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Fri 12th Mar 2021 - Propel Friday News Briefing

Story of the Day:

Sector heading for ‘sharp recovery’: Significant levels of corporate activity are predicted in the sector as a result of a very sharp return to positive trading that will see 2022 forecast to beat trading in 2019 – combined with serious weight of capital looking to invest in quality assets in the market, according to AlixPartners. As a result of pent-up demand from consumers, Graeme Smith, managing director of corporate finance at AlixPartners, told the online Propel Multi Club Conference that public markets forecasts show revenue levels in 2021 will be only 15% below those seen in 2019 and 2022 levels will be on average 10% above 2019, with some operators such as Loungers expected to greatly outperform – as much as 42% up on 2019. Smith said: “For 2022 the public markets expect levels of revenues at or above those achieved in 2019. It helps to demonstrate the levels of pent-up demand. Of course we saw this through the summer when businesses were able to reopen. It’s a good positive backdrop that this is seen to be a very sharp recovery in demand once reopening is possible.” Smith said the deal environment will be partly driven by the “enormous need for businesses to repair their balance sheets” on the back of the debts taken on during covid-19. He added: “We’ve seen an increase in debts – from landlords, suppliers and lenders – that all needs to be paid back. People will be under great pressure from lenders to ‘normalise’ their balance sheets.” Against this backdrop he predicted the emergence of buy and build strategies from well-funded players. He said: “They will use M&A to acquire and grow in order to take advantage of the disruption in the market. Some leading lights will benefit from the favourable property situation and there is the potential for some of these companies [themselves] to be ‘in play’. The return on investment on this could be strong. Buy and build will be an important theme over the next 24 months, with lots of [target] businesses sub-£80m of revenues and sub-£10m of profit. You can build scale quickly and boost margins through synergies. Larger companies could be the start points for a buy and build strategy – using M&A for growth.” According to Smith there will be “significant capital available for strong operators” whose focus will be on targets that feature some common characteristics. These include growth potential, strong return on investment, consistent profits across sites, attractive real estate portfolio, and a good management team in place.
AlixPartners is a Propel BeatTheVirus campaign member

Industry News:

Mark Wingett to look at legacy Ralph Findlay will leave in latest Premium column: Propel insights editor Mark Wingett looks at the legacy Ralph Findlay will leave at Marston’s, alongside other key bits of news from the past week, in this week’s Premium Opinion, which will be sent to subscribers at 5pm on Friday (12 March). There will also be the latest sector rumblings from Premium Diary. 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 regular columns from Mark Wingett. Propel is to improve its service for Premium subscribers by publishing a monthly updated list of multi-site operators – with a standalone report. The new multi-site list will be sent to subscribers at the end of each month with a report on new companies and changes in the list. A refreshed list of circa 1,600 companies will be sent out to all Premium subscribers at the end of March. It provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different, and what each business specialises in. In a new feature this year, there is a synopsis of what the business does and significant news associated with it. The list will then be updated at the end of each month. An annual premium subscription costs £395 plus VAT for operators and £495 plus VAT for suppliers. Email anne.steele@propelinfo.com

Propel Friday Wrap video series continues with Greene King chief executive Nick Mackenzie: Propel continues its new Friday Wrap video series on Friday (12 March) at 3pm. The new series, which is sponsored by innovative staffing solution provider Stint, sees Mark Stretton, former sector journalist and now head of sector PR firm Fleet Street Communications, and Propel insights editor Mark Wingett discussing this week’s key issues facing the UK’s hospitality sector, with a leading sector operator or expert. This week they are joined by Nick Mackenzie, chief executive of Greene King, to discuss navigating the roadmap ahead, the reopening of the sector, the evolving role of the pub and how the market’s landscape might change going forward.

