JG&Partners, Mid November Licensing updates
This week the Gambling Commission launched a new consultation regarding the regulatory returns operators must submit each year. The consultation proposes changes to the information that operators will be required to provide. The changes cover a range of issues including gaming machines and underage gambling. A link to the full consultation can be found here. The consultation windo…
Community Alcohol Partnerships 2016 Impact Report was issued on 14 November 2016 at the start of Alcohol Awareness Week, and shows how CAPs are having apparently significant impacts on crime, anti-social behaviour, litter, feelings of safety and reductions in underage purchasing of alcohol in CAP areas.
Cornerstone Barristers is reporting the latest development in the long running Hemmings saga which deals with the recoverability of enforcement costs by licensing authorities. [R(Hemming & ors) Westminster City Council] On 16 November 2016 the Court of Justice of the European Union delivered judgment in favour of the licensees. The United Kingdom Supreme Court had ref…
Liverpool City Council have revisited the adoption of the Late Night Levy, which had been rejected in March of this year. On this occasion the vote was in favour of adoption for premises operating beyond 12 midnight. The Levy is to commence in April. The adopted Levy contained significant revisions to that previously tabled, in particular an exemption for those premises in the Business Improve…
Further to our previous news on this subject (”Local Alcohol Action Areas’ announced’) the Home Office is canvassing for expressions of interest in participating in a second phase of this scheme. The first phase ran to March 2015 and case studies from that phase can be found in the document below. Some 40 places are available in this new roll out. Local Authorities interested shou…
Last Tuesday, partner John Gaunt appeared before the HoL Select Committee on Licensing. Also giving evidence at the 45 minute session was Professor Roy Light and Andy Grimsey of PA. The anticipation proved rather more daunting that the session itself! Topics covers included an overview of the effectiveness of the 2003 Act; consideration of the performance of licensing sub-committees; th…
Licensed Industry News, November 2016
If you would like to read the latest Industry News and Corporate Activity, please click on the following link http://www.propelinfonews.com/selecttemp.php, before 9.00 am for yesterdays News, click on the link after 9.00 am for latest Weekday’s News
PUB, RESTAURANT & DRINKS PRODUCERS:
ENTERPRISE INNS – ANALYSTS’ MEETING:
• Following the release of its FY numbers to end-September, Enterprise Inns hosted a meeting for analysts and our comments are set out below:
• See earlier email. All models, all regions and all quarters saw like-for-like growth in FY16
• The market, overall, is ‘more stable’. In addition, the regulatory uncertainty surrounding the MRO has now been cleared up
• Absolute EBITDA was down only marginally despite a 4% drop in the number of pubs owned
• All options – disposal, move to commercial leases, move to managed or move to short-term tenancies – have proved to be accretive to earnings
• That said, the MRO has been and is being disruptive
• New lettings were delayed for the same reasons as those outlined by Punch Taverns last week. This should only have a temporary impact
• Admin costs rose from £37m to £40m and will rise to c£42m this year – this is due to the enlarged infrastructure demanded by the new business model(s)
• Unplanned business failure numbers are down once again to only 1.6% of the estate. Only 59 pubs are currently closed
• There will be some cost pressures coming through. Prices may have to rise at some point
• Group is now 18mths into its new strategy
• Group reiterates this strategy (return to growth in tenanted), expansion of managed model, debt reduction, remains firmly on track.
• ETI no longer offers longer term tied leases.
• It may take pubs over to manage them at lease-end
• Around 94 (of a possible 285) pubs that have had a ‘trigger event’ have enquired about free-of-tie alternatives. None of these have yet concluded.
• Balance sheet, cash flow & other:
• The capital markets are ‘open to Enterprise’ & the group has pushed bullet payments out to the right
• In addition, it has paid down the absolute amount of debt outstanding by some £122m
• Debt to EBITDA has fallen from 7.8x to 7.5x. Punch Taverns stands at 6.6x.
• The share buyback (£25m is on the cards) is testament to the fact that cash is not the problem that it was in the wake of the smoking ban, the credit crunch & the recession
• Langton Comment: Enterprise has reassured on trading & says that it has the breadth of offer, tenanted, longer-leased, commercially-leased or managed, to suit all its pubs. It still sees itself owning around 800 managed pubs, c1,000 commercially tenanted pubs and 2,400 traditionally tied units.
