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Mon 28th Apr 2014 - Propel Monday News Briefing

Story of the Day:   

Tom Cobleigh founder re-enters pub trade with acquisition of village local, plans to open Italian concept: Derek Mapp, the Derbyshire entrepreneur who founded the Tom Cobleigh pub chain and who is currently High Sheriff of the county, has re-entered the pub trade with the acquisition of a freehold pub in his village, the Tickled Trout in Barlow, a former Marston’s pub. Propel understands that the venue is to be run by Mapp’s son Chris and will see the introduction of an Italian concept that Mapp runs at one of his two restaurants in the Cornish town of Padstow. The pub is expected to re-open in the summer after a major refurbishment. Mapp, whose Tom Cobleigh sites currently sit within the Orchid Pub Company portfolio, returned to the hospitality world in 2006 when he backed chef Paul Ainsworth, who had worked for Gordon Ramsay and Marcus Wareing, to open Number 6 in Padstow, Cornwall, which now holds a Michelin star. In 2010 the pair opened Rojano’s in the Square, an Italian restaurant. In 2011, Ainsworth’s dessert "A Taste of the Fairground" was chosen by the judges of the Great British Menu to be served to 100 guests at a banquet at Leadenhall Market in the City of London. Mapp, who is currently chairman of the publisher Informa, pioneered the new-build pub-restaurant in the 1990s, building large venues on arterial roads in major towns and cities in the East Midlands. He led Tom Cobleigh between 1992 and 1997 and sold the business to Rank in 1996 for £123m.  
    

Industry News:   

Propel 3 July Multi Club Conference and summer party opens for bookings: The Propel Multi Club Conference on Thursday 3 July at the Oxford Belfry, which will be followed by the Propel summer party in the evening, is now open for bookings. Operators can claim two free places each. A full-day conference will be followed by the summer party, to include go-karting, a BBQ, the top live covers band the All Stars (which includes Simply Red's guitarist and Rod Stewart's bass player) and Lucky Voice karaoke. To secure places or get more information, email Jo Charity on jo.charity@propelinfo.com.   
   
High streets minister to address ALMR spring conference: High streets minister Brandon Lewis will speak at the ALMR Spring Business Conference tomorrow (29 April). The annual conference takes place at 1 Wimpole Street in Central London and will examine future trends in the licensed retail sector. The ALMR's strategic affairs director, Kate Nicholls, said: “We are delighted that the minister will be joining us at the Spring conference to discuss the health of the high street and the contributions being made by licensed retail. It will be fascinating and informative to hear more about the challenges and opportunities before the industry from a prominent member of the government. We will have a first-class opportunity to listen and engage with an individual who is intimately involved with policy-making.”   
    
Groups of five to 20 make the best decisions: Research into the “wisdom of crowds” theory by Princeton University has found that groups of five to 20 make the best decisions. Decisions made by larger groups than this made worse decisions because they become over-reliant on information known to everyone and take less information into account. Author Iain Couzin said: “When we do see small groups making decisions, they are not necessarily compromising accuracy.” The "wisdom of crowds" theory holds that lots of people working together come up with more accurate answers to problems.   
   
‘French Eataly’ to open in New York: Le District, a French-themed marketplace and eating zone adjoining New York’s Winter Garden’s, is to open in November with annual turnover expected to be around $160m. The marketplace covers more than 37,000 sq ft and has been called a “French Eataly” by some. Le District’s developers describe it as “a new and improved way of sharing food and beverages, in a fun experiential way as opposed to just sitting in a restaurant”. The ground floor of Le District sits directly beneath a second mammoth venue, Hudson Eats, a 35,000 sq ft eating area. It will feature 14 high-end fast-casual restaurant brands. In addition, there will be five freestanding restaurants along Brookfield Place’s northern Vesey Street boundary. Brookfield Properties' national retail leasing director, Ed Hogan, said, “We conservatively project the food operations, including nearly 2,000 seats, will generate over $120m in sales in the first year but more likely in the $160m range.” Le District will contain four mini-districts. A restaurant section will include two sit-down spots including outdoor seats facing the marina. A cafe area will have coffee bars and pastry shops. The market section will include specialised vendors of cheese, wine, charcuterie and seafood as well as a large butcher station, while a “garden” zone will offer everything from prepared foods to flowers.   
    

