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Fri 18th Jan 2013 - Mitchells & Butlers, Stonegate and Wetherspoon

Story of the day:

Wetherspoon property case set for High Court return this month: The latest round of JD Wetherspoon’s long-running legal action over alleged property fraud is set to heard in the High Court at the end of this month. Two years ago, The Sunday Telegraph reported that Wetherspoon chairman Tim Martin “has turned his sights on one of London’s most successful property entrepreneurs in his fight against what he describes as ‘greedy’ property agents”. The chain filed a High Court writ against entrepreneur Anthony Lyons over a transaction by its then advisor, Van de Berg – this action is due to be heard the end of this month. Wetherspoon has already successfully sued Van de Berg over a breach of an exclusivity agreement that saw it sell pubs earmarked for Wetherspoon to other parties. Those deals lifted the value of the pubs by raising Wetherspoon’s rents. Legal action against Van de Berg began in March 2005, which means the various legal cases arising will have taken eight years to pursue to their conclusion. So far, Wetherspoon has recovered a seven-figure sum but has spent around £3m in legal costs – much of it spent hiring a legal team to comb through every document attached to property transactions between around 1992 and 2005. Last February, the company won another legal action involving five freeholds that were diverted to a third party by Van De Berg, which earned £15m from JD Wetherspoon in the period it was seeking new property for the company. Legal action has revolved around 18 pubs where the company was denied the chance to buy the freehold and ended up paying extra rent after the freehold was diverted. But Martin believes that another 30 pubs were involved.
 
Bookings for Spring edition of Propel Quarterly: The Spring 2013 edition of Propel Quarterly is now open for advertising bookings. Contact either sharon.dickinson@propelinfo.com or jo.charity@propelinfo.com to book space.

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 - more than 100 places have already been booked so far. The speaker list will be unveiled later this month. E-mail jo.charity@propelinfo.com to book places.

Industry news:

Institute of Chartered Accountants – too much reliance on like-for-like sales figures: The Institute of Chartered Accountants in England and Wales, has argued that there is an over-reliance on like-for-like performance that means people are often comparing “apples with pears”. The Institute argues that like-for-like sales performance is not always reported in a consistent way. Furthermore, the Institute claims that they are not always a reliable indicator of how a business is actually performing. Heavy discounting, for example, can alter the relationship between sales data and profitability, which can undermine the relevance of like-for-like sales as a guide to increased profitability. Ernst & Young head of retail Julie Carlyle said: “More sales don’t necessarily mean higher profits. Sales volumes can be driven at the expense of profitability.”

Planning inspector saves Chelsea pub: A plan to turn a Chelsea pub into a £20 million home has been rejected by a planning inspector. Local residents including Hugh Grant and former footballer Sol Campbell were among more than 1,000 people who signed a petition against a planning application to turn The Phene Arms into a residence complete with steam room, swimming pool and gym complex. A government planning inspector has now upheld Kensington and Chelsea council’s original decision to reject the application by property developer Robert Bourne, whose 26-year-old daughter Lily runs the pub.

Durham restaurant honours HMV gift cards: Oldfields restaurant in Durham has been swamped with bookings after promising to allow holders of HMV gift cards the chance to redeem some of their value. The venue is giving people with HMV gift cards 50 per cent of the card’s value off their bill as a gesture of goodwill. Managing director Bill Oldfield said: “We heard about them not honouring people’s gift cards and we were thinking about how many people must have received those cards at Christmas. We wanted to ensure that people at least got something for their money, as a Christmas gesture from us.” Since the deal was tweeted from the restaurant’s Twitter account, the venue has been inundated with bookings.

Trade show for casual dining to launch in 2014: Diversified Business Communications UK, organisers of the Lunch! exhibition, has announced the launch of a major new trade show, Casual Dining, to take place at the Business Design Centre in London on the 26-27 February 2014. The launch follows an extensive consultation process with leading industry operators and suppliers, which concluded that there was a significant gap for a dedicated trade show aimed at “the highly successful casual dining market, in which the UK is rapidly becoming a world leader”.

Tim Martin – Jacques Borel will win a VAT reduction: Wetherspoon founder Tim Martin has re-stated his support for the Jacques Borel campaign to reduce VAT to 5% in the hospitality sector. He told Reuters: “It takes a bit of mental gymnastics to think that what sounds like a bad tax reduction could end up benefiting the country. The (pop) group Black Eyed Peas do a song called ‘Meet Me Half Way’, I think it will be somewhere between that (20%) and 5%.”

