Managed sector set for new look
In a year where the Punch de-merger of
its managed houses to Spirit dominated,
managed pubs largely outperformed their
leased business contemporaries.
One interesting development was the new
approach to ‘management’ being adopted by
some companies.
Amber Taverns, for one, developed a new
quasi-managed/franchised operator agreement
–
one where operators are responsible for
the licensed elements of the business and not
the property itself. Marston’s has adopted
a similar approach which is proving very
popular. These models, one assumes, were
developed in response to the return to the
sector of entrepreneurs, whose flair for the
business is being maximised by the new
model agreement and not diverted from the
primary purpose of the business.
Elsewhere, buoyed by reasonable trading
performance, managed pub companies, either
owned or with the backing of private equity,
sought to expand their estates. This is a trend
we expect to continue into 2012.
Late-night sector hit while high
street bars thrive
As banks and major pubcos sought to
dispose of toxic lease sites in 2011, and the
administration of Luminar and its subsidiaries
hit the headlines, the late-night sector took a
bit of a beating.
There were encouraging signs for the high
street bar sector, however.
Christie + Co’s experience with the likes
of the former Barracuda, Cougar Leisure,
Walkabout, Yates’s, and Ivory Lounge bars
appeared to demonstrate the potential for
good businesses being realised under new
ownership and management. And this seemed
to be mirrored up and down the country.
The nature of the traditional high street has
changed in recent years as retail moves
increasingly to edge-of-town or out-of-town
locations, leaving opportunities available for
bars to be established. Meanwhile, there
appears to be a genuine appetite from both
experienced and new local operators.
Operators are also using their experience and
expertise to renegotiate on leases and rents
with the landlords. Many bars can be picked
up at nil premium, others will have leases that
can be torn up, redrawn or renegotiated.
In order to further safeguard their
investments, many landlords will also be
prepared to renegotiate on rents, or even
offer good, long, rent-free periods, leaving
well-advised operators with room to invest
in improving the quality of the bar and, by
extension, the customer experience.
All of which makes for a good deal for
landlords, operators and tenants alike.
Administrators busy
A number of regional pub companies fell by
the wayside during the year but the biggest
administration was that of Robert Tchenguiz’s
R&L Properties portfolio.
Christie + Co was instructed to sell almost
200
R&L pubs by the administrators and was
immediately met with a genuine appetite from
potential investors. Our feeling is that this
mirrors the migration towards quality that
the sector is undertaking.
This example is largely symptomatic of the
administrations we saw in 2011 – based less
on the trading outlook but more on the way
the businesses were geared.
Food overtakes wet-led for first time
The year was also marked by a major
shift in the trade which saw food-led
overtaking wet-led pubs in the marketplace.
It is surely symptomatic of our economy-
dominated times that pub-dining is proving
a viable alternative to restaurant dining
for consumers and more cost-effective for
operators. It’s not a seismic shift, but one
worth monitoring as 2012 develops.
M&B is leading the way thanks to its powerful
brands like Toby Carvery and Harvester.
However, Christie + Co is working with The
Restaurant Group’s Brunning & Price pub
brand to find suitable, characterful properties
to extend their brand across the UK from
their current north-west-focused operation.
Encouragement needs
further funding
In the Budget, apart from the de rigueur tax
on strong beers, the Government continued
to pursue its local community agenda by
offering opportunities and tax breaks for
small and start-up businesses.
The availability of good quality pub
opportunities, along with the tax advantages
afforded small businesses, may well encourage
yet more local entrepreneurs to see the value
in pub businesses – as well as entice more
tenants to make the step-up to ownership.
Much, as always, depends on the lenders to
see whether this confidence is misplaced.
Early in 2011 the Government announced a
deal it struck with big banks – Project Merlin
–
under which £76 billion was made available
to small businesses. Reports of how this pot
has been distributed have been confusing
and contradictory. And being a target-driven
exercise may have meant it missed the point
somewhat.
Funding remains a big question. Traditional
high street lenders have their own damning
experiences with ‘toxic’ property, so it is
not surprising that they remain somewhat
cautious about investment in the public house
sector. But with the Project Merlin cash and
optimistic noises from some new lenders,
we and our sister company Christie Finance
can hope that this will inspire a renewed vigour
and vitality in the sector.
We are, of course, at the mercy of the bigger
global financial picture, so making more
positive predictions on the availability of
funding is going to be a risky business.
Decrease in the number
of pub businesses
Christie + Co was instructed
to sell in 2011 compared
with the previous year
Increase in the number of
offers received for pub
businesses in 2011 compared
with the previous year
-13.8%
11.5%
24
Business Outlook
2012
