Star Pubs & Bars

Story of the Day:

Douglas Jack – we expect Restaurant Group’s full-year trading update to be weak

Frankie and Benny'sPeel Hunt leisure analyst Douglas Jack has forecast a “weak” Restaurant Group trading update next week. He said: “We expect the full year trading update, due on 25 January, to be weak. After all, we/consensus expect profit before tax to fall by 30% despite the benefit of closed sites being classified as exceptional onerous leases. Restaurant Group’s discounting activity is a clear sign that it has been caught up in a deteriorating restaurant sector backdrop. Like-for-like sales fell by 2.2% in the first half despite the majority of the estate benefiting from 6% growth in both cinema admissions and airport passenger volumes. In the first six weeks of the second half, which included the impact of Frankie & Benny’s food price reduction and lower cinema admissions, like-for-like sales fell by 3.5% by our estimates. In July to November, cinema attendance fell by 6.3%. In the first half, Ebitda margins fell by 330 basis points due to the decline in like-for-like sales and investment in gross margins, with the impact of higher costs being offset by cost savings and closures. Ebit margins fell by only 250 basis points due to an 80 basis points fall in the depreciation charge rate even though like-for-like sales were falling and the case for investing in the estate has not diminished. Our 2017 forecast anticipates like-for-like sales falling by 2.7%, with Ebitda margins falling by 350 basis points, reflecting a greater than expected step up in discounting activity in the second half, in addition to the first half’s’s price cuts. Aided by £10m of cost savings, a falling depreciation charge and closures being classified as onerous leases, 2017E profit before tax should be close to consensus, in our view. We are more concerned about 2018 forecasts. Cost pressures should start to ease, but with less incremental costs savings (as they were fast-tracked into 2017E) and less incremental closure savings. Our/consensus 2018E forecasts require 1.5% to 2.0% like-for-like sales to hold like-for-like profits, with a net 12 new sites forecast to provide £3m profit before tax growth (with minimal change in debt). The challenge in 2018E will be growing like-for-like sales. Collectively, managed restaurants (per the Coffer Peach Business Tracker) have not generated any like-for-like sales growth over the past two years and, despite all the discounting activity, restaurant like-for-like sales still fell by 1.0% in the six weeks to 7 January (Coffer Peach Tracker ). The bull case on The Restaurant Group is corporate activity, but there is no lack of other restaurant brands that are available to buy, which compounds the problem – capex and capacity always goes in much faster than it comes out.”

Douglas Jack – Marston’s wet-led pubs to continue to win

Marston's Inns and Taverns logoPeel Hunt leisure analyst Douglas Jack has forecast a strong performance from Marston’s wet-led pubs. He said: “We expect Marston’s trading update to be in line overall, but with the wet-led pub estates outperforming the food-led estate (Destination & Premium). We do not expect to change our forecast of 10% profit before tax growth in 2018E, helped by the company’s careful revex management and 36% increase in capex in 2017. We view the dividend (6.8%) and free cash flow yields (11.2%) as attractive. Destination & Premium’s like-for-like sales were positive in early 2018E; our full-year assumption requires just 0.5% growth. Last year like-for-like sales rose by 0.9%, but the first quarter was one of the better quarters, at 1.5%, which presents a slightly tougher comp for this update. As at late November, Christmas bookings were in line, but we expect trading in December to have been impacted by snow (in the weekend of 10 December, and after Boxing Day). We expect trading to be stronger in the wet-led Taverns estate than in the food-led Destination & Premium estate, repeating last year’s trend. Both Taverns and Destination & Premium face a comparable of 1.5% in the first quarter, but Taverns generated higher like-for-like sales (at 1.6%) over the past full year. This is consistent with the sector-wide trend, which is also inversely correlated to changes in supply within the wider sector. We expect a solid performance in both leased pubs and brewing. Leased like-for-like profits rose by 1% last year, but by 2% in the first quarter of 2017. Brewing like-for-like volumes grew by 3% in both FY2017 and in the first quarter of 2017; in addition to the strong growth that is being generated by the Charles Wells acquisition. Marston’s opened 19 pubs/bars and eight lodges in 2017, and is forecast to open 15 pub/bars and six lodges in 2018E. We believe this slowdown should enable net debt/Ebitda to fall from 6.0 times pro-forma to 5.7 times in 2018E, despite the company paying an increasing dividend that now yields 6.8%. Marston’s has a wide range of profit streams, most of which are stable and cash generative. It knows where to expand, and what its cost pressures will be over the next two years. The combination of these factors has reduced the risk profile of the company during a tough consumer period.”

Other News:

Peter Martin, CGA PeachBritain’s managed pub and restaurant groups saw collective like-for-like sales marginally down by 0.1% over the six-week Christmas and new year period, according to the latest Coffer Peach Business Tracker. The results, which cover the six weeks to January 7 2018, showed managed pub groups did better than casual dining restaurants, delivering a small increase in trade with collective like-for-likes up 0.6% on last year. Restaurant chains saw collective like-for-likes down 1.0%. “The public still went out to eat and drink but essentially it was a repeat of last Christmas, said Peter Martin (pictured), vice-president of CGA, the business insight consultancy that produces the Tracker in partnership with Coffer Group and RSM. “Better trading in the second half of the festive season, when people were mainly off work, failed to provide enough of a boost to beat 2016’s overall numbers. It looks like people were more willing to go out to drink than eat this festive season, with wet-led pubs and bars having the best of trading. Across the managed pub market, drinks sales were up 1.8%, while food was down 1.4%. Food-led operations, both pubs and restaurants, generally had a worse Christmas than 2016.” Although London, like the rest of the country, turned out flat overall, the capital saw a bigger contrast in fortunes between restaurants and pubs, with casual dining down 2.6% inside the M25 and pubs up 1.5%. Martin said: “Looking across the six-week period, the run-up to the holidays saw generally poor trading, with the snow in particular hitting sales. Trading picked up in the last three weeks either side of the core holidays. Every year the Christmas period seems to become more concentrated. Although the sector will be disappointed it didn’t beat 2016’s numbers, the results do reflect the flat trading we’ve seen in the market over the past year – and they also come on the back of increases for the past two Christmases.” Total sales growth among the 37 companies in the tracker cohort was 3.4% compared with the festive period last year, reflecting the continuing if much more subdued effect of new openings. Mark Sheehan, managing director of Coffer Corporate Leisure, said: “Despite very negative press, particularly associated with restaurant sector trading, the eating and drinking out market is not in free fall. Trading over the important December trading period was flat, with pubs trading better than restaurants. There is no question the trading environment is competitive but these numbers are not the car crash that has been widely portrayed. 2018 will be a challenging year and we expect to see bars and pubs trading more robustly than restaurants.” Paul Newman, head of leisure and hospitality at RSM, added: “Increased drinks spend across the managed pub market over the festive period was not enough to offset disappointing casual dining like-for-likes, rounding off a flat year for the sector and failing to give operators Christmas cheer. Since the new year a number of high-profile brands have already announced site closure plans and, with consumer confidence waning and uncertainty ahead of Brexit, we expect our restructuring teams to be kept busy in the months ahead.”