US restaurant like-for-likes down 1.1% in December: Analysis by Black Box Intelligence has shown like-for-like sales fell 1.1% at US restaurants in December. The first three weeks of the month, which ended on 16 December, showed like-for-like sales dropped 1.5%. The last two weeks of the month, including Christmas and leading up to 30 December, saw like-for-like sales up 1.7%.

Telegraph share diarist – I made outstanding gain on Enterprise Inns: Telegraph share tipper and diarist James Bartholomew has reported that Enterprise Inns was his outstanding gain in 2012. He wrote: “The little paradox of 2012 was that during a miserable year for the British – and indeed the world – economy, it was a good year for shares. Fears subsided. Quite a few companies that had been in difficulty gradually sorted themselves out. Dividend yields and valuations were too attractive to go on resisting. Fortunately, I had a heavy weighting in shares emerging from various difficulties. Enterprise Inns, a pub-owning company, provided my outstanding gain. Gradually, as the year went on, the stock market was persuaded that it could manage its debt overhang. I kept buying more and, over the year, the shares more than tripled.”

Company news:

Mitchells & Butlers opens first city centre Miller & Carter today: Mitchells & Butlers is opening its first city centre Miller & Carter today (Friday 18 January) in Leeds. The company chain, which has an outlet in the Garforth area of the city, is to launch the new site at The Light shopping centre – this will increase the size of the estate to 28. The steakhouse will cover 1,034 square foot and create dining for 128 covers. Adrian Frid, retail director at Miller & Carter, said previously: “Finding the right location for a Miller & Carter is one of the things that helps make our steakhouses so special. The Light provides us with a perfect venue for our first Miller & Carter in Leeds city centre, nestled amongst some well-established restaurants in an area well known for offering quality dining.” The Leeds site was considered for a Tuk Cho opening at one stage.

Former BII Licensees of the Year line up second pub: Richard and Loren Pope, former winners of BII License of the Year, has lined up a second as yet unnamed pub. The couple have achieved double-digit sales growth at their first pub, The Bull’s Head in Repton, Derbyshire, for each of the past six years since they re-opened a closed pub. The Popes have planned to develop a multi-site company through their Chilled Pubs vehicle but have waited to find the right second property. Richard Pope told Morning Briefing: “It’s a leased pub that will requires around £750,000 to develop.” The Popes have won widespread industry acclaim after pioneering a wide range of industry firsts at The Bull’s Head. One of their most recent initiatives has been to invest £60,000 in their own gelato-making equipment. They plan to undertake their own butchering at their second pub and will dry-age their own meat on site. (See separate Friday Opinion e-mail)

Stonegate Pub Company reports 44.9% return on investment in first year: Stonegate Pub Company, the 540-strong company that is a combination of Mitchells & Butlers 333 former wet-led pubs and Town and City Pub Company, has lodged documents on its website that show the company achieved a remarkable 44.9% return on investments (ROI) in the year ending 25 September 2011 – previously the company had merely reported that the figure was industry leading at over 35%. In addition, the company reported that its drink sales like-for-like growth was 3.9% in the year while food sales like-for-like growth was 3.7%. The company stated: “The first year trading was very strong with both like-for-like sales and profit growth achieved.” The company also reports that it has adopted a strong corporate social responsibility policy – no alcoholic drink will be priced below £1, it will never offer “all you can drink” promotions and does not offer liquor-only multi-buy deals.

Greene King set to start work on first Cloverleaf in Scotland: Suffolk-based brewer and retailer Greene King is set to start work on the first Cloverleaf in Scotland to be located at the Phoenix Retail Park, near Paisley. The restaurant, which was given the go-ahead by Renfrewshire Council last year, is expected to be open by the summer. Cloverleaf, acquired by Greene King in 2011, has 15 sites in England. The opening will create up to 70 full and part-time jobs Renfrewshire Council granted planning approval for the restaurant in July, with a liquor licence approved in October, as part of a scheme submitted by Miller Developments. Matt Brown, business unit director at Greene King, said: “The development will be the first Cloverleaf restaurant in Scotland. We are grateful to Renfrewshire Council for allowing us this opportunity to invest in both Paisley and the surrounding area.” Greene King paid £56m to buy Cloverleaf in January 2011. The business was forecast to add ten sites over the two years following acquisition. Average site sales at Cloverleaf are around £40,000 per week.