Company News:   

KFC plans to add 150 new sites and create 6,500 jobs: KFC plans to add 30 new sites a year for the next five years, which will create 6,500 new jobs, the company's managing director, Martin Shuker, has told the Daily Telegraph. A total of £21m is being invested this year to open 32 branches and £40m will be spent refurbishing 250 branches. KFC has grown sales in the UK from around £500m a decade ago to around £1bn now, with annual customer numbers increasing by 32% to 143 million. Shuker, who has overseen eight consecutive years of turnover and profit growth, said: “The average KFC restaurant will do between £1m and £1.5m a year in revenue and they each have the responsibility for training and investing in about 40 staff.” He said the company installed ovens in its sites two years ago to enable the cooking of griddled chicken, and is testing pulled marinated chicken in Scotland. KFC receives 400,000 job applications each year and saw 1,200 applicants for ten graduate positions this year. Around 70% of its 858 UK sites are run by franchisees.

Luminar Group Holdings moves into creditors' voluntary liquidation:
Luminar Group Holdings, the nightclub company that went into administration in 2011 before being acquired by a consortium led by Peter Marks, has moved into creditors’ voluntary liquidation. In its most recent report, administrator Ernst & Young reports that £33.1m has been collected from the sale: £15.9m was paid on completion of the sale in December 2011 and a further £14.2m of deferred consideration has been paid. The new owner of Luminar has completed 35 lease assignments, with a further three under negotiation and eight sites vacated. Ernst & Young’s fees between 27 October 2011 and 31 January this year have totalled £5.59m. Lloyds Bank, together with Barclays and Royal Bank of Scotland, face a "significant shortfall" on the £112.4m they are owed.   
    
Former Novus boss Steve Richards take over at Tragus: The former boss of the London bar and restaurant company Novus, Steve Richards, has taken over as chief executive of Cafe Rouge operator Tragus, where John Darkach has stepped down after less than two years in the post. The change of leadership comes after the acquisition of Tragus by Apollo, the American investment firm. Apollo entered into a restructuring deal with Tragus’s previous owner, Blackstone, that cut Tragus’s borrowings, of which Apollo owned a large part after buying its debt on the secondary market. Blackstone had bought some of Tragus’s debt at a discount and decided to sell it to Apollo at a profit, rather than fighting to retain an equity stake in the company, the Financial Times reported earlier this year. Blackstone paid £267m for Tragus in December 2006, using about £167m of debt to fund the deal. In its most recent 53 weeks to 2 June 2013 operating profit fell 12.9% to £34.59m from £39.71m in the previous year. The group recorded a loss of £33.72m for the year, up from £19.32m in 2012. Turnover was up 3% to £294.82m from £286.27m in the 12 months to 27 May 2012. However, like-for-like sales fell 1.6% because of a reduced level of promotions, the temporary closure of a number of sites for redevelopment and the “challenging” economic environment.   
    
John Wraith takes fourth site as he builds Home Counties and London estate: John Wraith’s Wraith Trading vehicle has acquired the assignment of the Duchess public house, in the shadows of Battersea Power Station in South London, through the property agent Davis Coffer Lyons (DCL). Wraith also owns the freeholds of the Crown in Chalfont St Giles, which is currently being redeveloped for investment purposes; the Phoenix, Steeple Claydon, Buckinghamshire and the Masons Arms, a free-of-tie leasehold in central London. The acquisition of the Duchess is part of the company’s strategy to build an estate of pubs in London and the Home Counties. Wraith Trading is, however, selling the Old Swan in Cheddington, Buckinghamshire, which is currently on the market through DCL, on a freehold or leasehold basis. Chris Bickle, associate director at DCL said: “As we have regularly reported, free-of-tie venues all over London are attracting good premiums and this deal is no different. Although the Duchess is in need of investment and repositioning, it is in an incredibly attractive proposition, which is enhanced by the vast amount of high profile development projects in the Battersea and Nine Elms area stretching all the way to Vauxhall.” Susan Scott of Downs Solicitors acted for the vendor.   
    
