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Morning Briefing for pub, restaurant and food wervice operators

Thu 27th Jun 2019 - Update: Greene King results, Ramsay receives investment for US expansion, Starbucks et al
Greene King reports adjusted profit before tax up 1.6% as revenue grows, trading since year end impacted by weather: Greene King has reported revenue was up 1.8% to £2,216.9m for the 52 weeks to 28 April 2019. Adjusted profit before tax was up 1.6% to £246.9m. Operating profit before exceptional and non-underlying items fell 1.3% to £368.2m while group Ebitda was down 0.9% to £482.0m. Over the first eight weeks of the new financial year, the company said trading was impacted by the poor weather and managed like-for-like sales were below last year’s strong comparatives. For the new financial year the company expected to see cost inflation of between £10m and £20m. The company managed to mitigate £35m of costs in the reported period, limiting cost inflation to £14m. As previously reported, full-year managed like-for-like sales were up 2.9%. Its Pub Partners division saw like-for-like net income increase 1.5% while Brewing and Brands revenue was up 5.8%. The company said further progress had been made refinancing Spirit debenture since the start of the new financial year. Chief executive Nick Mackenzie said: “Greene King is a great business with a rich heritage, a high-quality estate, a strong portfolio of brands and 38,000 talented team members. Just two months into the job, I have been struck by the amazing pride and passion that our team members have for Greene King and I want to thank them for their continued dedication to providing great experiences for our customers and supporting local communities. The business delivered good results last year, regaining trading momentum in Pub Company and returning to market outperformance while fulfilling a strong cost mitigation programme and making further progress refinancing the Spirit debenture. The existing strategy we have in place has led the business through challenging times. I am looking forward to building on Greene King’s strong foundations with a focus on innovation, on developing our people and on customer service to further enhance our brands and deliver sustainable growth for our shareholders.” Chairman Philip Yea added: “2018/19 was a year in which Greene King outperformed the market, making the most of the good weather and the Fifa World Cup while minimising cost inflation through an ambitious ongoing mitigation programme. Our teams worked hard to improve customer experience, and our executives made further progress in embedding those key processes that are so important to delivering value service and quality on a consistent basis. Excellent progress was made on the refinancing of the Spirit debenture, reducing the cost and increasing the flexibility of our debt. With clear momentum restored to the business over the last year, we are fully focused on delivering our aim of being the best pub and beer company in Britain. Just after the year end, Rooney Anand resigned from the board, leaving Greene King after 14 years as chief executive. Rooney proved himself to be one of the most successful business leaders of our industry and during his tenure the company has been transformed. On behalf of the board and our shareholders I should like to take this opportunity to thank him again for all he has done and wish him well for the future. After a comprehensive search we were delighted to appoint Nick Mackenzie to the board in succession as chief executive. Nick brings with him rich and relevant experience gained from his time at Merlin Entertainments as well as earlier roles at Bass and Allied Domecq. I am confident that he too will prove to be an outstanding leader for the business and drive continued evolution at Greene King. The board has recommended a final dividend of 24.4p, reflecting our continued confidence in the long-term prospects for the business. This takes the total dividend for the year to 33.2p, in line with last year. I believe with Nick’s fresh approach and extensive experience, coupled with Greene King’s strong brands, teams and assets, we are in a good position to deliver on our ambition of becoming the best pub and beer company in Britain while continuing to drive strong financial returns. We cannot count on repeating last year’s weather, nor a stable economic environment; however, we will remain focused on the needs of our customers, teams and shareholders."

