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Morning Briefing for pub, restaurant and food wervice operators

Tue 3rd Oct 2017 - Update: Revolution results, Greggs trading, Everards deal
Revolution Bars Group reports sales increase in full year results: Revolution Bars Group has reported sales were £130.5m (2016: £119.5m) in the 52 weeks ended 1 July 2017 – like-for-like sales increased 1.5% (52 weeks). Six new sites opened during the period – four Revolución de Cubas during the first half in Harrogate, Aberdeen, Reading and Glasgow, and two Revolutions towards the end of the second half in Southend and Torquay. In addition, major refurbishment projects were undertaken during the last quarter at the Revolutions in Blackpool and Cardiff. The company stated: “Based on trading levels achieved to date, the new bars are on track to deliver excellent returns on capital, consistent with the five new openings in the prior period, which achieved returns on capital of 32% in their first full financial year. Profit before tax was £3.6m (2016 Restated: £5.1m) Following the group’s trading update in May 2017 updating investors on lower than anticipated profitability for the 52 weeks ended 1 July 2017, and the resulting drop in share price, Stonegate Pub Company made an approach to acquire the group. On 24 August 2017, the board recommended Stonegate’s cash offer of 203 pence per share, which represented a 62.4% premium to the share price prior to the commencement of the offer period on 31 July 2017. It is expected that the group’s shareholders will vote on the recommended cash offer by Stonegate on 17 October 2017. The board is also engaged with Deltic Group as a possible offeror for the group. Deltic has outlined a merger proposal, which the board has rejected due to significant concerns regarding both value and deliverability. Deltic has indicated that, in order to put forward its merger proposal and discuss it with the group’s shareholders, it will in due course publish its own profit forecast and a quantified financial benefits statement in respect of a merger. In parallel, Deltic has also stated that it continues to evaluate a possible cash offer for the group. The Takeover Panel announced on 21 September 2017 that Deltic must either announce a firm intention to make an offer for the group under Rule 2.7 of the City Code on Takeovers and Mergers, or announce that it does not intend to make an offer, by 5.00pm on 10 October 2017. Deltic is continuing to perform due diligence on the group, and the board is committed to ensuring that the interests of shareholders are best served. Like-for-like sales in the first quarter of the current period are at +0.3%. July and August returned to a more normal trading pattern following the terrorist incident in Manchester in May, whilst September trading, for the sector as whole, has been disappointing, largely due to this year’s very wet and cool weather compared to record temperatures in September last year. The first of six new sites planned for the new financial period opened in Belfast in the third week of July. Belfast Revolución de Cuba has achieved the highest sales levels of all venues opened in the last two years and has averaged £80,000 per week over the first nine full weeks of trading. Three further Revolutions are scheduled to open in Solihull, Inverness and Putney before Christmas and two new Revolución de Cubas will open in the second half. The pipeline of new venues is building very strongly and contracts have already been exchanged on a further two sites that are due to open in the next financial period. The board is confident in the current strategy, the underlying financial strength of the group, its brands and strong customer propositions, which have underpinned three years of consistent like-for-like growth.” 

Greggs reports 5% like-for-like growth in Third Quarter: Greggs has reported total sales were up 8.6% for the 13 weeks to 30 September, its Third Quarter. Company-managed shop like-for-like sales rose 5.0% for the 13 weeks to 30 September. There have been 98 new shops opened year-to-date and 32 closures. A total of 120 refits have been completed year-to-date. The company stated: “Greggs traded well in the third quarter. In the 13 weeks to 30 September 2017 total sales grew by 8.6% (2016: 5.6%) and like-for-like sales in company-managed shops increased by 5% (2016: 2.8%). Total sales have grown by 7.8% in the year-to-date and like-for-like sales have increased by 3.9%. The investment in our new forecasting and replenishment system is resulting in greater product availability for customers; in addition the seasonal changes to our range have been popular and we have further developed our Balanced Choice options. Sales at breakfast time continue to grow strongly along with participation in our great value deals. In the year-to-date we have opened 98 new shops, including 37 franchised units predominantly in transport locations. We have closed 32 shops, giving a total of 1,830 shops trading at 30 September (comprising 1,636 of our own shops and 194 franchised units). For the year as a whole we still expect to open 140-150 shops and close 40-50, a net increase of around 100. We have also completed 120 shop refurbishments and remain on track to refurbish around 130 shops this year. As we go into the final quarter of the year we have launched our autumn/winter menu including a new ‘all day breakfast’ wrap and added Thai Chicken Soup to our Balanced Choice range. Work on our supply chain investment plan is progressing with the focus on redeveloping our Leeds bakery to consolidate manufacturing of small cakes and muffins. Alongside this we will trial our new SAP supply chain system in two sites ahead of broader deployment next year. Our investment in greater product availability and service has benefitted recent trading. As we have previously indicated, food ingredient cost pressures are a headwind, although we continue to expect that the rate of increase will begin to ease towards the end of the year. Accordingly, our expectations for the full year outturn remain unchanged.”

