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Morning Briefing Strap Line
Mon 4th Nov 2013 - Amber Taverns, Enterprise, 3Sixty, Wadworth, Wagamama

Story of the Day:

Jamie Rollo – the risk of a serious credit event at Enterprise Inns has disappeared: Morgan Stanley leisure analyst Jamie Rollo has argued that the threat of a serious credit event at Enterprise Inns has disappeared. He stated: “At Quarter Three, Enterprise said that net bank borrowings had fallen to £217m, and we forecast this will have dropped to £40-50m by year-end, helped by the £97m net bond proceeds. The company has prepaid some unique securitised debt to ensure it can continue to upstream cash while it still needs to, meaning the bank debt covenant is much safer. We think this means the risk of a serious credit event has basically disappeared. While group net debt is down from its 2007 peak of £3.8bn to an estimated £2.6bn at the end of 2013, net debt to EBITDA has remained stubbornly high at 8.1-8.2x, as like-for-likes have been under pressure and pubs have been sold. However, with like-for-likes, hopefully, stabilising and FCF strong, we expect this multiple to start to come down.” Rollo has a price target of 200p on Enterprise shares. He added: “We recently reiterated our Overweight rating and increased our price target following an upbeat meeting (with management), our growing confidence it can return to sustainable positive like-for-like growth, and our greater focus on property value, where its circa 50% discount to book (value) looks unjustified.”

Industry News:

Wagamama franchisee collapses into administration: The Australian franchisee of Wagamama, Edible Concepts Holdings, has collapsed into administration. One of its ten sites in Australia, at Southbank in Melbourne, has closed – it has two other sites in Melbourne. KPMG, the company’s administrator, said it was looking for a buyer for the remaining sites. The first Wagamama opened in Melbourne in 2004 in St Kilda. The Southbank outlet opened in 2011. A spokesman for Wagamama said: “The Wagamama group is supportive of the process to ensure the franchise is well placed for future growth. It firmly believes that there is significant potential for the iconic brand in the Australian marketplace, which is reinforced by strong research results amongst consumers and looks forward to continuing to offer its Australian customers the unique Wagamama experience.”

Fish & Chip prices expected to rise: The price of fish and chips is expected to rise after a dramatic cut in haddock-fishing quotas in Norway, one of the UK’s biggest suppliers. Haddock prices are more than 60% higher than they were a year ago – and could well rise again in 2014 when another reduction in quotas is made. Norway accounts for more than 50% of haddock imports into the UK.

RBS to begin surveying SMEs on loans: The Royal Bank of Scotland is to enlist the help of the Federation of Small Businesses and the British Chambers of Commerce to independently monitor its handling of smaller business customers. The two bodies will be asked to survey their members on a regular basis to ensure that it is keeping its promise to help more SMEs get access to finance. The move follows a report by Sir Andrew Large, a former deputy governor at the Bank of England, that found just one out of four SMEs approaching the bank for a loan had their application approved.

Hot weather provided staycation boost: VisitEngland has reported the hot weather in July persuaded more Britons to holiday at home in July with a 9% rise in the number of UK trips, producing an additional spend of £1.8bn. A survey found that 12% of those taking a staycation had changed their holiday plans because of good weather.

US restaurant confidence dips in September after post-summer faltering sales: Softer sales and traffic levels in the US during September combined with a dampened outlook for the economy caused the National Restaurant Association’s Restaurant Performance Index to decline for the fourth consecutive month. The RPI, a monthly composite that tracks the health of and outlook for the restaurant industry, fell to 100.2 in September, a decline of 0.3% from 100.5 in August. Despite the decline, the index remained above 100 for the seventh consecutive month. “The RPI’s September decline was due in large part to softer like-for-like sales and customer traffic readings, which were down from stronger levels in August,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the NRA. “In addition, restaurant operators’ confidence in the economy continued to deteriorate, which was likely due to the fact that the government shutdown and debt ceiling debates occurred during the midst of the survey’s October survey period.”