Gordon Ramsay planning UK joint venture to expand Bread Street Kitchen as he signs deal with Lion Capital to ramp up US expansion: High-profile chef Gordon Ramsay is planning to team up with Lion Capital or a similar private equity firm next year for a joint venture to expand his Bread Street Kitchen concept across the UK. Ramsay revealed his intention to The Times as he confirmed the formation of a joint venture with Lion Capital, which formerly backed Wagamama and Loungers, to ramp up his presence in the US. It comes after Propel reported in May that Ramsay was close to concluding a deal that would provide the backing for him to open up to 100 sites in the US. The deal will see Lion Capital invest $100m on five different concepts across the country over the next five years. Lion Capital is acquiring a 50% stake in Gordon Ramsay North America for $25m and will provide a mixture of equity and debt funding to finance the openings. Ramsay has placed his eight existing restaurants into the joint venture – five in Las Vegas, two in Atlantic City and one in Baltimore. He is seeking new sites in locations including Los Angeles, San Francisco, Washington, New York, Chicago, Texas and Florida. He has devised five concepts – Gordon Ramsay Street Pizza, Gordon Ramsay Fish & Chips, Gordon Ramsay Steak, Gordon Ramsay Pub & Grill and Gordon Ramsay Bread Street Kitchen – and would open 15 to 20 of each under the agreement with Lion. Ramsay, who is well known in America thanks to television shows including Hell’s Kitchen and Ramsay’s Kitchen Nightmares USA, told The Times: “Everyone thought we were crazy opening a steakhouse, fish and chips and a pub and grill, but there’s something pretty cool about bringing some nostalgia of British classics over there. I think America will fall in love with it. We've tried and tested our models and it's time to grow.” Gordon Ramsay Group celebrates its 21st year in 2019. It has just opened its 38th restaurant, with 15 in London and 23 across Europe, America, the Middle East and Asia. It has Bread Street Kitchens in London, Hong Kong, Dubai and Singapore.

Starbucks UK pays more tax despite loss: Starbucks UK has reported its first annual loss since 2013 after store closures, rising costs and the renegotiation of leases took their toll – but it was landed with a higher tax bill than the previous year. The company saw gross profit fall 21% to £56m in the year to 30 September 2018, from turnover that was up 4.1% to £387.1m, reports The Times. Starbucks UK made a pre-tax loss of £17.2m, compared with a profit of £4.6m the previous year. Starbucks UK paid corporation tax of £4.05m over the period, a 22.9% rise, which it said primarily was due to £20m of onerous lease provisions and one-off charges related to the renegotiation of other leases, plus the closure of unprofitable stores. The lease provisions could not be deducted for tax purposes. In 2012, Starbucks was at the centre of a furore that multinational corporations, including Google and Amazon, were avoiding tax. It paid £20m voluntarily to HM Revenue & Customs in two instalments in 2013 and 2014. Starbucks, which was founded in Seattle in 1971, has about 30,000 stores globally. In Britain it is second behind Costa Coffee, which was recently acquired by Coca-Cola. Starbucks UK has about 1,000 stores, of which 700 are franchises, and 12,000 staff. It has been closing high street stores in Britain in areas most affected by the shift to online retailing, switching its focus to smaller-format stores, drive-thrus and delivery, working with UberEats. Since 2014, London has been home to the headquarters of the company’s Europe, Middle East and Africa region and total regional revenues received in Britain rose by 1.3% to $229.5m. Total tax paid in the UK rose 69.1% to $23.6m, an effective tax rate of 23.7%. Martin Brok, president of Starbucks Europe, Middle East & Africa, said business in the region continued to be challenging because of changing consumer landscapes high rents and “political uncertainty”.

FSA – delivery firms 'undermining trust in food': The Food Standard Agency (FSA) has said food delivery platforms are undermining public trust by hosting outlets with poor hygiene ratings. The FSA’s comments came in a report by the BBC, which had carried out research and discovered hundreds of takeaways with low FSA hygiene scores available on Just Eat and Deliveroo. The BBC said it found more than 400 outlets with an FSA rating of one – in need of "major improvement". The BBC investigation focused on the cities that offer the biggest markets for the services – Manchester, Birmingham and London. It compared the FSA database of restaurants and takeaways awarded a hygiene rating of one with listings that were trading on Just Eat and Deliveroo on 17 May 2019. The research found 404 takeaways rated one for hygiene across the three cities, split almost evenly between the two rivals, and with many appearing on both. There were also 21 outlets that had been given the lowest possible hygiene rating of zero – in need of "urgent improvement", 18 on Deliveroo and three on Just Eat. By allowing low-rated outlets on their platforms, delivery companies are "undermining trust in food", FSA chairwoman Heather Hancock told the BBC. She added: "They're not helping drive up standards, they're not doing the consumer a service. Convenience is fantastic but convenience at what cost?" A Just Eat spokesman told the BBC: "We are at the forefront of raising food hygiene standards across the UK takeaway sector. Restaurants with a food hygiene rating of zero or one are allowed to trade on the high street, meaning customers can walk into any of these outlets and order food directly. However, we do not allow zero-rated restaurants to trade on the Just Eat platform, and are also investing more than £1m in a bespoke improvement programme for restaurants with a food hygiene rating of below three." A Deliveroo spokesman told the BBC: "Food safety is an absolute priority for our company and we know our customers would expect nothing less. Our hygiene policy requires that restaurants maintain a minimum of two stars in order to list on Deliveroo. We conduct regular checks to remove restaurants who fall below the high standards we expect, and restaurants are contractually obliged to inform us if they drop below our required ratings." Deliveroo also told the BBC restaurants with a rating of zero are immediately removed.

