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Morning Briefing for pub, restaurant and food wervice operators

Wed 30th Jan 2019 - Update: Turnaround specialists eye Patisserie Valerie leftovers, Greene King, BigDish
Turnaround specialists eye Patisserie Valerie leftovers: Rcapital, the private equity firm that rescued Little Chef from collapse is among the front-runners in the race to acquire most of the remaining Patisserie Valerie business from administration. The turnaround specialist, is one of a small number of suitors vying to buy the 122 cafes that continue to trade after the appointment of KPMG to handle the administration of the chain’s parent company, Patisserie Holdings, reports The Times. The list of potential buyers is also thought to include Endless, another private equity firm that specialises in acquiring distressed assets. Chris Campbell, investment director at Rcapital, said: “We don’t comment on the details of possible investments. However, I am able to confirm we have been speaking with KPMG in their capacity as administrators as well as a number of the landlords regarding a possible rescue.” Rcapital bought the struggling Little Chef roadside diner chain in 2006, bringing in the Michelin-starred chef Heston Blumenthal to collaborate on the turnaround. An economic downturn sent the recovery into reverse, however, and in 2012 Rcapital was forced to cut loss-making sites via a pre-pack administration. It finally sold the remaining 80 restaurants in 2013. Meanwhile, Patisserie Valerie failed to share a fraud report with its banks as it attempted to secure a funding lifeline prior to its collapse into administration last week. Neither HSBC nor Barclays were given sight of analysis prepared by accountants from PricewaterhouseCoopers, reports The Telegraph. Insiders claimed the findings of the report, which gave details into the suspected £40m fraud, could not be shared because it was subject to legal privilege. Patisserie Holdings collapsed into administration after bosses revealed the extent of the fraud was much broader than previously thought. Administrators have already closed 71 outlets.
Greene King to launch employment programme for ex-offenders as part of social mobility plan: Brewer and retailer Greene King is set to announce plans today (Wednesday, 31 January) to double the number of apprentices to 20,000 and launch an employment programme for ex-offenders as part of a commitment to improve social mobility. At an event in parliament backed by Damian Hinds, the education secretary, Greene King will launch a report outlining its ambitions and calling on wider industry to give people of all backgrounds the chance to pursue a career. The company lists five ambitions – to increase apprenticeships from 11,000 to 20,000 by 2022; to work with prisons in London and the north west to support ex-offenders; to become a signatory to Business in the Community’s Race at Work Charter; to increase promotions to pub manager; and to extend its partnership with The Prince’s Trust. Chief executive Rooney Anand told The Times: “Social mobility is about giving people a chance to climb up the ladder, irrespective of ethnicity or social background and to better themselves. To better the prospects not only for themselves but also their families. In Greene King we have examples of people who entered the trade casually, perhaps for a few hours’ paid work, found they had an aptitude for it and were taken on as a permanent member of staff. They can progress and it can quickly turn into a career. I believe this industry can be a pathway to prosperity.”
Jamie Rollo – encouraging debt filings and trading at Greene King: Morgan Stanley leisure analyst Jamie Rollo has said brewer and retailer Greene King’s latest securitised debt filings show decent headroom with plenty of flexibility, suggesting the company’s 5.6% dividend yield is secure. He said: “Greene King has just filed its first quarter and second quarter FY19 accounts for its two securitisation structures covering most of its pub Ebitda. These show debt service coverage ratios in Greene King retail (two-thirds of group debt) dropping marginally on the second half of FY18, continuing the trend towards debt service coverage ratio stability, and on track to widen Ebitda headroom to its ‘cash trap’ minimum from 15% in FY18 to 17% in FY19e. Spirit issuer (15% of group debt) saw its debt service coverage ratio stability rise sharply as more debt was repaid, and now has ample 37% Ebitda debt service coverage ratio stability headroom. Greene King has been using plc resources to repay some Spirit debt early and inject Ebitda into Greene King retailing, showing financial flexibility. This analysis is important as being able to upstream cash from the debt structures effectively funds the ordinary dividend, and our confidence level here remains high. Following Greene King’s strong third quarter, we raise FY19e like-for-like sales estimates from 2.0% to 2.5% (implying 1% in the fourth quarter despite an easy comparable), and FY20 from 0% to 1%. Our price target rises from 660p to 690p, also reflecting the peer group re-rating. Greene King recently announced Nick Mackenzie will take over as chief executive in May, in succession to Rooney Anand who advised the company in November of his intention to step down. Mackenzie joins from Merlin Entertainments, and has a background in pubs, with skills in property, brands, and customer experience. While we are not expecting any major changes post his appointment, it could be seen as an opportunity to review the company’s structure. We note there is a long-term trend for UK brewers to separate their larger managed pub business from their brewing and tenanted pub operations – Fuller’s exit from brewing is the most recent example. We remain ‘Overweight’ (on Greene King’s shares). Greene King shares trades on a 5.6% dividend yield and a calculated 2019e price-to-earnings ratio of 9.2 times, and while they have risen from their lows, we think this is still good value for an asset-backed business (850p net asset value) generating good cash flow, and we see 17% upside to our new 690p price target.”
BigDish appoints new chief executive: BigDish, the company that operates a yield management platform for restaurants, has appointed Sanj Naha as chief executive. Naha, who joins in mid-February, will replace founder Joost Boer, who will remain with the company as chief product officer but will no longer be a director. BigDish stated: “Sanj has significant experience in restaurant and hospitality technology platforms in the UK and Europe and has held senior positions at companies such as TripAdvisor and Bookatable. Furthermore, he has worked as a consultant for large restaurant groups in the UK. He has also sat on the board of four technology startups, which were successfully bought out. He has already identified further locations within the first two UK territories where the company plans to grow from the first quarter of 2019. Expansion to other UK territories will be announced in due course. The company is able to expand within its first two territories using its current staff base.” Naha said: “We wish to thank Joost Boer for his contribution to BigDish both as founder and in building a world class technology platform. BigDish is a fantastic opportunity and all the indications lead me to believe it has the potential to become a dominant player in UK restaurant technology. I believe the UK is the right place to be at this time. Given how advanced the BigDish tech platform is, I do not expect we will need to have a huge staff base in the UK. While at TripAdvisor I helped grow its restaurant base from 11,000 to 36,000 over a two-year period. We discovered the key was to have the right restaurants and the right deals. I intend to bring that same philosophy to BigDish and management fully expect that we will achieve break even in our first two territories within the second half of 2019.”