• The group is on track & its shares are cheap. However, in the absence of a catalyst (a ‘tipping event’), investors may need to be patient.
• Overall, a PER (and Langton acknowledges but does not completely agree with the suggestion that one should look at EV/EBITDA measures) of little more than 5x earnings does seem somewhat grudging for a company that is doing pretty much everything right.
• The ALMR has written to Chancellor Phillip Hammond calling on him to actively support the pub industry in his Autumn Statement on 23 November. The upcoming business rates revaluation has proven to be a particular bone of contention as it will disproportionately hit the hospitality industry due to turnover-based valuations. The ALMR is consequently calling for an ‘urgent review’ of trading provisions questioning the subjective element of ‘fair maintainable trade’ pub assessments.
• A study of more than 80,000 Chinese adults by Pennsylvania State University suggests that moderate amounts of alcohol can cut the risk of stroke and cardiovascular disease. Quarterly blood samples allowed researchers to measure participants’ high-density lipoprotein (HDL) – aka ‘good cholesterol’ – as well as liver function and inflammatory markers. Moderate drinking appeared to slow the natural decline of HDL levels.
• Fuller’s flagship pub, The George IV, on Chiswick High Road is once again hosting the switch on of the Chiswick High Road Christmas lights on 24 November at 5.30pm. The switching on of the lights will be led by Fred Turner, Fuller, Smith & Turner’s Head of Tenanted Operations, and is in partnership with the London Borough of Hounslow.
• Lancashire pub group Thwaites has posted a 5% rise in turnover to £44m on continuing operations although profit before tax was down due to interest rate swaps and pub investment.
• Kantar Worldpanel data show Tesco has continued to grow its grocery market share, accelerating at its fastest rate in three years of 2.2% in the 12 weeks to 6 November. This handily beats overall grocery market growth of 0.8%, bumping the UK’s number one up to 28.3% of the market, with much of the growth driven by own-label brands at the cheaper and more premium ends of the price spectrum.
• UK’s major supermarkets reported to have cut petrol prices by 3p per litre in attempt to attract pre-Xmas shoppers
• The BBPA has urged Cheltenham Borough Council to abolish its Late Night Levy and continues to support the existing local Business Improvement District (BID). The British Beer & Pub Association proposes that the Late Night Levy unfairly disadvantages pubs, many of which are small, independent, and contributing positively to the night-time economy. For such businesses, the Late Night Levy can represent a significant imposition.
• Brigid Simmonds, Chief Executive, British Beer & Pub Association, comments: ‘Cheltenham implemented a Late Night Levy in 2014, but have found it has failed to reach expected revenue targets, raising less than 39 per cent of the £199,000 figure that had been predicted in the first year. It is right, therefore, that they look again at the Levy…
• ‘…We will continue to oppose Late Night Levies, campaigning against them wherever they are proposed. We’ve already seen several big city councils, such as Leeds and Bristol, abandon their Late Night Levy plans, and it’s encouraging to see that Cheltenham is looking to do the same.’
• Recruitment agencies are warning restaurants that they will not be able to provide enough chefs to meet demand this Christmas due to an ongoing skills shortage. Restaurants are facing a ‘real headache’, according to the findings of a survey by the Recruitment & Employment Confederation (REC), which shows 61% of respondents say they do not have enough chefs over the festive period and just 18% believe they have sufficiently skilled chefs.
• REC chief executive Kevin Green said the statistics were a real worry, not just for Christmas but beyond and warned that if not addressed it would have implications for the future of the industry. ‘Training and progression needs to be improved so that more people are encouraged to become chefs. That’s a longer term fix, but there’s an immediate skills crisis which needs to be addressed. Any restrictions on access to chefs from the EU, such as a salary threshold for work visas, will only exacerbate the problem.
• ‘Without a supply of chefs to meet growing demand, restaurants, bars and hotels will have to pay more for their staff and it’s likely that these costs will be passed on to the customer. We may even see restaurants close their doors if they can’t remain competitive and profitable.’
