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Morning Briefing Strap Line
Wed 13th Jun 2012 - Spirit, TGI Friday’s and Nextep Inns

Story of the day:

Spirit – segmentation of leased estate now finished; rent re-base largely completed: Managed pub company Spirit has told City analysts that it has completed a bottom-up segmentation of its leased estate. The company will sell 100 sites – 29 are already sold and 26 are in legals – to reduce estate size to 450 high quality pubs. Of the segmentation exercise, chief executive Mike Tye said: “We’ve looked at whether it is a pub in the right location, with the right demographics and the right attributes to be a good pub in the future. We’re not necessarily selling awful pubs, just pubs that don’t fit our plan for the future. We’ve done a simple segmentation exercise along similar lines to our managed business. In terms of understanding the opportunity, we’ve been very clear. It will take us time to trial a number of activities to take us from today’s picture to tomorrow’s picture.” Tye reported that the company had undertaken honest discussions with licensees around a “better price for beer” in return for meeting conditions from the company. “That’s working a lot better,” he said. The company would undertake a “number of trials akin to franchise” and it might be that the results make this route preferable to transferring around 100 pubs to managed as previously planned. Tye told analysts that the eight per cent drop in leased income in the company’s third quarter is linked to good weather in April last year producing the division’s strongest trading of the year. But additionally, 25 per cent of the estate had seen rents re-based on the fifth anniversary of their initial letting in what amounted to a one-off. Of the original 800 pubs converted from managed to leased in 2007 and 2008, 250 were sold by Punch prior to de-merger last August and a number of others have changed hands before they reached their fifth anniversary. “The largest re-basing has been done. There will be a few in the 2013 financial year but nothing like 25 per cent.”

Industry news:

Government says advertising rules do not need strengthening: The government has moved to dismiss suggestions made by the Alcohol Health Alliance earlier this week that advertising rules need to be made more stringent. Public health minister Anne Milton told the health select committee’s inquiry into the government’s alcohol strategy that she thought there is a link between alcohol advertising ‘exposure’ and alcohol ‘consumption’, but that there is ‘insufficient evidence that the rules need to be strengthened further’. Department of Health deputy director for alcohol and drugs Chris Heffer said: “Our focus is on pricing and licensing - that is where the UK evidence is strongest.”

ALMR – Northampton jumping the gun: The Association of Licensed Multiple Retailers has accused the local authority in Northampton of “jumping the gun” in working out it can raise £168,000 per annum from pubs and nightclubs under the late-night levy. Kate Nicholls, strategic affairs director, said: “Northampton is clearly jumping the gun here – the process for introducing a charge, how it is calculated and what it will cover is a matter for national legislation which has yet to be published. They should wait and see what powers government gives them and, crucially, what triggers are required before a levy may be applied (and) before mentally sending out bills in this way. Not only that, but the decision is not Northampton’s alone to determine – there is a clear year-long public consultation exercise surrounding the levy which will have an impact on whether they are justified in imposing it in the first place, how much money they could theoretically raise and what it could be used to fund. Setting out so clearly their intensions ahead of that risks prejudging it and may open them up to judicial review.”

Around 71 per cent of alcohol in the grocery market sold on promotion last year: Research by Symphony IRI Group has found 71 per cent of the alcohol sold in the UK grocery market was on promotion last year, compared with 22 per cent in France and 19 per cent in Germany – the European average was 28.5 per cent. Alcohol was sold on promotion more than any other product category in the UK grocery market. The closest country to the UK was Holland – where only 30 per cent of alcohol was on sale.

Company news:

TGI Friday’s UK reports like-for-like sales growth running just under eight per cent: TGI Friday’s, the operator of 51 sites headed by Karen Forrester, has reported that sales growth on a like-for-like basis is currently nudging eight per cent. Chief executive Karen Forrester told Morning Briefing: “We’re having a fantastic year. Poor weather is very good for our sites and we have momentum around our people-based strategy. We’ve definitely got back the Friday’s feeling.” Forrester reported that sites in Bluewater and Meadowhall were deserving of a mention – the former has hit sales of £162,000 per week while the latter is still posting sales growth despite the arrival of seven competitors in the shopping centre. TGI Friday’s is planning to open at least seven sites in the second half of 2012 – and could get to eight openings. Openings include Wembley in mid-July, Manchester in late July, Halifax in early August and Blackpool in November. The company is also eyeing openings in Liverpool and Brighton for late 2012. It also acquired the second floor of its Glasgow site and will expand upstairs in October. Forrester added: “The opening plan has slipped because of planning and other issues – in Halifax, for example, there was a fire in an adjacent building.”

