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Morning Briefing for pub, restaurant and food wervice operators

Fri 18th Jan 2019 - Update: Richoux Group board bids to go private, Rollo on Whitbread
Richoux Group board bids to quit AIM stock market and go private: Richoux Group, the owner and operator of Richoux, Friendly Phil’s, Villagio and The Broadwick restaurants, has announced the proposed cancellation of admission of its ordinary shares to trading on AIM and re-registration as a private limited company, conditional on approval by shareholders. The company stated: “The directors have conducted a review of the benefits and drawbacks to the company and its shareholders in retaining its quotation on AIM, and believe the cancellation is in the best interests of the company and its shareholders as a whole. In reaching this conclusion, the directors have considered the following key factors. Whilst trading for the group remains in line with market expectations, the board has concluded material growth in revenue is unlikely to be achieved in the longer term under its current business model, and may require additional funding in future, whether from existing shareholders or externally, to achieve material growth. Following consultation, the board expects the company is unlikely to receive material support from potential providers of capital or additional financing to support the company as it is currently structured. In order to put the company in a position whereby providers of finance may be more inclined to advance funds, the board believes that a material reduction in central overhead is required. Given the board’s view the company is unlikely to attract material investment from third-party investors over the foreseeable future, the considerable cost, management time and the legal and regulatory burden associated with maintaining the company’s admission to trading on AIM are, in the directors’ opinion, materially disproportionate to the benefits to the company. The shareholding structure of the company is such that it has a limited free float and liquidity in the ordinary shares, with the consequence the AIM quotation does not offer investors the opportunity to trade in meaningful volumes or with frequency within an active market. By way of example of this, only approximately 1.5% of total current shares in issue were traded on AIM over the 12 months to 31 December 2018. The directors have concluded the cancellation will enable the company to reduce significantly administrative costs, enabling Richoux to continue trading as a private company, possibly without the requirement for external funding while the company focuses on improving its estate. Following careful consideration, and having consulted with the company’s nominated adviser, the directors have concluded it is in the best interests of the company and shareholders to seek the proposed cancellation at the earliest opportunity.” At least 75% of shareholders must vote in favour at a general meeting on Wednesday, 6 February for the proposal to be approved. Richoux Group expects the last day of trading on AIM to be on Thursday, 14 February. The company currently operates 14 restaurants. 

Jamie Rollo – five reasons to stay positive about Whitbread: Morgan Stanley analyst Jamie Rollo has outlined five reasons to stay positive about Whitbread following its third-quarter trading update. He said: “We remain positive on the shares. 1. We expect Whitbread to announce a £2.9bn cash return at its 13 February investor day, including the £0.5bn share buyback just commenced. This is equivalent to a significant 33% of market capital, technically share price supportive as well as limiting downside if we see a further market sell-off or Brexit de-rating. 2. Whitbread is a resilient hotel operator, both in terms of concept (budget hotels are less cyclical and benefit from trading down), operating model (mostly owned Ebitda, which has high margins, stable margins over the past decade), and balance sheet (we assume it de-leverages to about one times basic net debt:Ebitda, giving interest cover at 15 times). 3. Premier Inn is one of the world’s strongest hoteliers from an investment standpoint, and we cannot think of another asset-heavy listed hotelier enjoying its KPIs on occupancy (about 80%), TripAdvisor (average score of 4.5), direct distribution mix (97%), unit expansion (6%), and real estate backing (65% freehold tenure mix). 4. Germany could cause a valuation re-rating if the company can get to a more material position here (currently we estimate it will generate £20m Ebit in three years, 3% of the group), given this is a structurally more attractive market than the UK (branded budget share 5% versus 23% UK). 5. The company’s £5bn-plus real estate backing is about 80% of EV, implying the theoretical operating company is trading on two times to three times Ebitda. We also note the share price barely moved, suggesting either the bad news is already priced in, or that some investors may be thinking that bad news is good news if it leads to more activist pressure, or that the technical cash return support is working. We think there could be a potential positive surprise at the capital markets day in two areas. First, the company could announce a bold ambition in Germany, where it currently has a pipeline of 6,000 rooms (which will take it to the fifth largest branded budget hotelier from until recently zero presence), well below where it is in the UK (75,000). Given the German market is larger than the UK, and more fragmented, a medium-term target of 10,000 to 20,000 rooms seems achievable, but a long-term ambition could be a multiple of this. Second, while we expect the company to defend its unique and predominantly freehold strategy (easier to expand than via franchising, and owning preferable to leasing due to control over product/investment, potential for capital gains, higher margins, cheaper funding, easier to churn), the company could provide more information to help investors value the real estate. It wouldn’t be unreasonable to expect this to include a commitment to an annual revaluation (last done three years ago), reporting an internal operating company rent, doing more small sale and leasebacks, or even proposing an option to sell enough UK assets to reinvest in a German property-backed hotelier if a large deal were to become available. Either of these could help the ‘price discovery’ process the share price is going through as investors work out how to value such a unique hotel operator.”

