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Morning Briefing for pub, restaurant and food wervice operators

Fri 3rd Mar 2017 - Update: ETM Group hires chairman, The Restaurant Group, Rosa’s Thai, Britvic
ETM Group hires Graham Turner as chairman: The privately-owned bar, restaurant and pub company, ETM, has appointed Graham Turner as its non-executive chairman. Turner is a highly experienced executive with a wealth of hospitality experience. He currently acts as a non-executive chairman for Barburrito, the chain of fast-casual Mexican restaurants, and healthy grab-and-go retailer, Vital Ingredient. Prior to this he was chairman of The Liberation Group, the leading pub and drinks business in the Channel Islands and the West of England, and before that held chief executive positions at Tragus Group and the Unique Pub Company. Turner is the third ETM senior management appointment – Sam Bourke was appointed the new marketing director and Landen Prescott Brann its chief financial officer – as the group strengthens its team to support its future expansion plans. ETM co-founder Ed Martin said: “We’re thrilled to have Graham joining our board as we move into the next phase of ETM’s development and look to increase our estate as well as invest in our current portfolio. Graham’s extensive leisure experience will be invaluable in helping us deliver the ambitious growth plans that we have for the business”. Graham Turner added: “I have long admired ETM and I am delighted to be joining this forward-thinking company with its diverse mix of restaurants, pubs and bars. I very much look forward to taking the business forward with Tom and Ed and their team.” The 12-strong ETM portfolio includes the recently opened flagship site, Greenwood, which has significantly exceeded all trading forecasts. The 11,000 square foot, two-storey pub and restaurant, in Victoria’s new Nova development, includes a brow/lashes bar and barbershop as well as an upstairs sports lounge and 80-cover al fresco seating area.

Douglas Jack – the path to recovery will not be short at The Restaurant Group: Peel Hunt leisure analyst Douglas Jack has issued a ‘Hold’ note on Restaurant Group shares, arguing the path to recovery will not be short. He said: “The Restaurant Group has stepped up its promotional activity, which is necessary in our view, but winning back lost custom takes time and is also dependent on improving the quality of dishes, service, marketing and social media. Further like-for-like sales and margin erosion is already built into forecasts; Thursday’s results should highlight new initiatives and possibly initial results. For next Wednesday’s full year results, we forecast PBT falling by 14% to £74.7m. Consensus, at £67.5m, appears to be 10% lower than it would otherwise have been due to two outlying forecasts. For 2017E, we forecast a further 23% drop in PBT to £57.8m (consensus: £56.5m). Frankie & Benny’s has had minimal menu price changes over the last year, but it has added a value lunch menu, a “50% off main courses” (previously 25% off) post 5pm from Sunday to Friday, and two courses for £9.95 (previously £11.95) from Monday to Friday. Coast to Coast has introduced its first ever discount (25% off main courses Sunday to Friday). The company has to arrest some negative trends: Like-for-like sales fell by 5.9% in Q4 2016 vs a 3.7% decline over a year in which footfall fell 2.1% in co-located cinemas, fell by 2.0% in retail outlets and rose by 5.1% in airports. RTN’s trading reflected its own proposition and increased competition: although restaurant supply fell by 1.4%; managed restaurants, which RTN competes with, increased supply by 6.4% in 2016. Margins should be down by 220bps, by our estimates, largely due to the decline in like-for-like sales. For 2017E, we forecast average sales falling by 3% (like-for-likes -4%) and margins falling by another 220bps, despite closures adding 1.2% to average sales and 70bps to margins, by our estimates, spread between 2016E and 2017E, but weighted to the latter. In 2016E, RTN opened 24 sites and closed 37. For 2017E, the openings programme is under review, which is appropriate in our view, as the new management needs to focus effort on improving the value and proposition at Frankie & Benny’s and Coast to Coast at a time when cost inflation is rising. We believe the current promotions are necessary, but they alone are not the solution. Andrew Page’s management team rejected promotional activity (outside January) claiming it merely attracted transient custom that would leave when the discounts stopped. We expect the path to recovery will not be short.”

Rosa Thai Cafe secures Seven Dials site: Rosa’s Thai Cafe has secured a 1,500 square foot site located at 26 Earlham Street, Seven Dials through agent Shelley Sandzer. The news follows the location that Shelley Sandzer secured on Atlantic Road, Brixton, for Rosa’s Thai Cafe last year, which is due to open soon. The Earlham Street restaurant will be the second opening for the company in the area, following on from the Lao Café on Chandos Place that is also managed by Rosa’s Thai Cafe founders, Saiphin and Alex Moore. Casey Phillips, partner at Shelley Sandzer, said: “We are very happy to see Rosa’s Thai Cafe continue to grow. Located on a busy corner in the heart of the West End and complemented by the attractive boutiques of Seven Dials, it is an ideal next step for their expansion in the capital.”

Britvic completes acquisition of Brazilian company: Britvic has confirmed, following the completion of the due diligence process, it has bought Bela Ischia Alimentos Ltda for R$218m (£56.8m*). As previously announced, Bela Ischia revenues were R$160m and Ebitda was R$18.5m in 2016. The company stated: “Bela Ischia is a strong and well recognised consumer brand with its largest presence in the key areas of Rio de Janeiro and Minas Gerais. The acquisition strengthens both Britvic’s brand portfolio and distribution footprint by complementing our existing strengths in Sao Paulo and the north east. The combined businesses are expected to realise substantial cost savings, principally from efficiencies in procurement, production, logistics and administration; it is therefore anticipated that the acquisition will generate at least R$10m of cost synergies. It is anticipated that exceptional costs of approximately £3.5m will be incurred this year in relation to both the acquisition and integration of Bela Ischia. Britvic will publish its Interim results on 24 May 2017.”

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