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Morning Briefing for pub, restaurant and food wervice operators

Wed 31st Jan 2018 - Propel Wednesday News Briefing

Story of the Day:

Brasserie Bar Co reports turnover up 20% in current financial year, looking to open up to five sites in 2018: Mark Derry, chief executive of Brasserie Bar Co, the 36-strong group behind Brasserie Blanc and The White Brasserie Company, has told Propel turnover for its current financial year is up 20%. Derry also said the company, which has reported turnover up 14% to £46.8m for the year ending 31 June 2017, is looking to open four or five sites this year across the two brands. This includes new hotel Brasserie Blanc venues, with its debut hotel site in Bournemouth currently up 9% on budget. Derry said: “Trade in December started slowly but finished with a bang so we were pretty thrilled. January is also up on last year and overall this financial year sales are up 20%. We’re about to open our 17th White Brasserie pub, in Histon, and we’re looking at a couple of hotel sites for Brasserie Blanc at the moment. The performance of the Bournemouth restaurant has shown there is scope for further opportunities in that area.” The company has just sold its Brasserie Blanc restaurant in St Albans to The Ivy Collection but Derry said the company wasn’t planning any further disposals. He added: “We are trying to improve the overall quality of the estate so where we have sites making less money we are trying to reinvest that in more profitable opportunities at the top end. We were made an offer for the St Albans site we just couldn’t turn down and, personally, I think the town is over-served when it comes to restaurants. We have a White Brasserie pub just down the road in Berkhamsted that is absolutely flying.” Derry said the reason many casual dining operators were struggling was oversupply in the market but that would “right itself in due course”. He added: “I think the whole Brexit effect is being overstated to be honest. I don’t think the discounting going on in the wider sector has a big effect on us – quite a lot of our visits are people treating themselves who aren’t really looking for half-price offers. We have invested a lot to improve our menu, service and venues – and we are investing more.”

Industry News:

Propel and Thinking Drinkers launch fourth Craft Beer Retail Study Tour: Propel is staging its fourth Craft Beer Retail Study Tour on Thursday, 22 March in London, this time exploring the burgeoning beer scene in Bermondsey and Brixton. The tour, led by The Thinking Drinkers, award-winning beer writers Ben McFarland and Tom Sandham, will visit eight venues during the day-long tour including leading craft beer retailers, a cider specialist and a street food market that features its own brewery. McFarland and Sandham will provide the latest craft beer facts and figures, market segmentation analysis, and spot up-and-coming trends while CGA commercial director Graeme Loudon will provide further insights. Site visits will include question-and-answer sessions with some of London’s leading retailers looking at award-winning sites, beer-centric retail, beer sourcing, direct sourcing, menus, brewing on-site, and a host of other issues. The day includes travel between venues by coach where appropriate. Tickets are £345 plus VAT for Propel Premium members and £395 plus VAT for non-Propel Premium members. To book, email

Propel Multi Club Conference opens for bookings, Paul Wells to present: The first Propel Multi Club Conference of 2018 is open for bookings. The full-day event takes place on Wednesday, 7 March at the Grange Hotel in St Paul’s, London. Charles Wells chairman Paul Wells will talk about making a “sea-change” decision on strategy in selling its Bedford brewery to Marston’s, developing a managed pub estate, partnering great retailers, and developing a pub estate in France. Multi-site operators of pubs, restaurants and foodservice outlets can book up to two free places by emailing Anne Steele at

Takeaway food a key sector for UK online spending, 85% of millennials have ordered deliveries online: Takeaway food is one of the key sectors for online spending in the UK, according to consumer research commissioned by Visa. More than half (52%) of Brits have ordered takeaway online, a figure that rises to 85% of millennials. Visa’s Digital Payments Study 2017 also showed more than a quarter (26%) of respondents made their takeaway orders using a mobile device, showing consumers want quick, easy and seamless ways to pay digitally. The company announced the research as its Visa Checkout platform, which launched in May, surpassed one million enrolled accounts in the UK. Visa said the online wallet had led some merchants to see up to one-third of payment volumes on their websites made through Visa Checkout, with the UK now one of the service’s fastest-growing markets. Tony Holdway, sales and marketing director at Domino’s Pizza, which has signed up to Visa Checkout, said: “We are always on the lookout for ways to improve and simplify the ordering process for our customers so it makes sense we should be among the first companies to offer Visa Checkout in the UK and Ireland. We have seen fantastic adoption in both markets.” William Levaggi, vice-president, digital products at Visa in Europe, added: “It is more important than ever to offer people the right balance between security and convenience when they make payments.”

UK ‘free from’ food sector sees 27% growth in sales: Sales in the UK’s “free from” food market increased 27% in 2017, with more growth to come this year, according to Sam Benjamin, brand manager of pastry brand Too Good To Be Gluten Free. Benjamin predicted “free from” brands could look forward to an even stronger 2018, pointing to a report by Mintel that found 15% of households were avoiding gluten and wheat, more than half because they believed it helped towards a healthy diet. Benjamin said: “This growth has been driven by consumers who have medical conditions that require ‘free from’ diets but also by what we refer to as ‘free-from lifestylers’, a growing market of people who are choosing to cut certain ingredients from their diet for health, dieting or lifestyle reasons. This growing market is demanding ‘free from’ choices but with a focus on taste and quality of the product.”

