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Morning Briefing for pub, restaurant and food wervice operators

Mon 8th Jan 2018 - Analyst – over-supply in restaurant sector will take many years to correct
Douglas Jack – over-supply in restaurant sector will take years to correct: Peel Hunt leisure analyst Douglas Jack has argued that wet-led pubs and bars are benefiting from low supply in recent years compared to the restaurant sector, where over-supply will take many years to correct. He said: “Deltic, the UK’s largest operator of premium late-night bars and clubs, has reported an 8.2% increase in like-for-like sales in the four weeks to 31 December. The company has continued its track record of materially outperforming the market, providing a positive read-through to high street bar operators, and Revolution Bars Group in particular. Over the last 11 years, the nightclub, bar and wet-led pub sectors have all transformed themselves, benefiting from supply reduction of 40%, 11% and 32%, respectively. Outdated perceptions (a decade out of date) still exist, but the ongoing positive like-for-like trading and high returns on investment at Deltic, Stonegate and Ei Group confirm that low/negative supply growth, cost control and clever, disciplined capex should be the cornerstones of investment in the sector. These are the reasons why we view these three sub-sectors as well as bowling, cinemas and low-costs gyms as being superior investment propositions than restaurants. We do not believe old restaurant brands should be regaining previous valuations in a saturated market; as nightclub, bar and wet-led pub sectors have shown, the fall-out from oversupply takes many years to rectify, which they have come through; for restaurants, we believe this process is just beginning. There are some other positive trends in Deltic’s update. These include: pre- booked Christmas party bookings increasing by 20%; record New Year’s Eve trading; good returns from social media investment, achieving a reach of over 6m and engagement of 2.2m users, which on a per outlet basis, places Deltic comfortably at the top of the sector. Deltic’s management attribute its success to the quality of its brands, investments, central sales/social media campaigns and customer service. We would add, as we would with its wet-led peers, ten years of hard work, cleansing the model, to leave a core of assets that lead/dominate their sub- sectors in each location. Most quoted operators will struggle to match Deltic (+8.2%) and Stonegate’s (+5.5%) like-for-like sales for December, partly due to lower town- centre exposure, and partly due to higher food exposure (which also means higher supply exposure). We believe the two operators with the best chance of achieving this are: JD Wetherspoon (Reduce; TP 1100p on 10.0x EV/Ebitda) and Revolution Bars Group (Buy; TP 240p on 4.8x EV/Ebitda).”

Handful of tickets left for Restaurant Marketer & Innovator series this month, largest sector marketing event in the UK by attendance: A handful of tickets are left for Restaurant Marketer & Innovator, the most comprehensive marketing series the sector has seen. The event has now become the best-attended marketing event in the UK with more than 600 people from nine different European countries booked to attend. Propel will stage the two-day event in partnership with Think Hospitality on Wednesday, 17 January and Thursday, 18 January at One Moorgate Place in London. An array of marketers from agencies and early-stage, growing and rejuvenating brands will take to the stage to share their strategies and winning tactics. Companies and brands attending include Novus, Signature Pubs, Cafe Rouge, Wagamama, Brasserie Bar Co, Las Iguanas, YO! Sushi, Fuller’s, ASK Italian, Mitchells & Butlers, G1 Group, Costa Coffee, Ei Group, Jamie Oliver Restaurant Group, Brewhouse & Kitchen, Stonegate Pub Company, Be At One, Revolution Bars Group, Cabana, Thai Leisure Group, New World Trading Company, Pho, Maxwell’s Group, Gather & Gather, Oakman Inns and Restaurants, The Breakfast Club, The Coaching Inn Group, Gail’s Bakery, Gordon Ramsay Restaurants, K10, Giggling Squid, San Carlo Group, Ennismore, TLC Inns, Polpo, FrogPubs, The Real Eating Company, Claus Meyer Holding, VIP Pizza, 200 Degrees, Coppa Club, Snug Bars, Albion & East, Pint Shop, True North Brew Co, Darwin & Wallace, Chit Chaat Chai, BabaBoom, Electric Star and Eat Poke. For full details of the two days, co-ordinated by James Hacon and Ann Elliott respectively, click here. Conference prices for two days are £525 plus VAT for operators and £795 plus VAT for suppliers. Companies buying two tickets will receive a third free. A one-day rate of £345 plus VAT is available to operators only. For more information and to book, call Jo Charity on 01444 810304 or email or Anne Steele on 01444 817691 or Please note the Boot Camp on Tuesday, 16 January will now take place on the tenth floor of the Blue Fin Building in Southwark Street, London.

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