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Morning Briefing for pub, restaurant and food wervice operators

Thu 3rd May 2012 - Wasabi, Joule’s and April trading

Story of the day:

Prime Minister David Cameron – we want to work with the industry: Prime Minister David Cameron has issued a message of support for the Association of Licensed Multiple Retailers (ALMR), which is celebrating its twentieth anniversary at a business conference today. In a letter to the ALMR, Cameron said: “Well-run pubs and bars form a key part of the fabric of our neighbourhoods, providing employment and social venues in our local communities, as well as attracting visitors from abroad. “A profitable alcohol industry enhances our economy which is why we want to work with industry, not against them. We recognise that trading conditions have been tough but as a major employer in this country, I am always encouraged by the industry’s resilience and commitment to investing for growth. “And we know that the future prosperity of the sector rests with its people. Modern pubs and bars offer the first taste of work for many young people. The in-house training and apprenticeships they offer equips them with important skills needed to progress in their career, in the industry or in the workplace more generally. “Our new alcohol strategy recognises that the majority of British pubs promote a good drinking environment, and are the safest and friendliest places to have a drink. We want to build on this by driving greater industry action to prevent alcohol misuse by encouraging businesses to actively embrace initiatives like Best Bar None, which help to promote a thriving and enjoyable night time economy, and through more responsible product placement and marketing. I want to wish ALMR members and the industry well in celebrating 20 years in the business. The country looks forward to enjoying your licensed hospitality for many more years to come.”

Company news:

Collyer ranks managed operators per site profits: Deutsche Bank analyst Geof Collyer has provided a list of site profits for nine large pub and restaurant operators. Collyer reports that Restaurant Group makes the highest EBITA per site (£282,337 per annum per site on average weekly turnover per site excluding VAT of £21,712), Mitchells & Butlers is second (with 241,867 per site of EBITA on average weekly turnover of £21,725), Greene King is third (with EBITA per pub of £193,471 on average weekly turnover 15,953), JD Wetherspoon is fourth (with site EBITA of £177,309 on average weekly turnover of £25,705), Whitbread is fifth (with site EBITA of £187,031 on average weekly turnover of £21,394), Gondola is sixth (with average EBITA per site of £173,057 on average weekly turnover of £15,651), Marston’s is seventh (with average EBITA per site of £169,785 on average turnover of £14,756), Tragus is eighth (with average EBITA per site of £155,648 on average weekly turnover of £18,085) and Spirit is ninth (with EBITA per pub of £118,549 on average weekly turnover of £16,184). 

Hotel opens £400,000 conceptual Queen’s Jubilee restaurant: An award-winning hotel in Chester has completed a £400,000 refurbishment on a conceptual bar and restaurant, which aims to emulate the pomp and pageantry of the Queen’s Jubilee celebrations. The room features stately Union Jack-decorated thrones, a toy soldier-themed bar, a gallery of Queen’s head postage stamps throughout the years of her reign and quirky paintings reflecting the grandness of the royal household.

Joule’s Brewery re-opens Hanley pub as a classic ale house: Joule’s Brewery has re-opened The Old Bulls Head in Hanley as a 'classic ale house'. It is being run by licensee Martin Scott, who already operates The Tontine and The Burton Stores pubs, in Hanley. Joule’s boss Steve Nuttall said: "The Old Bulls Head is one of a group of pubs we have purchased and are operating as free houses. It is also a characterful old pub just right for our ale brand. "We are in discussion with other local publicans across the Potteries and expect to announce other pubs where we will be investing with local people who are passionate about pubs."

Greene King to sell The Wheatsheaf in Fulham: Greene King is to sell The Wheatsheaf in Fulham. The Wheatsheaf pub in Fulham Road is to close on 20 May – local sources claim it has been sold to a property developer. A spokeswoman for Greene King told The Fulham and Hammersmith Chronicle: “Following an extensive property review it was felt that the pub did not fit into our long-term plans. At this stage we are unable to confirm future plans for the pub."

Novus Leisure reports EBITDA to hit £19m: London bar and restaurant operator Novus Leisure, which runs 52 venues, is on track to hit £19m of EBITDA for the current financial year ending in June. Sales in the first six months of the year grew to £74.1m from £55.8m the year before. Like-for-like sales were up by 16.3 per cent, and the half-year group EBITDA increased to £13.8m from £9.5m. Pre-booked sales now account for 55 per cent of total group revenue, rising to 70 per cent at Christmas. Food sales also rose seven per cent and now account for 30 per cent of revenue pre-11pm. The firm also reported it had strong Olympic bookings with more than £5m of sales in the pipeline and £500,000 of deposits already secured. Chief executive Steve Richards said: "The market remains very tough - even in central London there are plenty of operators struggling. The key is to pick the right market and then deliver the proposition better than anyone else; easy to say, a bit harder in the execution."

