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Morning Briefing for pub, restaurant and food wervice operators

Thu 26th Jan 2017 - Trading update: Whitbread, Fuller’s, SSP and Sky
Whitbread posts 1.7% like-for-like sales growth in 13 weeks to 1 December 2016: Whitbread has reported like-for-like sales rose 1.7% in the 13 weeks to 1 December 2016. Premier Inn like-for-likes were up 1.8% although its pub restaurants declined 1.5%. Costa Coffee like-for-likes were up 4.3%. Total sales rose 8.6%. Chief executive Alison Brittain said: “We continue to make good progress against our three point strategic plan: to grow and innovate in our core UK businesses; to focus on our strengths to grow internationally; and to build the capability and platform to support future growth. We remain on track to open c.3,700 new UK Premier Inn rooms and our committed pipeline stands at around 14,000 UK hotel rooms. We have also recently signed two additional sites in Germany (Freiburg and Essen) taking our committed German pipeline to five hotels. We expect to open 230-250 net new Costa coffee shops worldwide and to install at least 1,500 new Costa Express machines, having already surpassed our previous guidance of 1,250 in the current financial year. In the quarter our brands continued to win market share growing total sales by 8.6% and like for like sales by 1.7%. Trading since the end of the quarter is such that we expect to deliver full year results in line with expectations. Premier Inn grew total sales in the quarter by 9.2%. We have opened 15 hotels in the UK since the start of the year, increasing the number of rooms available by 9.7%, whilst maintaining occupancy at a high level of 84.5%. Like for like sales grew by 1.8% benefitting from our hotel extension programme which, as expected, diluted our like for like revpar, which was down 1.3%. In the quarter, Costa delivered total sales growth of 12.5% and good like for like sales growth of 4.3%. This performance was supported by its new advertising and promotional campaigns and benefitted from the timing of the quarter end, which included a strong start to the Christmas period. For the comparable period, to 26 November, excluding this timing benefit, Costa’s like for like sales growth was 2.9%. Our property strategy is to carry out a modest number of sale and lease back transactions in order to recycle capital into strong returning new growth opportunities and we successfully completed two such transactions in December. We now expect total sale proceeds for the year to be in the region of £200 million. These transactions highlight the strong asset backing to our balance sheet and are evidence of how we optimise our significant property portfolio.” It added: Premier Inn has grown total sales for the 39 weeks by 9.0%, by continuing to win UK market share, growing like for like sales by 2.2% and total room nights sold by 8.5% to 14.7 million. As anticipated total revpar was down 0.7%, compared to the total market growth of 0.9%, due to the impact of our hotel extensions programme. Total occupancy remained high at 83.2%, whilst the number of rooms available increased by 9.5%. In the quarter, revpar for the total market was down 0.3%, with the non-budget sector supported by a weaker sterling and higher inbound tourism to London. Restaurants delivered total sales growth for the 39 weeks of 0.5% with like for like sales down 0.2%, slightly ahead of a soft pub restaurant market outside the M25. Costa had another good sales performance, growing total system sales for the 39 weeks by 13.0% to £1,317 million (10.4% at constant currency). Within this, franchise system sales grew by 13.6% to £503 million (9.1% at constant currency). Costa UK Retail grew system sales by 11.6% to £708 million. Costa Enterprises grew system sales for the 39 weeks by 9.3% to £322 million respectively, while International system sales increased by 21.4% to £287 million (9.2% at constant currency). We remain committed to the long-term growth opportunities for Costa in China, despite a tougher near-term trading environment. Year to date we opened 186 net new stores worldwide and installed 1,266 Costa Express machines. This exceeds our target for 1,250 installations this year and takes the total number of Costa Express machines to 6,482, of which 696 are in international markets. We now expect to install at least 1,500 new Costa Express machines this financial year. 

