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Tue 24th Jul 2018 - Update: Fuller’s AGM trading statement and Fulham Shore results
Fuller’s reports like-for-likes up 4% in managed division: Fuller’s, the London brewer and premium pub company, has released a trading statement for the 16 weeks from 1 April to 21 July 2018 in advance of the company’s annual general meeting to be held today. It stated: “The company has made a good start to the new financial year with like for like sales in our managed pubs and hotels rising 4%, particularly pleasing against a strong comparative of 6.6% for the same period in the prior year . Like for like profits in our Tenanted Inns were up 4% and total beer and cider volumes in The Fuller’s Beer Company were flat.” Chief executive Simon Emeny said: “Our core business has performed well, with the prolonged summer weather benefiting our pubs with outside space and our latest acquisitions are bedding in well and performing to plan. We have a number of exciting schemes lined up for the coming year, including refurbishments of the four We Are Bar sites acquired in June and the opening of two new station sites at Euston and Liverpool Street. Recent investment in our Destination Chiswick initiative has been well received and included the opening of our new brewery shop and pilot plant. Although we have undoubtedly benefited from the feel-good factor of England’s World Cup performance and good summer weather, it is important to remember that the underlying economic and political situation, particularly the UK’s position with regards to Europe, creates uncertainty and it is difficult to predict the nature of any potential impact on the sector. However, Fuller’s is a well-balanced company that is founded on iconic pubs and a premium portfolio of outstanding brands, underpinned by an excellent team of people. We have exciting plans in place to keep us relevant and interesting to today’s consumer and we face the coming year in a strong position and with a positive outlook.” The next report will be on 23 November 2018, when the company issues its half year results for the 26 weeks to 29 September 2018.


Franco Manca reports sales up, loss after tax: Franco Manca operator Fulham Shore has reported revenues of £54,695,000 (2017: £40,441,000) for the year to 25 March 2018. Headline Ebitda was £7,430,000 (2017: £7,274,000). There was a one-off impairment charge on property, plant and equipment of £867,000 (2017: £Nil). There was a loss after tax of £150,000 (2017: profit of £1,209,000). It opened nine new Franco Manca pizzeria and four new The Real Greek during the year ended 25 March 2018 in the UK (2017: 13 Franco Manca pizzeria and 3 The Real Greek). It opened the first Franco Manca pizzeria franchise in Salina, Italy. Since the year end: two further Franco Manca pizzeria have opened in Bath and Cambridge, and closed one underperforming restaurant in Brighton Marina. Management initiatives have led to an improved revenue performance in the first quarter of the new financial year. Chairman David Page said: “In the year ended 25 March 2018, Fulham Shore achieved a 35% increase in revenue from continuing operations to £54.7m (2017: £40.4m), an increase in Headline Ebitda from continuing operations to £7.43m (2017: £7.27m) and a loss before taxation from continuing operations of £0.1m (2017: profit of £1.4m). This increase in both revenue and Headline Ebitda by the group was achieved against a backdrop of a very difficult environment for retailers and restaurant operators in the UK. The sound foundation upon which Fulham Shore has expanded Franco Manca and The Real Greek has stood the group in good stead during this time. In last year’s Strategic Report, I wrote that an unprecedented amount of capital had been invested in the UK restaurant sector during recent years. Restaurant supply has grown faster than demand across the country initially caused by the fall in demand for retail shop space. Landlords and agents have consequently actively sought to rent the vacant space to restaurant operators. This structural imbalance of the restaurant industry then hit the brick wall of Brexit and the subsequent fragility of consumer confidence and inflationary pressures in the UK. Despite this backdrop, it has been a year of growth and strategic progress for the group. We believe that this demonstrates that Fulham Shore is well placed to ride out the UK economic turbulence as a dynamic operator with strong and popular businesses and a good portfolio of sites. During the year we opened: nine new Franco Manca pizzeria, with Oxford and Bristol particularly well received; and four The Real Greek restaurants, also to a great customer reception. We closed the only site of our third business, a Bukowski franchise, at the year end. Following the year end, we sold the lease and contents for £0.3m net of expenses. We have therefore recognised the loss on this investment of £0.4m. We will now concentrate on expanding our two successful operations. Also following the year end, we have agreed terms to surrender the lease for Franco Manca Brighton Marina to the landlord as this site has not performed to our expectations. This restaurant is expected to close later in the year. We have taken a cautious view concerning our other property values and have written down the carrying value of three underperforming sites, resulting in an £0.9m impairment charge, of which £0.5m relates to Brighton Marina.”

