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Morning Briefing for pub, restaurant and food wervice operators

Wed 8th May 2019 - Update: JD Wetherspoon trading, Fuller's value, Elegant Hotels, BigDish
JD Wetherspoon reports like-for-like sales up 7.6% in latest quarter: JD Wetherspoon has reported like-for-like sales increased by 7.6% and total sales increased by 8.4% in the 13 weeks to 28 April 2019. Year-to-date like-for-like sales have increased by 6.8% and total sales have increased by 7.6%.The company stated: “Since the start of the financial year, the company has opened three new pubs and closed seven. We intend to open two further pubs in the current financial year. In the current financial year to date, the company has spent £70.9m on buying the freeholds of pubs of which we were previously tenants. The company remains in a sound financial position. The net debt at the end of the quarter was £746m and is expected to be around £740m at the end of the financial year.” Chairman of JD Wetherspoon Tim Martin said: “We continue to anticipate a trading outcome for this financial year in line with our previous expectations.”

Numis – Fuller’s is undervalued compared to its peers: Numis leisure analyst Tim Barrett has argued that Fuller’s is undervalued compared to its peer. In a note, he stated: “We view the price achieved for Fuller’s beer business (24x Ebitda, 5x BV) as exceptional and believe it leaves a more focused, pure-play pub/hotel business with a uniquely high quality asset base. Whereas the brewery generated just 12% of group Ebit, the price achieved is equivalent to c.35% of the group’s EV prior to the deal. The estate is freehold-rich (88%) and includes 88 pubs in Central London. Such flagship assets are rarely available on the open market, making the portfolio impossible to replicate which should attract a scarcity premium we believe. The assets are not annually revalued, although applying market asset growth since 2001, we estimate an adjusted tangible NAV of 1,412p, suggesting that the stock trades at a 22% discount. The success of Fuller’s strategy of operating well maintained, premium pubs with a high food mix is evident in its sector-leading like-for-likes: +3.8% over the last 3y or three times the market average. This has enabled it to offset several years of pronounced cost inflation across the industry and still report margin growth. Ebitda margins increased by 90bp over the last 3y, in direct contrast to the industry average (-110bp). Fuller’s has continued to trade strongly in FY19 and reported 4.7% like-for-like sales growth for the 42 weeks to 19 January. On a pro forma basis FST trades on a FY19 P/E of 16.9x, EV/Ebitda of 9.7x and price/BV of 0.8x. The discount to London-centric peers such as Young’s (30% P/E discount) and CPC (29%) looks materially overdone, particularly now that Fuller’s no longer has the dilution from brewing.” Numis set a price target of 1,350p for Fuller’s shares with a ‘Buy’ recommendation.

Elegant Hotels reports turnover and profit rise in First Half: Elegant Hotels Group, the owner and operator of seven upscale freehold hotels and a beachfront restaurant on the island of Barbados, has reported revenue up 3% to $43.7m for the six months ended 31 March 2019. Adjusted profit before tax up 5% to $12.0m (H1 2018: $11.4m). Sunil Chatrani, chief executive of Elegant Hotels, said: “Elegant Hotels continues to perform well in the context of a competitive market and against a backdrop of ongoing uncertainty in its core visitor market of the UK. We are particularly pleased with the contribution during the period of our most recently acquired property, Treasure Beach, and are constantly assessing a range of opportunities for further expansion, whilst ensuring our balance sheet remains robust. We continue to execute our strategy in a measured and consistent manner, and we have good visibility of bookings for the remainder of the financial year. As a result, we remain comfortable with the FY19 outlook versus market expectations and confident in the group’s longer-term prospects.”

BigDish reports operational progress: BigDish, the food technology company that operates a yield management platform for restaurants, ha reported further progress in the UK and an expanded growth strategy. It stated: “The company is pleased to announce that both Basingstoke and Exeter are now live on the BigDish app as part of Territory 1 and 2 respectively. In addition, Winchester in Territory 1, Swindon and Taunton in Territory 2, and Brighton in Territory 3 are expected to go live around the end of May. Furthermore, the company is pleased to announce that it is preparing to set its sights on the London commuter towns.” Chief executive Sanj Naha said: “We are very happy with the expansion progress at BigDish. Since our successful launch in Bournemouth in January, we have added a further five locations, most recently Exeter and Basingstoke at the beginning of May. We are delighted to announce that we expect Brighton, Swindon, Taunton and Winchester to go live around end of May. Beyond that, we are preparing to set our sights on the London commuter towns, which we expect to provide strong exposure to growth. I look forward to updating the market in the coming weeks.”

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