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Tue 29th May 2018 - Propel Tuesday News Briefing

Story of the Day: 

Hotcha director facing bankruptcy petition over £4m owed to business, VAT fraud and money laundering investigation ongoing: James Liang, director of Chinese takeaway franchise Hotcha, is facing a bankruptcy petition over an unpaid overdrawn director's loan account (DLA) of £4m. In a progress report into Hotcha's administration, joint administrators Simon Thomas and George Baker, of Moorfields, said the outstanding £4,080,084 had not been received despite a statutory demand being issued. They stated: "As a result of no proposals being received by Mr J Laing for the repayment of the DLA a statutory demand was issued against him. The statutory demand for payment was not paid and the joint administrators are now considering issuing Mr Liang with a bankruptcy petition." The report said the criminal investigation being pursued by HM Revenue & Customs (HMRC) into VAT fraud and money laundering remained ongoing and may not be concluded "for a considerable period of time". The report showed the lease to the Newbury premises was assigned in January for a consideration of £10,000. Hotcha held leases to 22 further properties. Of these, 11 leases have been surrendered for no consideration and one lease has expired. The remaining ten leases have "little or no value". Steps are therefore being taken to either surrender or assign for no consideration the remaining leases. The report also updated on proposed payment to creditors. Secured creditor GLAS Trust Corporation, which is owed £7.5m, is still anticipated to "suffer a considerable shortfall in its lending". Preferential creditors in the form of the Department for Business Innovation & Skills in respect of the preferential element of payments made by it to employees for holiday pay and pay arrears is estimated to be £130,000 but the administrators have yet to receive details of the claim. The report said unsecured creditors claims of £937,253 had been received from 48 creditors but the administrators have yet to receive claims from 253 creditors, including the claims of employees. The administrators said there was unlikely to be sufficient funds to allow a distribution to be paid. Hotcha went into administration in October last year after “suffering heavy losses caused by declining turnover and the costs of its aggressive expansion strategy, which resulted in cash flow difficulties”. In the same month, HMRC carried out a raid at Hotcha’s head office and several retail sites for VAT fraud and money laundering activities. At that point, the company could no longer trade and the directors took insolvency advice, which resulted in the administrators being appointed and all 145 employees being made redundant.
 

Industry News: 

Prof Chris Edger publishes events management book: Professor Chris Edger, who will lead the Inspirational Leadership In Tough Times Masterclass in conjunction with Propel on Thursday, 21 June, has published his tenth book. Entitled “Events Management – 87 Key Models For Event, Venue And Experience Managers”, it is aimed at students on events management degree courses, giving them the tools and insights to “exploit this booming segment of the leisure economy”. Jennie Randall, course director for events management at Coventry University, described it as the “essential companion guide for all students studying events”. It will accompany Prof Edger’s BA in event, venue and experience management course. His books are available in more than 670 university libraries worldwide. Meanwhile, his Inspirational Leadership In Tough Times Masterclass is open for bookings. For the full schedule, click here. Tickets are £295 plus VAT for operators and £445 plus VAT for suppliers, while tickets for Propel Premium subscribers are £245 plus VAT. To book, email anne.steele@propelinfo.com or call 01444 817691.
 
Female chef wins equal pay case against Compass Group: A female chef who discovered a male colleague was being paid between £4,000 and £6,000 a year more than her for doing the same job has won an equal pay claim. Kay Collins, represented by law firm Leigh Day, pursued the claim against her former employer, Compass Group UK & Ireland. Bristol Employment Tribunal found Collins performed the “same or broadly similar work” to that of male head chefs employed by the group and was entitled to equal pay. The case was settled in Collins’ favour, although the terms have not been disclosed. Collins was employed from 2006 at Compass Group’s Weston College campus in Weston-Super-Mare and had worked for the company for ten years when she found out about the earnings gap. In her evidence, she said the only difference between her role and that of her male colleague was their respective job titles – he was called head chef while she was labelled a chef. When Collins raised a grievance with Compass Group seeking pay parity, the company disagreed and said her colleague carried out “substantially different work”. The tribunal found their work contained differences of “no practical importance”, with most responsibilities “substantially the same”. The tribunal found against Compass Group on the majority of the grounds on which it had consistently said Collins did not do “like work” to that of her male colleagues. Collins, from Weston-super-Mare, said: “It was really upsetting to find someone less experienced, less qualified and 12 years younger than me was earning more money than I was.” A spokeswoman for Compass Group UK & Ireland told Propel: “We recognise the importance of equality and diversity in the workplace and we are committed to ensuring all colleagues are treated equally regardless of gender. As part of these principles, employees should receive equal pay for comparable roles with a similar level of responsibility. We constantly review our practices and learn from them, ensuring that all our colleagues are treated fairly and equally.”
 
