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Morning Briefing for pub, restaurant and food wervice operators

Mon 3rd Sep 2012 - Oakman, Peach and Costa Coffee

Story of the day:

Oakman Inns to explore private equity investment: Oakman Inns, the Hertfordshire-based operator of six pubs led by Peter Borg-Neal, is to explore private equity investment in the wake of acquiring another freehold. The company has bought a former Berni Inns site, The Crown and Thistle in Abingdon, for £1.6m. Oakman plans to trade the 19-bedroom site into early 2013 before investing £1.4m on the site. The acquisition of the site has been funded internally but now Oakman plans to explore external funding. Borg-Neal said: “We are about to look at external funding but we will only do it if we like (the deal).” Oakman’s expansion comes on the back of an excellent start to the new financial year. For the eighteen weeks ending 5 August 2012 the business achieved overall sales growth of 21.52 per cent and like-for-like growth of 5.26 per cent. Average sales per outlet of the five core Oakman sites averaged just under £31,000 net per week for the period. Borg-Neal added: “We’re delighted with our performance in the first part of the year which is clearly well ahead of the market. It is a reward for the tremendous passion and hard work of our people. To us it is about three core pillars: great people, great buildings and a great concept. All three need constant attention, care and lots of love. The Crown and Thistle is a tremendous addition to our collection. It has taken us nearly a year to bring this deal to fruition and I am delighted to finally get it over the line.” The company also has a stake in the British Larder gastropub in Suffolk, a Punch Taverns pub run by Ross Pike and Madeline Bonvini-Hamel. The venue achieved 15.13 per cent like-for-like sales growth in the first 18 weeks of its financial year but Oakman is looking to sell part of its stake to focus on its core business and raise capital for the concept’s expansion. “We will remain as shareholders and supportive friends but it is now time for them to become more independent of us,” said Borg-Neal. Oakman also has two other acquisitions in the pipeline.

Industry news:

Propel Info recruits sales and marketing director: Propel Info has recruited Sharon Dickinson as its new sales and marketing director. Dickinson, who joins Propel on Monday 10 September, has previously worked for Pub & Bar magazine and the Publican’s Morning Advertiser. Paul Charity, Propel managing director, said: “We are delighted to have Sharon joining us. I enjoyed worked with Sharon for many years on the Publican’s Morning Advertiser (PMA) and I can’t think of anyone better to help us with the next phase of our development.” Dickinson said: “I have watched with interest as Propel has developed its Morning Briefing product and have heard first-hand from many operators how much they appreciate its content. So I naturally jumped at the chance to work with Paul and Jo Charity and their team at Propel, not least because of the exciting plans in store.” 

Financial Times – independent gastropub is thriving: A 3,000 word article in The Financial Times has argued that the independent gastropub is thriving. The article named a dozen companies, including many members of the Association of Licensed Multiple Retailers (ALMR), who are at the forefront of the development of quality pubs. Alastair Scott, whose Malvern Inns runs two Punch Taverns pubs, told the FT: “What we’re seeing now is a very distinct trend at the top of the market - the rise and rise of more and more smaller, nimble pub companies with anything between two and 15 sites. What’s so exciting is the way they’re not going down the branded route. And in so doing, they are literally transforming the pub landscape by targeting a much more affluent demographic.”

Deadline for minimum wage survey looms: The deadline for operators to take part in a survey on the National Minimum Wage being conducted by the Association of Licensed Multiple Retailers (ALMR) is this Wednesday (5 September). The survey will inform the ALMR’s submission to the Low Pay Commission’s 2013 Report, which this year focuses particularly on the value of the Accommodation Offset and the rate for young workers and apprentices. Kate Nichols, strategic affairs director of the ALMR, said: “Thanks in part to our lobbying, last year youth rates were frozen and the offset retained. The ALMR’s data has featured prominently in previous reports due to the strength of our evidence base and so all contributions are hugely valuable.” The survey is available here; replies should please be sent to

The Guardian’s new restaurant reviewer criticises celebrity reviewers: The Guardian’s new restaurant reviewer Marina O’Loughlin has stated her intention to remain anonymous, with no byline picture published of her. She states: “The principal reason is that you simply can't expect to get an accurate reflection of what a place is like if the entire staff recognises your mug as soon as you walk in the room. In his excellent book How To Eat Out, Times reviewer and TV personality Giles Coren has a pop at anonymity – he thinks we're “weary old Trots who bang on about the unfairness and elitism of the Establishment”. And “dumpy hacks" who “skulk in the shadows”. Meanwhile, he admits it's tough to give a stinker of a review when you've met the chef and been given an offer to ‘take sexual advantage of his eldest daughter at my earliest convenience’. Well, quite.” 

