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Morning Briefing for pub, restaurant and food wervice operators

Mon 25th Jun 2012 - Punch, JD Wetherspoon and Whitbread

Story of the day:

Punch Taverns in deal to buy Champs sports bar name: Punch Taverns has done an innovative deal to buy the name of the popular Champs sports bar in Sheffield’s Ecclesall Road from Thornbridge Brewery. The original Champs is being turned into a real ale bar and restaurant by its new owner BrewKitchen, a joint venture between Richard Smith restaurants and Thornbridge Brewery. Meanwhile, Punch Taverns will convert The Ecclesall, formerly known as The Pomona, into an updated Champs bar, investing a six-figure sum. Simon Webster, chief executive of BrewKitchen, said: “We felt that a fresh start was the best approach and we have some really exciting plans in the pipeline to incorporate both a bar and restaurant into the building.” BrewKitchen said the new name for the venue has not yet been decided. Champs claims to be the first US sports bar of its kind in the UK. It was refurbished in 2009 and has 40 flatscreen televisions and a giant outside television. The Ecclesall will close in July and re-open as Champs on 4 August. The new licensee of Champs will be Danny Grayson, who also operates Punch’s White Lion and The Chantrey in Sheffield. Punch senior regional operations manager Richard Woodward said: “We will be developing an American style sports bar and grill concept which will bring the much loved Champs brand up-to-date.”

Industry news:

Analyst Jamie Rollo – VAT on eating out in the UK higher than anywhere else in Europe: Leisure analyst Jamie Rollo, of Morgan Stanley, has analysed VAT rates on eating out in Europe and concluded that 22 countries now have a lower rate than the UK. He said: “The UK hospitality industry is trying to persuade the government to reduce VAT in these labour intensive sectors as a way to stimulate demand and thus jobs and tax revenue. (A total of) 22 EU countries now have a lower VAT rate for hospitality, with Ireland most recently cutting. The campaign has the support of leading trade associations as well as French lobbyist Jacques Borel, the man behind the 5.5 per cent VAT rate for the hospitality sector in France.”

Football fans estimated to have downed five million extra pints yesterday: Football fans are estimated to have enjoyed an extra five million pints of beer in pubs yesterday as the nation cheered on the England team. Brigid Simmonds, chief executive of the British Beer & Pub Association, said: “When it comes to watching football, the pub is the perfect place to savour the big match atmosphere - with a beer of course.”

Government – no alcohol plain packaging: The government has ruled out forcing alcohol into plain packaging, The Grocer magazine has reported. The idea was raised as part of an on-going inquiry by MPs into the government’s alcohol strategy. But the Department of Health, in its official response to the health committee inquiry, reported that there is “very limited” evidence to show that tough restrictions, as imposed in countries such as Norway, were either effective or proportionate. “Some countries, such as Norway, have banned alcohol advertising altogether,” Department of Health evidence stated. “France has banned TV and cinema advertising of alcohol, with controls on the content of advertising in other media. Evidence on the impact of such restrictions is very limited and it is very hard to show that they are proportionate.”

Portas criticises upwards only rent reviews: High street retail guru Mary Portas has criticised upwards only rent reviews for blocking the opening of new businesses on high streets. She told a Property Week conference: “Upward only rent reviews are stopping a lot of new businesses coming onto the high street. We need to generate what tomorrow’s businesses will be and I don’t think there’s any infrastructure on the high street to do that at all. Whenever we give opportunities for businesses to come into the high street on a low rent first of all and grow the business, and where landlords have been clever with working with them, then you start to see what tomorrow’s new Costa Coffees and tomorrow’s Starbucks will be.” However, Ashley Blake, of Land Securities, argued business rates are now the big barrier, having increased by 24 per cent more than rental rates in the past two decades.

Government considers asking supermarkets to promote health objectives through loyalty card data: A government department known as the “nudge unit” is considering asking supermarkets to use their loyalty card data to offer bespoke advice to customers on how they can improve their diets and lifestyle, according to The Daily Telegraph. The boss of the Behaviourial Insights Team said supermarkets had more information about their customers than doctors did and that this information could be utilised to offer advice to those buying large amounts of fatty foods and alcohol. Tesco, for example, has more than 15 million Clubcard scheme members. 

High Court VAT appeal by Subway franchisees to be heard next month: A group of Subway franchisees will have their appeal against a VAT decision heard in the High Court next month, The Sunday Telegraph reports. The Subway franchises are appealing against a decision to charge VAT on their toasted sandwiches. The Meatball Marinara is heated before being served to customers, placing the sandwich heat level “above ambient temperature” and liable to VAT. A test case was bought by a Huddersfield franchisee originally – he claimed all Subways toasted subs are heated to comply with health and safety legislation. Meanwhile, Morrisons has lost a VAT battle to spread VAT on barbecue items between disposable items and charcoal –the latter is currently lower-rated. 

