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Wed 29th Apr 2015 - Update: Giggling Squid, Young's and Wetherspoon
Giggling Squid secures Bath site, eight more in legals: Thai brand Giggling Squid has secured a new site in Bath and has eight more in legals. The latest acquisition takes the group’s portfolio to 13 sites. The company, which introduced the “Thai Tapas” dining concept to the UK in 2009, is on a quest to have the UK’s first nationwide chain of 70 restaurants within seven years. Giggling Squid is also in advanced legal negotiations to acquire eight more sites – five in the Home Counties, one in Essex, one in East Anglia and another in the Midlands. Following the successful launch of new restaurants in Salisbury and Bristol in March, the company led by husband-and-wife team Andrew and Pranee Laurillard, is now hitting an Ebitda run rate of around £2m. The Bath site is located in Bluecote House in Saw Close, opposite the Theatre Royal. The site is a converted school house. It will reopen as Giggling Squid with circa 200 covers, once major works to the square in front of the theatre are finished in 2016. The development will form what promises to be a highly-prized public outside area in the centre of the city. New operators to be included will be Zizzi, Byron, a new hotel and, it is understood, a super casino. Giggling Squid will invest about £200,000 refitting the restaurant and create around 30 new jobs. “We achieved critical mass some while ago and each new launch is more successful that the last, as we fine-tune the business model,” said Giggling Squid managing director Andrew Laurillard. “We’re very happy with our latest opening in Bristol – it’s busy every night, ahead of budget, with great customer feedback. Bath has been in our sights as one of the key provincial market towns and small cities in which to carry the brand forward – both Bristol and Bath have an affluent, well-travelled audience that knows what it wants and appreciates very good food at the right price.” Barclays Bank has granted a doubling of its loan facility to £4m to fund growth. Giggling Squid has appointed accountancy firm Grant Thornton as its commercial advisers, as part of its strategy to secure further finance for continued growth by the end of 2015. “Ultimately, we’re a food-led business and are still having great fun,” said Pranee Laurillard. “We are immensely proud that our customers compliment us for still having the welcoming feel of a one-off independent, which is why people think of us as a family of restaurants rather than a chain, whilst critics love the authentic street food style dishes.”

Young’s acquires Islington pub: London pub retailer Young’s has bought The Canonbury in Islington from Dawes Restaurants. General manager Oisin Rogers, formerly of The Ship, moves over to run the new pub. The 3,000 square foot Georgian pub boasts a 70-cover dining room, an elegant first floor private room and a 4,000 square foot garden. The venue will be food-led with a menu that focuses on best seasonal British ingredients and a wide selection of real ales and craft beers. Rogers said: “I am really excited that my name is going over the door at The Canonbury and look forward to opening this new pub for Young’s. The Canonbury has huge potential and, with the recruitment of a great kitchen brigade, we will be developing a strong food offer.” The pub is now closed, undergoing an extensive refurbishment by Harrison Design before reopening late May 2015. The renovations will include new fixtures and furniture to create an elegant stripped-back space featuring reclaimed original fittings and comfortable leather booths and sofas. The garden will also receive a complete makeover. The purchase of the Canonbury brings the Young’s portfolio to 130 pubs in London and the South East.

Douglas Jack – we expect Wetherspoon margins to keep falling: Numis Securities leisure analyst has forecast Wetherspoon margins will fall again when it reports Third Quarter results on 6 May – he has a ‘reduce’ recommendation with a 680p price target. He said: “We expect like-for-like sales to have slowed from H1’s level of 4.6%, to c.2% in Q3, with margins continuing to fall, compounded by additional breakfast/coffee discounting and weaker like-for-like sales. Despite this, we expect to hold 2015E forecasts, but believe there is downgrade risk to 2016E. Like-for-like sales should have slowed to c.2% in Q3, from H1’s level of 4.6%. Like-for-like sales slowed to 1.6% during the first six weeks of H2, having slowed to 2.7% in Q2, partly due to comps becoming tougher (Q1 3.7%; Q2 6.7%; Q3 6.2%; and Q4 5.2%), reflecting the evening extension of food trading hours in autumn 2013. The company started its attempt to boost early morning food trading on 18 March through discount-driven coffee and breakfast campaigns. Even if this initiative succeeds, it should need time to increase breakfast trade, and we question whether the resultant volume growth will be sufficient to offset the inevitable hit on margins. In H1, Ebit margins fell 75bps, causing Ebit/pub to fall by 5%, with low price increases (1% on drink) having hurt margins more than they benefited volumes. Due to like-for-like sales slowing, annual drinks price inflation remaining at 1% during February and March, as well as further dilution from discounting breakfasts, we forecast Ebit margins to fall 85bps over the full year. Since 1 January 2015 we have cut our 2015E forecast by 8% (PBT from £84.7m to £77.5m; consensus £78.0m). For 2016E, we believe there is downside risk to our forecast of Ebit margins falling 5bps (consensus: flat). Although proportional rent costs should fall (due to freehold expansion) and food costs should be subdued, labour cost inflation has picked up. Our 680p target price equates to 8.1x EV/Ebitda, above the company’s 7.5x historical average rating even though prospects are below-average. For example, average Ebit/pub has increased by a total of 2% over the 12 years to FY14; whereas average Ebit/pub fell by 5% in 1H15 alone.”

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