Alcohol promotions complaints body goes live in Northern Ireland: A independent complaints panel that will rule on whether drinks promotions are responsible has gone live in Northern Ireland. The Joint Industry Code for the Responsible Promotion and Retail of Alcohol in Northern Ireland, formulated with the backing of the local drinks industry, went live on Saturday. Under the code, people can make a complaint about a specific promotion to an independent panel chaired by Duncan McCausland. If a complaint is upheld it is made public, with the police and council also informed.

Small business bank to be launched: A small business bank is to be launched to make it easier for businesses to access billions of government funding. Chancellor George Osborne said the bank would “ bring together the alphabet soup of existing schemes” to help small businesses. He added: “The weakness of our banking system is one of the biggest problems we’ve got. Small businesses are the innocent victims of the financial crash.” There will be no new funding for the bank.

Duty escalator e-petition needs one last push: The duty escalator e-petition aimed at forcing a House of Commons debate on the issue is now less than 7,000 signatures away from reaching its 100,000 target. One leading industry figure said that the industry should carry on gathering signatures “so when a debate does take place our numbers are still going up.” To sign the petition click here.

Company news:

Peach Pub Company reports turnover and profits increase: Peach Pub Company, the operator of 15 pubs founded by Lee Cash and Hamish Stoddart, has reported a 12 per cent increase in turnover to £18.2m for the year to 1 January 2012. “Group normal operations” Editda rose to £2,485,340 from £1,926,446 the year before. Group Ebitda was £1,712,893 (compared to £1,401,766 in 2010) after taking into account the £190,000 cost of launching The White Horse and Brookmans pubs and developing the Richard Onslow site. There was also a “profit-related pay and quasi-dividend” of £265,073 (2010: £176,050). The company stated: “Directors are salaried at moderate levels and the majority of the potential directors’ earnings are based on profits and only payable if cash is available. The growth in our profit before tax to £628,880 (2010: £407,670) demonstrates our ability to successfully find and operate great pubs in a challenging and competitive market. We aim for steady growth based on our existing principles, sharing the fruits of our labour with our operators and retaining profits to grow and develop our business with the support of our banking and property partners.” The company, which will open its sixteenth pub in October, reported that its medium-term goal remained 22 pubs – to run “22 great pubs with shared ownership and with six to eight partners around our Peach table”. There are eight companies currently within the Peach Pub Company group, allowing for shared ownership with operators across clusters of two or three pubs. 

Redcomb secures seventh site: Redcomb Pubs, the six-strong multiple headed by former Mitchells & Butlers marketing executive Dan Shotton, has signed up its seventh site, Punch Taverns’ Crown and Horns in East Ilsey, Newbury. A £650,000 investment is underway to create a “quirky inn with 11 boutique letting bedrooms” – it is due to re-open in December this year. Shotton said: “It’s an ideal strategic fit for our roll out plan for 2012.” The company has also re-opened The Station Hotel in Hither Green, south London, where a co-investment of just under £1m is being undertaken with owner Spirit Pub Company. Shotton added: “We’re currently working on our pipeline for 2013, and aim to do another five sites. It’s an exciting and important time in the life of the company, as we begin to explore a whole raft of new deal structures with landlords, helping maximise returns for both parties.”

Caldmore Taverns to open fourth pub: Caldmore Taverns is to open its fourth pub in November having bought a derelict pub in Kidsgrove that’s been closed for six years. Developer Farlane Property Group was granted permission in 2009 to transform the pub into houses. However, the plans collapsed after the company fell into administration in 2010. Now, Caldmore Taverns has acquired the building from the receivers for a sum of about £87,000. The company, which already operates Darcys in Fenton, The Sutherland Arms in Stoke, and The Wheatsheaf in Northwood, plans to spend £150,000 on the site.

