Kevan Fullerton, 52, and Scott Piatkowski, 45, are the directors of Bruce Taverns. Jason Caddy caught up with Kevan at one of their pubs, The George lV bar, to discuss some pretty ambitious expansion plans for the business.
Edinburgh-based Bruce Taverns is 20 years old this year and is ambitiously looking to expand its 22-unit estate to around the 100 mark in the next three to five years. While one of the directors, Scott Piatkowski, was enjoying a family holiday in Orlando, the other one, Kevan Fullerton, met me in the George lV bar for a chat about the company’s expansion plans, which are Scotland wide.
The pub was doing a roaring trade on a sunny day in Edinburgh, and rather than make do with the entire business turning over £7.5m last year (with projections to turnover £12.5m this year), they’re raising a bond in order to raise £20m to boost their estate, which includes The Fiddlers Arms as well as other city venues, like Whistle Binkies, Stramash and La Belle Angele.
Explained Kevan, “Our first program is a £20m raise, the purpose of which is to expand the tenanted side of the estate and we see an opportunity to grow an estate of 80 to 100 pubs. They’re going to be good quality pubs and we aim to do this over the next two to three years. We have ten tenanted pubs at the moment and we’re looking to expand throughout Scotland, not just stick to the Edinburgh area. The idea is to build an estate of pubs that look like pubs, with individual characters. They’re all going to be under one banner but each which will have its own identity.
“We’ve had a very supportive lender in the form of the bank up to now but there’s only so far that we can go with a lender, which is why we’re raising a bond.”
I wasn’t absolutely clear on what a bond is, so Kevan kindly explained. “A bond is a debt instrument so it pays a coupon. It pays an annual interest rate of 7.2 percent over a three-year period. So essentially people are lending the money like a bank and at the end of that three-year period, the money is returned. This particular bond is created on the NEX Exchange so, just like shares, you can sell your individual bond coupon so you don’t have to hold onto it for the whole three years.
You can exchange or sell the bond or alternatively you can buy more bonds if you want. The unique thing about it is that it’s listed on the exchange so there is some trading and liquidity in the bond.
He continued, “We have a broker in London that introduces us to various hedge funds, family offices. They’re essentially road-shows where you present the bond. You walk into a room full of people that have all seen it 100 times before and they say pitch me this. A bunch of cynical investors who have got ten minutes to be persuaded why they should part with their money.”
And as Kevan explained, this has been a while in the making, “We spent most of last year essentially building the vehicle, the plc, and that was a year’s worth of work and now it’s the fundraising to raise money.
Bruce Pubs plc and collectively it’s the Bruce Group, under which comes Bruce Taverns and Bruce Bars.
So why have the guys decided to down this route now? Aren’t he and Scott tempted to put their feet up? Said Kevan, “It’s a great buying opportunity. I feel that pubs are out of favour investment-wise which is depressing prices a little bit so it’s a good opportunity for us to buy on the supply side. There aren’t a great many operators taking advantage of this opportunity. We are looking to build a good quality pub estate which we ‘re looking to hold onto for a long time. Over the long term, pubs are very robust and very resilient trading businesses.”
I asked him if he was at all tempted to sell so that he and Scott could both put their feet up, to which he replied, “I could get a big pile of money, but what would I do? These assets are doing very well at the moment, plus I get a kick out of it.
And what does Kevan think are the biggest challenges affecting the business at the moment? He said, “Pubs have got to be dynamic and adapting and changing. There’s also rising costs and the minimum wage, always a challenge. Rates had a big increase in the last year and we have a number of rates reviews happening at the moment. They did jump dramatically over that time. Rising costs are always a challenge, not so much in the city centre but in those outlying areas. The cost goes up.”
The guys are also doing some interesting things with their managed estate, while Scott is building a hotel as a side-line. Said Kevan, “On the managed side we are doing a lot of interesting things at the moment.
We’re opening a new pub on the Royal Mile in the New Waverley development in time for the festival, called MacKay’s on the Mile. Like the ‘Bruce’ in Bruce Taverns, it’s a good Scottish name – but this one has something to do with Scott’s grandma!
He continued, “We are also looking at doing a hotel development down on the Cowgate. We are just at the stage of putting together the case to apply for planning permission. There’s a year’s worth of work just to get to this stage. It’s directly opposite the new Virgin Hotel that’s been built there.
So how did it all begin for Kevan and Scott, and how does it work for the pair who are also friends as well as business partners. Said Kevan, “Scott is 45 and I am 52. I have known Scott for 30 years. We kind of grew up together. He and my younger brother knew one another. Scott came into the pub one day and said would you like to go into pubs? And here we are 25 years later.
“I was born in Glasgow but grew up in Glenrothes, which is where Scott is from. I went to university in Edinburgh. We have worked together for over 20 years and it all began when we bought one pub and made some money and then another and so on and so forth. Scott has a trade background, having worked in pubs whereas my background is actually engineering. I worked with Siemens as an account manager and then I set up a call centre on the west coast and sold that when I was about 25, so I had a few bob in my pocket and at that age, you think you’ve arrived, and then I realised that I hadn’t.”
He continued, “We have never had an argument, occasionally disagree. It just seems to work. Scott is more involved in the property whereas I am general managing and the finance, plus we are supported by a good ops guy. So I raise the money, Scott builds the pub and we have a chap that manages the ops side. We are supported by book-keepers, some marketing people and
Believe it or not, they do have time to pursue interests outside of the job. Explained Kevan, “My hobbies are snowboarding. We go every year to North America snowboarding over Christmas. Scott spends a lot of time in pubs. When it’s your own business it’s a lifestyle thing. We spend a lot of time property developing, training and raising money.
We’ve also run bars at music festivals for a number of years including Glastonbury. So over the past 15 years, we have done Glastonbury, Download, the V Festival and the Olympic Games in 2012, and the events side is a fun thing to do. There’s no financial involvement.
And speaking of music, Bruce Taverns has a few live music venues in its portfolio, and none other than Lewis Capaldi was headlining one of them the week I interviewed Kevan. He explained, “Our music venues are Stramash, Whistle Binkies, La Belle Angele and The Mash House. Lewis Capaldi is playing three gigs at La Belle this week.
There’s quite a lot involved like booking the bands and they are quite a difficult bunch to work with and they are supported by our head office team. Our business is growing a lot too. We currently employ around 260 and we have made a lot of investment in our venues in the past year with new venues. As I said, last year we turned over £7.5m and to June this year we are projected to turnover £12.5m and the year after that we expect to grow another 15 to 20 percent again – depending on how much money I raise of course.”
In terms of the future, Kevan is warm to the idea of partnering with craft breweries. He said, “I see an interesting opportunity with craft brewers. Some of them may be interested in working with us because we’ve got a retail estate and they’ve got a brewery. I admire Innis and Gunn.
They’re a good Scottish success story. I also admire Caledonian Heritable, they are well established and we have done some work with them in the past. Signature Pubs’ Cold Town brewery. Billy Lowe has always been a good op for a number of years and is someone we have a lot of respect for. We don’t really compete, we have each got our own reach.”