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Wed 30th Jan 2013 - Greene King, M&B and Peach

Story of the day:

Geof Collyer – Mitchells & Butlers could stand out by shelving the roll-out programme: Deutsche Bank analyst Geof Collyer has argued that Mitchells & Butlers (M&B) could “stand out from the crowd by shelving its roll-out programme”. Ahead of tomorrow’s results update from M&B, he argued that new chief executive Alistair Darby should think about focusing on getting better returns from the existing 1,600-strong estate – and put the roll-out programme on hold. This would allow the reinstatement of dividends or the reduction of debt. Collyer said: “During 2012, M&B drifted to the bottom of the major quoted pub groups like-for-likes table. Marston’s has already highlighted that at least one week in January was poor (like-for-likes circa -20% due to snow), but if you are going to have a poor weather-affected week, then January is the time to have it. We estimate that normal January trade is about 40-50% lower than December’s. M&B shares have drifted off in recent weeks, underperforming the peer group by between 10-15%, Wetherspoon excepted. We see this stage as too early for the new chief executive to have made any material impact on the business and we are not expecting any new strategic reviews either. M&B should have had a decent Christmas against a tough comp, but with two, maybe three weeks of poor trading due to weather, our forecasts may prove a little optimistic, given M&B’s relative lack of London exposure, which has been the key driver of Greene King’s, Spirit’s and Fuller’s like-for-likes. We think that we could get some more clarification on the new chief executive’s thoughts at the H1 results stage in mid-May, but one way to get M&B to stand out from the crowd would be to shelve the rollout programme and concentrate on the running the existing estate better – the actual target for the new ways of working. This could free up cash that could be used to either reduce debt or reinstate the dividend. It might slow down the earnings growth, but it would be a radical step in the context of a sector with a patchy record for returns.”
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Industry news:

Delivery Hero acquires Delivery Hero, the world’s largest network for online takeaway ordering, has completed the acquisition of UK online food delivery company The company took a ‘pivotal’ stake in Hungryhouse in March 2012, and since then the UK site tripled the size of its business with Hungryhouse generating more than £6 million in sales to the 11,000 restaurants in its network every month. The acquisition was made via a share swap, with Hungryhouse founders deciding to stay involved. In two years, Delivery Hero has become the largest restaurant network for online food ordering in the world. The company helps over 33,000 restaurants, across 12 countries, increase takeaway orders and keep up with technological demands. “We believe there is still a lot of growth potential left in this business, and so we re-invested 98% of the purchase price of our shares into Delivery Hero,” said Hungryhouse co-founder Tony Charles. “We had always planned to make an exit, but the opportunity to continue the Delivery Hero success story was too much fun to turn down!”

Pub capitalises on horse controversy with chaval night: A pub is Walton has capitalised on the current horse burger scandal - by putting the real thing on its menu. The Victory is holding a special gourmet night in its restaurant with horse burgers, horse haunch steak and horse stroganoff all featuring tomorrow night. Bar boss Sam Bettany admits it could have been controversial, but says so far it’s been a huge hit with customers. “We are calling it a Cheval Night,” said Sam. “The restaurant has sold out and now we’re booking tables in the bar because it’s proving so popular.”

Euro MP calls for VAT reduction for the hospitality sector: Bolton Euro MP Paul Nuttall, a member of UKIP, is calling for an urgent VAT cut for the leisure industry. He wants to see a cut from the 20% rate down to only 5%. Nuttall said: “There should be a change in VAT so drinks in pubs can be sold at prices which are competitive with those sold in supermarkets. Two-thirds of the cost of a pint of beer in a pub is swallowed in tax. The government is supposed to be committed to creating jobs - here is a fantastic opportunity and it will bring in more money to the Exchequer as well as safeguarding pubs which are at the heart of local communities.”

Cider makes call for stable regulatory and tax regime: Cider industry leaders have called on the UK government to help them grow both at home and abroad. Paul Bartlett, chairman of the National Association of Cider Makers (NACM), said that a stable regulatory and fiscal regime plus “recognition of the unique nature of the cider industry” will enable growth in the UK and especially in export markets. Bartlett told the audience of ministers, MPs and officials: “Investment by cider makers over many years means we are better placed to succeed over the long-term than ever before. In order to secure this opportunity we need regulatory stability, sensible restraint on duty and support in export markets. If we get this, we will do more for the rural communities we are part of and make a greater contribution in terms of duty and tax.”

