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Morning Briefing for pub, restaurant and food wervice operators

Thu 10th Jan 2013 - Hydes, Pesto and Wagamama

Story of the day:

Pesto plans ten openings this year; adds board members: The Italian restaurant group Pesto Restaurants, founded by La Tasca creator Neil Gatt and his partner Sara Edwards, is planning to open ten or more Pesto in the Pubs this year. The company has openings planned in February, March and two in April – and has two more currently in planning. “Our menu, price point, quality and service style has been very successful to date and has proved particularly successful in our pub estate, which will form the basis of our growth strategy for the next year or two,” said Gatt. “We have the capacity to open a site every three weeks.” The first Pesto in the Pub site, a Punch Taverns venue, The Cabbage Hall in Tarporley opened in November 2011 and saw 40 per cent like-for-like growth last month as it lapped its first year. Meanwhile, Pesto has recruited Lord Peter Daresbury, former chief executive of Greenalls Group and Martin Evans, former La Tasca and Everton Football Club finance director as directors, taking a small equity stake in the business. “Ironically, a number of the pubs were taking on and have taken on are former Greenalls site,” Gatt told Morning Briefing. The eight-strong group is set to more than double in size in 2013, creating hundreds of new jobs in the sector and moving well on its way to becoming the first national brand of its kind in the process. Pesto was founded in 2006 by Neil Gatt and Sara Edwards when they opened their first restaurant in Manchester city centre. Further openings in the Trafford Centre, Liverpool and Glasgow followed before the pair set about their new strategy in November 2011, that of opening Pesto in pubs. The group now has four pub sites.

Propel Opinion by Paul Charity: La Tasca founder Neil Gatt seems to have found a compelling proposition for his Pesto business. The company has discovered much healthier returns are to be made by installing his Pesto restaurant offer in high quality pub sites. Three of his first four pub sites, which opened in 2012, are owned by Punch Taverns and investment costs have been a fraction of the fit-out costs associated with a shell restaurant. Having proven his new business model over four sites, the company is now going into expansion overdrive with a strengthened board providing extra investment.

Propel Multi-Club conference: The first Propel Multi-Club conference takes place at One Moorgate Place, London EC2R 6EA on Tuesday 19 March and multi-site companies can book two free places each on a first come, first serve basis. The speaker list will be unveiled later this month. E-mail to book places.

Propel Quarterly magazine available online: The winter 2012 edition of Propel Quarterly magazine is now available to view online at

Company news:

Wagamama reports pre-tax profit of £17.3m: Noodle chain Wagamama, founded by Alan Yau, has reported pre-tax profit of £17,388,000 in the year to 29 April 2012 as turnover grew 12.4 per cent to £124,392,000. The year before the company saw turnover of £110,664,000 and pre-tax profit of £15,568,000. Wagamama had 80 restaurants in the UK and 37 operated under franchise outside the UK. The company stated: “The directors see considerable potential for continuing expansion and will continue to follow a well-controlled expansion programme.” The company paid compensation for loss of office of £367,000 in the year.

Hydes reports losses of £3,385,786 after fundamental re-organisation: North west brewer and retailer Hydes has reported a pre-tax loss of £3,385,785 in the year to 1 April 2012 on turnover of £23,233,326. The company made a pre-tax profit of £1,211,154 on turnover of £23,848,630 the year before. Turnover dropping by £600,000 was linked to the sale of the company’s free trade business to Thwaites. The company is selling its brewing site but has taken £3,096,000 write-down on its value. Production has begun on a new site in Salford Quays. Hyde said the changes allowed a focus on its pub estate, “which has been the most profitable part of the business for many years”. Managed turnover rise from £9.76m to £9.89m and profit was up five per cent to £2.59m. Profit in the tenanted estate was 6.8 per cent down at £1.54m.

Geof Collyer – statutory code threat could offer a good Enterprise Inns buying opportunity: Deutsche Bank analyst Geof Collyer has argued that the threat of a statutory code could well be a buying opportunity on Enterprise shares. He said: “It is barely a year since the voluntary code etc has been in place. Only three cases have been brought to PICAS in the nine months since it was formed; they each involved Enterprise Inns, which lost two and won one. In addition, during 2012, just 1.2 per cent of the group’s rent reviews went to PIRRS. This doesn’t seem the hardest of evidence on which to introduce the first statutory code for a non-regulated industry, or definitive proof that the self-regulatory process has failed, but it’s not our call. The industry – or all those fully complying with the voluntary industry code - would probably welcome a statutory code as it should finally put to bed once and for all the process of continual investigation that it had hoped had been ended back in November 2011. Until the issue is resolved, we would expect all pub groups to stop issuing new leases, sticking to tenancy agreements which would probably be excluded from any statutory code. The threat of an attack by the Business Secretary may flush out a few Enterprise sellers after last year’s outperformance, but we see this as a good buying opportunity for one of our top picks of 2013.”

