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Morning Briefing for pub, restaurant and food wervice operators

Tue 19th Jan 2016 - Revolution Bars Group reports “good progress” in First Half
Revolution Bars Group reports “good progress” in First Half: Revolution Bars Group, the operator of 60 premium bars across the UK, under the Revolution and Revolución de Cuba brands, has reported “good progress” for the 26 weeks to 26 December 2015. Trading results are expected to be in line with market expectations, reflecting a further period of growth in the number of sites, revenue and profit. Like-for-like sales rose by 2.7% for H1 FY16. Overall sales, including the contributions from new bars, were £59.1m for the same period (2014: £58.0m). The company opened three new Revolución de Cuba bars in H1 FY16, at Milton Keynes, Leeds and Nottingham. Trading for these sites is ahead of pre-investment expectations. Chief executive Mark McQuater said: “Following a good Christmas trading period, we are pleased to confirm that trading results are in line with expectations. Our new sites at Milton Keynes, Leeds and Nottingham have all started trading well. These sites were open and trading for the Christmas period and, for the six weeks to 2 January, Group sales rose by 7.0% compared to prior year, indicating the impact of adding new bars. We expect to open a further two new sites in the second half, which will grow the estate from 57 to 62 sites over the course of the financial year. We continue to develop our pipeline. We remain positive for the future and will be providing an update on first half profits and the success of our development activity at our interim results on 1 March 2016.” Numis Securities leisure analyst Douglas Jack, issuing a ‘Buy’ note with a 265p price target, said: “In H1, like-for-like sales rose by 2.7%, with total sales up 1.9%. Like-for-like sales growth exceeded total sales growth due to there being a similar average number of units (two sites closed in H2 2015; and all three H1 2016E openings occurred in October-December) and refurbishment downtime being higher in H1 2016E than H1 2015 (the latter was lower as the Evolution Programme ended in early 2015). Total sales rose by 7.0% over the six weeks to 2 January 2016. Of this, we estimate 4.1% was due to expansion (of the three new openings, Nottingham opened on 18 December) and 2.9% was like-for-like. We expect food like-for-like sales (up double-digits during each of the last four years) to have remained strong due to improved menus, and wet sales have benefited from the introduction of frozen, blended cocktails in September, although the greatest benefit from the new cocktails should occur in the summer. We forecast margins to be flat in both H1 and H2 2016E even though the company increased site Ebitda margins by 170bps in 2015 against a backdrop of 2.8% total sales growth. The company should benefit from increased scale economies as expansion continues to accelerate. Three Revolución de Cuba bars opened in H1, and two bars (one Revolution; one Revolución de Cuba) should open in Q4. Up to 2015, the Revolución de Cuba brand generated an average cash return of 54%, so any progress accelerating expansion could generate a material benefit. Having upgraded 2017E forecasts by 4% in September, we are holding our forecasts, which are based on assumptions of slowing like-for-like sales (to 2.5% in 2016E), falling gross margins, and expansion including just one to two large openings per annum. We would ‘Buy’ the shares, which we view as undervalued, on 4.9x EV/Ebitda 2017E based on cautious forecasts, in our view.”

Dalata Hotel Group buys Sligo hotel: Dalata Hotel Group has entered into an agreement to acquire the Clarion Hotel Sligo, for €13.115 million. Completion of the acquisition is conditional on the approval of the Competition and Consumer Protection Commission (CCPC). The consideration is payable in cash. Clarion Hotel Sligo is a landmark four star hotel, in Sligo town. Situated on 5.5 acres, facilities at the hotel include 162 bedrooms, including 89 suites, bar, restaurant, extensive meeting and conference facilities, leisure centre and swimming pool. Dalata plans to invest up to €750k in a refurbishment programme to further enhance the asset, and will rebrand the property as a Clayton Hotel, Sligo. The hotel generated Ebitda of €930k in 2015. Dermot Crowley, deputy chief executive business development and finance, Dalata Hotel Group, said: “We are very familiar with this hotel as we have been managing the property on behalf of the Receiver, Crowe Horwath since April 2013. The hotel is benefiting from the recovery of both the local and national economies. We believe that the introduction of the Clayton brand will further enhance the offering at the hotel and we are very excited about its addition to our portfolio of Clayton hotels in Ireland.” 

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