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Tue 17th Dec 2019 - Propel Tuesday News Briefing

Story of the Day:

Number of emerging restaurant brands grows for first time in three years indicating ‘first signs of recovery’: The number of emerging high-street restaurant brands has grown 3.8% in the past six months following three years of decline, according to the latest Ones To Watch report. In the report, which tracks fast-growing brands in the UK, industry analyst Peter Backman argued the rise could indicate the first signs of recovery for the sector. Backman’s twice-yearly report on the fastest-growing emerging restaurant brands showed the number on the list has grown from 129 to 134 – although the number of outlets has remained stable because the average number in each brand has fallen to 9.9. The rise in outlets was the first for three years, although there has been a net fall of 333 units from a high of 1,659 in May 2016. Backman said the latest list reflected a common theme – brands with small-footprint, fast food models that feature desserts and coffee, with the segment likely to fuel growth. He added investment and growth opportunities in the Ones To Watch cohort were “beginning to show promise once again”. Meanwhile, the current number of Bubbling Under brands – those considered too small to be included on the Ones To Watch list but likely to warrant inclusion in the future – has remained stable. The highest-ranked brand in terms of growth in store openings in the past three years was Crosstown Doughnuts. It was followed by Yorkshire-based Brazilian brand Estabulo Rodizio, Boost Juice Bars brand Shake Lab, Whitbread steakhouse brand Bar + Block and Wells & Co’s Pizza, Pots and Pints. The brands opening the most stores were Canadian cafe and bake shop Tim Hortons, sushi and bento brand Kokoro, Crosstown Doughnuts and West Midlands-based dessert franchise The Little Dessert Shop. Vegan brands have yet to make their mark, with only one on the list, but healthy eating brands – often based on eastern Mediterranean themes – are making inroads. Casual dining maintains a strong foothold on the list, with Italian and Far Eastern cuisine dominating.    

Industry News:

Propel launches Turning Data Into Strategy & Action Masterclass, open for bookings: Propel has launched the Turning Data Into Strategy & Action Masterclass in partnership with hospitality data consultancy DataHawks, with the event now open for bookings. The masterclass will take place on Tuesday, 25 February at Chartered Accountants Hall, One Moorgate Place, London EC2R 6EA. The event will look at why operators should be using data and address some of the common myths and language that surrounds it. Attendees will also learn how to use data to drive sales and long-term loyalty without sacrificing margin or brand credibility. The morning session will see Dan Brookman, chief executive of Airship CRM, talk about knowing and understanding your customers to drive personalisation and conversion; and improving the effectiveness and ROI of local marketing. He will also reveal how to leverage sales data to create compelling bundle deals and where to focus marketing spend. Meanwhile, DataHawks founder Victoria Searl will talk about building and optimising customer journeys, finding new customers and leads, and measuring the impact and effectiveness of offline marketing. In the afternoon session Searl will reveal how to prepare for the unexpected by using data and tech; improve the impact and effectiveness of discounts, offers and rewards; retain revenue when closing sites; and what data to collect and why. The event will be followed by drinks at The Tokenhouse in Moorgate. Tickets are £295 plus VAT for Propel Premium members and £345 plus VAT for non-members. To book, call Anne Steele on 01444 817691 or email

Propel Premium subscribers to receive Andy Lewis-Pratt video as last in exclusive series from Multi Club Conference: Propel Premium subscribers will receive the last video on Tuesday (17 December) in our series featuring speakers at the Multi Club Conference. The videos feature a spectrum of company leaders sharing insights into their strategies and plans, while industry experts look at some of the key trends shaping the sector. The last video features Andy Lewis-Pratt, who launched Xscape and is now chief executive of Market Halls, which operates four sites, who talks about the three-year global research that went into his reinvention of the food hall concept, how the offer is evolving and plans to open sites across the UK. The video will be sent at 5pm. Meanwhile, Propel Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out, discounts to attend Propel conferences and events, and receive regular columns from Propel insights editor Mark Wingett. They also receive access to our database of multi-site companies, which has grown to 1,500 businesses. An annual premium subscription costs £345 plus VAT for operators and £445 plus VAT for suppliers – plus £50 each for additional team members. Email

