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Wed 9th Jan 2013 - Camerons, Domino’s and Restaurant Group

Story of the day:

JD Wetherspoon rolls-out premium food presentation style: JD Wetherspoon has embarked on a radical change to the style of its food presentation. Morning Briefing understands the company is experimenting with a much more premium presentation style. Wetherspoon declined to comment on the detailed strategy behind the move, citing the danger of giving away competitive advantage when approached by Morning Briefing. But it is understood that the trial was launched in airport sites in April 2012, extended to central London in October 2012 and is now being applied elsewhere in the estate on a site-by-site basis. Propel managing director Paul Charity said: “There has been a radical re-think by Wetherspoon about how it moves away from its image as a purveyor of mainstream pub food. Until now, it’s fair to say that Wetherspoon customers have expected good-value pub food, presented in a very traditional way. The company has clearly thought long and hard about how it can provide customers with an eating experience that makes it stand out from its high street competitors. For a number of years chief executive John Hutson has argued its premium burger is on a par in quality terms with, for example, the Gourmet Burger Kitchen “better burger” offer. This may have been factually accurate but not been the perception. At an airport site I visited recently it was clear that Wetherspoon has applied a root-and-branch change to creating greater eye-appeal and flair in its food presentation. Burger and chips served together on a plate, for example, has been banished in favour of a stylish stand-alone burger and an individual serving of chips in a metal container. Similarly, porridge was served with an accompaniment of fresh-cut banana in a separate dish. JD Wetherspoon has enjoyed strong like-for-like growth since last summer – some of this may well be linked to its much-improved approach to food presentation.”

Propel Multi-Club conference: The first Propel Multi-Club conference takes place at One Moorgate Place, London EC2R 6EA on Tuesday 19 March and multi-site companies can book two free places each on a first come, first serve basis. The speaker list will be unveiled later this month. E-mail to book places.

Propel Quarterly magazine available online: The winter 2012 edition of Propel Quarterly magazine is now available to view online at

Industry news:

Cable promises help for struggling pub landlords: Struggling pub landlords have been promised help with Business Secretary Vince Cable announcing plans for an independent adjudicator to address unfair practices in the industry. As well as the new adjudicator, Dr Cable also wants to establish a new statutory code to look at the relationship between large pub companies and publicans, which will be enforced by the adjudicator. This new code will ensure fair practices for a number of issues including rents and the prices publicans pay for beer. It would also have the power to investigate and deal with disputes between pub companies (pubcos) and publicans, and in some cases have the power to fine. In particular, the proposed code would prevent abuses of the beer tie, which oblige publicans to sell particular types of beer. It would enshrine the fundamental principle that ‘a tied licensee should be no worse off than a free-of-tie-licensee’ which will ensure a level playing field is maintained in the pub sector. Business Secretary Vince Cable said: “There is some real hardship in the pubs sector, with many pubs going to the wall as publicans struggling to survive on tiny margins. Some of this is due to pubcos exploiting and squeezing their publicans by unfair practices and a focus on short-term profits. Four Select Committee reviews since 2004 have highlighted these problems. Last year, we gave the pubcos one last chance to change their behaviour but it is clear that the self-regulatory approach was not enough and in October I wrote to the industry to seek their views. A change in the law is now needed to shift behaviour. I hope these measures mean publicans are given a fairer chance at running their pub, which in turn will help them grow their businesses instead of losing them.” The formal consultation on the proposed measures will be launched in the spring.

Propel Opinion By Paul Charity: The surprise announcement by Vincent Cable yesterday looks like it is designed to head off a rebellion in a parliamentary debate due to take place today. The fear would have been that Liberal Democrat and Conservative backbenchers would join Labour MPs in condemning the government in not taking tough enough action.

