Long live the king

Regent Inns is seeing something of a turnaround in its fortunes - finally. Hamish Champ reports.

Shareholders in Regent Inns are a robust lot, which is just as well. Used to a series of unpleasant shocks over the years, they've seen the value of their investment plumb the depths as the group has lurched from crisis to crisis. So full year results announced last week - showing the Walkabout operator's fortunes on the up, with improving sales, a warmer relationship with its banks and a growth strategy driven by acquisition at the right price - will have been most welcome.

Equally satisfying for investors more used to hearing about bank difficulties and iffy management was seeing Regent's shares nudge the £1 mark last week, having sunk last year to a stomach-churningly low 30p.

More positively, City types speak of the group being "fundamentally sound" and the results being "very encouraging", albeit "further progress needing to be made". Although the shares had reached such dizzy heights earlier this year, garnering even the most caveated of plaudits from the Square Mile is not something Regent investors have been familiar with recently.

It is not overstating the case to say that Regent's chairman Bob Ivell, appointed almost exactly a year ago along with ex-Scottish & Newcastle colleague John Leslie as chief finance officer, can take the credit for engineering a turnaround in fortunes. Sales from ongoing activities have grown seven per cent, underlying profitability is on the increase and shareholder confidence is largely restored.

Reflecting on the task he and his colleagues undertook Mr Ivell says: "When we came in last October we knew we had a good platform to work from. Regent was not a totally busted business and getting this right isn't exactly rocket science. It's about improving the customer offer and ensuring we are coming up with what they want. That, plus getting the systems right and keeping an eye on costs."

On his arrival, key management personnel were changed and an operational review launched, starting with the group's underperforming Aussie bar chain Walkabout. The overhaul has paid off, with sales up, particularly in the second half.

"It was about getting the basics right," says Mr Ivell. The basics included introducing such revolutionary strategies - for Regent at least - as having an internal audit to gauge things such as how much beer was flowing through the estate at any one time. Other ills addressed included the selling of "secondary products at premium prices", a situation that was swiftly halted.

Business is getting better and service quality is improving, Ivell says. Attention is now being focused on the group's Bar Risa chain, where similarly the ball had been dropped.

Pursuing Urbium​

While gaining brownie points for its operational overhaul and a healthy hike in the group's share price, Mr Ivell has nevertheless come in for scrutiny over Regent's recent - and ultimately fruitless - pursuit of fellow operator Urbium. A "final" 975p per share offer was roundly rejected by Urbium's board and investors, and Regent notified the market it would not make any further offers.

Mr Ivell is adamant the decision not to up its bid for Urbium was the right one. "We didn't believe anything above what we offered was the right price. We weren't prepared to overpay, and we wanted to avoid spending time sorting out a subsequent over-valuation."

While such a conservative approach is to be applauded in this time of high-priced assets, there are those who believe Regent missed an opportunity. The group's strategy of doing the deal in the full glare of the media dismayed some observers, one of whom notes that going for Urbium with what was initially a low offer - 820p - and one that contained a significant chunk of equity just wasn't ever going to wash.

However, Mr Ivell says his shareholders wholeheartedly back him and his colleagues, "plus our banks (Royal Bank of Scotland, Bank of Scotland, Barclays and West LB) are very supportive of our on-going strategy".

Banking matters are indeed a cause for celebration, particularly after last year's covenant shenanigans. Last month's agreement of new debt facilities should lead to a reduced debt position and frees up around £40m to "provide the group with the flexibility to take advantage of market consolidation opportunities", a strategy that, once in place, would help maximise purchasing power, among other things.

Here is the rub. Mr Ivell acknowledges that growth will have to be bolted on and gives nothing away as regards Regent's likely interest in outfits such as vodka bar operator Inventive Leisure. "There is a lot of hype and expectation regarding acquisitions and we have to manage that expectation," he says. "We'll look at businesses individually and decide on a worthwhile price."

Shareholders are reported to be satisfied with current progress and back the management to pursue "suitable acquisition targets". Here Regent is prepared to look beyond its traditional trading ground of the high street. "People have narrowed us down to the high street," says Mr Ivell, "but we will look at all opportunities."

The comedy angle, present in its Jongleurs clubs, can be advanced, as can increasing the group's food operations, which currently account for a mere six per cent of sales.

Plus there is the possibility that situations such as the current review of Robert Tchenguiz's fast-growing Laurel operation or the "will it?/won't it?" break up of Spirit may see a shakeout of some desirable sites.

Looking for opportunities​

The key issue for the City is whether suitable acquisition opportunities are available at prices that Regent is prepared to - and indeed can - pay. With Mr Ivell's laudable stance on not over-paying holding firm, this could prove tricky. A case of damned if they do and damned if they don't.

Speculation has it that Regent itself could come under the bid microscope. From Urbium, perhaps? Mr Ivell smiles at the prospect, adding that he and his team are charged with looking after the interests of the group's shareholders. If they felt that was best served by accepting a realistic bid they would have to look at it. Few expect a bid for Regent any time soon, but it is not beyond the realms of possibility. The re-entry onto the market of Alchemy, which recently bought Spirit's city centre outlets, offers synergies that will certainly appeal to the entrepreneurially-minded.

One thing is certain, in today's highly competitive market, and with so many operators such as Regent sorting themselves out with a view to tackle what the high street and beyond has to throw at them, it's going to be anything but quiet in the run-up to Christmas...

Pictured: Regent's chief financial officer John Leslie (left) and chairman Bob Ivell are rising to the challenge of turning the troubled company around.​

Overall results in a nutshell​

(*before goodwill, amortisation and exceptionals)​