An acquired taste
Having just completed a major deal with British Waterways, Lorna Harrison finds S&NPE is not prepared to tread water over future acquisitions.
Two years after a major shake-up within Scottish & Newcastle, the lessee arm of the business is forging forward with renewed vigour. S&N Pub Enterprises (S&NPE) has grown from 1,000 to 1,500 pubs over the last year, boosted by 364 pubs bought from Spirit, along with a unique 50-pub deal with British Waterways.
Plans for the future include much more of the same, with the company's acquisition managers hot on the trail of pub packages and individual outlets. The flurry of activity within the highly competitive leased market and its success in breaking new ground helped earn S&NPE the title of Pub Company of the Year (Tenanted/Leased 100-plus) at this year's Publican Awards.
Dedication to training
Picked from a shortlist of six finalists, the judges said: "S&NPE has showed commitment and focus on supporting the people at the sharp end of its business - those running its pubs - especially in growing its food offer. The company has also demonstrated innovation within its estate, a drive for quality throughout, dedication to training and the flexibility to encourage new entrants into the industry."
A glowing recommendation, agrees commercial director Martyn Gray. "We've made significant progress over the past year and this is a great endorsement for what we've been doing and a fillip for all those involved," he said. The company has moved rapidly since it became part of S&N brewing arm Scottish Courage two years ago following the sale of managed estate S&N Retail. It needed to add value by acquiring sites which could sell its beers.
Last January, S&NPE pitched for a lucrative contract to manage riverside pubs owned by British Waterways. It was shortlisted alongside Brains and Punch. Having completed the deal last month, the first pub will open in time for the Spring Bank Holiday in May. The arrangement initially covers 30 pubs, all situated on canals or waterways, to be managed by S&NPE in a 50:50 partnership with British Waterways. Another 20 pubs have been identified for development over the next three years and the partners have identified at least 100 sites in total.
"It's a unique deal," said Martyn. "We look at packages all the time but this offers us a set of individual, high-profile sites. We will be investing from £40,000 to £350,000 per existing site and may introduce a form of soft branding to the pubs as a badge or stamp of approval. We're very excited by this project."
The completion of the deal follows another major contract in December when S&NPE was appointed to manage 364 pubs on behalf of Globe Pub Company. Globe, owned by property millionaire Robert Tchenguiz, bought the managed pubs from Spirit for £345m, entering into long-term agreements with S&NPE. Scottish Courage will supply beer, cider and RTDs to Globe.
"Out of the 130,000-barrel business, 100,000 barrels are currently non-ScotCo supplied, so this is a significant deal," said Martyn. "Our objective is currently to convert as many of the pubs to lease and ultimately to ScotCo brands."
Through property agent Fleurets, S&NPE has been actively seeking experienced licensees to take on 25-year leases on the Globe pubs. The transitional period ended on April 8, at which point the company hoped that 15 per cent of existing managers would have agreed to sign leases, with many more contracts waiting in the pipeline.
"There has been huge enthusiasm for these pubs, with around 2,000 prospective lessees attending viewings and some 140 attending opening days," said Martyn. "A high proportion of the 364 pubs are good sites and the plan is obviously to match the right people to the right pubs. We will have a plan for each pub and investment and refurbishment will follow."
"Recruitment will always be the key issue for our company," he continued. "There are so many pubcos competing for the same talent. It's a question of finding lessees first and moving them through the process sensibly. Generally, people don't fall in love with leases, they fall in love with the pub, so the pubs on offer have to be tempting in the first place. The lessee is the most important element in the perfect pub package. From the lessees' point of view, it's all down to the nitty-gritty of support. It's important to understand their issues to make money."
Of those existing Spirit managers who do not take on a lease, some will be found work elsewhere but the majority are likely to face redundancy.
Further acquisitions
The focus for the year ahead is further acquisitions. The company has just bought 16 pubs from North West operator MGR and exchanged on four more from Premier Taverns in the Midlands.
The Globe deal has restructured the company from five to six-regions with about 250 pubs per patch and there is a good geographic spread.
S&N has two main brands - James H Porter and Village Inns - which are viewed as badges of quality with consistency in standards and service rather than formalised operations which are difficult to control in the leased market.
"We will continue to grow, although we have not set ourselves a target," said Martyn. "We've always been recognised as a good quality business trading at the top end of the market and we have a model that we allow us to expand. We will be continuing to look for good opportunities."
Scottish & Newcastle Pub Enterprises' commitment to supporting its staff earned it the accolade of Pub Company of the Year for tenanted and leased estates with 100-plus outlets in this year's Publican Awards. Pictured at the ceremony are, from left, commercial director Martyn Gray, Alistair Darby, MD of sponsor Marston's Pedigree, S&NPE managing director Andrew Stevenson, and awards host Jimmy Carr.