Company news:

JD Wetherspoon to open a surf bar in Newquay: JD Wetherspoon, whose chairman Tim Martin is a keen surfer, will open a new Lloyds Number one venue in Newquay that is surf-themed. The venue, which will occupy the former Red Square and Divas site in Govar Lane, will be called The Cribbar - a legendary wave-making reef near Torquay. Design company for the project Absolute Interiors has been working closely with the surfing community on the design of the premises. Helen Blake, of Absolute Interiors, said: “You might be forgiven for thinking that it only needs some surfboards on the wall and pictures of bronzed dudes scattered everywhere to capture the essence of this historic culture – but you'd be wrong. Surfers and the surfing culture is based on the idea of creativity and spontaneity with a little dash of anti-establishment thrown in for good measure.” The open-plan building's new 'sail' material canopies acknowledge surfers' passion for environmental issues with the use of as much recycled material as possible. Chairs and tables will be built using the same resin from which surfboards are shaped, while TV screens and photos from Carve magazine’s iconic The Surfing Tribe book will adorn the walls. Meanwhile, Jamie Rollo, leisure analyst at Morgan Stanley, has described the company’s decision to reduce openings as disappointing. “With every ten new (pubs) worth around one per cent in earnings per share we think the revision of the rollout plan is disappointing.”

Landlord brewer Tim Taylor reports a solid year: Yorkshire-based Timothy Taylor, the brewer of Landlord, Madonna’s favoured UK tipple, has reported pre-tax profit of £2,735,519 for the year to 30 September 2011, down a fraction from £2,914,836 the year before, Turnover was £22,055,255, down around £350,000 from the £22,410,421 reported the year before. A total of £756,590 in dividends were paid out.

Hawksmoor operator Underdog reports big profit jump: The operator of the three-strong Hawksmoor steak restaurant business Underdog Restaurants has reported a large increase in pre-tax profits for the year ended 31 December 2011. Sales jumped from £3.721m to £10.627m with pre-tax profit climbing from £146,000 to £1,187,000. The company’s balance sheet showed net current liabilities of £751,000 “chiefly due to continued investment in existing and new restaurants”. Hawksmoor, styled as a 'British steakhouse and cocktail bar', has sites in Covent Garden an Guildhall with a third recently opening in Spitalfields.

Giraffe reports underlying earnings hit £4m: Restaurant chain Giraffe has reported that underlying earnings have risen 17 per cent to hit £4m in the year to March 2012, The Sunday Times reports. The company, headed by Russel Joffe, grew sales by 18 per cent to £40m and added six sites. It has signed a franchise deal to open a Giraffe into the United Arab Emirates and Lebanon with the first due to open in Dubai.

Iconic golfing hotel in administration: A well-known golfing hotel in Lincolnshire, The Woodhall Spa Hotel in Woodhall Spa, has gone into administration with Northamptonshire-based insolvency practice Marsham Price appointed as the administrator for Hoby Hotels Ltd, which operates the Woodhall Spa Hotel. Alan Price, who has been appointed as joint administrator with Gary Pettit, said: “The hotel will remain open and current indications are that all bookings for accommodation and functions will be honoured. Future bookings are also still being taken. The business, which obtains a significant part of its income from the nearby National Golf Centre, is on the market for sale via specialist agents Christie's and we are hopeful that such a prestigious venue will generate a large amount of interest.”

London chef buys Wiltshire pub: London chef James Wilsey and his wife Ashley have bought The Three Tuns pub in Great Bedwyn and will be re-opening it after a six months closure period. Ashley said: “We have been tempted to move out of London for some years and we had been looking for a pub in Wiltshire for a couple of years and trying to find the right one.”

The National Trust begins to operate its first pub: The National Trust, which owns 54 pubs and six hotels that are tenanted, has begun to operate a pub for the first time. The organisation is operating The Sticklebarn pub in Great Langdale, in the Lake District, Cumbria. Jeremy Barlow, the National Trust's general manager for the Central and East Lakes region, said: “The Sticklebarn has been a key part of life in Great Langdale for more than 40 years and is already a popular destination for walkers, bikers, climbers and campers, as well as day trippers. We are really excited about the opportunities this acquisition will give us and the benefits there will be for visitors.” The Trust already manages a large part of the Great Langdale valley, and owns several farms, a hotel and a campsite. Profits from the Sticklebarn will used to invest in maintaining the environment in the Great Langdale Valley. The Trust has environmentally friendly plans for the pub. It wants to install a hydropower turbine and a heat pump which will cool the cellars then extract the heat and use it to warm the pub. Surplus electricity will be used to feed electric car charging points. Among the pubs the National Trust owns is the 17th Century galleried George in Southwark, operated by Greene King.

