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Mon 28th Jan 2013 - Barworks, McMullens and Gordon Ramsay

Story of the day:

YouGov poll – minimum pricing won’t help the pub: A YouGov poll commissioned by SABMiller shows that, contrary to the government’s claims of a boost to the industry, a 45p minimum price for alcohol will turn people away from pubs. YouGov polled 1,261 people who had an alcoholic drink in the last week to find out whether a minimum price would make them more or less likely to go to the pub. The results show that at a minimum price of 45p: less than 1% (0.36%) say they will drink less at home and more in the pub; 39% will drink less in the pub; 45% will continue to drink the same as they did before, both at home and in the pub; pubs in some regions will be more affected than others, with 54% of people surveyed in the west Midlands saying they’ll drink less in the pub compared to 28% in Scotland; people who are constantly struggling to keep up with their outgoings are the most likely to drink less in the pub (56%). The report also shows that some people will cut back on other things in order to cover the increased cost of what they drink at home; 17% of those who thought they would end up spending more on alcohol said they would cut down on leisure activities, for example going to the cinema, and 16% said they would cut back on clothing. SABMiller’s senior vice president of Industry affairs Mike Short said: “This shows that people don’t behave in the way computer models predict. If the government really wants to cut anti-social binge drinking it needs to tackle that culture with better education for parents and in schools, targeted local schemes and proper enforcement of the existing licensing laws.” Tim Martin, JD Wetherspoon chairman, said: “The fact that less than 1% of people said they would drink in the pub more often and less at home puts paid to the government’s claim that minimum pricing will help the UK pub industry.”

Bookings for Spring edition of Propel Quarterly: The Spring 2013 edition of Propel Quarterly is now open for advertising bookings. Contact either or 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. E-mail to book places.

Industry news:

Consumers cut back over Christmas: Consumers cut back on their spending this Christmas with fewer people enjoying meals out, according to the results of a new online YouGov survey for foodservice analysts Horizons. The QuickBite survey shows that in the two week Christmas period 68% of respondents dined out, a sharp fall on last year’s figure of 72% over the same period. One third (31%) of adults responding to the survey hadn’t eaten out in the past two weeks, citing expense as the most common reason. “Christmas trade is vitally important to the foodservice sector and while some of the chains may have had stronger bookings than others, overall this survey shows that consumers were eating out less this Christmas as a cost-saving measure,” said Emma Read, director of marketing and business development at Horizons. According to the survey respondents ate out an average of 1.83 times over the two weeks of the Christmas period. This was down on the previous year’s figure of 2.1 times. However, consumers who dined out over the Christmas period spent an average of £14.55 when they did, up 5.4% on the previous year (£13.80). Added Read: “When consumers are eating out they are making it an occasion and are spending more. This increase in spend is good news for the sector but it is more important to businesses that people continue to eat out frequently. The downturn over Christmas will have affected turnover for establishments who would previously have relied on a strong end to the year. The QuickBite survey also notes the ongoing popularity of pub restaurants, which now account for 20% of respondents’ eating out occasions, up from 19% in June last year. Takeaway and delivery outlets represent 16% of eating out occasions – a third of all eating out (31%) was in quick service restaurants, demonstrating the nation’s continuing preference for casual dining.”

