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Morning Briefing for pub, restaurant and food wervice operators

Tue 16th Apr 2024 - Hostmore to acquire TGI Fridays US brand owner and franchisor, Hollywood Bowl and Everyman results
Hostmore to acquire TGI Fridays US brand owner and franchisor: Hostmore has announced that it has reached an agreement on a proposed all-share acquisition of TGI Fridays Inc (including affiliates TGI Fridays), the global hospitality business that owns the American-themed casual dining brand, which is the company’s franchisor. The company said that the “transformational combination would bring together TGI Fridays’ largest franchisee with the global franchisor”. TGI Fridays is the master franchisor to 493 franchised stores, with 128 located in the US, 89 in the UK (the Hostmore portfolio), and 276 across a further 42 countries. It has 4,447 employees. The TGI Fridays group also operates 100 US company-operated stores. It reported FY23 total global systemwide restaurant sales of $1.4bn, comprising $672m in the US and $708m in international markets. TGI Fridays is expected to be purchased for an enterprise value of £177m, or approximately 5.4x TGI Fridays’ FY23 underlying EBITDA, which Hostmore said represented “a highly attractive acquisition multiple for a large, established global franchisor”. The combined group would have had underlying FY23 revenue of approximately £490m, an approximately 9% Ebitda margin, and free cash flow of more than £30m. The combined group expected to be renamed TGI Fridays plc, with its shares admitted to trading on the London Stock Exchange’s main market under the share ticker TGIF. The parties said they have agreed that the proposed transaction would result in existing Hostmore shareholders holding a 36% shareholding in the enlarged business upon completion, with TGI Fridays shareholders holding a 64% shareholding in the combined group. The combined group would be led by Weldon Spangler as chief executive and Nik Rupp as chief financial officer, presently in the same roles at TGI Fridays. Julie McEwan and Matthew Bibby would continue as chief executive and chief financial officer, respectively, of the UK business. Bibby would have the additional role of head of investor relations for the combined group. Stephen Welker, chairman of Hostmore, said: “I am pleased to announce that we are in advanced discussions with TGI Fridays on the terms of a proposed transaction, which would reunite two businesses that are a natural fit, and were one business until as recently as 2014. Hostmore has made good progress in executing its turnaround strategy over the past year by reducing costs, revising our capital allocation policy to focus on debt repayment and shareholder distributions, and pursuing high ROI organic growth initiatives. I want to thank Julie McEwan, our chief executive, Matthew Bibby, our chief financial officer, and their colleagues, both in store and at executive levels, for their tireless efforts to put Hostmore in a stronger position which has led to the possibility of this compelling strategic transaction. This acquisition would give us the scale and flexibility to accelerate our existing strategy and enhance the financial outlook for Hostmore and scope for shareholder returns, while also strengthening our ability to provide an exceptional guest experience by harnessing our distinctive, trusted brand as the home of celebrations. We look forward to presenting our existing and new shareholders with the opportunity to participate in the significant value creation potential of the combined group going forward.”Rohit Manocha, chairman of TGI Fridays, said: “Today marks an exciting moment for the next chapter of the TGI Fridays story, as we continue to drive forward our brand revitalisation strategy. Bringing together TGI Fridays with our leading franchisee partner in Hostmore, in our largest international market, the United Kingdom, has a compelling and highly complementary strategic logic to it. Our two companies share close ties and have a longstanding, excellent working relationship and mutual respect. A combined group would stand to gain from our focused efforts with the benefit of greater combined scale, efficiencies and flexibility. By joining forces with Hostmore, this would support our long-term organic growth strategy and enable us to better harness TGI Fridays' global franchising and licensing infrastructure. I look forward to the prospect of working with the teams at Hostmore as a part of a new ownership structure, to ensure we keep delivering That Fridays Feeling that our guests across the world know and love.” It comes as Hostmore reported a 7% decline in like-for-like revenue for Q1 2024, “due principally to reduced consumer demand across the sector”. The company said: “Despite the revenue decline, unadjusted FRS102 Ebitda in the quarter was £300,000, representing an improvement of £3.2m on Q1 2023. Each month of the quarter showed increased improvement versus the prior year, with March 2024 being £1.8m ahead of the same period in FY23. Consolidated net bank debt at the quarter-end was £26.1m, in line with expected seasonality and consistent with the forecasted position for the end of fiscal year 2024. Guest sentiment scores continue to improve following a renewed focus on the guest experience initiated during FY23. Preliminary testing of Hostmore’s direct-to-consumer organic growth initiative was commenced, focusing on maximising the efficiency and effectiveness of the loyalty app and email database in driving repeat customer visits.” The company said it is in the process of negotiating a restated bank facility agreement with its lending banks, to extend the maturity date to 1 January 2026 from 1 January 2025. The company expects to publish its FY23 preliminary results by the end of April.”

