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Wed 5th Nov 2014 - Propel Wednesday News Briefing

Story of the Day:

KFC launches radical new design concept in the UK: Restaurant chain KFC is launching a radical new design concept, which it says represents “the future of interior design for KFC”. The prototype in Bracknell carries the tagline: ‘It all starts with an appetite for life’. The traditional red colour of the KFC branding is used “sparingly” as an accent colour, appearing in features such as chair legs and graphics, according to Design Week. The “informal and stylish” new interiors are launching at KFC’s Bracknell branch, with Exeter and Reading restaurants set to follow. KFC said it has plans to roll the design out nationwide – across its 870 branches – from March 2015. The new look features exposed ceilings and textured brick-effect walls as well as photographs and illustrations from commissioned artists that represent the ingredients in KFC’s food. Butchers block and timber plank kitchen tables are used, as well as loose furniture, while the space is lit by low-hanging copper lighting. The design brief is inspired by “families and friends coming together around the kitchen table to share freshly made food” adding, “KFC was designed with sharing in mind”. The new design also boasts a “semi open-plan kitchen” which means that for the first time diners will be able to see their food being prepared. KFC says the redesign to the back-of-house areas also allows service to be much quicker. Design manager Jade Swaby told Design Week: “The sense of the kitchen being the heart of the home really influenced the authentic, inviting design. You can feel the openness and warmth from the moment you step through the door and we hope that customers feel at home in the new restaurant.”

Industry News:

Rising employment costs will hamper investment, warns ALMR: Responding to the news that the Employment Appeal Tribunal has ruled that overtime should be a factor when calculating holiday pay, the Association of Licensed Multiple Retailers (ALMR) has warned against retrospectively penalising employers and the dangers of hindering investment. ALMR chief executive Kate Nicholls said: “The licensed hospitality sector is a first class employer, providing opportunities for both temporary and permanent work. Steps such as this, which penalise employers after the fact, are unhelpful, particularly when businesses will have complied with rules and acted in good faith. Businesses in the licensed hospitality sector already invest considerable amounts of time and money in their staff. The ALMR’s Benchmarking survey shows payroll costs at an average of 24.2% of turnover, a sizeable increase from 17% in 1999. Additional costs and retrospective claims have the potential to derail investment in staff and hamstring business investment in other areas.”

Channel 4 News poll shows youngsters drinking less: A new ComRes poll for Channel 4 News has shown one in four young people would rather be online than in the pub. One in four 16 to 30-year-olds have opted out of drinking alcohol altogether. When asked what stops them drinking, 26% of the under 30s polled said they didn’t want it to affect their judgement and a further 43% said they didn’t drink because of health and fitness concerns. It is also considered “embarrassing” to get really drunk, according to 40% of those polled. ComRes interviewed 1,119 British people among this age group and the over 30s, to compare the number of days of drinking per week, attitudes towards alcohol, factors preventing people from drinking and perceptions towards alcohol. The older group polled tend to drink nearly twice as often as the under 30s: an average of 2.68 days of the previous week, compared with an average of 1.36 days for their younger counterparts. The older generation are also far more likely to drink every day, with 15% admitting to doing so over the previous week, compared to just 1% of 16 to 30-year-olds.

Company News:

Wellington Pub Company income drops 2%: Wellington Pub Company, the UK’s largest free-of-tie pub estate, has reported that its estate is producing annual income of £26.7m, a 2% reduction from the year before. In a bondholders report covering the second quarter of its financial year to 30 September 2014, the company stated: “At the quarter end there were 782 public houses in the estate. This is three fewer than the last quarter. The disposal strategy remains to sell bottom end and / or problem properties and those that have a higher alternative use value. 664 pubs (85% of the estate) are let on a long lease. Four properties were re-let on a long lease during the quarter and there were seven lease forfeitures. The estate is producing an annual income of £26.7 million, which is a 2.0% reduction from last year. The average level of rental uplift achieved at review in the year was 6.1%. Quarterly Bond interest of £2,579,660 (‘A’ Class loan notes – £2,027,840 ‘B’ Class loan notes – £551,820) was paid in July. The issuer surplus at that time was £1,068,453 which was paid to the issuer. ‘A’ Class loan notes to the value of £1,208,320 were repaid and ‘B’ Class loan notes to the value of £510,000. Following these payments the Company retained circa £18 million of cash on deposit. The annualised Ebitda (adjusted for Property Profits) for the 12 months to the end of September 2014 was £17.9 million.”