Confidence among sector business leaders at highest level for 18 months: Optimism in the eating and drinking-out market has risen to its highest point for 18 months, the latest Business Confidence Survey reveals, but senior executives remain wary of squeezed consumer spending and rising costs. The survey, from insights firm CGA in association with hospitality software provider Fourth, indicated more than two-fifths (44%) of business leaders are optimistic about prospects for the sector during the next 12 months – substantially up from 30% in the last survey three months ago and the highest since May 2018. Operators’ confidence over prospects for their own business has risen quarter-on-quarter too, by 6% to 64%. However, leaders remain nervous about consumer footfall and spending in 2020. More than half (53%) think consumers will eat and drink out less often in the next six months, while only one-quarter (25%) expect an increase in average spend, with 32% predicting spend will fall. The poll identifies further concerns over rising staff, property and food costs. The survey also highlighted leaders’ priorities for the year ahead, including the importance of talented and engaged staff. Three-quarters (75%) of respondents consider service to be a key driver of consumer choice, making it the leading factor ahead of value for money. The environment is set to be another key issue in 2020, with more than three-quarters (76%) of leaders citing a sustainable food chain as important to their brand values. “After a tough 2019 for many out of home eating and drinking businesses the signs of cautious optimism in this survey are very welcome,” said CGA group chief executive Phil Tate. “The sector still faces a host of challenges – many of which, like increased costs, are out of their control – but this is a resilient and innovative industry and, even during testing times, there are big opportunities for operators with the right concept, right price and right consumer focus. If businesses can get some economic stability and the right support from government, there’s a lot to look forward to in 2020.” Fourth chief operating officer Simon Bocca added: “It is clear three Ps remain front of mind for our business leaders – people, profit and politics. With people, the market is unified in the sense the best teams will make the difference. In terms of profitability, the rising tide of cost inflation across every line of the P&L, notably for workforce, goods and property, keeps coming and the industry is waging war to defend and grow profitability daily. As for politics, while a confidence bounce from the election is encouraging, the industry will be mindful of the road bumps ahead knowing Brexit and 2020 will bring opportunities and challenges in equal measure.”  

People skills and service the key drivers in creating positive Christmas reviews: People skills and service will be the key drivers again this Christmas for operators looking to garner positive reviews, according to the latest data from guest feedback service Feed It Back. Last Christmas the words “staff”, “service”, “friendly” and “atmosphere” all gained positive sentiment. However, operational issues such as “cold food” and “wait times” lay at the heart of negative reviews. With a large number of guests booking in advance, two-thirds (67%) of negative reviews revolved around frustration at the table not being prepared. Regardless of whether customers left positive or negative reviews on Google, little more than one-fifth (22%) of reviewers received a management response. Feed It Back said considering the Google platform commanded a 63% share of all social reviews, there was a great opportunity for operators to “acknowledge reviews, reinforce positive endorsement and attempt to rescue customers from negative reviews”. The main reason for choosing a site to celebrate Christmas was because the respondent had enjoyed a previous visit (38%), followed by a recommendation (15%), the Christmas menu (13%) and location (10%). Feed It Back chief executive Carlo Platia said: “What stands out from the data is the importance of the entire customer journey. Even before customers set foot in a business their experience could be tarnished by a bumpy booking process. Equally important is acknowledging all reviews – positive and negative. The Christmas period presents an operational challenge for businesses, with a greater volume of sales placing strain on teams. While it seems obvious and is often easier said than done, focusing on the time it takes to get food to table is crucial. That said, when pressures mount the data reveals a bit of festive spirit and positivity from front of house goes a long way to keeping guests happy.”