Gluten free Greene King IPA and Old Speckled HenPeel Hunt leisure analyst Douglas Jack has forecast a slight improvement in Greene King’s managed division like-for-like sale when it reports later this month. He said: “The third-quarter trading update is due on 25 January. We believe the company should be capable of a slight improvement in managed like-for-like sales from the -1.4% that it posted in the first half, with the tenanted estate continuing to trade positively (first-half: 1.5%). Our ‘Add’ stance reflects this and the dividend yield reaching 6.4%. Managed like-for-like sales fell by 1.4% in the 24 weeks to 15 October, during which the pubs constituent of the Coffer Peach Business Tracker (CPBT) rose by 0.1%. Subsequent CPBT like-for-like sales were better, at +0.3% in October; +2.2% in November; and +0.6% in the six weeks to 7 January. Positive signs for Greene King were 3% growth in Christmas bookings and net promoter score rising by 6.4 points. Managed like-for-like sales are key – managed generates 71% of group profit; and costs (guidance is for a £60m increase and £45m of mitigation) are more certain. Like-for-like sales should benefit from: investing £10m in service, value and quality, as well as the rebranding/selling the 70 Fayre & Square sites in the second half. Although restaurant discounting and delivery is compounding the pain on value food outlets, we do not believe Greene King should reposition to drink; it has to excel in offering what restaurants cannot do so well (character, events and premium drinks). We expect to hold our forecasts that anticipate managed like-for-like sales falling by 1.0% this year. The EV/Ebitda valuation is now lower, at 7.5 times, than it was during the financial crisis (7.9 times EV/Ebitda), yet the balance sheet is now stronger (4.0 times versus 5.7 times net debt/Ebitda). Over the last decade, the managed estate has become slightly more food-led in our view (food is circa 40% of sales). Food-led pubs are not benefiting from supply reduction (unlike wet-led), and tend to require customers to drive to outlets, an effort and cost that customers are more likely to undertake if the pub offers character and events, as well as exceptional food, drink and service (premium rather than value). The ability of pubs to adapt partly explains why their long-term performance is more correlated to the weather than consumer confidence. It also partly explains our long-term positive view on Greene King.”

Chef and restaurateur Victor GarveyChef and restaurateur Victor Garvey (pictured) has closed modern Spanish restaurant Encant, one of two sites he operates in Covent Garden, ahead of the launch of a new concept in Soho later this year. The move follows Garvey’s completion of a buy-out of his investors, which sees him take ownership of Sibarita in Covent Garden and Rambla in Soho under the umbrella of the newly incorporated Garvey Restaurant Holdings. Team members including head chef Krisztian Palinkas, operations manager Claudio di Martino and executive assistant Marsida Rexhepaj have been given shares in the new enterprise. Garvey said: “Encant is very special to me as it was my first solo restaurant. It’s still as busy as ever but creatively the team and I feel we’ve taken it as far as we can. Sibarita and Rambla, which are both performing better than I could ever have imagined, opened in quick succession and their menus feature several dishes that originated at Encant. It got to the stage where Encant had effectively become a development kitchen for the others rather than innovating in its own right.” All staff at Encant will be redeployed within the group, while Garvey said offers had been received from unnamed restaurant operators for the site at 16 Maiden Lane. Regarding the new Soho concept, for which a site has been provisionally acquired, Garvey said: “Although all different, Encant, Sibarita and Rambla have a common DNA. I want to take it further and expand what we offer but don’t want to open a fourth restaurant at this stage, just a different one. I decided the best solution was to close Encant and focus on Sibarita and Soho.”

Purezza, the UK's first vegan pizzeria, is seeking investment for further expansion after securing its second site, in Camden TownBrighton-based Purezza, the UK’s first vegan pizzeria, is seeking investment for further expansion after securing its second site, in Camden Town, north London. Stefania Evangelisti and Tim Barclay launched the concept in St James’s Street, Brighton, in 2015. Now it will open its second site next month in Camden Town having acquired the former Market restaurant in Parkway in a deal brokered by agents Fleurets. Purezza has signed a new 20-year lease. Evangelisti said: “A London-based Purezza has always been an ambition of ours. We are delighted to have acquired the Camden site, bringing our pioneering food into the capital.” With aggressive expansion plans, Purezza is seeking investment to grow into further cities around the UK. Fleurets divisional director Andy Frisby said: “This acquisition will not only see the operation expand into the capital but also be of huge benefit to growing the Purezza brand due to the substantial footfall and profile of the area. The restaurant will cater for up to 100 covers across two floors.” The menu will largely mirror the Brighton site’s offering, which provides plant-based versions of classic Italian dishes. The entirely vegan menu includes wholegrain sourdough pizza, pasta, and raw and gluten-free dishes.

The first Propel Multi Club Conference of 2018 is open for bookings. The full-day event takes place on Wednesday, 7 March at the Grange Hotel, St Paul’s, London. Jon Collins, former chief executive of CGA, who has returned to the UK after living in Chicago for two years, will talk about contrasts between the US and UK markets and offer his thoughts on trends and practices over there that could be ripe for adoption over here. Multi-site operators of pubs, restaurants and foodservice outlets can book up to two free places by emailing Anne Steele at

Former Caravan head of wholesale James Hennebry is set to launch new concept Rosslyn Coffee in the City of London. Hennebry and co-founder Mat Russell have agreed a new ten-year lease for a 442 square foot ground-floor unit in Queen Victoria Street at a rent of £67,500 per annum. The coffee shop is opposite Mansion House station and occupies a prominent position at the junction of Cannon Street. Oliver Green, a director in the central London retail team at agent Savills, which represented landlord Amsprop Investments, said: “The brand will complement the area’s range of food and beverage operators well.” Hennebry and Russell have both worked in the coffee shop industry in Australia and the UK for many years as members of wholesale teams at roasteries such as Five Senses, Reverence and Caravan and have now decided to go it alone. Locate Retail represented Rosslyn Coffee.

