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Smith & Williamson favours pubs in the country

Smith & Williamson is aiming to raise up to £8m through two share offers for the British Country Inns 2 enterprise investment scheme,

British Country Inns 1 raised around £7.5m earlier this year and to date it has bought four pub units with a further four currently under offer. The existing funds are likely to be fully invested this month.

The new EIS will comprise a portfolio of up to 10 pubs. Up to £1.689m will be generated through the first share offer that has a minimum investment set at £5,000. The second offer will raise up to £6.311m, with a minimum investment of £35,000.

The EIS will provide growth by increasing the turnover of the businesses and increasing the capital value of the properties – for example, through refurbishment and development.

The executive directors of the company are Tim Udell and Peter Mathews, who were behind the English Country Inns EIS. Its portfolio of 14 pubs was sold to Wolverhampton and Dudley Breweries in September 2005 for £13.65m.

The management team will use a similar strategy for the new EIS, looking for existing pubs in a character building, preferably with a garden. The pubs will be food led, featuring fresh local produce where possible. 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.

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 feel pub-restaurants will be enhanced by recent changes in licensing and proposals to ban smoking, as most diners prefer a non-smoking atmosphere.

As an asset-backed EIS, this lowers risk than some schemes because the pubs are properties that can be sold if necessary. However, under EIS rules 80 per cent of the money raised after the deduction of costs must be invested in the first 12 months otherwise the EIS tax relief will be withdrawn. However, the team have a good track record at doing this.

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