Company News:

David Page – we’ve identified 40 towns and cities for Franco Manca openings, most opportunities coming through new-build given landlord incentives: Fulham Shore chairman David Page has told Propel the company has identified 40 towns and cities for Franco Manca openings, which would take the brand to 90 sites in five years. The company opened its 51st Franco Manca on Monday (16 December), off Bishopsgate in London. Speaking following the company’s half-year results in which revenue grew 9.3% to £36.0m, Page said it was also looking to strengthen the management team to gear up for the next stage of growth. He said the openings were planned across the UK, including further growth in London. Page added: “We are looking at places where we already have a restaurant as well as new locations. We want another in Manchester and then there’s Newcastle and York, for example. In some cases we’ve also identified the exact physical location of these restaurants.” Page said most of its opportunities were coming through new-build sites rather than existing restaurants, with landlords providing financial incentives. He added: “We plan to open nine restaurants in the financial year and with two of those we’re getting help from landlords with capital expenditure. On others we’re getting rent-free periods. Of the previous nine restaurants we’ve opened we’ve only paid a premium for one site. Probably two or three years ago we would have had to pay to secure eight of those sites. There’s a lot of office space being developed and the space underneath is being earmarked for restaurant rather than retail space, so there’s a lot of opportunity coming onstream and that’s where we see most of our pipeline coming from over the next couple of years.” Franco Manca launched its loyalty app seven weeks ago, which offers diners a free pizza on their sixth visit. As well as more than 55,000 downloads, Page revealed 1,000 people had already enjoyed a free pizza. Fulham Shore launched its partnership with UberEats about a year ago and Page said delivery made up about 10% of sales across Franco Manca and The Real Greek. Delivery is only offered at 30 Franco Manca restaurants because the others are “too small to accommodate it”, while all 18 Real Greek sites, which have larger kitchens, offer delivery. Page added: “We see further opportunity through delivery but our priority is getting people to come to our restaurants.” Looking ahead, Page said he was hopeful consumer confidence would improve following the election result. He added: “I think we’ll have to see how things pan out in January and February to see if that’s the case. That’s why we’re being cautious but we’ve just had one of our best Saturdays on record so we hope that’s an indicator of things to come.”       

TRG teams up with Levi Roots to trial delivery brand: The Restaurant Group (TRG) has teamed up with Reggae Reggae Sauce founder Levi Roots to trial delivery brand Levi Roots’ Kitchen, Propel has learned. The brand, which features Caribbean, jerk chicken and classics-based menus, is being trialled out of 12 Chiquito sites in the UK available through UberEats. Available all day, menu items include curry goat (£8.99), Three Little Birds, which is three quarters Reggae Reggae Jerk Chicken (£12.49), and Grandma’s Vegpot (£7.99). In the summer, Roots closed Levi Roots Caribbean Smokehouse, which he opened at Westfield Stratford in partnership with Las Iguanas co-founder Eren Ali in December 2015. Roots shot to fame after an appearance on television series Dragons’ Den in 2007, which propelled his Reggae Reggae Sauce business to an annual turnover of £30m within eight years. TRG has launched a number of virtual delivery brands this year through its established casual dining brands and delivery kitchens. Through Chiquito it already offers the Chicken Cartel, Cornstar Tacos and Kick Ass Burrito virtual brands. It also offers virtual brands Stacks and Birdbox through its Frankie & Benny’s sites and a number of virtual brands out of the Foodstars unit in Battersea, including Daily Naan, Jumping Pans and Pyjama Hotel. Last month Propel revealed the company had launched a further virtual delivery brand – Indian-influenced burger concept Baragara – this time through the Deliveroo Editions site in Battersea.