The ALMR welcomes statutory tenanted statutory pubco code of conduct consultation: The Association of Licensed Multiple Retailers (ALMR) has welcomed a move by the Secretary of State for Business to consult on establishing a statutory Code of Conduct and adjudicator to oversee the relationship between pub companies and their lessees. This proposal will give legal backing to the voluntary agreement currently being negotiated between the British Beer and Pub Association and trade bodies representing lessees, including the ALMR. Chief Executive Nick Bish said: “Today’s announcement draws a line under the protracted and prolonged period of political uncertainty and debate, which has been going on for far too long without any clear end in sight. That can only be helpful for investment in the sector as a whole and individual businesses in particular. The proposals unveiled by the Secretary of State today will not take effect immediately and that makes it even more important that all partners continue to engage in robust dialogue to finalise and implement quickly the substantive improvements outlined in the Draft Version Six of the Code and the associated changes to the self-regulatory structure. This will not only mean that tied tenants and lessees will have greater transparency and more robust rent setting in the meantime, but also that those businesses which fall outside the scope of the proposed regulatory structure will continue to be protected.”

Company news:

The Restaurant Group reports like-for-like growth of 4.5 per cent in 2012: The Restaurant Group has reported like-for-like sales were 4.5 per cent ahead in 2012. Turnover for the 52 weeks to 30 December 2012 was nine per cent ahead. Group operating margins for 2012 are expected to be at a similar level as 2011. New openings were ahead of the previous year with 28 restaurants opened in 2012. Trading at these sites has been excellent and they are set to deliver strong returns. The group expects to open between 28-35 new sites in 2013. Chief executive Andrew Page said: “The Restaurant Group delivered a strong performance in 2012, notwithstanding some tricky conditions for consumer-facing businesses. Profits were well ahead of 2011 and cash generation was strong. During 2012 we opened 28 new restaurants, creating over 700 new jobs and this year we expect to open between 28 and 35 new restaurants. Last year the TRG team worked relentlessly to deliver a great performance and the focus is now directed towards delivering further good progress in 2013.”

Greggs reports total sale up 4.3 per cent in five weeks to 5 January, like-for-likes down 2.9 per cent: High street baker Greggs has reported total sales grew 4.3 per cent but like-for-likes dropped 2.9 per cent against strong comparatives in the five weeks to 5 January. Chief executive Ken McMeikan said: “This is a resilient Christmas and New Year trading performance given the tough comparison versus last year when we had a particularly favourable trading pattern with Christmas Day and New Year’s Day falling on Sundays. During the Christmas period trading highlights included selling a record 8.5 million of our award winning shop-baked sweet mince pies, a seven per cent increase on last year. Our new channels to market of wholesaling and franchising also continued to perform well, adding 3.0 per cent to our total sales growth. ‘Bake at home’ sales of Greggs-branded products through more than 750 Iceland stores performed strongly over the period with 11 product lines available including our newly launched cocktail sausage rolls. We now have 11 franchised shops in motorway service stations across the UK in partnership with Moto Hospitality Limited, with more planned to open in 2013.”

Camerons unveils £24.7m funding deal: North east brewer and retailer Camerons is targeting “growth and new opportunities” after agreeing a £24.7m funding package with Newcastle team at Royal Bank of Scotland Corporate & Institutional Banking (RBS). Camerons currently operates 69 pubs across the north of England and last year produced around one million hectolitres of beer. Camerons is 76 per cent owned by chairman David Soley and his family, with the remaining 24 per cent is owned by Heineken UK - Camerons has a significant contract brewing agreement with Heineken. Soley said: “Royal Bank of Scotland provided us with a competitive refinancing offer which we are delighted to have received. We pride ourselves on our strong independent, customer-focused business model and continue to seek further opportunities to grow our presence in prime North East markets.”

Spaghetti House moves into the red: Spaghetti House, the operator of 11 restaurants owned by the Lavarini family, has reported losses for the year to 1 April 2012 – the company lost £166,505 compared to a pre-tax profit of £446,237 the year before. Turnover rose to £12,326,115 from £11,967,128 the year before. The company opened two new restaurants and closed one during the year due to a compulsory buy back scheme. The company also bought 66.67 per cent of the issue ordinary share capital of Pescaton, a company that operates two restaurants. The company stated: “The directors are pleased with the company’s results, despite the current depressed UK economy and strong competition within the catering sector.”