Franco Manca: Page said: “Between March 2015 and March 2017, we increased the number of Franco Manca pizzeria in London from ten to 33. This was in response to enormous demand and queues at peak times in our restaurants. As previously reported and as anticipated at the time, the result of this rapid expansion was some sales erosion in the original branches caused by the effect of opening another Franco Manca in close proximity (sometimes less than quarter of a mile apart). After sharing our existing customers between these (now 35) London locations, new customers are discovering us and the sales in the original branches have stabilised. We still have queues at peak times reflecting the quality and value of the offer, so we will look to open new sites where there is continued demand in particular areas. We have always served freshly made pizza, which is as it should be. Some other pizza businesses in the UK use frozen food products and frozen dough. We continue to make our dough every day in each of our pizzeria. Our aim is to keep the price of our Margherita pizza (the number two on the menu) well below the price of the frozen product at many high street pizza chains. The only thing we freeze at Franco Manca is our ice cream. Franco Manca believes in competitive everyday menu pricing – not discounting. We pay at least the government’s national living wage to all our employees including those who are under 25 years old. Our staff keep all their tips and we do not interfere with, or take a proportion of, those tips. Franco Manca management have committed their time and attention to increasing service quality. When and if a customer has a complaint, they aim to rectify the problem as soon as possible either immediately in the pizzeria or through social media. In this way they attempt never to lose a customer; these efforts have shown through in increasing customer numbers. This financial year’s performance and the opening of our Franco Manca franchise in Italy have encouraged us to investigate, and respond to, the many enquiries we have received to open Franco Manca pizzeria outside the UK. We are now looking around the world for opportunities.”

The Real Greek: Page said: “The Real Greek menu continues to offer great food and great value. Customers can share hot or cold meze, and, when finished, order more if they are still hungry. This eliminates waste, stops customers over-ordering, and keeps them and us happy. Our Real Greek restaurants have many outdoor eating areas and terraces, so when the sun shines they perform disproportionately well compared to the steak houses and hamburger restaurants trading alongside them. The Real Greek openings in the year to March 2018 have been in Southampton, Reading, Bournemouth and Bristol – all with large terraces to take advantage of our Greek style summers! We are being offered many new sites for The Real Greek. This business offers the public and landlords, especially in new retail schemes, a differentiated concept and gives the consumer a popular and healthy alternative to the normal repetitive high street offerings available. Emphasising the healthy aspect of the traditional Greek diet, the highlight of the year was the launch of our vegan Real Greek menu. This was heavily influenced by Pythagoras, Socrates and Plato, all of whom maintained that this diet was the foundation of democracy. Luckily many of our customers agreed with these ancient sages – and they love it too!”

Property: Page said: “The amount of new restaurant space coming to the market is the greatest for many years. Rents are falling, lease premiums are disappearing and the UK restaurant property market is in a period of turmoil. The capital needed to open a new restaurant is declining due to landlord incentives. Incentives alone, however, are never the right reason to open in a particular location and, if anything, this could continue poor expansion decisions being made in the sector. We still intend to open a limited number of new restaurants this year and to fund these openings largely from our internally generated cash. Any increase in our openings target would be for stand out and highly profitable locations which would immediately offer above average returns. Negotiating low rents supports our ability to offer low menu prices. Franco Manca especially concentrates on finding compact sites that may not be in the most prime locations. These off pitch locations are often at lower rents, but there is balance as it may take time for customers to find us and for the individual site to build up trade. We fit the premises out for what they are, hard wearing pizzeria built for very high volumes. Our two design imperatives are Enzo Apicella’s original artwork and our industrial and spectacular pizza ovens.”