ETM Group, Wagamama, and San Carlo to open at Manchester Airport: The ETM Group, Wagamama, San Carlo, Joseph Holt and Barburrito will be amongst 15 new food and beverage operators to launch in Manchester Airport’s new £1bn terminal. ETM Group will make its debut in the north west, with the opening of The Apiary, which is described as a “luxury artisan bar and eatery”. There will also be the Daisy Nook, which will offer all day dining with a menu focused on healthy and lighter dishes. The San Carlo Group will make its airport debut at the Terminal 2 extension with the opening of site under its Cicchetti concept. Salford-based Seven Bro7hers will open the Amber Alehouse, whilst Joseph Holt will open The Bridgewater Exchange brewpub and kitchen. Wagamama and Barburrito will also open sites at the new terminal extension alongside cafes from Manchester-based coffee shop operators Pot Kettle Black and Grindsmith. Healthy fresh juice and food bar Vit, Wrapchic, KFC and Manchester-based milkshake and burger bar concept Archie's will also open at the new development. There will also be M&S Simply Food and M&S Food to Go units. The new outlets are due to open in 2020, with a further eight outlets to open in 2022 when the existing Terminal Two reopens after being refurbished. The outlets are being brought forward on a mixture of a direct basis and also a franchise basis with HMSHost, SSP and The Restaurant Group. The second phase includes plans for food hall-style street food stalls. Andrew Cowan, chief executive at Manchester Airport, said: “Since starting work on the project, one of the questions we have been asked the most is which cafes, restaurants and other venues will feature in the new terminal extension, which is why I am delighted to be making this announcement. We have worked hard to identify partners that represent the strength and depth of the region’s food and drink scene and it is great to be working with so many brands that started life here in the north and have grown to become household names. We are confident there will be something for everyone when the terminal extension opens next year, and hope this gives our customers a taste of things to come.”

Time Out opens Boston market: Time Out Group, the global media and entertainment business, has opened its market in Boston. Located at Park Drive in the Fenway neighbourhood, Time Out Market Boston spans 25,000 square feet, offering 15 eateries, two full-service bars, a retail shop and communal-style seating. "Time Out Market Boston brings a new and unique experience – the next great food and cultural destination – to the city and one of its greatest neighbourhoods, The Fenway,” said Time Out Market chief executive Didier Souillat. “We are incredibly proud Boston’s most outstanding chefs have accepted our invitation to join Time Out Market – they have all been carefully chosen by our Time Out editors to bring the best of Boston under one roof and offer a true taste of the city. Our guests get to choose from more than 100 fantastic dishes every day. It is our mission to democratise fine dining – we are making fine dining casual, and casual extraordinary.” The first Time Out Market opened in 2014 in Lisbon, which last year saw a record 3.9 million visitors. The second Time Out Market opened in Miami last month and was followed by New York. The group is in the process of rolling out the format globally and new Time Out Markets will also open in Chicago in the third quarter of 2019 and Montreal by the end of the year. This will be followed by Dubai (2020), London-Waterloo (2021) and Prague (2022). At the end of 2019 there will be six Time Out Markets in operation, with a total of 185,000 square feet, almost 4,000 seats and food from 120 of the world’s best chefs.

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