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Tue 18th Mar 2014 - Breaking News - Spirit reports like-for-like acceleration
Spirit reports like-for-like acceleration: Spirit Pub Company has reported that like-for-like net sales grew 6.1% in the eight weeks to 1 March, up from 4.8% in the 28 weeks to 1 March. Food sales like-for-likes rose 6.7% while drink sales were up 5.5%. The company stated: “We are encouraged by the continued strong performance of our managed pubs. Whilst like-for-like sales in the recent trading period benefitted from snow-impacted comparatives, we continue to perform ahead of the market with good momentum achieved in both food and drink sales.” Meanwhile, the company’s leased estate also saw an acceleration in performance. Like-for-like net turnover was up 4.5% in the eight weeks to 1 March compared to like-for-like growth of 2.9% in the 28 weeks to 1 March. Like-for-like net income was up 6% in like-for-like terms compared to the 28-week performance of 2.6% growth. The company said: “We are pleased with the performance of the Leased estate with like-for-like net income remaining in positive territory. As a result of changes in the supply network ordering process in the period, sales have been brought forward into H1. Without this, like-for-like net income would still have been up 4.6% in the eight-week trading period and 2.2% in the year to date.” Chief executive Mike Tye said: “Whilst this short eight week period of trading has benefitted from the milder winter weather, our Leased estate continues to make positive progress and we are confident that our Managed estate will continue to go from strength to strength. We remain focused on further improving the quality of our estate through investment in our people, properties, and licensees complemented by innovation, brand evolution, and selective acquisitions and disposals.” Douglas Jack, leisure analyst at Numis Securities, issued a ‘Buy’ note with a Target Price of 110p for Spirit shares. He said: “Trading has accelerated in both divisions with managed like-for-like sales up 6.1% and leased like-for-like net income up 6.0% during the eight weeks to 1 March. As a result, year-to-date trading has moved further ahead of our above-consensus assumptions and management has stated it is “confident that the managed estate will continue to go from strength to strength”. Strong trading largely reflects brand improvement and rising service levels, with Taylor Walker, Fayre & Square and Flaming Grill outperforming. As volumes, prices and average spend are all in growth and net cost inflation is at just 2%, margins should be up (our forecast assumption is for a 40bps increase). We are holding our 2014E forecasts (PBT £57.9m; consensus £56.2m), which assume 2.5% managed like-for-like sales (guidance is 3%), 0.4% leased like-for-like EBITDA growth (similar to company guidance) and the acquisition of five pubs in H2 for conversion to Spirit’s brands, mostly Flaming Grill. Our forecasts allow for tougher comps in Q4, although underlying momentum is pointing to potential upgrades. Spirit’s ongoing operational outperformance against all its national competitors should justify at least a sub-sector average EV/EBITDAR rating (10.9x), rather than the lowest rating (9.4x) in the sub-sector, in our view. We believe Spirit’s stronger growth, bolstered by a gradual move into expansion, and the diminishing relevance of its Onerous Lease Provision should now lead to another re-rating.”

C&C Group buys remainder of Scottish wholesaler: C&C Group, the manufacturer, marketer and distributor of branded cider and beer, has acquired the outstanding 50% share of Wallaces Express that it did not already own. C&C acquired an initial 50% stake in Wallaces Express in March 2013. Wallaces Express is Scotland’s largest wine and spirits wholesaler. The acquisition is consistent with C&C’s strategy to develop a multi-beverage operating model in Scotland, the company stated.

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