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Wed 16th May 2018 - Update: M&B, Marston’s results, Dalata and Truman’s
CDG Group – rent to turnover percentages are unsustainable: A very large majority of London hospitality businesses anticipate that they could close or relocate sites, a new study reported in City AM has revealed. Some 90% of restaurateurs consider current costs to be “unmanageable”, agent Cedar Dean Group (CDG) found in a survey of 600 businesses. The CDG study showed that restaurants are spending an average of 21% of turnover on rent, compared to 12% five years ago. “A number of restaurants are in serious trouble at the moment, predominately related to the rents and not assisted by legislation,” said Roger Payne, chief executive of Shaka Zulu operator The Camden Dining Group. “Historically, the most successful rents have been under 12% of turnover and as restaurants have needed to expand, landlords have taken advantage and rents have crept up because of demand.” Under the Landlord & Tenant Act 1954, tenants have the right to have a renewable lease on the same terms as their original lease. But more than a quarter of operators said their leases now don’t fall under the Act. Leonid Shutov, of Bob Bob Ricard, said: “Leases within the act shouldn’t be optional or at the discretion of the landlord. The average leaseholder today has no protection whatsoever; they can’t rely on the Act. If landlords are unwilling to offer a lease within the Act, they have no choice.”

Marston’s reports revenue and underlying PBT growth: Marston’s has reported strong revenue and underlying PBT growth in the 26 weeks to 31 March 2018. Underlying sales grew 20% to £528.1m and profit before tax was up 8% to £36.3m. Managed and franchise like-for-like sales in line with last year whilst Taverns like-for-like sales were up 2.9%, with Destination & Premium like-for-likes were down 1.8% – drive-to destinations were weather impacted. Average profit per pub was up 1%. Total brewing volume was up 74% thanks to the Charles Wells acquisition, with market share growth in premium cask ale to 23% and premium packaged ale to 24%. Marston’s said it was on-track to deliver at least £4 million target synergies from Charles Wells acquisition and that Charles Wells brands had helped it penetrate new markets/geographies. The company said new openings are on track, but there would be a modest reduction to capital plans for 2019. Six new pubs and bars have opened and it is on target to open 15 for the financial year. Six lodges have opened, taking estate to over 1,500 rooms. The company said 2018 openings performing strongly and it had set a target of ten pubs and bars, five lodges in 2019, a net capital reduction of £25 million. Chief executive Ralph Findlay said: “We are pleased to report another period of good growth in revenue and underlying profit before tax. Strong trading in brewing and taverns and leased pubs offsets the adverse impact of poor weather on ‘drive-to’ pubs in our Destination estate, further validating the resilience of our model. We have made modest and prudent adjustments to our capital plans to reflect the current economic and consumer climate. However, Marston’s is a balanced business and we are confident that the medium-term outlook for the eating-out and wet-led pub sectors remains good and that targeting an increased profitable share of a growing market through an unremitting focus on quality, service, standards and value for money remains key.” Peel Hunt leisure analyst Douglas Jack said: “In a weak consumer environment and during a period of inclement weather, P&D’s profits were flat and all the other divisions were up. We believe the dividend is sustainable, supported by reduced capex and no increase in pension contributions, which have been pegged at £8m pa, ceasing when the deficit clears, which is likely to be 2021-2 at the latest.”

M&B reports 1.6% like-for-like growth in First Half: Mitchells & Butlers has like-for-like sales growth of 1.6%, with growth adjusted for impact of snow of 2.5% for the 28 weeks ended 14 April. Like-for-like growth was 5.8 % over Easter weekend. Sales were £1,130m (H1 2017: £1,123m) and profit before tax was £69m Phil Urban, chief executive, said: “During the first half we continued to deliver like-for-like sales growth against a period of growth last year. This strong performance comes from the progress we continue to make in our three priority areas: building a more balanced business; instilling a more commercial culture; and driving an innovation agenda. Success in this highly competitive market is dependent on a continuous stream of improvements, and that is what we are focused on delivering. We have therefore embarked upon a new wave of initiatives which are in their early stages of development, and we believe have the potential to further transform the business. As previously announced, margins are being adversely impacted by increased costs, most notably from wage inflation, property costs, energy and food and drink costs. In light of this, our operational teams have performed well to deliver flat underlying profitability in the period.” The company added: “Since the half-year trading has been strong, aided by good weather, and like-for-like sales in the 32 weeks to 12 May have grown by 1.4%. We have made good progress against our three priorities so far this year and will be refining and embedding our next wave of initiatives during the second half. In this uncertain environment and in the face of unrelenting cost headwinds our focus remains on delivering our strategy with the aim of returning the company to profitable growth and maximising long-term shareholder value. Good progress has been made in the first half in this area. We accelerated the capital programme, completing 220 conversion, remodel and growth projects, versus 172 in the first half last year. The aim of completing projects earlier is to capture more of the post investment benefit in year, however it does result in a greater number of closure weeks in the first half of the year. To minimise the impact we have been working hard to reduce closure time required for investment through operational efficiency and by working closely with suppliers to streamline work. We continue to focus on the upgrade of amenities across the estate through our remodel programme and are generating returns of over 20% on projects completed this year. The quantity of projects completed means that we are now within our targeted six to seven year investment cycle, and we are reaching the tipping point in terms of reducing the proportion of the estate which has not been invested in for seven years or more.”