UK Hospitality – 'Extension of low alcohol threshold will allow greater innovation across sector': UKHospitality has said the decision by the European Commission to extend the low alcohol threshold will allow for greater innovation across the sector. The ruling means small and artisan alcohol producers, including, for the first time, small independent cider makers, will have access to a new EU-wide certification system confirming their access to lower rates of duty across the EU. There will be a crackdown on the illegal use of tax-free denatured alcohol to make counterfeit drinks while there will also be an increase in the threshold for lower strength beer to which reduced rates may apply from 2.8% volume to 3.5% volume. UKHospitality chief executive Kate Nicholls said: “This is a pragmatic and helpful step by the commission. The extension of the threshold will allow for greater innovation across the sector and the continued promotion of healthier drinking habits and attitudes towards alcohol. The additional measures to provide uniform certification and improve clarity and support should also help reduce burdens for businesses and reduce costs for employers.”
 
B&B Hospitality Group and Eataly seek to buy out Mario Batali in wake of assault allegations: US-based B&B Hospitality Group is in the process of buying out co-founder Mario Batali, who is under police investigation in New York following allegations of sexual assault. Eataly, the largest Italian food hall chain in the world, has also initiated a process to compel Batali to divest his minority interest in Eataly USA. The moves follow a report on US television programme 60 Minutes that included allegations Batali drugged and sexually assaulted women in 2004 and 2005. Batali vehemently denies the claims. However, New York-based B&B Hospitality said the accounts were “chilling and deeply disturbing”. Co-founders Joe and Lidia Bastianich, and Los Angeles-based restaurateur Nancy Silverton, are expected to participate in the acquisition of Batali’s stake in the company. A spokesman told Restaurant Hospitality Batali had been “our partner and close friend” but the company needed to “separate wholly so we reinforce our core values for our employees and guests”. Batali stepped down from group operations in December following allegations he sexually harassed four women who worked for him. At the time, he apologised. B&B Hospitality stands for Batali and Bastianich. The group operates almost a dozen high-profile New York restaurants and B&B Ristorante in Las Vegas. It is a partner in several of Silverton’s restaurants. Eataly spokesman Chris Giglio said the company had initiated a process to compel the divestiture of Batali’s “small, minority interest” in Eataly USA. Meanwhile, Batali’s three Las Vegas Strip restaurants will shut on Friday, 27 July, officials said. Joe Bastianich sent a letter to nearly 300 workers about the closures of Carnevino Italian Steakhouse, and B&B Ristorante and Otto Enoteca e Pizzeria at The Venetian and Palazzo resorts. He promised to visit the restaurants to speak to employees.
 
Study finds UK families paying far more for Center Parcs stay than at European sites: British families are paying up to £1,400 more to stay at Center Parcs resorts in the UK compared with its equivalent holiday parks elsewhere in Europe, research has revealed. The study compared the cost of holidays and family activities in Britain against similar locations on the continent. And it found that in many cases those staying at home during the May half-term holidays will spend more than if they went abroad. The research, conducted by foreign currency firm FairFX, found a seven-night stay at the Woburn Forest Center Parcs in Bedford costs £2,128. However, the same holiday at the Het Heijderbos Centre Parcs in the Netherlands, close to the German border, costs just £715.25 – 198% less. Even the cheapest UK Centre Parcs, Sherwood Forest, still comes in at more than £900 extra than a stay at the holiday park in the Netherlands or similar ones in France, Germany and Belgium.
 