Current trading and outlook: Page said: “Sales in the first quarter of our current financial year, April to June 2018, have been encouraging in both Franco Manca and The Real Greek. This is a result of some great work from both businesses’ management teams and they are to be congratulated. Both teams have concentrated on food quality, price and service. Both businesses have shown overall like for like revenue increases during this quarter despite tough comparatives sales in 2017 as well as the continuous stream of poor UK economic data from the retail and restaurant sector. We will continue to approach expansion with caution. Our investment strategy will be much more circumspect than in ‘normal’ times. Careful property transactions will be even more crucial and our aim at present is to expand largely through internally generated funds. We have opened two restaurants since the year end, Franco Manca in Bath and Cambridge. Both are trading well. Franco Manca now has 43 pizzeria across the UK plus one franchise on the island of Salina in Italy, which reopened for its second summer season on 2 June 2018. We have signed a site on South St Andrews St in Edinburgh for Franco Manca in the next calendar year. We are in final stage negotiations on two others which should see Franco Manca starting to build this summer to open this autumn. Despite the growth we have reported and our positive first quarter in the current financial year, the remainder of the financial year is difficult to predict. Costs will, in all likelihood, continue to rise but maybe not as much as they did during the past financial year. Both our businesses continue to be leading lights in the restaurant sector. Top quality food and great value prices lead to busy restaurants and we believe that our two businesses continue to have significant growth potential across the UK. As a result and despite the challenging UK backdrop, we are confident that the group will continue to perform well and we look forward to the current financial year as we continue to grow and develop our brands.”


Britvic reports Third Quarter revenues up: Britvic has reported third quarter revenue of £366.9m, an increase of 3.4% on a strong comparative prior year number (+4.5%). Revenue excluding the Soft Drinks Industry Levy (SDIL) decreased 0.6% over the third quarter. Year to date reported revenue increased 4.2% (2.8% ex-SDIL) to £1,100.1m. Simon Litherland, chief executive, said: “Britvic has delivered a strong underlying performance in the third quarter, through continuing outstanding execution of no sugar carbonates and substantial growth from our stills brands. Whilst the industry-wide shortage of carbon dioxide held back our ability to fully capitalise on the exceptional weather in GB and Ireland, we leveraged the breadth and strength of our portfolio to moderate the impact. Consequently, we remain confident of achieving market expectations for the full year. GB revenue increased 8.0% (+1.9% ex-SDIL), with GB carbonates revenue increasing 6.1% (-2.9% ex-SDIL). Pepsi continued to gain share, led by outstanding execution of MAX. There was a well-documented disruption to the supply of carbon dioxide into the UK and Ireland within the period, which impacted the wider food and drink industry, including carbonated soft drinks. To ensure continuity of supply across all trading channels, we temporarily scaled back our promotional activity and reallocated some of our secondary feature space to stills. Supply has now normalised, enabling us to start rebuilding stock levels and gradually reintroduce promotions. GB Stills revenue growth was particularly strong, increasing 11.9% (+11.7% ex-SDIL). Underlying performance continued to improve, led by strong growth for both Robinsons and J20, and further enhanced by the additional display space referenced above. Since the introduction of the SDIL in April, the soft drinks category has benefited from a prolonged period of unusually warm weather. This, when coupled with the carbon dioxide shortage, makes it difficult to disaggregate the effect of the Levy, and we anticipate having a more informed view of the impact at the end of the year. Early indications remain positive for the category and Britvic, with the shift from full sugar to low or no sugar products accelerating.”

Fever-Tree reports profits expected to be ‘comfortably ahead of expectations’: Fever-Tree, the supplier of premium carbonated mixers, has reported revenue up 45% to £104.2m (H1 2017: £71.9m) in the six months ended 30 June 2018. Adjusted Ebitda was up 35% to £34.0m (H1 2017: £25.2m). Tim Warrillow, chief executive of Fever-Tree said: “The first half of 2018 has been one of major progress for Fever-Tree. The group delivered a strong performance, most notably in the UK, as we continue to drive and lead the evolution of the wider mixer category. Furthermore, our relationships with key customers and spirits partners mean we are increasingly well positioned as the growing move to premiumisation and long mixed drinks continues to develop across the globe. We have successfully launched our wholly owned US operations with a talented team recruited and now in place. The exclusive distribution agreement with SGWS, the largest North American wine and spirits distribution company, is a significant endorsement and provides a strong platform for Fever-Tree US in 2019 and beyond. Given the strong performance in the first half of the year, the board anticipates that the outcome for the full year will be comfortably ahead of its expectations.”

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