Coffee roastery business launches new coffee shop brand with barista school: Coffee roasting company 200 Degrees has launched a new coffee brand, 200 Degrees Coffee, at Flying Horse Walk in Nottingham – with plans to build a chain across the Midlands. 200 Degrees Coffee is an artisan firm of coffee roasters, sourcing beans from Rainforest Alliance certified farms. The coffee shop, which has created 15 new jobs, is the latest venture of university friends Rob Darby and Tom Vincent – with co-director Tim Moss. It occupies the 3,000 square foot former Sugacane unit in what was once the historic 15th century Flying Horse Inn in The Poultry side of the Flying Horse Walk. The ground floor of the building will be devoted to the 200 Degrees Coffee Shop while upstairs will be Nottingham’s first barista school, which will run courses for both the public and trade customers. Moss said: “We roast our own coffee in a Meadow Lane building and we sell our coffee to other restaurants and bars. We are passionate about our coffee and are excited about bringing a new concept coffee shop to Nottingham.” The business also operates three garden centre cafes in Bradmore, Tickhill and Towcester.

BrewDog launches Nomad Brewing Collective for shareholders: Scottish brewer and retailer has launches Nomad Brewing Collective to give its shareholders (referred to as Equity Punks) a chance to be involved in brewing. The BrewDog website stated: “Nomad Brewing Collective will be BrewDog’s alter-ego sister brewery, a virtual gypsy brewery where everything is controlled by our Equity Punks. Nomad will brew two batches of beer per year and all the profits from both batches will go to charities as chosen by our Equity Punks. Every element of the Nomad beers will be designed by our Equity Punk shareholders – from the recipe, to the packaging to where the proceeds of the sales of these beers go to. To kick things off, Nomad needs a logo, and we want our shareholders to design it. True to the concept, we will be opening a thread on our shareholder forum today, inviting any of our Equity Punks to submit their design ideas. We will then shortlist a selection that are suitable for the project and hold a vote for our shareholder community to decide on the winner. The first ever Nomad brew will hopefully launch in Spring 2015.”

Kitchenette launches in London’s Ladbroke Grove: A 40-seat restaurant in Ladbroke Grove called Kitchenette has been launched to provide a platform for young start-up restaurants, to “demo” their ideas, Foodepedia has reported. The project’s industry backers and mentors include MEATLiquor founder Yianni Papoutsis, Moro co-founder Mark Sainsbury, Dishoom founder Shamil Thakrar and Flat Iron founder Charlie Carroll. Each start-up team has the support of Kitchenette’s panel of advisers, chef mentors, a ready-made front-of-house team, systems and suppliers, that mean the start-ups can concentrate on the food and menu. Diners are invited to leave feedback and reviews, providing data that start-up teams can use to prove concept, raise money and accelerate opening up their own dream permanent site. First to open is Pao Wow, light, modern Indian food from Anshu Ahuja, whose residency comes off the back of a summer trading with Street Feast and Kerb.

