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Thu 18th Jan 2018 - Update: Whitbread and Ten Entertainment Group results, Revolution Bars Group
Whitbread reports like-for-like sales up 0.3% in third quarter: Whitbread has reported like-for-like sales rose 0.3% in the 13 weeks to 30 November 2017, with total UK sales up 5.8% (year-to-date 6.7%). Premier Inn like-for-like sales rose 0.5% with sales increasing 5% (year-to-date 6%). Pub restaurant like-for-likes were up 1.8% with sales rising 3.5% (year-to-date 2.7%). Costa Coffee saw like-for-like sales down 0.1% with UK equity stores like-for-likes falling 1.5%. Sales were up 7.2% (year-to-date 7.9%). Chief executive Alison Brittain said: “We have made good progress in executing our strategy and have grown group sales so far this year by 6.8%. This growth, combined with the results from our group-wide efficiency programme, means that we are on track to achieve expectations for the full year. Premier Inn UK achieved total hotel sales growth of 5.5% in the quarter as we continued to deliver our strategy to win market share through investment in new hotels and extensions, which will mature to give strong returns over the next few years. Our performance in the quarter moderated as the budget hotel market weakened and we had a particularly challenging October. Although it is early in the fourth quarter, performance so far has been encouraging and reflects a return to year-to-date performance. Costa UK has delivered strong total sales growth of 7.2% in the quarter, as we pursue our strategy to increase our presence in high footfall and convenient locations such as drive-thru and travel locations and we are particularly pleased with the strong performance of Costa Express. As a result of our channel strategy, more customers are drinking more cups of our coffee than ever before and we have gained market share. We have also continued to invest in the overall customer proposition, including new coffee, food and digital capability. These improvements have been well received by our customers and we have just been voted as the nation’s favourite coffee shop, for the eighth consecutive year. Our Costa high-street stores in the UK are highly profitable and generate strong returns. However, the well-publicised weak retail market footfall is negatively impacting our high street stores’ like-for-like performance and we expect this to continue for some time. Internationally, Costa in China continues its good momentum with another quarter of positive like-for-like sales growth. We remain committed to delivering our strategy to invest in the attractive structural growth opportunities in the budget hotel market and the growing coffee markets, in both the UK and internationally. We do expect the tough UK high street environment and inflation in our sector to continue to pose challenges in the year ahead. However, we have good momentum in the delivery of our plan to enhance our UK market leadership positions, create an international business of scale in Germany, China and Costa Express, and develop a more efficient infrastructure. This will create further customer loyalty and deliver long-term growth in earnings and dividends and a strong return on capital.”

Activist investor urges Whitbread split: Activist investor Sachem Head has asked Whitbread to consider a break up of its Costa Coffee chain from its hotels and restaurant businesses. The US hedge fund disclosed a 3.4% stake in Whitbread last month, sending its shares up more than 7% on the day amid speculation the activist would push to split up the company. Sachem Head wants Whitbread’s management team, led by chief executive Alison Brittain, to examine a break-up as a way to boost the value of its individual businesses, reports Reuters. Whitbread’s current market capitalisation is about £7.2bn. The hedge fund is reviving an idea long mooted by investors and analysts that Whitbread should spin off its Costa Coffee chain. Analysts at Barclays said in a note dated 3 January the “most obvious step” for Whitbread would be to sell Costa, should Brittain, who took the helm in December 2015, decide to restructure the company. Whitbread has more than 2,300 Costa stores in the UK, and almost 7,000 Costa Express machines.

Ten Entertainment Group reports like-for-likes up 3.6%: Ten Entertainment Group, the UK’s second-largest ten-pin bowling operator, has reported like-for-like sales increased 3.6% for the year ending 31 December 2017. Total sales growth of 8.9% was “underpinned by a stronger second-half sales performance” while the like-for-like growth included a 7% rise in the second-half. Three sites were acquired during the year and one underperforming site closed during the period. The company said good progress had been made during the year to strengthen the pipeline of new sites. It added FY17 Group adjusted Ebitda was expected to be at the top end of the range of current market consensus. Chief executive Alan Hand said: “The business has shown good momentum since the initial public offering and has performed well in meeting our key performance objectives. I am particularly encouraged by the business transformation opportunity of the innovative Pins & Strings technology, expanded into a further five sites during the second-half of the year. This technology is transforming the experience for our customers as well as improving the dynamics of our business model. In addition, we have made further improvements to the quality of the customer experience, through our highly committed and engaged colleagues.” Chairman Nick Basing added: “Very good progress has been made during the period, in line with the growth strategy outlined at the initial public offering in April 2017. Tenpin is building towards being the ideal hallmark to attract today’s modern leisure customer. Ten Entertainment Group is demonstrating a good growth formula, driven by a combination of organic sales growth, a continuous refurbishment programme and laser-like acquisitions. I am confident that full-year group adjusted Ebitda will be at the top end of the range of current market consensus.”

Douglas Jack – expect strong first-half from Revolution Bars Group: Peel Hunt leisure analyst Douglas Jack has said he expects Revolution Bars Group’s first-half to be strong. Issuing a ‘Buy’ note on the shares with a target price of 240p ahead of its trading update on Monday (22 January), Jack said: “December trading should be strong, in our view. Deltic (+8.2%) and Stonegate (+5.5%) have already announced strong December trading, and there should be a read-through to Revolution Bars Group, which has had no takeover distractions since October. Last year’s problems were all finance department related. We believe the executive board and operations of the company have continued to perform, with the slowdown in like-for-like sales (from 1.5%) to 0.3% during July to September (first quarter) being partly due to slower trade in Manchester after the terrorist attacks. In our view, in a strong late-night market, a recovery to 3% to 4% like-for-like sales in the second quarter should be achievable. Revolution Bars Group should be capable of at least £1m of cost savings. Our forecasts already reflect understandable delays in cost savings that relate to the company being in a recommended offer period over many months during the past calendar year. We expect to hold our full-year forecasts, which anticipate like-for-like sales rising by 1%, margins falling by 20 basis points, six sites opening, and net debt increasing by £2m to £5m. In our view, there is a chance the company will have traded ahead of expectations in the first half, and should be on track in relation to expansion, having opened one site in July and three in December. Revolution Bars Group is currently valued at 5.4 times EV/Ebitda (3.6 times site level Ebitda), well below the 7.3 times multiple on which the company floated. Lower supply and competition has transformed some leisure sub-sectors, and although the bar market has not benefited from supply reduction as much as clubs and wet-led pubs, it is still a beneficiary, and we believe this should eventually be reflected in Revolution Bars Group’s valuation.”

Co-op to deliver alcohol and snacks: Co-op customers will soon be able to buy wine, beer, crisps and chocolate without leaving their home. Co-operative Food has teamed up with Deliveroo for a trial targeting customers looking to have a bottle of wine or packet of sweets delivered in 30 minutes. The Greater Manchester trial could be rolled out nationwide, reports the Daily Mail. Prices are generally higher than walking into a Co-op store with, for example, a bottle of Jack Daniels whiskey costing £43.75. Co-op already provides a grocery home delivery service but the Deliveroo trial is limited to alcohol and snacks. 

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