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“I love pubs and I believe in going to a pub regularly.” So says 44-year-old Ronald Turnbull, FD of Pubmaster Limited, a company operating a chain of 2,000 tenanted pubs in the UK. He also loves finance. During his eight years with Pubmaster he has negotiated a management buy-out, a ground-breaking securitisation and several business acquisitions, transforming a spin-off from the ashes of a bust company into an attractive investment worth half a billion pounds.

Turnbull began his career at Price Waterhouse with a view to staying in the organisation. “In 1991 I was a senior manager and was ambitious to move up the partnership ladder,” he says, “and I was afforded the opportunity to move to London to work as personal assistant to the technical partner for Price Waterhouse practice matters in Europe.” But it was at this point that Turnbull’s affair with the pub industry began. He was responsible for client affairs for the Vaux Group and gained valuable insight into the operations of hotels, breweries and tenanted pubs. In 1992 he was offered the opportunity to cut his industry teeth at Maple Leaf Inns, a joint venture between Labatt, the Canadian brewers, and Pubmaster, then owned by Brent Walker.

“Although I grabbed the opportunity to work at Pubmaster with both hands,” says Turnbull, “the culture shock of moving from a professional environment to industry took me completely by surprise. At Price Waterhouse I was surrounded by high-powered and thoughtful individuals – I was confident that there would always be someone around with the answer to any problem. This is not always true in industry.”

Turnbull became financial controller for Maple Leaf Inns during the dark days of Brent Walker where he encountered more problems than answers. Brent Walker had run up debts of #15bn, and Standard Chartered Bank, the lead bank looking after the interests of more than 60 lenders, needed a vehicle to provide best return from 1,000 of Brent Walker’s pubs. Pubmaster was born.

Even in the shadow of the Brent Walker scandal, Turnbull knew the pub trade was about to offer up a number of exciting opportunities. “The Beer Orders of 1989 forced breweries to divest 12,000 pubs in the interests of competition within the sector. This gave Pubmaster the ideal opportunity to gain critical mass. Under Brent Walker we were encouraged to invest and develop in the managed house and branded market but that investment was not forthcoming.”

Pubmaster therefore had to take advantage of the vast numbers of pubs coming onto the market without breaking the bank. “We wanted a quick return on investment,” he says, “and that was only afforded by tenanted pubs. We could identify pubs that would do very well in a particular segment of the market but wouldn’t cost #200,000. We could find tenant licensees who would invest their own money in each individual pub.”

Currently Pubmaster operates a portfolio of 2,000 tenanted pubs. It owns the freehold, leases the property to a licensee, supplies drinks and takes 50% of revenues from gaming machines. The licensee in return runs their own business, has somewhere to live and benefits from discounts that Pubmaster negotiates with big breweries such as Carlsberg Tetley, Bass and Whitbread.

Pubmaster has thrived by concentrating on the community market where the traditional boozer and family pub are more important than trendy wine bars and Irish-flavoured fare. “The tenanted pub business means that we are not as susceptible to the vagaries of the fashion- and theme-led market that seems to be the staple of the managed house outlets you see on the high street,” Turnbull says.

There is obviously still a market for community pubs despite the All-Bar-One revolution. Pubmaster boasted a turnover of #109.5m last year, with EBITDA of #42.5m and retained profits of #2m. And all this from being dead-in-the-water ten years ago.

Turnbull owes much of Pubmaster’s financial success to Brent Walker’s failure. “As the financing for Maple Leaf was coming from Canada I was playing a cameo role at Pubmaster and never considered myself to be working directly for Brent Walker. But John Sands, then MD of Pubmaster, asked me to sit on a panel carrying out a review of operations in May 1993. In six months I had a keen insight into the whole Brent Walker operation that I would not have got through purely discharging my financial duties,” he says.

Maple Leaf Inns did not progress but Turnbull consolidated his relationship with John Sands and joined Pubmaster as chief financial accountant later that year. Turnbull was quick to learn from Brent Walker’s mistakes. “It reported profits rising exponentially year on year by using accounting tricks,” he says. “My philosophy at Pubmaster is that you have to go back to cash. Our prime management indicator is EBITDA.”