Fyfe leaves Mitchells & Butlers to join Gather and Gather: Another senior Mitchells & Butlers executive, Ric Fyfe, has left the firm. Fyfe worked at M&B for nine years and was most recently retail director for Harvester and Vintage Inns. He has become operations director for Gather and Gather, the catering arm of the FTSE 250 strategic outsourcing company Mitie. Gather & Gather says it focuses on bringing together the best ideas, ingredients, recipes and inspiration from the food industry so that customers can "gather together" to enjoy them in the workplace. Two years ago Mitie recruited a new management team to lead its catering business under an entrepreneurial investment model. Since then, the business has more than trebled its turnover through new contract wins and the acquisition of the award-winning hospitality company Creativevents, making it the fastest growing caterer in the UK and Ireland. Earlier in his career, Fyfe was European regional manager for Planet Hollywood and a joint venture partner for Outback Steakhouse. Fyfe’s departure comes after a rash of senior departures from M&B since the start of 2014, including Sam Wignell, Adrian Frid, Martin Taylor, Andrew Hallam, Robin Young, Tony Palmer, Tom Crowley and James Pavey.   
   
Kout Food Group to add Burger King inside Little Chef: A Burger King roadside restaurant is to open inside a Little Chef on the A12 at Feering, near Colchester in Essex. The new branch, on the northbound carriageway is being opened by the Kuwaiti-owned Kout Food Group, which acquired the vast bulk, 78 outlets out of 80, of the Little Chef chain for £15m in August last year. At the time of the purchase, the Little Chef estate already featured 27 Burger Kings. Kout already ran a chain of Burger King franchises in the UK before the Little Chef purchase, and also runs eight Costa Coffee franchises and eight KFC franchises in the UK. The company's UK operations director, Lee Skinner, said: “We are delighted to announce the opening of this new restaurant. There will be 15 new jobs for the area in the restaurant which is situated in the heart of the Feering services on the A12." The restaurant, which will not include a drive-thru, is expected to be open from 10am to 10pm daily.   
   
Two freeholds tenanted by Mitchells & Butlers, two Stonegate pubs, two Wetherspoon sites and Spirit venue to be auctioned by Allsop: Six freehold pubs tenanted by major pub companies are to be auctioned by Allsop on 20 May. A Mitchells & Butlers O’Neill’s site in Upper Street, Islington, North London has a guide price of £2.8m to £3m – M&B pays a rent of £183,300 a year on a 25-year lease ending in 2022. The second freehold tenanted by M&B is an All Bar One in the  Tomblands area of Norwich with a guide price of £1.05 to £1.15m – M&B pays a rent of £81,000 a year on a lease that expires in 2024. The long leasehold interest in a pub let to Stonegate Pub Company, the Ferry Boat Inn in Tottenham, North London is available for a guide price of £875,000 plus – Stonegate pays a rent of £66,000 a year. The Pembroke in Gravesend, Kent, also tenanted by Stonegate, is available for £1m – Stonegate pays a rent of £64,000 a year on a lease expiring in 2039. A Spirit-tenanted site, the Gamecock in Vale Road, Worcester Park, South West London is available with a guide price of £1 to £1.1m – Spirit pays a rent of £74,000 a year on a lease that expires in 2023. The freehold of the JD Wetherspoon-tenanted Foxley Hatch, Purley, Surrey is available for a guide price of £590,000 to £610,000 – Wetherspoon pay £40,700 rent a year on a lease expiring in 2033. A pub let to JD Wetherspoon, the William Tyler in Yardley, West Midlands is also available: Wetherspoon pays £43,000 a year rent and fixed increments take the rent to £57,425 a year by 2036.   
   
