Up the PECing order

Look through the literature for The Pub Estate Company, and one name is notable by its absence - its owner.

The company was formed six years ago with the acquisition of 230 pubs from Scottish & Newcastle (S&N) and has steadily grown into one of the leading players in the industry.

This growth took place under managing director Colin Homer until he stepped aside last June for a new boss, Brian King, from Greenalls' former franchise business, Inn Partnership.

But, while they have been the company's public face, the power behind the pubs is one of Britain's best-known leisure entrepreneurs, Trevor Hemmings.

Pub Estate Company, known internally as PEC (pronounced "peck"), is part of his empire that also includes Blackpool Tower, several piers, hotels, Littlewood Pools, the Vymura wallpaper business and a controlling stake in racetrack operator Arena Leisure. He satisfies his passion for racing with ownership of horses, including The Last Fling in this week's Grand National.

Hemmings, who started out as a builder's apprentice, made his initial fortune by turning around Pontins holiday camps and selling them to S&N, of which he was a director until 1996. According to last year's Sunday Times Rich List, he was the 54th wealthiest person in the UK with a fortune of £450m.

The 65-year-old multi-millionaire still finds time to visit PEC's head office in Chorley, Lancashire, to pick up the latest news, but he leaves the operations to the experienced management team.

Until now, the company has had a fairly low profile, apart from grabbing the headlines with various acquisitions. Between 1996 and 1999, it expanded with packages from Allied Domecq, Go-Ahead Leisure, Trust Inns and more former S&N outlets.

Doubled​

But last year, it doubled in size by buying a group of 360 pubs from S&N to take its estate to 730 tenanted and managed outlets, making it the 12th largest pub operator in the UK. With annual turnover last year growing to £18.7m, it expects significant growth in 2001.

Over the past nine months, it has been reviewing every site in the estate and converting 215 of the managed houses to tenancy, and it is now ready to shout about its achievements.

Mr King said: "Since 1995, PEC has been growing very confidently and very quickly, but it never made a big splash. We now want to raise our image."

PEC claimed to be raising its profile three years ago when it had 301 pubs, but now it has a larger estate and more to talk about.

The company is trying to gain recognition within the trade, such as through public relations, because it wants to make sure it can still attract the best licensees.

"Recruitment is the greatest challenge for the industry," Mr King said. "With the changes in ownership and structure of the industry, there are so many pub companies and there will probably be more in the next 12 to 24 months.

"In most cases, they are focused on tenancies and there is great demand for good quality entrepreneurs. This demand is growing but is growing faster than the human resource."

It mainly recruits at local level through word of mouth and its business development managers (BDMs), but it has also had a good response from roadshows in Nottingham, Newcastle and Haydock Park. It is also receiving a growing number of people through its website, which was launched in July.

While the company still has 60 managed houses, it is focused on running traditional three-year tenancies.One of the targets set last year was to improve the appeal of the tenancy package. PEC introduced assignability to the deal, allowing licensees to benefit from the work they may have put into the business.

It has also developed a 10-year agreement to attract more experienced entrepreneurs who want to invest substantially in the pubs, which has already been taken up by a handful of licensees.

The contracts are based on a fair rent using models of turnover and business mix set against estimated profit-and-loss figures. Licensees are earning discounts of up to £60 a barrel, but Mr King said there was no cap on the discounts available.

"If they can take the business that much further, we're delighted to pay above what might have been originally expected," he said.

But, like other modern tenanted operators, PEC is not just worried about increasing barrelage but helping licensees develop a strong retail business, such as developing letting accommodation.

"We have to encourage licensees to take every single opportunity that maximises money through the pub and help them to increase their profitability," Mr King said. "We want to create a stable estate of licensees."

The support package is also being improved, with new teams to help with marketing and promotions and catering development. It has also stepped up communication with its tenants with its website and a magazine, Pec Talk.

The training programme has an induction course, including the British Institute of Innkeeping's (BII) National Licensee's Certificate, and a series of regional modules such as promotions and marketing, growing food sales, employment law, financial management and front-of-house skills.

Licensees are also offered the chance to take the BII's Advanced Qualifications, which have already been taken up by all the BDMs.

With the estate now doubled in size, a new organisational structure has been put in place. There are now two regional divisions of about 360 pubs, headed by Ian Magowan from PEC and Ken Bevan, who worked with Mr King at Inn Partnership.

"We have got a strong team with a lot of experience, headed by someone from within PEC who brings stability and someone from Inn Partnership who brings a different approach."

The two divisions have eight BDMs looking after about 33 pubs each and an area manager to look after the managed houses.

Experience​

Mr King himself brings a wealth of experience. He joined Greenalls in 1980 when it was still Britain's biggest regional brewer. He remained there for 20 years in different parts of the company, from the freetrade side to managed and tenanted pubs, before ending up as franchise director, working on Greenalls' Inn Partnership franchise agreement.

After the 1,240 franchised pubs were sold to Nomura Principal Finance Group in December 1998, Mr King remained for 12 months.

"I'm grateful for what I experienced working with Nomura and the opportunity to learn and take things forward," he said. "It's exciting to take everything I've learned over the past 20 years and apply best practice."Mr King said the new structure would allow PEC to carry on expanding by several hundred pubs.

The estate is already national, stretching from the South West to Scotland, where it has about 100 pubs. There are clusters in Cumbria, the North East, the North West, Nottinghamshire and the Midlands, while there are about 60 in Greater London and the home counties.

Owning the freehold of about 85 per cent of its estate, PEC mainly runs community pubs in towns and surburban areas.

The plan is to grow through selective individual acquisitions, but it is likely to look at small packages that come on to the market later this year as the bigger owners, such as Nomura and Morgan Grenfell, start to churn their newly acquired pubs.

At the same time, it plans to step up investment in the existing estate to £3m this year, which will see over 100 tenanted pubs given a major facelift.

"We have bought a lot of pubs that were tired, which we see as offering potential," Mr King said. "Over the past nine months, we have been looking at each one and deciding what we can do to make a real difference."

He believes the company has achieved its aim of developing what he calls the "three Ps" - the right pubs in the right places with the right package for tenants.

"The product we have got is as good as, if not better than, others in the market,"