Operators can look forward to a period of increasing confidence this year with “plenty of room for growth”, according to the latest report by agents Christie & Co. In its Business Outlook 2018 report, Christie & Co said despite a “tough” 2017, with ongoing operational and financial pressures in the pubs market, the sector was proving “extremely resilient” as operators turned towards innovation to improve management and customer service. Average prices in the pubs sector rose 3.8% in 2017, although they declined 3.4% in the restaurants segment. The hotels sector saw a 5.8% increase. The report said new avenues of profit such as micro-brewing and adding rooms had significantly improved margins, while 2018 would see increasing competition for sites as pub values continued to rise. It added a resurgence in demand for tenanted assets “could drive excellent-value growth”. Christie & Co said it remained “increasingly confident” across all its sectors and expected further consolidation during 2018 as cost pressures continued. Neil Morgan, Christie & Co managing director – pubs and restaurants, said: “The pubs market in 2017 was tough, with the introduction of new or increased operational and financial pressures such as the Apprenticeship Levy and exacerbated by increases in the National Living Wage and business rates. Similar pressures will be felt throughout 2018 but the sector is proving itself to be extremely resilient as operators turn towards innovation to improve management and customer service. New avenues of profitability such as micro-brewing and the addition of accommodation have been shown to significantly improve margins. While some business failures are likely as we leave the peak of the cycle, 2018 will see increasing competition for sites as pub values continue to rise. Demand will stem from the growing interest of private equity and trade buyers, as well as operators and investors seeking opportunities in underinvested marginal assets and portfolios. Resurgence in demand for tenanted assets could drive excellent-value growth.” Global managing director Chris Day added: “We are seeing signs of increasing confidence and economic positivity in almost every sector in which we operate and pipelines continue to grow by double digits as we enter 2018. In short, the economy is recovering and there is still plenty of room for growth.”

Stonegate Pub Company is to open a 25th site for its Popworld brand – in Nuneaton, Warwickshire, in March. Since its launch in Southampton in 2014, the company said its pop-themed nightclubs had seen four years of growth in sales, margins and profits. Stonegate added there were “many more” openings in the pipeline, while the brand had seen a 94% return on investment in the past year. The company said a new website had driven pre-booked sales and events tickets, including a 62% increase in New Year’s Eve ticket sales this year, while the Popworld app had attracted 15,000 registered users and gained a 90% NPS atmosphere score. Popworld champions noughties nostalgia, with a soundtrack of party hits from the decade and decadent drinks that include giant sharing cocktail Partini. Head of marketing Alan Armstrong said: “Not only will we celebrate our 25th site this year but we also have lots in store for 2018, including a Popworld festival.” Stonegate operates more than 690 pubs split into two divisions. Earlier this month, the company reported all its formats performed well during the core four-week festive period to 31 December, with total like-for-like sales growth up 5.5%.

Oliver Tree Brasserie owner Dean WilsonMediterranean restaurant Olive Tree Brasserie is to open its fourth site in March, in Stockton Heath, Cheshire. Owner Dean Wilson (pictured) said the move was a “natural choice” as part of expansion plans across the north west. The 110-seater restaurant will be designed akin to Olive Tree’s venues in Lytham St Annes, Preston and Chester, with industrial lighting, exposed copper piping and geometric patterned tiles. The new site will also feature live music on Friday nights, a bar, and a private dining room and function space. Olive Tree Brasserie’s menu takes inspiration from the Greek islands, where Wilson sources almost 40% of his stock including halloumi, olive oil and Mastiha liqueur. Dishes include Olive Tree Kota (chicken breast, spinach, saffron, feta and herb rice), and skewered Greek kebabs. Wilson said: “Stockton Heath is somewhere I have been going for a long time – often for special meals. It’s got great energy and, from the research we’ve done, it’s on an upward trajectory in terms of being a great food destination.”

Soho House has reopened Kettner’s, the French restaurant in Soho it acquired in 2015, as Kettner’s Townhouse featuring a champagne bar, restaurant and 33-bedroom guesthouse. The restaurant’s menu has been inspired by the 150-year-old building’s history, with many original grade II-listed features retained such as floral plasterwork and heritage mirrors. The champagne bar features an early-deco mosaic tiled floor alongside French glass lights, a walnut bar with marble top, sofas, armchairs and vintage photos. Soho House stated: “The bedrooms have been individually designed and feature original Georgian timber floorboards, antique fireplaces and a mix of new furniture and vintage pieces, including art nouveau chandeliers.”

Zapaygo, a lifestyle and payment app for the sports, concert, leisure and hospitality sectors, has hit its £500,000 fund-raise target on crowdfunding platform Crowdcube for expansion. The app allows users to pre-order and pre-pay for food, drinks or goods before arriving at a venue or have them delivered to their table or home. Founder Richard Dilworth is offering a 5% equity stake in the company in return for the investment. So far, 162 investors have pledged £504,750 and the campaign is “overfunding”. The largest investment has been £126,000. The pitch states: “Zapaygo has contracts with listed and large corporate companies to ensure it reaches millions of users and thousands of venues. Of our initial partners, Verteda EPOS has about 750,000 weekly users and NEC Group will promote Zapaygo monthly to 28 million people. Planned revenue streams are processing fees, marketing advertising discounts and rewards, brand placement, and big data. Benefits to businesses include less cash on site, an ability to market to existing customers and Zapaygo users and offer discounts and rewards to encourage repeat visitors, and combining app orders and orders to staff in one payment. Benefits to users include rewards and discounts, using Zapaygo as an approved form of ID verification in venues through Paycasso, linking accounts with other Zapaygo users, and peer-to-peer payments and messaging. Commercial highlights include a key strategic commercial partnership that will deliver global brand awareness and trust, mass user and venue adoption, robust technology, EPOS integration benefits, flexible payment-processing with market-leading providers, revenue opportunities via ads and consumer trend data, and a scalable model capable of replication internationally.”