Technomic - consumers in the US moving away from ready meals as economy improves: Research and insights firm Technomic has reported that US consumers are purchasing ready meal solutions less often than they did just two years ago as the economy improves. A total of 38% of consumers report they buy ready meals from supermarkets each week compared to 42% in 2010. “These consumers may be reversing the patterns they set a couple of years ago by heading back to restaurants,” said Darren Tristano, vice president of Technomic. “For retailers to gain or maintain their share of foodservice dollars, they’ll need to clearly stand out from restaurants—especially since our data shows that consumers’ expectations are rising for the taste, quality, freshness and appearance of retailer prepared foods.” The same trend was reported by UK supermarkets over the weekend.

Company news:

Stonegate to open third Popworld on Friday: Stonegate Pub Company is to open its third Popworld venue this Friday (1 February) at the former Babylon in Portsmouth - it follows the successful launch of the brand in Southampton last September. Manager Maggie Hewlett said: “The vision for Popworld is a bar that celebrates and wholly embraces pop music, from the 90s to the present day, as well as its trademark anthemic music. There’s nothing like a great pop song; it gets you singing, it gets you dancing and most importantly, it makes you smile.” Stonegate is investing £100,000 in Popworld transforming the bar with bright and vibrant colours, a new sound and lighting system complete with an 8ft by 6ft LED wall which will be installed along with addition of new large party booths seating up to ten people. The booths, which can be pre-booked by calling in advance, are great for parties and special occasions and give an exclusive feel to a night out. The investment in the bar has also created two new jobs as Popworld will introduce table service throughout the bar as they aim to instil a service-focused culture.
Balthazar Bakery set to open next to Balthazar: The eagerly anticipated Balthazar restaurant, the London version of the famous New York eatery to be opened in Covent Garden on 12 February by New York restaurteur Keith McNally and Richard Caring, will have a bakery next door. The Balthazar bakery will provide home-made artisan breads to the neighbouring Balthazar restaurant, as well as offering a wide selection of homemade pastries, salads and sandwiches for take-away throughout the day.

