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Smith & Williamson drinks to EIS

Smith & Williamson is aiming to raise up to £8m for the British Country Inns 3 enterprise investment scheme.

Like the previous two British Country Inns EISs, this new offering will acquire, develop and manage freehold or long leasehold pubs to generate profits and increase the capital value of the pubs in its portfolio. It will follow a similar strategy to those and English Country Inns, which the same team was established in 2000. Its portfolio of 14 pubs was sold to Wolverhampton and Dudley Breweries – now Marston’s – for £13.65m in 2005.

According to the directors of the EIS, the UK pub market is worth an estimated £16.33bn and has become fragmented due to anti-monopoly legislation, with no company having a dominant position. The directors believe there is scope to develop existing pubs into food-orientated places, since food is becoming an increasingly important part of a pub’s turnover. The directors also feel pub-restaurants will be enhanced by recent changes in licensing and the smoking ban being introduced this year, as most diners prefer a non-smoking atmosphere.

The management team will aim to build a portfolio of eight to 10 pubs They will look for existing pubs in a character building, preferably with a garden. The pubs will be food led, featuring fresh local produce where possible and menus will be priced to attract return visitors. The target markets will be families at weekends and a mixture of business people and retired customers during the week.

It is likely the pubs will be located in ‘destination’ areas in the South of England, West Midlands and Wales, so that the pub will be the main focus of customers’ journeys. The management team intends to increase the level of business, make improvements through refurbishment and increase the overall portfolio value.

As an asset-backed EIS, this is lower risk than some schemes because the pubs are properties, which can be sold if necessary. Asset backing is useful because unlike EIS funds that diversify across a number of companies, investors in this single EIS will put all their eggs in a basket of pubs. Another factor for investors to bear in mind is that the scheme’s success depends upon the ability to find suitable pubs that can reach their full potential as pub-restaurants.

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