Michelin pubs guide features 70 new entries: There are more than 70 new entries in a 570-strong list of pubs in the Michelin Eating Out In Pubs Guide 2014. “Reports of the death of the British pub have been grossly exaggerated,” said the guide’s editor Rebecca Burr. “We now recommend more pubs than ever before and the great news is that they are spread all over Great Britain and Ireland, rather than just being concentrated in a few counties. No one has to put up with bad food in a pub any more, however picturesque that pub may be. The pubs in our guide have been rigorously inspected by our team of full-time inspectors – and highlight the fact that pubs serving good food are thriving.”

Company News:

3Sixty Restaurants reports sales discussions ended: 3Sixty Restaurants, headed by James Horler, has ended discussions to sell the group as offers “did not reflect the current performance”. The company will now focus on expansion. The company reported turnover of £13,372,670 and profit before tax £2,374,706 in the year ended March 2013. For the six months trading to the end of September 2013, like-for-like sales across the Group (Ego and Rocket) were ahead of last year by 12%. The group has also announced that Adrian Abbey will become chief operating officer with immediate effect. Chief executive James Horler said: “We have had a very strong start to the year, particularly with the Ego brand. Our development in quality, value, social media and people is now paying dividends and we are seeing strong demand. Ego now has over 30,000 Twitter followers and 80,000 Ego Club members, which, for eight restaurants, makes it one of the country’s leading brands. There are many opportunities for expansion, across the UK for both brands and we have a strong balance sheet with significant net cash resources, which enables us to do so without raising equity or bank debt. Adrian Abbey and I have worked together for many years and I am delighted that he will now take a more active role across the Group.” Chairman Luke Johnson said: “The business is in a good position from which to expand and Adrian will bring depth and experience in order to achieve that.” 3Sixty Restaurants comprises eight Ego restaurants in the Midlands and north west and four Rocket restaurants, three in Central London and one in Nottingham.

Amber Taverns hits 91 sites with new openings and acquisitions: Amber Taverns, the north west operator of community pubs led by James Baer and Bryan Wardman, has hit 91 sites with new acquisitions and recent openings. A major refit of The Unicorn in Worksop is underway which will reopen under the same name on 27 November. Bar Mondo in Gateshead has just been acquired and will reopen on the 18 December under the name Carters Well following a substantial refit. Work starts later this month on The Bluebell in Chesterfield, which will reopen under the same name in January 2014. The Bla Bar in Hull has been recently acquired from an independent operator and will reopen as The Ebenezer Morley in February. Contracts have also been exchanged to acquire a property in the West Midlands and one in Cumbria both of which will reopen in March 2014 following major refurbishments. Meanwhile, the former Ashley Hotel in Blackheath, Rowley Regis opened two weeks ago under the name of Windmills End and is trading ahead of expectations. Chairman Clive Preston said: “This takes us to 91 units and with negotiations in progress on a number of other properties the first hundred is now clearly in sight.”

Former M&B retail operations director Simon King advises on wife’s Wadworth opening: Simon King, who worked at Mitchells & Butlers for 27 years and recently left his role as retail operations director for the Browns Bar and Brasserie brand, has been advising his wife Sheila, who was previously head of category at SSP and their business partner Russell Esworthy, on the opening of their first pub – The Cross Keys, Wanborough near Swindon, a Wadsworth pub. King told Propel: “We’ve just re-opened following a refurbishment. The design is modern contemporary with fresh food ranging from pizza and salad to pub classics with a twist. There are the stalwart favourites, which will be available each day such as fish and chips, pizzas and the ‘Wanburger’ (which will compete against most London restaurants) and then daily changes to stimulate our regular guests. Wadsworth have been excellent to work with and very supportive ensuring we have a business that’s set for success.”

