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Morning Briefing for pub, restaurant and food wervice operators

Thu 28th Jun 2018 - Update: Greene King results, Subway partners with Just Eat, Cake Box float
Greene King reports full-year managed like-for-likes down 1.7% following slower food sales: Greene King has reported managed like-for-like sales were down 1.7% for its full financial year with the figure at -1.2% excluding the impact of snow. The company said slower food sales was the main driver of the negative like-for-like sales, partially offset by positive drink and accommodation sales growth. Its tenanted Pub Partners division saw like-for-like net profit up 0.4%. Brewing and brands revenue was up 7.4%. Group revenue was down 1.8% to £2,176.7m in the 52 weeks to 29 April 2018 and operating profit before exceptional and non-underlying items fell 9.3% to £373.1m. Ebitda dropped 7.2% to £486.6m. Group profit before tax, exceptional and non-underlying items was down 11.2% to £243.0m. Its brand optimisation programme delivered 25% return on investment while Fayre & Square has been fully debranded. Greene King delivered £44m in cost savings through its mitigation programme and Spirit synergies. The company said its strategic priorities to continue driving momentum was to improve underlying sales growth in the Pub Company, develop a more efficient and effective organisation and further strengthen the capital structure. Greene King said Pub Company like-for-like sales were up 2.2% over the past eight weeks, aided by good weather and sporting fixtures while Pub Partners and Brewing & Brands were “trading in line with expectations”. For the new financial year the company expected to see £45m to £50m cost inflation and is targeting £30m to £35m cost savings. Chief executive Rooney Anand said: “We made good progress improving the performance of the business during the second half of the year, despite a challenging trading environment. Our investment to improve the customer experience in our pubs and the focus on our strategic priorities are beginning to pay off. Positive momentum, both in terms of trading and customer satisfaction, is returning to our business. While it is still early days, this positive momentum has continued into the new financial year, aided by good weather and popular sporting events. We remain focused on continuing to drive top line growth, developing a more efficient organisation and further strengthening our capital structure to deliver long-term value creation for our shareholders. We expect the trading environment to remain challenging for some time, but we strongly believe people will continue to choose the great British pub as the place to enjoy time with friends and family.” Chairman Philip Yea added: “Greene King is a strong business with an excellent track record of delivery and resilience in tough market conditions. This has been a challenging financial year with pressures on both revenue and margins as consumer confidence remains fragile and a number of industry-specific input costs continue to rise ahead of headline inflation. Moreover, adverse weather in the second half and stronger competition across the year have given us additional challenges. I am pleased the investments we made in the customer offer and other actions taken in the second half are starting to pay off and that underlying trading is improving. We are fully focused on delivering our aim of building the best pub and beer company in Britain. While trading this year was below our initial expectations, the board has recommended a final dividend of 24.4p, reflecting our confidence in the long-term prospects of the business. This takes the total dividend for the year to 33.2p, in line with last year. We have a long-term track record of covering our debt amortisation, core capital expenditure and dividend from our free cash flow and the board continues to target a dividend covered approximately two times by earnings. We have 39,000 talented and hard-working team members who are responsible for the continued success of the business. Under the leadership of our strong management team, they responded well to the challenges we are experiencing in the market place and, supported by the £10m investment into value, service and quality, helped to deliver an improvement in underlying trading in the second half of the year. I should like to record our thanks for their effort and commitment. In February this year, Richard Smothers joined the board of Greene King as chief financial officer in succession to Kirk Davis. Richard has 20 years of experience at blue-chip retail and consumer-focused companies in senior financial roles. He is a strong addition to both the board and executive team. I should like to record the board’s thanks to Kirk for his contribution to Greene King, particularly during the integration of Spirit. We are pleased with the most recent trading performance although we are aware that we have benefited from better weather and sporting events. Building pub brands that customers admire remains central to our strategy and we are focused on providing the customer with offers that deliver compelling value, service and quality. We shall maintain our discipline in investing in both our estate and our people to generate long term value, while continuing to manage our capital structure prudently. Our aim is that Greene King will emerge from the current challenging environment stronger than ever and I look forward to reporting on our progress next year.”
