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Morning Briefing Strap Line
Thu 21st Jul 2022 - Update: Fulham Shore, M&B, Fuller’s, Mission Mars, future of shopping centres and Alison Brittain
Fulham Shore – now regularly taking more than £2m per week in net group revenues, current trading in line with expectations: Fulham Shore, the Franco Manca and The Real Greek operator, has said it is now regularly taking more than £2m per week in net group revenues, and in the three months since the beginning of its current financial year, it has continued to trade well at headline Ebitda level, in line with management expectations. As at 20 July 2022, the group operated 89 restaurants. It aims to have around 100 locations by the spring of 2023, including the 18 new sites it plans to open in the current financial year to March 2023. The company said: “With help of the return of overseas tourists, the disparity between suburban and regional towns versus city centre locations has narrowed with some city centre locations returning to comparatively 'normalised' patterns. For instance, our St Paul's and Covent Garden Franco Manca sites are generating record weekly sales thanks to UK and overseas tourists, more than making up for any reduction in office staff customers at these locations.” The group's revenue for the year ended 27 March 2022 was £82.7m, up 105% from last year's £40.3m last year and up 20.6% from £68.6m for the year ended 29 March 2020. Adjusted headline Ebitda in the year stood £12.4m excluding IFRS 16 (2021: £1.9m), while profit before tax was £3.9m (2021: loss of £7.5m). The business said: “Franco Manca traded encouragingly throughout the year and is now serving record numbers of well over 100,000 customers each week. More than 310,000 customers are registered to the Franco Manca loyalty app, an increase of almost 50% compared with the prior year. The Real Greek performed even more strongly, helped by some fantastic new openings which increased the business' profile throughout the UK. These included two new restaurants in Manchester which opened within a few weeks of each other and quickly became among the group's strongest performing Real Greek sites by revenue. Fulham Shore's financial year to 27 March 2022 was underpinned by the steadily rising number of customers per week.” David Page, executive chairman at The Fulham Shore, said: “While the first quarter of the year has been characterised by increasing pressures on the UK consumer, our restaurants remain crowded with customers seeking a great experience, quality food, and importantly outstanding value. We will always aim to keep our prices low, driving high customer numbers per site and making for fun, atmospheric restaurants, as well as motivated employees. These key ingredients underpin the board's confidence in our continued growth.” The company said landlords will continue to face an uphill task over the next few years and it believes rents will continue to decline under pressure from empty retail and restaurant space. It said: “There continues to be un-let premises all around the UK in unprecedented numbers. As pointed out above by our list of recent openings, we and others will benefit from this. The vacant high street sites will be let at lower rents to smaller expanding chains and independents. This will lead to a revitalisation of town centres – Kingston upon Thames and Peterborough are prime examples of where this is happening – helped by enlightened local planning and positive local council measures. The normal balance of the supply and demand ratio for property sites alongside tenants may, however, not happen for some years. While some landlords are seeing demand for London West End areas increase, driven by the return of tourists and the cheap pound, others will have to wait a long time for even prime positions around the country to be taken up by good restaurant operators. We believe this will take many years. We have now reached agreement with all our UK-based landlords regarding waivers or rent concessions over the last two years. Rent reviews that are coming due are almost all being agreed at nil increases. As a result of static or reducing rental values, we are agreeing rates reductions on our existing and new properties. All this should lead to maintaining or reducing the group's property costs in percentage terms for our existing estate over the next few years. This will offset some of the impact of the energy cost inflation that we are experiencing.” It now has 66 Franco Manca and 23 The Real Greek in the UK. It is fitting out four new Franco Manca in Chichester, Hove, Lincoln and Windsor and two new The Real Greek restaurants in Solihull and Gloucester Quays. A further 16 sites are in solicitors' hands. It said: “These sites will continue our existing opening programme for this financial year and the next to March 2024, with a view to operating more than 120 restaurants in the UK by the spring of 2025. With steady expansion, this should bring our total estate to more than 250 restaurants in the UK.”

Third UK Food and Beverage Franchisor Database to feature almost 60,000 words of content, released on Friday: The third UK Food and Beverage Franchisor Database, which will be sent to Premium subscribers on Friday (22 July), at midday, will feature 140 companies and almost 60,000 words of content, providing insight on the offer, locations, cost and other key details. Several hot and cold drink concepts are among the 20 new franchisors expanding in the UK and abroad featured in the third edition. Among them is milkshake bar chain Shakeaway, founded in Bournemouth in 1999 and now with more than 50 stores in the UK and abroad. Also featured is Puccino’s Coffee, which has grown to circa 33 locations at stations across London and the south east since being launched in 1995. Mooboo, which has grown to be one of the UK’s largest bubble tea operators since launching in Camden in 2012, with around 70 locations, is also featured. So too is fellow bubble tea operator Bubbleology, founded in London in 2011 and now with circa 20 UK sites. Premium subscribers also receive access to The New Openings Database, the Propel Multi-Site Database and the Turnover & Profits Blue Book. 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 single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. 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 group editor Mark Wingett.

