PracticeConsultingAccountancy Age interviews Chez Gerard’s finance director

Accountancy Age interviews Chez Gerard's finance director

As a finance director, Paul Rivers will soon be bringing all his experience of mergers and expansion to bear on a deal which is causing great excitement.

As chairman of the governors at Abingdon College of Further Education, near where he lives in Oxfordshire, Rivers will lead its merger with the neighbouring college in Whitney.

‘My experience of mergers will come into play then, more so than the board of governors realised when I joined as chairman,’ he explains.But merging the colleges is small fry compared to events in Rivers’ professional life.

As finance director of restaurant company Groupe Chez Gerard, Rivers is taking a leading role in the group’s expansion programme across the UK.From its traditional London-centric business, the group now needs to expand outside the capital if it is to survive in a prolific marketplace.

The group already has 24 outlets. Its two main brands account for 15 outlets – 10 Chez Gerard steak restaurants and five Livebait fish restaurants. It also has five other restaurants and four Richoux coffee houses, but these will not be part of the company’s expansion.

The two core brands will be rolled-out across the UK where Rivers hopes they will attract the same sort of diners as those who visit the restaurants in London.On the menu are Glasgow, Edinburgh, Manchester, Leeds, Birmingham and Bristol. The group is also examining the scope for Livebait in cities like Oxford and Cambridge.

The development programme will be funded from existing facilities. As well as cashflow, the group still has £3.7m of a £10m bank facility, which it expects will fund around five new sites. It is also considering sale and leaseback of its two properties in London’s Charlotte Street.

So how did an Oxford chemistry graduate move into the commercial world to a position helping to manage an emerging national restaurant chain?For Rivers it was easy. He simply studied to be a chartered accountant and took every opportunity put before him to expand his experience and develop his career.

After graduation, Rivers was looking for a more general qualification that would give him a foot into the door of business. Accountancy was his choice, although he had no intention of being an accountant long-term.While enjoying his training with Price Waterhouse in London, Rivers says he soon kicked against being part of such a large organisation. Around 400 graduates were taken on by the firm in the capital alone in the year he joined.

‘I always slightly rebelled against being a cog within a large organisation,’ he says.So after three years with PW, Rivers moved back to Oxford to join Grant Thornton where he stayed for five-and-a-half years. Then on the verge of partnership, business beckoned. And Rivers was ready to go.

‘I was just weighing up whether or not I wanted partnership when an opportunity came up to join what was probably my largest client,’ he says.The move saw Rivers join Oxfordshire brewery Morland as head of finance. He was later to become FD.

Joining Morland was an opportunity too good to resist. Rivers was in the rare position of being offered a head of finance position straight out of practice.’It was quite unusual. It was one of the reasons I jumped as it was such a good opportunity,’ he explains. ‘I was to be the number one finance person in the group.’

At the time of his arrival at Morland it was a small quoted company with a £16m market capitalisation and £2m pre-tax profits. Brewing giant Whitbread held a 40% stake in the business, which protected it from full exposure to the harsh realities of City life.What changed the scenario somewhat were the government beer orders in the early 1990s, which forced breweries to break their monopoly holdings. Designed to prevent national and regional monopolies by UK brewers, many swapped holdings in an attempt to adhere to the ruling.

The beer orders prompted Whitbread to dispose of its shares in Morland. And this launched one of the most ‘exciting’ times in Rivers’ life so far, he says. He was soon to learn the ins and outs of merger and acquisition accounting during a hostile takeover bid by rival brewery Greene King.Greene King started out its takeover battle with 44% of Morland shares and finished up 60 days later with just 44.1% of the shares. It was a valuable lesson for Rivers.

‘Having seen off Greene King the company grew. We did a number of deals and bought a number of pubs and brands,’ he says.By the time Rivers left in 1998, Morland was worth £170m and was making profits of around £15m – almost 10 times the size of the brewery he had joined.

A desire to change direction led him to spend time in an interim management position. This proved temporary however, and Rivers landed his next post in January 1999 as FD at Groupe Chez Gerard.The move will let him put into practice the lessons he learned at Morland. Rivers looks to be handling more M&A activity if Chez Gerard is as successful as the management hopes it will be.

But the business will not succeed on hope along. A good deal of hard work has to be put in to make the expansion a success and transfer a stable of the middle market London restaurant scene to the rest of the UK.Rivers is fond of saying Chez Gerard was previously run by founders Lawrence Isaacson and Neville Abrahams with ‘artistic entrepreneurial flair’. But he is also quick to point that the new management team – including chief executive David Williams – will add a ‘scientific and analytical’ approach to the business.

‘What we are doing now is say we want to build on that. We don’t want to lose the flair but if we want to move out from having 10 to 15 restaurants to having 100 restaurants nationwide – which is our ambition – we have to overlay that,’ Rivers explains.With the solid foundations already in place, the business must now be taken forward more aggressively. Financial disciplines such as budgeting, forecasting and capital investment must be instilled.

Rivers is also keen to establish a system of risk management to protect and defend the business and alert managers to potential problems almost before they come up.The group has shown the mettle of its expansion plans with the opening of its newest restaurant within the departure lounge of the Heathrow Airport Terminal 3 building. Taking orders for the first time on 20 April, the restaurant was open just in time for the Easter holiday rush.

Airport operator BAA approached Chez Gerard in the first instance but now they are in, Rivers says the company is keen to establish a new standard for airport catering in locations throughout the world.

And the thinking behind such a venture seems sound enough. Heathrow Terminal 3 has the longest wait time within the UK for passengers in transit. The average wait-time is between three-and-a-half and four hours, so hungry travellers are always on hand.

‘The idea for us is that there is pretty much a captive audience from six in the morning until 10 at night. The potential for this site is astronomical,’ Rivers explains.

‘The exciting thing for Chez Gerard is that we have a number of options that are not at the moment fully exploited or developed.’Opening new outlets is not the only opportunity in airport catering. Acquiring competitors in the sector is also an option. Rivers ‘confidently predicts’ there will be consolidation of the restaurant sector over the next two or three years. His job now is to make sure Chez Gerard is in a position to be an acquirer.’When we can get back into looking at corporate activity perhaps 18 months to two years down the tunnel, we can move to a different level of activity. I would like to be at the forefront of that as I’ve got experience of acquisitions, doing rights issues and all that good stuff,’ Rivers says.

Rivers is discreet about potential targets, but he reveals that Chez Gerard would look to acquire operations on prime sites.Certainly the group will hope to avoid acquisitions like the disastrous Richoux coffee shop deal which dented performance and confidence just as the new management team arrived. The move caused not a little shareholder anxiety and uncertainty – from which the company has yet to fully recover.

At a £40m market capitalisation the business needs to get bigger, says Rivers. He is aiming for a robust £250m – most of which can be driven through organic growth with Chez Gerard and Livebait outlets, he believes.’The reason we are rolling out these two brands is that we can make a lot of money from doing so,’ he jokes.It is a recipe he hopes will prove irresistibly mouth-watering for the public too.

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