Delivery and takeaway sales more than triple: Sales of deliveries and takeaways from the UK’s leading hospitality groups have more than tripled over the past 12 months, a new Tracker service from CGA has revealed. The Hospitality at Home Tracker indicated the combined value of delivery and takeaway in February 2021 was 317% more than in the same month in 2020. The volume of orders was 19.6 million—well over double the total of 9.1 million in February 2020. With the value of sales growing significantly faster than volume, CGA said it demonstrated a big uplift in average spend. Karl Chessell, CGA’s business unit director – hospitality operators and food, EMEA, said: “Deliveries, takeaways and at-home meal kits have been a lifeline for hospitality in an immensely challenging market. Delivery and takeaway was already a fast-growing trend before 2020, but we are seeing more and more consumers embracing it and the movement is very likely to continue, albeit without the ferocity of the past 12 months. The Tracker will offer crucial analysis of consumers’ spending patterns and help businesses spot new opportunities, areas for improvement and action points.”

Three quarters of hospitality leaders set to start recruiting staff: Three quarters of business leaders are set to start recruiting new staff members this year, according to research from CGA’s Business Leaders Survey. The survey, which was sponsored by software provider Fourth and collected responses from 726 operators across the restaurant, bar and casual dining industries, revealed just under half (44%) will be recruiting to the same, or a greater extent, than in previous years. Respondents also predicted their workforces will return to 79% of their previous scale by July, and 90% by December. Fourth’s own data, aggregated from the analysis of more than 700 companies across the restaurant, pub, bar and quick service restaurant sectors revealed the hospitality workforce shrunk by 28% during the course of 2020. As businesses embark on the regrowth of their teams, maintaining engagement and reinforcing a positive culture will be a key focus for 71% of business leaders while a further 29% listed it as a moderate focus. The CGA study also found one in three said the use of technology would be fundamental in helping operations, with a further 39% suggesting it will be important. The challenge most leaders predict turning to technology for is managing the cost of labour (49%), which will be partly driven by the uncertainty within the market, as 71% expect fragile consumer confidence to negatively impact business. Sebastien Sepierre, managing director – EMEA, Fourth, said: “There is cautious optimism returning to the industry, thanks to a clear timeline for reopening the industry and a new round of support measures announced in the Budget. This shot in the arm will act as the starting gun for many businesses, as they seek to drive employment and establish systems ahead of reopening. This is still a precarious time for operators. We have started to see more operators turn to technology to adopt a flexible approach to scheduling and driving efficiencies. What’s more, one key takeout from lockdown was the prevalence and importance of digital platforms in maintaining engagement and culture across businesses.”
 
Congress passes $1.9tn covid-19 relief package, including increased $28.6bn for small restaurants: The $1.9tn (£1.4tn) covid-19 relief package, which includes an increased $28.6bn for small US restaurants, has been approved by Congress. The final version excluded the Democrat-sought $15 minimum wage and shrunk unemployment benefits from the original $400 to $300. The bill will now head to president Joe Biden’s desk for signing, which he plans to do on Friday (12 March). The plan includes the Restaurant Revitalisation Fund, which will now provide $28.6bn in debt-free relief for small and mid-sized restaurants, an increase on the original $25bn, and is based on the original $109bn Restaurants Act passed last year. The plan provides up to $5m in grants for individual restaurants, bars, caterers, breweries and tasting rooms or up to $10m for restaurant groups. To qualify, restaurants must not be part of an affiliated restaurant group with more than 20 locations.
 
Job of the day: COREcruitment is supporting a service and catering company as it looks to build one of its key divisions. To support growth, the business is keen to appoint a business development director, who is an established catering or services seller as well as being a strong people leader and collaborative senior team player. The ideal individual will have a dynamic approach to selling and believe that building a strong, supported team is key in doing this. The company encourages creativity and innovation and is looking for a long-term hire who will grow with the division. The salary is circa £80,000 to £100,000 plus commission and long-term incentives. Anyone interested can email Hollie@corecruitment.com
COREcruitment is a Propel BeatTheVirus campaign member
 

Company News:

ETM Group secures £2.5m CBILS loan, early delivery sales ‘extremely promising’: London-based gastro-pub and sports bar operator ETM Group, led by brothers Ed and Tom Martin, has reported it received £2.5m through the Coronavirus Business Interruption Loan Scheme last year and has forecast, with the ongoing support of landlords and suppliers, its accounts can be prepared “on an ongoing basis”. The company also reported it has received a £250,000 insurance compensation for forced closure. It added: “The group has also again taken all measures to preserve as much liquidity as possible including applying for all the latest government and local authority grants. The group has continued to innovate and explore alternative revenue streams. Digital marketing and online bookings have been enhanced. An order at table app was launched within weeks of the lockdown and in partnership with third parties its first delivery service was launched in November 2020. Order at table purchases accounted for the majority of sales at some sites and early delivery sales have been extremely promising.” The company reported it produced turnover of £31.5m (2019: £31.5m) in the year to 23 February 2020. The company opened the sports bar Redwood at London Bridge Station in November 2019 and rationalised its portfolio by surrendering its lease at One Canada Square and selling the lease of Ealing Park Tavern for a premium. Talking about the period immediately prior to the arrival of the pandemic, the company added: “The continuous improvement programme initiated in 2019 resulted in significant year-on-year increases in site margins and a lower restructured head office cost base. This underpinned the group delivering adjusted Ebitda of £3m, an increase of 15.4% on a like-for-like basis (2019: £2.6m). With the noted cost control and the disposal of underperforming sites the directors felt the business was well-placed going forward into the 2022 financial year.”

Hollywood Bowl to raise £30m through share placing: Hollywood Bowl Group, the UK’s largest ten-pin bowling operator, is to raise circa £30m through a share placing to invest in new opportunities, resume its capex programme and strengthen its balance sheet. The company proposes to place new ordinary shares of £0.01 each in the capital of the company through an accelerated bookbuilding process. The price at which the placing shares are to be placed will be determined at the end of the bookbuild. Hollywood Bowl Group stated: “As landlords look to increase the experiential leisure offering in their schemes, the pandemic has created additional opportunities for ten-pin bowling and mini-golf in prime locations in the UK. The company's continued attractiveness as a tenant for high-quality locations means its new centre pipeline has been bolstered and additional growth capital will be required in order to capitalise on the number of high quality opportunities available to the company.” The company said it has an existing pipeline of seven new ten-pin bowling centres, which it expects to open before 30 September 2024. In addition, the company has nine centres under heads of terms or at legal stages, with an approximate gross capex requirement of £2.4m per site. The company also plans to resume its capex programme with its Stevenage and Basildon centres due for refurbishment before reopening in May 2021. The company is targeting an additional four refurbishments – Glasgow Springfield Quay, Liverpool, Cheltenham and Glasgow Coatbridge – this year, six Pins on Strings installations, completion of the rollout of its new scoring systems and an upgrade to its CRM infrastructure. Total spend on these activities is expected to be between £7m and £8m. Hollywood Bowl Group said the funds would also be used to strengthen its balance sheet. It said agreements have been reached with “some” landlords over rent, and the company has March 2021 rent and deferred rent payments of about £5.8m. It added the £10m it secured through the Coronavirus Large Business Interruption Loan Scheme remained wholly undrawn. As at 28 February 2021, the group had cash at bank of £11.3m and gross debt of £29.2m. The group expects operational cash burn of about £3.6m between March and mid-May 2021, when the group's English centres are due to reopen. 
 
Jollibee to invest £50m to grow brand across Europe, wants to lead post-covid QSR industry: Jollibee, the Philippines fast food group, has said it plans to invest £50m in total to open a further 50 sites across Europe by the end of 2025. Earlier this week, it was revealed part of this investment will be £30m focused on the brand’s expansion in the UK. The fried chicken brand, which operates about 1,200 sites worldwide, plans to be in “every major city in the UK”, including opening ten new outlets in 2021 and a further 15 to 20 next year. It currently operates three sites in the UK, with a flagship site on the ex-Bella Italia site in Leicester Square, complete with a new store design concept, set to open next. It also has openings lined up in Reading, Nottingham, Edinburgh, Leeds, Cardiff and Newcastle. Its expansion in Europe will include its first restaurant in Spain, which will open later this year in Madrid. Dennis Flores, president of Jollibee Europe, Middle East, Asia and Australia, said: “Jollibee is dedicated to growing the brand here in the UK and across Europe. Investing £50m proves our commitment to become a major player in the quick service industry here. We adapted our approach to appeal to a young British demographic, which meant building a premium, inviting space with a touch of our distinctive Asian heritage. The pandemic may have been a setback, but it will not deter us from pursuing our vision for Jollibee in the UK and the rest of Europe.” 