Irish bar operator unveils third UK Filthy McNasty’s: Irish bar operator Hathor Inns is to open its third Filthy McNasty’s in the UK, this time Newcastle, creating 30 new jobs. It will convert nightclub Bambu in the Bigg Market, which closed a year ago when owners PBR went into administration. Hathor Inns, based in Northern Ireland, is investing £750,000 into the site to transform it into its first North East outlet of Filthy McNasty’s – it has sites in London, Belfast and Nottingham. The brand is renowned for its quirky decor, which includes mismatched furniture, kitsch props, mannequins doubling as tall lamps and vintage vinyl to cover walls. The firm said its Belfast operation – known as The Filthy Quarter – is bucking the trend in a stagnant pub and club industry, making the time ripe to focus on the north east. A spokesman said: “The Filthy Quarter, Belfast, has grown from strength to strength. Initially employing only six staff the growth of The Filthy Quarter now means we are proud to employ a dynamic staff of 70. Both Filthy’s London and Nottingham are filling a niche in the market, offering an alternative setting, great live music, and unconventional entertainment. The company now believes this is the perfect time to focus on mainland UK.”

UK’s first cereal café to open in December: The UK’s first cereal cafe selling more than 100 varieties from all over the world is due to open in 139 Brick Lane, Shoreditch, on 10 December, opening from 7am to 10pm. Cereal Killer Cafe, owned by identical twins Alan and Gary Keery, will also host a huge collection of memorabilia, made up of 80 vintage boxes including, Pokémon, Bill and Ted, The Addams family, and Cabbage Patch Kids. Visitors will be able to customise their bowls of cereal with 13 different kinds of milk and 20 different toppings. Alan Keery said: “We remember how exciting cereal was as kids and we are trying to recreate it in our cafe, so you’ll be surrounded by a lot of vintage cereal memorabilia to stir up the nostalgia in all of us. We’re putting our own twist on a regular bowl of cereal by letting (customers) customise it with different milks and toppings. This will be a cafe experience like no other.” There will also be 18 flavours of pop tarts. The café, which will be at 139 Brick Lane, Shoreditch, will be spread over two floors.

Cote applies for second Scotland site: French brasserie chain Cote has applied to open its second site in Scotland. Plans have been submitted to transform a tourist shop in Edinburgh into a new site – it has applied for permission to open at 24 Frederick Street in the former Pride of Scotland shop. Cote has already been granted permission to open a new venue on the banks of the River Clyde in Glasgow.

Henry’s to open second sustainable restaurant: The team behind sustainable restaurant brand Henry’s Kitchen in Hampton Court, East Molesey is to open a second site, Henry’s Grill, in High Street, Esher, this month. Named after Henry VIII, the restaurant will feature a rotisserie charcoal grill, free range chicken from Windsor and fish and seafood from sustainable sources. Reza Amini, owner of Henry’s Grill, said: “It’s important that everyone does what they can to save the planet, so I wanted to create a second sustainable restaurant in Elmbridge borough. The restaurant’s interior walls are made from reclaimed timber from Farnham, the tables from recycled wood, the bar from recycled glass, menus will be printed on recycled paper and light fittings will be energy-saving LEDs.” The first restaurant is a member of the Sustainable Restaurant Association (SRA).

Brakspear to re-open former Henley Brew House with new name next week: Henley pub operator and brewer Brakspear is reopening the Brew House – the former City Pub Company site – in the town on 13 November with a new name, the Station House. It will have new food and drink menus and a new landlord, Christian Evans. The Station House name was chosen by Brakspear and Evans as it reflects the building’s history – it was Henley’s Police Station from 1868 to 2004 and two police cells remain within the pub’s interior, while the new pub sign shows a silhouette of a policeman wearing a traditional ‘custodian’ helmet. The change of name was made as a result of legal restrictions linked to the logo imposed by the previous owners, City Pub Company, who have also taken out the microbrewery. The menu at the Station House will include pub favourites such as fish and chips and sausage and mash as well as rustic comfort food. The drink offer is still being finalised, but will include a house beer, the aptly-named Bobby Dazzler, a 4% ABV golden ale, brewed from English pale ale malt and English aromatic hops. The Station House will also serve a selection of craft beers on draught and in bottles such as Shipyard APA, Revisionist and Freedom 4, as well as a carefully chosen wine list. Brakspear chief executive Tom Davies said: “We’re delighted to be reopening the Station House. Christian is a talented and experienced landlord and we are confident he will quickly turn it into a popular and thriving pub.”