Oakham Ales buys Bellwether Wines: Peterborough-based Oakham Ales has acquired nearby Bellwether Wines, which supplies to the licensed on-trade within a 35-mile radius of the region. The Bellwether Wines name has been retained to become the wine division of Oakham Ales. It has appointed Warren Ball, Oakham Ales’ wine director, who has over 20 years’ experience in the wine industry, to run the new division. It has also appointed Michael Posnett as wine co-ordinator. Posnett has been involved with Bellwether Wines since its launch in 2009. Adrian Posnett, Oakham Ales managing director, who joined the company in 2010 to implement a long-term growth plan, said: “The acquisition of Bellwether Wines provides us with a fantastic opportunity to develop a wine portfolio alongside our ever increasing cask ale business.”
Peach Pub Company fined £15,000 over near fatal shock: Peach Pub Company has been fined £15,000 after a worker suffered a potentially fatal electric shock at its Almanack restaurant. Peach pleaded guilty to two health and safety offences in a hearing at Nuneaton Magistrates Court last week. Warwick District Council, which brought the charges, was awarded full costs of £6,675. The court heard that last June a Polish agency worker, Agnes Sieczkowska, was working in the kitchen of the restaurant. As she picked up a metal-rimmed bucket from a stainless steel shelf below the waste disposal unit, she received a severe electric shock. She had come into contact with a live electric cable protruding from the waste disposal unit control box and lost consciousness for a short period of time before an ambulance was called. When interviewed she said she had suffered a less severe electric shock from the waste disposal unit about a month prior to the incident. A colleague reported his concern to the pub management but no action was taken. Agnes has been unable to return to work since the accident. Michael Coker, district council environment chief, said: “There was a clear potential in this case for serious injury and it was a matter of sheer luck that the employee did not receive a fatal electric shock. It is important that employers do not become complacent about the use and maintenance of electrical systems, and it is essential that businesses engage competent contractors to undertake planned maintenance.”
Orchid transfers Thai offer to second Ewell pub: Managed operator Orchid Pub Company has transferred its Thai food offer from the former Organ and Dragon pub in London Road, Ewell to a second site, which is now called The Queen Adelaide and Dragon. The Organ and Dragon pub, in London Road, Ewell, shut down in July. Kentucky Fried Chicken has appealed the decision of Epsom and Ewell Council to reject its plans to convert the 18th Century pub into a fast food chain and restaurant. The Adelaide and Dragon, which was renovated in October, now serves Thai cuisine, as well as its own pub food.
Bounce retains AG&G to find more sites: Ping pong concept Bounce has retained licensed leisure specialists AG&G to find them further sites after the opening of the first site in Holborn, initially in London and then in other UK cities. “We’re looking for between 8,000 and 15,000 square feet with a minimum clear height of 2.75 metres and not too many columns,” explains AG&G’s James Grimes. “And, of course, any site needs to have a catchment area full of would-be ping pong players who also enjoy cocktails and food!” Bounce is fronted by Adam Breeden (co-founder and ex-chief executive of All Star Lanes). Partners include Alex Chesterman (former global chief executive of Planet Hollywood), Ed and Tom Martin of ETM Group (The Botanist, Chiswell Street Dining Room, Pho and more), Matthew Freud of Freud Communications and Mark Sainsbury, owner of the Zetter and the Zetter Townhouse.
Brewdog founder makes US beer show: Brewdog founder James Watt is to appear on a US television show, which has the working title Brewdogs, about the burgeoning craft beer market. The show is part of Brewdog’s plans to market itself across the Atlantic. Watt told Propel Morning Briefing: “It will feature myself visiting some amazing locations.” The company hopes to expand distribution through chains such as Wholefoods in the US as well as independent retailers. Distribution there is overseen by Anchor, the 117-year-old craft brewer, which has a stake in the Scottish brewer - Brewdog has reciprocal shares in Anchor Brewing. There are no plans, at present, for the programme to be shown in the UK. Brewdog has a turnover of £20m.
Spirit opens last Original Pub Company day after scrapping the brand: Managed operator Spirit has converted The Golden Ball Hotel in Poulton as an Original Pub Company site and it opened last Wednesday – the day after Spirit scrapped the brand. The venue closed on Monday 14 January and reopened on Wednesday 23 January – the day after the company revealed it would scrap the brand. Meanwhile, The Bay Horse pub in Lewins Mead, Bristol, an Original Pub Company, will be unbranded after a £150,000 major refurbishment next month. It will close on the evening of Saturday, February 9 for the facelift and will reopen on Friday 15 February. A spokesman for Spirit said: “The pub had already been scheduled to receive an investment prior to the decision to remove the Original Pub Company brand. As part of the refurbishment the pub will become unbranded.”
Shelley Sandzer secures first site for Hot Pink: Leisure property agent Shelley Sandzer has acquired the first site for new healthy grill concept, Hot Pink, in Wimbledon, London. The 1,600 sq ft ground floor premises have been acquired on a 15 year lease. The rent was undisclosed. The site was formerly Reds Bar and Grill and is located at 86 The Broadway, Wimbledon. Henry Wilson, of Shelley Sandzer, said: “Hot Pink is a great new brand and their mix of healthy grilled food in a relaxed and cool environment is bound to go down well in Wimbledon. We are pleased to have secured such a prime site for them in their new venture.” Hot Pink was set up by some of the industry’s rising stars including Dipak Panchal - the founder of various venues including The Valmont Club, DukeBox and The Black Dog - and Cokey Sulkin the founder of Aragon House, Parsons Green and The Black Dog, Vauxhall. The Wimbledon site is the first of three planned over a two-year period, which will allow the concept to establish itself in a well-recognised casual dining restaurant pitch. 
Stuart Inns to open second site: Stuart Inns, the Suffolk company headed by Oliver and Lorna Macmillan, are set to open a second site in Hadleigh. The company currently operates The Long Melford Swan. Rachael Allen will oversee the management of The Long Melford Swan while Ed Keith, 28 from Bury St Edmunds, has been appointed to bar manager to allow the Mancmillans to focus on their second site. Lorna Macmillan said: “Over the past year we have worked tirelessly to form a team that provides not only delicious and brilliantly crafted cuisine but also the best customer service Suffolk has to offer. Rachael and Ed have always been core members of our team and are very popular with our existing customers so we are very confident they will continue to grow the business over the coming months whilst we focus on the opening of our second outlet.”
Greene King wins go-ahead to add bedrooms; changes policy on military ID as proof-of-age: Greene King has won planning consent to add bedrooms at Ely’s Lamb Hotel. The local authority has green-lighted a plan to create six new rooms at the hotel, in Lynn Road, in December. The plans involve converting some of the Grade II listed hotel’s ground floor function rooms into bedrooms. Two will be for disabled guests. Meanwhile, the company has changed it policy on accepting military ID as proof-of-age after receiving a complaint from a 19-year-old soldier who was refused service at its Knowlsey pub in Bury St Edmunds. A spokeswoman said: “Greene King takes responsible retailing extremely seriously to ensure a safe environment for all our customers. After we received (a) letter we investigated this issue thoroughly. We are now pleased to say that we have changed our policy so that alongside a passport, full driver’s licence and proof of age cards bearing the PASS hologram, military identification will now be accepted as a form of ID.”
Spirit’s Flaming Grill plays cupid on Valentine Day’s: Spirit’s Flaming Grill brand has launched a cupid promotion on Valentine’s Day by offering a novel way for guests to ask out their love interest – through Facebook. Fans of the Flaming Grill Facebook page are being encouraged to ask ‘Grill You Be Mine?’ and if the offer is accepted, they could win one of ten free Valentine’s meals. Tina Martin, brand manager for Flaming Grill, said: “It’s not easy to pluck up the courage to ask the object of your affection on a date, so we thought we’d lend a hand and play Cupid in an innovative way! We want people to take a chance on romance this Valentine’s Day and you could win a Flaming Grill date on us!” To play ‘Grill You Be Mine?’ and be in with a chance of winning one of ten Valentine’s meals at Flaming Grill simply visit

