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Wed 16th May 2012 - Enterprise Inns, No Saints and PizzaExpress

Story of the day:

Enterprise reports “lots” of small package disposals in pipeline: Enterprise Inns has a “lot” of disposals of small groups of high-end pubs – packages of between three and ten sites - lined up, chief executive Ted Tuppen has told City analysts. Tuppen added that he did not expect any “large blocks” of pubs to be sold, referring to the 16 pubs that Fuller’s acquired from Enterprise earlier this year. Enterprise is selling high-end pubs on a multiple of 12 to 14 times earnings – a number of multiple operators who are sitting tenants are expected to bid for their pubs alongside regional brewers eyeing prime Enterprise sites on their patch. Tuppen told analysts that the “deals in progress” would take the company close to the £200m it is looking to raise this year from disposals. He compared the deal to sell pubs to Fuller’s to a traditional pub-owning brewery move whereby a profitable tenanted pub had been switched to a managed division. Fuller’s will be able to convert a number of these Enterprise leased pubs to managed over time so justifying the 13 times Enterprise earnings it paid for the sites. Tuppen told analysts there was also a clear property plan now for every pub in its estate. So when pubs became vacant it was looking hard at the alternative use development potential rather than re-let them immediately. “As one of the biggest property owners in the country, we have to make clear strides in how we create value for shareholders,” he said. “(The thinking is) to make sure that re-letting a pub is the right thing to do – it may be higher value becomes available with vacant possession. We have been able to focus more on this with greater expertise in the company.” He gave as an example the letting of pubs to supermarkets as Express-type outlets - where the rental income stream can be sold at auction at around 16 times because of the strong covenant strength of a company like Tesco. There are currently 92 non-substantive pubs where Enterprise is looking at the broader property option.

Other Enterprise news:

Project Beacon eased back: Enterprise chief operating officer Simon Townsend told City analysts that the company had eased back on its conversion of non-substantive pubs to Project Beacon pubs, a “managed tenancy” where the company takes a very interventionist approach in areas like the retail offer. The “easing back” had allowed the company to consider the lessons. The company has 89 Beacon pubs and a pipeline of 66 sites. Conversion to Beacon trading style produces a 30 per cent uplift in net income for Enterprise. But they still only average £35,000 per income, which is a little over half the average income from the 89 per cent of the estate in the substantive estate.

Rent reviews produce a 1.3 per cent reduction: A total of 321 cyclical five-yearly rent reviews have produced an average rent reduction of 1.3 per cent for licensees, which compares to 380 rent reviews in the same half financial year producing an average rent reduction of 1.6 per cent the year before. Chief operating officer Simon Townsend said he thought that between ten and 20 per cent of the estate was still awaiting cyclical rent reviews in the wake of the changed economic conditions that have arisen since 2007.

Non-dilutive de-gearing is the order of the day: Enterprise will look to re-negotiate its bank debt in the next six months, with a new agreement through to 2015-2016. Chief executive Ted Tuppen said that bank debt would continue to be paid down to the point where it’s facility is “almost a working capital overdraft”.

Enterprise reports flat or better across the estate: Enterprise Inns has reported that income growth for its pubs in the south, which produce 41 per cent of company income, was up 2.5 per cent, up by 1.9 per cent in the Midlands and flat in the north. “The London estate is doing particularly well,” said Tuppen. The value of invoiced beer sales to pubs had risen by seven per cent, aided by a four per cent increase in wholesale prices.

Industry news:

Fast-casual strengthens US grip: Fast-casual chains have accelerated their sales gains in the overall US restaurant industry, with the top 150 fast-casual chains growing sales 8.4 per cent to $21.5 billion in 2011, a faster rate than in 2010 (6.6 per cent), according to foodservice reseserch company Technomic’s annual report. In comparison, 2011 sales growth for the Top 500 US chains was 3.5 per cent. Total fast-casual units among the “Fast-Casual Top 150” increased 5.2 per cent to 17,447.  This group made up over three-quarters of the fast-casual industry’s sales, which amount to $27 billion annually. "Fast-casual operators continue to outshine every other segment within the US restaurant industry," said Darren Tristano, executive vice president of Technomic. Fast-casual segment leaders are: Bakery cafe: Panera Bread (sales of $3.3bn); Mexican: Chipotle (sales of $2.3bn); Chicken: Zaxby’s (sales of $840m); Asian/Noodle: Panda Express (sales of £1.5bn); Better Burger: Five Guys Burger and Fries (sales of $950m); Sandwich: Jason’s Deli (sales of $525m) and Donatos Pizza (sales of $166m). Top fast casual chain in 2011 was Panera Bread with ten per cent sales growth - it's reported 20 per cent profit growth or more for eight of the last nine quarters.