Mitchells & Butlers upgraded to buy by Douglas Jack; preferred candidate for chief executive: Numis Securities analyst Douglas Jack has upgraded M&B to Buy with a Target Price of 280p after an institutional lunch with the company. He said: “Management believes ongoing progress to improve the business should bring medium-term margin growth, even without any change in the consumer. It believes it has major shareholder support and a preferred candidate for the chief executive role. Reflecting recent weakness (pricing in no progress) and the possibility that board appointments will eventually be made, we are raising our recommendation to Buy (from Add). Management believes it has shareholders’ support, having not been inhibited in recent months. The other area of concern is the pension deficit, which would increase by £180m if gilt yields remain at the current level through to March 2013. At current levels, we believe the shares have priced in zero progress, and should therefore carry limited downside for what still remains a high quality pub business.”

Wagamama chief executive steps down: Wagamama chief executive Steve Hill has stepped down after six years in the post. The company doubled in size during his time in post. The company was acquired two years ago by private equity firm Duke Street Capital.

PizzaExpress and Prezzo launch new offers: PizzaExpress launched three new voucher offers yesterday. It has begin to offer customers a second pizza or any other menu main course for £2.50 when they order any main course – it’s not available on Saturdays or Fridays within the M25. It’s also begun a weekend special offering three courses for £12.95 – available every Friday, Saturday and Sunday until 1 July – and a 25 per cent discount on food bills. In addition, PizzaExpress is offering customers up to 50 per cent off “Summer Experiences” like ballooning – customers are issued with a 12 digit code and can find out on the company’s website which experiences they can obtain discounts on. Meanwhile, Prezzo, the 160-strong operator, has launched a new customer offer that lasts slightly less than a fortnight – two main courses for £12.95. The offer, which doesn’t include Chefs’ Pizza or the Children’s Super Chefs menu, started yesterday and lasts until 25 June, excluding Father’s Day on Sunday 17 June.

Pioneering craft beer bar marks 15th birthday with special brews festival: Pioneering Leeds-based North Bar, which claims to have been the UK’s first craft beer bar, will mark its fifteenth birthday with a two-week festival of uniquely brewed beers – the festival is called “Fifteen beers for Fifteen Years”. The festival, which starts on Saturday 16 June, will see North Bar release a uniquely brewed beer every day for the fortnight leading up to the official birthday party, which takes place on Sunday, 1 July. Each beer has been specially brewed in honour of North Bar’s anniversary and will make its UK draught debut at the festival. The special edition beers will include offerings from US giants Flying Dog, Norwegian masters Nogne Ø and German beer company Uerige, whilst UK front-runners BrewDog, Magic Rock, Roosters and Thornbridge will all showcase specially-brewed, limited edition beers. 

Top-rated London burger offer to open in Soho: Lucky Chip, the better burger concept rated by burger blogger Burgerac as the best in London, is to take up residence in The Player bar in Soho this month. The concept has been resident at The Seabright Arms, in London’s Coaste Street. Writing in The London Evening Standard, Burgerac opined: “These guys had the bloggers salivating from the word go with their cooked-from-scratch perfect patties and wasabi mayonnaise-doused chips.” Player customers are being promised twelve various sized burgers on the menu, burger matching and floats. 

Deutsche Bank’s Collyer upgrades Spirit from Sell to Hold: Deutsche Bank leisure analyst Geof Collyer has upgraded Spirit Pub Company shares from sell to hold, raising its Target Price from 42p to 45p. In a note entitled “The good, the bad, and now, less ugly” he said: “The performance of the leased estate (around 35 per cent of pre-provision profits) highlights the scale of the effective brake that this division is placing on the performance of the retail business. However, we see most of the bad news as being reflected in the current share price. (There was) a much better than expected performance in the retail estate in the third quarter. However, the leased estate was much worse than expected. We see the timescale of turning this division around as protracted. We look forward to more detail on the group’s plans in October with the final results.”

York restaurateur makes a return to the city: A well-known Yorkshire restaurateur is to return to York to open a restaurant after a non-compete clause expired. Silvano Scanu is investing £500,000 in opening Silvano’s tomorrow (Thursday), converting the old Venture photographic studios in Micklegate. The building, which was a restaurant before it became a studio, has been refurbished in a Roman style, with lemon trees, marble tables, and an eight metre-long granite bar imported from Italy. Silvano, originally from Sardinia, first came to York in 1976 from Italy. He runs two restaurants in Leeds.

Christie & Co reports market movement: Property agent Christie & Co has reported “renewed movement in the sector” - it has recently been instructed on a series of pub portfolios. “Notably, we are seeing the emergence of deal sizes not seen in the market for a while,” it stated. Its Venners stock-taking business has added Charles Wells and Baxter Storey to its client list since the start of the year. Its Christie Finance arm has seen a “significant increase in completed deals and much improved conversion rates for loan offers” arranged. The company added in an annual general meeting statement: “Encouragingly, nearly 25 per cent of these completions are with first time buyers or operators, which is a healthy sign.”

