Case Study: RedCat Pub Company and the story behind it’s extraordinary growth

RedCat describes itself as a ‘fast-growing pub company with soul, placing pubs at the heart of the community’. And it is exactly that. Since its inception in 2021, it has built up a portfolio of over 100 pubs and pub hotels on its books. But where did such rapid growth come from?

The first is deep pockets. The company is backed by Oaktree Capital Management, who have raised at least £200M of equity to invest in the UK pub sector. Combining this with senior borrowing facilities (available up to 50% of the value of acquisitions) this provides RedCat with a serious acquisition fund. At face value, this acquisition strategy seems to be a very smart move. CGA reports that in the last 2 decades, 40,000 pubs have closed and pub numbers are at the lowest since the tracker began. The impact of this is twofold, lower competition and a host of deals appearing on the market.

It is these deals that RedCat Pub Company are exercising fully. Last August (2022) they acquired the 18 pub-strong Coaching Inn Group, which owned a series of coaching inns within market towns. It has since grown to 26 coaching inns. Other acquisitions include a purchase of 42 pubs in England and Wales from Stonegate, who are suffering from high interest rates on their soon-to-mature debt.

How have these acquisitions performed? Well based on the most recent set of financial figures (from April 2021 to April 2022) very well. They turned over £62,790,800, representing a turnover of £586,829 revenue per site – which is 25% higher than the average pre-pandemic pub turnover in 2019 (per British Pub Association). This portfolio also produced an Adjusted EBITDA of £7.2M.

For this revenue, they deployed £118M, representing a rough price of £1.1M per site or a multiple of 1.88x total revenue or 16x EBITDA. At face value, this seems significantly above the 7x – 8x EBITDA multiples seen in the pre-pandemic period (BDO). So why is there such optimism in their continued acquisitions and statements?

• Their £118M investment acquired £168M in tangible assets, representing value for money in the acquisitions.

• These multiples are based on 2021 revenue figures. As an example, the acquisition of Coaching Inn Group based on 2019s revenue of £24.9M represented a 1.04x revenue multiple and a 7.97x EBITDA multiple.

Moreover, this company is also headed up by Rooney Anand, the ex-CEO of Greene King. When Rooney Anand took over in 2004, Greene King had 1,998 pubs. Today, it has over 2,800 while turnover has quadrupled to £2.2bn.

So it seems like RedCat is investing in quality assets that are only being sold due to the lingering impact of the pandemic. Combining this with Anand’s track record of improving revenues – it seems clear why the company is using debt to its fullest potential and funds are putting serious money behind it.