Company News:

Cake Box set to float: Two cousins from London’s east End are on course to realise a £50m fortune when they float their cake shop business next month. The Sunday Times stated: "Sukh Chamdal and Pardip Dass opened the first Cake Box store in Green Street, Upton Park, a decade ago and now have more than 90 franchises across the UK. They aim to open two or three new stores each month, with a goal of 250 in total. Cake Box has appointed the broker Shore Capital to advise on the listing, which will see the business float on the junior AIM market. It is expected to value the company at between £40m and £50m, and Chamdal, 56, and Dass, 46, will sell 40% of their shares. The cousins will retain control of the remaining 60%. Chamdal, a former chef, had the idea for the business when his daughter asked for a cake that didn’t have eggs in it. All the company’s products are egg-free and suitable for vegetarians. Customers can choose to have a personalised message iced on to a fresh cream cake while they wait. Cake Box was named last week on The Sunday Times Fast Track 100 list of Britain’s fastest-growing private companies. It made revenue of £12.8m in the year to the end of March. When the business floats, franchisees will own 9% of the shares, offered to them at a discounted rate.”

Stonegate forecasts £6m sales uplift from World Cup: Stonegate, the operator of more than 700 managed pubs and bars across the UK, has released data that reveals the group has forecasted a sales uplift of more than £6m throughout its pub estate over the course of the FIFA World Cup, which starts on Thursday, 14 June. The business anticipated the pub sector could be a major beneficiary of a World Cup windfall. The business took sales data from 427 sites across its estate that screened the European Championship in 2016 and identified a total uplift of £5m for that tournament. They then multiplied this by their current game time average sales growth of 8.1%, which revealed a potential total uplift of more than £6m. Chief executive Simon Longbottom said: “Our aspiration is for our bars and pubs to be the best place for the UK’s sports fans to cheer on their favourite teams and athletes. We have a proud track record of innovating our customer offer to ensure they never miss a minute of the match and can celebrate their team’s triumphs. This summer’s World Cup is set to be a bumper tournament for Stonegate and we believe we will see a significant sales uplift for the business. We hope everyone enters into the spirit of the tournament and World Cup fever takes hold. We know from 2016’s European Championships that even if England suffer an early exit, football fans will keep following the tournament and be on the hunt for pubs and bars to experience the atmosphere and excitement of the knock-out stages.”
 
Greene King saves more than 246 million pints of water in first year of self-supply: Suffolk-based brewer and retailer Greene King has saved more than 140,000 cubic metres of water in the first year of self-supply, the equivalent of more than 246 million pints. Greene King was the first company to use a water supply and sewerage licence to self-supply water through a partnership agreement with water management company Waterscan. Greene King senior purchasing manager Gavin Worthington said: “We are looking forward to building on this successful experience to date, which we believe delivers competitive advantage in corporate social responsibility and commercial terms. While self-supply was a leap into unchartered waters, it has delivered better than expected results in a short time-frame.” Marston’s, Whitbread and Coca-Cola European Partners have also been granted licences to self-supply.
 
Wetherspoon lines up site on the Strand: A historic building on the Strand in London, previously dubbed “Britain’s most beautiful bank”, could be turned into a JD Wetherspoon pub. The company has submitted an application to take over the large premises located directly opposite the Royal Courts of Justice. While previously occupied by Lloyds Bank, the branch gained a reputation for its ornate interior, intricately carved pillars and elegant fountain. The branch was closed last year as part of Lloyds’ national overhaul of its services. Plans submitted to Westminster Council show Wetherspoon wants to convert the ground floor and basement into a new pub.

