Propel Morning Briefing Mast Head CPL Learning Link Paul's Twitter Link Mapal Banner
Morning Briefing Strap Line
Thu 12th Nov 2015 - Results: Punch’s new strategy, Restaurant Group, Young’s
Punch to invest £250m to £300m in estate as part of strategy review: Punch Taverns has unveiled its new strategic focus in the wake of the arrival of Duncan Garrood as chief executive. Garrood said: “Since joining in June, I have undertaken a detailed review of the business and today I set out a clear plan for the future. In recent years, Punch has been at the forefront of change within the leased and tenanted pub sector. The conclusions announced today represent an evolution of our existing plan. It is also designed to address the many structural and regulatory changes impacting our market. Our strategy enables us to maximise the value in our properties through a phased, lower risk approach to addressing an evolving pub market, taking greater control of the property and retail offer, but without the added overhead that comes with directly employing pub staff. We have already made significant steps towards evolving our operating model and financial position, and while we have a lot to do, we are well placed to deliver on our plan.” The company says it will invest between £250m and £300m in the estate in the next five years. Its new five-point plan is: 

1. Consistent consumer offer: Over the last few years, Punch’s business has been evolving towards a model in which we have greater insight into the consumer offer and are best placed to implement a clear and consistent strategy going forward. In 2013 we launched a dedicated New Business Development team working with our publicans from before the launch of their pub and throughout the first six months of trading, supporting them in executing the consumer offer in the pub. In 2014 we introduced Retail Operating Plans, setting out the agreed consumer offer, operating plan and rhythm of the week in our pubs. In recent years, we have also developed and trialled a small number of retail concepts, ‘Champs’ sports bar, ‘Mighty Local’ community drinks led pub concept, and most recently ‘Brewed & Baked’, our new high street coffee shop and chameleon bar concept. While the first Brewed & Baked outlet will open later this month, we have seen excellent results from our Champs and Mighty Local concepts which now number 6 and 13 outlets respectively with further rollouts planned for 2016. The majority of Punch’s core estate (c.84%: c2,400 pubs) is in the drinks led, mainstream and value pub segments. Having seen positive results from the early concepts where Punch has developed a clear and consistent consumer offer, we are now in a position to accelerate our programme of developing and rolling-out new concepts. We have a high level of confidence in the upside opportunity in rolling-out retail concepts across a meaningful proportion of the estate, but have purposely not put a target on how many pubs will operate under a defined concept as the scale of any roll-out will be determined by their financial performance, which is still in the trial phase. There is also the potential to franchise these retail concepts at a future date. While we are taking a much more active role in defining and overseeing the consumer offer in our drinks led mainstream and value pub segments, we will take a different approach in the premium and destination food led segments which accounts for c.16% of the core estate, (c.450 pubs). These sectors require specialist skills to maximise the opportunity in these sites and we will continue to work with specialist operators, such as Harry Ramsden’s, the iconic British brand, world famous for its fish and chips, and have formed a trading partnership within which we will jointly invest in selected sites across the Punch estate. We have seen significant uplifts in pub sales and profit where we have invested, alongside setting the right consumer offer. It will take time to implement our strategy however which will be phased over a five year period. Investment will be directed to those pubs where we have input into the retail offer and have control over the terms of the agreement. Subject to the above, we plan to invest in up to 500 pubs per year, investing between £250 million and £300 million over the next five years.