Jamie’s Italian planned for Harrogate: A planning application has been submitted by Harrogate-based Lateral Property Group to develop a Jamie’s Italian restaurant in the Multiyork retail unit on Parliament Street. Lateral developed Jamie’s restaurant at Lendal Cellars in York which opened in July 2012. Situated in a Grade 2* listed building, Lateral and Jamie’s completed a complicated restoration project creating a striking interior backdrop for diners. Subject to gaining planning permission, Lateral proposes to start construction work in May 2013 with Jamie’s targeting opening by Easter 2014.

Richard Negus to join AG&G: Property agent Richard Negus is understood to be joining London-based AG&G after leaving property agent Fleurets – he worked at Fleurets for nine years. Negus was head of the restaurants division at Fleurets and has been replaced by Graham Campbell. Negus worked for Greene King before joining Fleurets.

Dark Star increases brewing capacity by 50 per cent: West Sussex brewer and retailer Dark Star, based in Partridge Green, has increased its brewing capacity by 50 per cent. Managing director Paul Reed said they have had to step up their capacity to cope with increasing demand for their wares. “It’s a great time to be a craft brewer and Sussex is a great county to be based in. I grew up loving the beers from Harveys and King & Barnes, and they set the standard for quality throughout the whole county. Our recent expansion will mean that we can start to consider supplying more customers throughout the south east without losing touch with our long standing regulars, some of which have been with us ever since our early days of producing a barrel or two out of the cellar of The Evening Star pub in Brighton. It was a hobby then and it remains so now – just a rather bigger train set!”

Marston’s scales down Hunstanton new-build plan: Marston’s plan to erect the new first new-build pub on the north Norfolk coast has been scaled back. The new pub and restaurant in Hunstanton will now be smaller than originally proposed, following an application to vary the planning permission. The Marston’s project in Southend Road was approved by West Norfolk Council’s planning committee in October of last year. But the developer wanted to reduce the size of the pub and restaurant building to provide 150 seats instead of the 180 previously approved.

British Beer and Pub Association reports £654,555 operating loss: The British Beer and Pub Association (BBPA) has reported an operating loss of £654,555 in the year to 30 September 2012 on turnover of £2,256,704. The figures are in line with the previous year when the BBPA had a turnover of £2,213,133 and made an operating loss of £653,403. However, income from fixed assets (£157,586), profit on disposal of investments (£376,953) and interest receivable (£213,692) meant a small loss before tax of £17,703. 

Nightclub and pub company Vimac reports reduced losses and plans to exit late-night sector: Vimac, the north east pub and nightclub company, has reported reduced losses of £2,097,989 in the year to 31 March 2012 on turnover of £5,906,419. The company lost £4,069,965 on turnover of £6,691,503 the year before. The company operates the branded Studio concept, The Crab & Lobster gastro-pub in Thirsk and offer short-break accommodation through its Crab Manor business. Vimac stated: “As a result of difficult trading in recent years in the entertaining, dancing and drinking sector, the group wrote down its asset base in the sector in the period ended 31 March 2012 by £3,732,611. During this period there has been a further write down of £2,043,050. The company reported that an independent review has prompted it to refocus on the restaurant and short-term accommodation sectors and will, through time, seek to exit the entertaining, dancing and drinking sector.”

Burger & Lobster opens fourth site in just over a year: The fast-expanding London-based Burger & Lobster brand opened its fourth site in London’s Bread Street, in the City of London yesterday. The company opened its third venue in Farringdon in October following on from sites in Mayfair and Soho.

Flying Kiwi Inns reports jump in profit after property profit: Flying Kiwi Inns, the operator of four gastro-pubs in Norfolk, has reported pre-tax profit rose to £305,410 in the year to 31 March 2012, boosted by a £236,545 profit on the sale of a property – turnover was £5,257,679. The year before, it made a pre-tax profit of £96,464 on turnover of £4,617,236. Operating profit was £174,166 compared to £177,255 the year before. The company stated: “Administrative costs are seen as too high and have been addressed in the latter part of the trading year. The results were considered satisfactory by the directors who expect little or no growth in like-for-like sales in the foreseeable future.”

