Brakspear, the Oxfordshire based pub operator, saw its fledgling managed estate drive growth in 2014 and is now eyeing further expansion.
Chief executive Tom Davies told M&C that while Brakspear would “always be a predominantly tenanted company” there would further acquisitions for its managed arm as well as conversions from its c125-strong tenanted and leased estate.
JT Davies, the parent company of Brakspear, reported turnover for 2014 up almost 12% to £19.9m. Turnover in the managed estate increased by £2.1m to £3.6m. Drinks volume rose 1% across the estate.
Operating profit before the cost of the lease buy back of the Chequers in Marlow in September, increased by 8% to £5.8m, and profit before tax and exceptional items was up by 20% to £4.2m.
Davies said the current year had seen solid trade although the start of the summer had suffered with comparisons to last year.
During the year Brakspear grew its managed estate to four pubs and has added a fifth this year. It sold seven pubs and invested just over £3m in the existing estate.
Davies told M&C: “We are looking to acquire. We disposed of about 10% of our estate in the last two years – generally smaller tenancies that we didn’t feel had long-term potential. What we want to do is replace some of those with larger sites that have either the capability for a good tenancy or a managed house.
“The tenanted estate is always going to be the key to our business. We will always be a predominantly tenanted business but our experiences in managed pubs have been extremely positive so far and we are keen to do more.”
While growth in the managed estate is a target, Davies said there were no plans to offer any of the turnover-related operator agreements becoming increasingly popular across the sector.
He said: “We looked at those sort of models in the early days and decided we wanted to see how it played out in the market. We haven’t seen the demand or the need for it to be implemented. We would be open to it if the need arose but I think it is a lot easier to do something like that when you have a managed structure to be able to implement it. It is something we can now look at more easily but it’s not top of our agenda.”
On trends in the market Davies said: “It is still polarised around occasions and between the brands at one end and the more gastro experiences at the other. Customers do seem to gravitate either towards the predictability of a brand or paying more for a quality experience. It is the pubs in the middle, who are providing a good but not a great experience, that are being hit.
“What we have tried to do is invest to lift some of those pubs up into the higher category – including attracting some really good chefs so that they can be those destinations.”
On the current legislative landscape, Davies said: “While we won’t be directly affected by the Market Rent Only (MRO) option of the pubs code we are conscious of the wider implications. We have to be wary because who knows if the 500-pub limit will come down. That has to be in the forefront of the mind for any company offering a 20-year lease. These days we don’t give out more than 10 years on a new lease.
“For a small proportion of tenants and lessees the MRO will be a positive thing but a huge amount will lose out.
“We will have a couple of our very good operators who would be benefit if they could have a rent-only option. They will be the ones looking for those deals. But there will also be a huge number deciding this a far cry from what was promised and recognising the support that came with the tie.”
