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Tue 5th Oct 2021 - Update: Caffe Nero, Luke Johnson, Greggs and cheap labour
Caffe Nero hires advisers for debt talks as Issa brothers circle: Caffe Nero has hired advisers as it seeks to refinance debts of almost £150m and keep the billionaire Issa brothers at bay. The Telegraph reports that Gerry Ford, the coffee chain’s founder, is understood to have engaged investment bankers from Lazard to advise on funding options. Mohsin and Zuber Issa own £180m of Caffe Nero’s lower-ranking debts meaning that they could seize control if the company defaults on its debts. The brothers are understood to have attempted to also buy Caffe Nero’s top-ranking bank debt, which is currently owned by a group including HSBC, Santander, Lloyds, and Rabobank. Lazard is said to be assisting Ford with discussions that could see the bank loans refinanced with alternative lenders. Ford has insisted that Caffe Nero will not default on its debts. A spokesman for Caffe Nero said: “We will not comment on whether we have hired advisers or are planning any refinancing. As we have stated on several occasions, we are not forecasting any breach of banking covenants and our auditors have verified this for the next 12 months. In fact, our current trading has been very robust, going from strength to strength and closing in on pre-pandemic levels.” Last week, a High Court has dismissed a landlord-backed challenge to the restructuring of Caffe Nero after finding that there was no clear route for postponing an electronic vote on the plan amid an eleventh-hour takeover bid for the coffee chain from EG Group, the main holding company of the Issa brother. Court filings showed that as part of its offer for Caffe Nero, which has more than 600 coffee shops across the UK, EG was submitting “a proposal ascribing an enterprise value of £350m-£400m to the company”.

Third edition of The New Openings Database to show details of 346 new sites: The third edition of The New Openings Database, which is produced in association with StarStock, will show the details of 346 newly announced site openings and upcoming launches for Premium subscribers when it is published on Wednesday (6 October), at midday. The database shows the details of which company has opened a site or its plans to open one in the future. It will have details on what type of site it is and its location. There will also be a website link to the business so you can find out more about them. It is published on a monthly basis. Meanwhile, The Propel Multi-Site Database, which is produced in association with Virgate, was published on Friday (1 October) for Premium subscribers. The go-to database provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. In a new feature this year, there is a synopsis of what the business does and significant news associated with it. Premium subscribers also have access to another database called Turnover & Profits Blue Book, which is produced in association with Mapal. The Blue Book, which is also updated every month, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Propel insights editor Mark Wingett. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The regular single subscription rate of £395 plus VAT for operators and £495 plus VAT for suppliers remains the same. To subscribe, email jo.charity@propelinfo.com.

Greggs reiterates plan to double turnover to £2.4bn within five years: Greggs has reported its two-year like-for-likes for its third quarter are up 3.5% despite staffing and supply chain disruption. It said delivery sales were developing well, with 943 shops now involved. A total of 68 net new shops have opened year-to-date (84 openings less 16 closures). The company expects around 100 net shop openings in 2021. It has a target to double turnover over next five years to circa £2.4bn in 2026. It is planning to accelerate rate of net shop number growth to circa 150 per year from 2022 with potential for at least 3,000 shops. It will start an investment programme to equip shops for a multichannel future and create additional supply chain capacity for growth. The company stated: “Despite widely reported disruption to staffing and supply chains, it is a credit to our teams that Greggs has continued to trade well over the third quarter with two-year like-for-like sales in company-managed shops rising by 3.5% when compared with the same period in 2019. Growth was particularly strong in August when a ‘staycation’ effect was evident and remained in positive territory in September, with two-year like-for-like growth of 3.0% in the four weeks to 2 October. Delivery sales have continued to develop well, with 943 shops now involved in supplying customers through this channel. The broadening of our vegan-friendly food and drink options has been well received, notably the limited edition ‘Vegan Sausage, Bean & Cheeze Melt’ along with a ‘Vegan Ham & Cheeze Baguette’ and a vegan-friendly breakfast sausage. Pizza and savoury boxes are supporting the delivery channel and our autumn menu is now available in shops, featuring favourites such as pumpkin spiced latte and spooky bats and buns for Halloween. Openings in the third quarter have included three drive-thru locations and our first shop in London’s Canary Wharf. For the year as a whole, we continue to expect around 100 net openings, of which half are planned to be with franchise partners. Our new automated cold storage facility in Newcastle upon Tyne has commenced operations and is performing well. This will create additional capacity to support our growth ambitions whilst also reducing logistics costs and carbon emissions. Greggs has not been immune to the well-publicised pressures on staffing and supply chains and we have seen some disruption to the availability of labour and supply of ingredients and products in recent months. Food input inflation pressures are also increasing; whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022.” The company added: “On average, a company-managed shop generated a cash return of 42% on capital in 2019. In the same period the average franchised shop generated a cash return of 33% on capital. We see evening daypart sales as a significant opportunity for the business, as we seek to replicate our success in the daytime beyond traditional trading hours. The introduction of delivery services has made many more of our shops viable in the early evening market and we believe that two thirds of our estate will ultimately be suitable for late trading (both walk-in and delivery). In the short term our target is that 500 of our shops will be open until 8pm by the end of 2022. The recent relaunch of our Greggs app lays the foundations for future growth as we recruit many more customers to benefit from our loyalty mechanic and take a CRM approach to offer them reasons to visit more often. Much of the infrastructure investment to support this is now in place and we will increase marketing investment in the months and years ahead to develop visit frequency and average transaction value. We are focused on significantly increasing our membership base from the current 400k members.”

