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Morning Briefing for pub, restaurant and food wervice operators

Wed 24th Jan 2018 - Update: Wetherspoon trading, Fever-Tree, Hotel Chocolat, Time Out Group
JD Wetherspoon reports 6% like-for-like sales growth in its Second Quarter: JD Wetherspoon has reported like-for-like sales rose 6% for the first 12 weeks of the second quarter (to 21 January 2018) and total sales by 4.3%. In the year to date (25 weeks to 21 January 2018), like-for-like sales increased by 6.0% and total sales by 4.3%. The company stated: “As a result of better-than-expected sales, year-to-date underlying profit before tax is slightly ahead of our expectations. Similar outperformance in the second half will be more difficult to achieve. Since the start of the financial year, the company has opened three new pubs and sold ten. We intend to open approximately ten pubs in the current financial year. The company has spent £15m on buying the freeholds of pubs of which we were previously tenants and has bought back £51m of shares in the financial year. The company remains in a sound financial position. Net debt, at the end of this financial year, is currently expected to be around £30m higher than the level at the last financial year end.” Chairman of JD Wetherspoon, Tim Martin, said: “Most economists, business organisations and universities made extremely pessimistic forecasts about the immediate aftermath of a leave vote in the referendum, which have proven to be highly inaccurate. The Treasury, the IMF and the OECD were also key participants in this chorus. Their erroneous views lend weight to Warren Buffett’s aphorism that most forecasts tell you a lot about the forecaster, but nothing about the future. In Wetherspoon’s last update, I said that the CBI, the British Retail Consortium (BRC) and the chairmen of Whitbread and Sainsbury’s had issued ‘factually incorrect and highly misleading’ information about food price rises, post Brexit, which had been reported as if they were true in publications such as the Financial Times, The Sunday Times and The Guardian. None of these individuals or organisations has contested the truth of the criticisms. If this misleading information were true, it could have a damaging effect on Wetherspoon, similar businesses and the public – but it is not. By refusing to acknowledge the fact that food prices will be reduced, post Brexit, if the UK leaves the EU without a deal and parliament votes to eliminate taxes which are currently imposed on non-EU food imports, the CBI and the BRC are trying to fool the public and MPs and bringing business into disrepute. These factually incorrect scare stories seem to be designed to convince the public that a deal is necessary to avoid a ‘cliff edge’. In fact, the cliff edge is a myth. There is almost no action needed, for most companies, if the UK leaves the EU without a deal. Provided that parliament takes sensible steps, such as the elimination of food taxes, the public will benefit from lower food prices, from regained fishing rights and from savings of about £200m per week of EU contributions. Many people, including journalists and MPs, trust information from established organisations such as the CBI and the BRC – and many have been persuaded that food prices will rise if we leave the EU and the Customs Union. It should be emphasised that it is untrue and that the Customs Union, like the Corn Laws abolished nearly 200 years ago, keeps food prices at artificially high levels. As regards Wetherspoon’s performance, sales in the second quarter to date matched the strong growth of the first quarter. In the second half of the year, sales comparatives will be more difficult. We face significant costs in the second half in areas which include labour, business rates and the sugar tax. There will also be some uncertainty as to the effects on our business of the FIFA World Cup. Nevertheless, given better-than-expected year-to-date sales, we currently anticipate a slightly improved trading outcome for this financial year.”

