Big fish,
small pond
Many were surprised when Bob Ivell, the former boss of mighty Scottish & Newcastle Retail, agreed to take charge of Regent Inns. But Regent shareholders must be delighted at the share price surge since his arrival. PAUL CHARITY met him
Life is full of unexpected twists. Last February, in a speech to members of the Association of Licensed Multiple Retailers, Bob Ivell named Walkabout operator Regent as the next high-street company likely to get itself into trouble.
Six months later, with its share price tanking at around the 30p mark, following a series of profit warnings, it was Ivell that investors called on to restore Regent's fortunes. Since his appointment as executive chairman was announced in late October, Regent's share price has risen by around 170% from 32p to the 86p mark.
One very pleased Regent investor is Robert Tchenguiz, the property tycoon who also owns Laurel Pub Company and Globe (the new owner of 364 former Spirit-managed pubs). Tchenguiz, who is reputed to have made a cool £50m from his stake in Pubmaster, owns 14% of Regent's shares, acquired at last September's rock-bottom price of 30p. "By getting the value back in the shares, we've taken it out of the reach of people who were just chancers," says Ivell. "We've put off a lot of people who I call bottom fishers because, at 30p-a-share, every Tom Dick and Harry was sniffing around saying, I'll buy it off you'. If somebody wants to buy Regent now, they'll have to pay a premium well over the current share price."
That, of course, includes Tchenguiz, who has spoken of wanting to build a 1,000-strong pub estate. Bolting together Laurel and Regent would save Tchenguiz a lot of head office and other costs. Tchenguiz was a surprise visitor to a shareholder's meeting soon after Ivell arrived at Regent. He made no secret of his delight at Ivell's appointment, but had one question to ask: "Why are you doing this, because this company's not big enough for you and you're not being paid enough?"
There is a striking disparity in size between S&N Retail, which produced annual profits of £230m, and Regent, with annual profits around the £11m mark. Ivell says his part-time Regent chairmanship rumoured to be paying £1,000-a-day for a minimum two-days-a-week commitment suits him because it allows him to do other things, such as working as a non-executive director at the Restaurant Group. He is also sitting on a paper profit of around £400,000, having been granted an option on just over a million shares at 43p (the option is subject to performance criteria, of course, and exercisable in three years' time or at the time of a takeover).
Of Tchenguiz's comments Ivell says wryly: "I've made him a lot of money. He should buy me lunch." There's no doubt that the restoration of Regent's share price stems in part from confidence in Ivell's experience. In his final year at S&N Retail, for example, he grew profits by more than 10%, despite the distraction of a sale to Spirit Group. Its operating margins were also consistently the best in the sector.
Ivell believes that Regent made a number of errors at the start of 2004, when it instituted discounts after poor Christmas trading. "They threw discounts at everything rather than doing price-modelling. If you do things in an unmeasured way, you don't know what's working," he says.
By Easter, Regent had a dozen Walkabout sites that were struggling with substantial sales dips. The signs of distress were obvious by late spring, with odd midweek offers such as 50p-a-drink deals at some sites. There was also a problem with Walkabout sites stocking secondary brands. "Instead of selling Smirnoff Ice," says Ivell, "they were selling a substitute. You can't premium price and sell secondary products. The customer is too smart to do that nowadays."
Ivell also thinks Regent made a strategic mistake a few years ago in selling quality unbranded sites to focus on Walkabout and Bar Risa/ Jongleurs, a clever combination of comedy club and nightclub. He questions whether Regent should have sold 20 prime sites such as the Fire Station in Waterloo to Wizard, which was sold to Wolves and Dudley for £89.9m last year.
"The City drives what companies do too often. Regent had some very good pubs that were sold to Wizard, who made a turn on them by selling to Wolves. The company ended up saying it would have 50 Walkabouts within two years and being hoist by its own petard. It focused on buying sites to get the numbers rather than focusing on what it should be doing."
Crisis point at Regent occurred last September, when institutional investors some of whom had taken part in an £18m rights issue at 83p the year before moved to make management changes as Regent's share price slipped ever southward. Chief executive Stephen Haupt and finance director Simon Rowe were both ousted.
The situation worsened when non-executive director Nigel Bachelor spotted a technical breach of a banking covenant. It looked for a while like Regent might go the way of SFI Group, where a close examination of the books produced all sorts of accounting skeletons. In the event, the breach was a technical matter relating to a swaps issue. "It's one of those things that would have been settled with a conversation with the banks over a cup of coffee ordinarily," says Ivell. The issue was sorted out to the banks' satisfaction in December.
Meanwhile, Ivell has been moving quickly to impose big company disciplines and flatten the structure at Regent. Its head office in London's Muswell Hill will see a one-quarter reduction in personnel, with 27 out of 87 staff soon to be made redundant. "Regent was a small business," he says, "trying to act like a big business. It's got some very good sites that turn over a lot of money, so it has a nice heartbeat, but it's not a big business. It had some of the departments and had been trying to do some of things a big business tries to do.
"The operational structure had operations directors, regional directors, area managers and house managers. That just confuses things and lengthens the communication chain it's often the reason why things don't get done."
Ivell has also been applying big-business rigour to some of Regent's internal systems. He was surprised, for example, to discover there were no internal audits taking place highly irregular for a business turning over £130m a year. Ivell has ended the reporting of sales figures in gross terms internally. "When you're doing wage percentages, you need to be focused on the net takings figure," says Ivell.
Strong emphasis is placed, however, on the strength of Regent's key brand, Walkabout. With takings at around the £38,000-a-week mark per venue, it remains one of the best performers on the high street. "It's a very good place to have a party and it can major on Sky and other sport and do it very well we have the size and capacity to afford it."
The 17-strong Bar Risa/Jongleurs chain is, if anything, even more highly regarded than Walkabout within the industry. The largest employer of stand-up comedians outside of the BBC, its next nearest rival in size terms is the Comedy Store with just two venues. Regent's fledgling brands Stone House and Pals are, however, "under review" a euphemism, one suspects, for "likely to be sold". The key question for Regent concerns whether it is sold or acquires another business in the next six months.
Consolidation on the high street makes ever-greater sense in these tough regulatory times. Friends of Ivell have asked him whether he will be Bob the Builder or Bob the Terminator at Regent. So which is it? "Events often dictate strategy. Consolidation has to happen. It's my job to make that judgment (to sell or acquire) and manage it for shareholders."
Many have wondered whether a company like Regent will hold Ivell's attention for long. He dismisses any suggestion that boredom might hasten his departure at Regent.
"I'm not someone who has to run a big company. If I think there's an opportu