2. Broad range of operating models: The Group already offers a wide variety of flexible commercial agreements to our publicans, with over 60 different lease and tenancy agreements currently in place. In recent years we have seen a significant market shift away from long-term fully repairing leases towards shorter-term tenancy agreements, where the external building repair obligations remain the responsibility of the pub company. There has also been a marked shift away from fixed rent agreements towards variable turnover linked agreements. We have been quick to address these changing market dynamics and have already introduced three new operating formats, including the Retail contract, our first managed pub, and commercial free-of-tie arrangements (covering both fixed-rent and variable turnover-linked agreements). Under the Retail contract, Punch retains 100% of the sales and cost of sales (akin to a traditional managed house operation) and pub costs (excluding staff costs), and pays the retailer (the publican) a percentage of the retail sales, out of which the retailer pays their staff costs. The retailer is free to focus on delivering an excellent consumer experience while Punch supports the back-of-house process. As at October 2015, we had 31 pubs operating under the Retail contract and have seen significant (15% to 20%) volume growth in these pubs compared to historic performance under a traditional leased and tenanted model. We are pleased with the results from these initial trials and already have in place the infrastructure and a separate Retail operations team capable of rolling out the model nationally across the UK. We anticipate having approximately 100 pubs operating under the Retail contract by August 2016. Our first fully managed pub opened in October 2015, and while we do not currently anticipate building a significant managed pub presence, we will take learnings from a small managed pub trial to support the development of new consumer offers. We already have a small but growing commercial free-of-tie operation with a number of fixed rent commercial free-of-tie leases and variable turnover-linked agreements in operation. We expect this division to grow over time as we introduce new innovative agreements, particularly in the premium and destination food led segments of our estate.

3. Refocussing management resources to drive operational delivery: To ensure effective delivery of these changes and of the separate operating models, we have recently made a number of changes to the operating structure of the business with distinct divisions: Tied tenanted & leased division; Retail pub division (including the managed pub trial); and Commercial leases (free-of-tie); which will move into a separate division managed under the property team. Three new roles have also been created to ensure that we drive our future success, develop our employer brand and really maximise the opportunity from existing and new retail formats. These roles are Chief Strategy Officer, Marketing Director and Development Director.

4. Delivering value to our publicans through the Punch Buying Club: Launched in 2009, the Punch Buying Club has been a great success with the vast majority of publicans using the club to purchase their drinks products. Punch is one of the largest buyers of drinks in the UK on-trade market, delivering significant economies of scale not available to individual publicans buying drinks on their own. We offer a wide range of drinks products through the Punch Buying Club to our publicans and during the last year have supplied over 3,000 drinks brands from 660 drinks suppliers, including in the region of 2,500 cask ale brands. Through the Punch Buying Club we leverage our group buying power to provide services such as free Wi-Fi and provide access to cheaper electricity and gas supply through our brokerage service providers. The Punch Buying Club is also full of useful information to help our publicans to professionally operate their pubs giving access to free training, legislative information, marketing materials and a legal helpline. In addition, our innovative machines performance data, an industry leading service introduced earlier this year, is made available for publicans to monitor and maximise their machine income performance. We have continued to build on the success of the Buying Club over the last five years and have plans to further develop it over the coming years.

5. Releasing additional value from our property portfolio: The Group has a sizeable property portfolio with over 3,500 properties comprising in excess of nine million sq ft of ground floor gross area, significant additional upper floor area and encompassing c.1,400 acres of total site area. Historically the Group has looked to operate its properties purely as tenanted and leased pubs. While the principal use of our properties moving forward will continue to be that of public houses, there is a significant portfolio of under-utilised upper floor areas and excess under-utilised land bank. Through more active property management we expect to be able to release additional value, which is not currently recognised in the external property valuation, in our freehold property and land estate over the next five years. In summary, our strategic plan enables us to maximise the value in our properties through a phased, lower risk approach to addressing an evolving pub market, taking greater control of the property and retail offer, without the risk of added overhead that comes with directly employing pub staff.

Meanwhile, Punch reported average profit per pub up 4%, core estate net income up 0.3% and underlying Ebitda of £196m in the 52 weeks to 22 August. 

The Restaurant Group reports like-for-likes up 2%: The Restaurant Group has reported that after 45 weeks trading to 8 November in 2015, total sales are 8% ahead of the comparable period in 2014 and like-for-like sales are 2% ahead. The company stated: “We have opened 25 new restaurants in 2015 to date. These are performing well and are set to deliver strong returns in line with our usual targets. We expect to open a total of 43 to 45 new sites in 2015 (2014: 40). Our pipeline of new sites is strong and we anticipate opening at least as many sites in 2016. The Group’s balance sheet position remains strong and cash continues to be generated at levels which allow the Group to maintain investment in our existing portfolio and open new restaurants. We are confident that the business will continue to make good progress during the remainder of the year and expect to report full year results in line with market expectations.”