Luke Johnson becomes shareholder of Marechale Capital: Serial sector investor Luke Johnson has become a shareholder of corporate finance firm, Marechale Capital. The business, which has acted in a number of sector-related deals, announced this morning that it had conditionally raised the sum of £160,000 via subscription of 8,000,000 new ordinary shares of 0.8p each in the company at a price of 2.0p per share. The subscription has been made by Johnson who, following admission of the new ordinary shares to trading on AIM will have an interest in 8,000,000 ordinary shares representing 9.04% of the company’s enlarged issued share capital. As part of the terms of the subscription, Johnson will have the right to join the board of the company, subject to regulatory due process, and has entered into a 12-month orderly market agreement in respect of the disposal of any shares. The proceeds of the subscription will provide the company with additional working capital and funding for investment and co-investment opportunities that are “presented to Marechale in connection with its activity for corporate clients”. Patrick Booth-Clibborn, chief executive of Marechale Capital, said: “Luke Johnson is a successful entrepreneur and investor. Luke is a past chairman of Channel 4 Television and PizzaExpress and his current directorships include Gail’s Artisan Bakery, which was recently valued at over £200 million. The directors of Marechale Capital are delighted he has become a major long-term shareholder and we look forward to working with him particularly where he can help with deal flow and investments for our current and future pipeline of growth capital clients.”

Businesses have become ‘drunk on cheap labour’, say Tories: British businesses have become ‘drunk on cheap labour’, Cabinet ministers believe, with the government insisting that industry must shoulder the responsibility for petrol and food shortages. The Telegraph reports a series of ministers criticised firms at the Conservative Party conference, with several members of the Cabinet understood to be furious at what they saw as companies trying to shift blame on to the government. In recent weeks, supermarkets, retailers and hauliers have all complained about supply chain problems which they blame on labour shortages brought on by covid and Brexit. But ministers went on the attack as warnings of Christmas shortages grow, blaming businesses for failing to prepare for the post-Brexit economy. One senior source said “a failure of the free market, not the state” was behind the fuel crisis and empty shelves. It marked a significant departure from the Tories’ traditional stance as the champion of business and reflects the determination of Boris Johnson to follow through on his promise to make Britain a high-wage, high-skill economy as part of the Brexit dividend. One source close to a senior Cabinet minister said: “They have known for five years that we were ending freedom of movement, and we have told them repeatedly they shouldn’t pull the lever of uncontrolled immigration every time. But they are drunk on cheap labour.” Rishi Sunak, the chancellor, said he could not “wave a magic wand” to solve the crisis, stressing that industry had to rethink the way supply chains operated. Paul Scully, the business minister, said firms had a “collective responsibility” to find solutions, while Kwasi Kwateng, the business secretary, said firms had become too reliant on too few suppliers.

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