Edinburgh-based Bon Vivant secures £1m funding for expansion: Bon Vivant, the Edinburgh-based group that owns and operates bars and restaurants across the city, has secured a finance deal of almost £1m to help support its growth plans. The company, which is headed by Stuart McCluskey, operates The Bon Vivant, The Bon Vivant’s Companion and El Cartel in Thistle Street, as well as the Devil’s Advocate in the Old Town. McCluskey told The Scotsman: “Allied Irish Bank (GB) is providing £950,000 towards three new venues. We will be opening a second El Cartel in Teviot Square in the summer, once refurbishments are complete. As an independent Edinburgh business, we are particularly proud to have been selected as the operators for two new venues within the Edinburgh Grand development at St Andrew Square.” Sean Fallon, senior relationship manager at Allied Irish Bank (GB), added: “The Bon Vivant Group has huge potential for growth.”
 
Michelin-trained chef fails in £555,000 crowdfunding campaign to open central London restaurant: Michelin-trained chef Harvey Trollope has failed in his £555,000 fund-raise on crowdfunding platform Crowdcube to open a restaurant in central London. Trollope was looking to launch a first permanent site for his Harvey’s British Eatery concept following a series of 40-cover pop-ups. Trollope was offering 39.5% equity in return for investment. Trollope has worked at one and two-star Michelin restaurants in France and Italy. He has also been head chef of Wheeler’s of St James’s and premier sous chef at the Ritz Hotel. The Harvey’s British Eatery team also includes consulting director Nigel Sutcliffe, who operates two London restaurants and was co-director of The Fat Duck.
 
St Austell Brewery announces board changes as Jonathan Neame steps down as non-executive director: Cornwall-based St Austell Brewery has appointed Jill Caseberry as a non-executive director, as Jonathan Neame retires from the same position on Thursday (31 May) after 16 years’ service. Caseberry brings extensive sales, marketing and general management experience gained in blue-chip companies such as Mars, PepsiCo and Premier Foods. St Austell Brewery chairman Will Michelmore said: “I am delighted to welcome Jill to St Austell Brewery’s board. Her wide-ranging experience in sales, marketing, strategic analysis, corporate governance and digital technology as well as leadership and remuneration best practice will stand us in good stead. I would like to thank Jonathan for his wise counsel, industry expertise and friendship, which have made a significant contribution to the board over the years. Jonathan has also been instrumental in helping to oversee the development of our comprehensive corporate governance structure.”
 
Boston Tea Party invests £250,000 in cup loan scheme ahead of self-imposed disposable coffee cup ban: All-day casual dining cafe Boston Tea Party has ordered 60,000 reusable cups from Ecoffee at a cost of almost £250,000. The move comes ahead of its self-imposed disposable coffee cup ban, which comes into force on Friday (1 June). Customers will have to drink in, use a reusable cup or join the brand’s loan cup scheme, which is for customers who forget their own reusable cup. They can put a deposit on a cup and return it to any Boston Tea Party site to get a full refund. The chain will also donate 10p from every takeaway hot drink sold to local charities. Owner and managing director Sam Roberts said: “This is a decision we made in line with our ethos of making things better and it seems as though people are up for joining us on our mission to eradicate coffee cup waste. We’ve had requests to open cafes in London, Ireland and across the world based on the news and countless supportive social posts telling us people will visit more because of our lack of compromise on the crucial issue of plastic. It’s something we can all be proud of. I want to be able to look my kids in the eye when they’re old enough and tell them we started something.” Roberts previously said the company was risking £1m by imposing the ban, which was a “huge risk” but one he hoped other operators would follow.
 
Darwin & Wallace opens sixth site, in Wimbledon: Bar group Darwin & Wallace, which is backed by Imbiba, has opened its sixth site, in Wimbledon, south west London. The new venue, 601 Queen’s Rd, is next to the station and within walking distance of the famous tennis club. The menu celebrates seasonal and locally sourced produce including ingredients from Darwin & Wallace’s own kitchen gardens. Alongside Italian wine, the central bar offers craft, draught and bottled beer including Five Points Pale Ale, as well as a range of homemade lemonade and cocktails. Managing director Mel Marriott said: “The rarity of the space is incredibly special. The terrace, which wraps around the space, will open into the evening all year round. We have worked with our talented artisans and makers to bring 601 Queen’s Rd to life, with bespoke furniture, hand-picked artwork, ceramic tiles and unique lighting, forming its own version of the Darwin & Wallace address.” The group opened its first site – No 11 Pimlico Road – in 2012, followed by No 32 The Old Town in 2014, No 1a Duke St in Richmond in late 2015, and No 197 Chiswick Fire Station in April 2016. Its fifth venue, No 29 Power Station West, launched in Battersea in July last year.
 
