It's déjà vu for Bob Ivell at Old Orleans
It's a sweet irony that Bob Ivell's Regent Inns has bought the Old Orleans bar and restaurant chain from Punch this week. Back in April 2001, when Ivell was executive chairman of Scottish & Newcastle Retail (S&NR), there was a concerted attempt to sell the chain.
S&NR had bought the Greenalls business and the company decided it would make a few disposals to raise cash. Old Orleans, a business that S&N Retail had owned since 1992, became a sale candidate. The decision was also influenced by a desire at S&NR to see whether it could create shareholder value by building-up and selling-on brands. The suggestion was that S&NR would have been happy to accept £30m - not a price expectation that was met.
Five years on, as Punch sells the business for £26m, it's interesting to compare its performance over the five years.
Back in 2001, average sales per site were around the £19,400-per-week mark compared to a figure of £22,000 now. Full-year Ebitda in 2001 was £5.4m, which is £100,000 higher than the figure for the 12 months ended 20 August 2005. Turnover per site has moved ahead slightly, with outlet profit in marginal decay. Its performance suggests that Old Orleans is a fairly stable brand with per venue Ebitda of around £150,000 per annum throughout the period.
It has all the signs of a business that has been
treading water - there certainly haven't been M&B-style sales and profits gains in the past five years. For Regent Inns, the acquisition provides a good third arm to the business to sit alongside its Jongleurs comedy and Walkabout wet-led businesses. In the current high-street climate, Regent is doing well to maintain any degree of sales growth at Walkabout.
It's worth remembering that Walkabout has sales of £38,000 per venue per week anyway, a figure that many operators would give their eye teeth to achieve. The Jongleurs comedy club chain isn't performing as well as Walkabout, but there's no doubt that this is a highly differentiated offer with solid prospects.
Old Orleans has a 50:50 wet:dry split and is a business that should be able to benefit from the continuing boom in the eating-out market. It already has sales of around £6,000 a week more per site than the 239 Whitbread pub restaurants bought by Mitchells & Butlers for £2.1m each two weeks ago. Most Old Orleans sites - 20 of them - are in leisure and retail parks, with 11 of those located in and close to high-street pitches. Its obvious competitors are
businesses like Frankie and Benny's. That Regent was one of eight bidders for the business shows a general belief that the brand has solid growth potential. Regent management has already identified opportunities at Old Orleans. There is a strong belief at Regent that Old Orleans' menus have become too small and too focused on burgers.
Regent management also think they can leverage some of their Walkabout sports and party experience into Old Orleans to create a more peppy dining experience. They also believe that the brand will benefit from being a more strategically significant part of a business than it has been for the past 14 years.
Meanwhile, the sale of Old Orleans is another strong step in Punch's programme of disposals from the Spirit estate, acquired for £2.7bn last November. The £26m sale price is a million more than the figure forecast by analysts, and at five times earnings is not a bad multiple for a business that only has three freeholds. Punch has already sold 290 pubs to GI Partners for £571m. The sale of 45 gastropubs on an individual basis is expected to be wrapped up in the coming fortnight for a total sale price in excess of £100m. By my estimates, Punch will soon have sold 380 Spirit pubs for circa £700m. The sale of around a fifth of the Spirit estate will have raised more than a quarter of the original purchase price.
