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Morning Briefing for pub, restaurant and food wervice operators

Mon 1st Jun 2015 - Update: Coal and Grill, Fuller's, living wage, Jumpin Jaks
Charterhouse private equity owners seek fresh investment: Charterhouse Leisure, which trades as Coal Grill & Bar, operating ten high-volume casual dining restaurants in Basingstoke, Bristol, Bristol Waterside, Exeter, Meadowhall, Milton Keynes, Gloucester Quays, Cheshire Oaks, Telford and Swindon, has reported sales for the year to the end of February 2015 were ahead of the previous year by 21% at £10.2m. Restaurant Ebitda increased 17% to £1.6m and company Ebitda increased 15% to £814,000. The company has appointed BDO to act on its behalf in securing a secondary buy-out of the business led by the founder and chief executive John Gater. The business has been supported since 2007 by Beringea VCT and Octopus Investments. Both private equity houses have been very supportive towards the business and are working with John Gater, the management team and BDO to secure funding for the next stage of the company’s journey. John Gater said: “The business had a very good year with positive year-on-year sales growth for the existing estate. We opened four new restaurants in the year and are keen to secure new funding now in order to accelerate the growth of the business to 30 trading units over the next four years. I am grateful to Beringea and Octopus for their support through the early and formative years of the Group.” Stuart Veale, managing partner at Beringea VCT said: “We have supported the business since 2007 and feel it is the right time for us to exit and for the company to explore new avenues of funding that enable it to accelerate the growth of the brand.” Rebecca Hunt, of Octopus Investments, added: “We have been invested in Charterhouse Leisure for six years and believe that it is the right time for John to lead a secondary buy-out and we offer him all the support to achieve this goal.” Kieran Lawton, of BDO, which has been appointed by the board to lead the process, added: “Businesses like Charterhouse Leisure Ltd take time to develop and evolve. Both private equity partners have been very supportive and it is a perfect time for a new financial structure to be put in place to take the company onto its next stage of growth.”

Douglas Jack forecasts 6% rise in Fullers profit before tax to £36m: Numis Securities leisure analyst Douglas Jack has forecast that Fuller’s profit before tax will rise by 6% to £36m when it unveils full-year results this coming Friday – he issued an ‘Add’ recommendation and a target price for its shares of 1150p. He said: “For Friday’s full year results, we forecast PBT being up 6% to £36.0m (EPS +10% to 50.7p), assuming a slight slowdown from H1’s 8% PBT growth, reflecting recent pub sector trends. We believe there is upside risk to our 2016E forecast assumptions. Fuller’s managed pub/hotel like-for-like sales rose 6.8% (vs 7.7% comp) during the 43 weeks to 24 January 2015. About half of Fuller’s pubs are in London, with the other half in southern England. London managed pub market like-for-like sales rose 3.4% vs 0.6% for the rest of the country (source: Peach Tracker) between April 2014 and February 2015. In March-April 2015, managed pub market like-for-like sales slowed to an average of 1.4% inside the M25 vs -0.3% outside. At our recent conference, CGA Peach showed how premium products are outperforming in the on-trade market with volumes growing at 21% for craft beers, 8% for world lager and 6% for premium cider. Thus, Fuller’s is well positioned, extending its premium range, whilst continuing to invest in amenity, food marketing and training. We believe at least six managed pubs opened in 2015E, with up to four Stable Pizza restaurants and one Thames riverside pub already scheduled to open in 2016E. We believe our 2016E forecasts are conservative assuming: 2.5% like-for-like sales and no margin growth in the managed estate; 1.5% tenanted like-for-like profits; and 2% brewing volume growth. They also cautiously assume a slowdown in expansion to just two new managed pubs pa from 2016E, even though the company has the balance sheet (2.6x net debt/Ebitda) and the ambition to be more expansive.”

Frank Field MP accuses sector companies of profiteering: The largest foodservice companies and coffee brands in the UK have been accused of profiteering after a survey failed to identify any that were paying the living wage to all staff, The Independent has reported. It was conducted by Frank Field, the Prime Minister’s former anti-poverty tsar, who spoke of his dismay that companies are not doing more to boost the salaries of their lowest-paid employees. He wrote four months ago to companies including McDonald’s, Subway and Costa Coffee, asking them to spell out their pay policies. The MP for Birkenhead and former Labour minister still has had no reply from seven, and a holding reply from an eighth. The others only confirmed that they met their legal obligation to pay the national minimum wage of £6.50 an hour for staff aged 21 and over. None said they paid all staff the living wage – the amount someone needs to cover basic living costs and which is currently set at £9.15 an hour in London and at £7.85 in the rest of the UK. Field told The Independent: “These companies are creaming off mega-profits from the food and drink they sell in this country. Yet it seems they show no interest at all in whether their own employees can afford the basic essentials for their families.” The Independent stated: “Costa Coffee said its lowest pay rates were 5p above the national minimum wage and its parent company Whitbread was talking to the Living Wage Foundation about the impact of paying a living wage. Domino’s Pizza told Field that each of its franchises set their own pay rates, which it described as “at or above the minimum wage”. It made no reference to the living wage. Subway said many of its 800 franchisees who run more than 2,000 branches in the UK paid “over and above the minimum wage”. It also made no reference to the living wage. Roadchef said it paid its 3,200 employees “well above the minimum wage when our additional benefits of free meals each day, free uniform and subsidised transport are taken into account”. Pret A Manger said it believed it paid a living wage to employees outside London once benefits such as free food and bonuses were included and it was close to the London living wage for staff in the capital. It was speaking to the Living Wage Foundation to make sure the company is not put at a “serious competitive disadvantage”. Field said he had received a holding reply from Starbucks but no response from Caffe Nero, Papa John’s, Wimpy, Pizza Hut, Kentucky Fried Chicken, Burger King or McDonald’s.”

Former Jumpin’ Jaks in Gloucester finds buyer after decade of closure: A former nightspot Jumpin’ Jaks operated by Luminar has been sold a decade after it closed and could be turned into an over-25s club. The former home of the popular club has been empty for almost a decade, is in a state of disrepair and even has a tree growing through the middle of it. Jumpin’ Jaks is part of a hit-list of 20 key sites identified for regeneration by Gloucester City Council leader Councillor Paul James and Gloucester MP Richard Graham. The unnamed new owner hopes to re-open it as an over-25s club by spring next year.

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