LPF Leisure Review 2017 & 2018 Preview Public House Market - - PowerPoint PPT Presentation

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LPF Leisure Review 2017 & 2018 Preview Public House Market - - PowerPoint PPT Presentation

Nov 08, 2022 33 likes •167 views

LPF Leisure Review 2017 & 2018 Preview Public House Market Graeme Bunn 1 FLEURETS Fleurets.com 1 FLEURETS Snapshot I cannot remember a time when we have faced such an array of additional cost pressures, particularly in our

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LPF Leisure Review 2017 & 2018 Preview Public House Market Graeme Bunn

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Snapshot

“ I cannot remember a time when we have faced such an array of additional cost pressures, particularly in our Managed Pubs, starting with the 26% rise in business rates” Simon Emeny, CEO, Fuller Smith & Turner Plc

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Agenda

  • Market Conditions – Headwinds and Tailwinds
  • Summary of recent trading performance – Review of LfL Sales trends
  • Market Rent Only Option – noise and little substance?
  • Key Pub Sector Transactions - Groups
  • Key Individual London FH Transactions
  • 2018 Predictions

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Public House Market Conditions - Tailwinds

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  • Trading conditions have been strong for a long time,

albeit signs of slowing in some markets.

  • Blurring of the sectors and consumer’s habits.
  • Availability of cheap debt.
  • Equity demand due to the available returns.
  • Active M&A market.
  • Reduced supply of trading wet led pubs.
  • Strong residential market, resulting in developer

demand underpinning asset value.

  • Investment market is strong, possible return of the

sale & leaseback.

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Public House Market Conditions - Headwinds

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  • Significant cost pressures
  • Business Rates
  • Rental Growth
  • Staff Costs – National Living Wage
  • Scarcity of sites - inflationary pressures
  • Rental growth
  • Economic uncertainty
  • Brexit – particularly London and South East

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LfL Sales Growth

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Market Rent Only Option (MRO)

  • Introduced via the Pubs Code under the Small

Business, Enterprise and Employment Act 2015.

  • Applies to pub operating companies with 500+ tied

pubs.

  • Applies to rent reviews and lease renewals falling

after 21st July 2016.

  • Various qualifying events can trigger the MRO

process to commence.

  • New lease rather than a variation to existing lease

proving contentious.

  • Typical Free of Tie lease terms being offered:
  • 10/20 years
  • FRI
  • 5 yearly rent reviews plus annual indexation.
  • Stocking obligations – vary on the pub co.
  • Limited awards made to date despite expectations.
  • Continued uncertainty regarding the process for pub

cos and tenants alike.

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Key Pub Sector Transactions - Groups

Vendor/ Purchaser Description Date Transaction Value Multiple/ Yield Mitchells & Butlers/Milton Inns & Taverns 73 freehold managed pubs, pub restaurants and lodge hotels. UK spread, with some branded venues including Harvester and Toby Carvery. Aug 2017 £42m 9.1x Admiral Taverns/Proprium and C&C Group 853 tenanted public houses. Mainly freehold or long leasehold. Aug 2017 £220m 7.2x (pre head office) Punch Taverns/Patron Heineken The deal implies an enterprise value of £1,775.6m and represents a multiple

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approximately ten times Punch’s Ebitda for the 52 weeks ended 20 August 2016. At outlet level (pre central costs) the deal equates to 8.4 x. Dec 2016 £402.7m 8.4x Intertain/ Stonegate Pub Company 30 sites - all leasehold managed outlets. Dec 2016 £39.5m c.5.0x (Leasehold) Chapman Group/ Dominion Hospitality 28 hotels and pubs in the south of England. Dominion Hospitality is an affiliate of Stellex Capital Management. Dec 2016 £30.0m c7.8x Liberation Group/ Caledonian Investments Ltd Liberation Group has 94 pubs in the Channel Islands and the West Country, two breweries and three wholesale businesses. July 2016 £118m 8.0x (pre head office)

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Kensington Park Hotel Ladbroke Grove £5,475,000 Acquired on behalf of Barts Pub Ltd

Key London Transactions

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Carvossos, Chiswick £3,750,000 Acquired on behalf of South West Leisure Albert Arms, Esher £3,100,000 Acquired on behalf of Fullers

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The Blue Lion Clerkenwell £3,030,000 Sold to Individual Rose & Crown Clapham £2,400,000 Acquired on behalf of Leo Group Coach & Horses Clerkenwell £2,800,000 Sold to Farringdon Pub Ltd

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2018 Predictions

  • Year of the wet focused pub.
  • Tenanted Pub Company M&A
  • Hawthorn
  • Star/Heineken
  • Punch
  • Hostile bid for Greene King due to share price weakness.
  • Increased property company interest in the sector.
  • Positive LfL trading to continue but margins and profit under increased pressure.
  • Sale & Leaseback transaction from large multiple operator.
  • Pub Code Adjudicator to be spotted in a JDW pub drinking a soft drink!

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