ALMR sees New Year influx of 26 new members: The Association of Licensed Multiple Retailers (ALMR) has seen an influx of 15 new operator and 11 supplier members in the first weeks of 2013. Among the new members are Lovely Pubs, the six-strong food-led operator led by Paul Salisbury and Paul Hales, Grand Union, the seven-strong London operator led by Adam Marshall, and Chameleon Bar and Dining, chaired by Alistair Arkley and led by Phil Strong. Other new members are: Disco Bar & Club, Fabric, Goodfellas, Hull Student Union, Jones Nightclubs, Millennium Leisure, New Pub Company, Pink Toothbrush, Plymouth Students Union, Starlight Leisure, Troy Leisure and William Hardwick 2000 Ltd. Chief executive Nick Bish said: “These are wonderful examples of the trail-blazing companies that underpin the reputation of the sector as being innovative, dynamic and successful. It is fantastic to have these new members in the ALMR and joining colleagues already there as champions of our great industry.” Adam Marshall, managing director of Grand Union Bars, said: “We’re thrilled to be joining the ALMR; sitting alongside some of the best in the business. Campaigning for the positive interests of the industry is important to Grand Union as the external environment has a great impact on the running of our growing business. We will rely on the timely and accurate information regarding the ever changing rules and regulations of the industry.” In addition The eleven new supplier associate members are: Aloha Cocktails; Brewfitt; BT; Captive Media; Frobishers; GS Systems; Kurnia Licensing Consultants; MICROS; Monuriki Drinks; Poppleston Allen, and Westons Cider. Bish added: “The supplier members involvement is crucial to the success of what we do; they bring expertise, advice and general support to ALMR’s activity on behalf of its members and the industry at large.”

Starbuck’s threatens to withdraw UK investment over constant sniping: Coffee firm Starbucks has made a visit to Downing Street to threaten to withdraw proposed UK investment of £100m over “constant and unfair attacks” over its tax contribution, The Sunday Telegraph has reported. The meeting came after David Cameron urged tax-avoiding multi-nationals doing business in the UK to “wake up and smell the coffee”. UK managing director Kris Engskov demanded discussions in Downing Street on Friday. A Starbucks source told the newspaper: “The PM is singling the company out for cheap shots, a company that, it should not be forgotten, has pledged to pay more tax now and into the future.”

Lunch hour is just 29 minutes: The average lunch hour is just 29 minutes long, a reduction of four minutes on last year, according to a new survey. Two thirds of the 2,000 people asked in the OnePoll study said that they simply had too much work to do to take any longer and 14% said they took a short lunch-break to impress their boss.

Ground coffee fastest growing category at UK supermarkets: Ground coffee was the fastest growing category at UK supermarkets last year as “shoppers ditched essentials in order to keep luxuries”. Sales of roast and ground coffee rose 13.1% to £220.2m compared to the previous year. Frozen desserts and ready meals were among the fastest falling categories.

Leisure companies fail to grasp benefits of social media: Research by Barclays has found most leisure companies are failing to grasp the benefits of social media. More than two-thirds of the companies surveyed in the pub, restaurant, travel and hotel sector said they saw only “some” or “limited” opportunity in using social media to engage customers even though one in ten companies said half their sales were generated in this way. Mike Saul, head of hospitality and leisure at Barclays, said: “The industry is missing a trick here. Social media is everywhere and for many businesses it not only influences and directly generates sales but it provides a personal link with consumers, building loyalty and driving repeat footfall.”

Propel Morning Briefing dominates Morgan Stanley list of key industry news last week: The Propel Morning Briefing dominated a weekly list of key industry news items published by Morgan Stanley on Friday. Of the key stories listed by Morgan Stanley, almost half were Propel exclusives or broken first by Propel. The Propel stories listed were: Stonegate Pub Company reported 44.9% return on investment in the 2011 financial year, with like-for-like drink sales up 3.9% and food up 3.7%; the latest round of JD Wetherspoon’s long-running legal action over alleged property fraud will be heard in High Court at the end of January; Whitbread has withdrawn beefburgers from sale at 240 pubs amid horsemeat concerns; Costa Coffee has rejected a plea by the Mayor of Ripon not to open an outlet in the city; Spirit announced plans to become the UK’s top hospitality company, scrapping the Original Pub Company brand and with Local pubs reporting into the head of Leased. 