Hotel and pub operator Chapman Group reports turnover and profit increase: Hotel and pub operator Chapman Group has reported pre-tax profit increased to £721,292 in the year to 31 March 2012, up from £363,915 the year before. Turnover rose to £7,776,297 from £7,060,941 the year before. Accommodation income increased from £2,151,000 in 2011 to £2,445,000 in the most recent year, which the company attributed to “additional advertising of its hotels”. The company stated: “Sales have increased approximately 10 per cent due to the continuing efforts of the company and a slight improvement in the economy.” Operating profit increased to £1,524,183 from £1,053,648 as a result of a “reduction in administrative expenses” – gross profit stayed consistent at 79 per cent. Return on capital increased to 6.41 per cent from 4.38 per cent. It added: “The company continues to works hard to reduce costs. The market is very competitive and margins continue to be tight.” 

Ossett Brewery Pub Company reports stable profits: Ossett Brewery Pub Company has reported pre-tax profit edged down by 5.9 per cent to £89,442 in the year to 31 March 2012 compared to £95,107 the year before. Turnover rose 11.9 per cent to £4,069,913 from £3,636,809 the year before. The company said: “The company added one leased pub, The Kings Arms in Heath, Wakefield. The company sees this type of arrangement as its main method of expansion in the current climate and is considering leases with larger pubcos and also individuals. Sales, with the help of the Kings Arms, were up on last year but the like-for-like results elsewhere were down from last year. This is mainly due to the economic downturn where we can see traditional community pubs with a very steady customer base now being affected. Whilst prices have been kept as low as possible, the cost of goods has increased with all major suppliers increasing prices by at least 5 per cent. Gross margin has been maintained by improving waste management and making sure the pub yields are better than ever. Following these improvements it is hard to see how, without increasing prices, gross margins can be maintained.” The company has gross assets of £4.5m and bank borrowings of £2.8m.

House broker Numis issues “Buy” note on Domino’s: Analyst Douglas Jack, of Domino’s house broker Numis Securities, has issued a “Buy” note on Domino’s shares with a target price of 625p. He said: “In 2012, Domino’s opened 57 sites in the UK and 12 overseas, in addition to acquiring 12 corporate stores in Switzerland. The feat of achieving 35 (27 UK; 8 Germany) openings in the Fourth Quarter alone bodes well for future expansion in Europe, which should accelerate sharply, in our view: we believe Germany is trading above our original expectations. The first two Berlin stores increased like-for-like sales by 19.3 per cent and 24.1 per cent in 2012 and new German stores are opening strongly. This is impressive in light of Domino’s brand awareness currently being just 3 per cent in Germany versus 95 per cent in the UK. In 2013, we believe there is limited upside to like-for-like sales forecasts, but we believe faster expansion, margin growth and new developments (such as gluten free menu, 1-1 smart marketing and higher ecommerce advertising) could result in growth picking up. Under our bull case scenario, Domino’s would have one of the lowest PEG valuations (<1x) in the sub-sector. Like-for-like sales have remained strong, growing 5.0 per cent in the UK during both Q4 and in the year to 30 December. We are holding our forecasts (PBT £46.0m; consensus £46.3m), which the company is well placed to exceed given that margins should continue to rise, largely due to expansion and volume growth. For the long-term, it is very encouraging that Germany is already trading strongly.”

Gordon Ramsay Spotted Pig trademark dispute goes to arbitration: The controversial move by celebrity chef Gordon Ramsay to register a trademark on the Spotted Pig in the UK will now go to arbitration. Ramsay’s move has caused controversy because Spotted Pig is the name of the Michelin-starred gastro-pub in New York, run by April Bloomfield and with ambitions to expand in the UK. Two “notices of opposition” have been filed - the adjudication process is expected to take several months. 

