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Morning Briefing for pub, restaurant and food wervice operators

Mon 25th Apr 2016 - Premium pub operator and brewer Upham to float
Premium pub operator and brewer Upham to float: Upham Group, the premium pub operator with its own craft brewery, is to seek admission of its shares to trading on AIM and raise up to £12m to provide funds for further acquisitions. Upham currently manages a portfolio of 15 high quality pubs, 13 of which it owns, principally in Hampshire, Berkshire and Surrey. It has opened four new pubs in the past 12 months, and the Group aims to double the size of the estate to 30 pubs in the medium term, subject to funding. It has a highly experienced management team led by chief executive Chris Phillips, and deputy chief executive and estates director David Butcher, who were recruited in 2011 to develop and roll out a pub acquisition strategy. The first pub to open was The Winning Post at Winkfield, Berkshire, in April 2012. The group seeks to buy pubs with growth potential in prime trading locations, in order to invest in the customer experience; increase the revenue generating space of the buildings; provide comfortable and stylish accommodation and improve the pubs’ underlying operations. It believes there are more than 2,500 pubs in the relatively affluent geographic area in which it currently operates, up to a quarter of which would suit its acquisition criteria. This strategy has resulted in all of the pubs in the current portfolio reaching an Ebitda positive run-rate within four months of the commencement of trading, and a valuation uplift (after acquisition costs, fees and renovations) of the total estate (including managed pubs) of £10.3m to its current value of £36.8m, according to Savills. The pubs in the portfolio have approximately 1,075 covers in their main bar and restaurant areas (increasing by an additional 857 covers on the terrace/garden areas) and provide high-quality casual dining with a strong focus on local and seasonal produce with changing menus, a blend of inventive cooking and pub classics all using traditional ingredients. Upham’s high quality food-led model means that its pubs tap into the casual dining trend that has been evident in the past decade, during which eating out has risen to over 40% of total leisure spend, with consumers also eating out more frequently. Upham Brewery, located in Hampshire, updated its equipment to a modern 30 barrel plant in 2013. It brews three regular ales, Punter, Tipster, and Stakes; nine seasonal ales, and supplies approximately 300 local pubs. It also sells its beer in bottles through Majestic, Co-Op and Tesco. Between 2011-2015 the Group raised approximately £17.3m in equity, predominantly through EIS investments, and £5m in preference shares to finance acquisitions and launch the modern barrel brewery. The £17.3m was raised from circa 140 shareholders including family offices and private individuals. Between 2013 and 2015 Upham’s revenue grew to £12.2m from £4.6m, a CAGR of 64%; and Ebitda rose to £0.9m from a loss of £0.2m. Charles Good, Upham chairman, said: “Upham Group’s management team has used its significant experience to buy, develop and manage an exceptional collection of individual premium pubs, with each pub tailored to meet its local market. This successful buy, develop and manage formula has led to significant uplift in the value of the Group’s estate, with further organic growth potential. This fundraise and admission will provide Upham with the resources to build on our success.” Phillips said: “We have ambitious expansion plans, and see a wealth of opportunities around our existing locations, principally in Hampshire, Berkshire, and Surrey. Upham’s highly skilled and dedicated team provides a fantastic service, and has created a loyal customer base. We are very much looking forward to the exciting next chapter in Upham’s history.”

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