• Council of Mortgage Lenders says mortgages are now more affordable than they have ever been. Says first time buyers spend c17.7% of monthly income on mortgage repayments. Not sure the same would be true if rates rose to 6, 7 or 8%.
• CML points out 2yr fixed mortgages can be had for as little as 0.99%. Fine if you can pay the loan back in 24mths.
• Morrison’s has launched a service at Amazon. Orders will delivered same day by Amazon. Costs will be £6.99 for a 1hr slot or in a two hour slot for free. Morrison’s reports ‘as food maker and shopkeeper, we have unique skills to help build a broader new Morrisons through capital light growth. ‘Morrisons at Amazon’ is another exciting joint opportunity and makes Morrisons good quality, great value-for-money products available to even more customers.’
• Questions may be raised as to the ongoing nature of Ocada’s relationship with Morrison’s
• Trade bosses have warned that pubs could be in for two tough years of trade after Article 50 is triggered and the UK leaves the European Union. Potential issues include more difficulty in recruiting staff and lower disposable income, according to industry figures invited to accountancy firm Weller’s roundtable in London. Other issues discussed included the national living wage and business rates.
• The Campaign for Real Ale has called on the UK government to freeze beer duty ahead of the Autumn Statement to slow the rate of pub closures across the country. ‘UK pubs and breweries are facing a great deal of uncertainty in these times of economic uncertainty,” said Colin Valentine, CAMRA national chairman. Pubs in particular are facing significant cost burdens, including business rates, pension auto enrolment and increases to the national living wage. Coupled with UK beer drinkers paying significantly higher duty on their pint than other leading beer drinking nations, at 52.2p on the pint, we are seeing a significant shift from people drinking in pubs to people drinking at home.’
• The secretary of state for the Department of Business, Energy and Industrial Strategy (BEIS) has backed Paul Newby as the pubs code adjudicator. Greg Clark said he disagreed with a letter from the chair of the BEIS committee that the appointment process for the PCA should be reopened, adding: ‘The appointment process was run in accordance with the code of practice for ministerial appointments to public bodies. As part of the appointment process, the panel considered whether Paul Newby has conflicts of interest that might call into question his ability to do the job and concluded he did not.’
• Heineken has set up a new ‘Brew House’ brand that will be listed as a separate retail outlet on Deliveroo, which will sell Heineken, Birra Moretti, Kronenberg, Amstel, Old Mout, and Bulmers.
• Research from The NPD Group shows that the market share for branded food to go has taken market share from independents. NPD’s research shows that the market share for brands versus independents in terms of number of visits was 43% to 57% eight years ago, but has now nearly reversed as of the year ending (YE) September 2016 with the brands leading at 56% to 44%.
• Camelot has announced a 5.8% fall in first half National Lottery sales to £3.39bn, generating a direct returns to Good Causes of £783m.
• Moody’s reports AB InBev Debt Swap Offer is Credit Positive as regards SABMiller Debtholders. It says the bonds will be converted into new ABI notes and benefit from ABI’s guarantees.
• Shrinkflation. It’s a new thing. Suppliers can say that they’re not putting prices up. Consumer price warriors, beware
• Majestic H1 sales +13%, dividend reinstated. Back in profit, just. LfL at Majestic +5.7% with Naked +26.7%. Group says ‘the transformation plan to deliver future sustained growth in shareholder value is on track. The investments we have made are working, our lead indicators are improving and sales are growing.’
• Majestic. Says ‘we reiterate our goal of £500m annual sales by FY19.’ CEO Rowan Gormley says ‘our plan is working. We said that we would deliver sustainable growth, not by opening more stores, but by investing in better customer service and better customer retention. Both of these are working – sales are up over 10% and the projects driving that sales growth, like nationwide next day delivery, are on time and on budget. Now that we have built a solid platform for future growth, future cost growth will be much lower.’ Mr Gormley concludes ‘we are reiterating our commitment to hitting our goal of delivering £500m sales by 2019, and we believe that will translate into healthy profit growth now that the step change in investment is complete. We are reinstating the dividend as a signal of our continued confidence in the plan.’