Association of Licensed Multiple Retailers chief executive Kate NichollsThe Association of Multiple Retailers (ALMR) has reminded the newly created All Party Parliamentary Group for New Towns about the vital social and economic role hospitality businesses play in communities. The All Party Parliamentary Group has been launched with the aim of delivering a wave of new towns across the UK. ALMR chief executive Kate Nicholls (pictured) said: “Pubs, bars and other hospitality venues are valuable social spaces and focal points for communities. As the group begins to make its plans for new towns of the 21st century, we are reminding them of the positive contribution, both economic and social, hospitality businesses make to villages, towns and cities. In any thriving new community, hospitality venues can provide jobs for residents and can be a centre for the communal life, with pubs particularly flourishing in this role. A new town without a social communal space including pubs, cafes, restaurants and bars will, in all probability, lack the sense of cohesion and vitality only hospitality venues provide. With a blank slate from which to work, planners also have a great opportunity to ensure they plan positively in a way that gives hospitality venues an opportunity to thrive in an environment free from hassle. The creation of a new town is a fantastic opportunity to produce a new community with its own identity. Hospitality businesses will be vital to a new town’s success.”

Hollywood Bowl Group, the UK’s largest tenpin bowling operator, has begun its 2018 investment programme with the £400,000 rebrand of a former Bowlplex site in Birmingham. It is the group’s seventh refurbishment in the past six months. The 20-lane centre in Ladywood features plush new furnishings, contemporary American decor and upgraded music and lighting. It also features a Hollywood Diner offering American classics such as gourmet burgers, hotdogs, shakes and desserts, and a bar. The centre’s amusement area has also been upgraded including the introduction of retro games such as Pacman and Space Invaders. Hollywood Bowl Group chief executive Steve Burns said: “The refurbishment and rebranding in Ladywood starts what will be another exciting year for the group, during which we’ll continue to look for new locations, open new centres and invest in our current estate.” Last month, Hollywood Bowl Group signed to open at Intu shopping centres in Nottingham, Essex and Watford, while it will open at a venue in Yeovil in the spring after taking over a site formerly operated by MFA Bowl. In December, Hollywood Bowl Group reported sales up 8.8% to £114m for the year ended 30 September 2017, with like-for-like sales up 3.5%. Group adjusted Ebitda was 13.7% to £33.4m. The company currently operates 58 centres across the UK under the Hollywood Bowl, AMF Bowling and Bowlplex brands.

Beer + Burger, which launched in Willesden last year, has opened its second site in London, this time in Dalston. The venue has opened in Kingsland Road on the former site of A Little of What You Fancy restaurant. The concept, which brands itself as being for “beer-lovers and burger junkies”, offers five burgers but the Dalston venue will also exclusively sell the brand’s new vegan burger. The concept offers sides such as chicken wings and deep-fried jalapenos, while there are two desserts – Oreo cheesecake and chocolate Rolos. Beef + Burger also offers 20 rotating taps of craft beer alongside more than 300 bottles and cans.

The extension at Intu Watford, which will feature 11 new restaurantsIntu has said it will launch the £180m extension to its shopping complex in Watford in October after holding a topping-out ceremony. The expansion will add 400,000 square feet to Intu Watford, with the extension anchored by a 113,000 square foot Debenhams store and featuring a nine-screen IMAX Cineworld cinema, a Hollywood Bowl ten-pin bowling alley, 11 restaurants and 13 retail stores. Intu regional managing director Rebecca Ryman said: “Our plans will establish the centre as a daytime and evening destination and drive what is already a busy and prosperous local economy, with 38 million visitors to Watford high street every year.” The 129-week development programme began in March 2016. When complete, Intu Watford will become one of the UK’s largest in-town shopping centres at 1.4 million square feet. Last month, rival company Hammerson made a £3.4bn all-share offer for Intu in a deal that would merge ownership of the UK’s largest shopping centres.

Peel Hunt leisure analyst Douglas Jack has said Ten Entertainment Group is “well placed to generate attractive self-financed growth in earnings and dividends”. Issuing a ‘Buy’ note on the shares with a target price of 325p following the company’s full-year results, Jack said: “Like-for-like sales rose by 3.6%, split 0.4% in the first half and 7% in the second half, despite the negative impact of snow in early December. We believe without the closed Chelmsford site, like-for-like sales would have been 4.0%, split 3% footfall and 1% spend per head. We estimate Ebitda margins rose by 50 basis points to 26.6% driven by strong like-for-like sales and bowling increasing its share of the sales mix. The company is also benefiting from labour costs having a relatively low share of the cost base, refurbishments and new innovations such as Pins On Strings. The company added two sites net (three openings less the Chelmsford closure) in 2017E. We forecast the company opening two sites per annum in 2018E and 2019E, in comparison with which ‘good progress was made during the year to strengthen the pipeline of new sites’, supporting guidance of two to four new sites per annum. Typically, this expansion drives an average return on investment of circa 27%. Six sites have now benefited from the Pins On Strings roll-out. According to management, there are early signs these are delivering in line with management’s expectations. Given this, a conversion rate of ten per annum from 2018E and our forecasts assuming a 12% return (versus management’s original 50% target), this could create attractive forecast upside. Like-for-like sales have averaged 5.7% over the past four years, helped by refurbishments, new product and technology. In 2018E, we forecast 3.3% like-for-like sales growth, which we believe Ten Entertainment Group should exceed in the first-half 2018E aided by very easy comparables (due to warm, dry weather). We are holding our forecasts but expect consensus Ebitda to rise. In our view, this update should provide confidence the company is well placed to generate attractive self-financed growth in earnings and dividends, with scope for upgrades over the medium term, operating in a sub-sector with limited supply-side risk.”