Next Who’s Who of UK Hospitality to feature more than 233,000 words of content: The next Who’s Who of UK Hospitality will feature more than 233,000 words of content when it is released to Premium Club members on Friday (19 April), at midday. The database now features 865 companies, and this month’s edition includes seven new additions and 65 updated entries. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around Ebitda, plans and trading style available. The database merges Companies House information, interviews and other public information to provide an easy to reference and exhaustive guide to the sector. Premium Club members also receive access to five other databases: the Multi-Site Database, produced in association with Virgate; the New Openings Database; the Turnover & Profits Blue Book; the UK Food and Beverage Franchisor Database and the UK Food and Beverage Franchisee Database. All Premium Clubs members will be offered a 20% discount on tickets to five Propel paid-for events – The Excellence in Pub Retailing Conference (14 May), Social Media for Profit (18 July), the Talent and Training Conference (1 October) and Restaurant Marketer and Innovator (two days in January 2025). Operators that are Premium Club members are also able to send up to four members of staff to each of our four Multi-Club Conferences for free. Premium Club members receive their daily Propel Info newsletter 11 hours earlier than standard subscribers, at 7pm the evening before. They also receive videos of presentations at eight Propel conference events two weeks after they are held. This represents around 100 videos of industry insight over the course of the year. Premium Club members will be sent a dedicated monthly newsletter that will highlight key updates in the sector and direct subscribers to all the vital content their membership offers. Premium Club members also receive exclusive opinion columns every Friday at 5pm, which include the thoughts of Propel group editor Mark Wingett and a host of industry leaders from across the sector. A Premium Club subscription costs an annual sum of £495 plus VAT for operators and £595 plus VAT for suppliers. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or supplier. Email kai.kirkman@propelinfo.com today to sign up.

Hollywood Bowl reports record first half revenue including £100m in UK for first time, two further openings slated for opening in 2024 and four in 2025: Hollywood Bowl Group, the UK’s largest ten-pin bowling operator, has reported record first half revenue, including six-month revenue of £100m in the UK for the first time. In its trading update for the six months to 31 March 2024, it reported record first half group revenue of £119.2m, up 8.1% compared to £110.2m in the first half of FY2023. UK revenue was £103.3m, up 4.4% versus the first half of FY2023, and was up 1.3% on a like-for-like basis. Canada revenue grew 46.9%, to CAD 27m (£15.9m) and its bowling centres there had 8.0% like-for-like revenue growth, with total like-for-like revenues (including Striker Bowling Solutions) up 4.6% on a constant currency basis versus the first half of FY2023. Three UK refurbishments were completed, and all are performing in line with expectations, while one new centre opened in the UK and two in Canada. Its portfolio now stands at 71 UK centres and 11 Canadian centres, and its pipeline continues to build across both geographies. Net cash position at 31 March 2024 of was £41.4m, with an undrawn £25m revolving credit facility. A further four UK centre refurbishments are expected to be completed in the remainder of the year. Following the acquisition of Lincoln Bowl in early October 2023, a new site in Dundee is on track to open in May 2024. In addition, Colchester and Westwood Cross are expected to open during FY2024, with a further four centres due to open during FY2025. In Canada, two centres were acquired in the first half and are performing in line with expectations. Sites in Kanata and Creekside are signed and due to open in FY2025, with further sites in legals and four refurbishments due to be completed during the second half of FY2024. The group said it is confident about the outlook for the business in FY2024, and although the economic backdrop remains challenging for consumers, it “remains focused on offering a high quality and great value for money experience, with broad appeal to all customer groups looking for leisure experiences to enjoy together”. Chief executive Stephen Burns said: “We are pleased with the strong trading performance achieved in the first half of the year, particularly in the context of a very strong prior year comparative. It reflects the continued demand for high quality, great value and fun leisure activities that families, friends and colleagues can enjoy together. Our teams play a very important role in our success and their excellent service and dedication to our customers' experience is reflected in growing customer service scores. We continue to work hard to evolve our value-for-money customer proposition, including investment in innovation, technology, and sustainability programmes. Our strong cash position means we are well placed to continue to invest in improving and expanding our portfolio, both in the UK and Canada, and continue to create value for all our stakeholders.”

