Easter like-for-likes down 3.8%, restaurants see 9.1% drop: It was an Easter break to forget for Britain’s managed pub and restaurant groups, with collective like-for-like sales down 3.8% on 2016’s four-day holiday weekend, according to the latest Coffer Peach Business Tracker. While managed pubs experienced only a 1% fall in like-for-like sales, restaurant operators in the Tracker cohort suffered a steep 9.1% drop in like-for-like performance over the extended weekend period, including Good Friday and Easter Monday, compared with last year’s holiday weekend. “It was not a good time for eating out, as within the pub figures food-led businesses were down more than their drink-led competitors, which actually saw a slight increase in trade,” said Peter Martin, vice-president of CGA Peach, the business insight consultancy that produces the Tracker in partnership with Coffer Group and RSM. “The weather will have played its part in the comparatively poor performance in restaurants but Easter falling late this year in April, rather than in March last year, will have been a factor too. However, there will be concern that the overall decline is not a sign of a tightening in consumer spending. Easter last year was wet and this year the weather was much better, so that would have favoured pubs over restaurants – the reverse was true last year. A late Easter also meant some school holidays fell before the bank holiday weekend, meaning some children will have gone back to school on Tuesday. This may have curtailed the urge for families to go out. There are a number of factors at work here and it has to be noted like-for-like trading in March was only down 0.5% on 2016’s numbers, even without the impact of Easter, which is usually a busy time for the sector. Operators will hope overall April sales will hold up, even with a disappointing Easter, and that trading will even itself up over the two-month period. We will know in a few weeks. However, there will be nervousness about consumer sentiment, with cost pressures hitting businesses and customers alike. We expect overall trading to remain fairly flat for the foreseeable future.” Last month, Coffer Peach reported an underlying annual sales trend for managed pubs and restaurants showed sector like-for-likes running at just 0.8% ahead for the 12 months to the end of March. Trevor Watson, executive director, valuations, at Davis Coffer Lyons, said: “Easter statistics are prone to variations around weather and time of year. Nevertheless, these figures indicate the UK consumer is starting to take a more cautious approach towards eating and drinking away from home. The pub sector is now seeing the benefit of being leaner than it has for some years, which contrasts with the restaurant sector.” Paul Newman, head of leisure and hospitality at RSM, added: “These latest figures highlight the tougher consumer environment for the eating and drinking-out sector. Since June, we’ve seen a significant drop in consumer confidence and this year’s Easter spending will have been impacted by the squeeze on household budgets due to rising inflation and relatively static wages. April’s results will give a clearer indication if the later arrival of Easter and the weather over the period impacted the figures significantly or if they are more representative of an accelerated slowdown. In the meantime, the government’s business rate relief fund is now available, which will offer welcome light relief to some operators.”

Host of operators sign up for Finance and Investment Conference: A host of operators and investors have signed up to attend the Propel Finance and Investment Conference. They include Buzzworks Holdings, Shepherd Neame, Chalk Valley, The Wright Brothers, Bone Daddies, Bath Pub Company, Risk Capital Partners, Business Growth Fund, Barclays Bank, My Lahore, Ei Group, Snug Bar, CBRE, Tamweel Capital, Bounce Ping Pong, We Are Bar, Arlo’s Restaurants, Inn Collection Group, Cambscuisine, Shanti Hospitality, Piano Works, Coaching Inn Group, Electric Star, Wells Group, Distinct Group, Vaulkhard Group, Knot Pretzel, Players Bars, Kheera Kitchen, and Relish Ventures. Speakers will include Darren Tristano, president of insights firm Technomic, who will look at the key criteria US investment firms are applying in the US foodservice market and make his pick of the most interesting emerging US brands. Andrew Ball, partner at sector accountants haysmacintyre, will set out the most tax-efficient ways to offer investment in a company and how to involve employees in a business by creating an employee shareholder scheme. Andy Laurillard, founder of Thai restaurant brand Giggling Squid, which attracted investment from the Business Growth Fund in 2015, will talk about the process of preparing to attract investment, his experience of talking to potential investors and the difference the Business Growth Fund investment has made to Giggling Squid. Click here to see the full programme. The full-day event takes place on Thursday, 11 May at One Moorgate Place, London EC2R 6EA. Tickets are £295 plus VAT for operators and £445 plus VAT for suppliers, while tickets for Propel Premium subscribers are £245 plus VAT. To book, email anne.steele@propelinfo.com or call 01444 817691.