The Crown Estate confirms purchase of Castle Acres site from Everards: The Crown Estate, through the Fosse Partnership, has acquired Castle Acres from Leicestershire based family business, Everards. With the purchase, the Fosse Partnership is committing £135m to develop the 12.5 acre Castle Acres site, adjacent to its existing Fosse shopping park, to create a new shopping and dining destination. The new development will create around 288,000 sq ft of retail and restaurant space, complementing the current Fosse line-up. Everards of Leicestershire, the family-owned brewer and pub operator founded in 1849, had based its brewery, office and logistics at Castle Acres for over 30 years. Everards is relocating to two new sites, Everards Meadows and Optimus Point and will provide vacant possession of Castle Acres before Christmas. Work will commence on site in early 2018. The planning process for the redevelopment was led by Everards and supported by Next, which will be taking a 90,000 sq ft three-story store in the new scheme. The Castle Acres scheme is already almost 60% pre-let, with other confirmed tenants including Debenhams, TK Maxx and Clarks. Fosse is one of the UK’s most successful shopping parks, with 436,000 sq ft of retail accommodation attracting ten million visitors a year. It was acquired by the Fosse Partnership in 2014. In the last year, the partnership has invested £12.7m in Fosse to enhance the offer and experience for retailers and their customers. The investment has seen new store frontages and significant improvements to landscaping, public realm and parking. It has also attracted five new brands – Office, Pandora, Primark, Superdrug and JD Sports – to further enhance the impressive retail mix. The unconditional purchase of Castle Acres follows The Crown Estate’s successful launch of the 230,000 sq ft Rushden Lakes in Northamptonshire in July 2017 and the upcoming opening of the 800,000 sq ft Westgate in Oxford, in partnership with Landsec, on 24 October. Hannah Milne, director of regional retail at The Crown Estate, said: “Fosse is already one of the best retail centres in the country, and the addition of Castle Acres promises to make it that much better. The extension will be a fantastic boost for the local economy and we look forward to working with all our local partners as this new retail hub begins to take shape.” Richard Everard, chairman of Everards said: “We are delighted to have reached an agreement to sell Castle Acres to The Crown Estate, through the Fosse Partnership. Having already established our new logistics centre at Glenfield, Leicestershire we now look forward to developing Everards Meadows. The build programme, commencing in early 2018 will include a Everards office and brewery, destination food and drink units and a cycling centre. We look forward to all of these developments further strengthening our family business for this and successive generations.”

Britvic proposes closure of Norwich manufacturing site: Following a detailed review of its manufacturing sites and distribution network Britvic is proposing to transfer production of Robinsons and Fruit Shoot from its Norwich site to its manufacturing sites in East London, Leeds and Rugby. The company stated: “The proposal is being made to improve the efficiency and productivity of our manufacturing operations and, as a result, Britvic is proposing to close the Norwich manufacturing site. The proposal has been approved by the board for consultation with impacted employees and, subject to full and proper consultation, it is proposed that the site will close towards the end of 2019. We have also informed Unilever, who co-own the site with Britvic, of the proposals. Britvic has 242 employees on site that are affected by this decision. Every impacted employee will be offered a comprehensive package of support, including redeployment opportunities at other sites and outplacement services to help find alternative employment. In November 2015 Britvic announced a three-year business capability programme, investing a net £240m of capital in our GB manufacturing operations, to ensure we had the appropriate infrastructure to compete in the market and deliver sustainable cost and commercial benefits. We remain committed to this programme and the proposed closure does not affect the previously stated guidance. It is anticipated that there will be costs associated with the implementation, subject to the outcome of the consultation process, which are expected to be clarified in Britvic’s preliminary results release on November 29th.” Chief executive Simon Litherland said: “Britvic is proud to be a British manufacturer and Norwich has been an important site for our business for many years. This is not a proposal that we make lightly and we know this is upsetting news for our colleagues. We are very grateful for the hard work and dedication of our employees at our Norwich factory and today’s announcement is in no way a reflection on their performance or commitment. However the changes we are proposing today present significant productivity and efficiency savings in our manufacturing operations, deliver environmental benefits and, coupled with our ongoing investment programme in our GB manufacturing operations, ensure that we have the flexibility and capability we need to respond to changing consumer trends faster and more efficiently. No decisions will be made prior to full and proper consultation with employees and our focus is on ensuring we offer our colleagues on-going support and assistance throughout this difficult time.”

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