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Morning Briefing for pub, restaurant and food wervice operators

Tue 27th Mar 2018 - Update: Brighton Pier Group results, DP Poland
Brighton Pier Group reports sales and profit dip: Brighton Pier Group has reported sales dropped to £16m in the 26 weeks to 24 December 2017, down from £17.74m the year before. Profit before tax was £2.34m compared to £2.65m the year before. Executive chairman Luke Johnson said: “During the period the group acquired Paradise Golf, and transformed the bars and Palm Court restaurant on Brighton Palace Pier. The business is now well positioned to grow across all of its operations.” The company added: “As reported in the group’s preliminary announcement in September 2017 and in its FY 2017 annual report published in November 2017, the sales shortfall for the period was a result of three key factors: firstly, due to rain and strong winds, trading during the pier’s peak summer period of August and September was mixed and did not match the strong performance of the same period in the previous year; secondly, the group made the decision to utilise the winter months to close and improve the principal catering and hospitality offerings on the pier: and lastly £1.2m of sales in the 26 week period ended December 2016 relating to the six marginal bar sites that were closed during FY 2017 with no comparative in the current period. The ambitious investment plan to improve facilities commenced with the redevelopment of Horatio’s Bar, completed in December 2017. Benefitting from an enviable position on the pier with views across to the Brighton sea front, this bar has been transformed into a gastro pub offering with the added attraction of a live music platform. The upgrade and the extension to the outside terraces have increased overall capacity as well as enhancing the bars ability to diversify its offer. Following the redevelopment of Horatio’s Bar, significant improvements have also been made to the Palm Court restaurant and Victoria’s Bar. These two venues have now been combined into one, with substantial modernisation, as well as modifications enabling the flexibility to provide either one large or two smaller conference and events space(s) throughout the year. Palm Court is now one of the largest venues in Brighton and is unique in its location. Furthermore, the main restaurant and takeaway kitchens have been merged in order to enhance efficiency and at the same time internal and external seating capacity has been increased by 60%. Whilst these closures have had an understandable and short-term impact on sales and Ebitda for the winter- period, an immediate benefit is expected to be generated post-Easter and into the next financial year. Group gross margin for the period has increased by 25 basis points on last year, despite ongoing pressure from rising input costs as a result of the weakness of sterling. The highlight for the period was the acquisition on 8 December 2017 of Lethington Leisure Limited, which owns and operates Paradise Island Adventure Golf, for a total consideration of £10.8m on a cash-free, debt-free basis. Lethington Leisure Limited has a strong track record as a profitable and growing leisure operator. In its financial year ended March 2017, Paradise Island Adventure Golf had revenues of £3.5m (with a three year CAGR from 2014-17 of 14.7%), and adjusted Ebitda of £1.2m.” Of current trading, it stated: “Trading for the first half is in line with market expectations and this trend is expected to continue through the seasonally quieter second half as management execute the group’s strategy. The long-term strategy of the enlarged group is to create a growth company that operates across a diverse portfolio of leisure and entertainment assets in the UK. The group will achieve this objective by way of organic revenue growth across the whole estate, together with the active pursuit of future potential strategic acquisitions of experiential leisure businesses, thus enhancing its portfolio and ability to realise synergies by leveraging scale.”

Domino’s Pizza Poland reports strong like-for-like sales growth: DP Poland, which has the exclusive right to develop, operate and sub-franchise Domino’s Pizza stores in Poland, has reported 51% growth in system sales for the year to 31 December 2017. There are currently 56 Domino’s Pizza stores, 32 corporate, of which two are managed under management contract, and 24 sub-franchised. A total of 19 stores opened in 2017, from 35 to 54 stores. There was 17% like-for-like growth in system sales 2017 on 2016 followed by 24% like-for-like growth in January and 18% in February. Peter Shaw, chief executive of DP Poland said: “Momentum is continuing to build, with a record number of store openings and 51% growth in system sales in 2017. The group Ebitda loss increased, 2017 on 2016, impacted by the high number of new corporate store openings in 2017 (stores are initially loss making), margin pressures from inflation in food and labour costs and more aggressive price promotion as we responded to competitive marketing activity. The greatest volume of system sales growth over the last two years has come from the opening of 31 stores, 2016-17, corporate and sub-franchised. These 31 stores, the majority of the estate, are still immature and as such have significantly lower sales than the more mature stores. The key focus for new stores is to generate sales and acquire customers, Ebitda should follow as the customer count builds. Our most mature corporate stores of six plus years delivered significantly higher sales and Ebitda in 2017 than our original mature store model predicted. Our commissary delivered robust growth in gross profit from royalties on sub-franchised store sales and margin on food sales to stores. However we are very mindful of sub-franchisee profitability and, in the context of cost inflation, manage our margins on food sales carefully. The buoyant Polish consumer economy continues to provide positive conditions for growth, but also brings challenges through greater competition and wage inflation. Looking forward, European cheese prices began to fall in Q1 2018 and are predicted to fall further this year as supply increases. As the profile of the store estate matures we can expect to see improvement in group Ebitda on the back of continuing robust growth in system sales.”

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