£10m investment for 240 LESG pubs

Oxford Inns & Hotels (OIH) is making a £10m investment in the former London & Edinburgh Swallow Group (LESG) pubs it took over following the collapse of the company 12 months ago.

The pub group said it had been forced to instigate an emergency programme of repairs and maintenance on the properties it took back from the bankrupt operator.

OIH has revealed it was left to salvage the remains of a grossly neglected estate of 240 hotels and pubs left by LESG and its boss Alan Bowes.

Group managing director Kamaran Aziz has pledged that the investment will continue until the estate has been completely turned round.

He said: "We were confronted by a huge number of different issues last September, which in total is going to take us about three years to address. We have already spent £2.5m over the past year and major spending will continue for the next two years or so, until we have got things right.

"Much of the early work involved basics, such as essential fire safety and electrical work, which were a priority before other general repairs could be considered."

OIH already owned the freehold of the 240 properties it took back from the 670-strong LESG company which crashed in September 2006.

"We are slowly getting the pubs back on their feet, but it is going to be a long haul because there were so many different issues we had to face last year," said Aziz.

"In the managed pubs there were staff who had not been paid, and many suppliers had not been paid either. It's been a big remedial job, which also involved re-establishing relations between the pubs and their suppliers.

"Two major companies, Scottish & Newcastle and drinks wholesaler Matthew Clark, have been instrumental in helping us turn things round," said Aziz.

lesg pubs bounce back

Many of the pubs formerly operated by London & Edinburgh are run by licensees who now lease the properties directly from their head landlords. About 400 houses reverted to the direct control of their owners, comprising a mixture of private individuals and small companies who originally bought the properties at auction. Some are being operated by management companies, but many lessees have managed to negotiate new free-of-tie terms directly with the owners.

A number of licensees decided to walk away following the collapse of LESG and their pubs are now being run by new lessees, while a handful of pubs have closed down. A straw poll of hosts, which included those leasing from private owners and Oxford Inns & Hotels, suggests they have successfully salvaged their businesses from the chaos following LESG's collapse.

Loyalty scheme to get business back on track

Oxford Inns & Hotels (OIH) has embarked on a novel loyalty scheme with its tenants and lessees to help licensees get back on an even financial footing following last September's debacle.

Almost all licensees lost money, including their £3,000 deposit bonds paid into the LESG coffers, when they originally leased pubs from the company. OIH said licensees will be rewarded for buying within their tie and remaining loyal to the company in order to put them back into the position they enjoyed when their bonds were intact.

"We do not believe many tenants got their bond money back, but we are working with them to re-establish a working relationship so the bond can be re-instated," said OIH boss Kamaran Aziz.

Almost all lease and tenancy agreements have had to be re-written but OIH says it has tried to stick to the same tie and rental arrangements. "We want to restore a sense of security for our licensees and help them get back on their feet," he added.

A number of sales and acquisitions has seen OIH end up with an estate of 220 houses, made up of 40 managed pubs and 180 leased or tenanted units.

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case studies

Luke Brittain Fish & Anchor, Offenham, Worcestershire

Luke Brittain and his father, Steve, now operate a 20-year free-of-tie lease with Oxford Inns & Hotels, one of only a handful of such agreements within the estate.

The duo thought things had settled down after the LESG turmoil, until last July when the pub was deluged by the floods which hit the Evesham area. "The pub was under four feet of water and we have not been able to trade since 20 July," Luke revealed. "We have been forced to repair and refurbish the whole of the ground floor and cellar of the pub.

"Fortunately we had good insurance cover," he said. It may be another month before the pub can re-open its doors but the pair admit they will be running what will be, in effect, a brand new pub. "We are going to run a big marketing campaign before the re-opening and we hope to get the pub back on an even trading keel by Christmas," Luke added.

Kez Green Black Horse, Rampton, Cambridgeshire

Kez Green and partner Debbie Green now operate a tenancy agreement taken out with the private owner of their pub. The couple negotiated a freetrade supply deal with Coors and have managed to build trade thanks to the discounts they have achieved through the brewer and other drinks suppliers.

"It's not been a bad year considering the shambles that London & Edinburgh left," said Kez. "Beer trade is on the up and we are also starting to sell more food."

Derek Sephton Kings Arms, Downholland, Lancashire

The Kings Arms is now an Oxford Inns & Hotels pub and, like others in the estate, business has settled down after the initial LESG rumpus. The company inherited Sephton's original agreement with the LESG, although it took a full two months before proper business controls were put into place.

"We were able to buy beer on the open market for a time, and there was also a delay before new rent arrangements were put in place," said Sephton. "Quite honestly, there has been very little change and if you were a regular here you would have been unaware of the chaos of last September."