Company news:

McMullens places five pubs on the market as business rates bill overshadows rent: Hertford-based brewer and retailer McMullens has placed five pubs on the market. The company suggested the move had been made reluctantly but that they were suffering from the current burdensome tax regime. Managing director Peter Furness-Smith said: “We have stood by these pubs, in some cases for over 100 years, but feel it is now time for others to craft an opportunity from them. The challenge will be, as with all pubs, to try and develop a sustainable business providing employment and a valuable service to the community while at the same time being burdened with oppressive and increasing levels of taxation and business rates.” The company said it had responded to the difficult market conditions by reducing average rents by 20% since 2008 to assist tenants. It challenged the government to do the same in relation to business rates – they have increased by 7% over the same period. Some 20% of McMullen tenants now pay more in business rates than they do in rent for the trading property, accommodation and support services. Added Furness-Smith: “We hope that potential purchasers can see past this government’s highly ‘anti pub’ policies and maintain these five public houses as a going concern.” Four of the pubs, The Rest & Welcome, Haultwick, The Tanners Arms, Bishops Stortford, The Green Man, Ickleford and The Maidens Head, Whitwell, are on the market with agent Everard Cole. The fifth pub is The Farriers in St Albans. ALMR strategic affairs director Kate Nicholls said: “Our (annual) Benchmarking Survey shows an inexorable increase in property costs over the past five years, with both cost lines increasing as a percentage of turnover. Our latest Benchmarking Report shows premises costs rising by 12% year on year, to almost 7% of turnover, with rent remaining at 11.4% of turnover. In the pub sector in particular, rates and rents are closely linked and there is no doubt that high business rates have fuelled pressure on margins and investment, impacting on the viability of the community local sector in particular. What the Benchmarking Survey also shows is that it is the market as a whole, rather than costs in absolute terms, which is the key to determining business profitability. Rents may be coming down in some cases, but as a medium term trend, they account for an ever-increasing proportion of turnover.”

Barworks reports increased turnover and profit: Barworks, the operator of six leasehold bars and restaurants, has reported pre-tax profit rose to £400,397 in the year to 30 June 2012, up from £326,178 the year before. Turnover increased to £7,955,669 from £6,774,917 the year before. The company stated: “The directors are pleased to report another record performance. All this has been achieved by maintaining focus on the creation and retention of a loyal customer base by a dedicated team of employees providing a high level of customer service and by sound management. The business is now well-placed to make further core and strategic investments in the future, party funded by cash generated within the business and partly by finance.” Interim dividends of £354,000 were paid during the year (2011- £322,500). The company added: “All in all and once again, a very satisfactory state of affairs and the more so given the prevailing economic conditions.”

Edinburgh bar and nightclub operator reports “massive” increase in profit: Edinburgh operator of seven bars and nightclub, Montpeliers, has reported a “massive increase” in pre-tax profit rising to £1,535,992 in the year to 29 April 2012 compared to £101,424 the year before. Turnover rose slightly to £15,631,525 from £15,250,651 the year before. The company said its Tigerlily and two nightclubs, Lulu and The Opal Lounge, delivered the bulk of operating profits. It added: “The massive increase in pre-tax profit was primarily driven by excellent margins at all levels and tight control of labour and operating overheads (administrative expenses dropped by around £900,000 to £7,636,659). Marketing tactics, which were streamlined to focus more on the requirements of particular customer groups, were also highly influential in the success achieved. Other positive factors were reduced depreciation charges and finance costs, the latter due to continuing low interest rates on borrowing which are reducing as each year passes.” Net debt reduced by £1.8m to £8.2m. The company’s property estate was valued in December 2012 at £23,065,000. Montpeliers warned that the next two years “will be even more challenging than the four years that have elapsed since the credit crunch triggered global recession”.

Gordon Ramsay’s restaurants return to profit: Gordon Ramsay’s restaurant empire, run through his Kavalake company, has reported pre-tax profits of £2m in the year to August 2012, a bounce-back from a loss of £4.4m the year before, The Sunday Times has reported. Sales were down 6% to £43.1m after a loss-making Australian site was closed. Turnover in the UK rose 13% with the opening of Bread Street Kitchen in the City of London. US openings, including one in Los Angeles and three in Las Vegas, have been under licence meaning Ramsay collects a percentage of sales rather than footing the costs of opening. 

