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Fri 13th Jul 2018 - Update: Gaucho's £1m-plus tax bill demand, Pod and Boston Tea Party results
Gaucho tries to strike rescue deal after £1m tax threat: Gaucho, which is owned by private equity firm Equistone, has been given until the end of today (Friday, 13 July) to pay a £1m-plus tax bill as it tries to strike a rescue deal. The Gaucho estate, which comprises 16 eponymous restaurants and a further 22 under its CAU brand, is racing to secure a sale following a seven-figure tax demand that could trigger its collapse into administration within days. It is thought the company, which has been trying to find new investors since May, has insufficient funds to pay HMRC unless it finds a buyer. Unless it can secure a solvent deal, Gaucho faces the prospect of calling in administrators, an outcome that would threaten about 1,500 jobs. Sources close to Gaucho said its advisers were in regular contact with HMRC and it expected to have a conditional agreement to sell the company next week. It is understood there have been bids from a handful of prospective owners. A sale would enable the business to secure additional funding to meet cash commitments, including the HMRC bill. In a statement issued to Sky News, a Gaucho spokesman said: “We have been managing our cash tightly as we near completion of the options process. We remain confident the Gaucho business will emerge from this process on a more stable footing.” Insiders said the company and its lenders expected several bids ahead of the deadline, with those considering offers including Hugh Osmond, former PizzaExpress backer. Osmond Capital is competing with Core Capital, which is owned by ESO Capital and is backing Gaucho’s existing management team, and Limerston Capital, an investor in companies including Spark Energy. It is thought Equistone is also likely to submit a proposal that would involve it retaining control of the business. The bidders are all expected to offer significantly less money than the £50m owed by Gaucho to its banks. Under the management’s plans, the Gaucho chain would continue to operate while CAU would, if approved by creditors, close through a company voluntary arrangement. Talks with potential new owners come after CAU saw double-digit declines in like-for-like sales. The Gaucho-branded estate is said to be performing “in line” with the broader sector and is not under threat of closure.

Pod confident new management team will turn company’s fortunes around following corporate Ebitda loss: London-based healthy eating brand Pod has said it is confident its new management team will turn round the company’s fortunes in 2018 after reporting a corporate Ebitda loss in its latest financial year. The company saw turnover increase 1.2% to £17,244,033 for the year ending 4 January 2018, compared with £17,041,451 the previous year, thanks to 27% growth in the delivery business. It reported a corporate Ebitda loss of £500,000, compared with a profit of £600,000 the year before. Pod said the majority of the loss (£400,000) occurred in the first half of the year. Store Ebitda dropped to £1.4m, compared with £2.6m the previous year. Pre-tax losses increased to £1,748,884 compared with £383,964 the year before. Net assets totalled £1.6m, compared with £3.3m the year before, including cash of £0.6m (2016: £1.7m), according to accounts filed at Companies House. At the end of the period, the estate totalled 23 stores and two delivery hubs. In their report accompanying the accounts, the directors stated: “Strong growth in sales from deliveries offset by slightly softer trade in in-store revenues along with the continued improvement in the systems and structure, operations and the assignment of two poorly performing sites led to a much improved second half of year performance. In 2017, the company added a new store in Hammersmith in west London, which has delivered strong sales from the outset. As was forecast in last year’s chairman’s statement, 2017 proved a challenging year for Pod. Competitor expansion coupled with a slowdown in consumer confidence and rent reviews led to headwinds felt at top-line as well as non-controllable cost levels. The challenging market conditions meant the business delivered a corporate Ebitda loss. We have seen significant changes in the management team, with chairman John Postlethwaite leaving the business. We would like to thank John for his years of service to Pod. In May 2017, Alex Young joined the business as chief operating officer and was appointed chief executive in August. Alex is formerly of Itsu and his wealth of industry experience has brought immediate solutions to some of our operating challenges. From January 2018, Pod welcomed new heads of IT and supply chain and logistics, and an operations and standards manager. Finally, David Haimes replace John as chairman from January 2018. David brings 25 years of experience in the hospitality and food industry. Cost control will continue to be crucial in achieving our targets for 2018. Since his appointment, Alex has undertaken a number of key initiatives including food sourcing, store costs and overhead costs. The benefits of this work began to be reflected in performance in the second half of the year and will become increasingly apparent as we advance through 2018. By adhering to our principles of serving the best, nutritious food, the business will be well placed to compete. The focus over the next 12 months is on investing in our brand, estate, processes and people while continuing to seek relevant opportunities for expansion.” Pod is currently raising funds on peer-to-peer lending platform Code Investing via a mini-bond that will pay 8.5% annual (gross) interest rolled up and paid as a single lump sum on the maturity date after two years. Having hit its initial £200,000 target, the company has set a stretch target of £1m. So far, 37 investors have pledged £277,800 with four days remaining. The company also previously told Propel like-for-like sales were up 8% in the first four months of 2018.