Huddersfield entrepreneur starts work on second pub: Huddersfield entrepreneur Mark Robertson will re-open The Waterloo pub in Waterloo, near Huddersfield next month after a £400,000 refurbishment. He plans to run it himself for 12 months before leasing it out – the venue will also have a café next door. Two years ago, he converted The West Riding pub in Huddersfield town centre to his take on a modern bar, The Barking Spider.

Easy Pub Management plans third Wolverhampton site: Easy pub Management has applied to convert the former city centre nightclub Moscow Bar into a venue called Darlington Street – named after its location. Easy Pub Management already operates the city’s Gorgeous and Divine bars. The authority’s licensing sub-committee is set to decide the application at its next meeting, which is set for Friday (29 June).

Rollo – there are five reasons to keep buying Whitbread shares: Morgan Stanley leisure analyst Jamie Rollo has argued that Whitbread is still a compelling investment even after its recent share price rally. He argues that the company’s shares remain good value for five reasons: Firstly, its five-year expansion plan should generate ten per cent annual earnings per shares growth; secondly, attractive and well-invested brands mean Whitbread is currently outperforming peers in all three of its businesses; thirdly, Travelodge is undergoing a debt restructuring and may slow its rate of expansion and lose business to Whitbread’s Premier Inn; fourthly, Whitbread’s current share price makes it the “cheapest hotelier in our universe”; fifthly, it has a “free option” on corporate action. On the last point, Rollo said: “We see a Costa separation as likely. Our bull case is £30 per share, 50 per cent potential upside. Whitbread continues to surprise on the upside, but the best is yet to come. It is simply too cheap, in our view.”

Former Gordon Ramsay chef to open high-end Hull restaurant: Former Gordon Ramsay chef James Allcock – he worked at Petrus - opens 1884 Dock Street Kitchen, a new high-end restaurant in a former rope factory in Hull’s marina, this Friday (29 June). The restaurant features 12 wine lockers bought by local businesses for 12 months - the lockers allow companies to keep exclusive wines at the restaurant and give a bottle to clients who are dining there. Customers will be able to browse the menu and wine list on iPads.

Rollo – M&B should abandon the six brand growth strategy to focus on retail standards: Morgan Stanley analyst Jamie Rollo has argued that Mitchells & Butlers need to take four steps to become more attractive to investors. He notes that M&B shares remain under-owned by institutional investors, mainly due to corporate governance issues - dominance of large private shareholders, few non-executive directors - but also to the wider pub sector being tarred with “a record of indebtedness, poor investment decisions, and weak retail skills”. He said: “We think four things could make its shares more attractive to new investors. First, for the strategy to focus on improving the performance of its existing pubs, including more focus on retail and service standards, with improved marketing and IT skills. This would include published targets on areas such as like-for-like sales outperformance and margin recovery. This would admittedly involve reversing the previous strategy on aggressively rolling out six drive brands. Second, the improved free cashflow this should deliver should be returned to shareholders via an ordinary dividend from 2013. Third, for the company to seek to reinvest its circa £200m PLC cash into an acquisition of poorly run managed pubs that could benefit from M&B’s strong operating and retail skills. Fourth, for the board to be beefed up post the chief executive appointment. We think that a focus away from heavy annual investment and towards core estate performance could improve free cashflow reduce risk, and improve returns to shareholders. While it might reduce potential long-term growth rates, the business model is sufficiently operationally and financially levered to drive double digit EPS growth from modest like-for-like sales and margin gains. Any one of these could close the valuation discount to its peers, whilst in our view M&B’s high quality and freehold-backed pub estate mean its shares should be on a valuation premium.”

Independent columnist tips Spirit shares: Independent columnist Derek Pain has tipped Spirit shares in the wake of chief executive Mike Tye’s move to buy 109,000 shares at a price of 45.75p each. He said: “I usually find it encouraging when an executive puts his hand in his pocket to increase his presence on the share register. There is not universal support among the City's army of analysts, although one firm, Deutsche Bank, has removed its sell recommendation and now regards Spirit as a hold. I maintain that the shares are still worth buying and I also wonder about the depressed shares of Punch. Surely at 8p there is some headroom. They could well be worth a gamble.”

Original Spaghetti House re-opens: The original Spaghetti House site in Fitzrovia’s Goodge Street in London has re-opened after a refurbishment. The venue, opened in 1955, is now part of 12-strong chain. The venue is on four floors with each having its own theme: The Kitchen, The Dining Room, The Living Room and The Drawing Room.

YO! Sushi – we have no plans to sell: YO! Sushi chief executive Robin Rowland has denied suggestions that the company’s backer Quilvest is considering selling its stake. “We have no plans to sell YO! Sushi and there’s been no discussions about it – we’re happy where we’re at, particularly looking at America,” he told the Financial Times. Last week, Propel Morning Briefing reported the company will open in Washington DC next month. “We’ll have three in DC and I hope we will do another couple in a city such as Miami, Boston or Chicago – we’re targeting areas where there is heavy footfall such as transit centres and central business districts,” Rowland added.

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