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 Managed Pubs, starting with the 26% rise in business rates” Simon Emeny, CEO, Fuller Smith & Turner Plc 2 FLEURETS Fleurets.com 2 2 FLEURETS www.fleurets.com
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 3 FLEURETS Fleurets.com 3 3 FLEURETS www.fleurets.com
Public House Market Conditions - Tailwinds • 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. 4 FLEURETS Fleurets.com 4
Public House Market Conditions - Headwinds • 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 FLEURETS 5 FLEURETS Fleurets.com 5
LfL Sales Growth 6 FLEURETS Fleurets.com 6 FLEURETS www.fleurets.com
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 21 st 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. 7 FLEURETS Fleurets.com
Key Pub Sector Transactions - Groups Vendor/ Description Date Transaction Value Multiple/ Purchaser Yield Mitchells & Butlers/Milton 73 freehold managed pubs, pub restaurants and Aug 2017 £42m 9.1x Inns & Taverns lodge hotels. UK spread, with some branded venues including Harvester and Toby Carvery. Admiral Taverns/Proprium 853 tenanted public houses. Mainly freehold or Aug 2017 £220m 7.2x and C&C Group long leasehold. (pre head office) Punch Taverns/Patron The deal implies an enterprise value of Dec 2016 £402.7m 8.4x Heineken £1,775.6m and represents a multiple of 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. Intertain/ 30 sites - all leasehold managed outlets. Dec 2016 £39.5m c.5.0x Stonegate Pub Company (Leasehold) Chapman Group/ 28 hotels and pubs in the south of England. Dec 2016 £30.0m c7.8x Dominion Hospitality Dominion Hospitality is an affiliate of Stellex Capital Management. Liberation Group/ Liberation Group has 94 pubs in the Channel July 2016 £118m 8.0x Caledonian Investments Ltd Islands and the West Country, two breweries and (pre head office) three wholesale businesses. 8 FLEURETS Fleurets.com
Key London Transactions Kensington Park Hotel Ladbroke Grove £5,475,000 Acquired on behalf of Barts Pub Ltd www.fleurets.com 9 9 FLEURETS Fleurets.com
Albert Arms, Esher £3,100,000 Acquired on behalf of Fullers Carvossos, Chiswick £3,750,000 Acquired on behalf of South West Leisure www.fleurets.com 10 10 FLEURETS Fleurets.com
The Blue Lion Clerkenwell £3,030,000 Sold to Individual Coach & Horses Clerkenwell £2,800,000 Sold to Farringdon Pub Ltd Rose & Crown Clapham £2,400,000 Acquired on behalf of Leo Group www.fleurets.com 11 11 FLEURETS Fleurets.com
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! 12 FLEURETS Fleurets.com 12 FLEURETS www.fleurets.com
13 FLEURETS Fleurets.com
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