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Morning Briefing for pub, restaurant and food wervice operators

Wed 6th Dec 2023 - Update: Ten Entertainment, KFC, Various Eateries, Hostmore et al
Ten Entertainment agrees terms on circa £300m takeover: Ten Entertainment Group, one of Britain’s biggest tenpin bowling venue operators, has agreed terms and conditions on a circa £300m takeover by US firm Trive. The business said: “The boards of directors of Neon Buyer Limited (Bidco) and Ten Entertainment Group plc (TEG) are pleased to announce that they have reached agreement on the terms and conditions of a recommended cash acquisition by Bidco of the entire issued, and to be issued, ordinary share capital of TEG. It is intended that the acquisition will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the 2006 Act. Under the terms of the acquisition, each TEG shareholder will be entitled to receive, for each TEG Share: 412.5 pence in cash. The acquisition values TEG's entire issued, and to be issued, ordinary share capital at approximately £287m on a fully diluted basis and implies a multiple of approximately 7.3 times TEG’s group adjusted Ebitda after rental costs for the twelve months ended 2 July 2023. Trive views TEG as a high-quality and leading company in the leisure and hospitality sector with an experienced management team that has a clear vision and growth strategy for the future direction of TEG. Trive believes TEG has established itself as a highly regarded operator, offering a high-quality customer experience. Trive holds the TEG management team in high regard and values their operational expertise and experience. With its philosophy of developing collaborative partnerships with management teams, long-term investment approach and its expertise in realising value in the consumer-facing, multi-unit retail sectors, Trive believes it is well positioned to support TEG’s next phase of growth. Bidco believes that it can support TEG’s strong management team in accelerating its long-term growth potential, and that it can provide, where needed, access to additional capital, expertise and resource needed to fulfil TEG’s strategic objective to accelerate the longer-term potential of the business. This will enable the further investment needed in order to realise TEG’s strategic growth agenda of expanding its footprint of sites and improving the quality and breadth of services TEG provides its customers. Finally, Bidco believes TEG is better positioned to achieve its growth potential and to create long-term value for the benefit of customers, employees and other stakeholders as a private company than as a public company. The TEG sirectors believe that TEG’s value-for-money leisure proposition, high quality customer experience, proven expansion strategy, and strong capital base provide a foundation for continued sustainable growth. Since the start of this year, overall operational performance has been in line with the TEG directors’ expectations. The TEG directors remain confident in both TEG’s ability to succeed as an independent business and the further opportunities for growth in the UK. Notwithstanding the opportunities to accelerate this growth, the TEG directors are conscious of the need to be balanced against the uncertainties and risks that exist in the short and medium term. TEG is not immune to the highly unstable national and international political outlook together with a volatile economic backdrop, all of which have impacted UK economic conditions and UK consumer confidence as well as having led to significant inflation in certain input costs. In addition, the TEG directors realise that TEG shares have consistently traded at a discounted valuation multiple to its core peers in the public markets. Further, the TEG directors recognise that the market for TEG shares is relatively illiquid, making it challenging for TEG shareholders to monetise their holdings in the company should they so wish.” Ten Entertainment trades from about 50 venues across the UK. It come six years after the tenpin bowling group floated at 165p-a-share. On Tuesday, the stock closed at 310p, meaning that with a conventional takeover premium included in the offer, investors at the time of the listing would have more than doubled their money. Ten Entertainment is run by a Graham Blackwell, a leisure industry veteran. Its shares have risen by more than a quarter over the last 12 months amid growing post-pandemic demand for in-person leisure experiences.

Next Propel Turnover & Profits Blue Book shows 829 largest sector companies turning over total of £60.2bn, up from £56.9bn last month: The next edition of the Propel Turnover & Profits Blue Book, which will be sent to Premium subscribers on Monday (11 December), shows 829 of the largest sector companies are turning over a total of £60.2bn – up from £56.9bn the previous month. A total of 564 companies are making a profit while 265 are making a loss. The profit being made by sector companies is now outstripping losses by £1.87bn. The Blue Book shows the total profit of the 829 companies in the list is £3,826,075,567 and losses are £1,952,918,651. The Blue Book is updated each month and ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Premium subscribers also receive access to five other databases: the Multi-Site Database, which is produced in association with Virgate; the New Openings Database; the UK Food and Beverage Franchisor Database; the Who’s Who of UK Food and Beverage; and the UK Food and Beverage Franchisee Database. Premium subscribers are to also receive access to ten videos from up-and-coming operators as they explore the “white space” opportunity for their concepts. The ten operators, who presented this year at our Multi-Club Conference series, show that there is always uncrowded and unexplored areas of the UK food and beverage scene – where innovative operators can chart new territory with a fresh concept. Propel managing director Paul Charity said: “These ten operators prove what an exciting sector this is – they have brilliant new ideas and are tapping into novel parts of the market.” The videos will be sent on Friday, 15 December at 9am. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription. Premium subscribers are also being given exclusive access to the recording and slides to Propel Multi-Club Conferences. They also receive their morning newsletter 11 hours early, at 7pm the evening before; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