Banana Tree to open eighth site in Hub, Milton Keynes: Banana Tree, the 23-year-old Indochinese restaurant chain, is to open an outlet in the Hub in Milton Keynes in July. The company, which began in 1991 as a 36-seater restaurant in Maida Vale, North London, now has seven restaurants in and around the capital. Its Milton Keynes restaurant will be its largest. The menu offers food inspired by Vietnam, Cambodia, Thailand, Singapore and Malaysia, and Indochinese-inspired cocktails. Banana Tree's founder and head chef, William Chow, said: “We chose Milton Keynes and the Hub for its dynamic neighbourhood and buzzing night life." The Hub now has more than a dozen eateries, including Turtle Bay, Las Iguanas, Nando's, Brasserie Blanc and Zizzi.   
   
Fuller’s re-opens Bath pub after major investment: London brewer and retailer Fuller’s has re-opened the Boater on Argyle Street in Bath after a major refurbishment. The pub is the third in Fuller’s trio of Bath pubs, the others being the Huntsman and the Crystal Palace, and has undergone the biggest transformation of the three. General manager Tom Tucker described the new-look pub as “four floors of fun”. The top floor is now a dedicated dining area serving a selection of "pub classics", while the ground floor maintains a traditional pub atmosphere with a casual menu. The basement has been transformed into a cellar bar with a mural by internationally renowned Bristol-based graffiti artist Felix Braun, more than 30 craft beers on offer and live music planned, while the garden area has been given a facelift and now includes a large barbecue. Emma Carpenter, part of the refurbishment team, told the local newspaper: “One of the main parts of the refurbishment was opening up the upstairs. It was a bit of a dead space before but now we have given it a function. By dividing up the levels we are catering for more people. There is something for everyone.”   
    
Brothers behind Greenwich Tavern take site in Canary Wharf: Hiren and Bhav Patel, who run the Greenwich Tavern in South East London, have taken a site across the river at Canary Riverside to open a gourmet burger outlet, 28 West Bar & Grill, in the former home of Camino. Lucy Fender, events coordinator for the Greenwich pub, said the Patels had been seeking a site in Canary Wharf for at least a year. "This place came up and they thought it was perfect," she said. "It's got an amazing front terrace and that's going to be a big selling point. Inside, the feeling we have got going on is urban vintage in the furniture and how it looks. We are looking to offer something different. There's not a burger place on the waterside here – there's a Chinese, Gaucho and an Italian so we wanted to offer something quite different." The restaurant had its soft launch last Thursday, with the official opening planned for this week.   
   
Orchid Pub Company sells Pizza Kitchen and Bar site to Morrisons: Orchid Pub Company is selling its Victoria pub in Cheshunt, Hertfordshire, to Morrisons, it has been revealed. The Victoria underwent a £250,000 refurbishment in 2012, re-opening as a Pizza Kitchen and Bar. A building control application has been made to convert the pub into a “Morrisons local” convenience store and a 15-year lease agreed. The building was for sale at a price of £1.25m.   
    
Bath independent opens second site next to Patisserie Valerie: An independent coffee shop operator in Bath, Society Cafe, which opened in Kingsmead Square two years ago, is to open a second outlet early next month next door to Patisserie Valerie in Bath High Street. Adrian Campbell-Howard, the owner of Society Cafe, said: "We've just been so busy. We need the extra space because we have people coming from other towns just to pay us a visit. We chose the High Street place because it is open to the same diverse demographic as our cafe in Kingsmead. It draws in tourists, office workers and people browsing in town, so we live up to our name – to be the cafe for the society around us."   
    
Elliott working on ‘restaurant of the future’ for McDonald’s as it wins contract extension:
The building firm Elliott has landed a 12-month extension to its deal with McDonalds UK worth around £15m and is working on a “restaurant of the future’ for the company. Elliott initially secured a two-year framework agreement with McDonald's in 2012 worth £10m. It has been designing and building both single-storey and two-storey McDonald’s restaurants. The firm is now working on the "restaurant of the future, which was recently inspected by senior McDonald’s staff during a factory visit. More than 90% of the units are completed in Elliott’s own off-site facility, with work on site taking only weeks. Bertrand Quenot, Elliott's managing director, said: “This contract extension demonstrates the trust and confidence that McDonald's UK has in Elliott’s ability to support their restaurant programme.”   
    