Tapas Revolution and La Tasca owner acquires ex-Bella Italia in Brighton: Spanish Restaurant Group, the James Picton-led company behind the Tapas Revolution and La Tasca brands, has secured a site in Brighton for an opening later this summer, Propel has learned. The company has completed the acquisition of the former Bella Italia in the city’s North Street, through AlixPartners, administrators on behalf of Casual Dining Group. Spanish Restaurant Group plans to reopen the site, which was previously operated as Bellota under the La Tasca business, at the start of June. The 12-strong Spanish Restaurant Group, which operates seven Tapas Revolution sites, alongside its joint-venture partnership with La Tasca sites and La Viña in Manchester, will commence its reopening across its external terrace operations from Monday, 12 April. Propel reported last year the group was seeking further growth opportunities, with Brighton believed to be the first of a number of sites targeted to enhance its regional growth plans. Richard Negus, of AG&G, acted on the Brighton deal. 

Jamie Rollo – M&B should outperform on reopening given its residential portfolio mix, high-quality estate and significant industry capacity exit: Morgan Stanley leisure analyst Jamie Rollo has argued Mitchells & Butlers (M&B) should outperform on reopening given its “residential estate mix, high-quality estate, and the significant industry capacity exit”. Following the company’s £350m equity raise, Rollo has updated forecasts, rating the shares at “Overweight” with a target price of 350p. Rollo said: “We assume a 12 April reopening (outdoor only) with sales quickly building from minus 70% to minus 6% April to September, giving second half of 2021 sales of minus 23% versus the second half of 2019 – more conservative than the company's base case of minus 8%. M&B’s estate consists of mostly large, food-led, asset-backed pubs mostly located in suburban/residential areas, with outdoor space. It should therefore be less exposed to the structural shifts to working from home and from the high street to online. Better margin commentary means FY21 estimated Ebitda is unchanged at close to breakeven with sales 55% below FY19. Our headline earnings per share forecasts drop about 20%, reflecting the £351m open offer equity raise (28% headline dilution, but 20% underlying dilution adjusted for the 36% discount). Our IAS 17 FY21 estimated net debt forecast drops to £1.5bn, similar to pre-covid levels, and given the £0.1bn annual bond repayment profile we see leverage down to 2.9 times in FY23 – low for an asset-backed securitised pub estate. While M&B has signalled a dividend resumption is unlikely for some time, it should continue to de-lever and thereby increase equity value (11% free cash flow yield on FY23).” Meanwhile, an influential adviser to investors has called for M&B chairman Bob Ivell to be thrown out for failing to address shareholder dissent over the company’s board composition. The Telegraph reported proxy adviser Glass Lewis said Ivell “should be held responsible for his failure to address the concerns” following repeated shareholder revolts over the re-election of board members Eddie Irwin, Josh Levy and Ron Robson. It has urged shareholders to vote against Ivell’s re-election at the company’s annual meeting on Wednesday, 24 March. Glass Lewis also recommended shareholders vote against the re-election of Irwin and Robson. The pair, who have links to M&Bs’ largest shareholders, are members of the firm’s audit committee, which Glass Lewis said should consist solely of independent directors.
 