Fever-Tree reports 66% growth in sales in 2017: Fever-Tree has reported another period of very strong growth with full year revenue expected to be circa £169 million for the year to 31 December 2017, reflecting growth of 66% on 2016 with sales in the second half expected to be ahead of the prior year period by 58%. The company stated: “The performance in the UK in the second half of 2017 has once again been exceptionally strong. The company gained significant market share from its competitors culminating in Fever-Tree ending the year as the number one mixer brand by value in the UK off-trade channel. (IRI – Total UK Retail Mixer Market value share – 13 weeks to 31/12/17). Full year revenue in the UK is expected to be circa 96% ahead of 2016. The group’s performance over the Christmas period was particularly notable with impressive rate of sales growth across all channels, formats and flavours. The growth of the mixer category continues to accelerate, driven by Fever-Tree’s unwavering focus on quality and supported by the on-going premiumisation of the wider spirits sector. Sales in Continental Europe performed well in the second half of 2017, and it is anticipated that full year revenue will be circa 42% ahead of 2016. In the USA, strong revenue growth also continued during the second half of 2017, and as a result, full year revenue for the territory is expected to be circa 39% ahead of 2016. The establishment of a North American office and the appointment of Charles Gibb as North American chief executive officer, announced in December 2017, were significant milestones and reflect the group’s ambition and commitment to the North American market. Rest of World sales growth accelerated in the second half of 2017 and full year revenue is expected to be circa 57% ahead of 2016. In view of the company’s very strong sales performance in the final two months of the year, the group took the opportunity to bring forward planned operational expenditure in the US to invest ahead of growth. Year-end net cash position is anticipated to be in line with board expectations with significant cash balances still to collect given the strength of trading over the Christmas period. Reflecting the continued strong performance through to the end of the year, the board expects that the outcome for the full year will be comfortably ahead of market expectations.” Tim Warrillow, co-founder and chief executive officer of Fever-Tree said: “I am very proud of our performance in 2017 which has seen Fever-Tree end the year as the number one mixer brand at UK retail. Our pioneering approach and commitment to providing consumers with the highest quality range of mixers continues to capture peoples’ imagination and is transforming the wider UK mixer category which as a result is now the fastest growing category across the soft drinks sector. While we have seen strong growth across all regions, our performance in the UK over the Christmas period was once again exceptional. Our growing range of mixers and formats are appealing not only to our loyal customers but also bringing consumers back to the category and importantly attracting a new younger audience. There is clear evidence that the same trends of premiumisation and mixability that we’ve previously highlighted are accelerating and we are increasingly excited by the global opportunity this presents particularly as we transition to our own operations in the US.”

Hotel Chocolat reports sales up 15%: Hotel Chocolat Group has reported total sale up 15% in for the 13 weeks ended 31 December 2017. The company stated: “Retail, digital and wholesale channels all achieved growth. The business opened ten new stores during the six months ended December, and there are now 100 stores in the UK. Trading since December continues to be in line with management’s expectations. The board expects to announce the group’s results for the six months ended 31 December 2017 on 21 February 2018.” Angus Thirlwell, co-founder and chief executive officer, said: “We performed well, our new store openings contributed 6% of our growth in the period, with the balance of the growth coming from existing stores, digital and wholesale channels. Constant innovation saw our largest ever seasonal range in Christmas 2017 and we maintained strong availability of products to capitalize on the last minute rush, without any excess stock overhang. Highlights included a successful cocoa beauty launch, with a strong story behind it; rooted in our Caribbean eco-hotel and plantation. The launch of Supermilk Pure, our first-ever no-added-sugar milk chocolate, was also very successful and resonated strongly with customers seeking wellness and authenticity without compromise.”

Time Out Group reports 60% revenue growth in 2017 for Time Out Market: Time Out Group has reported that revenue and adjusted Ebitda are anticipated to be in line with its expectations for the full year to 31 December 2017. The company stated: Out Group revenue is expected to have increased by 19% year-on-year on a proforma basis with strong growth across both Time Out Digital and Time Out Market. Time Out Digital is projected to deliver e-commerce revenue growth of 57%, Premium Profiles revenue growth of 43%, digital advertising revenue growth of 21% and print revenue growth of 1%, compared to the prior year. Overall, Time Out Digital has seen revenue growth of 15%. Time Out Market is expected to show year-on-year revenue growth of 60% in the period. Time Out Market in Lisbon has continued to perform strongly and has seen over 3.6 million visitors in the full year of 2017, compared to 3.1 million in the prior year. Julio Bruno, chief executive of Time Out Group, stated: “Time Out Digital continues to make substantial progress in its core areas and in particular e-commerce has seen excellent growth with more transactions across more verticals. Our Time Out Market in Lisbon continues to perform particularly well and we are excited about rolling out this incredibly successful format globally, with plans on track for new markets which have been recently announced in Miami, Boston and Chicago. This year we celebrate 50 years since Time Out launched to inspire and enable people to make the most of the city with unique, curated content and it remains as relevant now as when it first started. We couldn’t be more proud of where the brand stands today as millions of people globally rely on us to discover and enjoy cities around the world, making Time Out the only true global marketplace for city life.”

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