M&B executives see remuneration double after bonus award, cutting pension contributions: Executive directors at Mitchells & Butlers have seen their remuneration double after being awarded most of their bonus, the company’s annual report has revealed. Chief executive Phil Urban and finance director Tim Jones were given bonuses of 82% of salary, resulting in bonus payments of £423,156 and £353,959 respectively. The annual bonus was based on four elements – 70% on operating profit and 30% on the non-financial measures of guest health, employee engagement and food safety. It meant Urban saw his total pay climb to almost £1.7m, compared with £819,000 the previous year. This consisted of £516,000 salary, £16,000 taxable benefits, £423,000 of short-term incentives, £91,000 of pension-related benefits, long-term incentive payments of £635,000 and £3,000 of other benefits. Meanwhile, Jones’ remuneration increased to £1.25m, compared with £688,000 the previous year. This was made up of £432,000 salary, £16,000 in taxable benefits, £354,000 in short-term incentives, £76,000 in pension-related benefits, long-term incentive payments of £372,000 and £3,000 of other benefits. Urban and Jones are both set to see their salary increase 3% at the start of next year. Remuneration committee chairman Imelda Walsh said the decision was taken given the “very strong” performance and noted there had been a number of new appointments at higher salary levels in the sector. Meanwhile, pension contributions for Urban and Jones are being cut. Walsh said in her report: “The committee is aware of the increased focus on pension contributions for executive directors and the expectation these will align, over time, with the broader workforce. The current level is 20% of salary less the cost of employers’ national insurance (incurred when this is paid as an allowance through payroll as opposed to being paid as a contribution into a pension), which is passed on to the executive director. Therefore the pension allowance paid to executive directors is currently 17.6% of base salary. The current employee average pension contribution is circa 4%. The chief executive indicated to the committee his desire to proactively address this issue and, as a first step, for FY2020 the cash equivalent pension contribution will be reduced by the same cash amount as the increase in base pay (3%). This means that for FY2020 the cash equivalent contribution for both executive directors will reduce to 14.2% and, therefore, overall fixed pay (salary and pension allowance) remains unchanged versus the prior financial year.”  

Yau confirms Obica link-up to launch sando bar concept next month: Wagamama founder Alan Yau has confirmed he will open Mozzasando, an Italian-influenced katsu sando bar, in London early next year. As revealed by Propel last month, Yau is working with international mozzarella bar chain Obica on the concept, which will launch at Obica’s former site at 96 Draycott Avenue in South Kensington on Monday, 20 January. The Mozzasando menu will fuse popular Asian snack katsu sando, which is usually filled with a deep-fried meat cutlet, with milanese, a parallel Italian recipe for breaded veal or chicken. The sandwiches will be served with french fries topped with beef ragu or nduja sauce and available to take away or eat in at the no-reservations, 32-cover site. Yau said the concept had been inspired by Frank Salvoni’s now closed Britalian sandwich bar in Wardour Street, Soho. Yau said: “Frank always joked that what Pret took in the form of the prawn mayo was only half of our unpolished diamond. What they missed is the milanese in a baguette, focaccia or ciabatta. I always wondered in those soul-searching moments for that golden goose whether Frank’s milanese could become the new champion for an Italian fast food concept. Imagine if this could merge with the Japanese aesthetics of the katsu sando?” Yau, who also founded Busaba Eathai and is behind fine dining concepts such as Hakkasan and Yauatcha, is opening a further three sites in London next year. The highest-profile venue will be Chyna, a 120-cover seafood restaurant launching at Wardian London, a 766-apartment high-rise development due to open in Canary Wharf early next year. He will also open 45-cover, Japanese-inspired counter restaurant Yau Grill at Wardian London and a permanent site for Turkish pizza pop-up Yamabahçe in Westfield London in early 2020.

Coffee#1 hits 100-site landmark, sees like-for-likes up 3.9% since joining Caffe Nero Group: Coffee#1 has seen like-for-like sales increase 3.9% since Caffe Nero Group acquired a majority stake in the brand. The announcement came as Coffee#1 opened its 100th site, in Banbury, Oxfordshire, with plans for 12 more stores in 2020. The Banbury site is the tenth to open in the past 12 months and ninth since Coffee#1 joined Caffe Nero Group in January. The 100-seater outlet is one of the largest Coffee#1 venues to date and features the brand’s festive menu, which includes Christmas cappuccino, pigs under blankets and mince pies. Coffee#1 director Bruce Newman said: “100 stores is a fantastic milestone for us and a great achievement for everyone involved with the business. We plan to run the 100th Coffee#1 shop with the same ethos as the 99 that preceded it, with a strong focus on our customers, great coffee and ensuring our stores are homely and welcoming.” Caffe Nero Group founder and chief executive Gerry Ford added: “I am delighted how Coffee#1 has performed since it became part of the wider Nero group – it’s run as an independent brand to Caffe Nero and will continue to be. There’s great potential for continued growth and we expect to open a further 12 stores in 2020.” Coffee#1 opened its first store in 2001 and now operates across Wales, the south west, south coast and the Midlands. Last week Propel revealed Coffee#1 had appointed Sally Hibbert as operations director, while Caffe Nero Group reported like-for-like sales increased 3.1% for the year ending 31 May 2019.