Collyer – significant merit in a nil-premium merger between Greene King and M&B: Deutsche Bank leisure analyst Geof Collyer has argued that Greene King would be a “natural buyer of Whitbread’s 400 pub restaurants if they came on the market”. He also think a nil-premium merger between Greene King and Mitchells & Butlers has “significant merit”. He added: “This could have potential cultural and shareholder integration issues, but we can see, without assuming more than a five per cent saving on purchasing, variable and central costs (£1.2bn in aggregate), that this could generate EPS-enhancement in the region of 15 per cent for both Greene King and M&B shareholders. This would be before any re-rating potential as a post-deal EBITA multiple would be 22 per cent lower than Spirit’s and six per cent lower than JD Wetherspoon. Given the improved scale (over £800m of EBITDA) and better balance sheet (circa 4.5x net debt/EBITDA; over 90 per cent freehold property), one would have thought that a re-rating post successful integration would be forthcoming.” 

Coffee shop backed by Tesco opens first site: The artisan coffee chain backed by Tesco, Harris + Hoole, has opened its first site in Amersham. The brand is the brainchild of siblings Nick, Andrew and Laura Tolley, founders of the upmarket London coffee shop Taylor Street. Nick Toley said: “We decided to come to Amersham because it's a beautiful town with a lovely high street. We also came here for commercial reasons because it's quite an affluent neighbourhood. We felt if we can make it work here then the business model is a brilliant proposition and it's probably got legs.” A second site will open in Uxbridge in the next few months and negotiations are under way to buy 15 shop sites from the administrators of Clintons, the failed card shop business. A spokesman for Tesco, which has a non-controlling stake in the business, said: “We are investing in the entrepreneurial founders of a new venture. The Tolley family will decide the business strategy. The coffee industry is growing as a whole and Taylor Street is a successful artisan coffee shop business with a loyal and thriving customer base and we support their vision to bring premium coffee to a wider audience.”

Marston’s lines up second new-build in Norfolk in a fortnight: Midlands-based Marston’s has lined up a second new-build pub restaurant site in Norfolk within a fortnight. The company has applied to South Norfolk Council to open a new-build pub restaurant on the former Hamlins electronics factory site in Park Road. The application comes less than a fortnight after the company applied to open a site in the north Norfolk coastal resort of Hunstanton. 

Enterprise Inns to unveil its “community heroes” at the end of September: Enterprise Inns is to unveil its “community heroes” at an award ceremony on Thursday 27 September at The Lord Binning, Kelsall, Cheshire. Pubs in the estate that have demonstrated outstanding community involvement will be given £10,000 to donate to local causes.

JD Wetherspoon tipped to open in Gloucester Docks: JD Wetherspoon is being tipped to open its third site in the city of Gloucester. The company has been linked with a takeover of the Coots Café Bar site. Nando's and PizzaExpress already have sites at the Gloucester Waterways-owned heritage and a new state-of-the-art cinema due to open later this year.

Antic plans Woolwich opening: Antic, the fast-expanding London pub company, is set to take on a new site in Woolwich, which would be called The Woolwich at Equitable House. The Grade II listed building in General Gordon Square already features parts of the Maritime Greenwich College, a walk-in clinic, betting shops a Chinese restaurant and mini market. A Greenwich Council licensing committee will decide on the application on September 6.

Jamie Rollo – we expect a sharp slowdown in Costa sales growth: Jamie Rollo, leisure analyst at Morgan Stanley, has forecast a “sharp slowdown” in Costa sales growth in Whitbread’s second quarter – he expects two per cent sales growth Costa compared to 8.5 per cent in its first quarter. He said: “Costa faces much tougher comparables this quarter, though the poor weather may have been helpful in selling hot drinks even if it had a negative impact on high street sales. Our 2013 financial year forecasts assume like-for-like sales growth of just +three per cent, so like-for-like sales only have to be +one per cent in quarters 2 to 4 to meet our forecasts. Every one per cent is circa £3m to EBIT. Whitbread expects to open 350 new outlets this year and 1,000 Costa Express machines, and we estimate new openings last year and this will contribute circa £10-15m to 2013 EBIT.” On Whitbread’s pub restaurants he said: “We expect like-for-like sales of plus one per cent, below the plus two per cent in the last quarter. Trading for other pub restaurants has been up moderately in June despite the poor weather. Whitbread launched a number of initiatives last year to close the sales gap with its competitors, so we expect (it) to at least trade in-line with the market.”