Mezze set to open fourth West Country site: A restaurant company based in Bristol is to launch its fourth restaurant in Clutton, Somerset. Mezze Restaurants, which opened its first restaurant in Thornbury in 2008, is to launch in Clutton next month after completing a £400,000 refurbishment of the village’s The Warwick Arms. A fifth restaurant, Mezze at The White Lion in Portishead, is set to open in May. Mezze spokesman Alex Tryfonos said: “We are thrilled with the rapid expansion of the Mezze chain across the south west, which has regenerated the fortunes of several old and much-loved pubs in the region. We believe that pubs are the central hub of our local communities and through our continued self-funded investment we are helping to ensure that they continue to thrive as the focal point of these small towns.”
 
Investment sought for £2.5m Lake District distillery: More investors are being sought for a new £2.5m distillery, The Lakes Distillery, which is to be built in Cumbria and is set to open at the end of 2013. Founded by Paul Currie, who set up the Isle of Arran distillery in the 1990s, funds have been raised from private investors, with some grant funding, to allow work on the distillery to start this April. Located at a 19th century farm near Bassenthwaite Lake, the production of single malt whisky and gin will start towards the end of this year and a visitor centre, will open in March 2014, which will include a bar and bistro, shop and offer tours. It is hoped the distillery will be one of the biggest tourist attractions in the Lakes and produce 300,000 bottles of whisky a year. Investors interested in funding the next stage of its development can find details on lakesdistillery.com.

Original Bowling Company reports Ebitda of £11m: The Original Bowling Company, which is formed of AMF Bowling and Mitchells & Butlers former Hollywood Bowl business, has reported sales up 7.5% to £68m in the year ended 30 September 2012. Like-for-like revenue was up 6.6% on 2011 with total EBITDA after central costs and balance sheet movements of £11m. In the three months to 31 December 2012, like-for-like revenue increased by 3.2%. Sales over the Christmas trading period increased by 4.6% over the corresponding six weeks in 2011. Chief executive Richard Cook said: “With the AMF and Hollywood brands now fully integrated, the primary focus over the past twelve months has been driving top-line growth. Thanks to the success of this strategy, coupled with an ever-improving profit margin, the business is now effectively debt free; creating an excellent platform for on-going internal investment and step changes in scale.”
 
Mountain Capital tenant of eight hotels in administration: Brompton Hotels, which leased eight hotels across the UK, has gone into administration. The hotels, which were managed by Brook Hotels, continue to operate as normal through a new management company called Delight Hotels. The eight hotels are The Chimney House Hotel, Crewe; Honiley Court Hotel, near Warwick; Madison Hotel, Swindon; Queensferry Hotel, Fife; Redwood Hotel & Country Club, Bristol; Tewkesbury Park Hotel, Tewkesbury; Waterloo Hotel, Bracknell; and Westfield House Hotel, Blaby Leicestershire. The freehold of all the properties is owned by Mountain Capital.

People power wins coffee shop battle in Lewes: Railway company Southern has done a dramatic u-turn and awarded a coffee shop contract at Lewes train station to local operator The Runaway Café, which has previously lost the contract to a national operator despite 24 years of occupation. Southern had awarded the contract to the Flying Coffee Bean but the coffee firm withdrew after 5,000 Lewes people signed a petition opposing the move. 

Banwell House pub to host comedy night: Banwell House Pub Company, led by Toby Brett, is hosting Bath’s longest-running comedy night, Comedy Cavern, at its new Victoria Pub and Kitchen in Upper Bristol Road. Brett said: “We have been very busy since we opened and having something as strong as the Cavern gives us a real boost.” Comedy Cavern founder, comedian Geoff Whiting, said: “The Victoria is a great venue for the Cavern to continue its success. I have worked with Toby the owner in three of his other pubs and he is a great supporter of comedy.”

Facebook campaign to save Oceania, Kingston attracts 3,201 supporters; pre-hearing date set over licence revocation appeal: A Facebook campaign to save the Oceania nightclub in Kingston from closure, Save Our Oceania, has attracted 3,201 supporters. The nightclub, operated by Luminar, is still trading pending an appeal against the revocation of its licence in the wake of a fatal stabbing. One members of staff has posted: “We are the second largest club in London (and) the busiest club with over 300,000 customers per year. Majority of reported crime was of phone theft (including lost phones). The number of phone thefts have decreased dramatically (less than 10% of previous months) in the past two months since the introduction of assist security. A Met licensing team claimed, (that) for the young audience, the number of violent crimes and incidents are extremely low.” Lawyers for Luminar and Kingston Council will meet for a pre-hearing on the licensing appeal at Wimbledon Magistrates’ Court on Monday 28 January. The meeting will decide when to list an appeal against the council’s decision to revoke Oceania’s licence.
 