The Times – KFC thwarting efforts to stop fast food outlets near schools: An investigation by The Times has claimed that KFC is thwarting efforts to stop fast food outlets opening near schools. It said at least 43 local councils in England and Wales having had their anti-obesity policies challenged by KFC since 2017. In more than half of these cases, the fast-food giant has succeeded, and town hall bosses have either abandoned their plans or significantly watered them down, the newspaper said. When councils introduce new planning policies that set out what property developments they are likely to approve, these have to be put to public consultation. The introduction of policies that might restrict takeaways are often challenged by KFC, before an external planning inspector rules on whether the policy can go ahead. Officials said that after they submitted their plans to improve children’s health, KFC has argued in some instances that the measures were “unlawful” because they had not been through all the correct processes, or that there was not enough evidence of links between obesity and the proximity of fast-food outlets to schools. In 16 out of 43 of these cases since 2017, KFC’s challenges have successfully convinced inspectors to throw out a council’s plans. In a further eight, KFC’s submissions helped convince inspectors to significantly water down the policies. After one successful appeal against Solihull council, the behaviour of KFC’s barrister was raised in a council meeting, with one member saying they felt it could put off witnesses from giving evidence in these hearings. KFC said it instructed a barrister in the Solihull appeal regarding issues related to highways and residential amenity rather than because of issues to do with healthy eating. In Wakefield, 40% of its schools are within a quarter of a mile of at least two takeaways, and more than four in ten children in their final year of primary school in are obese or overweight. To tackle this problem, Wakefield council introduced plans to ban new takeaways within 400 metres of its primary schools. In March, KFC succeeded in convincing national planning inspectors to strike out Wakefield’s plan, arguing that there was not enough evidence of a direct link between the number of takeaways in an area and obesity rates in schools. Stephen Turnbull, Wakefield council’s director of public health, told The Times his team were disappointed to have had these anti-obesity plans quashed after opposition from KFC. He said: “Your choices are restricted by where you live. We can’t control everyone’s lives and we don’t want to control those people’s lives, but people can’t make healthy choices when there’s a takeaway straight outside the school.” In Gateshead, officials in 2020 were able to resist an appeal from a local property company, alongside KFC, in relation to a planned new outlet in the town. The council had previously conducted extensive research sampling the nutritional value of most of the town’s 187 independent outlets. That research found in “a large proportion of takeaway food contained more calories, fat and saturated fat in one portion than 66% of the recommended daily intake for a female, and in many cases nearly 100 per cent of the recommended daily intake”. KFC appealed its policy on restrictions on new takeaways near schools on the grounds that the council’s policy meant that “since every ward in the council area has a level of year 6 obesity greater than 10 per cent, the policy … amounts to a de facto borough-wide prohibition on the development of hot food takeaways”. The planning inspector ruled in the council’s favour, finding that “it is indisputable that there is an obesity problem among children” and that “it is incumbent upon the council to use those powers it has to try and address this problem”. He added: “It has not been demonstrated that all food sold by KFC is entirely healthy.” Despite this victory, council public health leaders say the prohibitive time and cost of fighting off well-resourced challenges by multinationals such as KFC have convinced many other councils not to try pushing similar policies through. A spokeswoman for KFC said: “We take our role on high streets and the positive contribution we make in communities across the country extremely seriously and, like many businesses, we take up opportunities to contribute when local authorities seek the views of relevant parties on things like planning policy. This is a standard part of the policymaking process to ensure potentially unconsidered impacts on the local area are brought to light. As a part of this routine consultation process, we have offered our concerns on some draft policies which took a broad-brush stroke approach, supported by limited evidence, that would in practice actually mean a ban on opening any new restaurants at all in the local area. As a business, we are in fact supportive of the sector taking a responsible approach to schools. For example, we already have self-imposed restrictions on advertising near schools which are stricter than current advertising regulations.”
 
Various Eateries raising £10m with aim of rolling out ten new Noci and three new Coppa sites over the next 18 months: Various Eateries, the Coppa Club and Noci operator, has said it raising £10m with aim of rolling out ten new Noci and three new Coppa sites over the next 18 months. The company said it is carrying out a conditional placing to raise approximately £10m, before expenses, by way of the issue of new ordinary shares in the capital of the company to certain existing shareholders and other investors at a price of 25 pence per share. It said: “The directors consider that, given the current market conditions, the company’s financial position and its ambitious roll out plans, it is necessary to increase the company’s capital and working capital position through the placing and reduce its ongoing liabilities with the conversion. Accordingly, the company intends to use the proceeds of the placing, as well as operational cash flow for the next 18 months, to deliver, amongst other things the roll out of up to ten new Noci sites and up to three new Coppa Club sites, including Cardiff and Farnham. The directors believe that the Noci flexible format can work from both large and small sites; although the concept has been designed specifically to deliver profitability in circa 3,000 square foot spaces which the directors understand have become challenging for incumbent operators. Market research has led the directors to believe there are over 100 suitable sites in the UK, while the immediate roll out will be largely focused on the Greater London boroughs. Overall, the group has 12 established Coppa Clubs in affluent predominantly southeast locations. Part of the funds from the proposed placing will be utilised to roll out up to three new Coppa sites over the next 18 months, including Cardiff and Farnham, which are both planned to be Coppa Townhouses.”
 
