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Morning Briefing for pub, restaurant and food wervice operators

Mon 6th Mar 2017 - Update: Laine’s second ‘managed expert’ site, Wetherspoon, BT
Laine’s second “managed expert” site opens in Hove: Multiple pub operator and brewer, the Laine Pub Company, has opened Old Albion in Hove, East Sussex – its second managed expert venture with Ei Group, formerly Enterprise Inns. Old Albion (formerly known as The Albion) was built in the mid-Nineteenth century, when pub design in Brighton and Hove tended toward either the utilitarian, beer-house style or the opulent style of the gin-palace. Laine’s inspiration for the design of Old Albion comes from the latter, with its refurbishment of the pub featuring elements such as ornamental brickwork and plaster, glazed tiles, mosaic floors, engraved glass windows and ornamental lamps. “We wanted to create an environment that drew on the pub’s past,” said Laine’s chief executive Gavin George. “There were some fantastic gin-palace features already in existence that were perfect for picking out and enhancing.” A key focus of Old Albion’s drinks range is, perhaps unsurprisingly, gin and there are references to the spirit throughout the interior of the pub – from the gin barrels suspended from the ceiling at the front to the Tanqueray Gin Yard lit by a Victorian street lamp at the back. The company has also collaborated with the Blackdown Distillery to create an Old Tom gin exclusively for Old Albion, which will be dispensed from large glass kilner jars behind the bar and served in china teacups. “Albion is an ancient name for England,” added George, “There is perhaps no spirit more associated with England than gin. But Old Albion, of course, offers a full range of beers, wines and spirits, including Laine Brew Co’s craft portfolio, and a food menu of pub classics.” Old Albion is located in Church Road, Hove, a major retail area and thoroughfare west of the city centre. The pub reopened this weekend following an extensive refit.

Douglas Jack issues ‘Reduce’ note on Wetherspoon shares because its margins are set to fall: Peel Hunt leisure analyst Douglas Jack has issued a ‘Reduce’ note on Wetherspoon shares ahead of Half Year results this coming Friday. He stated: “For the H1 results, due on Friday, we forecast profit before rising by 50% to £48m due to total sales rising by 1.6% and margins rising by 170bps. This largely reflects higher pricing, in our view, but with a price-sensitive customer base, management must be wary of pushing prices too far. Average drinks pricing is flat in Q3 versus +5.4% in H1, which should result in margins falling in H2. Like-for-like sales rose by 3.4% in H1. Our full-year assumption of 2.5% reflects a tougher comp in H2 (3.9% versus H1’s 2.9%). We expect food to outperform drinks in a market in which eating out volumes rose 2.4% (eating in: +2.1%) in calendar Q1-3 2016, compared to drinking out volumes falling 0.8% (drinking in: +5.2%). Ebit margins rose by 170bps in H1 (Q1 280bps; Q2 +c100bps), which we believe were driven by average drink prices rising by 5.4% versus H116 (on our estimates based on CGA data). There is a very high correlation between changes in JDW’s average drink prices and its margins, and perhaps wary of how much its prices had risen, average prices fell by 1.4% in Q217 versus Q117, but were still up 4.7% versus Q216. Our forecasts anticipate a 110bps fall in margins in H2, reflecting: the lapping of Q316’s 4.3% drinks price increase; the Q217’s 1.4% price reduction; tougher like-for-like sales comps; rates (up £7m pa from April), the Apprenticeship Levy (up £2m pa from April) and rising input costs. In H1, two pubs opened and 21 were sold. Historically, JDW used to succeed in acquiring, rebranding and repositioning competitor sites, but we now expect the estate to reduce in size for second consecutive year. The shares have re-rated to 9.4x EV/Ebitda (vs a 7.4x ten-year historic average), against a backdrop of net debt/Ebitda reaching 3.6x, the maturing swaps benefit ending this year, and the long-term expansion target being cut from 1,500 to 1,200 outlets. In our view, the positive H117 results are priced in; we would take profits before the news flow weakens.”

Electra completes sale of Parkdean Resorts for £1.35bn: Following regulatory approvals, Electra Private Equity has completed the sale of Parkdean Resorts to Onex Corporation for £1.35 billion. Electra Private Equity has received proceeds from the sale of £406 million. Together with proceeds previously received, Electra’s total proceeds from the investment are £516 million. This equates to a return of 3.9x cost, and an IRR of 45%. Alex Fortescue and Sarah Williams were responsible for the investment and the exit of Parkdean Resorts.

BT renews Champions league rights: BT Sport will remain the exclusive UK home of all UEFA Champions League and UEFA Europa League football, it was confirmed today. Following a competitive auction process, BT has secured the rights until the end of the 2020/21 season that for the first time brings together exclusivity across all live games, highlights and in-match clips of both competitions. The UEFA Champions League is set to be even stronger from 2018/19, with a minimum of four participating teams now guaranteed from each of England, Spain, Germany and Italy, resulting in more games between the top European teams. Pubs will also be able to show UEFA Champions League ‘double header’ nights, as live matches will kick off at both 6pm and 8pm during the Group Stage. Bruce Cuthbert, director of commercial customers at BT Sport, said: “We are delighted to have renewed these rights. The UEFA Champions League and UEFA Europa League are two of the best competitions in the world and we know that pubs and clubs value being able to show top flight, live, mid-week football. The UEFA Champions League is due to get even stronger and we are delighted that from 2018 pubs will be able to show bumper nights of action with two live matches on Tuesdays and Wednesdays for the first time.”

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