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Tue 25th Sep 2018 - Update: Luke Johnson to increase stake in Brighton Pier Group, Time Out et al
Brighton Pier Group reports progress with evolution of business, Luke Johnson to increase shareholding to 27%: The Brighton Pier Group, which owns and trades Brighton Palace Pier, as well as twelve premium bars nationwide including two ping-pong concept bars and six indoor mini golf sites, has reported revenues rose to £31.7 in the 53 weeks ended 1 July 2018 (52 weeks ended 5 June 2017: £31.3m). Profit before tax was £3.2m compared. The company stated: “The group successfully acquired Paradise Island Adventure Golf during the period – this business provides opportunities for growth with one site planned for opening during the coming year. We completed an ambitious £1.3m upgrade of the restaurant and bars. Increased seating capacity from these refits is benefiting peak trading and provides future opportunities to grow the conference and events business all year round. Operating profit in the bar division was in line with the prior year. (A) second Smash opened in Wimbledon and is trading in line with expectations. (It was) voted ‘Bar of the Year’ in Wimbledon/Putney area.” The company sold the leasehold interest in Manchester Sakura and the site in Liverpool. It has let the ground and first floor at Derby on a 20-year lease at £90,000 per annum. Luke Johnson, executive chairman, said: “The successful acquisition of Paradise Island Adventure Golf during the financial period has added a new income and profit stream with further growth potential for the group. We are looking forward to opening our first new golf site at Rushden Lakes in the spring of 2019. Works have also started on the redevelopment of the Fez Club in Putney – this popular venue is due to reopen towards the end of November in time for the busy Christmas period. I am immensely proud of the work that has been done by the team at the Pier to completely refurbish the restaurant and bars on time and on budget. The result has been a truly transformed Horatio’s Bar and Palm Court restaurant. The improved capacity and additional outside space, together with the improved conference and events capability, will improve earnings for the future.” Johnson added: “The profitability of the pier is highly dependent on the weather. Overall the pier’s results were reasonable in the circumstances. The £1.3 million refurbishment of Palm Court restaurant, Horatio’s bar and Victoria’s bar caused some disruption in trading, but following the renovations the catering operations showed material improvements against the comparable periods in the prior year. The pier is now better placed to win more function business in its venues with its much improved offer. We exited two unprofitable bars in Manchester and Liverpool and let two floors in our Derby freehold. The portfolio has been streamlined, which enables management to focus on the outlets with more potential. We also converted our Wimbledon site into a Smash bar, which combines ping pong, artisan pizza, craft beer and sports on TV. The new format achieved a substantial uplift in revenue and profitability. Our new mini golf business has been successfully integrated into the group. It is meeting our profit expectations, and we are undertaking various initiatives to boost revenues, including introducing amusement machines where appropriate. In the current financial period we plan to open the first new Paradise Island Adventure Golf location, since we took ownership. We are also carrying out a full refit of our Putney Fez bar, which we forecast will lead to an improved profit contribution. There are no other major capital expenditure plans for the pier in the forthcoming year, save the usual repairs and maintenance to the infrastructure. These are relatively testing times for the leisure and hospitality industries, mainly owing to cost inflation, additional taxes and intense competition. However, your board believes The Brighton Pier Group remains well placed to take advantage of opportunities. We have a well invested and diversified portfolio of experiential attractions in good locations. Overall the group will continue to generate cash and repay its borrowings. I remain confident of our prospects, and as a sign of my faith in the business I intend at the earliest practical opportunity to exercise my warrant in full at a cost of almost £1million, which would increase my shareholding to 27% of the enlarged share capital.”

Time Out Group – Time Out Food Markets remain top priority: Time Out Group has stressed the roll-out of its food markets remain its top strategic priority as it reports the continued success of Time Out Market Lisbon, with a record 1.9m visitors in the six months ended 30 June 2018 (2017: 1.7m). It stated: “The group’s top strategic priority remains the global roll out of the successful Time Out Market format, with five new markets on track to open in North America next year, including New York, Miami, Boston and Chicago, as well as Time Out Market’s first management agreement in Montreal.” Julio Bruno, chief executive of Time Out Group, said: “Time Out is celebrating its 50th year and continues to provide incredible content to our global users across digital, print and physical platforms. Our first Time Out Market in Lisbon continues to exceed our expectations, with records broken again in the first half as visitors grew 12% to 1.9m. Over the next 12 months we will open ‘owned and operated’ markets in New York, Miami, Boston and Chicago and our first franchise location in partnership with Ivanhoé Cambridge in Montreal. We are in the unique position to attract the best chefs and food offerings in a city, and to drive customers to the locations through our global digital reach. Following the successful integration of our franchises in Spain, Australia, Hong Kong and Singapore and the expansion of our content, we now own and operate the Time Out Digital business in 288 cities and have licence agreements in 27 others. Through these recent acquisitions and further improvements in our operating structure we will benefit from a much-rationalised cost base going forward. Furthermore, following a review of revenue lines, Time Out Digital has removed low margin activity, leading to significantly improved gross margins which we expect to continue into the second half. Digital advertising continues to perform well, growing sales 56% in the period. Whilst this reduces our revenue outlook for the year, it ensures we will deliver significantly lower losses in the second half and remain on track to deliver the near-term priority of Ebitda profitability.” Adjusted Ebitda was a loss of £6.4m (2017: £9.4m), a 32% improvement on prior year and expected to be significantly lower in the second half. It reported an operating loss of £10.2m (2017: £15.6m) with underlying overhead savings of 5%. Group revenue – year-on-year growth of 20% to £22.4m (2017: £18.7m), driven by a combination of underlying growth (+8%) and prior year acquisitions.