Hostmore appoints new CFO: Hostmore, the parent company of TGI Fridays, has appointed Matthew Bibby as permanent chief financial officer and a director of Hostmore, effective immediately.  Since 8 September 2023, Bibby has been acting as the interim chief financial officer. He joined Hostmore group in 2019 as head of finance, and in 2022 became the group’s finance director. Prior to this, he was at Whitbread for 14 years, latterly as head of finance, procurement and supply chain, having held management roles within the finance department. As a part of his remunerative package, it is proposed that Bibby will receive a one-time share award with a value of £50,000 on a gross basis, equivalent to approximately 130,000 shares on an after-tax basis at yesterday's closing price of 20.5p. Hostmore chairman Stephen Welker said: “Matthew has impressed the board immensely during his period as Interim CFO, particularly with his financial, commercial, and operational experience, as well as his knowledge of our business. The board is pleased that Matthew has accepted the permanent CFO position and we look forward to working with him to deliver on our key objectives for the business.”
 
Osmond – furlough was a terrible mistake that’s destroyed our work ethic: Hugh Osmond has argued that “furlough was a terrible mistake that's destroyed our work ethic”. Writing in the Daily Mail, the Various Eateries director and Punch Taverns founder said: “As a businessman with 1,000 employees in the hospitality sector, I despair at the effect recent events have had on the attitude of many in the workforce today. A huge proportion of hospitality staff did not bother going back to their jobs after they had effectively been paid to sit around and do nothing for the best part of two years under the government's £70bn furlough scheme. Meanwhile, many of those who did go back decided they no longer wanted to work full-time. And in my own companies' experience, fewer of our young new recruits want to commit to full-time work. Lockdown and the generous furlough scheme that accompanied it were a huge mistake. The furlough scheme outlived the initial panic for nearly two years, and it came at a terrible cost – contributing to the £400bn of government debt with which we have been saddled.” Osmond was writing following a report from the Bank of International Settlements, which this week found that Britain has a major economic problem caused by a shift in people’s approach to work. He wrote: “It’s no surprise either that the BIS concluded that countries such as Britain, the US and Canada, which had the most generous furlough schemes, also have the biggest problem in dragging people back into the office. In lavishing this £70bn on furlough, those running our economy have overturned that truism of human nature: we need financial incentives to motivate us to work, which patently makes it absurd to pay people to do nothing at home. In Britain, we pride ourselves on a north European work ethic, a Victorian drive that administered an empire. Career progression brought better pay, a fancier job title and greater satisfaction. This was the ‘carrot’ while the ‘stick’ was the threat of penury, or at least limited means and a lower standard of living. But the furlough scheme turned the idea of incentivising people on its head. Measures such as working from home became difficult to reverse because a perk of employment quickly becomes an entitlement. To anyone struggling to run a business since covid, this principle of entitlement is painfully plain.” Osmond said former employees have told him can’t see the sense in working as a bar manager when all their mates “work from home for much of the week and effectively enjoy every Monday and Friday off”. He added: “The benefits and tax system has to change so that it makes clear sense to work rather than lounge around at home. We have to use both the carrot and stick to encourage people to return to work five days a week. If we don't, the terrible effects of furlough will be felt for decades and Britain will be locked in a downward spiral that will make us poorer still and diminish our global stature.”
 
Britain only rich nation where food prices are rising by more than 10%: Britain is the only rich economy where food prices are still rising by more than 10%, according to new data. The Organisation for Economic Co-operation and Development (OECD) said while UK food price inflation eased in October, rises remain in double digits in just three other countries. Food inflation across the 38 nations it monitors slowed to 7.4% in October, down from 8.1% in September. This means the UK is the only country in the G7 rich club of nations where food prices are still rising by more than 10%, reports The Telegraph. Only Turkey, Iceland and Colombia have higher inflation rates in the wider OECD. By contrast, food prices are rising 2% in the US, 5.4% in Canada and 8% in France.
 
PPHE Hotel Group appoints new non-executive deputy chairman: PPHE Hotel Group has appointed Kenneth Bradley as non-executive deputy chairman to its board of directors. Bradley has served as an independent non-executive director of the group since 2019, a position he will continue to hold, during which time he has served as chair of the Nomination and ESG Committees. Eli Papouchado, chairman of PPHE Hotel Group, said: “Kenneth’s appointment provides additional leadership support for the group, as we re-enter the FTSE 250 Index and continue to deliver the latest phase of group’s exciting growth. With his breadth of experience and knowledge, Kenneth will take charge of optimising our corporate governance procedures and processes, as an established and independent member of the board, including ahead of the anticipated implementation of new corporate governance and reporting requirements in the UK.”

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