Wasabi hit by VAT confusion: Wasabi, which operates a chain of 25 sushi and bento outlets across London, has reported that it found it had undeclared VAT payable after incorrectly declaring menu items as zero-rated. The admission, contained within its newly filed annual accounts, meant it has set aside £276,000 for unpaid VAT. It added: “At the date of the approval of these accounts, the company is in discussion with HRMC regarding finalising the amount due arising from this error of classification of sales and the timing of amounts payable. It is HRMC practice in such circumstances to agree “time to pay” arrangements and the company expects with reasonable certainty that it will be able to agree a payment schedule that can be accommodated within its expected future cash flows.” The company reported pre-tax profits almost doubled – jumping from £584,098 to £1.022m – in the year to 31 August 2011. Sales rose by 44 per cent from £22.6m in 2010 to £32.5m for the latest year. Companies House documents showed the company is achieving a 40 per cent return on capital.

Dong Yang takes second London site: Chinese food operator Dong Yang has picked up a second site in London. The operator is opening on Bloomsbury Way, near to the British Museum in Central London, on a site formerly occupied by an Ahking Chinese restaurant called Ice Pearl. A new 20 year FRI lease has been granted at a rent of £100,000 per annum exclusive. Dong Yang currently runs The New Garden restaurant in Chinatown. Agent was Davis Coffer Lyons.

Prezzo to open in Swadlincote: Restaurant chain Prezzo is to invest £500,000 opening a site at The Pipeworks retail site off Coppice Side, Swadlincote, near Burton. It is expected to open in late August or early September. A Costa Coffee has already opened on the site.

Hitchen to open second Manchester restaurant: Entrepreneur James Hitchen is to open his second restaurant in Spinningfields, Manchester. He is to open a New York-style all-day eatery with 200 covers in Avenue North, to be designed by Warrington company Innex Design.  Hitchen's first Spinningfields venue, barbecue restaurant Southern Eleven, opened last June.

Yo! Sushi to open in Washington DC in June: Restaurant chain Yo! Sushi will open its first US site in Washington DC’s Union Station in June, with three more to follow in the area.  Chief executive Robin Rowland told The Independent: "The great thing about that place is that we'll get fantastic word of mouth very quickly – traffic between Union Station and New York is just phenomenal. After that, we'll look for shopping centres, triple-A, prime downtown locations. "The market is there and waiting for us. There are no real rivals to Yo! in the US – the only sushi bars are still Mom and Pop operators, so the opportunity is tremendous."

How was April trading?

Glendola Leisure – April was a mixed bag: Waxy O’ Connors operator Glendola Leisure managing director Alex Salussolia reported that “April was a mixed bag”. He added: “But we are there or thereabouts - ahead of last year even with all the bad weather.” He said only three of the company’s 17 sites benefit significantly from having an outside area. As such, the rain didn’t have much of an impact on footfall. “Overall, the general numbers were okay, and the Oxford and Cambridge Boat Race (14th April) was good for business.” He added: “Some people were expecting good things for April because of the great weather in March”, but near record rainfall dampened those expectations. “We are seeing more of the pay-day effect on our business. People are more cautious and saving their money until pay day and even, if they do go out, they are not spending as much.”

Head of Steam – April “not too bad”: Head of Steam founder Tony Brookes said trade in April “hadn’t been too bad and not as bad as I thought it would be because of all the rain”. He added: “Obviously, it wasn’t as good as March when everyone was hoping that the good weather would continue.” To drum up custom during the month, Head of Steam held major promotions to mark the centenary of the sinking of the Titanic. “They were very effective – you have got to be on top of your game and think up ideas to attract customers.” An additional fillip to trade was the fact that the company did not pass on the full effect of the brewers’ price rises and the increase in duty levied in March’s budget. Head of Steam operates eight managed houses and one tenanted outlet in the North-East, Yorkshire and Merseyside and Brookes said the picture was mixed throughout the estate between those with outside facilities and those without. “We have some that do quite well when the weather is bad. And although the weather has been awful up here, you do get a mental impression sometimes that things are worse than they actually are.” Like-for-like comparisons between April 2011 and April 2012 weren’t distorted by last year’s Royal Wedding swelling the coffers of Brookes’s pubs. “There are not many royalists in the North-East.”

Kurnia Group - April was fairly poor: Owner Michael Kheng of Lincolnshire operator Kurnia said: “April’s figures were fairly poor and the last week on the month was a killer because of the weather.” Like-for-like sales were down a thumping 44 per cent compared with April 2011. Kheng said: “I think it was a mix of everything – not just the weather. We’ve seen a noticeable decline in mid-week spending – trade has been hit particularly on Mondays, Tuesdays and Wednesdays. And the weekend spend is not as great as it used to be.” Kurnia’s sites are also dependent on tourists. The company’s prime site, Cloud Bar, overlooks Lincoln Cathedral and the castle. “It has a roof terrace with 65 covers and when the weather is good, it will be packed with people all day long. This April, it took half of last year’s takings, in both wet and dry sales.”