North west-based franchisees open seventh Papa John’s site in 18 months: Sukhbir Gill and Lakhwinder Singh have opened a Papa John’s site in Lancaster to join its six other franchise stores in the region. Gill and Singh only joined Papa John’s in 2018 and already run stores in Skegness, Bebington, Warrington, Liverpool Wallasey, Liverpool Allerton Road and St Helens. Singh said: “The past 18 months have seen us expand our portfolio of Papa John’s quickly. Initially, we opened five stores in the first five months. Previously we both worked at a rival pizza firm and our industry experience has helped us grow – but Papa John’s head office staff have been particularly supportive. The whole team is hugely motivated and they have been instrumental in helping us expand rapidly in a very short space of time.”

Pret customers to vote for additional EAT menu item: Pret A Manger is giving customers the chance to vote for a menu item to appear at its sites from the EAT business it acquired earlier this year for almost £60m. Consumers can vote on the company’s Instagram page until the end of this week, with the winner added to the menu in early 2020. Consumers will be given three options – chicken pot pie, firecracker chicken toasted flatbread, and houmous and falafel mezze salad. Guy Meakin, UK food and coffee director at Pret, said: “We know EAT customers will miss the food they have enjoyed over the years so we want to offer one of their favourite products on Pret’s menu. Once customers have voted for their winner, our food team will work closely with EAT on the finished result and we look forward to sharing it with customers in 2020.”

Buzzworks Holdings to relaunch Kilmarnock bar as all-day cafe concept: Scottish bar and restaurant operator Buzzworks Holdings, which acquired Lucky 7 Bar & Kitchen in Kilmarnock town centre last month for its 13th venue, is to relaunch the venue as all-day cafe bar The Duke. The venue in John Finnie Street will reopen in January offering hand-roasted coffee, a takeaway and late-night bar. Additions to the decor will include sofas, a marble bar and one-off pieces of furniture. Buzzworks Holdings managing director Kenny Blair said: “Kilmarnock is at the heart of our plans and we’re passionate about investing in the community by operating venues everyone can enjoy. Launching The Duke is a definitive part of this exciting chapter.” Buzzworks launched a community bursary scheme in October to support organisations and projects in communities where the company operates such as Ayrshire, Renfrewshire and West Lothian.

Mansfield-based Jco Pubs opens third Corby site: Mansfield-based Jco Pubs has opened its third site in Corby. The company has taken on the lease of The White Hart in High Street. The pub and music venue shut in April, reopened in June under new management but closed again in mid-September. Only drinks are being served for now but food will be back on the menu in the new year. Jco Pubs director Danny Oldfield told the Northamptonshire Telegraph: “The people of Corby need to support their pubs and get behind the pub’s manager, James Telfer.” Jco Pubs leases two other sites in Corby – The Kingfisher in Fotheringhay Road and The Lincoln in Lincoln Way.

MJMK opens second Casa do Frango: London-based hospitality company MJMK has opened a second site for its Algarvian piri-piri concept Casa do Frango. In the summer Propel revealed the business, led by Marco Mendes and Jake Kasumov, was looking to open a further site for the concept it launched near London Bridge last year. The new venue has opened in King John Court, Shoreditch, with additions to the menu. The venue features a ground-floor cafe focusing on Portuguese tapas and a bakery, as well as a bar offering Portuguese wine, cocktails and house beer. The main dining room upstairs features an open kitchen and wood-fired grill. Mendes said: “The Algarve has a rich culinary history and identity that’s relatively unknown outside Portugal. It’s a cuisine that owes its heritage to family recipes passed down through the generations.” MJMK opened Casita do Frango, a smaller version of the concept, at Arcade Kitchen Theatre in New Oxford Street in July, followed by the launch of neighbourhood pub The Belrose in Belsize Park. The company also owns and operates bar S11 and health food cafe Homegrown, both in Brixton.

