The Investment Column: The pub chain with no theme

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The Independent Online
Pub chains have been one of the easiest ways to make money so far in the 1990s, both for those lucky or astute enough to set them up and flog them on to the majors and for other shareholders who have ridden the wave. Discovery Inns, yet another product of the 1989 beer orders, is the latest to jump on the bandwagon - after pricing in early December, the shares should be trading by Christmas.

Discovery is slightly difficult to categorise, positioned halfway between the managed themed chains such as Wetherspoon and Tom Cobleigh and the groups of tenanted pubs run by the likes of Enterprise and Century. With 45 managed pubs - all maintaining their own character, not a centrally determined theme - and 234 tenanted outlets, Discovery is a bit of both and will presumably be priced as such.

Set up in 1992 as a vehicle to acquire 223 pubs from Whitbread in England and South Wales, the chain has been added to subsequently with purchases from Marstons and Allied Domecq. The focus is now expected to be on expanding the relatively small managed portfolio, but the cash-generative tenanted pubs will remain as a 200-strong core to help fund expansion of the other leg.

After the proposed exit of the original venture capital backers, led by Kleinwort Benson, Discovery is pitching itself to investors (who are frankly beginning to have had their fill of pub chains) as a non-fashion led, traditional chain of pubs, designed not to need regular refurbs and so generate a decent return on capital. It is a commendable resistance to the relentless trivialising of the country's pubs and for that, if nothing else, deserves support.

For less sentimental reasons, Discovery looks likely to be a reasonable bet. Operating profits have grown smartly from 1994's pounds 2.35m to the pounds 5.11m achieved in the year to September and the board has a wealth of experience gleaned from years at Devenish and Courage. All will depend on how ambitious the pricing is next month.