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Morning Briefing for pub, restaurant and food wervice operators

Tue 29th Jan 2019 - Update: Patisserie Valerie sales on slide for three years, Domino's Pizza fourth quarter results, Stonegate bond
Patisserie Valerie sales in ‘secret’ decline for at least three years: Patisserie Valerie sales were in “secret” decline for at least three years before the discovery of the accounting black hole that triggered its collapse. A private document containing the stricken cafe chain’s finances show revenues from “un-loved” established stores were falling even as the management team under executive chairman Luke Johnson pursued an “ambitious roll-out plan”, reports The Daily Telegraph. Marketing material by administrators KPMG reveals like-for-like revenue has been on an accelerating downward slide since 2015, including a 4% drop in the past two years. The chain’s parent Patisserie Holdings did not report such sales figures prior to its sudden failure, with former chief executive Paul May branding them “a bit meaningless”. Including new cafe openings, the company said sales were up 10% in its last set of audited accounts. His successor Steve Francis attacks the way Patisserie Valerie was run in the documents, saying “the whole business has been run for head office/central production”. “Stores are often emptier, closed more and relatively tired/unexciting,” he said. In dramatic contrast with financial information given to the stock market, Patisserie Valerie was on course to notch up £2.6m of losses in the year to September 2019, KPMG found. Even after a sharp downgrade in October, Patisserie Holdings had been expected to Ebitda of £12m in the year to September 2018. Ebitda may only be £5.3m in the year to September 2020 – a fifth of what Patisserie Valerie claimed in its last accounts, for 2017, which were audited by Grant Thornton. Patisserie Valerie collapsed into administration last week. More than 70 shops were closed within hours, resulting in the loss of 920 jobs. KPMG hopes to sell the remaining stores through an accelerated sales process, thereby safeguarding the jobs of some or all remaining 2,000 staff. KPMG has given potential bidders until noon on Friday (1 February) to submit offers. Management presentations in London and Birmingham will then take place with selected parties next week. Francis will tell bidders that £5.1m can be saved through “estate rationalisation” – closing or adjusting the company’s shop portfolio. A “back to basics” campaign that includes halving food wastage will save £1.3m and £800,000 of head office costs cuts have been identified. Sports Direct founder Mike Ashley is among those weighing up an offer for Patisserie Valerie. Ashley, who owns Premier League side Newcastle United and has bought House of Fraser and Evans Cycles as well as stakes in Debenhams and French Connection, has not yet tabled an offer. But City sources told the Mail he is looking into making an offer. Veteran restaurateur David Scott, who sold Druckers to Patisserie Valerie more than a decade ago, is also understood to be lining up an offer. The information memorandum, which is shared with parties interested in rescuing the company, provides a damning insight into the realities of how Patisserie Valerie functioned behind closed doors for years. Suggestions the business was being run to please head office raise further concerns about Johnson’s stewardship of the business, as its largest shareholder as well as chairman. Insiders have claimed a fear of failure motivated some staff to artificially inflate sales. Forensic accountants from PricewaterhouseCoopers, hired as Patisserie Valerie shocked investors last October with “significant and potentially fraudulent accounting irregularities”, found simple techniques were being used to “fake the numbers”. The KPMG report also shows the desperate lengths Patisserie Valerie went to after discovering a £40m black hole in its accounts last October. In order to build a true picture of the company’s finances, “‘shoe leather’ was used in the absence of any reliable financial info”. Investigators collated till receipts for October and November to check against management accounts. However, the KPMG report warns: “There is a significant lack of reliable financial data.”
Domino’s Pizza reports UK like-for-likes up 4.5% in fourth quarter: Domino’s Pizza has reported UK like-for-like sales were up 4.5 for the 13 weeks to 30 December 2018 with system sales increasing 6%. The company opened 16 stores in the UK and Ireland during the quarter taking it to 59 openings for 2018. It expects the store pipeline for 2019 to be similar to 2018 at the same time last year and reaffirmed the potential for 1,600 stores in the UK. UK and Ireland system sales were up 6.2% to £312.9m. UK online sales were up 10.8% year-on-year, representing a record 80.1% of sales during the period. The night of the Strictly Come Dancing final – Saturday, 15 December – saw a new online record with sales up 25% compared with the same day the prior year. During its biggest ever week, it sold a record number of pizzas the Friday before Christmas. Total group system sales increased 5.5% to £339.5m. The company now has 1,261 stores group-wide having opened a total of 25 in the quarter. Domino’s Pizza said strong UK and Republic of Ireland performance was offset by weaker international sales progress and business integration challenges in Norway. It expects full-year underlying profit before tax now to be at the lower end of the consensus range of £93.9m to £98.2m. The Republic of Ireland saw system sales up 10.2% with like-for-likes growing 7.5%. Switzerland saw a system sales decline of 0.6% with like-for-likes down 7.7%, “reflecting the strong performance in the prior period”, and the temporary closure of its busiest store due to fire damage. It opened one store in the period, ending the year with 20. In Iceland, sales were up 1.5%, with like-for-likes down 0.7%. A further two stores were opened in the quarter, taking the total to 25. In Norway, it now trades from 42 Domino’s branded outlets, adding a further four stores during the period. System sales growth from the Domino’s chain was 47.5%, supported by the ongoing conversion of Dolly Dimple’s stores. Like-for-likes were down 6.4%,  “reflecting the continued impact of unseasonably warm and dry weather, and delivery area reduction as we converted Dolly Dimple’s stores”. Domino’s Pizza stated: “The process of integrating the two Norwegian operations we acquired in the first half of 2017 has proven more complex and challenging than expected. During the quarter we have significantly strengthened the local management team of the Norwegian business, scaling up the local finance team in particular.” In Sweden, system sales were up 34.7% with two stores opened in the quarter, taking the total to nine. In Germany, progress on the conversion of the Hallo Pizza sites “continues to be good as we build nationwide scale under the Domino’s brand”. Chief executive David Wild said: “I’m pleased with the continued strong performance in the UK and Ireland, where we opened a further 59 stores. Many families decided to kick off the festive season with a Domino’s, with the Friday before Christmas breaking all records as we sold more than 535,000 pizzas – equivalent to 12 every second. Our international businesses offer significant long-term potential, but we have experienced growing pains this year, particularly in Norway, where we have faced business integration challenges. Looking ahead, we will invest further in robust teams and infrastructure in our newer markets, to create a solid platform for profitable growth. The UK delivered food market is vibrant and we estimate it will grow at a compound rate of 8% a year to 2022. We aim to maintain our share of this market, thanks to more than 30 years of experience in delivery, a leading brand, great-tasting pizza and superior franchisees.”
Stonegate launches £150m bond issue: Stonegate Pub Company has launched a £150m bond issue to repay borrowings taken on to finance recent acquisitions – cocktail bar brand Be At One, Fever Bars and four Balls Brothers and two Tank & Paddle sites from Novus, reports The Times. The deals have expanded Stonegate, which is backed by private equity firm TDR Capital, to 772 venues. Last year it reported revenue of £742.3m and underlying earnings of £110.5m.  

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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