City diary

By The PMA Team

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Undercover operations in green light district We've all heard share-buying theories over the years. The sale of Grolsch to SABMiller reminds City...

Undercover operations in green light district

We've all heard share-buying theories over the years. The sale of Grolsch to SABMiller reminds City Diary of the "Grolsch stock-picking method". In his excellent book, The Undercover Economist, Tim Harford describes the method:

"I met an investor who told me he had bought lots of shares in Grolsch because he'd been to lots of parties around the City of London and Grolsch was being served at all of them.

"I told him that parties in the City weren't necessarily a good indicator of Grolsch's worldwide sales. He reckoned that if Grolsch was big in the City, lots of City investors would figure it was made by a successful company and buy the shares. The shares would go up - for a while - and he could sell at a profit. The fundamentals only mattered if he planned to hold the shares for a long time, long enough for the real picture, whatever it was, to become clear."

Hartford defines the Grolsch method as "an attempt to take advantage of what mistakes you think other investors will make".

Arkley still Passionate about pubs

Alistair Arkley, below, boss of the New Century Inns business acquired by Greene King two weeks ago, admits to being fed-up with the ever-rising tide of red tape that besets the pub industry. In fact, he says, it's making life for the small tenanted operator almost impossible. "Life for the small tenanted operator is very difficult," he says. "You can't afford to hire experts to deal with all the issues." But Arkley is not abandoning the pub business and will focus on Passionate Pub Company and Chameleon, two small, multiple-managed multiple lessees, where he is opening sites that shoot to take £20,000 a week. "Employees are working for you; you can't instruct your tenants to do things," he explains.

Jeremy Rata's expletive-laden world

The Morning Advertiser's sister magazine H, which caters for the hotel sector, carries an intriguing interview with the general manager of the De Vere Grand in Brighton, Jeremy Rata. The Grand is owned by the Alternative Hotel Group which paid £1.1bn for it in August last year. Rata has an uncompromising need-for-investment message for his bosses. "You can't keep banging in high levels of profit with an average rate that has no sign of being able to grow exponentially, because this hotel is f*****. There's no other way of describing it. And it's f***** because there's been no major capital investment in this building for far too long." Anybody know of any major pub brands that are, to borrow Rata's technical language, f*****?

Sharing a fairytale loving cup

JD Wetherspoon and coffee company Lavazza are currently in the midst of a love-in. Bosses at Lavazza have remarked at how impressed and pleased they are with the high profile the brand is enjoying in its boozers. Now Wetherspoon has returned the favour by allowing Lavazza an interminable two-page spread in its magazine extolling the wonders of the 2008 Lavazza calendar. The company's corporate image director Frances Lavazza provides this insight: "Our 2008 calendar has a feminine touch. It's all about strong, aristocratic, proud (but somewhat naïve) women. Every queen has her king, not only in fairytales, but also in real life; obviously, the king of our calendar is Lavazza espresso, the coffee which reigns supreme." Must be the way they talk in coffee circles.

Champagne sales far from sluggish

CGA Strategy reports Amuse Bouche Champagne bars are going from strength to strength in London. Having only opened their first branch in Parson's Green in 2005, they have just opened their second branch in Soho. CGA reports: "The Soho branch works much the same way as Parson's Green; a good range of Champagnes are on offer, many by the glass, including their house Champagne at just £5 a glass. Novello's, a long-running bar next to the Parson's Green branch, has recently closed, seemingly blasted away by this new Champagne-bar brand." Following on from the introduction of Champagne Fridays in Slug & Lettuce a while back, one wonders whether those City types are suffering as badly as they ought to be in these days of crunched credit.

Chasing business in Nottingham

Ultimate Leisure, you'll know, acquired the Prohibition brand from Living Ventures and then went back to acquire the Living Room brand. One problem presented itself in Nottingham's Lace Market - two sites less than 20 yards apart. Now the Prohibition has been converted to Ultimate's Chase brand.

"It seems like quite a sensible move," says a local operator.

Durham feels the love

Utopian boss Bob Senior's, right, new nightclub Loveshack, in Durham's Walkergate, looks funky. Says a design chief: "We basically envisioned a 1960s ski lodge with a relaxed and comfortable atmosphere. We wanted Loveshack to project a basic and fundamental design that was well finished without being too slick. It was important for us to normalise the space and make people feel at home, whilst ensuring the décor was fun to casually put a smile on people's faces." City Diary struggles with this design talk but loves the VW campervan parked inside the club, complete with plush seating and an open-top roof, "normalised" or not.

Rent rolls downwards

City Diary hears that London property firm Equable Properties is selling a group of 10 former Provence pubs for offers in excess of £4.5m. The pubs, which are being marketed by Christie+Co, produce a rent roll of £398,620. The pubs are all believed to be free of tie. It is thought that Equable Properties bought the pubs from private freehold owners in the wake of the collapse of Provence in November last year. The rent has been adjusted downward in at least one case - the Queen Victoria, near Wainfleet, Lincolnshire, is now let on a rent of £28,500 compared to a rent under Provence of £50,000 per annum. Nevertheless, it's looking like a handy quick flip.

G1's territory creeps south

Further incursions south of the border are being promised in the wake of news last week that a Scottish hotel company was looking at the 340-strong Pubfolio package. Stefan King's G1 Group, renowned for its stylish pubs and bars, has quietly assembled a 100-strong tenanted estate, Iona Pub Partnership, in the past two years. Like-for-like sales are up by double digits this year on the managed side and barrelage volumes at the tenanted boozers are in positive territory. G1 is planning to double its tenanted estate to 200 pubs in the next two years. Now finance director George Middlemiss tells me: "We're looking at opportunities as far south as Birmingham. We're looking at tranches of pubs."

Christmas starts a little later this year

It was a pretty poor November, wasn't it? One operator goes a little further and reports it was terrible. CGA Strategy reports that venues across Guildford are also indicating an unusually slow November this year. "Whereas October is generally recognised as the worst month for trade, pubs and bars in the area have failed to see the typical start to Christmas parties around the third week of November," CGA reports.

You're only as good as your last pint

Shepherd Neame boss Jonathan Neame, below, has been musing on the subject of pub valuations versus hotel valuations. He notes that hotel earnings multiples tend to stretch to 15 to 16 times, compared to pub earnings around the 10 to 11 times earnings mark. "Our view is that the multiple on good quality will hold and might go up," he says. But why the gap between hotel and pub valuations? It's to do with pub incomes being highly dependent on the quality of licensees, argues Neame. It comes down to the old adage: a pub is only as good as the person running it.

Doing the horseshoe shuffle

Last time I looked it seemed that Greene King was scaling back its Hungry Horse brand, with a dozen or more sites coming out of the segment. Now it sounds like the remainder may be getting a re-jig. Details are scarce but CGA Strategy reports that the Aylesbury Hungry H

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