New food bar Wahu replaces Eat in Manchester's Spinningfields: A new food bar concept, Wahu, is replacing the Eat outlet on The Avenue in Spinningfields, Manchester. The 1,300 sq ft site has had £300,000 spent on it to create an eatery and take-away with room for 98 seated customers for breakfast, lunch and dinner. Founder Jamie Barr said Wahu will be fulfilling a demand for quick and healthy food on the go. He said: “The Wahu brand will be the first of its kind in Manchester, with our ‘design your own’ concept allowing customers to create their perfect meal. We’re focused on providing fresh, tasty and nourishing food; whether it’s a quick breakfast on the go, a swift lunch, or dinner and drinks with friends, Wahu will give customers a truly unique experience, with a vibrant atmosphere unlike any other eatery in the area.”   
    
Disused Glasgow pub to open as 104-bed 'hotel without wardrobes': A disused Glasgow city centre transformed into a budget hotel without wardrobes is due to open at the end of next month. Z Glasgow is in the former Old Printworks in North Frederick Street. There are already two Z Hotels in London and another in Liverpool. The new development will be the company's first Scottish hotel. Z Hotels is thought to have spent around £1m buying the empty property, which had been used as a pub until last orders were called in 2009, and millions more turning it into a hotel which will have 104 bedrooms across five floors. Guests will have to hang their clothes on hooks fixed to room walls and store their luggage under their beds. However, the firm says the hotel offers guests "urban luxury", with rooms featuring handcrafted beds and en-suite wetrooms. It will also have a Z Cafe offering food.    
   
Glasgow cafe and deli chain to open restaurant: The Peckham's cafe and deli chain in Glasgow is to open a bar restaurant at the site of its first store. The Hyndland Fox in Clarence Drive will open next month. Tony Johnston, founder of the Peckham's chain, said: "We had three retail units close together, but that was no longer sustainable. So we came up with the idea of bringing in the restaurant element." The menu will focus on "homely" meals and dishes suitable for sharing, along with an extensive breakfast range. The outlet will also be offering artisan coffees and craft beers, and three types of Bloody Mary cocktail. Around 22 people will be employed at the new site. Johnston said: "We couldn't call it Peckham's because that always led to confusion – we had people coming into the deli looking for bottles of malt and people coming in to the wine shop looking for olives and bread. We wanted to have quite a definitive name but everybody knows that it's run by us – that it's our take on a bar and restaurant."   
   
Janse Van Rensburg family acquires third Cornwall site: The Janse Van Rensburg family has bought the 29-room, 3-star Hartland coaching inn in Bude, Cornwall through the property agent Christie & Co. Matthew Smith, director of Christie & Co in Exeter, said: "This is the second hotel in Bude we have sold to the Janse Van Rensburg family in the past year, following their acquisition of the Inn on the Green (renamed Tommy Jacks) from Christie & Co last May. The Hartland Hotel becomes the third hotel owned by the family in Bude. Based on the capital expenditure programme undertaken on their two other hotels, and the trading performance they are now achieving, it is clear the Hartland Hotel has a bright and promising future." Wayne Janse Van Rensburg said: "We have an exciting new concept for the redevelopment of the Hartland Hotel to ensure it fits in with our existing group of boutique hotels, all of which contribute significantly towards the local economy and provide much needed employment for local people.” The Hartland Hotel was sold off a guide price of £850,000.   
    
Wetherspoon lodges plan for second pub in Corby: A planning application for a second JD Wetherspoon pub in Corby, Northamptonshire has been lodged with the local council. If approved, the new venue would create 15 full-time and 25 part-time jobs. Wetherspoon plans to transform part of Westgate House, in Elizabeth Street, which used to be a Co-op department store. In recent years part of the building has been used by the British Heart Foundation to sell unwanted furniture and household goods. A report to the council says the building requires extensive work after years of neglect. A report by agents for Wetherspoon said: “We believe the proposals for a new restaurant/public house will help promote vitality back to the town and improve the local economy, providing up to 40 jobs to the local population, as well as retaining shoppers in the town centre.” Wetherspoon already runs the Samuel Lloyd in Rockingham Road, Corby.   
    