Whitbread invests £6m in Weymouth: Whitbread is investing £6m to open a Premier Inn hotel and Beefeater restaurant at the Weymouth Gateway development in March. The new openings, part of the Weymouth Gateway development, will provide 55 jobs.
Domino’s launches 50% off order over £15 this week: Domino’s has launched a 50% off promotion on its full menu priced pizzas. This offer began on Monday 28 January and runs through until Sunday 3 February. The offer is only available on pizzas and involves a minimum spend of £15. This online offer can be redeemed at Customers have to enter the code FEEDME50 to their shopping basket prior to checkout.
Cloverleaf Restaurant founders step down from the board: Former Whitbread executives Gary Douglas and John Winder have stepped down from the board of the Cloverleaf Restaurants business owned by Greene King. Their departure from the board comes two years after they sold the business, which included 12 pub restaurants at the time, to Greene King for £55.8m. At the time of acquisition, Greene King planned to invest around £25m to finance ten new Cloverleaf openings within two years. The sale price equated to 8.7 times annualised earnings before interest, tax, depreciation and amortisation. Chief executive Rooney Anand pointed out at the time that the brands’ carvery offer added to the appeal of the acquisition. He said: “It is growing strongly both organically, with like-for-like sales growing ahead of our existing retail business, and through additional sites. There is a strong pipeline of new sites with a minimum of ten additional outlets expected to open within two years. The acquisition, combined with a planned investment of around £25m in the first ten pipeline sites, will utilise the remaining balance of our rights issue proceeds.” According to the Cloverleaf website, there are 16 sites currently open. A source said: “It would appear Gary and John have completed their earn-out after the Greene King deal.” There are at least two more Cloverleaf sites in the pipeline - a 1,291 square metre site in the Team Valley that is due to open in June this year and work has started on the first site in Scotland which will be located on the outskirts of Glasgow. Cloverleaf sites take around £40,000 per week although later, larger openings have hit circa £50,000-a-week. In May 2011, Greene King reported that the most recent five Cloverleaf openings were producing Ebitda of circa £700,000 per annum. Its dessert offer provides a USP with high quality desserts served in large portions. The most recent Cloverleaf opening was Pear Farm Tree in York in November last year.

Propel Opinion by Paul Charity: The acquisition of Cloverleaf by Greene King in January 2011 was not cheap at £55.8m for twelve pub restaurants – a lumpy £4.65m each. But Greene King’s philosophy, as espoused by its chief executive Rooney Anand, has been that it should not be afraid to pay top dollar for top quality assets. At an estimated cost of around £2.5m for each pub restaurant that has followed, the company has so far spent circa £66m to create 16 sites, which bring average price down to £4,125,000. This is clearly at the top end of investment levels normally seen in the sector, but Greene King was keen to point out in 2011 that site Ebitda levels are extremely high at £700,000 per annum for later openings. Industry sources reported that Marston’s has baulked at paying over £4.5m a site to buy Cloverleaf preferring to stick to its site-by-site new-build strategy. Greene King sources were keen to point out the advantages of buying quality assets, already trading, in seeing a return on investment straight away. The timetable for new Cloverleaf openings seems to have slipped but the brand is still in expansion mode. It would appear to offer more potential for growth than Greene King’s Loch Fyne business, which was bought for £68.1m in August 2007 when it had 36 sites – half a decade later it trades from 42 sites.

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