Rising cost of business prompted New Century Inns sale

From The Publican

By Hamish Champ , 14-Nov-2007

Related topics: General News, Company & City News, Property News

The prohibitive cost of investing in New Century Inns prompted Alistair Arkley's decision to sell the North East tenanted pubco to Greene King.

 

The Suffolk brewer acquired the 49-pub group, of which Arkley is chairman, for £32.6m yesterday. The estate generated some £3m of pre-tax earnings last year, around £61,000 per pub.

 

"We'd been looking at the business and the level of resources it needed to take it forward and we came to the conclusion that we needed to invest significantly more into it," Arkley said.

 

"We realised that we weren't generating enough cash to develop the business in the way we felt we needed to, which was improving our food-led operations and letting rooms," he added.

 

The group's board was faced with a simple choice, Arkley said: "Invest more of our own wealth and stick with it for five or ten years, or sell. The decision was a tough one, but we feel it is a good deal for our tenants and our employees."

 

Arkley will work with Greene King on integrating the businesses but will not follow the example of previous management at companies the group has bought and stay on to run NCI.

 

As well as the investment issue, the cost of running a small tenanted estate was another factor in selling NCI. "Owning 50 pubs in the tenanted sector is just a non-starter. There is more regulation, such as health and safety to deal with, and it's getting more expensive to operate a business like ours," he said.

 

Running a smaller managed estate had more potential, he believed. Arkley is chairman of Passionate Pub Company, another North East-based pub group, operating 24 managed sites.

 

Arkley said his board colleagues regarded Greene King "as the best buyer, quick in the process and easy to deal with". The deal was sealed after what he described as a comparatively short process, overseen by pub deals expert Peter Hansen.

 

The acquisition acts as a platform for the Suffolk brewer, adding 50 pubs in the North East region to its presence in the Midlands - via Hardys & Hansons - and connecting with its Belhaven operation in Scotland.

 

Greene King's chief executive Rooney Anand said in a statement: "New Century Inns' pubs are located across the North and North East, areas where we are keen to grow our presence.

 

"The licensees at New Century Inns will benefit strongly from having access to a flexible range of agreements, attractive product range and supportive management style."

 

Forty eight of the 49 NCI pubs are freehold and Greene King said it would look at converting some over to leased businesses.

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