Call for 20 per cent tax on soft drinks: Imposing a 20 per cent tax on soft drinks could cut up to 2,700 heart attacks a year, according to Oxford University’s Department of Public Health. Researchers also argued that the tax could relieve the burden on the NHS and the taxpayer. Denmark became the first country in Europe to introduce a fat tax last October, with extra tax on food high in saturated fat while France taxes sweetened drinks.  

McDonald’s trials table service: McDonald’s is trialling table service at its Milton Keynes testbed restaurant. Chief executive Jill McDonald told the Daily Mail: “McDonalds has always been about convenience. We want to understand if table service is what people want. If you have lots of bags, kids or are a large group table service can be easier and less stressful.” The Milton Keynes store has extendable tables, banks of iPads, and a separate meeting rooms where business customers can pre-book space. McDonald added: “It’s less about being upmarket and more about being modern and ahead of the design curve.”

Northern Ireland licensees back minimum pricing: An organisation that represents bars and nightclubs in Northern Ireland has given its backing to a minimum price for alcohol of 50p a unit. Pubs of Ulster boss Colin Neill was responding to news that the Scottish government announced it wanted to add 5p to the original 45p per unit figure that had been put forward in the previous parliament. A 40p per unit minimum price is planned for England and Wales, and it is hoped the measure will reduce health problems caused by excessive drinking. In Northern Ireland, Health Minister Edwin Poots is proposing to charge a minimum price of between 45p and 50p per unit of alcohol by 2013 "The availability of incredibly cheap alcohol, namely by the large supermarkets, is having a serious impact on issues such as health and antisocial behaviour," said Neill. "It has now become acceptable for large retailers to sell alcohol as a loss leader and offer customers alcohol cheaper than bottled water. One leading supermarket recently sold two-litre bottles of strong cider for only £1 – a staggering 50 pence per litre."

Residents of Chelentham call for another pub: The residents of Cheltenham suburbs have called for another pub after the area was reduced to having a single estate pub. Residents of Springbank and Hester's Way have been forced to trek to the other side of the town to visit pubs. The improbably named Umbrella 2009, which lies on the edge of Hester's Way in Orchard Way, is the last estate pub in Cheltenham. Coronation Square's Gold Cup called last orders in 2005 and the former site of The Goat and Bicycle, in Hester's Way Road, is set to become new homes. People living in the area have now backed the Cheltenham Echo's Save Our Pubs campaign and want another venue to open up.

Norwich set for City of Ale festival: A total of 45 pubs in Norwich and 25 breweries have teamed up to launch a City of Ale that will feature more than 200 beers. The festival is billed as “celebrating fine ale in the fine city”. The festival is being supported by the Norwich Evening News, which is running a Love Your Local campaign which aims to get people to support local pubs. This is the festival’s second year and it runs from 31 May 31 to 10 June.

Smartdiner seeks investment to reach 1,000 restaurants: SmartDiner is seeking investment via the Government’s new Seed Enterprise Investment Scheme (SEIS) to help it achieve its plans to increase the number of participating restaurants from 150 to 1,000 by the end of the year. SmartDiner offers time-related discounts to consumers in the restaurant and pubs market, enabling venues to attract diners at quieter times. Leeds-based Stanley Wootliff, who established the business last year, is applying for a grant from SEIS. Wootliff said: “SmartDiner is a pioneering and patented, new, dynamic pricing internet restaurant reservation system. There is no reason why diners who are happy to eat at quieter times should be paying premium prices. Dynamic pricing makes a lot of sense.” Most of the participating restaurants are currently based in Yorkshire, but Wootliff hopes to expand the website’s reach – it is adding 40 new restaurants per month.

Free Report: Paul Charity has written a report on menu trends, the drivers of US dining occasions, the franchise business model and other key areas of the US foodservice market and their significance to the UK market. The report, based on a visit to the National Restaurant Association show in Chicago, is produced in conjunction with the Association of Licensed Multiple Retailers and sponsored by CPL Training. It is free and is available by e-mailing Paul Charity on

Company news:

Stonegate to convert Bedford sites to Yates’s: Managed company Stonegate is to spend £275,000 converting its Litten Tree site on Bedford High Street to its Yates’s brand. The Litten Tree officially closed yesterday (Tuesday 15 May) and will re-open on 31 May. Gary Voysey, general manger of the new venue, said: “Customers are going to see a phenomenal change to the pub. “Totally new décor, a longer more accessible bar, four new giant screens for viewing sport and several new booths, perfect for private hire are being installed.”