BrewDog Lone Wolf GinScottish brewer and retailer BrewDog has signed a UK distribution deal with Global Brands for its Lone Wolf gin, vodka, and canned gin and tonic drinks to increase their availability in bars and restaurants. The partnership is expected to increase Lone Wolf sales by £40m during the next two years, with a target of 100,000 extra cases. Global Brands will also distribute BrewDog’s whiskey, Uncle Duke’s, across the UK on-trade, off-trade and international markets. BrewDog chose Global Brands following a competitive three-way tender. Lone Wolf Spirits managing director Doug Bairner said: “We chose Global Brands for the quality of its Franklin & Sons business, the innovative ideas it came forward with in the pitch process, and the knowledge and enthusiasm of its people.” Global Brands founder and chairman Steve Perez added: “The UK’s demand for premium-quality spirits and serves continues to rise. We know Lone Wolf will be a massive success in the premium end of the on-trade.” BrewDog launched Lone Wolf distillery in April 2017 at its brewery in Ellon, Aberdeenshire. Its products are already available in Tesco, Morrisons and Sainsbury’s.

Revolution de CubaPeel Hunt leisure analyst Douglas Jack has said he expects Revolution Bars Group’s first-half to be strong. Issuing a ‘Buy’ note on the shares with a target price of 240p ahead of its trading update on Monday (22 January), Jack said: “December trading should be strong, in our view. Deltic (+8.2%) and Stonegate (+5.5%) have already announced strong December trading, and there should be a read-through to Revolution Bars Group, which has had no takeover distractions since October. Last year’s problems were all finance department related. We believe the executive board and operations of the company have continued to perform, with the slowdown in like-for-like sales (from 1.5%) to 0.3% during July to September (first quarter) being partly due to slower trade in Manchester after the terrorist attacks. In our view, in a strong late-night market, a recovery to 3% to 4% like-for-like sales in the second quarter should be achievable. Revolution Bars Group should be capable of at least £1m of cost savings. Our forecasts already reflect understandable delays in cost savings that relate to the company being in a recommended offer period over many months during the past calendar year. We expect to hold our full-year forecasts, which anticipate like-for-like sales rising by 1%, margins falling by 20 basis points, six sites opening, and net debt increasing by £2m to £5m. In our view, there is a chance the company will have traded ahead of expectations in the first half, and should be on track in relation to expansion, having opened one site in July and three in December. Revolution Bars Group is currently valued at 5.4 times EV/Ebitda (3.6 times site level Ebitda), well below the 7.3 times multiple on which the company floated. Lower supply and competition has transformed some leisure sub-sectors, and although the bar market has not benefited from supply reduction as much as clubs and wet-led pubs, it is still a beneficiary, and we believe this should eventually be reflected in Revolution Bars Group’s valuation.”

Alison Brittain, chief executive of WhitbreadChief executive Alison Brittain (pictured) provides further insight into Whitbread’s strategy following third-quarter results:

Break-up speculation: Brittain said: “We have open and regular discussions with our shareholders, the contents of which will remain confidential. We remain entirely open-minded about the structure of the business and are fully committed to reviewing it on a regular basis at board level. We are always looking at ways we can increase shareholder value in the medium and long term and are always open to discussing how best we can achieve that. We are halfway through a transformation project in Costa that will deliver better shareholder value and we don’t want management to deviate or be distracted from that.”

Costa ROI and refurbishment: Brittain said Costa’s new openings were generating a return on investment of about 45% compared with 35% five years ago as Whitbread pursued its strategy of locating the brand in high-footfall areas. She added: “We are using our short-lease options to churn any high-street sites where we think we have a negative position.” Brittain said the churn was very low and while like-for-like performance had fallen by 1.5% in the third-quarter at its UK equity stores, they were still profitable sites. She added: “Being in more convenient locations means we can put more cups of coffee in the hands of more customers in the UK, which drives loyalty.” A two to three-year Costa refurbishment programme is about to start that will include a new store format “we think we like the look of better”. The Costa Club loyalty app, launched in November, now has 1.2 million active users.

Costa pricing: Brittain said: “We continue to look at pricing in a competitive context and it’s never the first lever we pull. As a management team we’re focused on being as efficient as possible. We have to try to make the business work harder for every pound of revenue we gain. We still have options. We are cheaper than Starbucks and Caffe Nero but more expensive than the value end such as McDonald’s and Greggs. We sit in the middle and we’re comfortable with that. We have the option but at the moment we are in a difficult economic environment and convenience and value are key things for consumers. We want to do some more interesting things around food pricing such as bundle offers for breakfast and lunch.”

Costa Express: Brittain said: “Convenience is such an important thing. We are increasing our market share by providing machines in more convenient locations.” The company has added more than 1,000 net new machines during the past nine months. Brittain said there were significant opportunities in Costa Express to build a business of scale with strong return on capital and it is expected investment would increase over the next year to achieve that. She added: “In a growing market, there’s still a long way to go.”

Restaurants working for Premier Inn: Brittain said: “We’ve done a lot of work this year on menus and improving footfall. We are not strategically opening standalone restaurants. When establishing a new hotel we’re now thinking what food and beverage offer is best for the hotel and looking at our restaurants as ancillary income. That’s why we now have one managing director for Premier Inn and restaurants because they are working hand in hand. When we carried out refurbishments before we tended to do the hotel or restaurant separately, which was also quite expensive. Now they are being thought of as one project.” Brittain added there had been no price rises at its restaurants this year with “value at the forefront of what we have done”.

New restaurant concept on the way?: Brittain revealed the company had been conducting a trial in a “few places” that would lead to the launch of a new menu and concept. She said: “We have been testing concepts that will allow us to further slim down the number of brands we have and make sure our food offer is current and in line with fast-casual experiences.”

Premier Inn: Brittain said occupancy levels remained at more than 85%, with market weakness in London partly driven by the relatively high level of recent new capacity, which was expected to moderate in the year ahead. Almost 5,000 rooms had been added during the past 12 months, with 3,200 rooms opened year-to-date. Room openings in the current year have been significantly more weighted towards the first nine months compared with prior years, which were fourth-quarter weighted. This timing of room openings had a temporary effect on like-for-like performance, although new capacity is “expected to mature over the next few years”. Britain added the company was confident it could increase capacity to 85,000 rooms by 2020, with the remaining 13,700 rooms now secured through a mix of extending existing hotels, new freehold developments and new leasehold hotels.