Young’s to open two new pubs in April: Young’s, the Patrick Dardis-led pub company, will increase its portfolio with the opening of two new sites next month. Acquired by Young’s last year, the Alban’s Well in St Peter’s Street in St Albans is a 6,000 square foot site that is undergoing building work to create a 168-cover pub and dining room alongside a 62-cover outdoor terrace. Food menus will focus on underutilised and ethically sourced ingredients, with plant-based and gluten-free dishes at the forefront. There will also be a self-service “Wine Wall”, offering wine by the glass. The group will also open its fifth pub in Greenwich, following its purchase of the grade II-listed Enderby House in 2018. Young’s is renovating the house with a maritime history that dates to 1835. The three-storey site features two dining rooms and private dining areas, alongside the main bar and two outdoor terraces. Menus will focus on seafood and British produce, together with a selection of local craft and draught beer. Dardis said: “After the most challenging of year for our industry, we are pleased to announce the arrival of these two new pubs. With the reopening of hospitality finally on the horizon, we are looking forward to welcoming guests back into our pubs and establishing both Alban’s Well and Enderby House at the heart of their respective local neighbourhoods.” Both pubs will open their terraces for business in April and open fully in May, in line with the easing of government restrictions. Young’s has a 200-strong pub portfolio with 143 opening their outdoor areas from Monday, 12 April.
 
Cain International appoints former Disney executive to oversee leisure portfolio: Cain International, the privately held investment firm led by Jonathan Goldstein, has appointed Nick Franklin to the newly created role of global head of private equity. Franklin will be responsible for overseeing Cain’s portfolio of private equity investments across all geographies, including Prezzo, which has more than 150 sites across the UK; crazy golf brand Swingers; Maslow’s Group, which operates private members’ club Mortimer House; and The Saint James, a premier sports, entertainment and wellness club. Franklin joined Cain in September last year to oversee the operations and growth of the firm’s private equity portfolio in the US and brings with him almost 30 years of experience in the experiential and leisure sector. He previously spent 18 years working for The Walt Disney Company, where he held a wide range of senior leadership roles primarily in Disney’s parks, resorts and experiences segment. Goldstein said: “Nick has been a fantastic addition to the team and his expertise and market insight will be instrumental in developing new strategies for our existing businesses and growing our presence in the market.” Franklin added: “While the pandemic has impacted many aspects of our day to day life, it has not dampened our appetite for memorable experiences with friends and family. As lockdown restrictions lift and our urban landscapes begin to recover from the pandemic, we are confident there will be significant opportunities for businesses that offer value and interactions that can’t be replicated online.” 

Papa John’s franchisee takes on third site: Papa John’s franchisee Nazim Vadiwala will take on a site in Clydebank for his third store. Vadiwala already runs Papa John’s sites in Edinburgh and Whitley Bay, having joined the pizza business in 2018 after working at a rival for a decade. Vadiwala now has a team of about 55 people spread across the franchises. Papa John’s has more than 450 sites in the UK, and 5,000 stores in more than 40 international markets and territories.

Coventry’s first permanent indoor street food venue to open: Coventry’s first permanent indoor street food venue is set to be unveiled this spring. Factory will launch in FarGo Village in mid-May once government restrictions allow food and drinks businesses to operate inside and outside. Factory will be a food hub, “bringing together favourites from the street food world”. The 340-seat venue is combining three of the biggest units at the Creative Quarter to create one open-plan dining experience “with an industrial vibe reflecting the history of the space”, which was used as a car radiator factory by Coventry Motor Fittings for 60 years from the turn of the century. There will also be a new roof terrace and covered canopy for diners to enjoy eating outdoors while covid and social distancing measures remain in place. The £360,000 renovation at FarGo Village has in part been funded by Arts Council England and the Cultural Capital Investment Fund, which includes an allocation from the Getting Building Fund from the government, through the Coventry and Warwickshire Local Enterprise Partnership. Elyse Cadden, The Box Venue manager of FarGo Village, said it wanted five different operators to be located within Factory. She added: “We have had a couple of residencies from street food companies that have proved hugely popular and we believe this kind of independent street food venue is missing within Coventry’s dining sector.” 
 