Inspirational Leadership Masterclass open for bookings: The Inspirational Leadership Masterclass is now open for bookings. Propel has partnered with the UK’s leading thinker and teacher on multi-site foodservice management Professor Chris Edger and Tony Hughes, cited by many current industry leaders as the most influential figure in their career, for the event. Edger and Hughes will draw on their book, eMotion – how leaders mobilise positive feelings in super-performing teams, to outline the “ten moments of emotional truth” of leadership that separate the best from the rest. The event takes place in the Chartered Accountants Hall at One Moorgate Place, London, on Thursday, 8 June and Edger and Hughes will explain their book’s key proposition – that focusing on mobilising positive emotions lies at the heart of inspirational leadership. Gary Harris has been deputy chairman of British Rowing for almost 20 years – a period of unprecedented success – and will outline the ten key insights into coaching outstanding performances from teams and individuals. Writer and lecturer Dr Nollaig Heffernan, co-designer of the ILM72 psychometric test, will outline the key components that underpin mental toughness for inspirational leaders and how to incorporate them to overcome everyday stress and challenges. Click here to see the full speaker schedule. Tickets are £295 plus VAT for operators and £445 plus VAT for suppliers, while tickets for Propel Premium subscribers are £245 plus VAT. To book, email anne.steele@propelinfo.com or call 01444 817691.

Hotel management contracts becoming more complex as power of global operators grows: Hotel management contracts are becoming more complex as the power of global operators grows, according to a new report. While hotel lease contracts have traditionally been popular in Europe and continue to be preferred by many institutional investors, management contracts have become increasingly prevalent as many other investors have sought to share further in their hotel’s trading profit. At the same time, most major international hotel operators have become far less willing to offer leases. The nature of management contracts is becoming more complex, they are taking longer to negotiate and contain a wider variety of terms and restrictions, often requiring the assistance of a specialist advisory firm, according to a new report by global hotel consultancy HVS London. The report suggested that while owners have become far more knowledgeable in recent years, major global operators have also become larger and more powerful through recent consolidation and mergers and the acquisition of hotel operators in the industry, which might make it more difficult for owners to negotiate with them. Many owners have developed a greater understanding of hotel operations and become more sophisticated in their selection of operators and the negotiation of contract terms. As hotels are becoming more mainstream assets, a number of alternative operating models have emerged, including the growing use of third-party operator agreements, which offer more flexibility to the owner – usually for shorter periods and with a greater willingness of the operator for the contract to be terminated prematurely. Hybrid lease/management contracts are also becoming more common as are “manchises”, where hotel owners engage a branded hotel company to manage their venue for an initial period of time, after which the agreement converts into a franchise contract and the owner assumes management responsibility but retains the operator’s brand in exchange for an annual franchise fee. HVS London senior associate and report co-author Dayk Balyozyan said: “A well-negotiated management agreement should align the interests of both parties. As an owner, the major goals should be to select the management company that will maximise profitability, and therefore the value of the asset, and to secure the best possible contract terms ensuring the operator is properly incentivised to maximise the owner’s net income."

