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Wed 13th Mar 2013 - Brewdog, Finest Catch and Giraffe

Story of the day:

Lovely Pubs buys Enterprise pub for £1m evolution of Farm concept: Lovely Pubs, the Midlands operator headed by Paul Salisbury, Sue Salisbury and Paul Hales, has bought Enterprise Inns’ Queen’s Head in Stoke Pound near Bromsgrove in Worcestershire where it will invest £600,000 evolving its Farm concept – the pub was bought ahead of an auction for slightly above the guide price of £395,000. The Farm in Lichfield has been described as a “posh Harvester” and takes around £55,000 per week. Paul Salisbury, whose team developed and rolled out Premium Country Dining Group at Mitchells & Butlers, said that the menu at the Queen’s would be an evolution of the Farm offer with wood-fired pizza, salad cart, a bigger rotisserie offer, an outdoor barbecue and live music two nights a week. Salisbury told Propel: “We thought about re-naming it The Farm but decided that The Queen’s Head is a well-known name locally. It’s on a canal and the demographics are very, very good and there is nothing on offer in Bromsgrove at all. It’s very close to a couple of Premium Country Dining Group sites that have done very well. We saw the car park at The Queen’s Head which has space for 120 cars – it must have been built for a reason.” The pub has around 150 covers inside and a further 70 outside. The Queen’s Head, which occupies a canal-side position at Stokepound, is to reopen on 1 July. The pub has had a chequered year – it was re-opened at the start of 2012 by chef Lorenzo Richards, the owner of The Wildmoor Oak pub and restaurant. The Queen’s Head first closed its doors a year ago after then owner, Gianni D’Aniello, handed the lease back to Enterprise Inns. It reopened in the spring under new management but closed again last autumn. Lovely Pubs currently operates six freeholds pubs and a leasehold site – and is already looking at an eighth site. The Queen’s Head is Lovely Pubs first major project since it invested £200,000 on a new concept at its Orange Tree pub, Chadwick End, Solihull a year ago - it has the tagline: Hoof, Fin, Feather and Fur. The new-look Orange Tree features stone-fired ovens and an open kitchen. Its menu features “casual things like pizza, steak and pasta” – the fur section offers rabbit, venison and bison burger, for example. Salisbury reports like-for-like sales are 10% up a year after it opened.

Industry news:

Tesco to buy Giraffe restaurant chain: Supermarket Tesco is poised to buy the Giraffe restaurant chain as part of moves to pep up its UK stores, according to The Times. Tesco is expected to pay up to £50m to buy the 47-strong restaurant chain and will install the brand in UK stores. The deal follows a move by Tesco to take a 49% stake in coffee shop operator Harris + Hoole. It is thought that Tesco will retain founders Russel and Juliette Joffe, who, with other members of management and investors, own 54% of the business. Luke Johnson’s Risk Capital Partner holds a 20% stake in Giraffe after investing £2m in 2004. Private equity firm 3i owns another 36% stake in the firm having invested circa £10m in 2006. The company made a profit of £4m on turnover of £40m in its most recent financial year. The next site will open in Leeds in May with six planned for this calendar year. It has opened it first overseas site at the new airport terminal in Dubai.

Coffer Peach reports February like-for-likes up 3.1%; new openings drive sales up 6.1%: Britain’s leading restaurant and pub groups enjoyed a welcome sales boost in February after poor trading in January. Collective like-for-like sales were up 3.3% on the same month last year, with total sales, which include the impact of new site openings, up 6.1%, according to latest Coffer Peach Business Tracker figures. “School half-term holidays, which this year were staggered over two weeks, helped drive sales, with pub restaurants and casual dining chains doing particularly well. Overall, trading was slightly better in London than outside the M25,” said Peter Martin of Peach Factory, the business intelligence specialist that produces the sector Tracker, the sector’s biggest and most comprehensive performance barometer, in partnership with Coffer Group, Baker Tilly and UBS. The improved trading figures for February come on the back of a poor, weather-affected first month of the year, which saw the 25 companies in the Tracker sample collectively record a 2.4% drop in like-for-like sales against January 2012. “The figures, however, seem to have produced a halt to the downward trend in the rate of market growth which we have seen since last summer. In August, year-on-year like-for-likes were running at +2.0%, but have shown a steady decline every month since then, until now,” said Martin. “The rate is now up to +1%, after dropping close to zero at the start of the year. The February results will also bolster confidence in the market, which has remained remarkably high despite tough trading conditions,” he added.