Cake Box opens 100th store: Cake Box, the specialist retailer of fresh cream cakes, has opened its 100th store, located in Bletchley, Milton Keynes. The opening marks the ninth store opened by the company since its IPO on the AIM market in June 2018. The company stated: “Further to the ongoing franchise roll-out programme, Cake Box has also continued its product development and innovation, to improve the customer offer both in-store and online. Recent product developments include egg free red velvet cake, soon to be launched in stores, and egg free macaroons, which the company aims to roll out across its portfolio in the coming months. The group specialises in making high quality, individually-crafted and personalised fresh cream cakes for purchase on demand or ordered in advance in store or online.” Sukh Chamdal, chief executive of Cake Box, said: “It’s fantastic to be opening our 100th store which is a real landmark for our franchisees, staff and customers and demonstrates our continued momentum post the IPO in the summer. We’re proud to be providing the backing and organisation to support entrepreneurship across the UK through our franchise proposition and look forward to our ongoing store roll-out over the next few years.”

Hotel Chocolat report revenue and profit growth: Chocolat Group, the British chocolatier and multi-channel retailer, has reported revenue of £116.3m (2017: £105.2m) in the 52 weeks ended 1 July 2018, growth of +11% year on year. Profit before tax was up 13% to £12.7m (2017: £11.2m). The company said: “We opened 15 new UK and ROI stores during the period, contributing 6% to group sales year-on-year. 30 Shop+Cafe format stores are now open giving customers more reasons to visit.” Angus Thirlwell, co-founder and chief executive of Hotel Chocolat, said: “I am pleased to report another year of significant progress for the group. Revenue grew by 11%, underlying Ebitda rose by 16% and profit before tax increased by 13% to £12.7m slightly ahead of expectations. All channels achieved growth and cost efficiency resulted in an improved Ebitda margin. The decline of sterling created pressure on raw material costs, but we have been able to mitigate this by improving productivity and leveraging increased scale. The encouraging performance of our UK channels means we remain confident of further growth, with an exciting range of new product innovations for this autumn, including our Chocolat Cream Liqueur and the Velvetiser in-home Hot Chocolat system. We are increasingly confident that international expansion presents a growth opportunity, and will be adopting a cautious ‘test, learn, grow’ approach to our new partnership in Scandinavia and our new ventures in the US and Japan, where we intend to open our first stores this winter. Greg Hodder, non-executive director, will be very involved in overseeing our US strategy, leveraging his wealth of experience growing British brands in the US, including Charles Tyrwhitt shirts. The new Japanese joint venture will be led by Chris Horobin, the experienced former chief executive of QVC Japan. We have also strengthened our executive team, creating a new position of chief marketing officer; Lysa Hardy joins us this September and brings a wealth of multichannel marketing experience having previously held roles as CMO at Holland and Barrett and Joules. I would like to thank the whole team for their enthusiasm and passion, without which these results would not have been possible.”

Douglas Jack moves Wetherspoon share recommendation to ‘Hold’ from ‘Add’ after recent strength: Peel Hunt leisure analyst Douglas Jack has changed his recommendation on JD Wetherspoon shares to ‘Hold’ from ‘Add’ after recent strength in the shares. He said: “Operationally, JDW remains at the forefront of the sector, but over 4% like-for-like sales failed to sustain positive like-for-like profit growth in H2 2018 despite a £5m cash flow boost from increasing the onerous lease provision. Given this and recent share price strength, we are cutting our recommendation to Hold from Add. It is encouraging that 2018’s like-for-like growth was relatively evenly spread (drink +5.1%; food +5.1%; machines +2.9%; and accommodation +2.1%), and that 2019E has started well (+5.5%). This compares to like-for-like sales averaging +0.9% in the managed pub sector over the year to July (drink +2.4%; food -1.3%) and -1.6% in restaurants. The company’s clear value proposition has helped the company significantly increase its share of food sales. Over the past five years, JDW’s total food sales have grown from £501m to £726m. JDW’s machine sales are also outperforming. Last year’s 2.9% like-for-like growth was due to digital machines, which “customers are becoming increasingly attracted to”. Encouragingly for 2019E, digital machines’ share of total machines should rise to 75% from 20% to 40% in 2018. Despite the strong sales trend, profit growth stalled in H2 2018. In our adjusted PBT numbers, we have excluded the one-off £2.9m of profit on disposal that the company decided to include in its reporting of adjusted PBT. Admittedly, the movement in repairs and depreciation took 7.4% off PBT. However, the increase in onerous lease provisions added 5.0% (the onerous lease provision credit in the cash flow was increased from £0.7m to £6.0m). As JDW’s profit margin is small (7.8%), modest changes in pricing and costs have a disproportionate impact on profitability. For 2019E, management’s guidance is not particularly encouraging, pointing towards potentially much higher labour costs, and limited price increases. As the chairman said: “if prices go up, we will try and keep them as low as we can”. Given this and a rating above the long-term historic average, we believe the shares should pause for a breather.”

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