Family coffee chain to open new permanent outlet in Portsmouth: Coffee Cup, a chain of cafe shops and kiosks run by the Parsons family in Portsmouth, is building a new permanent outlet at Eastney in the city to be completed by the end of the summer. The business began as a small trailer at Eastney in 2007 and has grown to include a coffee shop at Clarence Pier and a trailer in Guildhall Square. Adam Parsons, son of Steve and Debbie, and manager of Coffee Cup, said the new outlet "should be finished by September or October. We have never built anything before so we are learning quickly. Being a family-run business, we are trying to offer something extra to our customers. Everything we sell is freshly made. Everything is baked that morning. Each one of our locations makes the food – you don’t always get that from chain shops in the high street."   
   
Anglo-French hotel commissions exclusive Anglo-French beer: A hotel in Droitwich, Worcestershire built in the 19th century in the style of a French chateau has commissioned its own exclusive cask ale, made with French hops and English malt. The Chateau Impney Hotel and Exhibition Centre decided to brew the beer as part of the venue’s new offering after a major facelift. The bespoke draught beer has been brewed with French Aramis hops from the Alsace region and English Maris Otter malt by an unnamed brewery "within 30 miles of Droitwich". Ben Elder, the Chateau Impney's general manager, said: "When we decided to offer our own ale, we considered how we could best represent the hotel’s unique character and history. We knew we had to celebrate the chateau’s French legacy and its proud British roots, so we have worked closely with a local brewery to source the finest ingredients and develop a distinctive taste.” The hotel is already producing its own lamb for use in its restaurant and has plans to plant a number of orchards throughout its 110 acres of grounds. Elder said: “When people come to stay or dine at the hotel, we want them to have a unique experience. Therefore, we’re delighted to be launching a Droitwich beer that can only be found at Chateau Impney." The beer, called The Imp, will be sold exclusively in Chateau Impney’s two bars and its recently refurbished restaurant.    
   
Taco Bell to launch fast-casual taco concept for diners who don't like Taco Bell: Taco Bell is developing a new fast-food concept called US Taco Co and Urban Taproom designed to appeal to people who would never set food inside a Taco Bell outlet. The new concept is scheduled to open in Huntington Beach, California, this summer, offering a simple line-up of ten premium tacos, thick-cut fries and shakes. Future locations will also include a menu of craft beer and wine. The new concept, which was designed by a team of young Taco Bell executives in a “secret war room” at the chain’s headquarters in California, is nothing like the Taco Bell brand, except that tacos are on the menu. Instead of an authentic Mexican theme, the new concept is more in the fusion style of food trucks or the contemporary taquerias of Dallas or San Francisco’s Mission district. Greg Creed, Taco Bell’s chief executive, said: "Taco Bell is Mexican-inspired. US Taco is American-inspired.” Creed said US Taco Co was born of a segmentation study conducted on Taco Bell that revealed a fairly large demographic that was not likely to use quick-service restaurants at all. Rather than spend millions trying to lure those potential diners into Taco Bell, Creed’s team decided to design a new concept that would appeal to that demographic, which includes an eclectic mix of generally higher-income foodies who are “edgy in how they live their lives but not necessarily in how they eat,” he said.   
   
Handmade Burger Co to finally open in Manchester: Handmade Burger Co is finally opening its outlet in Deansgate, Manchester, almost two years after it announced it was taking a 15-year lease on a 2,000 sq ft unit in Henry Boot's Courthouse scheme. Handmade began in Birmingham in 2007 and now has 19 outlets around the UK from Aberdeen to Reading.    
   
McDonald's Canada suspends recruitment of foreign workers during investigation: The Canadian arm of McDonald's has suspended all of its applications under the country's temporary foreign worker programme while a third-party audit takes place to find out if the scheme was being abused. The company has been criticised in media reports about its use of the Canadian government plan, which allows companies to bring in foreign workers when there are no local residents available. The Canadian Broadcasting Corporation reported that a franchise owner in Victoria, British Columbia, was bringing in foreign workers for three locations while at the same time turning away seemingly qualified Canadians seeking jobs and cutting local staffers' hours. That was followed by similar media reports involving other McDonald's restaurants in Western Canada, prompting the federal government to launch a probe of the chain's use of the programme. McDonald's has cut ties with the Victoria franchise-owner, but has defended its broader use of the programme, saying that it uses the temporary foreign worker programme only as a "last resort" in markets where there are severe labour shortages. "Of our more than 85,000 employees nationwide, temporary foreign workers account for approximately 4% of our workforce," McDonald's said in a statement. The company said it continues to support the programme and expects to continue participating in it.   
   