Britvic to launch “reassurance” advertising campaign: Britvic has unveiled a Fruit Shoots reassurance campaign today. The campaign aims to reassure parents that a problem with faulty bottles has now been resolved. The problem, which prompted a recall of Fruit Shoots, could cost the company as much as £25m. Television and newspaper adverts have started today with a “We’re back” message – television adverts will start in mid-September and run until November. Jonathan Gatward, Britvic Soft Drinks GB marketing director, said: “We’re confident that our heavyweight communication plans will reassure parents that the brand that first created the kids soft drink sub-category is available and here to stay.” Britvic began distributing the drinks to outlets last week and will gradually return to full availability.

Tapas chain La Tasca secures a Company Voluntary Agreement; hands back the keys to 22 sites: Spanish tapas restaurant chain La Tasca has secured a Company Voluntary Agreement (CVA) that allows it to surrender the leases on 22 restaurants, according to Property Week. The deal was passed by 86 per cent of creditors and will see the rent it pays on a further 19 restaurants drop by 25 per cent. At another 26 sites, La Tasca will start to pay rent on a monthly basis. The CVA is being overseen by Grant Thornton.

Douglas Jack – The Restaurant Group will struggle to pass on more price increases: Numis Securities leisure analyst Douglas Jack has argued that The Restaurant Group will struggle to continue its strategy of passing on large price increases to support margins. Of the company’s results last Friday, he said: “The first half profit-before-tax, up seven per cent to £26.1m is slightly behind (our forecast of £27.1m) as a result of margins failing to grow despite being supported by an 11.6 per cent annual increase in drinks prices. Like-for-like sales remain up 3.25 per cent, but comparatives now toughen, to four per cent, for the next eight months and the strategy of using large drinks price increases to support margins will become increasingly difficult, in our view. It is difficult to argue for a premium valuation as The Restaurant Group’s dependence on passing on large drinks price rises is now likely to become harder to execute (from a premium level) in an increasingly-competitive trading environment.”

Filthy MacNasty's Whiskey Café on the market: Filthy MacNasty’s Whiskey Café in London, formerly co-owned by The Pogues’ frontman Shane McGowan, has been put on the market through leisure property advisor Davis Coffer Lyons. Food accounts for around 30 per cent of the pub’s sales. Davis Coffer Lyons is acting on behalf of the tenant, who also operates ‘The New Rose’ pub on Essex Road, Islington. An asking price of £135,000 is being sought for the part-tied, 25-year lease, at a passing rent of £43,500 per annum.

Top curry chef opens site in Northern Ireland: A Bangladeshi chef has opened an Indian restaurant in Northern Ireland after training in one of the world's finest venues. Ripon Biswas has opened Mumbai 27 in Belfast's Cathedral Quarter. He grinds his own spices - and the restaurant also has its own herb garden. After leaving Bangladesh, Biswas worked in Mumbai's Taj Restaurant, part of the luxury Taj Hotel and one of the world's most renowned Indian restaurants.

Newcastle cocktail bar to expand: The Mimo cocktail bar is to expand after securing a new licence. The venue opened for business in Pudding Chare near Newcastle Central Station a year ago serving rum-based cocktails in a Miami beach-inspired setting with a stylised beach terrace. It is a joint venture between bar operator and hotelier Tony Knox and entrepreneur and singer Recardo Patrick. The second phase of their plan is to develop a much larger first floor of the building, which runs across the top of Revolution bar.

Simon French – reiterates hold recommendation on Prezzo shares: Panmure Gordon leisure analyst Simon French has repeated his ‘Hold’ recommendation on Prezzo shares ahead of Wednesday's first half results from the company. He said: “We expect it to report a circa seven per cent increase in earnings to £7.8m profit before tax (2.5p earnings per share) and reiterate its comfort with market expectations for the full-year of £17.6m profit before tax (5.6p EPS). We reiterate our ‘Hold’ recommendation and 70p target price.”

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