Camra to urge councils to protect pubs: The Campaign for Real Ale is to launch a campaign today to persuade councils to make it more difficult for pubs to be converted to alternative use. It will warn that London pubs are closing at the rate of two a week. Local authorities will be encouraged to list pubs as assets of community value.

National media reports minimum pricing to be dropped: Several national newspapers report this morning that minimum pricing is to be dropped in the next few weeks. The move comes after David Cameron was forced into a U-turn in the face of a revolt by most of the Cabinet. Home Secretary Theresa May has led criticism of the Prime Minister’s proposal to ban the sale of alcohol at less than 45p a unit in England and Wales. The Daily Mail reported: “Last night, government sources confirmed that it would be formally ditched within the next few weeks.”

Sector to be set salt limit: Companies will be set new maximum targets for the salt content of their dishes in a government bid to improve the nation’s diet. Public health minister Anna Soubry said: “Today our typical shopping basket contains much less salt than it did ten years ago, but more needs to be done to help lower these levels even further.”

London and the south-east paying more beer tax than the whole of Germany: Drinkers in London and the south-east are paying more in beer tax than the whole of Germany, the second biggest beer consumers in the world, according to the British Beer & Pub Association (BBPA) figures. Since 2008, beer tax has risen by 42%. The UK duty bill stands at £3.5 billion, with London and the south-east paying £804 million a year. This compares with just £664 million paid by all the beer drinkers in Germany.

BT Sport signs Dallaglio as its lead rugby expert: BT Sport has signed former England captain Lawrence Dallaglio as its leading rugby union expert. Dallaglio is the first signing to be announced for BT Sport’s exclusive coverage of up to 69 live matches a season from the Aviva Premiership. He will feature both as a co-commentator for some live matches and studio pundit for other live clashes, when BT Sport launches in the summer.

TripAdvisor reaches 100 million reviews: TripAdvisor reported yesterday it has become the first travel site to reach 100 million reviews and opinions - a more than 50% increase year-on-year. According to a recent study by PhoCusWright, commissioned by TripAdvisor, nearly nine out of ten users (87%) agree that TripAdvisor hotel reviews “help me feel more confident in my decisions”. 

Spirit Pub Company apprentice to meet the Deputy Prime Minister today: Charlotte Bonser, an apprentice at Spirit Pub Company, will be meeting with the Deputy Prime Minister, Nick Clegg, today (Wednesday 13 March) as part of the National Apprentice Week celebrations. Charlotte, who was named Intermediate Apprentice of the Year by the Hospitality Guild, will join 140 other apprentices from across the UK, including another award winning apprentice, Spirit’s deputy general manager of the Year 2012, Scott Bailey. The ‘Made By Apprentices’ meet and greet, organised by the National Apprenticeship Service, aims to showcase the talents of apprentices from within the UK and the great value they add to businesses and the economy as a whole. The event is part of a whole host of activities running across National Apprentice Week (11- 15 March 2013).

British Land to raise £500m for new investment opportunities: British Land is to raise £500m through a share placing to fund new investment opportunities. The proceeds will be used to fund £213m of recent acquisitions, with a further £130m in advanced negotiations. British Land said it has a “significant pipeline of identified opportunities” in its core sectors in London and the south east. “The company believes that this placing will provide it with additional investment capacity, enabling it to capitalise upon its scale and financial strength to drive future growth in earnings and returns,” it added.