Dalata secures sites in Bristol and Birmingham: Dalata Hotel Group has signed agreements to lease two new hotels to be built in the UK, which will deliver an estimated 580 new bedrooms to the group’s hotel portfolio. A new Clayton Hotel is planned for Bristol, to be developed by Artisan Real Estate Investors Limited, and a new Maldron Hotel is planned for Birmingham, to be developed by McAleer & Rushe. Dalata now has just over 1,700 rooms in its UK development pipeline on top of the 1,968 rooms that it already owns or leases. Dalata will commence operations in both hotels through 35 year operating leases, subject to five year rent reviews linked to the Retail Price Index. Dalata already operates seven Clayton hotels in the UK, in London (two), Cardiff, Leeds, Birmingham, Belfast and Manchester Airport. Two new Clayton hotels are also planned for the centre of Manchester and Glasgow as announced in September 2017 and November 2017 respectively. Dalata operates Maldron hotels in Derry, Belfast City Centre and Belfast Airport with a further Maldron hotel under construction in Newcastle and another one planned for Glasgow, as announced last December. Dermot Crowley, deputy chief executive – business development and finance, said: “We are delighted to secure agreements to lease these two very exciting new hotels in the heart of Bristol and Birmingham. Both cities possess very strong hotel markets and these two projects demonstrate our ability to grow a very attractive development pipeline of hotels in the UK. In Dalata, we pride ourselves on developing long term partnerships. We are already developing hotels with Artisan and McAleer & Rushe and we now look forward to working with them again on these projects.”

Truman’s opens first Tap House: Brewers Truman’s is opening its first Tap House in the City, The Newman Arms in Fitzrovia, today. Truman’s have expanded the pub into the basement and increased the number of draught lines to offer customers a range of beers from brewers far and wide. Truman’s will run tasting evenings and beer training at the pub which will act as its West London Flagship. Truman’s managing director James Morgan said: “The greatest satisfaction comes from serving amazing beers and seeing drinkers enjoy them – that’s exactly what we’ll be doing all day every day at the Newman Arms. It’s a dream come true to bring back to life such a well-loved pub. Yet again we’re reviving a London institution; it’s becoming a habit! We’re bringing the best of East End craft brewing to the West End and beyond. Look out for our imminent announcement about Tap House No.2.” The Newman Arms will be one of the first pubs in London to install a fully functioning ‘crowler machine’. The machine will fill 910ml cans with any draft beer on site for customers to take away. Delivery options for homes and businesses will be available to keep the local community in pints and pies. Whilst the pub has undergone various guises in its 100 year plus history, the interiors will still embrace a traditional pub feel. The upstairs will remain the celebrated pie room, with two new snugs located in the basement available for private hire.

C&C Group reports ‘significant strategic year’: C&C Group has reported a 4.9% drop in revenue to 548.2 million euros and a 6.3% fall in adjusted Ebitda to 100.4 million euros for the 12 months to 28 February. The company, however, said the year was significant in terms of underlying performance. Chief executive Stephen Glancey said: “FY2018 was a significant year of progress for the group, both in terms of strategic development as well as improved underlying performance. While the trading environment in our key markets of the UK and Ireland remained challenging, our branded portfolio returned to volume and revenue growth, outperforming the broader LAD market. Our Scottish businesses excelled this year, with Tennent’s driving share growth and revenues of +5%, benefiting from continued investment in social media, sponsorship and new fount roll-out programme. Our Tennent’s wholesale distribution business in Scotland also performed strongly. Customer numbers, volumes and revenues were all up, driven by the group’s procurement scale helping deliver value to customers and excellent service levels. The expansion of our distribution agreement with AB InBev for our cider portfolio in the UK gained momentum, through its first year. Incremental on-trade and wholesale distribution points for Magners yielded positive results in H2’18. Our investment in Admiral Taverns further enhances our route-to-market across the UK. We completed the investment in December 2017 and trading to date is in line with our expectations. In Ireland, Bulmers brand investment helped boost our brand health scores with our key target demographic of 18-24-year-olds as well as grow share in the off-trade and hold share in packaged on-trade, but competitive pressures remain in draught. FY2018 saw another year of strong performance for our craft and super-premium brand portfolio, with Menabrea increasing volumes by +53% and Heverlee by +35%. We strengthened our portfolio increasing our investments in the Dublin craft brewery – Five Lamps and the Somerset craft cider brand – Orchard Pig. These craft investments, together with Admiral totalled €53 million. We also returned €78 million to shareholders through a combination of share buybacks and dividends. With Net Debt/Ebitda (of 2.37x at 28 February 2018, leverage at year end remained low. This enabled us to move quickly and opportunistically for Matthew Clark Bibendum, which we acquired post year end out of the administration of Conviviality. Matthew Clark Bibendum, is the largest independent distributor to the UK on-trade. With unparalleled on-trade market access, a wide range of supplier relationships, and supported by a skilled and loyal employee base, this is a business we know well. A strategically important acquisition for C&C, this greatly enhances our route-to-market in the UK on-trade. Significant progress has already been made in stabilising the business. We look forward to working with our new colleagues in restoring the group’s position as one of the leading and most respected drinks suppliers in the UK hospitality sector. In terms of outlook, trading in March and April for C&C Group has been in line with expectations, and we are confident in our outlook.”

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