Former Ivy head chef downsizes to small Hampshire town: Former Ivy head chef Nigel Davis has down-sized to operate the newly-opened Riverside Kiosk in the small Hampshire town of Fordingbridge (population: 5,700). Nigel Davis said: “This is a dream come true. I have spent the last few months, dreaming, hoping, preparing business plans, and now I am cooking and fishing in this great location and I am close to my family. I feel I have everything that I have ever wanted. This is a huge life change and a very happy one. And I am cooking and creating food that I want to cook, that is seasonal and local. When I was head chef at The Ivy, I would cook food that would cost some people a week’s wages and then walk to the Tube station, where there were homeless people. This did not sit well with me. The higher up you become as a chef, the less time you spend cooking as you become engrossed with the management.” His menu includes everything from wild mushroom soup, bramley apple and cinnamon pies and toasties, which are reputed to be the best in the country.

Glasgow ice-cream parlour looks to open fish restaurant: The family behind the ice-cream parlour Jaconelli’s, on Maryhill Road, Glasgow, want to open a fish diner at the £140m mixed use development at Lomondgate, near Dumbarton, on the road to Loch Lomond. If approved, the 50-seat diner, adjacent to Scotland’s first drive-through Costa Coffee outlet, would open early next year. The nine-acre development already includes a 60-bedroom Premier Inn hotel and the Malt & Myre pub restaurant. Work is due to start later this month on an Esso petrol station to be run by Euro Garages, with a Spar store, a Subway outlet, a Greggs takeaway and a Starbucks. Lawrence Jaconelli said he had been looking for a new site for some time. He said: “Lomondgate met all our requirements. As well as a substantial passing trade, there is a large local population to cater for.”

Pizza Hut franchisee Ocean Success to expand after securing £1.2m in funding: The Northampton-based franchise operator Ocean Success, owner of 12 Pizza Hut restaurants, is expanding in the Midlands after securing £1.2m in bank funding. The company, owned and operated by Nadim Choudary, who opened his first franchise pizza outlet at the age of 18, provides employment to 400 agency staff across its stores in Birmingham, Manchester and Nottingham. It is one of the largest franchisees in the UK for Pizza Hut. The funding, from Santander Corporate & Commercial, will allow the company to operate more efficiently and also help with the purchase of three more sites, Choudary said. His expansion plans include opening nine more restaurants across the Midlands and the North West of England during the first quarter of 2015. Choudary said: “Our immediate expansion plans will see our restaurants rise to 15, and I’m hopeful of even more in the future.”

Starbucks bans engagement rings: The new dress code rules for Starbucks cafe staff in the United States have banned engagement rings and any other ring with stones, as well as watches, bracelets and wristbands, on the grounds of food safety. Plain rings are fine, and “simple” necklaces “can be worn under your clothes”. For the first time, Starbucks is allowing its baristas to have tattoos, “but not on your face or throat”. The “no engagement ring” rule is proving predictably controversial, with the US news site WKBN reporting that some staff have also started an online petition asking Starbucks to reverse its decision. One man wrote on social media: “To Starbucks: my wife just said you’ve instituted a policy that she can’t wear her wedding ring to work anymore. Where are your brains?”, while a customer said: “I would rather see a wedding ring and a watch than someone’s ‘mom’ tattoo.”

McDonald’s in second try for second restaurant at Gatwick: McDonald’s has applied once again to Crawley Council to build a two-storey restaurant in Longbridge Road, the approach to the North Terminal at Gatwick airport. It withdrew an application in May after the Highways Agency raised concerns about proposed access from the London Road slip road. The scheme has been reconfigured and patio area has also been removed from the plans after Gatwick Airport said it would attract birds. There will be space for 155 diners within the “relaxed modern environment”, 57 parking spaces and ten cycle spaces. If given the go-ahead, the restaurant would employ more than 65 full and part-time staff. The council will make its decision by 12 November. McDonald’s already has an outlet at the airport’s south terminal.