International: Premier Inn has added a site in Dortmund to its German pipeline, which will take it to ten sites. In the year ahead, hotels will open in Munich, Leipzig and Hamburg, comprising 550 rooms. Work continues to accelerate this pipeline through a mixture of freehold and leasehold development, as well as exploring small acquisition opportunities. The international Costa business is now operating in 31 countries. Total sales growth moderated in the third quarter due to the closure of the equity-owned business in France together with the closure of underperforming stores in China. Following enhancements to the management team and a refocus of strategy, Brittain said Costa China had continued to perform well with total revenue growth of 5.3% year-to-date.

Making savings: Brittain said: “Our cost-efficiency programme has good momentum. We started making savings before we had challenging increases in headwinds such as business rates and the National Living Wage. We are very confident about our cost-efficiency plan to save £150m over five years.” The company said there had been a £70m to £80m increase this year in cost headwinds.

Looking ahead: Brittain said: “We expect the tough UK high-street environment and inflation in our sector to continue to pose challenges in the year ahead. However, we have good momentum in the delivery of our plan to enhance our UK market leadership positions, create an international business of scale in Germany and China, build our Costa Express business, and develop a more efficient infrastructure. This will create further customer loyalty and deliver long-term growth in earnings and dividends and a strong return on capital.”

Ten Entertainment Group's Tenpin venue in CardiffTen Entertainment Group, the UK’s second-largest ten-pin bowling operator, has reported like-for-like sales increased 3.6% for the year ending 31 December 2017. Total sales growth of 8.9% was “underpinned by a stronger second-half sales performance” while the like-for-like growth included a 7% rise in the second-half. Three sites were acquired during the year and one underperforming site closed during the period. The company said good progress had been made during the year to strengthen the pipeline of new sites. It added FY17 group adjusted Ebitda was expected to be at the top end of the range of current market consensus. Chief executive Alan Hand said: “The business has shown good momentum since the initial public offering and has performed well in meeting our key performance objectives. I am particularly encouraged by the business transformation opportunity of the innovative Pins & Strings technology, expanded into a further five sites during the second-half of the year. This technology is transforming the experience for our customers as well as improving the dynamics of our business model. In addition, we have made further improvements to the quality of the customer experience, through our highly committed and engaged colleagues.” Chairman Nick Basing added: “Very good progress has been made during the period, in line with the growth strategy outlined at the initial public offering in April 2017. Tenpin is building towards being the ideal hallmark to attract today’s modern leisure customer. Ten Entertainment Group is demonstrating a good growth formula, driven by a combination of organic sales growth, a continuous refurbishment programme and laser-like acquisitions. I am confident that full-year group adjusted Ebitda will be at the top end of the range of current market consensus.”

Whitbread has reported like-for-like sales rose 0.3% in the 13 weeks to 30 November 2017, with total UK sales up 5.8% (year-to-date 6.7%). Premier Inn like-for-like sales rose 0.5% with sales increasing 5% (year-to-date 6%). Pub restaurant like-for-likes were up 1.8% with sales rising 3.5% (year-to-date 2.7%). Costa Coffee saw like-for-like sales down 0.1% with UK equity stores like-for-likes falling 1.5%. Sales were up 7.2% (year-to-date 7.9%). Chief executive Alison Brittain said: “We have made good progress in executing our strategy and have grown group sales so far this year by 6.8%. This growth, combined with the results from our group-wide efficiency programme, means that we are on track to achieve expectations for the full year. Premier Inn UK achieved total hotel sales growth of 5.5% in the quarter as we continued to deliver our strategy to win market share through investment in new hotels and extensions, which will mature to give strong returns over the next few years. Our performance in the quarter moderated as the budget hotel market weakened and we had a particularly challenging October. Although it is early in the fourth quarter, performance so far has been encouraging and reflects a return to year-to-date performance. Costa UK has delivered strong total sales growth of 7.2% in the quarter, as we pursue our strategy to increase our presence in high footfall and convenient locations such as drive-thru and travel locations and we are particularly pleased with the strong performance of Costa Express. As a result of our channel strategy, more customers are drinking more cups of our coffee than ever before and we have gained market share. We have also continued to invest in the overall customer proposition, including new coffee, food and digital capability. These improvements have been well received by our customers and we have just been voted as the nation’s favourite coffee shop, for the eighth consecutive year. Our Costa high-street stores in the UK are highly profitable and generate strong returns. However, the well-publicised weak retail market footfall is negatively impacting our high street stores’ like-for-like performance and we expect this to continue for some time. Internationally, Costa in China continues its good momentum with another quarter of positive like-for-like sales growth. We remain committed to delivering our strategy to invest in the attractive structural growth opportunities in the budget hotel market and the growing coffee markets, in both the UK and internationally. We do expect the tough UK high street environment and inflation in our sector to continue to pose challenges in the year ahead. However, we have good momentum in the delivery of our plan to enhance our UK market leadership positions, create an international business of scale in Germany, China and Costa Express, and develop a more efficient infrastructure. This will create further customer loyalty and deliver long-term growth in earnings and dividends and a strong return on capital.”

Value for money and convenience will become increasingly important during 2018 as sector turnover slows amid continued consumer uncertainty surrounding Brexit, according to a new report by supplier McCain Foodservice. In its “What’s Hot” report, which forecasts major trends during 2018, the company said value for money would become increasingly important as consumers scrutinised their spending. However, “value scrutiny” wouldn’t necessarily see consumers chasing the cheapest option but seeking “hearty portions, great-value food, and excellent standards of service”. Convenience will be another key trend, the report stated, with the 6% rise in quick-service lunch visits seen in 2017 showing no signs of slowing. McCain said making it as easy as possible for diners to get a “great meal quickly and easily” would be a “key growth area” in 2018. Regarding technology, 40% of 25 to 37-year-olds preferred ordering food via their phones last year rather than dining out, while two-thirds (67%) spent more on food ordered on their phones compared with in person. McCain Foodservice said finding ways to integrate the latest technology could see businesses “sink or swim”. Another key trend in 2018, according to the report, will be “informality”, with consumers viewing out-of-home meals as opportunities to socialise and take a break from modern life. The report stated easy-to-share food, communal seating and “pay first, leave whenever” service would all be hot trends. Indulgence, “foodie culture”, provenance and sustainability, and healthy eating were other key trends highlighted. McCain Foods senior brand manager Jo Simmons said: “With so many changes happening it can be hard to pick out the opportunities that will work for your business and those that will make headlines and then disappear. We’ve rounded up a few of the key ones we believe can help operators stay hot and ahead of the competition in the next year.”