Adventure Bars reports like-for-likes up 32% over five weeks in December: London-based bar chain Adventure Bar has reported a 32% increase in like-for-likes sales in the five weeks from 3 December with total sales of £414,268. Director Tobias Jackson said: ‘“We saw a huge jump in sales this festive period based on several initiatives we put in place in the build up, due to lessons learnt the previous year. We managed to open our Covent Garden flagship bar for more hours and attracted an increase in bookings of 42% across the estate. We want to increase our customer satisfaction and interaction in 2013 and this has given us a great foundation for the year ahead.” Adventure Bar opened on Clapham High Street in December having closed a site in Balham in October – estate size, therefore, remained stable at four. Food sales made up just 1.5% of their sales at Christmas with wet sales making up the other 98.5%. “We are aiming to consolidate this year, with two new sites planned by the end of 2015,” added Jackson. “We are really looking forward to further natural expansion and serving more of London, looking central for sites five and six.”

Douglas Jack – buy Enterprise Inns shares: Numis Securities analyst Douglas Jack has issued a Buy recommendation on Enterprise Inns shares with a Target Price of 110p ahead of a trading update this Thursday. He said: “Thursday’s (first quarter trading update) should indicate that like-for-like net income has weakened due to largely one-off factors. We believe Enterprise is making good operational progress, which should be reflected in a return to positive like-for-like net income growth in H2. This could drive a further recovery in the share price, even after such a strong run. We expect like-for-like net income, which fell 1.2% last year, to be down circa 3% in Q1 due to poor weather and disruption from supplier WaverleyTBS going into administration. However, we expect to retain our full year assumption of -1.3% like-for-like net income due to an improving underlying trend (ex-Waverley and snow) and easier second half comparatives. The improving underlying like-for-like trend relates to: more growth-orientated investment; selling more higher-margin product; buying cheaper; supplying Sky TV and food to tenants, applying bulk purchasing discounts; as well as reducing the number and cost of business failures (a substantial opportunity from a cost of £29m in 2012). Management targets reducing the number and cost of business failures through better licensee recruitment and support, repair and maintenance funds, accountancy support and a 20% increase in the ratio of BDMs-to-pubs. Completing the five-year rent-rebasing cycle (from 2007 peak levels) should benefit rent (68% index-linked); average beer discounts have barely changed for 17 months. The Statutory Code proposal is unlikely to help sentiment, but the pubcos are already complying with self-regulation and BIS has stated that the code ‘will not mandate a free of tie option with open market rent review’.”

Simon French – Mitchells & Butlers like-for-like set to lag peers: Panmure Gordon analyst Simon French has reiterated a Sell recommendation on Mitchells & Butlers shares ahead of its trading update next Thursday – he has set a target price of 225p for the shares. He said: “We expect the group to have traded solidly over the Christmas and New Year period but expect it to continue to lag the peer group in terms of like-for-like sales growth. After the first eight weeks of financial year 2013 managed pub like-for-like sales growth was -0.1%. Following industry data and updates from peers combined with two weekends of snow, we reduce our year-to-date like-for-like sales assumptions from c+1% to c-1%. The stock trades on a CY 2013E adjusted EV/EBITDAR of 7.5x, an unjustified premium to Wetherspoons and in line with The Restaurant Group. Combined with our caution on the UK consumer we reiterate our Sell recommendation and 225p Target Price, implying circa 27% downside potential.”

Brighton vegetarian restaurant to re-open next month: The vegetarian restaurant Terre à Terre in Brighton is set to reopen next month after a four-month closure following a fire. It has now undergone a complete kitchen refurbishment and will reopen on 4 February.

Hanley licensee takes on fourth pub: Hanley license Marti Grice has taken on his fourth pub - The Victoria on the Square in Hanley. He already runs the Black Horse Inn in Chesterton, The Talbot Inn in Cheadle, and The Swan Inn in Biddulph. The 58-year-old, who was asked by Punch Taverns to take on The Victoria on the Square, said: “It is a great pub but it does need to be revamped and updated. I am a bit of a stickler for watching the pennies and with the economic climate we have to be more business-minded. You are more likely to find me doing paperwork than pulling pints behind the bar.”