Drinks delivery platform backed by BrewDog founder launches £250,000 crowdfunding campaign for UK expansion: Drinks delivery platform Drinkly, which is backed by BrewDog co-founder James Watt, has launched a £250,000 fund-raise on crowdfunding campaign Seedrs to expand into 150 UK locations within the next 12 months. Drinkly, which aims to deliver chilled beer, wine and spirits to customers in Glasgow, Edinburgh and London within an hour, is offering 7.22% equity in return for investment, giving the company a pre-money valuation of more than £3.2m. The company plans to use the funds to recruit sales staff, invest in marketing, and update its technology to optimise revenue streams. The pitch states: “Drinkly was born out of frustration – how was it we could order a takeaway pizza, a taxi or a restaurant-quality meal but couldn’t get our favourite bottle of sauvignon blanc delivered chilled? The UK drinks market is huge – it’s forecast to be worth £55.5bn by 2022 with the e-commerce portion growing 16% year-on-year. There’s no denying the food delivery market is thriving but we haven’t seen similar growth in the drinks delivery sector. We derive revenue from two sources – we earn between 10% and 25% of each sale plus we earn revenue from drinks brands by providing marketing, data and product testing. Since we started we’ve more than tripled our revenue. We’re on the cusp of an ambitious expansion that will help us achieve our mission of becoming the market leader in drinks-on-demand delivery in the UK.”

Pepe’s Piri Piri Grill strengthens Scottish footprint with Musselburgh site: Flame-grilled chicken chain Pepe’s Piri Piri Grill is to expand its Scottish footprint with an opening in Musselburgh. The company has been granted permission by East Lothian Council to convert a site in High Street. Atif Ali is diversifying from his buy-to-let business to open his first Pepe’s franchise early in 2020, reports the East Lothian Courier. Pepe’s specialises in piri-piri chicken, serving wings, chicken strips, fried chicken and lamb burgers, wraps, pitta and vegetarian options. Pepe’s opened its debut site in Watford in 2007 and there are now more than 100 outlets in the UK, including in Edinburgh, Falkirk, Fife, Glasgow and Perth.

Ei Group to give away 100,000 free drinks in January, expands low and no alcohol options: Ei Publican Partnerships is to give away 100,000 free drinks to boost January trade as part of its annual Cheer Up January initiative. Brewing partners this year include Heineken, Budweiser, Diageo and Molson Coors. Customers will be able to find pubs taking part and redeem their free drink via the app on the Great British Pubs website. The promotion will be available in more than 1,000 Ei Publican Partnerships pubs from 2 to 19 January. Ei Group customer director Helen Cook said: “We know people want to cut down after the indulgences of the festive season so we’ve extended the offer this year to include a broader range of drinks making it more accessible to people who might want low or no alcohol options. Feedback from our publicans last year was incredibly positive, with more than 80% of participants saying they’d like to do it again.” Last year, 100,000 people visited the Great British Pubs website during Cheer Up January, with participating pubs seeing a 5.6% uplift in drinks sales during the month.

James Clay falls to pre-tax loss following investments: Craft beer importer James Clay and Sons has reported a pre-tax loss of £528,000 for the year ending 31 March 2019, compared with a profit of £62,000 the previous year, following a series of investments. Turnover was down slightly to £22.0m from £22.8m the year before. James Clay and Sons, which has been operating since 1974, imports, distributes and builds speciality craft beer brands from Europe, America, Japan and the UK. In their report accompanying the accounts, the directors stated: “The business made a series of investments that had an impact on profitability in the financial year in order to provide the foundation for growth. These included a business acquisition to provide a direct delivery platform in the Midlands, expansion of the sales and operations teams, and investment in IT systems.” In August, James Clay took over as managing director of the business from his father and company founder Ian, who remains a director and part of the leadership team.   