The Restaurant Group - Frankie & Benny's, WembleyThe Restaurant Group has stepped up discounts at its Frankie & Benny’s sites with new 50% off mains and free dish offers. The 50% off mains offer is valid until Monday (22 January) but cannot be used on breakfast, lunch, fixed-price or children’s menus. One voucher covers an entire table at all Frankie & Benny’s and Little Frankie’s restaurants, apart from airport locations. Meanwhile, giveaway vouchers will be available from 10am on Thursday (16 January) until just before midnight on Sunday (21 January) for the offer of a free dessert or salad with every main dish depending on which option is voted favourite on the Frankie & Benny’s Facebook page. The brand has been promoting a number of discount offers since the end of last year, including 50% off mains and a free themed cocktail for bonfire weekend, and “kids eat for £1” during Christmas and New Year.

City Pub Group chairman Clive WatsonCity Pub Group executive chairman Clive Watson (pictured) has told Propel the company hopes to have another ten pubs trading by the end of this year, with “no mad rush” to spend the funds it has in place. The company, which was admitted to AIM in November, currently has five pubs lined up to open in 2018 having added sites in Clapham, Parson’s Green and Reading to its 33-strong portfolio. Watson said the company, which reported turnover increased 34% to £37.4m for the year ending 31 December 2017, had a “very strong” balance with no borrowings, which put it in a great position to take advantage of opportunities. He added: “I would like to think by the end of this year we will have 42 or 43 pubs trading. With our existing balance sheet, the money we raised from the float, plus a £30m banking facility in place with Barclays, there’s a good sum of money available to us – but we don’t have to spend it in the first 12 months. It’s about the quality of sites. We’ve said previously we want to double the size of the estate by 2021 so there’s no mad rush – we’ve managed to go from zero to 33 in five years.” Watson said the company was appraising about eight sites as it worked on further acquisitions, a mix of new locations and towns and cities where the company already operates. He added that while London and southern England would remain the focus, there was scope for going a “bit further north and west”. Watson added: “I’m pleased about Reading having been at university there. It’s improved a lot and is ideal being between London and Bath. I don’t see why we can’t open further sites there – it’s a big enough town.” Watson said while the company preferred freehold sites, it would continue to acquire leaseholds. Berenberg analysts said: “We continue to believe on a multi-year view that the company can deliver strong like-for-like growth, scale the business to at least 60 sites, and reap the rewards of operational gearing as the strategy progresses. We increase our earnings per share estimates by 1% and 7% in 2018 and 2019 respectively, and increase our price target to 210p.”

BarburritoBarburrito founder Morgan Davies has told Propel that 2018 will be a year of consolidation for the brand before “ramping things back up” in 2019. The company, which this week revealed a new partnership with The Restaurant Group to launch Barburrito into airports, will open a site at the Arndale Centre in Manchester this summer and “perhaps one other” in the second half of the year. Davies said: “We are being cautious at the moment – it’s a measured approach for us this year. We’ve got some exciting projects such as The Restaurant Group partnership going on but we are looking at a bit of consolidation before ramping back up again next year. Our long-term objective remains the same – to expand the business nationally and be the UK’s most-loved burrito brand. We’re looking closely at our costs and pricing.” Davies said like-for-like sales at the 21-strong group remained positive and ahead of the Coffer Peach Tracker. However, they were down on the double-digit growth seen last year. He added: “Our average transaction value is £8 so we have seen some consumers coming to us as they cut their spend. However, what we have noticed is the drop in footfall in some of the environments we operate in and that’s something we can’t control.” Morgan said he was “extremely excited” by the partnership with The Restaurant Group and said the impending airport opening would not be a one-off. He added: “We have invested a lot of time and effort and we would not have done that for one unit, so others will follow. We are having conversations about potential sites at the moment. We are used to operating in high-footfall environments such as shopping centres and at Paddington station so I’ve no concerns in us being able to handle the volume of potential customers. We’ve adapted the menu slightly to suit airport travellers.” Barburrito, which is backed by the Business Growth Fund, launched the UK’s first burrito bar in 2005 at Piccadilly Gardens, Manchester.

Delhi street food concept Hankies, which operates a cafe in Shaftesbury Avenue, is to launch an upmarket restaurant format, in Marble ArchDelhi street food concept Hankies, which operates a cafe in Shaftesbury Avenue, is to launch an upmarket restaurant format this month, in Marble Arch. Hankies offers Indian tapas and specialises in roti – flatbread that is hand-spun until thin enough to read through, cooked on a roomali tawa, which resembles an upside down wok, and folded into “hankies” in front of customers. The concept is the brainchild of Anirudh Arora, whose dishes include bhindi bhel (crispy rice puffs with okra, sweet chutney, onions and fresh coriander). The flagship restaurant will be located in Montcalm Hotel in Berkeley Street and will be much larger than Hankies’ debut site, featuring glassware and china sourced from Indian markets and antique stores. It will also feature the addition of a tandoor oven, producing offerings such as skewers of prawns with chives and garlic, and chilli lamb chops marinated in Kashmiri chillies, paprika and mustard. The drinks list will feature cocktails and lassi.

Bea Vo, who founded the Beas of Bloomsbury chain, is to start expansion of her Butterscotch bakery concept by opening a second London site, this time in James Street. Vo, who launched a first permanent site for the concept in White City Place in November, will open Butterscotch Tea Room on Monday, 15 February. The venue will be split over two floors, the first housing a cafe dotted with footstools and window bench seating alongside Bea’s Goldilocks porridge bar, which launched at the White City site. A staircase will lead to an afternoon tea room adorned with white marble tables, while the venue will also offer breakfast and Jasmine Evening Tea that will include Bakewell fizz prosecco cocktails. Vo said: “I’m so excited to unveil a whole new space for afternoon tea. It’s my favourite British tradition and our take will put a modern spin on it. I want people to feel like they can come to Butterscotch for a good time, whether it’s a cocktail and a slice of cake or a full-blown affair with all the trimmings.” Butterscotch Bakery is part of Vo’s Feed Your Soul restaurant portfolio, which includes Stax Diner in Soho, southern US specialist Boondocks in Shoreditch, and burger bar The Famous Flames in Camden Town. Vo founded Bea’s of Bloomsbury in 2008 and left the company in 2014.

