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Morning Briefing for pub, restaurant and food wervice operators

Thu 21st May 2015 - Results: Young’s, Shaftesbury, SSP, Booker
Young’s reports 35% increase in profit before tax: London pub retailer Young’s has reported a 35% increase in profit before tax for the year to 30 March, up to £36.1m. Sales rose 7.7% to £227m and managed like-for-likes were up 6.5%. There was further growth in hotels with 76 new hotel rooms added, increasing total number of rooms across the estate to 476; average room rate, occupancy and revenue per available room all increased. Ram Pub Company (its re-branded tenanted business) returned to growth with revenues up 9.6% (3.0% like-for-like), and adjusted operating profit up 13.2% to £4.3 million. There was investment of £50.9 million, including acquisition of eight pubs alongside upgrades to the existing estate and hotel developments. The company reported that it remains conservatively financed with net debt of £129 million (2014: £112 million) equating to 2.47 times Ebitda. It reported ‘continued appetite for further acquisitions, alongside our existing estate and extending into southern cities and market towns that suit our premium offering’. There has been positive trading since the period end; managed house revenue in first seven weeks of current financial year up 8.1% in total, and 5.6% like-for-like. Chief executive Stephen Goodyear said: “Young’s has had another extremely good year, with further robust profit growth driven by increased revenue and strong operational management, reaping the rewards of our consistently high levels of investment in our estate over many years. We have added eight pubs, 76 new hotel rooms, invested significantly in our estate, and we remain actively in the market for further acquisitions – of pubs and hotels that complement our premium positioning either where we currently trade or in market towns and cities in the south of England. We have ample financial resources to continue to pursue this proven growth strategy. Trading in the current year has started promisingly, with managed house revenue in the first seven weeks up 8.1% in total and 5.6% like-for-like. We have a number of new pubs to come on stream this year, and we look forward to this autumn’s Rugby World Cup drawing people into Young’s pubs in south west London and beyond. Whilst the strength of last year’s performance sets the bar ever higher, we are confident that we can make further progress.” The company added: “Our three distinct formats, Young’s and Geronimo, which comprise our managed house division, and the Ram Pub Company, our tenanted division, are all growing well. In each market, our absolute and like-for-like performance was underpinned by: our continued investment in growth projects; strong operational delivery; focus on our London and south east heartland and our clear positioning at the premium end of the market; not to mention a warm and dry summer last year. At the year-end we had 166 managed pubs (including 22 hotels) and 80 tenancies, spanning a mixture of vibrant London destinations including Borough Market, Covent Garden, Mayfair, the Southbank and Westminster in central London alongside affluent London neighbourhoods such as Islington, Richmond, Wandsworth and Wimbledon. In turn, these locations are complemented by pubs in picturesque cities and market towns like Stow on the Wold, Shaftesbury, Chichester and Guildford. Amidst this variety, the common strand remains premium, well-invested pubs which seek to play a pivotal role in their communities, run by teams who maintain traditional values in an environment that appeals to today’s consumers. We invested £24.3 million in acquisitions. In the summer we acquired the Fox & Anchor pub and hotel in Smithfield Market and the White Bear in Kennington. In October we purchased the 580 Group for £10.4 million, adding four large London pubs in attractive locations where we were looking to grow our presence; all are performing excellently. In January we acquired the Bell at Stow, another pub and hotel, in the heart of the Cotswolds and the Trafalgar Arms in Tooting, which is due to open in early autumn after an extensive redevelopment. Over the course of the year, we also invested £26.3 million in our existing estate. As part of our strategy to maximise the potential of our pubs and to develop, where appropriate, a premium, boutique hotel offering, we have added 76 bedrooms and undertaken some transformative developments elsewhere.”

