City Diary — 4 June

Cross-eyed view on Bec inquiry

Satirical magazine Private Eye has given its own assessment of the state of play in the pub sector in the wake of the Bec inquiry. The magazine, in an article entitled "Tied and Emotional", picked up on a number of the juicier claims arising from the Bec report. Shame, though, that it muddled up some facts, claiming Punch Taverns and Enterprise Inns have 9,000 pubs each and asserting that Scottish & Newcastle Pub Enterprises has a management contract to run the Trust Inns estate of Trevor Hemmings.

Interpub goes all Big Brother​

Interpub, the company that runs backpacker hostels, fitted its first live webcam in a dormitory last week. It's expecting all sorts of shennanigans and a dramatic spike in hits…

No profit trimmed from M&B hedges​

A debt of gratitude is owed to the London Evening Standard for trying to explain exactly who did (or, more precisely, who didn't) make money out of Mitchells & Butlers' ill-fated hedge losses for which the final bill came to nearly £500m pre-tax. Turns out that nobody made a penny. An M&B advisor explains: "The analogy is if you're going on holiday in the United States in the summer and exchange currency at $1.50 now, if by the time you go it's $2 to £1, you suffer because your spending power is lower, but the bank hasn't made money because it sold the dollars to you at the prevailing price at the time." It gets more and more baffling. This was a series of hedges that, as it turns out, needed a series of hedges to hedge against the potential losses of the original hedges. Yet nobody pocketed a penny. This truly is innovative financing.

Siblings spread food wisdom​

City Diary discovers that London-based Young's has a very capable new director of food development, Tina Buffini, who has championed the rollout of entirely fresh food offer across the managed estate this year. Buffini used to be a Young's area manager and has also run her own restaurant. Better known is Tina's brother Damon Buffini who runs private equity outfit Permira. He knows a thing or so about food development as well. At Christmas 2008, he felt some of his staff needed taking down a peg or two and sent out an order for more than 100 burgers from his nearest McDonald's. He then waited 48 hours before calling a lunchtime meeting of his staff at his London office. He proceeded to tell the gathering he was tired of their poor attitude and reminded them how lucky they had been in life — before serving the reheated McDonald's for lunch.

Young's pursues pub purchases​

Young's has bought four pubs in the past year, trailing a little behind London rival Fuller's. Boss Stephen Goodyear tells City Diary that the company has been bidding for some of the plum assets that have been coming on the market as companies like Punch look to generate cash. Young's had been "unsuccessful with a sizeable recent offer", he reports.

Ups and downs of Young's value​

The £10.7m writedown in the value of pubs by Young's last week is rather odd. The company had not had a formal revaluation of its estate since 1997 when it was worth £262m. An informal valuation in 2006 by Fleurets valued the estate at £400m and the company has bought some terrific pubs since then. But the impairment review found 28 pubs that had decreased in value by the aforementioned £10.7m. So, to sum up, a few pubs are worth a bit less but the estate is worth a lot more than book value. Confusing, eh?

Retired host rides again​

The willingness of Punch Taverns to sell its freeholds is even drawing a few hosts out of retirement. One, returning to the fray like a boxer who feels he's retired too soon and fancies one last bout, is Ian Bromwich. He bought the freehold of the Rampant Horse in Chapelfield, Freethorpe, near Acle, Norfolk, from Punch. It was closed for months before he reopened it a fortnight ago. He says: "I'm an active person and I did get bored."

Ebison falls victim of Sugar firing​

Mitchells & Butlers area manager Howard Ebison bowed out of this series on The Apprentice last Wednesday. Ebison, who oversees a number of London pubs and is now back in harness at M&B, had acquitted himself well with a calm and professional approach amid the bitching and boardroom character assassination. Appearing on the post-mortem show with Adrian Chiles, Ebbison admitted, though, that his business experience at M&B was a little limited, with an absolute focus on low prices to boost volume. "It's all I know," he told Chiles. Come on, Howard, City Diary bets you've learned a bit more than that.

Deja vu for former Punch boss​

Ex-Punch leased division boss Adrian Fawcett moved two years ago to run private hospital group General Healthcare. Some aspects of his new perch may seem familiar. He told private hospital chiefs at London's Portman hotel: "The industry is paying an awful lot of earnings in debt servicing. In a recession there will be winners and losers not investing in capital expenditure." With average operating margins of 8.9% in the sector — GH claims its margins are near double that figure — revenue falls could lead to some firms breaching bank covenants, he added.