Boston Tea Party reports like-for-like sales up 1%: All-day casual dining cafe Boston Tea Party has reported like-for-like sales in its mature sites increased 1% for the year ending 25 October 2017. Turnover was up 13% to £16,764,191, compared with £14,857,105 the previous year. Ebitda fell to £823,782, compared with £1,047,345 the year before. Pre-tax profit was down to £37,183 compared with £351,346 the previous year, according to accounts filed at Companies House. Two sites opened in the period – Bristol and Edgbaston – taking the total to 20. Since the year-end, a venue has opened in Solihull while another is lined up for Chichester later in the year. In their report accompanying the accounts, the directors stated: “Ebitda and profit for the financial period were both impacted by the more challenging trading conditions in place during the past financial period and some internal restructuring has been necessary to strengthen the business for future growth. This restructuring and other actions taken to improve profitability have yielded positive results in the new financial period. The directors are confident Boston Tea Party is a strong and sustainable brand that will continue to perform well in the next financial period and beyond. The company ended the period with net assets of £2,720,630 (2016: £2,788,291) including cash of £236,481 (2016: £955,982). Employee numbers increased by 11% to 535 (2016: 484), reflecting job creation through the two openings in the period. The strength of the brand continues to grow strongly through the new openings and investment in social media development.” In June, the company became the first UK coffee chain to ban all single-use coffee cups. In the first month of the ban, it saw a drop of 24% in hot drink sales but the company said it was looking at the bigger picture as it saved 17,500 cups from going to landfill.

Peel Hunt – Domino’s Pizza Eurasia team driving growth: Peel Hunt leisure analyst Ivor Jones has said Domino’s Pizza Eurasia team is driving growth. Issuing a ‘Buy’ note on the shares with a target price of 220p following the company’s half-year results, Jones said: “Management is pleased with the first-half performance in the key markets of Turkey and Russia. A total of 21 stores were opened in Russia, seven in Turkey and one in Azerbaijan. Several new cities have been added in Russia and early trading in those new cities is in line with expectations. About 50% of store openings were ‘splits’ – stores opened in the delivery area of an existing store. This is very positive as a way of entrenching the competitive position of the business and is a continuing part of the strategy. We note it is slightly supportive of reported like-for-like sales as the more mature split store is taken out of the like-for-like calculation. Online system sales were 59% of the total at group level, up from 50% in the first half of 2017. At the time of the initial public offering, management had flagged the importance of getting through the inflection point of 50% of sales being online. The larger the proportion of orders that come in online, the more Domino’s Pizza Eurasia can analyse order data and target customers with marketing efficiently to grow sales further. With online at 54% of the total in Turkey and 74% in Russia, the group is well placed to exploit digital levers ever more efficiently. Expansion in Russia continues in the Moscow area as well as in new cities. Management is ‘very excited’ by the success of openings in new cities as they are validating the growth plan. The number of sub-franchisees has increased, from 13 at year-end 2017 to 15, and management expects to add more by year-end. Sub-franchisees are being supported with know-how from Domino’s Pizza Eurasia but not capital – they are self-financing. Competition is increasing in Russia but Domino’s Pizza Eurasia is also growing very quickly and management still sees the long-term target of 1,500 stores as realistic. In Turkey, the group continues to manage food cost inflation with increased efficiencies, which is clearly a competitive advantage relative to smaller operators. Domino’s Pizza Eurasia planned marketing around the World Cup in Russia and some Russian sales records were broken. Turkey did better than expected in the World Cup in terms of pizza sales, perhaps because of a favourable time zone. The GPS roll-out is on track to complete by year-end. More than 200 stores are using the system and Domino’s Pizza Eurasia is making operational tweaks before the full roll-out. We expect GPS to support customer satisfaction (and hence order frequency) as well as efficiency in using delivery resources. There are multiple digital innovations in the pipeline, mainly focused on customer convenience. Order kiosks were on trial in 15 to 20 stores and early signs are promising. We came away from the call as confident as ever in the quality of the team and its ability to execute the growth plan.”

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