Thorley Taverns – like-for-likes mirrored weather: Kent-based Thorley Taverns operations director Philip Thorley reported: “I think it is fair to say like-for-like comparisons mirrored the weather. Last year, the good weather produced very good results. This April has been a damp squib and both wet and food sales have dipped below last year’s figures.” He said many of the Kent-based company’s sites are on the coast and trade fluctuates according to the barometer. “We have a lot of weather-led sites. People will flock to the coast when the weather is good and stay away when it is bad.” One ray of sunshine was the performance of the company’s hotels. “The hotel side has bucked the trend, although not quite up to last April’s figures. We haven’t had as many DFLs (down from London weekenders), but mid-week trade has remained solid.” Thorley said the next few months could make up for a disappointing April. “We have the May Bank holiday, Diamond Jubilee celebrations, Euro 2012, Olympics and Paralympics coming up.” He said some of the budgets set for the months ahead are higher than last year’s results.

Southern Counties Taverns - trade up: Southern Counties Taverns founder Bert Johnson said: “I dreaded coming in to look at the figures, but overall they are quite healthy. I really don’t know why in view of the weather and the increase in duty in the Chancellor’s Budget.” The company did not pass on the full effect of the Budget increases and Johnson said the move was appreciated by customers. The net effect saw trade “up by around eight per cent and long may it continue”. A contributory factor may have been that only one outlet in Southern Counties’ estate of community pubs has any sizeable outdoor facilities, so there was no real diminution in footfall. Johnson said “recession fatigue” may have set in relation to the current financial climate. “People are so fed up with what is happening with the economy, they are saying: ‘Let’s have another couple of pints and forget it’.”

Salisbury Pubs – figures held up well: Salisbury Pub co-founder Becky Salisbury told Morning Briefing: “I’m glad it (April) is over; the weather has been appalling.” Despite the weather conditions, she said: “Trading levels, considering the bad weather, have been fine.” The company’s five sites are located in Hertfordshire and Buckinghamshire. “Most of our pubs like a bit of sunshine to help trade. We always do better if Easter comes early or if we get a spell of fine weather before people get the chance to dust-off the barbecue equipment.” Although April experienced the heaviest rainfall in over one hundred years, she said: “From a budgeting point of view, compared with previous years, the figures help up quite well.” St George’s Day (23rd) provided a stimulus for trade with all five sites participating. One hosted an evening feast, complete with an opera singer belting out patriotic songs such as “Land of Hope and Glory” and a quiz. Another opted for a fish and chips night, while the other three offered English-themed menus. She commented: “They were a great success.”

Whiting & Hammond – like-for-likes down 14 per cent: Whiting & Hammond co-founder Brian Whiting said: “Like-for-like, we are down 14 per cent across the group. The latter part of the month had a dramatic effect of trade. During the second two weeks, the weather was so bad that we were 25 per cent down on a week-on-week basis.” Comparisons between April 2012 and April 2011 trading figures weren’t helped by Mothering Sunday falling in March this year, whereas it fell on 3 April in 2011, thereby flattening sales even more. The Kent-based operator reported the downpours affected both food and drinks sales. Whiting added: “The rise in duty in March didn’t help matters.” He also said the economic climate was making its presence felt. “In the South-east, we have been cosseted from the worst effects, but now it is starting to hit home.”

TLC Inns – like-for-likes down 40 per cent in “horrendous” April: TLC Inns, the six-strong operator led by Steve Haslam and Jo Drain, has reported like-for-like sales down 40 per cent compared to record trading in April 2011. Haslam said: “April last year was the biggest month of 2011 – it was huge. We were cautious in setting the budget for April this year, knowing that unless there was wall-to-wall sunshine we wouldn’t get near last April’s figures. The gap in like-for-likes was huge but was taken into consideration and not as painful as if we’d predicted we’d do the same. We set an achieveable budget on the basis that we’d get a week or two of nice weather – in the event we didn’t get a day or two of nice weather. We’ve set the budget for May, June and July to compete with last year when the weather was not friendly – we should recoup April’s trade if we get decent weather. April last year was double ecstasy in trading terms – this year was horrendous.”

Bulldog Hotel Group – rain brought us down: Bulldog Hotel Group, the operator of six coaching inns headed by Kevin Charity, reported that the company was “spot-on its budget for the month”. Accommodation had held up well in the month but food and beverage sales had been clipped by days of continuous rain. Charity said: “We were slightly ahead of last year in sales terms. We had some good days in the month – but we also had some terrible ones with the weather. The rain brought us down with a number of outside events – like the folk festival in Holmfirth – a complete wash-out. This time of year our square footage increases as the weather brings outside areas into use – but days and days of rain spoilt this.”

Anglian County Inns – comparisons are difficult: Director James Nye said making comparisons with April last year was “very tough” for a number of reasons. “Easter came earlier this year and we were badly let down by the weather. We lost a lot of outside trade. We have large outdoor areas at our sites and, proportionally, we lost a lot more on the drinks front than on the food side. ” Nye said the weather was a lot better last year. Coupled with the Royal Wedding, this helped boost trade. He added: “For these reasons, it is very difficult to compare like-for-like.” One of Anglian’s four sites, The White Horse in Brancaster Staithe, North Norfolk, has 15 letting rooms. Nye said the letting side of the business “held up remarkably well, more so than the ambient trade”. “The only downside was we had a couple of cancellations because people rang to say they couldn’t get any petrol.”

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