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Wed 20th Nov 2019 - Update: M&B results, Fever-Tree trading and SSP results
M&B reports profit boost in full year: Mitchells & Butlers has reported like-for-like sales rose 3.5% and total sales rose to £2,237m ((2018: £2,152m) in the year to 28 September. Profit before tax was up £47m to £177m. Chief executive Phil Urban said: “These strong results reflect the work we have done over the last few years, first to build sustained sales growth and then to convert that into profit growth. It has been extremely encouraging to see an improvement in like-for-like sales growth across the portfolio during the year, fuelled by our Ignite programme of work. This puts us in a stronger position as we move forward into the next financial year, in what we expect to remain challenging market conditions. Our estate comprises 1,748 pubs, bars and restaurants, of which more than 80% are freehold or long-leasehold. Our focus in this area is to optimise the balance of brands across the estate in order to create long-term value. During the year, we continued to execute our plan focusing on improving the quality of the estate through premiumisation and amenity upgrades. We completed 240 remodels and conversions in FY 2019 (FY 2018 232) and remain on course to deliver a six to seven year cycle of investment, from the 11 to 12 year cycle of previous years. Ordinarily we expect a drag on profit in the year of investment due to lost trade during closure and the cost associated with opening the invested business. This year we have been focusing on enhancing the ‘in year’ return of our investment projects and have eliminated profit drag by reducing closure time, more efficient use of resources and setting businesses up for success from the first day of trading. As a result, return on investment for conversion and acquisition projects increased to 21%, the strongest we have seen for many years. Our remodel returns have also improved, increasing to 34% for projects completed in the financial year. Our remodel programme is designed to enhance the amenity and appeal of sites which remain within the same brand, giving the opportunity both to delight existing, and attract new, guests. The remodel programme provides a vehicle through which brands can continue to evolve and innovate in the highly competitive market in which we operate. We continue to search for new areas to create value. Miller & Carter Frankfurt opened in August and gives us an opportunity to test this successful offer in a new market. During the year we have developed our technology to facilitate an improved online booking experience, have developed an employee app allowing our staff greater flexibility and have continued to work with Just Eat and Deliveroo, with 273 sites now offering delivery. In addition to this, we have three delivery only brands in trial, utilising existing kitchens which have additional capacity. The George at Harpenden, a new all-day concept which we opened last year, has been performing well. The offer is a premium suburban concept which aims to appeal across all day parts with flexible space which is appropriate for a range of occasions.” Of the most recent trading period, the company said: “In the first seven weeks of the new financial year like-for-like sales have grown by 1.4% having continued to outperform the market in a period of adverse weather. A return to profit growth in the last financial year represents significant progress in the face of inflationary cost headwinds impacting the sector. We have now started the new financial year with like-for-like sales remaining consistently ahead of the market and a new wave of initiatives from our Ignite programme of work under development.”

Fever-Tree reports strong trading, especially in the US: Fever-Tree, the supplier of premium carbonated mixers, has reported an acceleration in key growth markets of the US and Europe in the second half. The UK On-Trade has continued to perform well despite exceptionally strong comparators in 2018, it said. Of the UK, it stated: “In the year when the group has lapped exceptional comparators from summer 2018 and more recently seen a wider slowdown in consumer spending, the group expects to deliver c.2% growth in its most mature market. In the UK off-trade, our performance has been behind our expectations in the second half as we continued to lap very tough comparators in July and August and more recently seen a slowdown in consumer spending, as reflected in the wider retail data. Despite these short-term headwinds, Fever-Tree remains in a very strong position in the UK off-trade, maintaining our leadership position with 38% value share with little impact from the increasing number of premium competitors who collectively remain at under 5% value share. Our On-Trade business, which accounts for half of the group’s UK revenue, has continued to perform well in the second half. We have won new accounts, further strengthened our leadership position, and seen good growth across our major national on-trade accounts. Whilst our tonic range still remains the key focus, we are seeing increasing opportunities and interest from our customers and consumers in our broader range of mixers as we look ahead to 2020.” Of the USA, it added: “Sales have accelerated in the second half reflecting both the significant distribution expansion across our key off-trade accounts seen in Q2 as well as further distribution gains in our On-Trade channel where our partnership with Southern Glazers Wines & Spirits continues to perform well. We are building an increasingly strong platform and the recent signing of a US bottling partner to commence bottling on the West Coast in 2020 is a further significant milestone. Given the considerable progress seen in the second half, we now expect to deliver growth of c.34% which is ahead of our previous expectations.” Chief executive Tim Warrillow said: “We continue to see growth across all four regions. Indeed, sales accelerated in our key growth markets of the US and Europe. Fever-Tree’s progress in the US is particularly encouraging and the signing of a US bottling partner is a further step in building our operations in this exciting market. Despite challenging comparators, our performance in the UK On-Trade underlines the strength of the brand and while the mixer category in the off-trade is moderating alongside the recent slowdown seen across the wider grocery channel, we continue to maintain our clear UK market leadership position.”

SSP Group reports strong performance: SSP Group, the operator of food and beverage outlets in travel locations worldwide, has reported underlying profit of £203.2m: up 10.2% for the year ended 30 September 2019. Revenue of £2,794.6m was up 7.8% at constant currency, and 9.0% at actual exchange rates. Like-for-like sales were up 1.9%: driven by growth in passenger numbers, both in air and rail. The company reported an ‘encouraging pipeline’, with significant new contracts underpinning future growth, including in North America at LaGuardia, San Jose and Ottawa Airports and at Brisbane, Shenzhen, and Hongqiao Airports and entry into three new markets next year: Bahrain, Bermuda and Malaysia. Simon Smith, chief executive of SSP Group, said: “SSP has delivered another strong performance in 2019. Operating profit was up 12% at constant currency, driven by solid like-for-like sales growth despite some external headwinds, significant new contract openings and further operational improvements. We continue to grow our business in North America, and have made good progress expanding in Continental Europe. In the Rest of the World, we have grown in India and the Philippines, and have entered Brazil, a new market for us, with further market entries planned in Bermuda, Bahrain and Malaysia. The new business pipeline is strong across all our geographies both this year and next, and we’ve announced a £100m share buyback which further demonstrates our confidence in the future of the business. The new financial year has started in line with our expectations and, whilst a degree of uncertainty always exists around passenger numbers in the short-term, we continue to be well placed to benefit from the structural growth opportunities in our markets and to create value for our shareholders.”

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