UK leisure attractions need to hone food and drink offer to entice rising numbers of staycationers: UK leisure attractions need to hone their offer, especially around food and drink, to appeal more strongly to the rapidly rising number of staycationers, according to a new report by business intelligence research consultancy Future Thinking. The Retail and Leisure Barometer, which features a detailed breakdown on how consumers spend their leisure budgets and what the key draws and barriers are for attractions, found 30% of people will stay in the UK for their main holiday this year, while 38% are planning at least a weekend break. The average leisure budget per person breaks down to more than one-third (35%) on eating and drinking out, followed by children’s activities (16%), evenings out (12%), hobbies (12%), days out (8%) and sporting events (6%). Cost (36%), lack of information (27%) and quality of facilities including food and drink (18%) were found to be the three biggest barriers to visiting leisure attractions more often. More than two-thirds (70%) of respondents see visits as a complete day out, earmarking a fair proportion of time and money for food and drink purchases, while three-quarters (75%) look for offers and discounts when planning days out. Future Thinking head of retail and leisure Noreen Kinsey said: “Staycationing is clearly here to stay, with almost a third of us planning to spend our main holiday in the UK. Visitor attractions should continue to look closely at their facilities, marketing and pricing to ensure they are offering the best deal. Whether it’s improving the food and drink, offering better parking or providing discounts to loyal customers, our research indicates a seamless, affordable and stress-free experience is a key priority.”

Just Eat strikes £10m-a-year sponsorship deal with X Factor: Just Eat has struck a £10m-a-year deal to be the new sponsor of The X Factor and will launch a nationwide “Chef Factor” hunt for takeaway cooks to star in its branded clips. Just Eat’s multi-year deal, one of the largest for a weekly British television show, includes sponsorship of The X Factor app and annual live tour. The move marks a major ramp-up of Just Eat’s marketing and advertising strategy following significant growth in its business after it swallowed Hungry House, its biggest competitor in the UK, for £200m in December. A fall in viewing figures for The X Factor, with last year’s final the lowest-rated in the show’s 12-year history, has failed to dent the value of the deal, although ITV was reportedly seeking up to £15m a year. Just Eat chief marketing officer Barnaby Dawe told IMDb: “It is a great fit for both brands as we each play a key role for millions of people every weekend. The partnership will give the business a fantastic opportunity to reach an even broader audience.” Just Eat has almost 28,000 restaurant partners serving more than 100 types of cuisine to nine million regular customers in the UK.

Corbin & King reports turnover and Ebitda boost at number of restaurants: London restaurant operator Corbin & King has reported a turnover and Ebitda boost at a number of its restaurants for the year ending 27 March 2016. The Wolesley saw like-for-like sales increase 1.5% to £12,564,000, compared with £12,384,000 the year before. Ebit before central costs was up 11.3% to £2,625,000, compared with £2,358,000 the previous year. Turnover at Brasserie Zedel increased 14.9% to £9,978,000 for the year ending 27 March 2016, compared with £8,681,000 the previous year. Restaurant Ebit before central costs jumped to £735,000, compared with £62,000 the year before. Turnover at The Colbert increased to £6,652,000, compared with £6,328,000 the year before. Ebit before central costs was up 21% to £1,067,000, compared with £881,000 the previous year. Following its first full year of operation, Fischer’s saw turnover increase to £3,074,000, compared with £2,590,000 the year before. Ebitda before central costs rose to £151,000 compared with -£439,000 the previous year. Losses narrowed to £318,000 from £646,000 and the company said it anticipated the restaurant would become profitable in this financial year. The Bellanger opened in December 2015 and reported revenue of £1,111,000 in its first three-and-a-half months of trading. Restaurant Ebitda before restaurant costs and pre-opening costs was a loss of £259,000. It made a net loss of £1,066,322. The Delauney saw revenue drop to £8,785,000, compared with £9,250,000 the year before following a fire in Kingsway that caused the restaurant to close for a week and severely disrupted the area for six months. Ebit before central costs fell 12% to £983,000, compared with £1,119,000 the previous year. The company said trading had now considerably strengthened. The accounts for the parent company Corbin & King Hotel Group are overdue, according to Companies House. Following a reorganisation in September last year, the ultimate parent company is now Corbin & King Holdings.