BrewDog launches Hop Hub taproom: Scottish brewer and retailer BrewDog has launched a taproom at its “Hop Hub” global distribution headquarters near Glasgow. The bar at the 129,000 square foot distribution centre offers ten taps of the brewer’s craft beer alongside the BrewDog pizza menu. The company stated on its blog: “As Europe’s first fully refrigerated beer warehouse for national distribution, we have fitted it with a taproom so you can see, first-hand, our commitment to beer quality – and then sample it for yourself.” Last month BrewDog sold the Hop Hub to CBRE Global Investors for an eight-figure sum, with the centre leased back to BrewDog in a 20-year agreement. The facility is on the 650-acre Eurocentral industrial estate in Motherwell. 

London Central Portfolio partners with Dutch pension firm to launch hotel brand after buying South Kensington site: Real estate investment advisory London Central Portfolio (LCP) and Netherlands-based pension delivery firm APG have launched a joint venture by acquiring Harrington Hall Hotel in South Kensington as the “cornerstone asset for a new brand of all-suite lifestyle hotels”. LCP founder and chief executive Naomi Heaton said the brand would showcase the “best in British design with a focus on sustainability and green technologies”. She added: “Harrington Hall Hotel is planned to open in spring 2022. LCP will be responsible for its design, development and operation and the intention is to follow this up shortly with further acquisitions across central London’s prime neighbourhoods.” Robert-Jan Foortse, head of European property investments at APG, said: “We intend to create a new type of accommodation for the prime central London market.” APG’s hotel investments currently amount to more than €2bn (£1.7bn).

Peel Hunt – Cineworld acquisition of Cineplex ‘risky but could be well timed’: Peel Hunt leisure analyst Ivor Jones has said Cineworld’s acquisition of Canadian operator Cineplex is “somewhat risky but could be well timed”. Issuing a ‘Buy’ note on the shares with a target price of 300p, Jones said: “Cineworld is to acquire Cineplex, Canada’s largest cinema operator, for US$2.1bn (EV/Ebitda multiple of 6.3 times, including US$130m of synergies). Cineplex has a 75% share of box office revenue in Canada, while circa 20% of revenue comes from ‘non-exhibition’ business that may be sold to reduce debt. Synergies of US$130m are targeted – US$65m from cost efficiencies and US$65m from ‘operational best practice’, including the introduction of a subscription programme and additional advertising. Management expects US$120m of these benefits, on a run-rate basis, to have been achieved by the end of 2020, which seems ambitious. The acquisition is to be financed with debt – net debt/Ebitda of ‘towards’ three times is targeted by the end of 2021. Had completion taken place at the end of 2019 and synergies fully realised, net debt/Ebitda (pre-IFRS 16) would have been circa 4.0 times (excluding exceptional restructuring costs). The transaction is expected to be ‘double-digit’ accretive to earnings and free cash flow per share, which is unsurprising given the relatively low cost of debt. Completion is expected by the end of the first half of 2020. The acquisition is subject to Cineworld and Cineplex shareholder approval. Cineworld’s 28% shareholder, Global City, has said it will vote in favour. We believe admissions in the core US business will be broadly stable, with upside from ticket price increases, subscription and concession sales. The bear case, reflected in the large short position in Cineworld, is 2020 (and perhaps subsequent to this) is likely to see a sharp dip in admissions which, in a highly operationally and financially leveraged business, would put Cineworld under pressure. Cineplex’s share price was more than C$5O in 2017 (the agreed offer is at C$34). In general the cinema business is out of favour with investors. The move by Cineworld is clearly somewhat risky but, if successful, will prove to have been well timed. Given our positive view on the industry, we are pleased to see Cineworld increase its exposure to the cinema business through acquisition and reiterate our ‘Buy’ recommendation and 300p target price.”

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