Nick Batram – Domino’s sale of sites to franchisee in Poland a positive step: Peel Hunt leisure analyst Nick Batram has welcomed the sale of managed sites in Poland by Domino’s pizza as a positive step in establishing a successful sub-franchise base in the country. He said: “Domino’s Pizza Poland has agreed to sell a number of corporately owned stores to sub-franchisees. The existing sub-franchisee, Jakub Stepien, is acquiring three stores and former area managers for DP Poland, Pawel Muszynski and Wojciech Juchniewicz, are purchasing two stores. All the stores being sold are based in Warsaw. The total acquisition price is £575,700 and this includes the outstanding payment for the first sub-franchise store. In H1 2014, the stores being sold reported an aggregate loss of £28,000. Jakub, a previous operations manager for the Group, became the first sub-franchisee when he bought a Warsaw store at the end of 2013. The store has been successful, reaching profitability well ahead of the corporately managed stores. Through Rush Hour Pizza Polska, he is now acquiring three other Warsaw stores and is being backed by a Singapore based investment manager, Working Capital Management PTE. As part of the transaction, WCM is being given the right to subscribe for up to 9.99% of the enlarged equity in the event of an equity raising within the next three years. Also as part of the deal, WCM agreed not to acquire any shares in DP Poland within the period without the consent of the company. Pawel and Wojciech are acquiring two stores through their newly formed entity, HLM Group. Following the deals, the group will consist of 13 corporately owned stores (in Warsaw and Krakow) and six sub-franchised. The stores being sold were expected to be broadly breakeven in H2, although there will be some additional cost savings through Pawel and Wojciech leaving the Group payroll. Given the significant change in the store structure, we need to remodel our forecasts going forward. We don’t expect any material change to 2014E Ebitda forecasts, but the year-end net cash position will be higher than currently forecast (£3.5m). The acquisition of corporate stores by sub-franchisees is, in our opinion, a reflection of the growing confidence in the prospects for Domino’s Pizza in Poland. Importantly, the store disposals are not being driven by an urgent need to sell unprofitable stores, but rather to meet demand from those that know the business well. Building a successful sub-franchisee base is key to the long-term future of the business in Poland.”

Douglas Jack issues ‘Buy’ note on The Restaurant Group ahead of Third Quarter results on Friday: Numis Securities leisure analyst Douglas Jack has issued a ‘Buy’ note on The Restaurant Group shares, with a 760p target price, ahead of Third Quarter results on Friday. He stated: “Although we expect to hold forecasts, we believe there is increasing visibility on upgrades: we are forecasting less PBT growth in H2 (9.6%) than in H1 (12.3%) even though like-for-like sales accelerated to 6% (from H1’s 2.5%) in July-August and cost pressures have eased. We expect like-for-like sales to have remained ahead, having risen 3.5% during the first eight months (versus our 3% FY forecast) during which cinema attendance fell 7.4% and airport passenger volumes rose 4.4%. Subsequently, cinema attendance fell 13.8% in September, followed by a 30% increase in weekend box office during October. Like-for-like sales comps have eased from 5% in H1 to 1.5% in Q3 and 3.5% in Q4.We expect to hold our full year forecasts. In our view, visibility on upgrades is increasing: Like-for-like sales were ahead after eight months, and comps are easing. Against the ten-year moving average, cinema attendance in 2013 rose 0.4% in January-August and fell 4.2% in September-December. We believe RTN is capable of beating FY forecasts (2014E PBT: £80.5m / consensus: £80.8m), even though a large number of openings in late Q4 should incur pre-opening costs without having time to generate offsetting revenues. Thereafter, the company can look forward to easy weather/sport-related comps in 2015E and a very strong cinema release schedule in both 2015E and 2016E.”