M&B reports third-quarter like-for-like sales up 0.9% in ‘very challenging’ environment: Mitchells & Butlers (M&B) has reported like-for-like sales in its third quarter were up 0.9%, excluding the VAT benefit, but total sales have declined by 1.6% in the year-to-date driven mainly by temporary covid-related closures in the first part of the year and site disposals since FY 2019. The company said like-for-like sales started the third quarter strongly, up 2.2% for the first five weeks, before falling back slightly across a period including the Jubilee weekend, industrial action and the recent very hot weather, to end up 0.9% across the full quarter, with food continuing to be the main driver. Food like-for-like sales in the 42 weeks ended 16 July 2022 were up 5.5%, against a 4.9% decline in drink sales. Excluding the VAT benefit, like-for-like sales for the 42 weeks were down 1.5%. The company said: “Inflationary cost pressures continue to present a major challenge to our business and to the hospitality sector as a whole. While the near-term outlook is unchanged it now seems likely that, particularly in the case of utilities, wages and food costs, these will persist at or above current levels well into the next financial year, increasing and prolonging the medium-term impact on margins. Our Ignite programme of work remains at the core of our long-term value creation plans and we continue to focus on initiatives which enhance efficiency and productivity, helping to offset these inflationary cost pressures.” The business said despite challenging conditions, it remains committed to investing in enhancing the competitiveness of its estate. It has completed 116 conversions and remodels in the financial year to date. Chief executive Phil Urban said: “The trading environment remains very challenging with inflationary costs squeezing consumer discretionary spending and putting pressure on the industry's margins. In the face of these challenges, we remain focused on driving sales and efficiency through our Ignite programme and pushing forward with our capital investment plan, which we are pleased to see delivering strong sales uplifts.”

Fuller’s – our sales recovery is continuing, three sites in negotiation: London pub operator Fuller’s has said its sales recovery is continuing, especially in the City and West End of London. The company stated ahead of its annual general meeting today (Thursday, 21 July): “In the first 16 weeks of the new financial year, total sales are up 3% on pre-pandemic levels and up 81% on the same period last year. On a like-for-like basis, sales for the 16 weeks to 16 July 2022 are up 27% on last year. The company is well-financed, with total available facilities of £226m and with net debt reduced from £131.9m at the start of this financial year to £123.6m at 17 July 2022, demonstrating the healthy recovery in free cash flow generation. The underlying strength of our long-term business is reflected in our implied net asset value per share of £13.80, based upon the directors’ valuation of the estate undertaken as at 26 March 2022. During the period, the company has acquired one new site – The Queen’s Arms, landside at Heathrow Terminal Two, The Queen’s Terminal – that will open in early August 2022. The site is a perfect complement to London’s Pride, our successful airside pub in the same terminal. A further three sites are in advanced stages of negotiation.” Chief executive Simon Emeny said: “We are pleased with our sales growth trajectory, particularly in our central London sites where momentum is building well. The industry-wide inflationary cost pressures around food supply, labour and particularly energy are showing little signs of abating. Our premium offer and effective supply chain management provide a degree of protection, but we are not immune from its effects on costs or consumer behaviour. Fuller’s is a long-term business with a strong balance sheet, a clear strategy, and great people to execute it. Hospitality continues to bear the brunt of many challenging external factors, but we remain confident that Fuller’s is well placed to continue to prosper.” The company said it will next report on 17 November 2022, when it issues its half-year results for the 26 weeks to 24 September 2022.