Company news:

JD Wetherspoon plans £7.8m north east expansion: JD Wetherspoon is investing £7.8m on creating six new bars in the north east. The company will create 240 jobs by opening the new venues, adding to the 35 already in existence across the region. The company is spending £1.4m on transforming each venue, with an estimated 40 to 45 jobs created per pub. A old shop in Seaham, County Durham, is set to open its doors first as The Hat and Feathers, on Tuesday, 26 March, followed two days later by a one-time bingo hall in Spennymoor, which will be called The Grand Electric. An opening date of 9 July has also been set for a Wetherspoon pub to open in Cramlington, Northumberland, and work is underway on creating three further bars in a former cinema in Blyth, an old pub in Norton, Stockton, and a shop in Byker, Newcastle. Meanwhile, the company has also identified sites in Alnwick, Whickham, Billingham, Newton Aycliffe, Guisborough, Tynemouth, North Shields and Wallsend, and it is still looking for more sites in the region. A spokesman said: “We have identified sites in all of these places and are somewhere down the line in terms of purchasing freeholds, licences and so on, but we are still in the relatively early stages so cannot reveal more in terms of opening dates as yet. In general, the company is doing very well and the bottom line is a very simple strategy of opening very good pubs where you can drink and have good food. Having had successes in cities, we’re looking at other communities where we can have an impact on the area.”

Wye Valley Brewery takes on sixth pub: Wye Valley Brewery has opened its sixth pub - The Vaga Tavern in Hunderton which shut suddenly in 2011 following a dispute between a relief manager and its then owner, Marston’s. The venue re-opened a year later following a “substantial” renovation before Wye Valley’s involvement. Vernon Amor, managing director of Wye Valley Brewery, said: “At a time when more and more people are drinking cheap supermarket - bought alcohol we still sell 95% of our beer in pubs and continue to invest in them.”

St Austell Brewery boss writes to Cornish MPs over beer duty escalator: St Austell Brewery boss James Staughton has written to all Cornish MPs asking them to back the campaign for a freeze in beer tax in the Budget on 20 March. Staughton said with 300,000 young people working in the industry – which is one in 12 of 16-25-year-olds in employment – pubs could grow and create new jobs, with the right policies. “I hope all the MPs I’ve written to will support this campaign and back this motion in Parliament. It is clear that beer and pubs are an absolutely vital part of our local economy, especially for young people. The current government policy is counterproductive, as it is shutting down pubs, and costing jobs.”

Ramsgate hotel receives £500,000 interest free loan to expand: The Royal Harbour Hotel in Ramsgate is to get a £500,000 government-backed loan to expand. Owner James Thomas is receiving the loan, which he will match with his own investment to create a £1 million boost for the town. The scheme, coordinated by Kent County Council, has £35 million from the Regional Growth Fund to make interest-free loans to business investing in East Kent. The money will expand the hotel by eight rooms, build a 40-50 seat restaurant and create 17 jobs over the next two to three years.

The Finest Catch opens second site: The Finest Catch fish and chip brand has opened its second site in Tipton. The restaurant, which replaces an industrial unit next to Farmfoods, will employ 12 full-time and 15 part-time staff and opens after a £500,000 investment. Adam Wesley, manager of the Tipton site, said: “We felt there was nothing similar to Finest Catch in the region and that although there were fish and chip shops in the area, there was nowhere to enjoy them sitting down in the surroundings of a licensed restaurant where you can enjoy a pint of beer or a glass of wine.” The first Finest Catch branch opened in Henley in Arden in 2012.

Two prime Lake District sites come on the market: Two prime sites in the Lake District have been placed on the market after the companies operating them fell into administration. BDO has been appointed administrator of Taylor Hotels (Grasmere) Ltd, trading as The Red Lion Hotel, and Riverside Hotels Ltd, trading as Burnside Hotel. Property agencies Colliers International hotels and GVA Hotels and Leisure are marketing the sites for sale – they are still trading. The Red Lion Hotel has 49 en-suite bedrooms and leisure facilities and is situated in the centre of Grasmere, employing 37 staff. The Burnside Hotel is in Bowness-on-Windermere and has 57 bedrooms and a leisure centre, employing 41 staff. The administrator reports both sites had already attracted “strong interest” from corporate buyers.

Private buyer lining up to acquires Wolverhampton Oceania: A private buyer is in talks to acquire the giant Oceania nightclub in Wolverhampton, which has been closed since March last year. Mike Maguire, of Colliers Estate Agents, which is overseeing the sale, said: “We have got interest from a private investor to re-open it as a nightclub and carry out a complete refurbishment. It is a private investor who we cannot name at the moment but we are currently in legal negotiations. Once they are sorted we should be able to move forward and there is a timescale for opening by the end of the year.”

