A lasting legacy

Pyramid, which was once again highly commended in The Publican Awards, is a company that does not shy away from a challenge. Mark Stretton met the boss.

Imagine discovering a battered old heap of a car abandoned in a field and lovingly restoring it. Once the machine has been restored to full working order, after months of dedication, the driving experience feels very different - infinitely superior - to the person who simply walks into a showroom and buys one brand new.

This is the analogy that Paul Davies uses to describe the Pyramid Pub Management Company business. "I don't think people really appreciate or fully understand what we do," says the founder and executive chairman. "What we do is not from any business school or corporate manual. We take broken pubs that other people have given up on, create sustainable businesses and give people futures."

These pubs are what the majority of tenanted companies would call the "bottom end" or "the dogs" of a pub estate, but for Pyramid they are the food and drink of its business.

The 430-strong estate does have pretty country houses and destination food pubs but many are wet-led community locals, on tough housing estates. The average barrelage for a Pyramid pub is about 150 barrels per year, some way below the industry average. A "dog" in the Pyramid estate does less than 70 barrels. If the bottom quartile of the estate was removed, the average barrelage would rise to 180.

"I passionately believe that if it had not been for us at least 25 per cent of these pubs would not be here today," says Paul. "It is hard work but this is what we do, this is where we have set our stall out. Others don't want to do what we do."

The stories of tough trading conditions that exist within the business are numerous. One example on a tough estate with high unemployment is the Red Dragon in Wrexham. Many of the houses that surround the pub are fortified with metal grills over windows to prevent unwelcome visitors.

The estate was splashed across tabloid newspapers last year after becoming the focal point of riots when Iraqis from a nearby asylum centre clashed with locals. Thirty-nine people were sent to prison, including a 14-year-old boy who had thrown a petrol bomb at police.

The pub was badly damaged and boarded up and the future for the business looked bleak. But Pyramid found the right tenant, worked with the local residents' council and got the pub trading again.

"Most companies would have washed their hands of that pub," says Paul. "Many people say we are over-pubbed in the UK and that if 10,000 pubs closed it would be a good thing - the additional beer volume dispensed among the other 50,000 would be quite nice. But if you close a pub, a community loses something."

Because of the nature of the business, Pyramid actively seeks out licensees to work as business development managers (BDMs). All but one of Pyramid's BDMs have run pubs previously and Paul says they need to have an intricate understanding of what it is like on the frontline.

Consequently, the BDMs have the licensee's ear. If a beer bill is not paid a BDM will be there within 48 hours to find out what the problem is and to strive for a resolution. The BDMs are empowered to give rent concessions and beer discounts. The key, adds Paul, is flexibility and coming up with practical and deliverable solutions.

"If you take your average BDM with a patch of, say, 40 pubs, he or she will have 10 fantastic pubs that are a delight to visit, a middle 20 of okay pubs and then 10 that are cash with delivery - a complete pain," Paul explains. "Normally some of those 10 pubs will be nominated for disposal when the time of year comes round in that process called churn. But with our business we have no hiding place. It is our philosophy to get stuck in to those bottom-end pubs and sort them out."

It is worth noting that training for tenants is essentially free. They are charged up front and then credited with beer. Last year every pub was touched by training.

The business was formed in July 2000 from the remnants of the 145-strong Paramount business plus 284 pubs bought from Wolverhampton & Dudley Breweries. W&DB sold a further 44 pubs to Pyramid in December 2000.

Of the pubs Pyramid acquired, only two-thirds had tenants with the rest either boarded up or in the hands of short-term management companies. The fabric of the estate was poor, and many of the pubs were loss-making and considered unviable.

Today, just three pubs out of 430 are under temporary management and composite beer volumes have grown 24 per cent across the estate. Pyramid has more than doubled the rent roll but average rents are still only £10,000. "It is completely sustainable," says Paul.

The executive chairman owns the management business but the freeholds are owned by Royal Bank of Scotland. In three years £8.2m has been invested in the estate, comprising 189 major projects (£6.3m) and 194 minor schemes, with average returns of 34 per cent.

After spending time with the Pyramid man, one word resounds again and again - passion. "I'm hugely proud of what we have created and our success is, to a degree, driven by the passion we've created something from nothing," comments Paul. "It is very personal, you take it home with you. You can't let passion override everything to detriment of the business but you can tether it and channel it."

Neil Roe, Paul's right-hand man who heads operations, agrees. "We have taken something that was dead and buried and brought it back to life. We are the crazy gang - the Wimbledon FC of the pub business," he says.

"We are as competitive too. While we wanted to win, we were delighted to emerge from an increasingly strong field to be highly commended at The Publican Awards for the second year in succession. The whole process has enabled us to move forward as the new kid on the block. Our internal systems are better, we are more professional as an organisation."

The company is scouring the market for a pub deal and gearing up internally for the next phase in its development. The pubs will not necessarily be like the ones bought in 2000. Fundamentally, Paul wants to find a package of pubs that will add enough barrelage to have a significant impact on beer supply contracts.

The company has been close to snaring a deal already. "We have had two transactions slip through our fingers," says Paul. "We have the support of the banks and we do not have a number in mind. We want the added benefits increased scale will bring - 10 pubs won't really change the profile of our business but 300 would.

"We have spent a lot of time preparing and thinking about the issues a chunk of pubs will bring because my only fear is that we lose the Pyramid powder. We don't want to end up with a financial vehicle - a machine that we have to keep feeding with pubs. We mustn't lose our magic of giving pubs and tenants a future."

Pyramid boss Paul Davies on:​

• Smoking:​ "I feel very strongly about The Smoking Charter but in our business we have had to work quite hard to get barstaff in our pubs not to smoke while they are pulling pints behind the bar. But the task is to eliminate the smoke not the smoker."

Pub acquisitions:​ "We have had two transactions slip through our fingers. We had filled our pens with ink and were ready to sign and lost out at the 11th hour. But we have the support of the banks. We want the added benefits that increased scale will bring - 10 pubs won't really change the profile of our business but 300 would."

The Pyramid name:​ "When we researched various names, the ones we wanted had all been taken. We needed to be registered for VAT reasons inside of 24 hours and there was a postcard in reception from Egypt - and that was it. I despise the name with a passion for its association with pyramid selling, but it now