Novus Leisure searches for head of training: Novus Leisure, the 52-strong operator headed by Steve Richards, is looking to hire a head of training. The company, which has an average site turnover of around £60,000 per week, wants the new recruit to oversee its strategic training plan. The salary is circa £50,000 per annum.

Investor looks for free-of-tie tenant: An unnamed investor is looking for a tenant to run a pub in Worthing, The Montague Arms, on a free-of-tie basis. The pub was purchased by private investors just over a year ago and has been totally transformed into a community pub with great facilities. The finishing touches, kitchen layout, furnishings are awaiting new tenants input. The pub now has a function room together with a brand new flat and six en-suite letting rooms.

SSP continues investment in transport hub pubs: Travel concessionaire SSP has continued its investments in airport and train station pubs and bars with the £900,000 opening of The Kissing Gate bar and eatery at Liverpool John Lennon station. At the start of last month it opened the £1.2m Merchant on Bishopsgate at Liverpool Street Station. Intended as a blueprint for future SSP “modern pubs”, the venue was developed with the purpose of transforming the drinking and eating experience available at the station, putting it on a par with the capital’s best high-street pubs and bars.

Fuller’s strikes deal on former Gales brewery: Chiswick-based Fuller’s has struck a deal on the empty four-and-half acre Gales Brewery site in Horndean. A contract has been signed between Fuller’s and Linden Homes, in a deal that is likely to see the site re-developed for housing. Peter Turner, property director at Fuller’s, said: “We have every confidence that the new owners will create a development that Horndean can be proud of.” He said Fuller’s will also make a ‘significant investment’ in The Ship and Bell pub in the town, which it still owns. launches app to find quality burgers: A website run anonymously that blogs on quality burgers has launched an app, costing £1.49, that helps burger fans find tasty burger in London, Los Angeles and New York. The app costs £1.49 and has been holding a high place in the chart of paid apps since its launch two weeks ago. The blog began in January 2011 with aim of publicising great examples of the burger. London recommendations include the beef-shin burger at The Prince Arthur pub in east London, The Lucky Chip, The Admiral Codrington in Chelsea and The Opera Tavern's mini Iberico pork burgers.

Douglas Jack – buy Enterprise Inns share: Douglas Jack, City analyst at Numis Securities, has argued that yesterday’s results from Enterprise Inns point towards financial stability and a further recovery in the shares. He added: “Our 100p target price equates to 9.5x EV/EBITDA (or 22 per cent equity free cash flow yield), in line with the company’s valuation in 2009 and 2010, before the market’s financial concerns peaked. The progress highlighted in these results suggests financial stability is more visible than it has been for many years, justifying a return to the former rating.” He has a Target Price for Enterprise share of 100p.

PizzaExpress revamps retail offer: PizzaExpress has revamped its grocery stores products with a new box design and eight new lines, according to The Grocer. The new look boxes are inspired by the black and white shirts worn by pizza makers in the restaurants and has been applied to a total of 46 PizzaExpress products. The packaging now includes a large window on the box. The company has added thin Romana bases to the range and new products include spicy Calabrese pizza and PizzaExpress fresh pasta sauces.

Meantime brewery opens £3m facility: London brewer Meantime has opened what it claims to be the largest new brewery in London since before the Second World War. The Meantime Brewing Company's £3m development at its site in Greenwich will allow it to produce 17 million pints of craft beers a year when running at full capacity. The brewery will produce 28 different styles of beers based on traditional recipes from the city's brewing past, ranging from India pale ales to darker porters and stouts. Chief executive Nick Miller said the market was dominated by “pretty homogenous big-brand lagers, ales and stouts” but consumer demand for beers that are a bit different is stimulating the industry.

No Saints unveils Cambridge Jam House; August re-opening for Oceania in Milton Keynes: No Saints, the company run by former Luminar chief executive Steve Thomas, will convert the former Gala Bingo House in Cambridge into a £2.5m Jam House in time for Christmas. The building has been left derelict since its closure in June 2009. A spokesman for the company said: “Work has not started on the building but we are looking to open it later in the year.” Meanwhile, No Saints is planning to re-open the former Oceania in Milton Keynes in August. The company had wanted to re-open the site a few weeks after Luminar vacated it in March. However, the site, where No Saints is planning to open its Wonderworld concept, needs a complete re-fit and Thomas said he hoped to be on the site in the next ten days. Oceania landlord Xscape did a deal to let No Saints three Luminar sites after a rent dispute with the company’s administrator. Thomas told Morning Briefing: “Luminar and I are getting on well - but the company took its stuff out of the Milton Keynes site (when it vacated).” The sites in Norwich and Maidstone will be re-opened after Milton Keynes, Thomas said.

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