• Majestic Wines is ready to raise prices in 2017 if necessary to combat the weak sterling and a potential duty rise.
• The VAT Campaign, BBPA and ALMR all agree that Brexit could free the UK up to reduce the unfair levels of VAT faced by the hospitality industry.
• Last weekend’s televised sport boosted beer sales in UK pubs, per Vianet, whose iDraught system provides detailed breakdown of pint per hour consumption. England’s victory over Scotland at Wembley on 11 November saw sports pubs enjoy a 5.8% increase in sales versus the same day last year, while the match at Twickenham on Saturday 12 November saw a 4.1% increase in beer sales on the same day last year for sports pubs, with non-sport focused pubs registering a 1.98% increase.
• Innis & Gunn is extending its crowdfunding investment opportunity after reaching £1m target in just 72 hours.
• Asda must be wishing for sales to return to the heady heights of its August 2015 ‘nadir’ after posting another big slide in Q3 earnings (-5.8% in the three months to September). New chief executive Sean Clarke, who took over on 11 July, said: ‘We have lowered thousands of prices, improved hundreds of own-brand products and invested in more hours for colleagues on the shop floor – so it’s encouraging to see more customers shopping with us in stores and online.’
• McDonald’s is to roll out in-store mobile ordering as well as extending its table-service offer to boost growth. CEO Steve Easterbrook reports ‘ordering should be the most enjoyable experience but at McDonald’s it can be one of the most stressful points in time.’ He continues ‘bringing out service staff on to the dining floor does change the atmosphere.’
• Tesco boss Dave Lewis has warned suppliers not to try to push through ‘illegitimate price increases’. Definitions unclear. The FT reports Lewis as saying ‘we buy virtually everything for our own label so there isn’t an ingredient or a commodity out there that we don’t have very good insight into.’ He adds ‘we’re naive to the fact that there’s inflationary pressure. You see it already in some categories. Pork has been affected much sooner.’
• Sodexo yesterday reported FY numbers to end-Aug 2016 saying revenues rose by 2.2% & organic growth was +2.5%. The group said its on-site organic growth was +2.4% ‘despite a tough economic environment in Remote Sites and a difficult situation in France.’ CEO Michel Landel reports ‘Sodexo continues to grow as a result of solid growth in North America, the UK (On-site Services) and Benefits and Rewards Services. We achieved this growth despite a tough environment in the commodities markets affecting the Remote Sites business and the impact of a difficult situation in France.’ He concludes ‘we are confident in the future, and for Fiscal 2017 aim for around 3% organic revenue growth and between 8% and 9% growth in operating profit, excluding the currency effect and exceptional expenses of the Adaptation and Simplification program.’
• UK retail sales growth jumped to a 14-year high in October as colder weather boosted clothing sales and pushed the seasonally adjusted volume of sales up 1.9% month-on-month. Total volumes were 7.4% higher than the same month a year ago — the fastest annual growth since April 2002, and far higher than had been expected. Sales were boosted by strong growth in clothing and footwear as the end of unusually mild autumn weather — two degrees Celsius above normal — encouraged people to invest in winter clothing.
• USA same-store restaurant sales fell 0.6% in October in what proved to be the worst month for the restaurant industry in more than three years, per the latest MillerPulse survey. Same-store sales were weak for both the quick-service and casual-dining segments, which registered a flat performance and a 1.4% fall respectively, with an emerging trend of weak traffic appearing to drive the numbers.
• Frozen food suppliers claim Brexit is ‘bad for business’, with 68% of BFFF members voting that it will have a negative impact.
• Poor harvests of olive oil looks set to raise prices for shoppers after Christmas.
60 Seconds on Rising Interest Rates, Inflation, etc.
Inflation is coming – who stands to lose out?
· Interest rates have been kept at 0.5% since January 2009 (even falling as low as 0.25%), distorting the markets
· Crowdfunding has also played its part wrt excess funding; AltFi research shows that of the 751 companies that have crowdfunded on the UK’s largest platforms, some 88 have gone bust with another 79 suspected to have suffered a similar fate.
· Meanwhile, a further 34 have undergone a painful downround, suggesting that the probability of a negative outcome for the average retail crowd-funding investor is a considerable 26.7%.
