Propel – capacity expansion, asset utilisation and organic growth will drive managed pub food sales: Propel managing director Paul Charity has forecast that managed pubs share of the eating out market will continue to grow, driven by capacity expansion, asset utilisation and organic growth. Share of the eating out market could grow to almost a third within a decade as companies put the UK’s pub stock to better use. Writing in today’s Propel Friday Opinion, he states: “The further growth of pub food will be underpinned by three main drivers. First is extra capacity. Whilst smaller pubs have seen net closure rates, large managed pubs have been in net growth every year since the recession. My calculation is that around 250 large capacity managed pubs have opened a year in each of the past three years. JD Wetherspoon, Mitchells & Butlers, Greene King, Marston’s and a host of independent multi-site companies have been opening new-build sites – or sites so transformed by capital expenditure that they are new-build in all but strict definition. The second driver is capacity utilisation. A lot of the UK’s pub stock was built big, with gardens to match. The last few years, in particular, has seen operators putting these assets to better use to capture food spend. Spirit Pub Company, for example, has set about transforming under-utilised but good quality community pub assets with branded food offers. It’s been a process of catch-up elsewhere in the estate, with Chef & Brewer, for example, modernised. Its major job-in-hand is to apply the same focus to its good quality leased estate. This expansion into food is being followed by tenanted operators. A host of tenanted operators such as Punch, Star Pubs & Bars, Greene King and Enterprise Inns are keen to apply capital spend to their larger assets in partnership with good quality multi-site operators (and independents) to capture food spend. Last but not least among the market share drivers is the motor of organic expansion. The current sales mix of many large managed pubs carried the legacy of over-weighted beer sales. The past 30 years have been a story of this legacy unwinding, propelled by an unfriendly tax regime. JD Wetherspoon is at least a decade away from gravity asserting itself fully here and arriving at a natural 50/50 food and drink split. Food sales have grown from 23.2% to 32.5% of sales in the past decade. The first half of 2013 saw a remarkable 13.4% jump in food sales. The company, as well as others, will know that this direction of travel needs to be pursued relentlessly. If growth continues along the current trajectory, managed pubs could well control one-third of the UK eating out market in ten years’ time.” (See separate Friday Opinion e-mail for the full article)

Hotel distress increases – as record numbers open: The number of hotels in financial distress has leapt almost fourfold in the past year, according to insolvency specialist Begbies Traynor. Its Red Flag Alert found that 2,512 hotels were in financial distress in the fourth quarter of 2012, up from 679 a year before. However, record numbers of new bedrooms are being opened across the UK. “There are more hotel bedrooms being developed in the UK than anywhere else in Europe, including Russia,” Richard Lewis, UK chief executive of Best Western, told The Financial Times. The latest forecast from PwC predicted room occupancy would remain at a “fairly healthy 70%” in 2013. However, it said average daily room rates would drop 1.2% to just over £58, with revenue per available room – a closely watched measure – down by 1.4% to £40.50, virtually the same level as in 2010.

Technomic - chicken with spice on the rise on UK menus: Research house Technomic has reported that spicy chicken is a growing feature on UK menus, with chilli-based rubs and sauces winning over diners seeking bold flavours - and a little heat in their meat. Technomic’s Christine Laface Grace noted: “Credit UK consumers’ growing appetite for curries that pack a little more punch than chicken tikka masala; credit the rising familiarity with and popularity of Mexican cuisine; credit even the cult-like following of Nando’s (Nando’s saw sales climb 9.1% in 2011 on unit growth of 8.0%). In any case, chillis’ heat on UK menus is undeniable: the incidence of “chipotle,” for example, on menus for UK concepts featured in Technomic’s MenuMonitor database rose to 82 in the first quarter of 2013 from 48 a year earlier. And “jalapeno” appeared on menus 191 times in January–March, up from 150 for the same period in 2012. Neutral-flavoured, food cost-friendly chicken offers an ideal protein platform for showcasing the vibrant flavours and colours of chillis from around the globe, from smoky chipotles (dried jalapeno peppers) to fiery piri piris (African bird’s-eye chillis).”

Eating out resurgent in Ireland with host of new openings: The past year has seen a resurgence of new openings in Ireland with almost a quarter of this year’s top 100 restaurants having opened in 2012. John McKenna, publisher of the Best 100 Restaurants in Ireland, said: “You are talking about 22 or 23 brand-new restaurants. I can’t recall a time when there were so many new names.”