Mission Mars – trading across first nine months of FY22 has been excellent, team turnover at its lowest ever level: Mission Mars, the Albert’s Schloss and Rudy’s Neapolitan Pizza operator led by Roy Ellis, has reported trading across the 15-strong business for the nine months into its FY22 has been “excellent”, with turnover of £34.2m and site adjusted Ebitda of £8m. Chief executive Roy Ellis told Propel: “We are nine months into FY22 and our performance and growth have both been encouraging. Our new investment of almost £4m in Albert’s Schloss, Birmingham, is proving popular with excellent feedback. After almost six months of full trade, we are delighted with turnover and Ebitda, both of which are ahead of internal budgets and payback models. Financial performance to date also puts Albert’s Schloss Birmingham ahead of Albert’s Schloss Manchester when adjusting for inflation and comparing opening trade. Our new Rudy’s in Chorlton and Sheffield are both performing nicely ahead of expectation. Rudy’s Chapel Allerton and Didsbury will open in the next month or two. Beyond this we have a further four Rudy's sites very close to final design and should be open by spring 2023. For years we have sought a beautiful building in which to house an Albert’s Schloss in Liverpool. I'm delighted we have finally commenced work on Radiant House, a 22,000 square-foot site on Bold Street, in my home city. Albert's Schloss Liverpool is scheduled to add even more Bavarian excitement and glamour to Liverpool from November this year. Trade across Mission Mars for the first nine months of FY22 has been excellent with turnover of £34.2m and site adjusted Ebitda of £8.0m (adjusted to exclude pre-opening costs and bonus). As at the end of the third quarter, Mission Mars consisted of 15 trading venues with Rudy’s Sheffield (venue number 16) opening at the start of the fourth quarter. The bars division of the business contributed £22.7m of turnover and £5.7m of site adjusted Ebitda by the end of the third quarter. Rudys Pizza Napoletana contributed turnover of £11.5m and site adjusted Ebitda of £2.3m. Providing comparisons against previous years financial performance is challenging due to the extraordinary trade conditions and restrictions we have encountered. FY19 is the last full financial year unimpacted by covid 19 with Mission Mars turnover at the third quarter totalling £25.5m and site Ebitda of £4.2m. Back then the shape of the business was very different with just three Rudy’s sites and eight bars including three live music venues. Whichever way you look at current financial performance in comparison to pre-covid figures, I am delighted with trade and conversion to Ebitda. It has been gratifying to see guests return at record levels with average group turnover per week increasing from £500,0000 to nearly £900,000 largely driven by volume at existing sites and new venues. A proportion of the revenue increase is attributed to Deliveroo, which now makes up 18% of overall Rudy’s turnover over the first nine months of the financial year. In addition, I am delighted we have managed to deliver record levels of net promoter scores and have consistently tracked at the top of weekly tables when comparing against our peers.” Ellis said against an extremely tough and competitive backdrop, the company is pleased to see team turnover reduce month by month and it is now at the lowest level in the group’s history. He said: “Management retention has been particularly pleasing as we believe we have some of the strongest managers in the industry. In a recent Best Companies survey that measures team engagement, the rating was the highest we have ever recorded against a record response rate. We look forward to investing further in our people with the development of our management development centre and a pzzaiola academy in central Manchester later this year. Further to this, we have invested a significant amount of time driving operational efficiencies helping to offset the cost increases seen across supply in the industry. These results are a testament of the professionalism, hard work, enthusiasm and determination of our Mission Mars team. I’m grateful and thankful for their continued support and the part they have played in ensuring we are in a strong financial position as we enter a sustained period of new venue openings and significant investment in our people and their development.”

‘Radical plans’ needed to save shopping centre developments: Nearly half of all shopping centres in Britain should be knocked down or dramatically repurposed, a report has suggested. The Times reported Lambert Smith Hampton estimates 37% of the country’s shopping centres need reinventing, while a further 9% should be demolished. “Shopping centres are big, capital-intensive and very visible projects and, as such, major change is often hard to deliver — but faced with more scrutiny over valuations and the changing dynamics of town centres, owners of shopping centres will increasingly be required to demonstrate vision and boldness,” Steve Norris, national head of planning, regeneration and infrastructure at the commercial property agent, said. Lambert Smith Hampton analysed the 100 shopping centre deals – worth about £2.4bn – that have been completed since the start of 2020. Its analysts think just over a third would be better off if they were reinvented. That might include reducing the number of shops and using the space for flats and offices, as well as adding to their leisure facilities. Some are doing this. In Edinburgh, Ocean Terminal’s owner has submitted plans to knock down part of the shopping centre and its car park, to replace it with a mixed-use development of houses, offices and a new public realm to open up the waterfront. In Birmingham’s Bullring, Hammerson has re-let the old Debenhams shop to Toca Social, an interactive football bar. The new owners of Templars Square in Cowley, Oxford, want to add 226 homes, a hotel and restaurants to the 1960s shopping centre. Repurposing and redevelopment “should be a central pillar of the regeneration of the UK’s towns and cities, supporting economic growth and the government’s levelling-up agenda”, Norris said. Almost a fifth of all the units in shopping centres are empty. The collapses of retailers such as Debenhams and Arcadia, the Topshop owner, have left many owners with big holes that they are struggling to fill. About a third of the vacant space has been empty for at least three years and Lambert Smith Hampton believed it was “unlikely to ever be filled on commercially viable terms”.

Alison Brittain appointed chair designate at Dunelm: Alison Brittain, the outgoing chief executive of Whitbread, has been appointed as an independent non-executive director and chair designate of Dunelm, the homewares retailer. Last month, Whitbread appointed Dominic Paul as its next chief executive. Paul will succeed Brittain, who has decided to retire from full-time executive life at the end of the financial year 2023. Brittain, who has led Whitbread since 2015, will join the Dunelm board on 7 September 2022 and it is expected that she will succeed Andy Harrison as chair comfortably in advance of the expiry of his nine-year term in September 2023. Brittain said: “Dunelm is a company I have long admired as a customer and I love that it's an entrepreneurial, purpose-led business with strong values and lots of ambition. The last two years have reinforced the importance of the home in all of our lives, and I am delighted to be joining a team with such a fabulous track record of focusing on delivering value for customers and a company with fantastic opportunity for future growth. I look forward to working with the board and building on Andy's achievements as chair.” 

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