No resting on his Laurels

Despite his company's 'frighteningly fast pace' of growth, Julian Sargeson is predictably upbeat, reports Hamish Champ.

Try "Googling" the name Julian Sargeson and you'll soon come across an online CV that runs to a mere 53 words.

Former operations director of Wizard Inns, which was sold to Wolverhampton & Dudley Breweries (W&DB) in June last year. Once worked for Scottish & Newcastle (S&N) and Sainsbury's. Currently chief executive at the Laurel Pub Company. Left Bristol Grammar School in 1981. That's about it.

The man steering the burgeoning empire of property tycoon Robert Tchenguiz through the rapids of the UK high street smiles at the brevity of the entry.

Asked to expand, he whizzes through his career - which included a decade moving up through the ranks at S&N - to the point where he joined "a small pubco called Wizard Inns about eight or nine years ago". Buying out the group with boss Chris Hutt for £11m, Wizard had grown from 35 pubs to 65 by the time they eventually sold to W&DB for £90m.

Mr Tchenguiz, who had considered buying Wizard through his R20 vehicle, then approached Messers Hutt and Sargeson to cast a slide rule over other potential targets, including Regent Inns.

Presenting to Mr Tchenguiz, Mr Sargeson described Regent as suffering from a cold, rather than a life-threatening disease. The property man, warming to the analogy, subsequently bought shares in the company, made money on them and still holds around 10 per cent of the stock.

Business plan​

A formal bid for Regent was then on the cards, but Mr Tchenguiz's attention was diverted by the availability of the 160-odd outlets of the Laurel Pub Company being touted by then-owners venture capitalists MidOcean Partners, which had previously sold more than 400 Laurel sites to Greene King and another 2,000 to Enterprise Inns.

Mr Sargeson checked out the pubs that were part of the deal. "I travelled around, looked at the sites, did the due diligence and helped build a business plan," he says. Banks were convinced, the strategy was developed and the deal done for £151m. Messers Hutt and Sargeson then joined the new-look Laurel as chairman and chief executive respectively last December.

Then, before anyone could say "summer trading", R20 bought Yates Group for £202m. Weeks later, Slug & Lettuce operator SFI went into administration and R20 cherry-picked around 100 of the collapsed group's better sites; yet more for Mr Sargeson and his team to cope with.

It has all happened at a "frighteningly fast pace", admits Mr Sargeson. "Somebody asked me recently why I'd want to do something like this; back-to-back acquisitions and integrations. These sorts of complicated deals involving lots of people, offices, personalities, egos, different competing brands and so on, had never been done before."

The reason, Mr Sargeson says, is because prices were right and, importantly, the opportunity was there. "Putting three competing estates together and getting the best brands or the best offers from them means you can end up with a more profitable operation," he says. "You're not going for the same sector or segment. Instead of those three sites going for the same segment they can attack different competition."

And despite the travails of the high street, Mr Sargeson argues it remains a sector with potential. "We're investing in the market while others aren't. Four years ago there was a new offer on the high street every week. Now there's an opportunity to get an up-to-date offer on the high street, whether it's a reviewed Yates brand or a reviewed Litten Tree brand; whatever the brand is, if you've got a more customer-focused offer you've got a good opportunity."

Not everyone sees Mr Tchenguiz's entry into the pub sector so positively, however. Some compare his tactics with Chelsea FC owner Roman Abramovich's move into football: cash-rich, piling in and ramping up prices, squeezing others out. Others have gone so far as to suggest he is paying "silly money" in order to get recognition.

Mr Sargeson naturally rebutts this. "Robert's no fool. Let people try and get him to pay more," he says. "Everything going gets pushed under his nose by people who want him in the game to bring others in," he says, adding - sans details - that the multiples Laurel has bought at have been more than satisfactory.

Key to running the estate has been the use of the "operating co/property co" (opco/propco) appr-oach, he says. A business is bought, money lent on expectations for that business, the freehold assets are put into the property company and securitised, and more money is obtained from the banks on the cashflow of the rental income which the operating company pays to the property side. Relatively straightforward in these days of low interest rates, and effective.

"It's the assets that attract Robert," says Mr Sargeson. "He likes the fact that he can secure his investment against them." This tactic sees Tchenguiz gearing himself up, but with interest rates currently bumping along the bottom, there should be little to fear. For now. Operationally, the next few months will see Laurel assess and integrate its new purchases. "Our rationale is to evaluate what we offer, from the mainstream at one end, to the likes of Ha! Ha! Bar & Canteen at the other, and look for opportunities," says Mr Sargeson.

Integration​

Laurel is being helped in the integration of the estates by external specialists Bain & Co. Meanwhile, some industry watchers have questioned Mr Sargeson's ability to oversee more than 400 sites versus running a niche pubco with fewer than 70 outlets in his Wizard Inns days.

Mr Sargeson responds: "I have a lot of experience in driving and taking a business forward, looking for opportunities, creating value, getting returns on capital, getting the best out of people." Such skills, he adds, translate up and down. "And I'd run 200 pubs prior to all this at S&N," he says.

Since Laurel has set its sights on more than doubling its existing estate to 1,000 sites there will clearly be more deals, but the dynamics of the industry mean that the days of "just piling into pubs and expecting the numbers to come through doesn't work any more", he says.

"But if the right pubs are there at the right price and they fit with what we're trying to do, we would be stupid not to look at them," says Mr Sargeson, who believes the consolidation picture will probably last 12 to 18 months.

Finally, Mr Sargeson wants to highlight pubs' contribution to wider society. "Pubs are great places to go to watch, play and do, and as an industry we need to remind people that the blame for society's drink-related ills cannot be laid solely at a pub's door. All the negative coverage is disproportionate to the majority of people's experience," he says.

Pub operator and champion of the industry? Fifty-three word CVs might be a thing of the past...