Panmure Gordon strengthens leisure team: Panmure Gordon has strengthened its leisure team, currently led by Simon French and including Lindsey Kerrigan, with the addition of Karl Burns who joins from Shore Capital, where has worked for five years focused on the travel and leisure sectors.

Punch Taverns on track to meet full year profit expectations: Punch Taverns has reported an improvement in core estate like-for-like net income, which was down 3.5% in the second quarter, compared to a decrease of 5.2% for the first quarter. It reported its core estate of 3,000 pubs is 94% let, up from 91% at March 2012. It completed investment in 270 core pubs in the 28 weeks to 2 March at an average spend of circa £100,000 per pub. It sold 164 pubs together with other assets for £55 million, above book value and at a multiple of 18 times EBITDA. On its restructure, Punch said: “While discussions remain ongoing and a range of views have been expressed, the Board believes that a consensual restructuring can be launched in the first half of 2013.” Executive chairman Stephen Billingham said: “Our profit performance for the first half of the year has been in line with management expectations, with improving trends in the underlying business. We expect to make further progress in the second half of the financial year and are on track to meet our full year profit expectations. We are progressing with our discussions with stakeholders on our capital restructuring and while discussions remain ongoing, we continue to believe a consensual restructuring can be launched in the first half of 2013.” Analyst Douglas Jack, of Panmure Gordon, said: “First half profit before tax fell 21% to £26.2m, largely due to core estate like-for-like net income being down 4.5%. Nevertheless, we are upgrading our full year forecast by 6% to reflect debt reduction and an expectation of trading trends continue to improve. More importantly, management remains confident that the debt restructuring will complete by July.”

Oakman Inns to open Beaconsfield site next week: Oakman Inns and Restaurants, Eat Out Magazine’s Pub Company of the Year 2013 and led by Peter Borg-Neal, will open its latest site, Beech House, in Beaconsfield next Friday (12 April). The venue has been converted from a former shop in a £850,000 investment – it is thought to be the first new pub opening in Beaconsfield in several decades. Borg-Neal told Propel: “It’s quite a transformation from a what was a rather ugly shop front.” The company, which operates six sites, is due to open a site in Abingdon in late autumn when it has received planning consent. Oakman expanded last month by adding The Cook and Fillet, in Kingswood, Aylesbury, to its estate – it’s a pub opened last year by former Mill House inns chairman Bob Williams.

Itsu looks to appoint first creative agency: Itsu, the Asian-inspired food chain founded by entrepreneur Julian Metcalfe, is looking for a creative agency ahead of its first advertising and marketing campaign. Metcalfe, who founded sandwich chain Pret A Manger, has hired Oystercatchers to run the pitch process. He wants an agency to help get across the message that Itsu is no longer just a sushi place but rather an Asian-inspired, “healthy fast food” shop. Metcalfe, who is renowned for a hands-on to company marketing, wants to have the pitch process completed and an agency in place by May. Itsu was founded in 1997. It is predicting annual turnover of £55m by the end of 2013.

Enterprise Inns will not pursue Classic Carvery trial: Enterprise Inns has stated that it will not pursue its Classic Carver trial launched at The Star Inn in Winscombe last summer. The pub sold carvery meals for £4.19 and a buffet breakfast offer but reverted to higher prices and an a la carte menu last week. Enterprise has launched a Classic Carvery website which indicated pubs in Saltash and Alton would join the trial. The company told Propel that it would take the website down shortly after deciding against adding pubs to the trial, which was an extension of the Project Beacon scheme that takes greater control of the retail offer at tenanted pubs.

Cheshire Cat Pubs and Bars to open fifth pub in late May: Cheshire Cat Pubs and Bars, headed by Tim Bird and Mary McLaughlin, expects to open its fifth pub, The Church Inn in Mobberley, in late May – it acquired the freehold of the pub in January. The company stated: “We hope to add some bedrooms to the pub and we would also expect to take on functions and private dinner parties. The menu will be focused on lunch and supper and the wine list will be wider reaching. The aim is to offer a different experience to our wonderful Bulls Head and ensure Mobberley has two fantastic pubs famous for their people, their food and drink plus the differing occasions they offer.” Bird was formerly part of Michael Cannon’s management team that acquired companies such as Morrells of Oxford and Eldridge Pope. He was more recently managing director of Brunning and Price and the Freehouse Pub Company within the Restaurant Group. McLaughlin was formerly managing director of La Tasca and grew the Spanish restaurant chain from three to over 70 restaurants nationwide.