McDonald’s opens the UK’s first two-story drive-thru: McDonald’s opened the UK’s first two-storey drive-through in Bognor Regis yesterday. The town’s second McDonald’s opened on Steyning Way alongside the A29 Shripney Road. The new premises combine a drive-through operation with room for 115 customers over two floors.

Tesco boss defends Harris + Hoole investment: Tesco chief executive Philip Clarke has offered a detailed defence of the supermarket’s investment in the coffee shop business Harris + Hoole, 51 per cent owned by the Tolley family and 49 per cent owned by Tesco. Clarke, writing on the company’s website, said: “We like backing great brands, helping them to grow and to realise their potential. We’ve done it with suppliers for years. Great ideas can find it hard to get backing these days, so we’re pleased to be in a position to help entrepreneurs achieve their vision. Some people have asked why it’s not branded Tesco. The H+H brand is part of its value – its distinctiveness and appeal. It’s the Tolley’s business, their brand. Our investment helps them to take it further. So what’s in it for Tesco? I’ve talked a lot about loving the stores we have, making them an appealing destination for customers to come. Dobbies, another Tesco business, does this brilliantly with coffee shops which customers travel to just for the scones. When the Tolleys are ready, we will put them into some of our stores. They will have proved that their brand and their offer work, that customers like it and it will be another reason for customers to shop with us. We will back businesses in which we see an opportunity for their brands to grow with ours. Euphorium bakery is another example: an established brand and business, with a compelling offer, it is already in a store in Kensington, offering amazing breads, pastries and sandwiches. It makes what is already a terrific store even better for customers. We’re proud of it and I hope our customers will love it too.” 

Intertain to spend £1m to refurbish flagship Birmingham site next: Walkabout operator Intertain, headed by John Leslie, is refurbishing its flagship Birmingham site – the company will re-open the venue on 24 January after investing almost £1m. Intertain has refurbished ten of its 35 sites so far – the company reported last week that invested sites had achieved 15 per cent sales growth in December and 25 uninvested sites were up six per cent. Chief executive John Leslie told Morning Briefing: “Birmingham is a big project as it’s one of our flagship sites – total spend is just under £1m. It’s traded since 1996 without a major refurbishment. There will be a couple of surprises that we think will get people very excited. Leslie said that the company planned to refurbish five to eight sites in total in 2013, which will means that the estate will be 50 per cent invested by the end of the year. We believe in the (late-night) sector – it just needs investment.” 

Sandwich chain Eat appoints new chief executive: Sandwich chain Eat, which was bought by private equity firm Lyceum Capital in March 2012, has named Adrian Johnson, former managing director of Costa Retail as its new chief executive. Johnson spent 22 years at Whitbread and oversaw consistent like-for-like growth at Costa Retail. The company said that his appointment was a crucial next step in Niall MacArthur and co-owner Lyceum Capital’s long term growth plans for the business, which will see it double the number of stores over the next five years. It opened a new look £1m flagship site on The Strand, London last year.

Geof Collyer - Greene King had the best confirmed bookings in the sector: Deutsche Bank analyst Geof Collyer has argued, ahead of a Greene King result update scheduled for next Monday (14 January) that the company’s performamce should have been boosted by its 2011 acquisitions that will have been overlapped. He said: “Greene King shares are trading on the lowest forward EV/EBITA multiple (11.1x) amongst our pub retail peer group and the only retail stock we have on the buy list. We expect the group’s exposure to the more economically buoyant London and the south east region to keep its retail performance at the top end of the sector league table. It is the stock with the most momentum from a trading perspective we expect this +4 per cent growth rate to have been maintained. This will have been driven by the geographic advantage mentioned above, enhanced by the 2011 acquisitions that are now in the like-for-like sample. However, as the group showed in H1, the key Hungry Horse brand (like-for-likes +6.3 per cent in the first half) will also be a major driver. If the group outperforms our expectations, it is likely to have come through a strong Christmas/New Year trading. In the last results season, Greene King seemed to have the best confirmed bookings schedule amongst the retailers.” 

Hall & Woodhouse finds buyer for disused pub: Dorset brewer and retailer Hall & Woodhouse has found a buyer for a disused village pub, the Lamb Inn in Vicarage Street, Tintinhull, Dorset – months after plans to convert it into a home were rejected by a planning inspector. A spokesman Hall & Woodhouse said: “The property is under offer and we hope to complete on the sale by next spring. Someone made an approach to us and made an offer. It will be up to them to apply for any planning permission. We certainly won’t be pursuing the planning process any further.”