Adnams – ‘2017 will be year of substantial investment’: Suffolk brewer and retailer Adnams has said 2017 will be a year of substantial investment but profits will be hit by its closure of The Swan Hotel until the autumn for redevelopment. The company stated at its annual meeting: “Underlying trading is encouraging, with continuing strong growth in our sales of beers and spirits, notably Adnams Ghost Ship and Adnams Copper House Gin. Our enlarged estate of managed inns has traded well so far this year, as have our shops and our leased and tenanted pub estate. The sale of some of our smaller pub outlets has meant some decline in overall profitability from this part of the business. Second-half 2016 operating results were affected by the depreciation of sterling and by the impact of having sold the UK distribution rights for Lagunitas beers. These impacts have continued into 2017, which will be a year of substantial investment for Adnams. The Swan Hotel closed at the start of the year for a major renewal project that will see it transformed into a top-quality hotel celebrating the Adnams brand and its historic place in the centre of Southwold. Building works have been delayed by four months following the discovery of asbestos, the removal of which will add about £0.5m to the project cost, but our previous £6m estimate of the total cash cost of this project remains broadly correct. There will be an impact on 2017 profits, including our half-year out-turn, resulting from this important business being closed until the autumn. Our second substantial 2017 investment is the £7m project in our brewery, which is now close to completion. This will extend capacity and provide us with beer conditioning, filtration, enhanced cooling and an automated kegging line. Political uncertainties have become almost the norm in recent years and we now approach an unexpected general election. Nonetheless, Adnams has a firm commitment to the long term and we will continue to invest on that basis.”

Benugo extends John Lewis partnership with Aberdeen opening: Cafe-deli and restaurant operator Benugo has extended its partnership with John Lewis by opening a cafe in its department store in Aberdeen. Benugo has launched the site on the second floor of the store in George Street. It is the company’s eighth site inside a John Lewis store. The new cafe offers breakfast, lunch and daily specials, including salads and oven-baked dishes, as well as toasted sandwiches. There is also a wide range of cakes and scones, alongside speciality tea and coffee. Benugo is part of WSH, a holding company made up of six trading brands in the food and hospitality sector.

Soho House launches £200m, 252-bedroom London hotel The Ned featuring nine restaurants: Soho House has launched The Ned – a £200m, 252-bedroom hotel with nine restaurants and bars – in the City of London. The venue, a joint venture with US hotel owner Sydell Group, has opened in the former Midland Bank headquarters in Poultry, a grade I-listed building close to the Bank of England that was designed by Sir Edwin “Ned” Lutyens in 1924. Seven restaurants are in the former banking hall, including American cafe Penny, Millie’s Lounge serving British and American classics, Parisian outlet Café Sou, the Grill Room, which offers traditional trolley service, Soho House Italian brand Cecconi’s, Japanese grill Penny Yen, and New York-style deli Zobler’s. Total capacity for the restaurants is 1,400 covers. Rooftop venue Ned’s Club features a swimming pool, while Canopy Bar & Restaurant and the Vault Room lounge bar are housed in the basement. Soho House founder Nick Jones told the Evening Standard: “This is what I envisaged when we started four years ago. It’s been a hard, but hugely enjoyable journey. I really hope Ned Lutyens would be proud of what we’ve created. The Ned is aimed at everyone. What I mean by that is from a creative to a banker, and my mum for afternoon tea.” Jones founded the company in 1995 in Greek Street, Soho. It has since expanded to have “houses” around the world.

Hastings Hotels to invest £53m in Northern Ireland’s largest hotel: Hastings Hotels has confirmed plans to invest £53m in Northern Ireland’s largest hotel. The company has been given the go-ahead by the city council to increase the room numbers from 200 to 304. To be known as the Grand Central Hotel, the project is expected to create more than 150 jobs. Hastings Hotels has vowed to spend £53m on the revised project and chairman Sir William Hastings said it would represent the company’s largest single investment to date. He told Insider Media: “The Grand Central Hotel will be more than a hotel when it opens in mid-2018. It is a legend reborn and to celebrate this we have created a building wrap that will be changed at regular intervals before the hotel opens. It will help tell the story of the hotel as it is being built and pay tribute to some of the local companies we are working with and who are each playing key roles in helping Hastings Hotels create this major development.”