Friends tribute café Central Perk to open second site: Central Perk, a café that pays homage to comedy sitcom Friends, is to open a second site in Chester’s Bridge Street on 15 April. The first Central Perk opened in Hatton Garden, Liverpool, almost a year ago. General manager Clodagh Naylor said the café would show episodes of Friends. “Just like before we opened in Liverpool, we are seeing that Friends fans are still crazy about the show and cannot wait to visit.”

Barclays Capital – we recommend M&B as our preferred special situation, Marston’s for income and Enterprise as a risk play: Barclays Capital leisure analyst Richard Taylor has published a note setting out his key share tips. He said: “Given the context of terrible weather for pubs in the past quarter we have looked in detail at how the reporting season is likely to pan out. We do not believe there are clear winners and losers from the weather itself, but it will exacerbate the performance differentials and also reveal which companies have other levers to pull to meet full year earnings per share expectations. We believe that Mitchells & Butlers will produce the best results, with 6% growth in First Half profit before tax. Cost cutting from H2 of the 2012 full year should help margins. We forecast a weak First Half from Marston’s with a 9% decline in profit before tax. However, we expect a strong H2 as the back end weighted new opening program from FY12 should help accelerate growth in the second half of the 2013 financial year. We cut our Enterprise Inns full 2013 year earnings per share by 5%, as we believe it will not be able to overturn the first half‘s weak trading in the second half. Spirit is under pressure to deliver improving trading in the second half, given soft first half figures despite significant capital investment. This will be a challenge in the short term given the current trading period coincides with a weather affected March. The shares have already fallen 9% year-to-date, and we think it could be a challenge for the company to meet full year forecasts. Mitchells & Butlers is our preferred special situation, Marston’s for income, and Enterprise is our risk play. Many pub stocks are now trading at mid-cycle multiples, so it is harder to make the case for a re-rating, unless investor risk appetite increases further. Sector trading was actually worse in 2012 than 2011, but pub shares rallied significantly in 2012, with most stocks outperforming the market. Despite relatively strong trading in 2011, pub stocks materially underperformed the market.”

Cozy Pub Company puts Eight Bells on the market: Cozy Pub Company, the three-strong company headed by Leanne Langman, sister of Peach Pub Company founder Lee Cash, and former Orchid Pub Company operations director Paul Cutsforth, has put its original pub, The Eight Bells, Saffron Walden on the market with an asking price of £195,000 for the remaining 18 years of a 20-year Punch Taverns lease. Turnover is £850,000 per annum excluding VAT. Cozy Pub Company also runs The Cricketers Arms in Rickling Green and The Saracens Head Hotel in Dunmow, Essex.

Town and Village Hotels place Darlington site on the market: Town and Village Hotels, headed by Ed Walsh, has placed The George Hotel in Piercebridge, Darlington on the market. David Lee, of agent Christie + Co, said: “It is a popular venue for weddings and has a healthy number of bookings for the next 12 months and beyond. The hotel generates a good turnover in excess of £1m, which generates a profit of around £200,000.” The George Hotel is on the market freehold at an asking price of £1,500,000.

PizzaExpress set to open in Skipton: PizzaExpress is set to open in Skipton before Christmas. The restaurant will be the first business to open in the new £8.5 million Maple Grove Development scheme on the High Street and behind the town hall. Demolition of the former clinic building at 9 High Street has been carried out and the replacement building, partly containing PizzaExpress, is due to be completed by the middle of November.

Oliver to relaunch Hoxton Fifteen with new head chef: Jamie Oliver’s is to relaunch his flagship Fifteen restaurant in Hoxton later this month with a new head chef. Oliver said he hoped a revamped menu and refurbishment would “bring the restaurant back into its own” ten years after it first opened. He has recruited Jon Rotheram, a former sous chef at Fergus Henderson’s acclaimed St John Hotel, to run the kitchen and oversee the disadvantaged apprentices who are a key part of Fifteen’s not-for-profit training ethos.

Loungers set to open Woodley site in May: Loungers, the café bar concept headed by Alex Reilley and Jake Bishop, has begun work on a site in Woodley precinct on the outskirts of Reading in Berkshire - Bosco Lounge will occupy the site of the former Big Discount Store in Crockhamwell Road. Twenty jobs will be created when Bosco Lounge opens, with a provisional date set for Friday, 3 May.