Domino’s seeks to recruit 2,400 extra drivers: Domino’s Pizza is looking to recruit an extra 2,400 drivers in time for its busiest period, Christmas and new year. Scott McLeod, operations director at Domino’s Pizza UK said: “The Christmas and new year season is when we really ramp up our recruitment efforts. For many people, it’s a great time to make some extra money for the holidays, or a start to a rewarding new career. We are looking for hard-working people who enjoy bringing great service and care to our loyal customers. Delivering pizzas is a fun and rewarding job with longer-term opportunities, as most of our store managers started out as delivery drivers – with some going on to own their own stores.” Domino’s expects to sell nearly 12.5 million pizzas during November and December, the length of 3,500 kilometres of ribbon (or 1,900,000 Christmas trees), equal to almost 100 million slices of pizza, topped with 2,100, tonnes of mozzarella cheese, 1,400 tonnes of tomato sauce and 400 million slices of pepperoni, which would stretch the equivalent of 12,000km – or from London to Christmas Island, just south of Java.

Carluccio’s aims to add £1m in festive sales with ten pop-ups: Italian restaurant group Carluccio’s, led by Simon Kossoff, will open ten pop-ups shops over the festive season in order to boost sales of its Christmas food and drink products, which could generate an additional £1m in turnover for the company. Each shop will be situated close to an existing Carluccio’s restaurant and will open daily from mid-November until Christmas Eve. Locations include Liverpool, Manchester Trafford Centre, Leicester, Bristol Cabots, Leamington, Bristol Cribbs, Exeter, Worcester, Bath and Milton Keynes. The entire 2014 Carluccio’s Christmas range will be available including the brand’s gift boxes, panettone, Italian biscuits and sweet treats. Each pop-up will host (in keeping with the restaurants) shopping evenings on 27 November and 4 December with shoppers receiving a 10% discount on all purchases and complimentary mulled wine and festive canapés. Kossoff said: “We trialed a handful of Christmas pop-up shops last year and they were extremely successful in generating additional sales over our most important retail period. It made perfect commercial sense, to utilise empty sites nearby our restaurants to roll-out further temporary stores.”

EAT unveils ‘Festive Full Works’ Christmas menu: EAT, the food-to-go retailer, has unveiled the 2014 version of its “‘Festive Full Works” range, including hot pots, baguettes, bloomers, and a new Festive Full Works Hot Roll. The hot Festive Full Works Turkey Hot Pot (£4.95) is mashed potato topped with a winter vegetable medley stew, sage and onion turkey and cranberry sauce. The vegetarian Festive Full Works Chestnut Hot Pot (£4.85) includes roasted chestnuts instead of sage and onion turkey. The three-meat Festive Full Works Bloomer (£3.65) includes sliced turkey with smoked ham and pork and sage stuffing, cranberry sauce, mayonnaise and spinach on multi-seed bread. The Festive Full Works Hot Turkey Roll’ (£4.85) is a crusty roll filled with sage and onion turkey, cranberry sauce, mayonnaise and rocket. The festive updates to the chain’s toastie range is the Christmas Brie and Cranberry Toasted Sandwich (£3.99) using ciabatta bread. The Turkey and Cranberry Christmas Wrap (£3.50) combines sliced turkey, cranberry sauce, low-fat mayonnaise and rocket in a soft tortilla wrap. Sweet treats include the Merry Mincemeat Crumble Bar (£1.65) while drinks include the Merry Berry Mocha (£2.50), a Black Forest gateau-inspired mocha hot drink topped with whipped cream. EAT now has more than 100 stores in London and across major cities.

Two coffee entrepreneurs open Newcastle pop-up: Two coffee entrepreneurs have opened a pop-up in Newcastle. Former bank worker Joe Meagher, the owner of Flat Caps Coffee and Josh Thompson, the owner of Ponteland-based The Speciality Coffee Company, have launched Lola’s Coffee – in a familiar but underused Newcastle spot. The pair have set up a small open-air coffee shop on the smoking terrace at Science Bar, at The Old Ticket Office, beside Newcastle’s Central Station. In a bid to capitalise on significant footfall from the station the business has posted two baristas at the pavement-side spot, armed with equipment and signage to serve passers-by with quality coffee between the hours of 7am and 3pm.