Cote lodges plans for Haslemere site: French brasserie Cote has lodged plans for a site in Haslemere, Surrey. The company has applied to Waverley Borough Council to convert the former HSBC Bank in High Street, reports the Farnham Herald. In its planning application, Cote said: “The proposed alterations should be viewed in context of the overall benefits of the proposals, which will bring back a vacant building back into viable use, increase the vitality and viability of Haslemere town centre, and boost the local job market and economy. It is for these reasons the proposed development should be permitted.” Cote, which is owned by private equity firm BC Partners, currently operates 92 sites under its eponymous brand. Earlier this month, the company revealed it was examining plans to dispose of the six restaurants trading under its Limeyard and Jackson & Rye brands.
 
Petition to save Guildford live music venue where Stranglers made debut garners 2,000 signatures in 24 hours: A petition to save a Guildford live music venue in which punk band The Stranglers made their debut has garnered 2,000 signatures in the first 24 hours. Shepherd Neame, which owns The Star Inn, is backing the petition, which was launched after the developer of a neighbouring new block of flats complained to the council about noise levels. The pub in Quarry Street, which backs on to the new flats, claims to be Guildford’s longest-running music venue but the complaint has raised the possibility of Guildford Borough Council issuing a noise abatement notice. Star manager Georgina Baker told Get Surrey: “When the planning application went in three years ago we pointed out it was ludicrous to put flats next to a live music venue overlooking a pub courtyard, but they wouldn’t listen. Small live venues are the lifeblood of the music industry as well as an invaluable cultural and social asset, they can’t just be swept aside for luxury apartments. We’re part of the historic fabric of Guildford.” The pub is licensed to play live music until midnight from Sunday to Wednesday, until 1am on Thursdays and until 2am on Fridays and Saturdays. In its objection to the original planning application for the flats, submitted in 2013, Shepherd Neame stated: “At least 40% of the pub’s turnover is attributable to its function as a live music venue.” A spokesman for Guildford Borough Council admitted there is an “ongoing investigation”. The developer’s name, ironically, is Neil Young.
 
New Aspall owner underlines commitment to Suffolk with multimillion-pound upgrade plans: Molson Coors, which acquired Suffolk-based cider-maker Aspall in January, has revealed plans to upgrade the company’s facilities in the county at a cost of between £7m and £10m. Molson Coors UK and Ireland managing director Philip Whitehead visited the brand’s Debenham base to reassure residents and workers over the company’s commitment to the region. Whitehead said Molson Coors plans to upgrade facilities at Aspall’s base to increase production by about a third but would keep within the same footprint. Top priorities will be building an effluent facility and weighbridge, which would cut lorry movements considerably, upgrading to temperature-controlled fermentation vessels, and renovating packaging and vinegar barn areas. Whitehead also stressed Molson Coors planned to expand the business responsibly. He told the Ipswich Star: “The heart of the brand is in Suffolk.” Brothers Henry and Barry Chevallier Guild, who sold Aspall, said the way Molson Coors had treated Cornish craft brewer Sharp’s since its acquisition in 2011 convinced them the company was the right suitor. Henry Chevallier Guild said: “We have created a brand we believe Suffolk is very proud of. It’s a quintessentially Suffolk brand.”