Shepherd Neame to invest £1.6m in Whitstable hotel: Kent-based brewer and retailer Shepherd Neame is to invest £1.6m in the 31-bedroom Marine Hotel, Tankerton, Whitstable with an eight-week refurbishment due to be completed in March this year. A spokesman for Shepherd Neame said: “It is a substantial investment in the business and the local tourism market. The work will help establish it as the leading hotel in the area with a modern and stylish bar, restaurant, coffee lounge and conservatory.”

Douglas Jack – reduce Restaurant Group shares: Numis Securities analyst Douglas Jack has recommended reducing shareholdings in The Restaurant Group with a target price of 340p. He said: “Like-for-like sales rose 4.5 per cent in year to 31 December and by an estimated eight per cent in Q4, aided by cinema attendance rising circa 17 per cent (box office up circa 21 per cent) as well as food promotional offers, even during December. We are holding our forecasts (£64.9m PBT; full year PBT should be “just ahead” of consensus’ £64.2m) with higher like-for-like sales offset by lower than previously expected margins.”

Hulk Hogan launches his own restaurant – ‘Hooters times ten’: Former wrestler Hulk Hogan has launched his own restaurant, Hogan’s Beach, located in a 20,000 square foot beachfront property on the Courtney Campbell Causeway in Tampa Bay, Florida. Hogan describes the restaurant as a ‘Hooters times ten’, adding: “It’s a logical extension of the Hogan brand”. According to the website, the property where restaurant will be located also features volleyball courts, fire pits, cabanas, tiki huts and a “mechanical shark ride.” Hulk Hogan has also hired Chef Robert Uzzillia to oversee the kitchen while he plays the role of general manager. “I see myself almost like a general manager, creatively. I play a fake general manager on Impact Wrestling. But this is for real,” he said.

Question marks over the future of 3,000 capacity Doncaster nightclub: Question marks hang over the future of 3,000 capacity nightclub in Doncaster that closed its doors pre-Christmas, three weeks after re-opening. Trilogy in Silver Street opened on 1 December – two and a half years after closing its doors. But the club was forced to shut shortly before Christmas on ‘Mad Friday’ – less than three weeks after returning – and clubbers have taken to social media seeking answers. The club originally closed in 2010 due to a slump in trade and was snapped up earlier this year by a new consortium Yorkshire Bars Limited.

Shepherd Neame chief executive becomes Deputy Lieutenant of Kent: Jonathan Neame, chief executive of brewer and pub owner Shepherd Neame, has become a Deputy Lieutenant of Kent. Neame, who lives in Oare, was educated at Harrow School, Pembroke College Cambridge, The City University and Inns of Court School of Law. He joined Faversham-based Shepherd Neame in 1991 and became chief executive in 2003. He also chairs the British Beer and Pub Association, is a non-executive director of the St Austell Brewery Company, a trustee of The Leeds Castle Foundation and a Kent Ambassador.

Atmosphere Bars and Club chief executive to step down: Atmosphere Bars and Clubs chief executive Paul Harbottle is to leave the business on 19 January after two years at the helm. The company stated: “Paul has implemented a number of strategic, commercial and operational initiatives that have improved the underlying performance of the business, leaving Atmosphere Bars and Clubs in a strong position for the future.” Christian Rose replaces Harbottle as chief executive of Atmosphere, starting his new role on Monday 28 January 2013. Rose’s most recent role was as managing director of Searcys, the restaurant, champagne and events business. Prior to which he has held the position of chief executive of gin and vodka distiller GJ Greenall for three-and-a-half years. He has also held senior, commercial and marketing roles within Alliance Pharmacy, Homebase and Spirit Group, where he was director of food. Atmosphere human resources director Wayne Morgan said: “I would like to welcome Christian to the business and I would also like to thank Paul for his contribution whilst wishing them both every success for the future.” Last year, Atmosphere, which is backed by private equity firm Sun European Partners, reported that a turn-around of the former Chicago Rock Café, business was under way. The company achieved positive like-for-like sales growth of one per cent in the first quarter of the current financial year, which started in March, a dramatic transformation from the minus 24 per cent like-for-likes in the business when it was acquired in early 2010 out of the administration of 3D Entertainment. Harbottle said at the time: “We have effectively taken the business apart and re-built it again. Customers seem to like what they see, reflected in an improving sales performance. We’re very optimistic about the current year-end result.” The company reported Ebitda of £2380,000 on turnover of £21,533,000 in the year to 26 February 2012. Harbottle joined Atmosphere after leaving JD Wetherspoon, where he was chief operating officer.

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