Eclectic targets growth to 50 sites: Late-night operator Eclectic Bar Group will look to double the number of its venues during the next decade in the wake of its plans to float. Eclectic will use the £10m it plans to raise to pay back a £7.3m loan to its backer Avanti, spending the remainder on its expansion plan. Reuben Harley, Eclectic’s chief executive, told The Financial Times that he thinks the company could have as many as 50 outlets over the next decade – more than double its current total of 20.

Whitbread gets Farnham Beefeater and Premier Inn go-ahead: Whitbread has won a licence to open a town centre Beefeater and 80-bedroom Premier Inn on Victoria Road, Farnborough in the face of some limited local opposition. Meanwhile, Whitbread will open a new pub restaurant and hotel development in Exeter bringing a total of 75 new jobs to the local area on Monday 18 November. The Premier Inn will feature 102 bedrooms.

Tokyo Group report 6.4% dip in turnover: Tokyo Group, the holding company for five nightclubs run by Aaron Mellor, has reported turnover dipped 6.4% in 2012 to £6,203,410 after a reduction in university admissions following the introduction of academic fees. Pre-tax profit dipped to £784,925 compared to £1,073,434 the year before. The company stated: “We have maintained spend per head and we have also achieved gross profit margins in line with last year. The management team have demonstrated the ability to adapt to the price sensitive trading environment with a good balance of discounts and incentives and, where appropriate, cost-cutting initiatives.”

Beefeater introduces kids eat free after 2pm on Sundays in November: Whitbread’s Beefeater brand is looking to boost Sunday business this month with the introduction of a kids eat free offer after 2pm on every Sunday in November. For every adult ordering from the main menu, one child can have a starter and main course free.

Nightclub chain lines up third opening: Nightclub chain Level One will open its third site, this time in Darwen, Lancashire. The former Roxy nightclub in Market Street will reopen as a Level One, which already has two clubs in Accrington and Burnley. Owner Leon Kelly said: “We will be open from midnight until 6am and I am looking to bring some big-name artistes to the town. The club has established itself in Burnley and I want to turn Level One into a recognised brand, giving people in Darwen a destination.” As with the other Level One nightclubs, it will be completely glass free.

Thomasina Miers to launch Burrito Mama: Wahaca co-founders Thomasina Miers and Mark Selby are to launch a burrito concept called Burrito Mama in London’s One New Change this Thursday – next to an existing Wahaca. Burrito Mama’s menu will feature a variety of toasted burritos, as well as salads and burrito pots. Food will be ready within 30 seconds. Miers said: “We know what works and we’re cutting waiting times by serving what we see as the perfect burrito.” Customers will be able to use self-service screens or the chain’s app to order or pay remotely. A roll-out of the brand will follow next year if the site is successful.

Caffe Nero to remove leery poster: Caffe Nero is to remove a poster from its sites that shows three men leering at the bottom of a lone woman as she walks by. The poster is supposed to “portray Italian culture”. It will now be removed after the brand conceded it might cause offence. Caffe Nero spokeswoman Ceri Aiken said: “We have stopped actively using this image, meaning it is no longer used in new stores, or existing stores given a refresh. We are also in the process of removing the image from stores where it is displayed.” 

Bella Italia among four new restaurants get go-ahead in York despite Spirit objection to one: Four new restaurants have been given the go-ahead in York. City of York Council has approved applications for the Budgens store building, on the corner of George Hudson Street and Micklegate, and for two restaurants at part of the former Argos site overlooking the River Ouse on Bridge Street. The authority’s planners have also given the go-ahead for a Bella Italia restaurant at Clifton Moor. The Budgens proposals were submitted by British Overseas Bank Nominees and WGTC Nominees said restaurant chains with outlets at Sheffield’s Meadowhall centre but no York presence could not find suitable units in the city. The Bridge Street site will be developed by Individual Restaurants, which owns the adjacent Piccolino restaurant and the Bank, Zinc and The Restaurant Bar & Grill chains. Approval was granted for the building to be used for restaurants in 2009 but expired before work could start. Bella Italia already has a Low Petergate restaurant and will now open another at Clifton Moor. It will cost £800,000 and create 22 jobs. The plan was opposed by Spirit Pub Company, which owns the nearby Flying Legends pub. The pub company claimed the scheme would leave the area with too many restaurants, the pub would lose car-parking, and Bella Italia should have looked at city-centre sites instead.

