Just as we were finalising the June/July edition, a story emerged about Young’s selling off the Ram Pub Company (RPC), which is the holding company for their tenanted pubs. At that time, Young’s said in a statement to the Stock Exchange, “The Company confirms that Savills has been appointed and that it is in discussions regarding a possible sale. There can be no certainty, however, that any sale will proceed.” On 12 July, the company made a further statement to the Stock Market announcing that it had ‘agreed to sell most of its tenanted estate to Punch Pubs and Co for £53 million’. The sale is scheduled to complete on 9 August. Only 56 of the 63 RPC pubs are to be sold. Young’s are retaining the other seven pubs for the long term. The identity of these pubs has not been revealed but there are five hotels in the RPC portfolio and that might be a clue. This includes the Spread Eagle in Wandsworth which is due to become the company headquarters when the current refurbishment is complete. The last list that I have of RPC pubs includes 64 pubs in total; four in the City and West End, 23 in inner London, 16 in outer London and 21 outside London.
The second statement explained, “As part of its strategy to create long-term sustainable shareholder value, Young’s regularly reviews its capital allocation priorities. Following the review, the board decided that the best way to increase value for shareholders was to withdraw from the tenanted model and focus solely on operating premium, individual, differentiated and predominantly freehold managed pubs and hotels.” RPC pubs are reported to bring in just 5% of Young’s total revenue compared to its 200 managed pubs. It said in the stock market announcement that, for the last full financial year, RPC pubs had brought in adjusted earnings of £4.7 million. It is sad that Young’s feel that tenanted pubs, once the backbone of the company, no longer fit their model. There are some very special pubs in the tranche to be sold.
Young’s latest figures, for the year to 29 March, show a loss before tax of £45.2 million. The announcement of the sale however saw the share price increase by 24p to £16.39. Patrick Dardis, Young’s chief executive commented, “Young’s sole focus will now be on operating well-invested and premium managed pubs and hotels. We have a proven history of making attractive returns from investing in high- quality pubs and this disposal will provide us with additional firepower to upgrade our existing pubs and capitalise on attractive acquisition opportunities that may come to the market. During lockdown, we invested a total of £17 million in improving the pubs in our managed estate and the purchase of two new pubs, Enderby House in Greenwich and Alban’s Well in St Albans. We are delighted to be welcoming back our customers and are already seeing encouraging trading, despite some restrictions remaining. The board is confident Young’s will emerge from the pandemic in a stronger position and is excited about the future of the business.”
The purchasers, Punch Pubs, are a different organisation from the Punch Taverns of old. The current incarnation dates back to August 2017 when Punch Taverns was taken over jointly by Heineken and private equity company Patron Capital, partnered by May Capital. Punch’s 3,000 pubs were split between them, with 1,900 going to Heineken (Star Pubs & Bars) and 1,100 to Patron. Patron decided to use Punch as a trading name. Their chief executive, Clive Chesser, said, “It is a privilege for us to become the new custodians of such a wonderful and high quality collection of pubs, and we look forward to working alongside the talented and passionate tenants and lessees who run them so well. They will be a great addition to the Punch estate, and this acquisition represents an extremely positive step for our business as we emerge from the crisis of the pandemic and head towards the long-awaited lifting of trading restrictions next week. I would like to thank Patrick Dardis and his team at Young’s for working so collaboratively with us on this deal, and I look forward to extending a warm welcome to our new team members and business partners.”
As they operated less than 500 tenanted pubs, Young’s were not subject to the Pubs Code. The tenants of the pubs being sold will however come under the Code’s provisions from the start of Punch’s next financial year. It would have been nice if the pub tenants could have been given some sort of option to buy, although raising the money at this time would not be easy.
It will be interesting to see if Young’s beers, now brewed by the Carlsberg Marstons Beer Company, of course, remain available under Punch or if this could be the thin end of the wedge for their survival. Either way, let’s hope that we will also see guest beers from local breweries.