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Fri 15th Nov 2019 - Update: Chilango looks at restructure, Fuller’s trading
Chilango looks to restructure: City AM has reported that Mexican brand Chilango is in talks to secure its long-term future with restructuring firm RSM and is more than six weeks late posting its accounts. City AM added that the firm is considering all options including administration or a company voluntary arrangement. Chilango said it had engaged RSM “to assist on long-term planning, options and strategy” for the company. City AM added: “Accounts for Chilango – which runs 12 restaurants in London, Manchester and Birmingham – were due to be filed with Companies House by 30 September, but are marked as overdue online. Chilango spokesperson said the company was “currently working” with its auditors to get the accounts “out as soon as possible”. It is understood the company is audited by Grant Thornton. The burrito chain has raised £5.8m from around 1,500 retail investors through two mini-bonds dubbed “Burrito Bonds” – controversial investment products that have come under scrutiny in recent months. Mini-bonds allow investors to essentially buy company debt for a set period in exchange for regular interest payments. More than 700 investors backed Chilango’s first bond, which was raised in 2014. Its most recent bond – promising an eight per cent return for four years – closed in April last year. The offering was over-subscribed, and exceeded its initial £1m target to raise £3.7m from almost 800 retail investors. The minimum investment for the bond was £500 but 194 backers invested over £10,000, qualifying them for a free weekly burrito for the duration of the loan.”

Fuller’s reports that profits likely to stand still as transition costs higher than expected: Fuller’s, the premium pubs and hotels business, has reported total sales in its managed estate grew 5.2% with like for like sales growth of 2.3% for the 32 weeks to nine November 2019, ‘against strong comparatives for the corresponding period last year albeit with some margin erosion due to industry wide cost pressures’. The company stated: “As previously communicated, 2019 has been an unprecedented year of change for Fuller’s following the disposal of the Brewing Business to Asahi; delivery of the Transitional Services Agreement (TSA) associated with the sale; and migration to a new Enterprise Resource Planning system (ERP). As a result of the sale of the brewing business, underlying earnings of the retained business have been aligned accordingly and the vast majority of the central overheads reflecting Fuller’s former integrated structure have been retained by the company until the TSA agreement with Asahi comes to an end by May next year. Whilst it was not underestimated that this would be a period of significant transition for the business, the costs associated with carrying the central overhead previously allocated to the beer company have transpired to be materially higher than expected, with additional resource required to assist the business through this complex separation period. In part, this has been impacted further by the migration to a new ERP system which has not yet delivered the expected benefits and additional costs have been incurred operating the system as a result. It is anticipated that the current level of overhead will continue until the TSA agreement concludes by May 2020. Thereafter, the company will be able to transition to a structure more appropriate for a focused premium pubs and hotels business. As a result of the above, it is anticipated that profit performance for the full year ending 28 March 2020 will be broadly in line with the prior year on a comparable basis, resulting in adjusted profit before tax in the region of £31m. Looking forward our strategy is clear and remains on track as we look to deliver our growth plans for the future as a focused premium pubs and hotels business. This has been evidenced most recently by our acquisition of Cotswold Inns and Hotels, comprising seven high quality, freehold country inns and hotels, together with two vibrant leasehold bars in Birmingham’s city centre.” Fuller’s chief executive Simon Emeny said: “This is a transitional year for the company following the sale of the brewing business and subsequent separation of a highly integrated business. There have been many moving parts to navigate and we have incurred some greater than anticipated costs as a result which have had a short term impact on our financial performance. Whilst we are taking the action to address these, the impact of this will not be felt in the current financial year. Trading is good in light of exceptionally strong comparatives last year and the continued challenge of cost inflation facing our sector. Our strategy remains on track and we will continue to execute our growth ambitions and maximise the opportunities open to us as a focused pubs and hotel business.”

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