· This has driven several important trends in Leisure
· Cheap money has been one of the primary drivers of estate growth
· This may soon change as inflation works its way through the economic system and interest rates rise
A rising tide lifts all boats…
· Fast-expanding diners and bar chains might consider whether the thermals of low interest rates have allowed them to fly too close to the sun
· Similarly, hotel markets such as London that have seen persistent excess capacity trends might question whether the party’s over
· A whole generation of operators who have not known anything other than today’s macro environment might be in for a rude awakening.
· Supply pull, not demand push, appears to be driving sales growth.
· Incumbents who have seen it all before, meanwhile, might now be looking at the timing of their roll-outs and whether a period of retrenchment is on the cards.
ALMR News Press Notice
Cheshire East’s common sense a welcome approach, says ALMR
The ALMR has welcomed the decision not to introduce either a Late Night Levy or Early Morning Restriction Order in Cheshire.
Cheshire East Council’s Licensing Committee met this week and decided against introducing either measure following a recommendation from the Council’s Licensing Working Group last week.
ALMR Chief Executive Kate Nicholls said: “This is a very welcome decision from a local authority that has seen the benefits of focusing on partnership schemes and giving its local businesses a chance to thrive.
“The ALMR has been the only national trade body to consistently campaign against the blanket introduction of punitive measures such as the Late Night Levy and EMRO that would undermine growth and investment in communities across the country.
“The Government’s own guidance on introducing these measures states that they should only be considered as a last resort, when all other measures have been exhausted. The decision not to introduce these measures on a whim, and to investigate partnership and voluntary schemes in the first instance, shows a degree of common sense that other councils would do well to match.”
ALMR welcomes Night Czar appointment
The ALMR has welcomed the appointment of the new Night Czar and has reiterated its eagerness to work closely with City Hall to promote the capital’s late-night hospitality businesses.
Mayor of London Sadiq Khan has appointed Amy Lamé, former Mayor of Camden, as the inaugural Night Czar for the capital.
ALMR Chief Executive Kate Nicholls said: “The Mayor has spoken very positively about his vision for a 24-hour city and we are pleased to see him acknowledging the importance of the capital’s night-time economy.
“London is renowned as a world destination and it is important that its night-time economy is at the cutting edge, not just in terms of infrastructure, but also through a hospitality offering that promises the best for customers and a legislative environment that lets businesses thrive.
“Amy has previous experience working as the Mayor of Camden, an area of London renowned for its thriving hospitality sector and the success of its partnership schemes including the Camden BID. We are looking forward to working closely with the Mayor and our new Night Czar to promote London’s first class late-night hospitality offering and to push for a fair and flexible deal for the businesses that make it such an important part of the capital’s economy.
Latest Licensed Industry News
If you would like to read the latest Industry News and Corporate Activity, please click on the following link http://www.propelinfonews.com/selecttemp.php, before 9.00 am for yesterdays News, click on the link after 9.00 am for latest Weekday’s News
PUB, RESTAURANT & DRINKS PRODUCERS:
• Visa’s UK Consumer Spending Index shows spending +2.4% in October versus the same month a year ago.
• Visa says UK hotels, restaurants & bars see strongest y-o-y spending growth vs all other sectors at +9%. Spending on clothing & footwear was +4.7%.
• Visa says eCommerce spending in Oct was +4.3% y-o-y but face to face spend was only +1.8%. Transport spending was down 1.4%.
• Visa reports ‘consumer spending growth rose to a 6mth high in October. Talk of potential price rises does not appear to have dented consumers’ confidence, with spending up 2.5% on the year, on a par with pre-referendum levels.’ It continues ‘the experience economy continued to fuel this growth. Hospitality and leisure were the best performing sectors once again, boosted perhaps by the half term break and Halloween, with a noticeable increase in spend on food and drink. We’ve also seen two strong comebacks this month. Clothing and footwear bounced back strongly from a disappointing dip in the previous month, up 4.7% in October, and the highest level of growth since September 2015. New season stock, combined with a chilly start to winter created the perfect conditions for the high street to rebound from last month’s flat line.’ Visa concludes ‘as we get closer to the all-important Christmas trading season, it will be interesting to see whether the strong momentum in October continues into Black Friday and beyond.’
