The growing split between the owner and the operator of a property already evident in hotels will become common in the pub world within the next five years, predicts Honeycombe Leisure, which is spearheading this development in the sector.
The Preston-based operator of 76 pubs, which last week unveiled a set of robust annual figures, has already struck management deals with three companies and is speaking to a number of other major pub owners.
"We saw it as a good way forward to continue to grow our profit stream without the need for further capital outlay," explained joint chief executive Bryan Wardman.
The big operators with access to cheap money from securitisation would always be able to outbid their smaller rivals for sites and were happy to work on a return on capital as low as 12%, said Wardman. But they couldn't always find good managers to run the sites efficiently.
Groups like Honeycombe, which was set up in 1976, can cut their overheads by providing retailing and management expertise along with established supply contracts.
Honeycombe kick-started this new development last August when it set up Nectar Taverns, a stand-alone company created under the tax-efficient Enterprise Investment Scheme with an £11m facility to buy 20-25 pubs for Honeycombe to manage. To date, the venture has eight pubs, with two more in the pipeline.
In February, it sold 12 managed pubs for £11.72m to Punch Taverns, the UK's second-largest pub owner, but retained their management for 20 years.
It is now looking at potential new sites for Punch to buy and Honeycombe to manage.
The group is also exploring further opportunities with student accommodation provider Jarvis Construction after taking over the management of its bar at the Manchester student village last September.
Honeycombe's strategy of running unbranded pubs away from the tough conditions on the high street appears to be paying dividends. In the year to 27 April, it boosted pre-tax profits by 50% from £1.1m to £1.6m on turnover up 3.8% from £32.5m to £33.7m. Like-for-like sales were 4.3% ahead.
During the year, the group reduced its gearing (its debt-to-equity ratio) to 188% from 288%.
By Angela Frewin
Source: Caterer & Hotelkeeper magazine, 10 - 16 July 2003