pubs ­ we bought them for £6.55m."

He does agree with the managed house paradigm that views £10,000 a week as the viable turnover level.

"A managed pub has got to achieve £10,000 a week in sales ­ or be capable of that.

Gone are the days when you can get away with £5,000 a week."

Bowes is quite prepared to give any retailing idea with a fighting chance a go in his pubs.

There's the Duty Free Pub Company, the name stressing the affordability of prices.

Cheaper non-branded lager and bitter are badged "Tax Paid" at five pubs trading under the banner.

Indian Reservation is a scheme that allows customers to order an Indian takeaway in his pubs.

"It's still working nicely in some pubs," he says.

Laundry services, a Chinese takeaway and a pub-based meat-ordering service have all been tried with less success.

"The meat ordering idea was working in some pubs, but not enough to keep suppliers happy."

The hotels division of L&E shows Bowes' appetite for a deal at its plainest.

Although based in Maidstone, Kent, L&E has shown a willingness to buy hotels virtually throughout Scotland.

"We've made as many single acquisitions in the hotel market in Scotland as we have in England."

In 2000, Scottish hotels could still be bought for five times net profit.

Bowes believes that there is still relative value to be had north of the border despite rising prices.

"You're now talking about 6.5 times net profit in Scotland compared to between seven and eight times in England ­ apart from in central London and Edinburgh," he says.

"We don't have any