• Sunday Times has beer prices rising by up to 30p per pint on the back of NLW, input and business rates cost increases
• Retailers & leisure said to be facing a ‘perfect storm’ re cost increases & margin pressures.
• Anecdotal & small sample size but a visit to Tesco suggests the store is looking smart (including its re-engineered ex-Giraffe cafes) but prices are not cheap
• Young’s CEO Patrick Dardis has warned that an ‘exceptional’ rise in business rates will hit pubs in April 2017 and is likely to add £1.8m to Young’s annual cost base. Dardis also highlighted Brexit uncertainty and cost pressures including the national living wage and the apprenticeship levy as additional challenges facing the pub company in its interim reports for the 26 weeks to 26 September 2016. London pubs are set to absorb a 25.6% rise in business rates over the next five years, while the rest of the country will be subject to an estimated 9.2% rise.
• Liverpool council plans to introduce a Late Night Levy despite strong opposition from trade bodies including the BBPA and a previous recommendation not to introduce the measure. BBPA CEO Brigid Simmonds commented: ‘This is very disappointing. Liverpool’s Licensing Committee had rejected a Levy in March, after extensive consultation. Other major cities, such as Bristol and Leeds, have also rejected a levy, which will damage the city’s economy. We are looking at whether the Council can reintroduce the measure in this way, without further consultation.
• ‘Pubs are already struggling with high business rates, high beer duty and red tape. This will also undermine partnership schemes between local business, the Council and police, which can produce very positive results.’
• Amazon delivery drivers have reportedly been made to work ‘illegal’ hours and are receiving less than the minimum wage.
• Phillip Clark is one of several senior executives named in the lawsuit filed against Tesco by 111 institutional investors for losses in the wake of its £263m accounting scandal.
• Marks and Spencer, American Apparel, and Sky are set to close a combined 100 stores, while the 1,250 stores affected by failed retailers so far this year is double the rate of 2015. The FT writes that ‘BHS, Austin Reed, Netto, and My Local have fallen into administration and brands including Banana Republic have withdrawn from the UK’ in 2016.
• Dominic Chappell, the controversial ex-owner of BHS, has been arrested in relation to an unpaid tax bill of about £500,000 arising from profits he made as the department store chain failed. Speaking about Swiss Rock’s tax bill in September, Mr Chappell told The Guardian: ‘There was a return that was made in error; they [HMRC] have acted upon it and we are rectifying that as we speak.’ HMRC began legal action against Mr Chappell to recover the sums, but he has put Swiss Rock into liquidation, making it more difficult for the tax man to obtain the funds.
• The BBPA, SIBA, and CAMRA have published ‘The Story of Beer Duty: 2008-2016’, chronicling how the government’s decision to halt the Beer Duty Escalator sparked a major turnaround. A 42% increase in beer duty caused beer sales to fall by 18.5%, 3,700 pubs closed and 75,000 jobs were lost. The relaxation of the escalator, coupled with a ‘penny off a pint’ initiative, has been credited with making 2014 the first year of beer sales growth in a decade.
• A new publication called ‘Managing Safety in Pubs’ aims to provide licensees with tips on helping customers and staff feel secure in the run-up to Christmas.
• Markets have been relatively sanguine in the wake of Trump’s election victory although Constellation Brands, the largest US importer of Mexican beer, has seen its shares fall. The group paid $4.75 billion to Anheuser-Busch InBev for Grupo Modelo’s US beer business in 2013, giving it an exclusive permanent license in the US to import, market, and sell Corona and Modelo.
• Qatari officials have confirmed a ban on alcohol in public spaces during the 2022 Qatar World Cup and are seeking to ban alcohol in stadiums. The secretary-general of the Supreme Committee for Delivery and Legacy Al-Thawadi said in an interview with Arabic language newspaper Al-Sharq that booze will only be permitted in ‘far-away places’.
• Liverpool’s council approved the city’s proposed Late Night Levy in a meeting last night.
• A Swansea licensee has been fined £65,000 for illegally broadcasting Premier League football via a ‘domestic’ decoder box.