BrewDog launches Lone Wolf distillery: Scottish brewer and retailer BrewDog has launched its Lone Wolf distillery in Ellon, Aberdeenshire, featuring the world’s only triple-bubble still and an 18-metre rectification column, the tallest of any craft distiller in Europe. The distillery manages every aspect of its small batch production on-site – including distillation of its base spirit. Lone Wolf will also release its own pink grapefruit tonic and mint soda, formulated to pair with its gin and vodka respectively. There are also plans to extend the range to whiskies and other spirits, while packaging is a nod to moonshine gin producers, with 12 versions of the label conveying a different aspect of the “Lone Wolf attitude”. Lone Wolf managing director Doug Bairner said: “Lone Wolf is an apt name for a brand that stands alone in the industry as a custodian of purist, truthful production methods. To create a spirit that is pure of bloodline you need to start from scratch, so Lone Wolf Vodka and Lone Wolf Gin are created entirely under one roof. When three-quarters of the most popular pour for gin and vodka is made up of tonic, we can’t understand why no other spirits brands have developed dedicated mixers. Our mixers accentuate the unique flavour profile of our spirits – allowing us another dimension of control.”

TGI Friday’s lodges plans for Bolton site: TGI Friday’s has lodged plans to open a restaurant in Bolton. The company has applied to Bolton Council to open the venue at Middlebook leisure complex on the site of the current Next ladies store, creating 80 jobs. The restaurant would open in 2018, subject to approval, with Next planning to move to a new £12m superstore at the leisure complex on land bordered by The Linkway and Aspinall Way, reports the Lancashire Telegraph. A planning statement accompanying the application said: “TGI Friday’s would be an excellent restaurant offer to have at Middlebrook and would be complementary to the retail, restaurant and leisure uses that already exist.” TGI Friday’s operates more than 900 restaurants in 60 countries.

Jewish soul food trader Monty’s Deli opens permanent site in east London: Jewish soul food trader Monty’s Deli has opened its first bricks and mortar site, at a former bakery in Hoxton Street, Hackney, following a successful crowdfunding campaign. Mark Ogus and Owen Barratt, who launched the concept as a market stall in 2012, raised £50,000 in late 2016 on crowdfunding platform Kickstarter, with backers including The Observer restaurant critic Jay Rayner, celebrity chef Tom Kerridge and food writer Gizzi Erskine. Monty’s Deli is renowned for its chicken soup, and salt beef and pastrami sandwiches, with everything made fresh on-site. Available to eat in or take away, the counter will run a ticket-style service during breakfast and lunch. The evening menu consists of whole joints of hot pastrami or salt beef for the table; cholent – a traditional slow-braised brisket dish with bone marrow, potatoes and pearl barley; and beef and dill meatballs topped with pastrami-dripping breadcrumbs. A long bar offers seats where customers can watch meat being sliced and sandwiches prepared, with a baked goods section displaying pastries and guest bagel of the week.

TLC Inns opens sixth Grand Central site, in Thetford: TLC Inns, the award-winning pub and restaurant operator led by Steve and Jo Haslam, has opened its sixth Grand Central, this time in Thetford, Norfolk. The company has invested about £600,000 to open the venue at the new £8m riverside development in the town, creating 42 jobs. The 152-cover restaurant has a bar, booths and tables, and a 100-seat outside area. Steve Haslam told the Eastern Daily Press: “I get an offer a day to open a new unit. We have a tough selection process but what attracted us was the promise of how Thetford was going to develop and grow.” As previously reported by Propel, TLC Inns will launch seafood concept Fish & Co later this year. The company has acquired a riverside venue in Ely that formerly housed Ta Bouche restaurant, which is close to its Grand Central and Cutter pub sites in the Cambridgeshire town. The venue will undergo a major investment in the autumn to reopen as the first Fish & Co restaurant, with another site in the pipeline.