Everyman reports strong trading so far in 2024 with year expected to outperform 2023, three new openings confirmed: Everyman, the independent, premium cinema group, has reports strong trading so far in 2024, with this year expected to outperform 2023 and three new openings confirmed. “With a focus on hospitality, Everyman is re-defining how film is being consumed and is therefore outperforming the wider cinema market, non-executive chairman Philip Jacobson said following the release of the company’s results for the year to 28 December 2023. “We look to the future with confidence. Despite the impact of the SAG-AFTRA and WGA strikes in 2023, we anticipate a continuously improving film slate in 2024 and beyond. Positive momentum in Q1 2024, with strong trading driven by Dune: Part II and high-quality awards content. Management expects 2024 to outperform 2023 due to a stronger slate, with more focus on original storytelling and quality content. Highlights include Paddington in Peru, Joker: Folie a Deux, Wicked, Mufasa: The Lion King and an untitled Gladiator sequel. This year, we will proceed with our expansion plans at a measured pace, with three new openings planned, mindful of reducing net banking debt and leverage.” The new openings are in Bury St Edmunds, Stratford (London) and Cambridge. This follows four organic openings during the year – in Salisbury, Northallerton, Plymouth and Marlow – plus the acquisition of Tivoli Bath and Cheltenham from the Empire Cinemas administration process in December 2023. It comes as Everyman reported a 15.3% rise in revenue in the year, to £90.9m from £78.8m, with adjusted Ebitda up 11.7% from £14.5m to £16.2m. Admissions were up 9.7% from 3.4 million to 3.75 million, with market share increasing from 4.5% to 4.8%. Average ticket price was up 3.2% from £11.29 to £11.56 while food and beverage spend per head rose 10.2% from £9.34 to £10.29. Chief executive Alex Scrimgeour said: “Again, we have outperformed the wider cinema market and proven that the unique Everyman proposition, with a core focus on exceptional hospitality, is the most relevant form of cinema. Guests are returning to our venues in greater numbers and spending more with us than they have in previous years, and the progress made both financially and operationally is testament to the hard work of the teams in our venues and head office, who have shown exceptional dedication during the year. Our measured approach to organic expansion continues, with three exciting and confirmed openings for 2024. We are confident of delivering another year of growth, as we move ahead with a larger footprint and continuously improving film slate.” The group said its directors believe that the opportunities to develop new Everyman venues both across the UK are “significant”. It has been able to finance the majority of its expansion through £17.9m of operating cash flow (2022: £11.8m). In addition, the group raised £6.5m (2022: nil) through the sale and leaseback of its freehold venues in Crystal Palace and Salisbury and received lease incentives of £4.1m (2022: £5.0m) in the form of contributions to venue fit out costs. Net banking debt at the end of the period was £19.4m (2022: £18.3m). “The directors remain of the view that the property deal landscape is highly favourable, with the majority of transactions attracting significant landlord contributions,” it added. “However, there is a balance to be found between continuing expansion and making the most of attractive market conditions and maintaining sensible levels of net banking debt. In light of this, the group now expects to open three venues in 2024 and three or four venues in 2025, with the fully-built venue in Durham currently expected to open in Q1 2025. The directors expect this to have a deleveraging effect, with a higher proportion of expansion financed through operating cash flow. Strategic acquisitions, such as the Tivoli venues in Bath and Cheltenham acquired in December 2023, will continue to be judged on their merit.”

