City Diary — 25 June

Big thanks owed to Admiral

As part of attempts to attract a new equity investor into Admiral Taverns, there's a document doing the rounds entitled You and Admiral Taverns. The company currently has just over 2,000 pubs, but what's surprising is the decline in earnings. There have been a lot of disposals, of course, but 1,000 pubs are producing well over 80% of the company's current £57m to £59m earnings, which are now tens of million below their peak. Hence, of course, Lloyds Banking Group's hefty £400m writedown. It's a reminder of just how big a favour Admiral owners did the major pubcos and Punch, in particular, in buying so many bottom-end pubs — 869 from Punch alone in 2007.

Cavendish cash goes Walkabout​

Cavendish Bars, led by former Po Na Na boss Christian Arden, bought seven Regent Walkabouts last week. So what's the plan? Arden tells City Diary that the company will spend up to £1m rebranding the venues with two concepts ready to plug into them. Cavendish was set up a year ago to purchase 20 or or sites from Luminar — five are still trading under Cavendish auspices with the rest sold, sublet or returned to landlords. The Walkabout package involves sites in Southampton, Brighton, Bromley, Swindon, Oldham, Putney and Durham, only two of which have been prelisted for sale by Regent. Arden reports that Cavendish will be pressing landlords for rent reductions.

Desperate times squeeze landlords ​

Talking of rent reductions, Nigel Ball of BNP Paribas Real Estate reports that there are some swingeing rent cuts being agreed by desperate landlords. He reports that a former Walkabout in Newport saw its rent drop from £135,000 to £100,000 per annum while a Yates's in Derby dropped from £101,000 to £67,000 and a Yates's in Northampton saw its rent drop from £114,597 to £46,917 per annum. He thinks the dynamics of supply and demand means there should no increase in rent from 2009 to 2014. It's worth noting, also, how JD Wetherspoon has its rent increases well and truly pegged. Out of 80 rent reviews he's conducted for JDW, 40 have been agreed at nil increase. More generally, there's been an average increase in rent for JDW of 5% every five years — with no RPI increases in between.

A couple more locals for Martin​

JD Wetherspoon is picking up some very cheap pubs. Perhaps it's no surprise that founder Tim Martin is doing his bit in his home town of Exeter. It's opening not one but two new venues in the city. The former Hog's Head pub in Fore Street and the Sawyer's Arms in Cowick Street have both been taken on by JDW and will open within weeks of one another. The Sawyer's Arms will open its doors for business on Friday 3 July. The Hog's Head, which will now be known as the Chevalier Inn, will open on Friday 24 July.

Mail tales of debt and dinosaurs​

It was a pretty bad press for Punch boss Giles Thorley after the U-turn over whether Punch needed to make a cash call. Just a few weeks after saying it wouldn't be necessary, Thorley caved in to concerned shareholders. Even the Daily Mail, not known for its pub expertise, gave Thorley a bit of a kicking. Columnist Alex Brummer said: "The pub chains have become dinosaurs with unmanageable portfolios and swamped by debts rather than customers."

Arnold pressed into service​

Among those currently lending Punch Taverns a hand is one slightly surprising figure. Guy Arnold was a senior regional executive for Enterprise Inns in a former life. He's now licensee of an Enterprise pub, but providing consultancy advice on the way ahead for the opposition.

Fittings furnish Brit-style US bars​

Interesting news on where the fittings from closed pubs may be going — across the pond. The Pub, a British-themed restaurant and bar chain, is opening its 11th venue in Hampton, Virginia, employing 75 people. The Pub features traditional British pub fare: fish and chips, shepherd's pie, a British dip platter with goats cheese dip, crab fondue and spinach-artichoke dip. The exterior of the building is modelled after corner pubs in London. All the furniture and most of the accessories were bought in England.

Heineken goes Global with 80% ​

Heineken has mopped up around 80% of the A1 bonds attached to Globe Pub Company. There are a host of good reasons for this, including having a strong position to determine the future of the 421-strong estate now it's breached covenants for two quarters. There is one other pressing issue. Under the original terms of the securitisation, payment for beer becomes subordinated to interest payments to bondholders in the event of covenant breach. Not getting paid for your beer supply would test the patience of anyone, wouldn't it? One senior industry figure calls this non-payment for beer supply arrangement "poisonous".

Taybarns stokes sales not profit​

First indication that Whitbread's blockbuster Taybarns concept is far more impressive at the gross sales level than the profit levels. Boss Alan Parker told City analysts last week that the seven Taybarns sites contributed 1.5% of the 2% sales uplift in the pub restaurant division in the first quarter of its current financial year. Parker added, though, that it has a "small effect" at Ebit level, adding for emphasis, "nothing material".

Wetherspoon makes a hash of it​

A JD Wetherspoon customer has written to the company to ask why it serves just one hash brown with breakfast in Rhyl, Wales, while a Manchester outlet serves two. Founder Tim Martin is determined to get to the bottom of this one and stop the Welsh pub making a hash of it: "My wife comes from the Rhyl area, where they are notoriously parsimonious (like Scots, without the generosity).

I will look into the hash brown discrepancy and attempt to provide the same amount

in both jurisdictions."