The number of UK distilleries has more than doubled in the past five years helped by a surge in gin sales, according to new research. Figures from HM Revenue & Customs showed there are now 315 distilleries in the UK, with 49 launching in 2017 and seven closing. In 2013, there were 152 distilleries in the UK – most of them in Scotland. England is the region with the most rapid growth, from 23 distilleries in 2010 to 135 in 2017, accounting for 56% of all UK openings in the past eight years. London alone now has 24. The Wine and Spirits Trade Association (WSTA) said the boom was down to what it dubbed the “ginaissance” – a surge in gin consumption. The gin industry across the on and off-trade in the UK in 2011 was worth £630m. Since then it has almost doubled to £1.2bn in the 12 months to September 2017, with gin in the on-trade alone worth nearly £730m in yearly sales. WSTA chief executive Miles Beale said: “There is a significant amount of investment going into the British spirits industry and the chancellor’s welcome boost is likely to see this trend continue into 2018 – as well as broadening out into new variations of English and Welsh whisky.”

Whitbread brand Bar + BlockWhitbread has signed to open a Premier Inn and a first northern venue for its Bar + Block all-day casual dining brand at the Milburngate development in Durham city centre. The 92-bedroom hotel, which is subject to planning approval, would be Durham’s second Premier Inn. Combined, the hotel and restaurant openings would create 75 jobs. They will join Everyman Cinemas and Marston’s Pitcher & Piano at Milburngate, which is being developed by Arlington Real Estate and the Richardson family to also feature luxury apartments and offices. Matt Aubrey, Premier Inn acquisitions manager for the north east, said: “Milburngate is a major part of the future of Durham city centre and we are excited to be part of it.” Whitbread launched Bar + Block in Birmingham in 2016 and has since opened sites in King’s Cross, Whiteley and Bath, with further plans to open a Nottingham venue. The main menu includes steaks that are hand-cut to order as well as a “butcher’s block”, a range of rotating specials, and an extensive drinks list.

Italian street food market Mercato Metropolitano has hit its £400,000 target on crowdfunding platform Seedrs as it looks to open further sites in London. The company is offering a 5.40% equity stake in return for the investment. So far, 132 investors have pledged £464,519 and the campaign is now “overfunding”. The largest investment is £190,000. Mercato Metropolitano opened its first site outside Italy in a disused paper factory in Elephant and Castle in July 2016. The free to enter, 45,000 square foot market attracted 590,000 visitors between November 2016 and July 2017. Now the company wants to expand the concept and said it has identified a number of potential new sites in London including one in Camden Market and another in Canary Wharf. The pitch states: “Mercato Metropolitano started with a pilot project in 2015 during the World Expo in Milan. Our first flagship site in London is where we started to refine our business model for expansion. Since January, we have seen an average month-on-month growth in gross sales of 18%, going from £342,000 sales in January to more than £900,000 in July, with an estimated footfall in July of more than 90,000 customers. We have identified a number of potential new sites. Among these is a development of more than 28,000 square feet within Camden Market and an 18,000 square foot space in Canary Wharf.”

Goodbody leisure analysts have argued UK hotels face a difficult year as economic uncertainty prevails. They said: “2017 proved a strong year for hotels in both Ireland and the UK, with high single-digit revpar growth in both markets expected for the full year. The Irish market continued to be supported by a significant undersupply of hotel stock and a strong domestic economy. UK hotels benefited from sterling weakness, which saw a surge in international business. However, there was a marked slowdown in UK revpar growth in the fourth quarter as the benefit of sterling weakness came to an end and supply continued to outstrip demand, mainly in London. Following the slowdown in revpar growth in the fourth quarter, we think 2018 could prove to be a difficult year for UK hotels given the continued surge in supply coming onstream and increasing concerns of a UK consumer downturn. Those who offer a value-for-money proposition in a price-sensitive market should be better positioned to weather a weaker macroeconomic environment, but are unlikely to be immune. Additionally, the industry will face well-flagged material cost headwinds over the next few years, namely foodservice inflation, National Living Wage and property cost increases, which should significantly affect hotel operators’ margins, in particular smaller operators who cannot implement cost-saving initiatives as well as bigger operators. This should cumulatively create a more difficult operating environment for hotel operators in 2018.”

Propel has partnered with Piper to conduct a survey to hear operators’ thoughts and experiences on food delivery and the effect it has on their business. The survey should take no more than ten minutes to complete and participants will be sent a copy of the research. All individual responses are confidential and data will only be viewed in an anonymous, non-attributable and aggregated way. Neither Piper nor Propel are compensated by any company to conduct the survey and will not sell individual responses or pass them to third parties. To take part in the survey, click here. The findings will be presented by Yasha Estraikh, of Piper, at the next Propel Multi Club Conference. The full-day event takes place on Wednesday, 7 March at the Grange Hotel in St Paul’s, London. Multi-site operators of pubs, restaurants and foodservice outlets can book up to two free places by emailing Anne Steele at

Supply Chain Masterclass, which will look at how to achieve best-in-class supply chain efficiency, is open for bookings. The one-day event, launched by Propel in partnership with Food Partners founder and managing director Campbell Askwith, will take place in the Fifth Floor State Rooms at 30 Euston Square, London, on Wednesday, 21 February. The event will pose the question: “Who should be responsible for a restaurant, pub or hotel group’s purchasing strategy?” Speakers will include Leon French, category procurement director at Brakes, who will look at the real impact of Brexit and other material factors that have influenced inflation during the past 18 months and provide a view into the future. Former Intertain chief operating officer and now sector non-executive director Simon Kaye will discuss the opportunities to speedily challenge practice and deliver projects and value by thinking laterally. Jeremy Ward, previously chief information officer for Kempinski Hotels and chief operating officer of Iris and now a cloud strategist with Cloudreach, will discuss the current trends in mobile technology and what you should be preparing for when looking to implement solutions and systems for your customers. Tickets are £295 for Propel premium members and £345 for others. To book, email Anne Steele on or call 01444 817691.

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David Bruce, NITAs 2007

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21st November 2017

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