North west operator Kalton & Barlow up 3.8 per cent in December: Pub operator Kalton & Barlow has reported like-for-like sales growth of 3.8 per cent in December. The group, founded by Simon Kalton and Edward Barlow, has three pubs: the Boat in Erbistock, the Swan in Tarporley, and the Crown in Goostrey. The Swan and the Boat were up 3.8 per cent on 2011’s like-for-like figures. The Crown opened in September 2012 boosted the group’s overall 47.8 per cent growth in the month of December. Barlow said: “We’re thrilled with the support we received throughout the festive period, particularly as we didn’t even start marketing the Christmas menus or events at The Crown until mid-October! Our dedicated teams worked their socks off to make sure our locals were looked after and their efforts have certainly paid off.” The company is planning a fourth site.

Animal Inns closes Norwich site: Animal Inns has closed a Norwich city centre restaurant, Mackintosh’s Canteen, in Chapelfield Plain, nine months after the business was acquired. The company’s other sites - The Mad Moose in Norwich’s Golden Triangle, The Wildebeest Arms in Stoke-Holy-Cross and The Hunny Bell, near Holt – continue to trade. Entrepreneurs Jez King and David Cappendell bought Animal Inns for an undisclosed sum last April. The company, which employed 85 people and had a turnover of £3.5m, was owned and managed by Henry Watt, who stayed on with the business in a consultancy role to oversee development of the brand.

Lakeland-based Hawkshead Brewery reports 17.5 per cent production increase: Hawkshead Brewery has reported a 17.5 per cent increase in production in 2012. Production at its base in Staveley rose to 5,250 barrels, made possible by the brewery’s second major investment in plant and equipment in its ten-year life. “It is tough in the beer market at present, with the economic squeeze, the government forcing the price up by duty increases, the large number of new breweries and the lack of finance, so we’ve done very well to increase our share,” said Hawkshead’s founder Alex Brodie.

SGE Hotels acquires fifth hotel: SGE Hotels has acquired the three-star Leapark Hotel in Grangemouth for an undisclosed sum. The venue has been on the market since April last year after the owners decided they wanted to retire. Family-owned SGE already runs four hotels in the west of Scotland providing almost 200 rooms. Those are the Esplanade Hotel and the Argyll Hotel in Dunoon, plus the Imperial in Fort William and the Columba in Oban.

Bramwell Pub Company hires four new staff members: Bramwell Pub Company, formerly known as Barracuda, has hired four team members. Daniel Jones joins in the newly created role of head of pricing and insight – he previously worked at Mitchells & Butlers where he was involved in significant sales growth projects. Michelle Farrell joins from Glaxo Smith Kline and JD Wetherspoon to drive digital strategy forward by creating online sales campaigns as well as project managing all of the company’s digital activity. Danny Black joins from Spirit as an area manager and Abi Griffin, formerly of Stonegate and Paramont, arrives at the company as a regional training manager. Rob Pitcher, operations and human resources director, said: “It’s exciting times for Bramwell as we begin our journey to becoming an employer of choice, attracting world class talent from across the industry.” 

Virgin hires former Starbucks marketing chief: Virgin Active has hired former Starbucks international marketing boss Brian Waring as its first chief marketing officer. Waring, who left Starbucks in March last year, joined Virgin Active in December. He heads up all marketing activity for the chain of health clubs, including its January campaign ‘Whatever gets you going’ designed to encourage people to get active in 2013.

Community pub launches second-round fund-raising: A Grade II listed 19th Century pub, The Seven Stars, that re-opened its doors in Wrexham as a community-owned enterprise a year ago is looking to raise £40,000 to create a Welsh cultural centre. Marc Jones, chairman of the community-owned co-operative known as Canolfan Gymraeg Wrecsam Cyfyngedig (CCWC), said: “This is a landmark building in the town and it is great to see it back in use, illustrating what can be achieved when communities work together. The pub re-opened as a co-operative last January and, this second phase will enable the first floor to be refurbished. Continuing the work to transform the building into a centre for the community by offering music, poetry and film alongside meeting rooms, office space and community facilities to promote Welsh language and culture.”