First round bid date set for sale of three Hilton hotels: Agent Christie + Co has set a first round bidding deadline on Monday 18 March for three Hilton Worldwide hotels in the UK. The three hotels - Hilton Milton Keynes, Hilton Portsmouth and Hilton Coylumbridge (near Aviemore in Scotland) - were placed on the market in February. All three hotels are operated by Hilton Worldwide and will be sold free of all Hilton branding and management. Hilton Worldwide’s expansion strategy in the UK has led the company to seek to sell the properties in order to explore other opportunities that align with the company’s growth plans.

Brewdog to open eleventh site tomorrow in craft beer Mecca of Leeds: Brewer and retailer Brewdog will open its eleventh site tomorrow - in Leeds. The venue is located near the iconic Corn Exchange and situated in one of Leeds’ oldest buildings, The White Cloth Hall. Brewdog spent nine months obtaining a licence for the venue before it was granted on appeal. The company stated: “The Corn Exchange has long been hailed as a meeting point for alternative and independent retailers. Brewdog Leeds will be joining this troupe in bucking the mainstream and embracing a new way of thinking. Leeds is fast becoming a craft beer destination with the likes of Red’s True BBQ, Friends of Ham, North Bar and now Brewdog Bar all flying the flag for better beer. Our new bar has some ace original features - exposed brickwork, beams and windows, complimented by some awesome new pieces such as a spiral staircase, concrete cast bar, and, of course, our trademark gym flooring.”

Douglas Jack – buy Punch Taverns shares: Numis Securities analyst Douglas Jack has issued a Buy note on Punch Taverns shares with a target price of 15p in the wake of yesterday’s trading update. Jack said: “Core estate like-for-like net income fell 3.5% in Q2, an improvement on Q1’s -5%, despite January’s poor weather. In H1, like-for-like net income is down 4.5%, but we are holding our full year assumption of -3.2%, expecting the trading trend to continue to improve, aided by recent improvements in letting and investment activity, increased field support, food development and easier weather-related comparatives. 164 pubs were sold for £55m in the first 28 weeks (versus 86 for £26m in the first 16 weeks). These were sold for slightly above book value and at 18x EV/EBITDA. This equates to £335,000 per pub with both the 21 core pubs (half golden bricks; half tail-end) and the 143 non-core pubs being sold at 18x. The circa 1,500 pubs to sell over the next four years are valued at £287,000 per pub or 7.9x EBITDA, by our estimates. We estimate Punch has £80m of cash at PLC. However, that becomes less relevant if the debt restructuring proposal is approved, reducing debt and financial risk in the process. If approved, we estimate that Punch’s share price would be 30p if the company were valued on the same 9.7x EV/EBITDA rating as Enterprise Inns.”

Young’s re-opens Ship in Wandsworth: London retailer Young’s has re-opened the flagship Ship in Wandsworth after a major renovation. Young’s has refurbished and extended the dining room, restored the 1950s horseshoe-shaped bar and updated the vintage furniture. The riverside venue, which dates back to 1786, has also got a new outside bar, terrace and barbecue area, with increased seating capacity and three Thames-side cabins for private parties and events.

Starbucks opening attracts tax protest: A small group of protesters have gathered outside the newly opened Starbucks at Bournemouth’s Triangle to object to the company’s UK tax affairs. Activist group Anonymous highlighted the tax avoidance controversy that came to light last year when it was revealed Starbucks had paid only £8.6 million in corporation tax in 14 years of trading despite sales of over £400m in 2011. In December last year, Starbucks said it would voluntarily pay extra tax in the next two years. One protester said: “We just want them to pay their tax like everyone else.”