Luke Johnson – I’ve attracted a stalker: Sector investor Luke Johnson has reported that he appears to have attracted his first stalker. In his Management Today column, he wrote: “I appear to have attracted a stalker. She attends many of my speaking engagements and then comes up to me at the end when I’m signing books, for example, and says: ‘I want you’ or: ‘I want to marry you.’ I think she has probably been to at least 15 of my speeches in the past few years, and has called at our offices on various occasions, leaving weird letters. I do know who she is and have even gone on her website to discover why on earth she is pursuing me. She has obviously researched me and knows I’m married, with a family, but none of this stops her obsessive behaviour. Mostly I have been civil towards her, but my patience is wearing thin. Irritatingly, I tend to spot her just before I go on and start my talk. Inevitably, it can throw me off my stride. She has not been at all threatening, but if the sexes were reversed, then I daresay I would be getting nervous by now and trying to obtain a restraining order.”

Rooney Anand sets out Greene King and Spirit tie-up benefits: Greene King chief executive Rooney Anand has told City analysts that a combined Greene King and Spirit Pub Company would create the UK’s leading pub company, “particularly the leading retail pub company” with a managed estate of more than 1,800 pubs (and a total estate of 3,100 pubs). Anand said: “The logic of bringing the two businesses together is very clear and very compelling – this will allow us to accelerate on a path we are already on.” He added that Spirit chief executive Mike Tye and his team had done a “very good job in highlighting the underlying quality of the Spirit estate in the last few years” and the time is right to combine the two businesses. Anand described the deal as transformational – “the largest transaction we’ve carried out” – although argued it was not the first transformational deal for the company, referring to the company’s Laurel Pub Company deal as similarly transformational in terms of making retail the focus for the company. He also noted that the pub market is a mature one and “ready for consolidation” some 500 years after it began. “There is a return to mergers and acquisitions activity after a long period of calm,” he said. Anand said the two businesses fit in a complimentary manner – “the jigsaw pieces fit nicely”. Of the total of 3,100 pubs, 83% are freehold or long leasehold. More than 1,000 sites within the combined pub estate are located in London and the South East. Food accounts for 42% of combined managed sales with drinks sales triggered by food occasions accounting for another 20% of total sales. Greene King and Spirit managed pub produce similar per site Ebitda on similar weekly average sales per pub – the combined managed Ebitda is £204,000 per site per annum with average weekly turnover per pub at £18,000 per week. Anand said the enlarged company would be in a position to apply the best brand within the portfolio where Spirit and Greene King pubs are clustered. He stressed that there would be “open-mindedness” in applying capex to converting Greene King sites to Spirit brands and Spirit sites to Greene King brands – as well as investing in the circa 100 uninvested Spirit sites. Analysts were shown a slide that indicated five Greene King and Spirit brands – Fayre & Square, Hungry Horse, Meet and Eat, Flaming Grill Pub and We Love Flame Grill – operate in the same value food part of the market. The slide showed that Greene King and Spirit each have brands in similar markets position in other segments – Spirit’s Chef & Brewer parallels Old English Inns and Spirit’s Taylor Walker and Metropolitan Pub Company occupy the same premium end quadrant. The addition of 443 leased and tenanted Spirit pub would improve the overall quality of the enlarged tenanted estate with average Ebitda of more than £90,000 within Spirit per site versus £70,000 within the Greene King estate. Asked whether Greene King had considered increasing the 8p cash element of its Spirit offer, Anand said the Spirit board had indicated it regarded Greene King paper as very attractive. “As good as the stuff with the Queen’s picture on,” added Anand. It is expected that the Greene King and Spirit tie-up will complete towards the end of the First Half of 2015. The company has stressed that total head-count across the two companies is expected to reduce by less than 1%.

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