Leadership Summit open for bookings: Propel is launching the Leadership Summit, which will see a select group of the sector’s most experienced bosses share their expertise on leadership. The full-day event, in partnership with Elliotts, will take place on Tuesday, 12 February at One Moorgate Place and is open for bookings. Speakers will include Will Stratton-Morris, UK chief executive of Caffe Nero, who will talk about building high-performance teams. Alasdair Murdoch, chief executive of Burger King, speaks about the role of leadership in business turnarounds. Elliotts chief executive Ann Elliott will talk to Des Gunewardena, chief executive of D&D London, about the lessons of leadership he has picked up in his career in the sector. Duncan Garrood, chief executive of Ten Entertainment, will give his views on leadership and the customer experience, while Jo Fleet, managing director of Flat Iron, will talk about empowering people and trust and getting the team to “buy in” through clear communication and vision. Mark Jones, chief executive of Carluccio’s, will explain how the company is building the quality and skillsets of its general managers to lead the business out of decline. Simon Townsend, chief executive of Ei Group, will give his views on the challenges of leadership during a period of immense change and Zoe Bowley, managing director of PizzaExpress, will give her top ten tips on leadership. Meanwhile, Loungers founder Alex Reilley will talk about the adaptations involved in growing a business from one site to more than 100, celebrating success and the art of succession, while Ann Elliott will give her views on the power of mentoring to grow talent in organisations. Propel managing director Paul Charity said: “With the industry facing such challenging times, effective leadership has never been more important. This is an unmissable opportunity to learn from high-profile leaders in our sector.” Prices are £295 plus VAT for Premium members, £345 plus VAT for operators and £445 plus VAT for suppliers. To book, email

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