Greene King expands Flame Grill concept with openings before Easter: Greene King is expanding its new ‘Flame Grill’ concept, which has the tagline Pub and Flaming Grill. It combines ‘contemporary style with authentic pub atmosphere’ and industry sources report the new concept provides a more premium approach to community mainstream pubs. Décor is upmarket whilst the menu places emphasis on value price points combined with big flavours through grill cooking and special sauces. Early conversions to the format, which sits within Greene King’s locals division, include the Lord Darcy, Alwoodley, Leeds, The Red Lion, Sunningdale, Ascot, The Ascott in Pinner, The Golden Hind in Portsmouth, The Red Lion in Stubbington, The Old Salt Quay in Rotherhithe and the Testwood, Totton. The brand website states: “We have a speciality grill section which is delicious - choose from a selection of dishes which are cooked and infused with oak, hickory, or maple.” The flame grill selection includes a variety of steaks and sizzling dishes – a section of the menu also offers two main meals for £10. The Monument pub in Hereford and The Speckled Hen on the outskirts of St Albans are due to move to the Flame Grill format shortly. The Pavilion in Shepherds Bush is another conversion on the blocks. Of the Pavilion, the company states: “With the business turning over an average of £11,000 per week year-to-date and food at 19% of the mix it is currently in a great position but crucially has a lot of opportunity to grow.” Greene King’s website states: “The Flame Grill menu offers consistently well-presented, quality, value-for-money food and drink where tasty flame-grilled food, enhanced by delicious smoke-marinade is the speciality. The unique cooking method offered by the Flame Grill equipment, sears the meat on contact and locks in natural flavours resulting in tender, moist, succulent food.” Greene King has increased food sales within its 472-strong local pubs segment from 17% of sales to 23% of sales since 2007. Of the 472 pubs, 137 sit within the community mainstream segment. The Flame Grill menu offers a steak and a drink for £7.49 on a Monday and Tuesday, a burger and a drink for £6.99 between Monday and Saturday, 12pm to 5pm, plus a curry and drink for £5.99 on Thursday from 5pm. There’s a choice of nine burgers and five dishes served with their own marinades. Greene King is the second largest operator of managed pubs and restaurants in the UK with 972 sites, second to Mitchells and Butlers with 1,600 sites. Confusingly, Spirit Pub Company operates a brand called Flaming Grill that has grown to more than 100 sites since it was founded in 2009.

Government orders an independent review of pre-pack administrations: The government has announced an independent review into controversial pre-pack administrations during a Parliamentary debate on pre-packs. The pre-pack administration has been a feature of the sector since the credit crunch – the first and most high profile pre-pack occurred in 2008 in respect of Laurel Pub Company when it was owned by Robert Tchenguiz and acquired 293 of its 383 outlets through two new companies in the wake of administration. In 2008, private equity investor Jon Moulton called into question the use of pre-packs in the sector. He said at the time: “I think you’ll see a lot of pre-pack administrations – and some controversy. They are under a lot of scrutiny. Not getting the best value back for assets is the danger. There has to be a good reason for doing pre-pack administrations – and I’m not convinced there is in the pub group world. Would it matter if a company traded for a month in administration while orderly bids were found? But owners of leases on pubs that get dumped aren’t very likely to be willing victims. It’s an abuse of the market if you do that through pre-pack administration. That companies will fail properly is beyond doubt and administration done properly is doing what it was designed to do: sorting out the problem. Administration used incorrectly in pre-pack is not acceptable.” He also told The Daily Mail: “Pre-packs could be very easily abused. Bad management can plan for a pre-pack months in advance, line up an administrator - and then be back running the business immediately. It means when retailers fail they are often being kept with the same directors when it would be much healthier if new management arrived and with fresh money to invest. It is not a procedure that has any legal basis. It has grown up as a practice and no one has yet had the enthusiasm to contest it.” However, in 2010 he appeared to backtrack by describing pre-packs as “not all bad”. A timescale will be announced at the time the review is launched in late spring. A spokesman for the Insolvency Service said: “The government has listened carefully to the concerns of creditors about pre-packs and that is why we already have measures in place to increase transparency and prevent abuse. Strengthened measures are being introduced to improve the quality of information insolvency practitioners are required to provide on pre-pack deals and we are using targeted monitoring of outcomes to assess whether there is evidence of abuse. Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value and safeguarding jobs. The independent review announced by the Minister will enable further evidence to be assembled on how pre-packs are working in practice and whether further steps are needed.”

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