Douglas Jack – we expect Wetherspoon to report 3-4% like-for-like growth on Wednesday: Numis Securities leisure analyst Douglas Jack has stated that he expects JD Wetherspoon to report 3-4% like-for-like growth when it unveils First Quarter results this Wednesday. He said: “Like-for-like sales need to rise by circa 3% to offset cost inflation and hold margins flat in 2014E; our cautious forecast that margins fall 33bps reflects our like-for-like sales assumption of 2% (company guidance is for flat margins). We expect to hold our forecasts after this statement, but believe the risk to numbers (later in the financial year) is on the upside. This also assumes that the company opens 30 pubs in 2014E, having opened 29 sites in 2013. The main sensitivity continues to be margins, with every 10bps movement causing profit before tax to move by 1.7% (£1.4m).” Meanwhile, Simon French, at Panmure Gordon, stated: “We estimate 3.5% like-for-like sales growth for the 13 weeks following 3.6% after six weeks of the period and an EBIT margin of 8.3%. The group’s new food menu has seen the extension of food serving hours to 11pm following a successful trial. Like the initial phase of earlier openings we suspect this may dilute like-for-like profit initially but as ever with “the spoons” it is the long-term impact one needs to assess. In our view this will prove another successful strategic move at a time of ongoing flux amongst the competition. We do not expect any change to consensus forecasts of £80.7m PBT (49.7p EPS) at this early stage in the year. We reiterate our ‘Buy’ recommendation and 806p Target Price implying circa 11% potential upside.”

£3m Walkabout re-opens in Blackpool: The Walkabout bar in Blackpool has re-opened following a fire that destroyed the venue earlier in the year. A £3m redevelopment sees new bars, a new menu, an outdoor balcony overlooking the town and an upmarket, Australian city bar feel. The re-opening also sees the original Walkabout team reunited as 18 members of staff who, following the fire worked in local bars or at other Walkabouts across the UK, return to work. In addition, the re-development has created 43 new roles. The ground floor has become home to a ‘Reef Bar’ where linked-screens project under-sea footage, giving the impression of being in a Great Barrier Reef-like underwater paradise. An additional ground-floor bar features a whole wall filled with authentic Australian beers, whilst concertina windows at the front of the building open onto the street, creating an ‘al-fresco’ atmosphere for diners. The new menu features light bites, main meals, sharing dishes and party platters, while a brand new cocktail menu. Intertain chief executive John Leslie said: “It’s been a tough few months, but I’m thrilled we’ve been able to reopen the venue as quickly as we have.”

Koh Thai Tapas to open fifth site in Bristol: Koh Thai Tapas will open its fifth site at the former Zizzi restaurant in Triangle South in the Clifton area of Bristol. Work will begin on the refurbishment on 11 November with an opening scheduled for 7 February 2014. The new site will host a 100+ cover restaurant and will include an alfresco area and cocktail bar. This company, who were recently voted in the Top 10 Employers in Hospitality in England and Wales, will bring around 35 jobs to the local community. The restaurant will join sites in Bath, Southsea, Bournemouth and Boscombe. Chief executive Andrew Lennox said: “We are very excited to begin work on this great new venue. The adaptable and sociable space is perfect for our informal Thai Tapas concept. This build will bring exciting developments and new features to Koh Thai Tapas, including a perfect summer terrace.”

Greene King starts work on Hartlepool Hungry Horse new-build: Greene King has started work on a new-build Hungry Horse on a former derelict site next to one of the main roads into Hartlepool, on the corner of Belle Vue Way and Brenda Road. The site is expected to be open for business by next March. The overgrown land has been empty for several years, but it used to house an occupational therapy centre and then a child guidance centre.