Loungers partners with The Prince’s Trust to help develop next generation of hospitality workers: Loungers, which is backed by Lion Capital, is working with The Prince’s Trust to help develop the next generation of hospitality workers. The company has been supporting the charity’s Get Into Hospitality initiative. It is designed for young people aged from 16 up to 30 to get the experience and training they need to move into a job. Young people in Bristol are given the chance to earn a free Level 2 food hygiene qualification with the pilot programme, while gaining hands-on experience at local Lounges and The Cosy Club in Bristol. At the end of the programme, they will be interviewed and hopefully hired for positions such as kitchen porters, front-of-house servers and chefs thanks to the training received. Jake Bishop, Loungers commercial director and co-founder, said: “Since Alex (Reilley) and I became patrons, it’s been truly remarkable to discover the amount of great work The Prince’s Trust does. When I saw the trust did a ‘get back to work’ programme that was linked with local employers, it was a great opportunity not to be missed to offer up the Lounges and Cosy Clubs as an avenue to work experience and employment. It’s a pilot programme and Lounges and Cosy Clubs would very much like to take nationwide. With 124 sites to offer work in and The Prince’s Trust’s structure and hard work, I’m sure we can achieve loads of employment.”
 
Two Heads Beer Co passes 50% mark in £350,000 crowdfunding campaign to open four sites: Independent craft beer retailer Two Heads Beer Co has passed the halfway mark in its £350,000 fund-raise on crowdfunding platform Crowdcube to open four stores. The company, which is led by former BrewDog head of retail acquisitions James Hickson, recently increased its equity offer to 14.9% in return for investment instead of the original 10%. So far, 138 investors have pledged £185,250 with 11 days remaining. Two Heads Beer Co trades as The Beer Boutique and We Brought Beer brands and currently operates six stores – in Balham, Putney, Clapham, Tooting, Wandsworth and Tunbridge Wells. The company generated revenue of more than £958,000 in 2017. The pitch states: “We believe we are firmly in the right part of a growing market. We are looking to raise investment to expand our concept to more areas in London and the south east, where we believe a beer-thirsty population is underserved. The way people drink beer is changing and we see ourselves at the forefront of this change.” Hickson founded We Brought Beer in 2014. It merged with fellow bottle shop business The Beer Boutique in January, with founder Jon Kaye becoming executive chairman of Two Heads Beer Co.
 
The Richmond duo open second site: Brett Redman and Margaret Crow, the duo behind The Richmond in Hackney, have opened their second site. The duo have launched Neptune in the newly opened Principal London hotel in Bloomsbury. The 102-cover restaurant and 30-seater bar shares the same DNA as the pair’s Hackney restaurant. They have created a new seafood-focused menu for Neptune based around an informal approach to the classic oyster bar and featuring Redman’s signature wood-fired cooking in the a la carte menu. The oyster bar in the centre of Neptune’s dining room serves oysters and other shellfish and diners are able to order seafood platters that change with the seasons. Alongside this, large sharing dishes include steamed-to-order whole Cornish crab with house spaghetti in a smoked datterini tomato, Vietnamese basil and long pepper sauce. The bar offers cocktails, wine and a large selection of grower champagnes. The grade II-listed dining room features a graphic wooden floor, peach ceiling and a centrally located pewter-top bar, while the walls are adorned with artwork that will become a rolling exhibition series in the restaurant. Crow said: “Brett and I are excited to be opening a contemporary space within such a wonderful historic building. Our approach has always been to create food based on honest, good-quality ingredients and to serve it in thoughtfully designed spaces. We see Neptune at the Principal London as a great embodiment of our ideals.”
 
Former Great British Menu chef opens restaurant at North Wales holiday park for second site: Former Great British Menu chef Mark Ellis has opened a restaurant at a North Wales holiday park for his second site. He has launched Shippon at Plassey Holiday Park, near Wrexham. Shippon means “cattle shed”, with the restaurant built in a former dairy. Interiors include feeding troughs around the bar, while the restaurant also offers a dedicated wine-tasting room. Ellis described the holiday park as a “hidden gem”. He told the Daily Post: “I believe my style of food will complement the already superb product and philosophy of the park. I’m excited to show off not only the food but the team and I’m looking forward to our restaurant becoming part of the community. We will use local suppliers and produce where we can to create stunning dishes that can’t be experienced anywhere else, whether a light snack, lunch, steak and a glass of wine, or a six-course tasting menu.” Ellis holds three AA rosettes and represented the north west in two series of BBC’s Great British Menu. He opened his debut restaurant, Allium, in Tattenhall, near Chester, last year after working at a number of top restaurants, including Gordon Ramsay’s Pétrus. Plassey’s owners John and Sarah Brookshaw said: “Mark’s fantastic culinary background was exactly what we were looking for in a partnership to provide an affordable and bespoke luxury dining experience.”
   