Fishmonger and restaurant Prawn on the Lawn moves into larger London site: Fishmonger and restaurant Prawn on the Lawn, which also operates a venue in Padstow, Cornwall, has relocated its London site to incorporate a new kitchen and more covers. Rather than cold seafood dishes only, Prawn on the Lawn customers can now select their fish from the front of the site and request how they want it prepared and cooked. Traditional styles of dressing, such as lemon, garlic and rosemary, are joined by Thai-style marinades such as kaffir line and lemon grass. New dishes, many from the Padstow menu, have also been added, including hake with paprika butter beans and coriander, and octopus with cuttlefish ink cannellini beans and chermoula, Hot Dinners reports. However, the menu will change regularly depending on the day catch from Cornwall. The venue in St Paul’s Road, Highbury East, also features a 20-cover private dining space. Prawn on the Lawn was founded in 2013 by Rick Toogood and wife Katie, opening their first site in Islington. In April 2014, the venue topped TripAdvisor rankings for London, beating the capital’s Michelin-starred chefs following rave reviews. The Toogoods opened their second site, in Padstow, two years later.

Five Guys to open Chelmsford site in August: Better burger brand Five Guys will open a site in Chelmsford in August. The company will open the venue in High Street as part of the redevelopment of a former NatWest bank into an enhanced restaurant quarter. The building, which is next door to YO! Sushi and Pret A Manger, is being revamped by developer Aquila Holdings and, as well as Five Guys, another restaurant will be delivered as part of the scheme. The Five Guys restaurant, which will be the company’s third in Essex, will open on Monday, 21 August. Five Guys UK chief executive John Eckbert told Essex Live: “Chelmsford High Street is a bustling area full of vibrancy and activity so we are looking forward to Five Guys becoming a hot spot for local residents to relax with good food.” Five Guys, which was founded in Virginia in the US in 1986 by the Murrell family, has 61 restaurants in the UK having opened its first in Covent Garden in 2013. Its other Essex sites are in Harlow and the Intu Lakeside shopping centre in Thurrock.

Team behind Sebright Arms and Bunsmiths to open all-day restaurant in Hackney: The team behind the transformation of East End pub the Sebright Arms and buns concept Bunsmiths is to open an all-day restaurant in Hackney. Charles Ross, Richard Temple and Jamie Hempseed will launch The Vincent in Dalston Lane next month. The Vincent will offer a 50-cover restaurant downstairs with seating for 20 upstairs. It will also have a 50-cover terrace. The all-day menu, led by head chef Rob McMillan, will feature local salads available to eat in or take away packed with rice and grains such as smoked hoisin crispy duck with peach and pomegranate. Items from the Bunsmiths menu will include burgers and fried chicken. On weekday mornings, pastries and coffees will be available to go, while weekend brunch will feature home-smoked meat and fish, baked eggs and waffles, with low and slow-cooked ribs on the Sunday lunch menu. The drinks list will feature local brewers, including Hackney-based Five Points and Pressure Drop, as well as herb and fruit-infused syrup cocktails. Ross said: “The Vincent is about bringing together the best bits of what you want from your local restaurant, from grabbing a pastry for breakfast to enjoying a long brunch with friends or a burger and beer after work.” Since selling the Sebright Arms, the team has relocated Bunsmiths to The Miller, near London Bridge.

Stonegate to reopen former JD Wetherspoon pub in Leamington Spa next month: Stonegate Pub Company will reopen a former JD Wetherspoon site in Leamington Spa, Warwickshire, next month following a £400,000 refurbishment. Stonegate completed the purchase of the Jug & Jester earlier this week and is now revamping the Bath Street property. It will reopen on Monday, 22 May as The Old Library – a nod to the building’s history. The pub was originally Leamington Spa’s first library before turning into a theatre and most recently the Jug & Jester. Stonegate agreed to buy the site from JD Wetherspoon in February along with the Robert Ransom in Ipswich. The Old Library’s new manager, Ange Sinclir, told the Coventry Telegraph: “It will have the quirkiness synonymous with the town’s culture while reflecting traditional pub values, which is why we chose the name The Old Library – a nod to the pub’s history. It will have music, quality pub food, craft and cask ale, and sport. We’re telling customers to expect something different.”