Hot Stone opens second restaurant: Japanese dining concept Hot Stone has opened its second restaurant, in Fitzrovia’s Windmill Street. Although offering delivery and collection of food currently, Hot Stone Fitzrovia will open fully for dine-in from Monday, 17 May, in line with the easing of government restrictions. Following the success of the group’s first site in Islington’s Chapel Market, Hot Stone Fitzrovia will have a 50-cover restaurant and seven seat open sushi bar in the 1,300 square foot space. Customers can currently order an elevated “at-home” experience reflective of the à la carte menu. The Chirashi box contains fresh seafood dressed in truffle and caviar alongside a range of sushi, new-style sashimi and carpaccio. House favourites include seared fatty tuna with red jalapeno, crunchy Hot Stone roll and the 24-piece omakase box. Once the restaurant is able to open its doors, diners can expect sushi and sashimi alongside maki rolls as well as Hot Stone’s signature Ishiyaki menu – inspired by the ancient Japanese art of cooking on searing-hot stones. As well as Hot Stone signatures such as 48-hours marinated black cod, the new restaurant will offer dishes exclusive to Fitzrovia, including an A5 Japanese Wagyu & Uni Don, featuring the highest grade A5 Japanese wagyu beef with uni, Ikura, truffle, tsukemono and Koshihikari rice and ponzu sauce.
 
Team behind Hackney restaurant Nest to open Fenn in April: The team behind Hackney restaurant Nest is to open the terrace area of its seasonal British restaurant Fenn in Fulham on Tuesday, 13 April – with the inside restaurant opening on Tuesday, 18 May. Founders Luke Wasserman, Toby Neill and Johnnie Crowe were inspired to open Fenn in Wandsworth Bridge Road by Fulham’s proximity to the Thames. Fenn takes its name from the old English word for “low-lying wetland”, symbolising the restaurants commitment to serving locally sourced, British seasonal dishes. Fenn’s heated and covered outdoor terrace will open its reclaimed antique French doors to allow up to 14 covers to experience the menu for the first time. The main dining room, which will open in May, is centred around a single hand carved ash wood table that seats up to eight guests with additional tables surrounding it. And Fenn’s wine cellar will also double up as a private dining space, which seats up to 16 guests. Neill said: “It has been a really tough and frustrating few months for us but we are thrilled our opening is now within touching distance.”
 
Aktar Islam finds permanent premises for home-delivered food business: Chef Aktar Islam is moving his home-delivered food business into new premises in Birmingham. Islam owns and operates two restaurants in the city – Michelin-starred Indian venue Opheem, and Argentinian restaurant Pulperia in Brindleyplace – but developed his Aktar at Home company when these venues were closed by covid-19 restrictions. While Aktar at Home currently operates from his restaurants, he needed to find new space for when they reopened. The food preparations for the Aktar At Home service will now be based in a 7,300 square foot property in New Bartholomew Street in Digbeth. Islam said: “Aktar at Home is my new creation, tested and proven throughout the lockdown, where me and my team create excellent food with the best possible produce that is restaurant quality even after it’s delivered to your home and reheated. There’s been a huge demand for Aktar at Home, but more important than that is the fact it has helped me and my team to support the needy in our local community by continuing to provide hundreds of meals weekly to local charities. We’ve been operating the new service from our restaurants, but once they reopen we will need our own space.” Edward Siddall-Jones, of Siddall Jones, acted for Islam.
   
Four former Hawkshead employees reunite for new Cumbrian brewery venture: Four former employees at Hawkshead Brewery in Cumbria, have reunited to launch a new brewery venture. Matt Clarke, Michelle Gay, Steve Ricketts and Paul Sheldon, who were made redundant at the beginning of lockdown restrictions 12 months ago, have launched Lakes Brew Co. The new brewery will be in the heart of Kendal on the Mintsfeet Industrial Estate, housing a bespoke designed 16-hectolitre brew kit, canning line and a proposed pop-up taproom. The quartet hope to have the first beer ready in June, available in can, keg and cask. Clarke, who was head brewer at Hawkshead Brewery for 15 years, will be creating a range of modern beer styles, focusing on “freshness and quality”. Gay said they were looking forward to developing a “progressive and sociably innovative” brewery in line with their own ethos and attitudes: She said: “This opportunity has come out of adversity. What most people would regard as a disaster – when we lost our jobs – means we can now build something fresh and new.”

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