While keeping an eye on the cash, Turnbull began to concentrate on the financial and operational growth of the company. Pubmaster had entered into lease arrangements in 1992 with Allied Breweries and Whitbread for 700 and 200 tenanted pubs respectively, bringing Pubmaster’s tally to 2,000 pubs nationwide. But Turnbull was keen to divest the company of excess baggage. “Because we were working with tight cash management the first part of our business model was to sell off under-performing assets. We could reinvest money into the business, building opportunities within the existing estate as well as acquiring solus pubs as opportunities arose,” he says.

Much needed financing came in the form of a management buyout in 1996. It was led by a VC-backed consortium comprising Natwest Ventures, Prudential Venture Managers and BC Partners. (NatWest and Prudential later became Bridgepoint Capital and PPM Ventures respectively.) The deal was worth #171m, with #95m from syndicated bank debt through HSBC and #80m from the VCs and management.

The lessons of Brent Walker again came into play when setting up the MBO. “I learnt to deal with banks, with provision of information and cash-flow management,” says Turnbull. “We were able to develop our strategy and operate within financial constraints. This was one of the big selling points in terms of influencing investors.”

Turnbull always knew that investors would have to stay on the Pubmaster train for longer than usual – his strategy has always been to reinvest and grow the business rather than provide quick cash return for the VCs. He is quick to applaud Bridgepoint and PPM for their patience: “They made a brave decision. Traditional VCs expect to be in and out within three years. Investment in Pubmaster was always going to take an extra year or two.”

Extra cash was generated immediately after the MBO with the sale of all Pubmaster’s 86 managed houses for #36m, and disposal of a gaming subsidiary to Bass for #5m. Turnbull could spend this cash in several ways. “I asked myself – why don’t I repay some of the syndicated debt? Why don’t I pay off some of the loans that the VCs have contributed? But that was not my financial strategy. The VCs had the foresight to see that by sitting on the money we could wait for the right acquisition opportunities to come along,” he says.

Despite a surfeit of potential acquisitions, Turnbull stood his ground and waited for the best deals. A dozen rejected purchases and one year later, Pubmaster acquired the 54 tenanted pubs of Devonshire Pub Company for #17m in June 1998, as well as 152 pubs from Mercury Taverns plc for #35m.

But Turnbull knew that in order to achieve critical mass the business would have to raise more cash to fund further acquisitions. In addition, Pubmaster was paying about #4m in rent on the Allied and Whitbread leases. “It didn’t take long, perhaps a year or two, before those leases became quite onerous as they were indexed up with RPI,” he says.

In March 1999 Turnbull was asked to become Pubmaster’s financial director by chief executive John Sands when the previous FD returned to his native Ireland. With his new-found status, Turnbull lost no time finding new investors, and hit upon a novel financing methodology. “We had to look for a form of financing that would fit our long-term strategy,” he says, “and we were introduced to the concept of securitisation. But we needed to negotiate the terms of the covenant with institutional investors so that we would have maximum flexibility.”

Turnbull needed to convince investors that the company’s management had to retain complete control of the company to ensure success. He wanted to be able to sell and acquire assets without repeatedly returning to the security trustee for approval. “We were pioneering the mentality that the management needs to run the business without restraints,” he says. “This is in contrast to the traditional model of securitisation where you take a host of properties and ring-fence them, so that all the mortgages, rents and so on, go directly to the bond holders.”

Pubmaster’s bond issue was 50% over-subscribed and in July 1999 the securitisation succeeded in raising #305m against DTZ’s valuation of #364m for the whole business. Of this, #120m was used to pay off the syndicated debt from HSBC, and #110m was used to buy the freeholds of the company’s leased pubs from Scottish Amicable, wiping #4m off Pubmaster’s rent expenditure into the bargain. A further #35m was deposited in separate acquisition accounts to ensure the company could purchase businesses quickly without having to raise more cash.

Of the remaining funds generated, Turnbull used #30m as bridging finance for the acquisition of Swallow Group’s 662 tenanted pubs. The Swallow deal was worth #127.5m, including #2m for debts, and it consolidated Pubmaster’s position at the forefront of the UK tenanted pub business.