Masterchef the Professionals chef opens own restaurant: Masterchef Professionals chef Richard Cullen has opened his own restaurant in partnership with wife Kara. Richard, who has won the Taste of Staffordshire Masterchef competition twice, Staffordshire Young Chef of the Year in 2006 and appeared on BBC’s Masterchef The Professionals, was previously head chef at his parents’ pub, The Spotgate Inn, in Hilderstone. Now the 27-year-old has opened his own restaurant, Cullens, in Stone. He said: “It has been my dream for a long time to open my own restaurant. Now it has finally happened, we can’t quite believe it.”

YO! Sushi reports improved billing accuracy with hand-held technology: YO! Sushi claims to have raised service efficiency and improved the payment process for customers through the adoption of Omnico’s ClarityLive mobile payment solution. The electronic point of sale (Epos) technology allows orders to be processed with handheld software on a number of mobile devices including iPods. A switch to Omnico’s handheld Epos solution has resulted in both order accuracy and efficiency being boosted, as the payment process is streamlined by 30 seconds per customer. “YO! Sushi still constantly seeks out new ways to engage with our customers and build on our cool and ‘techie’ brand image,” said Billy Waters, YO! Sushi’s UK IT manager. “[ClarityLive enables] a much more effective way of engaging with our customers, capturing information and serving efficiently. This new system reduces the kitchen staff’s workload, improves our billing accuracy, and greatly adds to our knowledge of customers’ food preferences. We estimate that we’ve reduced customers’ time at the payment booth by 30 seconds, as well as improving people flow at our restaurants on all fronts – including when customers are waiting for a restaurant table or ordering takeaway.”

Peter Boizot inspects refurbishment of first ever PizzaExpress: Peter Boizot, the man who founded restaurant chain PizzaExpress, has returned to visit his first branch in Soho. He opened The Wardour Street restaurant in 1965 after a trip to Italy – and 50 years later the company operates more than 420 restaurants. Boizot, 84, was awarded an MBE in 1985 and remains president of the company despite it being sold several times. After inspecting the refurbished restaurant, he said: “It’s a pleasure to return to the site of my first restaurant and to meet the team running it today. It’s good to know Wardour Street is being looked after and that they continue to serve some of the same recipes we created as far back as the 1960s.”

Friska secures funding for three more sites: Bristol-based food chain Friska has been given £65,000 to help it launch three new stores over the next two years. Friska, which opened its first outlet in 2009, specialises in serving healthy food and drink options such as Vietnamese pho noodle soup, sandwiches and grilled flatbread wraps. The company currently operates four branches near high-density office buildings, with 70% of its revenues coming from lunchtime trade. Santander Corporate & Commercial agreed to provide a £65,000 funding package, enabling the business to open three additional stores and build up capital reserves for investment in future opportunities. Friska was co-founded by University of Bath graduates Ed Brown and Griff Holland. Brown said: “We have ambitious growth targets for Friska and I’m delighted we are now in a position to be able to achieve them, having started the business just four years ago.”

Buffet brand Cosmo aims to add eight sites by the end of 2014: Cosmo, the buffet restaurant brand, has added a site at Town Centre Securities’ New Front leisure scheme at the Merrion Centre in Leeds, close to Leeds Arena, which is due to open at Easter 2014. Cosmo, which was founded in 2003, has 12 restaurants, including one in Doncaster, and plans to increase this to 20 by the end of 2014. Fit-out of the 12,500 sq ft restaurant is now underway. Tas Nicolaou, Cosmo’s brand marketing executive, said: “By the end of 2014, we will have four new restaurants in Yorkshire which demonstrates our confidence in the leisure sector in the region. With the launch of the First Direct Arena, Leeds has such vibrancy and we are excited to be bringing our cuisine to the city. Our best performing current restaurant is located within a leisure centre in Edinburgh so we recognise the appeal of having our restaurants within quality retail and leisure centres and the New Front is a perfect example of this.”

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