Subway announces delivery partnership with Just Eat: Subway has announced a new trial partnership with online food delivery business Just Eat Just Eat. The delivery service is initially limited to London, Leeds and Manchester, but the plan is to extend it to more than 500 Subway stores nationwide by the end of 2018. Sarah Clarke, marketing director at Subway UK and Ireland, said: “We’re delighted to announce the Just Eat delivery trial, making it even easier for our customers to enjoy their Subs, salads and sharing platters anywhere, at any time. We look forward to seeing the results and being able to roll out delivery nationwide.” Just Eat UK managing director Graham Corfield added: “We’re excited to welcome Subway to Just Eat, as part of our continued efforts to offer customers more of their favourite food brands at the tap of the app.” Meanwhile, Just Eat gave a more cautious outlook than expected at its Capital Markets Day meeting yesterday (Wednesday, 27 June). The group did not give any new guidance for 2018 and warned profits could be subdued due to high investment costs. Chief executive Peter Plumb said he would continue to up the ante on investment in technology and marketing in the pursuit of market share. While this would mean not better than flat margins on its market place takings, he made clear these would be off much higher revenues. On the group’s move into delivery, mainly using third-party couriers, he said over time he expected delivery to account for between 5% and 15% of total UK revenues.
Cake Box targets 250-strong estate as it makes AIM debut: Fresh cream cake retailer Cake Box is targeting a 250-strong UK estate as it saw its shares rise almost 19% on its AIM debut. The shares closed at 127p, with the initial public offering having been priced at 108p. The company, founded by cousins Sukh Chamdal and Pardip Dass in east London in 2008, now has 91 stores and is looking to open two or three new stores a month. Chamdal and Dass pocketed £16.5m. They retain a 60% interest, reports The Times. Chamdal, a former chef, came up with the idea after his daughter asked for an egg-free cake. All of the cakes continue to be egg-free, appealing to the vegan market and people with egg allergies. Customers can have a personalised message iced onto a cake while they wait. The company achieved like-for-like sales growth of 15% over the year. Chamdal said: “We are confident we have all the ingredients to continue to grow our franchise estate to 250 stores and further expand our slice of the sizeable UK cake market, with a unique customer proposition and limited direct competition.”
Eagle Eye extends credit facility with Barclays: Eagle Eye, the SaaS technology company that validates and redeems digital promotions in real-time for the grocery, retail and hospitality industries, has extended its credit facility with Barclays. Eagle Eye has agreed a £2.0m extension to its existing facility and as a result the company now has a £5.0m revolving credit facility available until 30 June 2020. The company said the funds available through the new facility would strengthen its balance sheet as it “deepens relations with existing Tier 1 customers” and explores opportunities with new ones both nationally and internationally. Chief executive Tim Mason said: “I am pleased by Barclays’ confidence in our growth prospects. Over the past 12 months we have made significant improvements to our product including the addition of the digital wallet to our loyalty offering, allowing all available data relevant to a single customer to be held in a single ‘digital container’. As the loyalty market moves to meet increasing customer expectations of personalisation we are well positioned to exploit the major growth opportunities open to our business both in the UK, and internationally with this innovation.”
Vianet reports trading ‘broadly in line with expectations’: Vianet Group, the international provider of actionable data and business insight through devices connected to its Internet of Things platform, has reported “trading is broadly in line with expectations”. Ahead of its annual general meeting today (Thursday, 28 June), chairman James Dickson said: “Benefiting from solid momentum into the new financial year, the group’s trading in the first two months is broadly in line with the board’s expectations. The business is also making good strategic progress through our focus on strong growth opportunities in the Smart Machines division. The Smart Machines division, where there is real emphasis on taking advantage of our leading position in coffee vending and contactless payment device connectivity, is building sales momentum which will fuel growth. The integration of Vendman is also progressing well and traction is increasing as we seek to overlay circa 200,000 Vendman mobile connections with higher value Smart Machines connections and also cross sell from the portfolio to existing customers and vending operators internationally. In the Smart Zones division trading is marginally behind last year so far due to installation phasing although there is encouraging progress with revenue growth in our managed compliance service. The board remains confident Vianet’s long-term strategy is the right one and the group is well positioned to deliver earnings growth and expand the future strategic options for Vianet. This is reflected in the board’s decision to recommend maintaining the final dividend at 4p per share.”
Hotel booking websites face court action: Hotel booking websites are facing court action for applying hidden fees and trying to pressure customers into making a booking. The Competition and Markets Authority (CMA) would not name the sites but said it was concerned commission paid by hotels could be influencing rankings. The CMA said the sites could be breaking consumer protection law.

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