By Nikki Daly
The policy of buying up properties that offer accommodation and food will help the Old English Pub Company (OEPC) avoid the pressure on profits at pubs that rely largely on drink sales, says chief executive Barry Warwick.
The company last week snapped up seven hotels from the Forte Heritage chain for £12.5m, 10 hotels from Regal Group for £12.64m, plus 23 assorted pubs, inns and hotels for £19.3m from other vendors.
OEPC was carving a special niche for itself, claimed Warwick. "We are the only company targeting the grey market, the only sector that is growing in terms of disposable income. These purchases will do much to build our income streams," he said.
Warwick's arguments were echoed by brewery and pub analyst Stuart Price, of Credit Suisse First Boston. "The pub market is suffering from over-saturation. We are entering a time of escalating competition, tightening consumer spending and an increasing need for places to be differentiated in the market," he said.
OEPC now has 160 properties, of which 59 are pub-restaurants and 101 are coaching inns.
The acquisitions were part-funded through a £30m rights issue of new shares, more than half of which were taken up by underwriters after a profit warning from Regent Inns made investors wary of the whole pub sector.
But OEPC announced like-for-like sales up 5.1% in the first quarter compared with a year ago. Among its 160 properties revenue for 1998 is forecast to be 22% from accommodation, 41% from food and 37% from drink.
Warwick said further acquisitions were in the pipeline and the group hopes to have 200 properties by 1999.