De Vere set to sell The Grand Harbour Hotel in Southampton: De Vere Group is to sell the 173-bedroom Grand Harbour Hotel in Southampton to an unnamed private buyer later this month. De Vere said the hotel is a non-core property in its portfolio and the sale is in line with its objective to enhancing its position as a golf resort operator. The group also plans to sell the Grand Hotel in Brighton in 2014 following the completion of a “substantial” investment programme this year. It said this is the last non-core property in its hotel division’s portfolio.

McDonald’s to hand out 15 million books by 2015: McDonald’s will become the UK’s largest book distributor in a plan to hand out 15 million books with its Happy Meals by 2015. The book giveaway kicks off today with a five-week promotion that will offer a series of non-fiction books from DK Books’ Amazing World series. The campaign aims to encourage families to enjoy reading together. Customers will also be able to redeem books at WH Smith under the offer. Meanwhile, McDonald’s is planning a marketing push to support the launch of chicken McBites, an attempt to develop sales in the snacks market. McBites are part of the Little Tasters menu and are designed as an anytime snack as McDonald’s bids to stretch its menu beyond main meal times into different day-parts by offering a range of sizes and portions. The bite-size pieces of chicken breast have a peppery coating have been likened to KFC’s popcorn chicken product.

Buffalo Trace pop-up to appear in Brighton: Drinks company Hi-Spirits is relocating its successful Buffalo Bourbon Empire pop-up bar to the south coast. The prohibition-inspired venue will spotlight the range of award winning whiskeys from the Buffalo Trace Distillery in an upstairs speakeasy at The Wick Inn in Hove, from Friday 25 January to Saturday 9 February. The new two-week run for the Buffalo Bourbon Empire follows its successful London debut in October 2012. Tying into London Cocktail Week, the bar opened close to Covent Garden, serving more than 7,000 drinks to over 3,500 customers over three weeks.

Christie + Co reports leasehold interest of St John Chinatown sold for above £1.1m guide price: Agent Christie + Co has reported that the leasehold interest in St John Chinatown restaurant and hotel at One Leicester Street, formerly operated by Fergus Henderson and Trevor Gulliver, sold for above the guide price of £1.1 million. None of Henderson’s and Gulliver’s other businesses, which include the Smithfield Bar and Restaurant and Bread & Wine Spitalfields, are affected by the administration.

La Tasca to open independent tapas bar: La Tasca Restaurants will unveil the first of its new independent format tapas bars, called Bellota, later this month in Brighton. Bellota will incorporate the UK’s first standalone Cava Bar, in partnership with Grupo Codorniu. Alongside the Cava Bar, Bellota will serve high quality tapas including the award winning Jamon Iberico de Bellota from Guijuelo in Salamanca famous for its black hoofed Iberico pigs. Chief Executive Simon Wilkinson said: “Bellota will operate totally independently and will have no branded signals whatsoever. It will be a contemporary independent Spanish tapas bar serving high quality food and drink products. We have identified a further eight sites that would potentially convert pending a successful trial in Brighton, with a Norte site in Edinburgh and a yet to be named London site being next in the pipeline. There are certain demographics that demand innovation and independence alongside quality and Bellota in Brighton will tick all those boxes. Strategically within our portfolio we want Spanish concepts positioned across every market segment except for fine dining (for the time being that is). We believe this will be achieved with Bar y Tapas, a rejuvenated and re-positioned La Tasca and our successful La Vina concept.” On festive trading Wilkinson added: “Trading for the festive period was on track with expectations, we are three months into the new company and are ahead on both sales and Ebitda, which is a great achievement by the team considering we have a largely un-invested estate and the kicking the high street is taking from on-line Christmas shopping. Particularly pleasing was the continuing double digit growth within our flagship Victoria La Tasca site for the second year running and the performance of our latest minor investments, namely La Tasca Covent Garden and La Vina in Hale both of which were in double digit growth. The best performing site in the country was La Vina in Manchester, which illustrates our resurgence within our north west heartland, which will be further strengthened by the refurbishment of the Trafford Centre site at the end of February, where stage two of new look La Tasca will be launched.”

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