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Thu 1st Jun 2017 - Update: C&C Group promotion, tied pubs
C&C Group promotes Andrea Pozzi to chief operating officer: C&C Group, the manufacturer, marketer and distributor of branded cider, beer, wine and soft drinks, has appointed Andrea Pozzi to the group’s board of directors and as group chief operating officer, with immediate effect. Pozzi (45) is currently the managing director of the group’s businesses across Great Britain covering both the Scotland and C&C Brands business units. He joined C&C in 2010 and has held a number of roles within the group, including group manufacturing director and managing director international (EMEA). Before joining C&C, he held various management positions in the Carlsberg Group, Brasseries Kronenbourg and Masterfoods. In his new role, as well as continuing to lead the group’s businesses in Great Britain, Andrea will assume responsibility for the group’s manufacturing, logistics, procurement and IT functions. Sir Brian Stewart, chairman of C&C, said: “We are delighted to announce Andrea’s appointment as a director of C&C and our chief operating officer. Andrea has made a significant contribution to the group since joining C&C, most recently leading our business units in Great Britain. His appointment as chief operating officer strengthens our management team and his leadership will augment the ability of our operations function to continue to drive the success of the group.”

Douglas Jack – MRO is a damp squib: Peel Hunt leisure analyst Douglas Jack has described the introduction of the Market Rent Only option, allowing licensees the right to negotiate a free-of-tie rent with their landlord, as a damp squib. He said: “Only eight licensees have taken up a Market Rent Only (MRO) option across five of the six pub companies governed by the Pubs Code since its start, in July 2016. The threat to the pub companies from losing the beer tie once brought dire predictions from some commentators; it is encouraging that the actual outcome is, so far, immaterial largely due to exposing the many weaknesses of the free-of-tie model. We estimate that there are circa 10,000 leased and tenanted pubs in Ei Group, Punch Taverns, Star Pubs & Bars, Marston’s and Admiral Taverns’ combined estates. Of these, nearly 2,000 would have been due a rent review or lease renewal over the last 11 months, of which just eight licensees have successfully taken a free-of-tie MRO lease. These comprise: zero licensees at Star Pubs & Bars and Marston’s; one at Admiral Taverns; three at Punch Taverns; and four at Ei Group. We believe there is a risk that the MRO conversion rate will increase as the figure of eight MRO conversions exclude all the agreements that are currently with the Adjudicator, and the first year under the MRO is not yet complete. However, we would view Ei Group’s assumed rate of 13% (of leases) as being the upper limit on conversions as it assumes that every agreement that is currently with the Adjudicator will result in a MRO. According to Admiral Taverns, there is “very limited desire” from licensees for a MRO. The tenanted pub model provides lower risk and lower cost opportunities for individuals to run their own businesses within their community. Our forecasts assume the MRO taking 1-2% off EI Group’s Ebitda over the next five years, based on a 13% conversion rate amongst its leases (which account for 48% of the company’s pubs) and an 18% decline in profit in these pubs. This prediction may prove to be over-cautious, particularly as the ratio of EIG pubs that have leases in excess of five years fell from 20% to 17% over the six months to May 2017, with further reductions likely. Historically, the beer tie threat has undermined sentiment in Ei Group. However, the combination of reduced political risk and all-time high licensee financial health measures has lowered the barriers to Ei Group returning to Ebitda growth. Even without such growth, we forecast debt reduction to increase equity value by a 16% CAGR over the next four years.” 

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