Numis – we remain cautious on cost outlook for M&B: Numis Securities leisure analyst Tim Barrett has said he remains cautious on the cost outlook for Mitchells & Butlers (M&B). Issuing a ‘Reduce’ note on the shares with a target price of 50p, Barrett said: “In the first half, M&B’s Ebit fell 5%, reflecting like-for-like growth of 1.6%, more than offset by net cost inflation of £23m. The former was held back by snow, which had a 90 basis points impact on like-for-like sales and £4m profit impact (net of the benefit from the timing of Easter). Excluding these factors, Ebit fell 2.7% (attributed to disposals and accelerated investment). Like-for-likes of 1.6% is ahead of the Coffer Peach Tracker and in the middle of the pack of quoted peers (ahead of Greene King’s minus 1.2%, behind JD Wetherspoon’s 3.5%). This growth is largely being achieved through conversion to premium brands and increases in average spend per head – volume of food sold fell by 3.6% in the period, the third consecutive year of decline. More relevant is like-for-like sales growth is below the level required to offset cost inflation. We estimate £23m of cost growth net of mitigation versus £17m of contribution from sales growth, some 60 to 70 basis points below the margin neutral level of like-for-likes. We view mitigation as most important to the investment case for all pubcos. M&B generated £7m of its targeted £26m savings in the first half, equivalent to a 23% offset. Expectations of £60m FY18 cost inflation are unchanged, meaning it will have to offset 63% in the second half. The company unveiled its Ignite 2 initiatives to drive efficiency, ranging from better sales forecasting to digital marketing. This looks well-founded but with cost pressures unlikely to subside for at least two years, efficiencies will need to accelerate to meet consensus estimates. M&B has a high-quality estate (82% freehold) and a mix of established brands and newer formats. However, with capex running at 1.6 times depreciation, this has created pressure on return on capital expenditure, which has fallen from 7.8% to 7.0% on the last 12 months. Shorter-term, recent weather has been much more favourable for the sector and to week 32 like-for-likes are up 1.4% (Numis estimates FY18 up 2.1%). We upgrade our Ebit from £290m to £297m, but with tweaks to interest and tax our earnings per share forecasts are broadly unchanged. This is 2% below consensus and requires a flat second half Ebit when adjusted for Easter and the 53rd week in the prior year, which will be challenging. M&B’s valuation is undemanding – price-to-earnings ratio of 8.0 times, EV/Ebitda of 8.3 times and stable free cash flow yield of 8.8% (12% ex-pension deficit). In our view, managed pub companies are yet to reach trough earnings in this cycle, hence we remain cautious. External factors such as rising bond yields may improve M&B’s pension situation but, based on fundamentals, we retain a ‘Reduce’ recommendation.”
 
Leisure Resorts to launch £12m Yorkshire Dales development: Luxury holiday park company Leisure Resorts is set to launch a new development in the Yorkshire Dales following a £12m investment. Aysgarth Lodge Holidays comprises of 75 holiday lodges, each with a private hot tub and decked area, set within 33 acres of North Yorkshire countryside. One of three parks owned by Leisure Resorts, the facility represents the company's first foray into the burgeoning lodge rental market. Managing director Gary Molloy told Insider Media: "For too long time park holidays have been perceived as a cheap and lower quality choice. Aysgarth is our first-step to proving that need not be the case, placing exceptional, purpose-built, individual lodges within the most beautiful of settings, which is finely equipped. Enabling singles, couples, families and groups to escape the hustle and bustle of everyday life and enjoy quality time together is our ambition and with close to full occupancy in our opening week, it seems the British public welcome that very much."

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