Fuller’s reports like-for-likes up 7.4% in ten weeks to 21 January: London brewer and retailer Fuller, Smith & Turner has announced a trading update for the 43 weeks to 21 January 2017. Trading over Christmas and New Year period has been strong, with like-for-like sales in Managed Pubs and Hotels for the last 10 weeks to 21 January increasing by 7.4%, like for like profits in Tenanted Inns rising by 2% and total beer and cider volumes in The Fuller’s Beer Company increasing by 1%. For the 43 week period to 21 January, like-for-like sales in Managed Pubs and Hotels increased by 3.7%, like for like profits in the Tenanted Inns division were down by 1% and total beer and cider volumes in The Fuller’s Beer Company decreased by 4%. Chief executive Simon Emeny said: “Our strategy of sustained investment in our pubs, our brands and our people continues to drive the business forward. In the final quarter, we will be taking advantage of what will be a 53 week year to accelerate investment in our existing estate and reinforce our marketing programme for The Fuller’s Beer Company. With our clear vision and exciting initiatives for the coming financial year, we are well placed for the future. However, in common with many other companies we are facing increasing cost pressures including a steep rise in business rates, an increase in the National Living Wage and the introduction of the Apprenticeship Levy, all set against an ever-changing global political and economic backdrop. The last 10 weeks have been particularly strong, which is a credit to the whole Fuller’s team. We will next update the market on 9 June 2017, when we announce the Company’s full year results for the 53 weeks to 1 April 2017.”

SSP reports good start to the financial year: SSP, the operator of food and beverage outlets in travel locations worldwide, has reported a good start to the new financial year in its First Quarter between 1 October and 31 December 2016 and expectations for the full year remain unchanged. It stated: “Revenue increased by 4.3% on a constant currency basis, comprising like-for-like sales growth of 2.4% and net contract gains of 1.9%. We completed the initial investment to create a joint venture with Travel Food Services in India in December 2016 and this added a further 1.1% to sales, bringing the total group revenue increase in the first quarter to 5.4%. Total group revenue growth at actual exchange rates was 18.7%. We expect to have acquired the initial 33% stake in TFS in full by the end of February 2017. Like-for-like sales growth in the UK and Continental Europe has remained positive, driven by increased passenger numbers in the air sector. In North America the positive trends seen in 2016 have continued through the first quarter of 2017. In the Rest of the World, like-for-like sales growth is in line with our expectations. The pipeline of new contracts remains encouraging. Trading results from outside the UK are converted into sterling at the average exchange rates for the year. The overall impact on revenue of the movement of foreign currencies (principally the Euro, US Dollar, Swedish Krona and Norwegian Krone) in the first quarter compared to the same period last year was approximately 13%. If the current spot rates were to continue throughout the remainder of FY 2017, we would expect a positive currency impact on full year revenue of approximately 7%. This is, however, a translation impact only. The new financial year has started in line with our expectations and the pipeline of new contracts is encouraging, although it is always difficult to predict the precise timing of the openings of new units. Whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets and our programme of operational improvements.”

Sky reports revenue up 12% to £6.3bn in first half: Sky has reported a 12% increase in revenue to £6.4 billion, up 6% on a constant currency basis, in the six months to the end of 31 December 2016. Operating profit was £679 million, after absorbing £314 million step up in Premier League costs Chief executive Jeremy Darroch said: “We have delivered a strong first half performance across the group, continue to make significant progress against our strategy and remain on track for the full year. Across the half we have continued to drive customer and product growth in all our markets, adding over 500,000 new customers – faster growth than last year – and selling two million products. That means, in the past three years and since the Skys have come together, we’ve now added 2.5 million customers and total products are up almost 25%. This has resulted in sector leading revenue growth of 6% which we’ve achieved despite some pressure on discretionary consumer spending across Europe and a decline in the UK advertising market. In a year in which we are absorbing significantly higher programming costs, as a result of the step up in Premier League costs, our financial performance has been good. To put this into perspective, our first half operating profit of £679 million is down £65 million on the prior year despite absorbing an additional £314 million of Premier League costs, highlighting the strength of our underlying financial performance. This has been supported by the efficiency of our operating model and the achievement of our £200 million synergy target six months early. We remain confident in our strategic plans and have made significant progress against them. We’ve launched Sky Mobile in the UK, delivered further enhancements to the customer experience across the group and extended our reach in Europe’s largest TV market with the launch of Sky Sports News free-to-air and Sky 1 in Germany and Austria. Whilst churn in the UK has remained higher than planned, we have a full set of actions to address this, including replicating the success of our Italian loyalty programme which has resulted in reduced churn. We enter 2017 focussed on giving more quality, choice and value to our customers. In the UK we plan to launch our Sky TV service without the need for a satellite dish for the first time, at the same time as pushing ahead in the £15 billion mobile market. We are continuing to build our European TV production studio with 100 original series going into production this year. And we will broaden our businesses further with the launch of Sky Store in Germany and Austria and the full roll-out of our targeted advertising service, Sky Adsmart, in Italy and Ireland. Whilst we expect the backdrop in our territories to remain uncertain, we are on track as we enter the second half of the financial year and we remain focused on delivering our clear strategy for growth.”

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