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Morning Briefing for pub, restaurant and food wervice operators

Fri 8th Jan 2021 - Update: Patisserie Valerie, Marston’s, Pony & Trap
Patisserie Valerie liquidators sue Grant Thornton for £200m: The liquidators of Patisserie Valerie are suing auditors Grant Thornton for £200 million for its role in its collapse. Liquidator FRP Advisory has launched a claim against the accountancy giant, which audited the cake shop’s accounts for 12 years before it went bust. Patisserie Valerie – whose former chairman is serial entrepreneur and anti-lockdown commentator Luke Johnson – collapsed into administration two years ago following the shock revelation of significant fraud at the company and the discovery of a £40 million hole in its finances. Grant Thornton failed to spot the fraud. The lawsuit will be one of the largest brought against a top six auditor in the UK. FRP said ‘large accounting misstatements’ resulted in Patisserie Valerie’s board ‘being unaware that the group has insufficient funds to continue to trade’. Grant Thornton said: “We will rigorously defend the claim. Patisserie Valerie is a case that involves sustained and collusive fraud, including widespread deception of the auditors. The claim ignores the board’s and management’s own failings.”

Ralph Findlay – extending the VAT and business rates holiday for the rest of 2021 is the minimum support required: Marston’s chief executive Ralph Findlay has called for an extension of the VAT cut and business rates holiday for the rest of 2021. He said: “The pub sector has been closed for much of the last nine months and remains in a very difficult position. Regrettably there have been casualties across the sector and It is vital that the government reviews urgently the opportunity to continue to support pubs as we reopen the economy in the coming weeks. Pubs are viable businesses which are part of the social fabric of Britain and which make a major contribution to the economy and the communities in which they serve. It is vital that they not only survive the short-term crisis but are supported in order to recover and flourish. Extending the business rates holiday and VAT cut for the rest of this year is a minimum requirement. Despite these challenges, Marston’s has a significantly strengthened balance sheet following the creation of the joint venture with Carlsberg and the financial headroom to weather the extended period of current trading restrictions. With the roll out of the vaccine programme now underway nationwide, we remain well positioned to rebuild trading momentum once restrictions are lifted, as well as to leverage potential market opportunities open to us. We have a clear strategy in place which leaves us confident for the future of our business over the medium term.” Findlay’s comments came as the company reported that the 13 weeks to 2 January had been materially disrupted due to covid-19 related trading restrictions imposed across England, Scotland and Wales. Total pub revenues for the quarter were £54 million. The company stated: “Following the imposition of lockdowns across the UK in recent days, all our pubs are closed. We do not have certainty about the timing of reopening, but in view of comments from the Prime Minister about the potential for lifting restrictions as the vaccination programme progresses we anticipate that pubs will be closed for trading until March at the earliest, and expect some of the previous restrictions to remain on reopening. Despite this disruption, we remain focused on the strategic development of the business. The joint venture between Carlsberg UK and Marston’s Beer Company completed on 30 October 2020 and we received initial proceeds of £233 million which were used to reduce debt. The profit on disposal of Marston’s Beer Company into the joint venture is estimated to be around £280 million and the spot value of the contingent payment to be received in October 2021 is approximately £20 million. In December 2020 we exchanged contracts with SA Brain to operate its portfolio of 156 pubs in Wales, on a combination of leased and management contract arrangements. These pubs generated a pre-covid outlet Ebitda of £14 million from which we will pay rent of £5.5 million per annum with effect from April 2021, representing a 2.5x rent cover. This transaction does not compromise our stated financial strategy of reducing borrowings to below £1 billion by financial year 2024. As we outlined in our preliminary results in December, when restrictions are lifted we expect consumer demand to be strong and that our pub estate, which is predominately located in suburban locations, will be well positioned. The SA Brain transaction demonstrates our commitment to growing our pub business and our confidence in the medium-term outlook for the UK pub sector. During the quarter we have continued to focus on cash preservation with all non-essential spend avoided. Government support is being accessed through the job retention scheme, with 97% of our employees currently furloughed, and business rates relief. Recently announced grants will be applied for subject to compliance with State Aid rules. Despite the ongoing temporary disruption to trading, we have significant liquidity following the completion of the joint venture. Bank drawings net of cash at 2 January were £104 million, from a £280 million facility which extends to 2024, providing bank facility headroom of £176 million. In addition, within the securitisation we have generated sufficient cash in the period to make scheduled repayments of £18 million which fall due on 15 January. The securitisation also includes a £120 million liquidity facility of which £10 million is currently drawn. Our providers of finance have continued to demonstrate support by granting waivers and amendments to covenants when requested, and we are confident of receiving their continued support in the future if it is needed. As previously reported, we estimate that our cash burn in full lockdown is £3-4 million per week, before scheduled securitised payments. As a consequence of our having significant liquidity in our financing arrangements, the absence of any near-term refinancing requirements, and in the expectation that the outlook for the second half-year is much more positive, we remain confident in our ability to navigate the current difficult environment.”

Gastro-pub the Pony & Trap set to reopen as community interest operation, second restaurant to open and pub in pipeline: Michelin-starred gastro-pub the Pony & Trap has announced it will be closed until spring but will open a second site called Pony North Street in Ashton Gate, Bristol, and a pub in Chew Magna. The Pony & Trap gastro-pub in Chew Magna – run by chef Josh Eggleton and his sister Holly Eggleton – will reopen under a different guise and name. It will operate as a community interest company, offering baking, foraging and fermentation courses. People will be able to volunteer in its gardens in return for lunch and a veg box, and a set number of people interested in but unable to afford what Josh insists will be “some really refined gastronomy” will be invited to eat for free at one of three weekly communal dinners. “It’s a Robin Hood thing,” Josh told The Guardian. “We’re going to charge the rich and give it back to people who need it. That’s the way the world should work: redistribution of wealth. Dining won’t be a simple transaction of ‘pay us loads of money and we bend over backwards’. That’s the old way. I want my staff to enjoy it. It’ll be like coming to my house. The kitchen will be integrated into the restaurant and people can walk in and watch me. I’m not coming to the table to dress the plate. Pick your plate up and watch me take apart this turbot. Invest in me. I’ll invest in you.” Meanwhile, the new restaurant in Ashton Gate, adjacent to Bristol Beer Factory’s taproom on North Street, will serve “modern British bistro classics”, with an all-day menu including a full English using ingredients sourced from Chew Valley, brunch dishes such as Chew Valley trout and scrambled eggs and a Sunday roast. The Eggleton family is also set to launch a new pub in Chew Magna, called the Queen’s Arms that will serve “sharp pub grub and Sunday roasts”. The second restaurant and pub are also expected to open in the spring.

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