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Tue 2nd Jun 2015 - M&B – we're learning from Orchid's people-centric culture
M&B – we’re learning from Orchid’s people-centric culture: Mitchells & Butlers has told analysts it has been learning from the “strong people-centric culture” it found when it bought the 173-outlet Orchid estate last year. Orchid also had an “outstanding” cost control and waste management culture, M&B said, in a presentation after a series of trade visits for City research analysts on Monday. The company revealed that the acquisition cost for Orchid was £266m plus around £40m of investment capex, for which it bought Ebitda of £29m before head office costs of £8m. It said it saw two major “value creation levers” that would deliver £6m of synergy: overhead synergies, and M&B’s purchasing power. Analysts were shown four M&B sites, the Miller & Carter Steakhouse in Brookmans Park, Hertfordshire, which was doing an average weekly take of £40,000 with a food mix of 75%; the Toby Carvery at Whitewebbs House, Enfield, which has an average weekly take of £39,000 and a food mix of 72%; the Cock Inn, Cockfosters, a Orchid conversion, which was now doing an average weekly take of £37,000 with a food mix of 47%; and the O’Neill’s in the Euston Road, North London, which has an average weekly take of £54,000 with a food mix of 35%. Steve de Polo, M&B’s programme director for the Orchid conversion and integration programme, told the analysts that M&B was seeing a “two-way best practice transfer” occurring since the Orchid takeover. He revealed that M&B had reopened 24 former Orchid pubs after investments to turn them into M&B brands by the end of May, and was seeing a “strong” turnaround in sales and a high ROI, with around 65 conversions left to do. Another 80 or so former Orchid pubs will be moved to M&B’s Heartland division, covering the Crown Carveries, Oakland and Sizzling Pubs chains, around October, De Polo said, and M&B saw “further investment potential in many of these pubs”. Two case studies were shown as examples of how M&B brands added value: one, the Hemlock Stone, Wollaton, Nottingham, was a traditional pub and Thai dining venue, and had reopened in December last year under M&B’s Ember brand, while the other, the Angel, in Highgate, North London, was an “independent” local which reopened in February as part of M&B’s Castle chain, devoted to upmarket historic pubs. The Hemlock Stone had “purchased” average weekly takings of £12,000 and “purchased” Ebitda of £125,000, analysts were told. After an investment of £444,000, average weekly takings were now £21,000, with a post-investment ROI of 45.1%. At the Angel, the “purchased” average weekly takings were £10,000, with a “purchased” Ebitda of £144,000. After an investment of £501,000, takings have now risen to £16,000 a week. M&B also told the analysts that its Toby Carvery brand was ahead of its major rivals, Whitbread’s Brewers Fare and Beefeater chains, on almost all major metrics, with awareness of 76%, against 68% for Brewers Fare and 77% for Beefeater, “consideration” of 39%, against 32% for both Brewers Fare and Beefeater; usage of 19%, against 13% for Brewers Fare and 11% for Beefeater; and “first choice” of 11%, against 4% for Brewers Fare and 3% for Beefeater.


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