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Fri 7th Jul 2017 - Update: Handmade Burger Co collapse, Deliveroo, Domino’s Poland
Handmade Burger Co falls into administration: The Handmade Burger Co has fallen into administration. Leonard Curtis Recovery administrators closed nine of the company’s 29 restaurants yesterday with remaining outlets trading as normal pending “a solution which will enable as many jobs as possible to be preserved”. Approval will be sought from creditors to pursue a company voluntary arrangement, which was “considered the best outcome for all creditors”. If that could not be achieved, the administrator will seek a buyer for the company. The company has expanded quickly in recent years, opening as many as five new sites a year. In November last year, the Birmingham-based company, led by Chris Sargeant, hired Kevin Bacon as chairman. The most recent accounts for the company, which is registered as The Sergeant Partnership at Companies House, show turnover of £16,011,435 from 16 restaurants in the year to 31 December 2015 with pre-tax profit of £810,986 – two of the 16 sites, Grand Central Birmingham and Nottingham, opened in late 2015. One industry source suggested the company has been suffering sharp like-for-like sales declines at a number of sites. At the end of 2015, the directors’ loan account was overdrawn by £404,150 (2014: £51,547). The company stated: “The directors have reduced dividends taken which has resulted in overdrawn loan accounts which are planned to be repaid over the next two to three years.”

Deliveroo tells government it will improve benefits if law is changed: Deliveroo has told the government it will pay sickness and injury benefits to its 15,000 riders in the UK if the law is changed. In a submission to the government’s review of the “on-demand” economy seen by the BBC, the firm says that at present the law prevents it from offering enhanced rights because it classifies its riders as self-employed. Deliveroo said it uses that classification to provide its riders with the flexibility to work when they want. It says employment rules should be changed so that people who work for companies like Deliveroo and Uber can receive enhanced benefits and not lose that flexibility. The BBC claimed Deliveroo is willing to looking at enhanced payments to riders to cover things like sickness pay – and that the money would probably be administered under a government controlled scheme similar to national insurance or pensions contributions. The move comes after a criticism and court cases against gig economy companies over how they treat people who work for them. “Central to our popularity with riders and our success as a business is the flexible nature of the work that we offer,” the submission says. “We want to offer riders more security. We believe everyone – regardless of their type of contract – is entitled to certain benefits, but we are constrained in offering these at the moment.” At the moment “self-employed” workers in the so-called gig economy do not have the right to sickness pay, holiday pay or maternity and paternity leave. They also are not covered by the minimum wage rules. Deliveroo says that if it did offer “worker” contracts, flexibility, which is very popular with its riders, would be lost. Deliveroo says its riders earn on average £9.50 an hour, £2 more than the National Living Wage. “At present, companies in the UK are forced to class the people they work with as either ‘employees’, ‘workers’ or ‘self-employed’,” the submission says. “Our riders are ‘self-employed’. This gives them full flexibility – but the quid pro quo is that they are not entitled to certain benefits. In short, there is currently a trade-off between flexibility and security and we want to play our part in overcoming this divide.”

Douglas Jack issues ‘Buy’ note on Domino’s Pizza Poland shares: Peel Hunt leisure analyst Douglas Jack has issued a ‘Buy’ note on Domino’s Pizza Poland (DPP) shares. He said: “On 6 June, the Group raised £5m through a placing. These funds underpin DPP’s site opening plans and provide for additional marketing spend and technology investment. The transaction gives us greater confidence that DPP will achieve scale. The group opened 12 new stores in 2016 and has opened nine so far in 2017 (by 5 June), bringing the total to 44. DPP is on track for its target of 50 by year end (we forecast 55), and 75 by the end of 2018. Revenue growth remains strong too, with like-for-like sales up 19% in the period January to April (having been up 21% in Q1 2017). We had previously forecast that all 20 new FY18 stores would be opened by sub-franchisees. However, management noted that it could not be confident that there would be sufficient sub- franchisees to meet that target. The Domino’s brand has been very successful in other markets and we are confident that, in the medium term, there will be strong demand for stores from sub-franchisees in Poland. Majority of FY18E store openings now forecast to be corporate stores. In our revised model, we assume that 15 of the 20 stores opening in FY18E will be corporate stores. As a result, our profit forecast for FY18E is modestly lower (we assume that owned stores are loss-making initially). However, longer-term forecasts are slightly higher reflecting the greater contribution from corporate stores relative to sub-franchise stores. Increased marketing spend supports revenue growth forecasts. Management intends to apply some of the funds raised to increasing marketing spend in order to accelerate revenue growth. We have not changed our per-store forecasts to reflect this, pending a progress report from management. Our 75p/share target price is based on our assessment of the value of an estate of over 200 stores and has not changed as a result of the placing. As a result of the placing, we are now more confident that DPP can achieve its short-term store opening objectives and continue to generate the momentum required to get the business to scale. We reiterate our ‘Buy’ rating and 75p target price.”

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