This was a stressful time for Turnbull. “We were faced with a one-week gap between securitisation closing and having to complete the acquisitions from Scottish Amicable. At the same time I had been negotiating the Swallow deal. We completed the acquisition of Swallow’s pubs on 16th July 1999 – two weeks after Pubmaster’s restructuring.” The hectic schedule took its toll, but Turnbull insists you have to get your priorities right.

“After each transaction I took a week off to recover and spend time with my family. You have to reconcile your family’s personal strategy with business financial strategy.”

Pubmaster began 2000 with a new round of financing. February 2000 saw additional securitisation of the Swallow estate, raising #109m through an issue arranged by Barclays Capital and Deutsche Bank. By this time, Pubmaster operated 2,000 pubs and was selling 370,000 barrels of beer per annum.

Last orders come in the guise of the Pubmaster Group sale in December 2000 to Pubmistress for #550m, finally providing a lucrative exit for Bridgepoint, PPM and BC. Pubmistress is an acquisition vehicle comprising property investors WestLB, Rotch Property Group and St Modwen Properties, which are already contributing management expertise. “Rotch is innovative in putting together financial structures to execute property transactions. St Modwen is providing development expertise,” Turnbull says.

With these skills behind it, it is expected that Pubmaster will be vying for the #3bn worth of pub properties flooding the market this year as Whitbread, Scottish & Newcastle and Bass dispose of pub assets. The sheer numbers of properties available may also help Pubmaster fill some of the geographical gaps in its portfolio, such as London, the South-West, Wales and Scotland.

Despite building the company from the outset, Turnbull found it difficult to push the Pubmistress deal. “The management were vendors, but also acquirers. We knew that if the Pubmistress deal went though, management’s investment in the new vehicle would be significantly enhanced so there was a conflict of interest. We couldn’t drive the deal in the way we had driven the securitisation. Nevertheless, John Sands and myself were the key points of reference for all concerned.”

It is easy to see why Turnbull was so keen for the deal to go through. Pubmaster’s management team increased their stake in the company from 8% in 1996 to 22% after the sale – a four-fold increase in money terms. And management’s stake may increase to 25% if financial targets are met in the next few years. “This gives us the incentive to perform,” says Turnbull. And if he delivers, drinks should be on the house.


Name: Ronald Turnbull

Age: 44

Qualification: ACA


1999-: FD, Pubmaster

1994-1999: Financial Controller, Pubmaster

1993-1994: Chief Financial Accountant, Pubmaster

1992-1993: Financial Controller, Maple Leaf Inns

1988-1992: Senior Audit Manager, Price Waterhouse

1975-1988: Thomson McLintock

Turnbull on being an FD: You can hire the best experts and consultants money can buy but at the end of the day it is the person who knows the business, the financial director, who implements the advice.

Turnbull on securitisation: We were 50% over-subscribed for the securitisation which was a great boost to us. We received an accolade in the International Financing Review which said that Pubmaster has become the benchmark bond for the pub industry.

Turnbull on the future of Pubmaster: With pubs worth in excess of #3bn currently on the market we are staring at a huge opportunity and we have the right platform to make acquisitions. We intend to become a major consolidator in the tenanted pub industry. We are not in a rush to the stock market however. This business is financed on the ideal footing currently.

Turnbull on pub life: At my age I get great enjoyment listening to 60- and 70-year-old regulars. They have so much experience. It is also interesting to meet younger regulars who may look to me for some kind of advice or counsel.


The securitisation deal that Turnbull put together was designed to provide cheap loan capital and a certain amount of operational and financial flexibility. The key element was to ring fence the operating subsidiary (which owned the pubs themselves) with a sister company, registered in the Cayman Islands, which borrowed the money. Both of these were subsidiaries of a holding company, and the three companies comprised the ring-fenced securitisation group.

Over and above this is the parent Pubmaster Group Ltd, which is the vehicle in which the venture capitalists and management hold stakes. As long as the operating businesses within the securitisation group generate enough cash to finance the securitised debt, surplus cash can be paid up to the parent group to pay dividends. If not, loan note holders get first bite at the assets.

Even then, there is a facility (undrawn, so far) provided by Lloyds TSB by which Pubmaster gets two years’ breathing space if things start to go wrong (the covenants include a requirement that EBITDA interest cover be at least 1.25 times).

This structure helped reduce debt costs as all four series of loan notes were highly rated: three were single-A, and the fourth was triple-B.

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