Douglas Jack issues add recommendation on Marston’s shares: Numis Securities analyst Douglas Jack has issued an Add recommendation on Marston’s shares ahead of its First Quarter trading update next Tuesday – he has a Target Price of 145p on its shares. He said: “Trading was slightly ahead in October and November; we expect this scenario to continue with the company now able to look forward to much easier comparatives in Q2-4. Anticipating positive trading in all three divisions, we expect to hold our above-consensus forecasts on Tuesday. Due to the resilience of the managed estate, we expect like-for-like sales to have remained at around 2.0%, the level achieved during the first eight weeks even though comparatives rose. Our full year forecasts, which assume 1.5% growth, may be over-cautious given that LFL trading should now benefit from easier weather-related comparatives of 2.0% in Q2-4. 23 new builds should open in 2013E Marston’s is continuing to generate circa 18% cash returns on this type of freehold asset, creating value, as reflected in the recent 50%+ upward revaluation. As last year’s openings were back-end loaded, two-thirds (£6m) of their annual EBITDA should first emerge in 2013E, which we believe is not fully reflected in consensus forecasts.”
 
Enterprise Inns pub introduces tapas: New licensee of Enterprise Inns’ Griffin pub Thorpe St Andrew, Norfolk have introduced Spanish tapas to create a point-of-difference. Simon Bennett-Bennett and partner Mariana Poponete spent 12 years in Spain, eight in Malaga in the south and four in Tarragona in Catalonia, and Ms Poponete worked for part of that time at a tapas bar where she learned her cooking skills. She’s originally from Romania so her tapas also has a south-eastern European feel to it, with one of her specialities, mici, a Romanian sausage.

Carluccio’s set to open in Lincoln: Carluccio’s in lining up an opening in Lincoln.  The company is converting the former Lamb and Flag pub building in High Street. The restaurant is set to open at the beginning of April. Simon Kossoff, chief executive of Carluccio’s, said: “We have been keen to open in Lincoln for a number of years now and are delighted to have finally found the right site for us.”

Antic subsidiary placed in administration: A subsidiary company of highly regarded London pub operator Antic, Antic Limited, which runs a small number of leasehold sites, has been placed in administration with Chantrey Vellacott. The sites are still open and trading pending a possible sale. The administration does not affect around 24 pubs still operated by Antic, which are now listed on a new website Antic London. Antic, which is headed by Anthony Thomas, co-owns 11 freehold pubs with investment fund Downing and has four other freehold acquisitions in the pipeline – the 11 sites are run through a variety of independent vehicles. The company also runs a number of leasehold pubs in London through other vehicles. An industry source said: “The Antic brand continues very successfully - it’s just that a number of leasehold sites within Antic Limited have been placed in administration.” Antic has been credited with helping to revitalise several unfashionable south and east London high streets with its quirky and characterful pubs. Its Leytonstone High Road pub, for example, has won several awards including CAMRA’s East London Pub of the Year. Antic has recently submitted plans to convert part of the former Leyton Town Hall site into a pub. The company used several front rooms of the building, in the High Road, as a temporary ‘pop-up’ bar during the Olympic and Paralympic Games. One of the four pub freeholds Antic is currently acquiring is The Prince in Colliers Wood, which it plans to rename as Provenance. “Antic bought the property off a guide price of £1 million,” Michael Penfold of licensed leisure specialists AG&G, which marketed The Prince, said at the end of 2012. Joint administrators at Chantrey Vellacott are Richard Toon, Kevin Murphy and David Oprey. In its most recent accounts, filed in October last year, Antic Limited had net current liabilities of £929,000 as at 31 December 2011, including short term bank loans and overdrafts of £125,000. The short term bank loans and overdrafts were repaid in February 2012 following the sale of a leasehold interest. The company stated: “However, net debt facilities have yet to be secured by the company to fund its working capital requirements.” The company identified the need to find new investors and raise fresh equity “within the next 12 months” to deliver its business plan. The company added: “However, due to the need to successfully identify investors and complete a placing, including obtaining shareholder consent in general, there is a material uncertainty which may cast significant doubt about the ability to continue as a going concern.”

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