Aberdeenshire-based operator CranberryCo opens sixth site: Aberdeenshire-based operator CranberryCo has opened its sixth site. The company, owned by Mark Cavanagh, has launched the Clachan Grill in the village of Ballater following a £350,000 investment. The restaurant, in the former La Mangiatoia premises in Bridge Square, offers a menu of modern Scottish cuisine with a strong focus on seasonal food and local produce. Cavanagh told the Aberdeen Journal: “This is CranberryCo’s sixth unit and we have invested £350,000 to bring a former restaurant back to life and create local jobs. We have created a traditionally decorated dining room with a Scottish country theme. CranberryCo also operates Aberdeen venues The Adelphi Kitchen, Angus & Ale, The Red Lion, Fusion Bar + Bistro and the No1 Bar & Grill.

Festival specialist Saucy Chip opens permanent Fitzrovia site: Festival and pop-up specialist Saucy Chip has opened a permanent home in Fitzrovia. The company has started selling its gourmet chips at the Jerusalem Bar and Kitchen in Rathbone Place. Chip offerings include The Italian Job (with fresh basil, pesto mayo, mozzarella, cheddar, and basil and parmesan crumb), and Chippy (curry chips in katsu curry sauce), Hot Dinners reports. The venue also offers burgers, fish balls, hotdogs and popcorn shrimp on the menu, alongside a sauce bar with 20 sauces and desserts such as knickerbocker glory and a death by chocolate brownie.

Peel Hunt’s Douglas Jack issues hold recommendation on Wetherspoon shares: Peel Hunt leisure analyst Douglas Jack has issued a ‘Hold’ recommendation on JD Wetherspoon (JDW) shares ahead of its quarter three trading update on Wednesday (3 May). Jack said: “On 10 March, management were cautious in relation to like-for-like sales and rising costs over the next 12 months. However, to help offset this, we believe the company increased prices by circa 3% in early March. We view this as being a positive development that should limit the widely expected decline in profits in the second half of 2017E. Like-for-like sales rose by 3.4% in the first half, versus a 2.9% comparable, but management expects them to slow to 1-2% in the second half, partly due to a tougher comparable of 3.9%. We forecast 2.2% like-for-like sales in the second half, anticipating March’s price increases stick against a backdrop of on-trade competitors also raising prices, and supermarket prices rising by 5.3% for beer (partly due to higher duty) and by 1.2% for food following food and beer price deflation in 2015 and 2016. Ebit margins rose by 187 basis points in the first half, boosted by price increases, lower utility costs, tail-end pub disposals and less taxation. JDW expects second-half margins to fall by 60 to 160 basis points due to £60m of cost inflation over the next 12 months and tough like-for-like comparables. We estimate like-for-like sales need to rise by circa 4% to offset cost inflation. Hence we forecast margins falling by 140 basis points in the second half. JDW’s costs are predictable and it is very good at communicating its regulatory and taxation cost burden. Pricing, through being less predictable, is the key to estimating JDW’s margins, which have become correlated to forecasts and the share price, supported by expectations that consumers will accept price increases. JDW increased its average drink price by 4.3% in the third quarter of 2016; we should have an accurate figure for the third quarter of 17 within two weeks. We view our £87.4m profit before tax forecast as being very achieveable (consensus is £86.0m). To meet our forecast, the company needs to make £36.6m of profit before tax in the second half, down from £43.1m in the second half of 2016. Equating to a £10m fall in Ebit in the second half, this requires £2m of savings from selling unprofitable units and efficiency gains. Net debt should be 3.8 times this year, versus 3.6 times in 2016 and a 3.0 times historical average. This increase assumes just 15 openings but also freehold reversions, £20m of working capital outflow and £35m of share buy-backs. In our view, JDW’s rating is full, at 9.6x EV/Ebitda versus a 7.4 times ten-year historic average, although the cost of debt is lower (4% versus 7%) and the estate quality is higher (54% versus 44% freehold, with the sales mix improving as accommodation rises and machine income falls). We do not envisage much earnings growth in 2018E and 2019E due to further cost inflation, disposal benefits slowing, and the cost of debt rising to 5% in 2019E.”