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Morning Briefing for pub, restaurant and food wervice operators

Mon 12th Jul 2021 - Young’s to sell majority of tenanted estate to Punch for £53m
Young’s to sell majority of tenanted estate to Punch for £53m: London pub retailer Young’s has agreed to sell most of its tenanted estate – the Ram Pub Company – to Punch Pubs & Co for £53m in a cash deal. Young’s has agreed to sell 56 of the 63 pubs in the Ram Pub Company, having generated Ebitda of £4.7m for the year ended 31 March 2019. Young’s will retain the remaining seven pubs for the long term. Young’s stated: “As part of its strategy to create long-term sustainable shareholder value, Young’s regularly reviews its capital allocation priorities. Following the review, the board decided the best way to increase value for shareholders was to withdraw from the tenanted model and focus solely on operating premium, individual, differentiated and predominantly freehold managed pubs and hotels. The disposal is consistent with Young’s strategy to target growth through investment in higher turnover managed pub and hotels. The following benefits will accrue to Young’s from the disposal: net proceeds from the sale will be used to strengthen the company’s balance sheet and provide additional capacity for investment in its managed estate; Young’s will look to acquire predominantly freehold managed pubs; and by focusing on its managed house estate, head office costs will reduce. Completion of the disposal is expected to occur 9 August.” Chief executive Patrick Dardis said: “Young’s sole focus will now be on operating well-invested and premium managed pubs and hotels. We have a proven history of making attractive returns from investing in high-quality pubs and this disposal will provide us with additional firepower to upgrade our existing pubs and capitalise on attractive acquisition opportunities that may come to the market. During lockdown, we invested a total of £17m in improving the pubs in our managed estate and the purchase of two new pubs: Enderby House in Greenwich and Alban’s Well in St Albans. We are delighted to be welcoming back our customers and are already seeing encouraging trading, despite some restrictions remaining. The board is confident Young’s will emerge from the pandemic in a stronger position and is excited about the future of the business.” Punch chief executive Clive Chesser said: “It is a privilege for us to become the new custodians of such a wonderful and high quality collection of pubs, and we look forward to working alongside the talented and passionate tenants and lessees who run them so well. They will be a great addition to the Punch estate, and this acquisition represents an extremely positive step for our business as we emerge from the crisis of the pandemic and head towards the long-awaited lifting of trading restrictions next week. I would like to thank Patrick Dardis and his team at Young’s for working so collaboratively with us on this deal, and I look forward to extending a warm welcome to our new team members and business partners.” The acquisition will take Punch’s estate to about 1,290 pubs. Punch is also thought to be one of the bidders for Hawthorn, with last round bids for the circa 700-strong community pub company understood to be due today (12 July). It is thought Admiral Taverns and a pair of private equity firms were also still in the bidding for Hawthorn. Propel revealed last month that Punch had completed a £600m debt refinancing. The company successfully issued £600m of senior secured notes due 2026 at a yield of 6.125%. Propel understands the offer was oversubscribed and completed within four days of its launch. The proceeds from the offering will be used to redeem and repay all existing debt of Punch and its subsidiaries. Concurrently with the issuance of the notes, Punch also entered into an undrawn revolving credit facility with Barclays Bank and National Westminster Bank, which will provide for borrowings of up to £70m. In addition, Punch had cash of more than £20m on its balance sheet at the time of completion of the bond issue. Savills acted for Young’s on the Punch deal.

Second edition of Blue Book now available for Premium subscribers: The second edition of the Propel Turnover & Profits Blue Book database has been released to Premium subscribers. Another 62 companies have been added, meaning the latest database features a total of 280 companies and provides an overview of the most recent five years, ranking them by turnover and profit conversion. It also shows directors’ earnings over five years and the top-earning director. Total turnover for the 280 companies is £25.8bn. The minimum company turnover to be included will be £4m. The Blue Book is updated each month, with more companies added. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The regular single subscription rate of £395 plus VAT for operators and £495 plus VAT for suppliers remains the same. Premium subscribers also receive access to a second exclusive monthly database, The Propel Multi-Site Database. The updated database of multi-site companies for June includes 63 new companies since its previous update in May – making a total of 1,880 listed businesses. Collectively, the 63 new companies operate 565 venues. Subscribers not only received the database as a PDF and an Excel spreadsheet, they were also sent a 10,389-word report on the businesses added during June. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Propel insights editor Mark Wingett. Email to sign up

Metcalfe – only the fittest will survive: Julian Metcalfe, founder of Itsu, the healthy Asian food chain, has said “only the fittest will survive” the current crisis and a mixture of “rocketing” food costs, high business rates and rent for restaurants, and a “severely perilous” staffing situation have made it almost impossible for many businesses to cope. Talking to The Telegraph, Metcalfe said: “Lots of places have closed down and won’t be able to reopen.” Metcalfe said many of these restaurants were “perfectly good businesses”, but added: “But no one can run a business when they’re paying half a million pounds in rent and rates, they can’t get staff and lorry drivers don’t turn up. And then suddenly they can’t get half their ingredients because they can’t ship them from Europe.” For Itsu, the costs have been significant. Containers now cost four times as much as they did before Brexit. Its salad supplier was suddenly unable to deliver last month. Metcalfe said there is a real danger that many sites will simply remain empty. He added: “This perfect storm isn’t just a breeze that will go away in a few months. It’s going to be here for years and years unless something is done. The question is, will we survive the perfect storm better than others? I hope so. But we should all be concerned.” It could mean higher prices in restaurants across the UK, Metcalfe warned. He said: “It’s very labour intensive making fresh good food, so there’s a real chance that inflation is going to massively increase the costs.” But he is adamant that won’t be the case at Itsu. “We don’t want to put our prices up,” he said, pointing to recent spending on robots and equipment in an effort to stay below the £7 a meal mark. After all, this is a price point that Metcalfe said is critical. He added: “McDonald’s is growing like crazy, not because people are in love with the product, but because there isn’t much else for £6 or £7. If there was, maybe McDonald’s wouldn’t be opening as many restaurants as it is.” Metcalfe said talented people in the businesses have opened “lovely, fancy restaurants that cost £100 for two, £120, £150, but that is not what most young people can afford anymore”. A return to offices may provide a bump for Itsu, but Metcalfe remains downbeat about the new normal. He said: “Less choice is not good for the country and it’s not good for us.”

Travelodge recruiting 680 staff amid staycation boom: Travelodge is looking to fill 680 jobs across the country in readiness for this summer’s “staycation” season. The recruitment drive includes full and part-time positions for posts ranging from management, bar work and receptionists. Travelodge is also recruiting in-house maintenance engineers and workers for its head office in areas such as finance, human resources and marketing. Chief executive Craig Bonnar said: “We are gearing up for a busy summer staycation season this year, and we need to fill 680 permanent positions immediately. We are looking for individuals who have passion, determination and a desire to deliver excellent customer service.”

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