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Morning Briefing for pub, restaurant and food wervice operators

Fri 17th Jul 2015 - Drake & Morgan backer Imbiba reveals investment progress
Drake & Morgan founder Imbiba reports progress on current investments: Imbiba, the specialist leisure sector EIS investment fund that set up and sold Drake and Morgan and earned a 5.7 times return for investors, has reported strong progress for its current round of investments. Darwin & Wallace has produced Ebitda of £247,000 in the past 12 months compared to a budgeted figure of negative £180,000, a turnaround from negative Ebitda of £184,000 in the previous full year. Imbiba partner Simon Wheeler told the Imbiba Investor Conference: “No.11 Pimlico Road, the first site, has really started to motor and is trading 22% up year-on-year over the past quarter. No.32 The Old Town, the second site, has a run-rate of circa £750,000 – which represents an ROI of over 40% versus (the) acquisition case of 30%.” Camm & Hooper produced Ebitda of £423,000 compared to budgeted figure of £74,000 – it made a negative Ebitda contribution of £61,000 in the previous year. Wheeler said: “Tanner & Co, the first site, now has a ROI of around 45%. This also compares with an acquisition case of 30%. Banking Hall, the second site, is on track to hit its acquisition case of over 40% in 2016. Both Darwin & Wallace and Camm & Hooper have made tremendous progress over the past 12 months.” Ruth & Robinson has made a negative Ebitda contribution of £209,000 in the past year compared to budget of £212,000. Wheeler said: “14th Colonie has, like every project before it (yes, even Drake & Morgan!), taken a while for the first site to get some traction. And, like every project before it, there is plenty of work going on behind the scenes.” Darwin & Wallace has sites in Chiswick, Battersea and Richmond in legals. Sites in Wimbledon, Old Street and Victoria are in the pipeline, with further sites in Hammersmith, Islington, the West End, The City and Leeds in a secondary pipeline. Camm & Hooper has two City of London sites in the pipeline and venues in Covent Garden, The West End and Kings Cross in a secondary pipeline. Ruth & Robinson has a pipeline site in Old Street. Wheeler told investors: “A number of good quality sites have been located in the past six months as the projects gain momentum. Darwin & Wallace has a target of eight sites. It has two open and trading, two exchanged, one in legals and a very strong pipeline. Camm & Hooper has a target of six sites. It has two open, one exchanged and also good visibility in its pipeline for new locations. This trend seems to be growing and landlords are being attracted to the quality of our brands and the capability of the management teams. With regard to The 14th Colonie, there are some good potential new sites in the pipeline and further progress to be made.” Of Imbiba’s fourth and most recent investment, Wright & Bell, he said: “Wright & Bell will focus on opening large sites in London’s City and West End, driving the category forward in design, service, food and drink. It will be a very exciting and significant new business for us.” Of the target leisure market, Imbiba partner Fraser Bradshaw told investors: “It’s a strong sector, which in many respects had seen a lack of innovation over many years – until eight or nine years ago. And this coincided with technology growth. Now that consumers are well-travelled and digitally world-travelled, the market has had to catch up and innovate. We’ve seen the decline of the traditional pub market, as the casual dining market has expanded. The UK bar and restaurant sector has experienced over two years of consistent growth, month on month, with like-for-like sales growth of 3.4%. London’s restaurant and bar sector continues to outperform the rest of the UK, with like-for-like sales up 6.1%, compared with 2.4% outside the M25. The ratio of opening to closing restaurants, at 3.1x, has been beaten only once previously in history. A typical restaurant-goer in the city now enjoys a record 3.7 meals out a week, a dramatic rise from 2.2 in 2012. London remains an attractive destination for younger consumers and is over-represented in terms of young, working-age professionals. Some 35.6% of London’s population is aged 21-41 compared with around 30.1% of the population of other major conurbations and 26.5% of the population as a whole.” Bradshaw added: “We have to go further to get further ahead. Today, consumers simply want to come home interesting. They want to experience new things and share them on and off-line. To keep this level of engagement, much of our innovation and success has come from inspiration trips that management from all businesses participate in. By reference ‘brands in demand’ both inside and outside of our category, it helps us to develop and define new formats. It is often around the fringe of industries, particularly with new suppliers that we find great innovation; they have to try hard to differentiate themselves to enter and compete in the market and we can be earlier adopters through this process. It’s important for us to push the boundaries to keep relevant and resonant with our audience.” Founding partner John Connell told investors: “Some of the rental levels being demanded today are clearly unsustainable in the long term and could, we think, lead to serious loss of capital. Personally, at the cost of some suffering, I have learnt that ‘successful investment is often about what you don’t do’. Whilst the competition for sites is intense our close association with large property developers, our strong balance sheet, heavy investment, historical record and quality management gives us an edge. I can say with confidence that we know London very well and, for clarity, have divided the city into 58 different villages. We have experience in all villages, from edgy Camden to Armani-suited Islington. Also (there’s been) the emergence of some less than obvious areas like Shoreditch and Bermondsey; places that not many years ago ‘were behind enemy lines’. This enables us to focus our firepower. None of this is of any use unless we have able entrepreneurs to partner with. These are people who want to run their own business and achieve a degree of financial independence. We have been very fortunate in finding such people although they have often found us. The other factor that is important for us is travel. All our teams have travelled extensively from Australia to China to Hong Kong the Middle East. Claire (Lawson, Tanner & Co managing director) and Mel (Marriott, Darwin & Wallace managing director) have just returned from Istanbul and Tel Aviv. This gives us an idea as to what international competition is up to. It broadens our minds and makes us think out of the box. It makes us competitive.” Other Imbiba investments have included: Lewis & Clark (achieving a 3.7 times exit), Thomas & Carter (achieving a 2.3 times exit) and Smith & Jones (achieving a 2.2 times exit).

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