Nextep Inns opens third site: Nextep Inns, the pub company set up by brothers John and Peter Knowles, has added two new sites to its original Punch Taverns venue, The Fielden’s Arms, near Blackburn, as it set its sites on growing to six venues. The company has re-opened The Red Lion in Wybunbury, near Nantwich, a Daniel Thwaites pub, after a £250,000 investment. Nextep Inns has also taken on a second Thwaites pub, The Bay Horse, which is a quarter of a mile from its original site. Peter Knowles told Morning Briefing: “We’ve had quite a lot of interest from other companies.” The company re-opened Punch’s Feilden’s Arms in Mellor Brook, Blackburn last year after a £286,000 joint investment with the company. The venue is trading well – it took more than £22,000 last week. The brothers, who also run an accountancy business with a number of pub sector customers, plan to operate six pubs within three years. Peter added: “We’ve taken The Red Lion on a ten-year lease – a similar arrangement to our Punch deal. Thwaites has been excellent and the original Punch requirement to provide a full business plan has stood us in good stead – it was the best (structure) we’ve come across.” Early trading at The Red Lion has been strong and is building. Takings at The Bay Horse, a smaller community pub, have tripled since Nextep Inns took over. 

Jamie’s Italian launches summer menu: Jamie’s Italian, the 28-strong operator founded by Jamie Oliver, has launched its new summer menu across the estate. New on the menu are: Ravioli Primavera, stuffed with new season peas, fresh mint and ricotta with a silky asparagus, mascarpone and Amalfi lemon sauce; salmon sourced from the Great Glen at the foot of Ben Nevis, beetroot-smoked and served up on a zingy fennel, blood orange and yoghurt dressed salad; tender Welsh lamb, slowly braised with mint, chilli and sticky balsamic. New desserts include raspberry & prosecco jelly and a minty Lemon granita served with a glug of Limoncello.

Admiral Taverns launches new website: Admiral Taverns, the operator of 1,200 tenanted pub led by Kevin Georgel, has launched a new website. The website features four minute videos and case studies of four licensees within the estate, a searchable facility that allows visitors to locate available pubs geographically and a news section.

Former Coronation Street star opens third pub: Former Coronation Street star Rupert Hill and business partner Johnny Booth have opened their third pub. The pair has already re-opened The Castle Hotel in Manchester's Northern Quarter after a refurbishment and The Parlour in Chorlton. They have now re-opened The Eagle in Salford. Its big screen televisions have been taken out and been replaced by an old piano. Hill told The Manchester Evening News: “It's all about trying to create the sort of place that we wanted to drink in. You can take any site and turn it into a funky bar or a gastropub, but for us there is something about a pub that's 200 years old, it's so steeped in character, and we wanted to retain that, and get young people back and interested in the traditional pub.”

Licensee couple raises cash to buy their pub: Dave and Bobbie Mitchell have raised the money to buy the freehold of the pub they rented from Punch Taverns for six years. “We may be a small community pub but we believe that we can offer excellent service in a relaxed, traditional setting,” said Dave. “Borrowing money to purchase a small business isn't impossible in the current climate. We'd encourage anyone with a good prospect to have a go, but be prepared for quite a long process.”

Chiquito follows Wagamama with “augmented reality placemats”: The Mexican chain Chiquito, with 69 sites, has followed Wagamama, with 80 venues, in introducing augmented reality placemats for children. The placemats, combine a child-friendly food and drinks menu and games, accessible through smartphones. A free Blippar app turns the traditional content into a game, where kids will have a minute to strike to hit as many creatures appearing on placemats as possible. Wagamama signed up for the placemats last month.

Celtic Manor plans Europe’s longest zip wire attraction: Newport hotel Celtic Manor will open Europe’s longest zip wire attraction in August as the first small step in a £180m investment over ten years. Four wires will take users from the top of the golfing resort on a one-mile ride across the River Usk to Caerleon at speeds of up to 80 mph in a £200,000 investment.

Surrey businessman plan to turn Llangollen site into top-class hotel and restaurant: Seamus O’Keefe has bought the 36-bedroom Chainbridge Hotel in Llangollen for the asking price of £500,000. The venue was previously owned by hotelier Stephanie Booth before it went into administration in July 2011. Neil Thomson, associate director hotels at Colliers International, said: “Seamus O'Keeffe plans to invest and develop the business over the coming months and transform this lovely riverside site into a top destination hotel and restaurant.”

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