City Diary: 17 January
Quick thinking by BBPA's Hayward
Deft footwork from Rob Hayward, chief executive of the British Beer and Pub Association, when he was asked - by MPs on the Tourism Select Committee last week - whether the pub trade was facing a "crisis" at the moment. The question came from Conservative MP Nigel Evans, someone who was fervently opposed to the smoke ban. From Hayward came a circumspect answer designed not to avoid stoking headlines: "It's serious but not a crisis."
Ways to get loaded at home
MPs and journalists on Radio Four's Today programme were entertained by two terms offered up by Hayward to describe drinking patterns in the post-reform era. Pre-loading - drinking at home before you hit the circuit - is one in fairly wide circulation. But there was a new one - post-loading. It describes the drinking session at the end of an evening out, using booze acquired from an late-night off licence. "It was coined by Jon Collins, chief executive of CGA." Hayward tells City Diary. Collins says: "I am the proud father of that one. Our survey last year showed 28% of people contiunue theier drinking at home now after a night out. It's because of the greater availability of offers in the off-trade and the fact that it's easier now to pick up alcohol at 2am."
Calling time on opco/propco
The Morning Advertiser reported in its last edition of 2007 that Laurel Pub Company made a loss of around £12m in its most recent year and gross profit margin dropped by 2% to 8.6% as rents, which are rumoured to be linked to RPI. increased. The report prompted one City analyst to e-mail the following: "The reality, long-known by seasoned operators, is that there is insufficient growth in the pub sector to support a totally-leasehold pub model. Asset stripping, attempting to value businesses on an Opco/PropCo basis, cannot be right if the model is unsustainable." Sometimes it feels like the tide has turned on this operating company/property company malarkey.
Jones in good company
What do superchefs Gordon Ramsay and Jean Christophe Novelli have in common with former Spirit boss Karen Jones? All three are Enterprise tenants. Ramsay's new pub in Chiswick, the Devonshire, Novelli runs the White Horse in Harpenden, Hertfordshire and Food & Fuel, Jones new company, is an Enterprise tenant by dint of buying Front Page's sites earlier this year - the Lots Road Dining Room in Chelsea is an Enterprise pub, incidentally. And how does Jones find Enterprise? "Absolutely great - seriously good," she says. "They're very commercial and very helpful."
The gamble with online casinos
In the search for new revenue streams, major pub companies like Punch and Admiral have been signing up with on-line casino operators. The agreements seem to offer licensees a cut of on-line losses racked up by their customers. Another pub company chief has a sensible-sounding explanation for why his company will not be taking this route. The company has rejected a tie-up because the schemes seek to "persuade people to play games at home".
Globe makes handy profit on pub
Robert Tchenguiz's tenanted business, Globe, continues to have a tough time, with beer volumes down by 7% during the sutumn. Better news, though, comes from individual site disposals. The company sold one pub during its most recent quarter for £3.2m, providing net proceeds of £1.6m after allowing for allocated debt. Handy.
Big changes for London Town
Big changes at AIM-listed London Town with the company becoming Punch's largest multiple tenant with the acquisition of GRS Inns and the departure of chief executive Mark Crowther. Interesting, too, that the company was off-loading four of its bottom-end pubs in the public auction market last month. The pubs, all of which appear to be boarded up to judge from the photographs attached to them, raised a total of £759,000, with three of them selling for around the £130,000 mark. It's a long way below the average estate freehold value of around £560,000.
Time to flash the cash?
Could depressed share prices at the start of 2008 represent an opportunity? Mark Sheehan, managing director of Coffer Corporate Leisure, certainly thinks so. "Those investors waiting to pick up cheap deals or "bottom fish" will simply find very little to buy. Rather than bargains there will be good opportunities for cash driven buyers. "Cash will become King" again - if you have the cash there will be opportunistic deals to acquire businesses and property at sensible prices rather than "trophy prices" being paid in early 2007. "Add the prospects of lower interest rates and I believe it's likely that the period of early 2008 could become viewed as a "golden period" to have bought." So there.
Talking sense on pub sector stock declines
It's been little short of astonishing to see sector shares plummeting to extraordinary lows in recent months. Good to hear Geof Collyer, of Deutsche Bank, applying a little common sense to the situation in a particularly impressive note last week. On the steep declines, Collyer points out: "The stock market likes to discount bad news, and when it hears it, to discount it again. "It will probably do so over the next few weeks, but at some stage, it will have to wake up to the fact that pub stocks just don't face the same sort of operational issues that the more geared retailers do. "Whilst we understand the need to find a floor, we feel that the market has disconteed the bad news so many times that it has gone way past any historical perspective."
Good things in small packages
Even the staff at little Brunning & Price (B&P) were clearly a little surprised when The Restaurant Group (TRG) snapped the company up last year. But the B&P website is keen to stress that TRG boss Andrew Page doesn't want to change a thing.
"It is the way we do things, and our people, that he has bought into," it states. "He would not have paid £32m just to acquire 14 more trading outlets, but rather believes that the unique Brunning and Price culture and style can help develop and enhance other parts of The Restaurant Group." It's good to hear, isn't it?
Money and speaking kit in alignment
Interesting to see JD Wetherspoon founder Tim Martin putting his money and his speaking apparatus in aligment. Sensing a bargain, Martin upped his stake in the company by 0.45% to 23.46% in four days by buying 935,127 shares in his own company for a price just £50,000 short of £3m. Martin paid £3.89 each for 250,00 shares last November. With Wetherspoon's share price riding high at 772p at one stage last year, Martin paid £3.33, £3.10 and £3.00 for tranches of 297,127, 315,00 and 325,000 shares last week. Shrugging off concerns about the consumer sloiwdown besetting companies' share prices, Martin had this to say about company prospects in the Morning Advertiser last week : "The forecasts may well become a reality. But if we can only do well in a boom, why did we ipen all these pubs?"
Luminar's reasonable results
After a period of frosty relations, Luminar boss Steve Thomas and City Diary are now the best of friends (almost). Last week, City Diary reported that Luminar's Oceana venue had seen a rent jump from £55,000 per annum to £150,000 a year. The Luminar grand fromage calls to report that the trading area was 30,776 square feet but it is now 40,921 square feet."Rent is now £150,000 per annum which equates to £3.67 per square foot," he says. "Very cheap, I am sure you agree. "The business has changed from the Event and now combines with Oriana's. It's two venues not one." We stand corrected.