Scottish hospitality slows growth plans due to tax burden: The boss of one of Scotland’s largest independent hospitality groups has said government policies have caused him to slow down his expansion plans. The Times reports Kenny Blair, the managing director of Buzzworks, suggested the administrations in both Westminster and Holyrood should be “more sympathetic” to the industry to help foster growth. Blair said many Scottish firms would have liked the 75% non-domestic rates reduction in England replicated north of the border. He pointed out his company, which is backed by Sir Tom Hunter’s West Coast Capital, still plans to open two venues in the coming year but suggested that could have been five with a more supportive policy environment. “The politicians are seeing new venues opening but what they are not seeing are the many decisions not to open and not to invest in boardrooms up and down the country,” he said. “It would be fair to say we feel as an industry, we are not getting much help. Because of the environment we are in, and the fact rates are so high and costs are so high we are making decisions not to invest.” The company runs more than 20 venues across a number of towns with Scotts, which has restaurants in Troon, Largs, South Queensferry and Greenock, its largest brand. Blair suggested that the company was looking to “fill in” areas across the central belt having grown its presence around the west and east coasts. He would like to see a new system where the tax burden for hospitality is reduced. He said: “Typically, we go into a town perhaps like Kilwinning in Ayrshire with a population of 18,000 and invest circa £1m, developing a property within that town. That makes a usually closed or derelict building look good first of all and creates as many as 70 jobs. It then creates footfall for that town, a few thousand people a week going through the front door. It also creates an amenity for living there. We feel strongly that what we do makes living in your town that little bit better. My question to the politicians is if it is not us investing in these towns, then who is? For us to then be hit with a rateable value of £250,000, which is the case in some of our venues, is a difficult pill to swallow.”

State of Play Hospitality promotes Sam Pollard to MD UK: State of Play Hospitality, the Toby Harris-led the international experiential leisure operator, has announced the promotions of Nicola Blackford and Sam Pollard to chief commercial officer and managing director UK respectively. Blackford joined State of Play a year ago as commercial director for its UK business, transitioning from her role as chief commercial officer at Secret Cinema. As the group’s chief commercial officer Blackford will lead product development for its Bounce and Hijingo concepts, execute the company’s plan to develop international partnerships (outside of the US) and head up all major commercial projects outside its existing brands. Pollard has held the role of operations director at State of Play for over five years, having previously been a multi-site manager at D&D London. He led the operational launch of Hijingo in 2021, the group’s bingo concept, as well as more recently leading the opening of Bounce at Battersea Power Station. In his new role as managing director UK, Pollard will have full accountability of the group’s UK business. Harris, chief executive of State of Play, said: “It’s always a real joy promoting top talent from within and that's very much the case with Nicola and Sam. They are both outstanding executives who embody all of our leadership values and we are lucky to have them leading such important strategies within the group. Optimising our leadership structure to capitalise on existing and future opportunities is essential as we scale, particularly as we seek to add further concepts and markets to the State of Play platform.” In January, Propel revealed that State of Play is looking to double its estate by 2026 following a “transformational year” in which revenue more than doubled, including a record month in December. The year to 30 March 2023 saw its revenue rise to £35.3m and return to post pandemic profit. In the UK, revenue was £13.3m, an increase of 40% on the previous year. Revenue for the year to March 2024 is expected to be more than 30% up on the prior year. The group launched its latest immersive concept, Hijingo, in London in 2021 and is actively pursuing opportunities internationally to roll out the concept, both on an owned and operated basis and with local partners. As well as operating three Bounce venues in London, and its sister concept AceBounce in Chicago, State of Play also operates Flight Club under an exclusive licence in North America, and to date it has opened six Flight Club venues across the US.

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