Young’s reports 10.3% profit boost: London pub operator Young’s has reported sales up 8.3% to £126.3m in the 26 weeks ended 28 September. Profit before tax adjusted for exceptional items, up 10.3% at £20.3 million. It saw managed house like-for-like revenue growth of 5.5%, the fourth consecutive year of interim growth above 5%. It reported strong momentum in hotels, with our 475 rooms delivering occupancy of 78.5%, driving RevPAR up 5.6%. Net debt of £126.0 million, was down £3.0 million, despite further investment of £21.8 million in the business. It also reported promising trading since the period end with managed house total sales for the first six weeks up 13.0% and 9.6% on a like-for- like basis. Stephen Goodyear, chief executive of Young’s, said: “We are very pleased to report another six months of excellent trading, with particularly strong growth from our managed estate despite tough comparatives and more variable weather over the summer months. Our well-invested and well-located pubs, premium product range and the energy and dedication of our teams are crucial to this success. In addition we continue to see the benefit from a number of newly refurbished pubs providing excellent contributions to the success of the first half. The second half will benefit from a full contribution from five recent acquisitions including most recently the Canonbury in Islington and the Grocer in Spitalfields Market, two scheduled new openings and the re-opening of a number of our London pubs currently under development. Momentum has continued into the autumn. Many of our pubs, in south west London in particular, have a deep rooted rugby heritage and have thrown themselves into the World Cup. Despite England’s early demise, they have generated good business from both local and visiting rugby fans alike.”

Miller Brands reports volume growth: Miller Brands (UK) Limited has reported 4.4% NPR growth for the six months ended September 2015, driven by its portfolio of premium imported world beers. Peroni Nastro Azzurro retains its UK number one world beer position in both the on-trade and off-trade channels. Increased distribution and marketing activity have seen Peroni’s value from draught grow at more than double the rate of total draught premium lager during the half year with the brand’s overall volume in double digit growth. Czech brand Pilsner Urquell, the original Pilsner, still brewed the original way, achieved double digit value growth in the six months to September 2015 and this is set to continue with several more tank beer outlets planned to open before the end of the financial year. These serve brewery-fresh unpasteurised Pilsner Urquell from striking, authentic Czech copper tanks. Since the inaugural tank beer bar was opened in London in summer 2013, more than half a million pints of Pilsner Urquell tank beer have been sold in the UK. In October 2015, tank beer arrived in two more cities, with the opening of Headrow House in Leeds and Albert’s Schloss in Manchester. Miller Brands’ other Czech import, Kozel, saw a strong first half with double digit value growth and reaching new drinkers through events such as London’s Street Feast and National Burger Day in Dalston Yard. Kozel is exclusively available on draught in the UK and appeals to consumers looking for an authentic easy-drinking, flavoursome Czech lager. Gary Haigh, managing director of Miller Brands UK said: “Peroni, Pilsner Urquell and Kozel are certainly capturing the imagination of consumers and their thirst and enthusiasm for genuinely imported super-premium beers. We continue to seek ways to innovate and remain committed to exciting both our consumers and industry partners about these exceptional beers.”

Return to Archive Click Here to Return to the Archive Listing
Punch Taverns Link
Return to Archive Click Here to Return to the Archive Listing
Propel Premium
BrewDog Black Heart Banner
NR&B Banner
5loyalty Banner
Butcombe Brewing Co. Banner
Contract Furniture Group Banner
Bizimply Banner
Propel Banner
John Gaunt Banner
Reputation Banner
Cynergy Bank Banner
Zonal Banner
The Licensees Association Banner
Airship – Toggle Banner
Libeo Banner
COREcruitment Banner
Hospitality Rising Banner
BrewDog Black Heart Banner