Rainer Becker to open Shard restaurant in early May: Rainer Becker, who opened Zuma and Roka restaurants in London, will open Oblix, a dual dining experience on the 32nd floor of The Shard, in early May. It will offer a New York grill-influenced menu.

Cote secures two more sites: Leisure property agent Shelley Sandzer has acquired two sites for Brasserie chain Cote in York and Tunbridge Wells. The York restaurant will be the first the chain has opened in the north. It will be the 44th branch of the popular French brasserie chain, which is backed by Richard Caring. The historic city of York has an affluent catchment as well as being a major tourist attraction and popular University town. The York site is situated within the Walled City, and was the former Cafe Veranda on Low Petergate. Cote will occupy the entire 3,500 sq ft building at 49 Low Petergate on a new 20-year lease. It is expected to open in the summer. The Tunbridge Wells restaurant will be in the 3,000 square foot former Pigwidgeon and Pye premises.

New name for Italian restaurant threatened with legal action: A customer has come up with a new name for an Italian restaurant threatened with legal action. Italian ‘gastro wine bar’ VINeataly, at Granary Wharf, agreed to drop the brand after a big company with a similar name threatened to sue for brand infringement. The owners called on the people of Leeds to come up with a new identity. VINeataly’s new name ‘LIVIN’Italy’ was unveiled at the restaurant’s first birthday party on Sunday. The winning entry was submitted by Nick Barker, a regular client of both VINeataly and its sister restaurant Dive Italiana.

Freehold of Clapham’s Mongolian Grill sold off guide price of £475,000: The Mongolian Grill in Clapham has sold off a guide price of £475,000. The tenant has a lease running until December 2023 and pay rent of £34,000 per annum subject to rent reviews every three years. Said Michael Penfold, of agent AG&G: “It’s an attractive, period building in Clapham Old Town, so not surprisingly it generated a fair bit of interest. We had around a dozen offers in all”.

Britannia Hotels fined £160,000 over failure to protect diners from asbestos: Britannia Hotels has been fined £160,000 after exposing diners to the risk of inhaling asbestos dust during refurbishment work. It happened during a conversion of one of the wings of the Britannia Grand Burstin, in The Harbour, between February and July in 2010. Britannia Hotels admitted breaching safety regulations designed to minimise the risk of people being exposed to inhaling asbestos dust.

Poncho8 adds two new sites: Burrito brand Poncho8 has secured a further two sites in the City of London – venues are located on Devonshire Row, near Liverpool Street station, and on New Street Square, near Fleet Street. The company plans to expand to 20 sites by the end of 2014 – the latest two sites will see the company grow to five sites. The New Street Square and Devonshire Row sites are due to open on 25 April and 1 May respectively. Poncho8 opened its first site in 2008.

George Osborne pledges more support for pubs: Chancellor George Osborne has said support for the pub industry will not finish with the historic cut in beer duty. Speaking at a briefing at Marston’s brewery today, Osborne said he wants to help encourage more employment in the sector. He described the 1p reduction and axing of the beer duty escalator at this month’s Budget as “an important step forward but not the last word.” He said: “It’s not just the penny off we also cancelled the beer escalator but what I want to talk to the industry about is what we can do to help young people get employed in the industry, what we can do to help support British agriculture, which is where it all starts and what we can do to with the pub industry, which is where it all ends and the product is sold.” He refused to be drawn on an industry campaign for VAT in pubs to be cut. “We just had a Budget and I took the tax decisions on VAT and on duty that I thought were the right decisions but I am not going to start writing the next Budget. I think we got the balance right in the Budget and by specifically focusing the help on the beer industry, which had been under real pressure I think we were able to get the most bang for our buck. I want to congratulate Andrew Griffiths (Burton MP and Beer Group chairman) and other MPs who fought a really strong campaign and got their voice heard.”

JD Wetherspoon writes to auction house to express ‘concern’ over exaggerated trading information: JD Wetherspoon is writing to auction house Allsop to express its concern over marketing of a JD Wetherspoon freehold that exaggerates its trading figures. Allsop has claimed the Tally Ho in Finchley is one of JD Wetherspoon’s ‘best trading pubs in the Greater London area, producing approximately £35,000-£45,000 per week in turnover’. Allsop is seeking offers in excess of £2,370,000 for it. Wetherspoon chairman Tim Martin saw the information in an edition of Propel last week and has instructed colleagues to write to Allsop pointing out that the information is wrong. “The premises is not one of our best trading pubs in the Greater London area,” a Wetherspoon source told Propel.