Microbrewery launched at Enterprise Inns pub in Coventry: A new microbrewery has been launched at one of Coventry’s oldest pubs. The Rainbow, in Allesley Village and owned by Enterprise Inns, has set up only the second brewery to open in the city in a building behind the pub – a microbrewery, Piddle Brook, operated at the site four decades ago. Licensee Dip Dosanjh said: “It’s been a massive boost to the pub – the amount of people we’ve had coming in saying ‘we’ve heard the brewing is coming back again’. We’ve started to brew a couple of test beers here. People are very excited about it.” The ales are being produced by brewers Kevin Buckley and John Reilly. It means The Rainbow is making its own beer four decades after its previous on-site micro brewery turned off the taps. The former brewery there produced Piddle Brook beer, which became known throughout the city. Kevin Buckley first contacted Enterprise about bringing brewing back to the Rainbow two years ago.

St Austell Brewery strengthens its position as the south west’s beer champion with the acquisition of a specialist cask beer company: Award-winning family brewer St Austell Brewery has bought the Real Beer Company. Founded in 2009 by Martin Breading and Chris Ham, The Real Beer Company is a Devon-based specialist drinks wholesale company providing an extensive selection of cask and bottled beers as well as keg and bottled ciders for pubs and bars. The purchase of The Real Beer Company is expected to strengthen and complement St Austell Brewery’s existing composite free trade business and will give customers access to an even greater range of award-winning guest beers from across the country. James Staughton, managing director of St Austell Brewery, said: “The purchase of The Real Beer Company will firmly establish St Austell Brewery as the undisputed cask beer champion in the south west and Bristol. The acquisition means we’re able to offer existing and new customers an unrivalled range of guest ales; including our own brands and those of other brewers. It’s a very exciting time for the cask and specialist beer market which is forecast to keep growing, so we’re delighted to be able to add another string to our bow and excel against our competitors as a guest ale provider in the wholesale beer market.” St Austell Brewery completed the purchase of The Real Beer Company (for an undisclosed sum) today. Former owners, Martin Breading and Chris Ham have both joined St Austell Brewery; Chris, will continue to head up the Real Beer business under St Austell Brewery’s sales director, Ian Blunt while Martin joined St Austell Brewery in 2012 in the role of National Sales Director driving the growth of St Austell’s own award-winning ales.

Harry Ramsden’s report lower turnover and increased losses; profit expected in 2013: Fish and chip shop chain Harry Ramsden’s has reported that it disposed of six sites in the year to 1 January 2012 at a cost of £1,160,000 but removing losses incurred at the sites in 2011 of £1,150,000. This is expected to mean the company moves to profitability this year. Turnover decreased to £15,707,934 from £18,879,874 the year before. Gross margin dropped to 38% from 43% the year before. The Harry Ramsden’s estate now stands at 22 sites. The company made a loss before tax of £2,129,019, up from £1,471,958 the year before. The company stated: “The company has made great progress since the balance sheet date in turning around the financial performance of the business, the benefits of which will be seen fully in 2013. The disposal of six loss-making sites and operational improvements have moved the business to a position where it is generating cash and is now looking to improve profitability through targeted investment in its core estate, together with expanding franchise operations and licensed retail range under third party agreements. During the turnaround period, the business has the full support of its owner to provide the required liquidity and capital expenditure to ensure the business is not only a going concern but is able to realise its full potential.” The company incurred £1,455,558 (2010- £1,290,000) of recharged management costs from its parent company, Boparan Ventures Limited. 

Camerons reports turnover and profits increase: North brewer and retailer Camerons, which owns 70 pubs, has reported pre-tax profit increased to £1,904,971 in the year to 29 April 2012, up from £1,546,582 the year before. Turnover rose to £68,975,178 from £68,024,547 the year before. Ebitda in the year increased by £800,000 to £5.9m. Net debt decreased by £2.2m to £32.3m and net debt to Ebitda levels were 5.5 at the period end compared to 6.8 in the prior period. The company said: “Recent trading within both the contract brewing and pub divisions mean the directors expect further growth for the 12 months to 28 April 2013.”

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