Kornasiewicz to succeed Bloom as Cineworld chairman in 2020: Cineworld has announced Alicja Kornasiewicz will succeed Anthony Bloom as chairman in 2020. Kornasiewicz, who has been a non-executive director since 2015, has become deputy chairman with immediate effect. She will step up into the role of chairman at the conclusion of the company’s annual general meeting in 2020. Bloom will step down having served as chairman for almost 25 years, dating to the formation of the company. Cineworld stated: “Alicja joined the board in 2015 as an independent non-executive director, and has played an extremely valuable role. She has had a distinguished career in business, finance, politics, and on regulatory bodies, having worked in management roles at UniCredit and Morgan Stanley, as chairman of the supervisory board of Bank Pekao SA, and as a member of the Polish parliament after the first free elections in 1989. Alicja has also served as secretary of state for the Ministry of the State Treasury of the Republic of Poland, has a PhD in economics, and is a qualified auditor.” Nomination committee chairman Rick Senat said: “We conducted a thorough process and evaluated a wide range of candidates. Alicja was the outstanding one, and we believe she will be an excellent successor to Anthony Bloom as chairman of the board in 2020.” Kornasiewicz added: “I consider it an honour to accept the position of deputy chairman and, in due course, chairman of this very successful company, which has such an exciting future ahead of it. Anthony has made a major contribution to the development of Cineworld since day one, and I look forward to working closely with him to ensure a seamless transition following the 2020 annual general meeting.” Bloom added: “Alicja has made a significant contribution to the board since joining it in 2015, and her experience and background will undoubtedly be an asset to the company going forward. I fully support her appointment.” Meanwhile, Everyman has appointed Streisan Bevan as an independent non-executive director. Bevan has more than 20 years digital marketing and innovation experience within the technology sector, having worked at Facebook, and Microsoft. She has spent the past ten years at Facebook UK, in a variety of senior roles across both commercial and technology focused teams.

Leadership Summit open for bookings: Propel is launching the Leadership Summit, which will see a select group of the sector’s most experienced bosses share their expertise on leadership. The full-day event, in partnership with Elliotts, will take place on Tuesday, 12 February at One Moorgate Place and is open for bookings. Speakers will include Will Stratton-Morris, UK chief executive of Caffe Nero, who will talk about building high-performance teams. Alasdair Murdoch, chief executive of Burger King, speaks about the role of leadership in business turnarounds. Elliotts chief executive Ann Elliott will talk to Des Gunewardena, chief executive of D&D London, about the lessons of leadership he has picked up in his career in the sector. Duncan Garrood, chief executive of Ten Entertainment, will give his views on leadership and the customer experience, while Jo Fleet, managing director of Flat Iron, will talk about empowering people and trust and getting the team to “buy in” through clear communication and vision. Mark Jones, chief executive of Carluccio’s, will explain how the company is building the quality and skillsets of its general managers to lead the business out of decline. Simon Townsend, chief executive of Ei Group, will give his views on the challenges of leadership during a period of immense change and Zoe Bowley, managing director of PizzaExpress, will give her top ten tips on leadership. Meanwhile, Loungers founder Alex Reilley will talk about the adaptations involved in growing a business from one site to more than 100, celebrating success and the art of succession, while Ann Elliott will give her views on the power of mentoring to grow talent in organisations. Propel managing director Paul Charity said: “With the industry facing such challenging times, effective leadership has never been more important. This is an unmissable opportunity to learn from high-profile leaders in our sector.” Prices are £295 plus VAT for Premium members, £345 plus VAT for operators and £445 plus VAT for suppliers. To book, email

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