World's largest Burger King franchisee to sell $62m of shares: Carrols Restaurant Group, the largest Burger King franchisee in the world, has announced a public offering of 10 million shares of common stock at a price of $6.20 a share. Carrols, which runs 560 Burger King restaurants in the United States, says it intends to use the net proceeds to accelerate the remodelling of the company's restaurants to Burger King's 20/20 restaurant image, to acquire additional franchised Burger King restaurants, and, "to a lesser extent", develop new restaurants and "for other general corporate purposes".   

Analyst Geof Collyer upgrades rating on all sector companies covered: Deutsche Bank analyst Geof Collyer has upgraded his ratings on the major sector companies he covers as economic recovery "plays to their strengths after eight years of repositioning". Collyer’s new report shows a large but fragmented UK market with considerable growth opportunities for major quoted companies. Relying on Propel Info’s Blue Book publication, which lists the 200 largest food and beverage operators in the UK marketplace, he says: “Propel Info produces a detailed list of the top 200 or so companies that make up the pub and restaurant space. It is a movable feast year on year, as more groups achieve critical mass or just appear on the radar through publicity in the media. We have sorted Propel’s data (predominantly 2012 and 2013 accounts) into six categories (managed pubs and bars, managed/tenanted/brewing, restaurants, single-brand restaurant groups, concessions, pure tenanted/leased, and Other). The 208 companies featured account for about 37% of the INS consumer spending sales on eating and drinking out.” He concludes that the major quoted companies researched by Deutsche Bank account for just 6% of the 208,000 outlets in the market and 12% of the £70bn of revenues in the eating and drinking out market. Collyer concluded: “After eight years of repositioning, all of the sector’s major groups are now in much better shape, operationally and financially, than they have been for the past 25 to 30 years. With improving employment, rising real wages and the UK economy turning up, the pub and restaurant sector – focused on affordable treats for value conscious consumers – appears to be in a sweet spot as far as the future is concerned. We have upgraded our view on all of our companies. The last six years have seen some of the worst trading conditions that the pub industry has experienced probably since the Second World War. However, whilst beer volumes have fallen heavily, the eating out market has continued to grow – declining in nominal terms in only six out of 196 quarters since records began back in 1964. This has provided the pub operators with scope to transform their businesses from rearguard defensive operations into ones capable of real growth. We have seen some recovery since the previous peak of 2007, but most of the quoted groups’ profits remain below peak levels. Because of their repositioning, and because they are looking into a period of economic upswing that should play to their strengths, we have argued in this note that the target price EV/ebitda multiples should increase by one turn of their 10-year forward averages. Our investment preferences are driven by the groups that are self-funding most or all of their growth – as a hedge against the rising cost of debt. We have increased our FY 2015 & FY 2016 forecasts for Greene King ("buy"), M&B (upgraded to "buy" from "hold"), and for Spirit ("hold"); and have downgraded Marston’s ("hold") FY ’14E only. We have maintained forecasts for JD Wetherspoon ("hold"), which, along with Spirit, is the most operationally geared group in the sector. We have maintained Enterprise Inns ("buy") as our special situation. We have upgraded our target prices for all of the pub retailers by between plus 13% and plus 43%. In addition, we are initiating coverage on the Restaurant Group ("hold"), which, our analysis suggests, has been the best performer over the past decade, and may well be over the next five years as well – much of which is in the rating.” The Propel Info Blue Book of the UK's 200 largest operators includes turnover and profit figures, directors’ salaries for the past five years and profit conversion percentages. It is available to buy by e-mailing Jo.charity@propelinfo.com
 



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