Shaftesbury – demand for space in West End at historical high: West End property landlord Shaftesbury, which derives 36% of its total income from circa 265 properties let to cafes, restaurants and pubs, has reported historically high demand for sites in the six months to 31 March. It stated: “With resilient visitor numbers in our villages, and the growing popularity for eating out, restaurants, cafes and leisure choices in the West End are increasingly becoming a destination and footfall driver in their own right. Occupier demand remains at historically high levels. We are currently seeing particularly strong interest from the independent sector, including established street-food concepts, start-ups seeking their first site and existing small restaurant groups with new ideas and creative partners. Such operators are of particular interest and relevance to our villages, broadening their dining and leisure offer with innovative concepts, which bring both customer and social media interest. The availability of space to satisfy this demand remains low, the result of long-term restrictive planning policies and the reluctance of operators to relinquish sites other than for significant premiums. We continue to identify opportunities to secure possession of restaurants within our portfolio which had in the past been let on long leases, providing tenants with security of tenure at the end of the term. This is allowing us to improve the configuration of space on the lower floors, attract new operators on more beneficial terms, including turnover-related rent increments, as well as releasing valuable upper floors for other uses. In our sought-after locations we regularly receive numerous competitive offers for available units and our restaurant space is often pre-let in advance of completion of works. During the period, we completed leasing transactions with a rental value of £3.9 million in the wholly-owned portfolio, including ten new concepts, four renewals and eight rent reviews.”

SSP Group reports like-for-likes up 3%: Transport hub foodservice specialist SSP Group ha reported like-for-like sales up 3.0% in the six moths ended 31 March 2015 with strong increases in the UK, North America, Rest of the World. Revenue of £859.2m was up 2.6% on a constant currency basis and down 0.8% at actual exchange rates. Operating profit of £25.2m: up 35.2% in constant currency, and 27.9% at actual exchange rates. Operating margin was up 0.6% to 2.9%. It reported increased investment in the business with capital expenditure up 19.2% to £39.8m. It reported brand and concept portfolio has been further strengthened, working with Jamie Oliver Restaurant Group; James Martin Kitchen opened; new brands include Joe & the Juice and Maan Coffee. Kate Swann, chief executive of SSP Group, said: “We delivered a good performance in the first half of 2015 with profit up 28% and like-for-like sales growth of 3.0%. We have continued to successfully implement our strategy, and are encouraged by the significant contract wins we have secured so far this year. Our confidence in the future is supported by our increasing investment in the business and by the further strengthening of the portfolio of brands and concepts we offer to our clients. The second half of the 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 positioned to benefit from the underlying positive trends in our markets.”

Booker to buy Londis and Budgens for £40m: Booker Group has signed a deal to acquire the entire issued share capital of Musgrave Retail Partners GB Limited, which comprises the Londis and Budgens businesses in Great Britain for £40 million. Completion of the Acquisition is conditional on the approval of the Competition & Markets Authority. Londis is a symbol retail chain of 1,630 convenience stores. Sales in the year to December 2014 were £504 million. Budgens is a franchised chain of grocery stores. It has 167 stores with sales of £329 million in 2014. In the year to December 2014, GB Limited had sales of £833 million and made an operating loss before exceptional items of £7.4 million. Booker stated: “Through Booker, Londis and Budgens joining forces, we will help independent retailers and consumers throughout Great Britain. Following Completion, Booker’s aim is to further develop the Budgens and Londis brands alongside Premier and Family Shopper, Booker’s retail brands. GB Limited’s supply chain will be used for delivery to Booker retail customers. Budgens and Londis customers will retain their brands, but will benefit from a better local and national supply chain. This will help improve the choice offered by the retailers to the consumer. The increased scale and operational efficiency should help lower prices, and retailers will benefit from a better delivery and cash and carry service. This will help independents prosper amid the changes that are occurring in the grocery market. Booker and Musgrave are also developing a strategic partnership agreement to facilitate opportunities and the sharing of competencies between the two groups. We anticipate that the Acquisition will be earnings neutral in the first complete year of ownership and earnings enhancing thereafter.” Charles Wilson, chief executive of Booker, said: “Booker, Londis and Budgens are joining forces to help independent retailers prosper throughout Great Britain. This transaction should strengthen Londis, Budgens, Premier, Family Shopper and other Booker retailers, through improving choice, prices and service to consumers. Overall it will help independent retailers prosper.” The Acquisition constitutes a Class 2 transaction for the purposes of the UK Financial Authority’s Listing Rules and, as such, does not require Booker shareholders’ approval. The gross assets at December 2014 were £185 million. Further announcements will be made in due course.

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