Remarkable’s Elton Mouna secures regular radio slot to discuss pub sector: Elton Mouna, managing director of Remarkable Pubs, the 14-strong London-based operator of pubs, is to appear regularly on talkRADIO’s breakfast show to discuss hospitality and pub sector news stories. Mouna’s first guest slot will come during the James Max Early Breakfast Show on Friday (2 February) between 6am and 6.30am, with regular appearances on Fridays thereafter. Mouna said: “To be invited by a broadcaster of James’ standing to be a regular contributor on a national radio station to represent the wonderful vibrant world of pubs is superb.” Max added: “I have a penchant for the Great British pub and have long admired companies and entrepreneurs who not only keep this great institution alive but thriving through innovation and superb service.” Other regular industry experts on the show include Leon co-founder Henry Dimbleby. Earlier this month, Remarkable Pubs reported like-for-like sales grew 9.2% in December.

Company News:

Brunning & Price aims to step up openings rate in 2018: Brunning & Price, the Restaurant Group’s gastro-pub arm, is aiming to step up its rate of openings in 2018, Propel has learned. The company, which operates 61 sites, has already added the former Greene King-operated Loch Fyne restaurant in Beaconsfield, Buckinghamshire, and the Arrow Mill in Alcester, Warwickshire, to its estate. Both sites are expected to reopen under the Brunning & Price banner this summer. A spokeswoman told Propel: “We are always on the lookout for opportunities, especially in new territory for us around the Midlands. But the kind of buildings we love come up rarely and often with complications so it’s tricky for us to put a firm number on anything – but we are enthusiastically seeking. We do intend to make a step-change from previous years, where we have completed three or four developments.”

Mowgli reports like-for-like sales up 11.5% in December, plans five new sites in 2018: Indian street food restaurant Mowgli has reported like-for-like sales up 11.5% in December, while it has also told Propel it plans to open five sites in 2018. Mowgli, founded by barrister and food writer Nisha Katona in 2014, currently operates two sites in its home city of Liverpool and one each in Manchester and Birmingham. Mowgli said all the restaurants were outperforming expectations, with the Birmingham site already trading above initial projections after opening late last year. The next opening will be at the Westgate development in Oxford in early March. Mowgli said it was also seeking sites in Nottingham, Leeds and another in Manchester, while identifying the right site and opportunity in London was also part of its strategic plan. In July, Mowgli secured £3.45m in expansion funding from independent infrastructure, private equity and investment manager Foresight Group, which brought experienced leisure sector executive Karen Jones on board as chairman. Katona said: “Mowgli is all about the fresh, light zing of an Indian home kitchen. The menu is entirely comprised of dishes from my family’s recipes. I take curry virgin chefs on principle and teach them one on one in the ancient Hindu culinary philosophy. It is utterly humbling that Mowgli has found a place in the heart of the nation.”

We Brought Beer and The Beer Boutique agree merger, plan further expansion: London-based bottle shops We Brought Beer and The Beer Boutique have agreed to merge, creating the largest specialist beer retailer in the UK. Two Heads Beer Co, a new company jointly owned by the original founders of each business, will run both We Brought Beer and The Beer Boutique. The new group will be run by James Hickson, founder of We Brought Beer, with Jon Kaye, founder of The Beer Boutique, acting as executive chairman. Together, the new group has six stores – in Balham, Putney, Clapham Junction, Tooting, Wandsworth Town and Royal Tunbridge Wells. The Beer Boutique opened its first site in Putney in 2010 and has subsequently opened venues in Wandsworth Town and Royal Tunbridge Wells. We Brought Beer was established in 2014, founded by former BrewDog employee Hickson. Its first site opened in Balham, with a focus on events, drinking-in and the introduction of growlers. Subsequent shops followed in Clapham Junction and Tooting Market in 2015 and 2016 respectively. Two Heads Beer Co intends to open more stores over the next couple of years under both brands, focusing on London and key cities outside the capital. A crowdfunding campaign will be launched in the near future to help fund further expansion. Hickson said: “We’ve got some really exciting plans ahead, which we can’t wait to put into action. In addition to opening new stores, we are also working on bringing some of the most highly sought overseas breweries over to the UK and we’re also working on some really cool new bits of innovation to make the experience of buying beer even better. This is the beginning of a new journey for both We Brought Beer and The Beer Boutique and Jon and I couldn’t be more excited to build on what we’ve achieved so far.”

Birmingham-based online food-ordering firm Appetise launches £500,000 crowdfunding campaign to scale up: Birmingham-based online food-ordering firm Appetise has launched a £500,000 fund-raise on crowdfunding platform Crowdcube to scale up in the city before expanding to “other key regions in the UK”. The company, which has Revolution Bars Group executive chairman Keith Edelman as its non-executive chairman, is offering a 16.67% equity stake in return for the investment. It is targeting further growth in Birmingham, where it has 370 restaurant partners and 60,000 customer accounts. After that it would look to expand to London and other key UK cities with further fund-raising planned. The pitch states: “We are an online market place connecting customers with takeaway restaurants and charging restaurants a commission on each order placed via our platform. The sector is dominated by Just Eat (market cap £5.4bn), which charges its restaurant partners joining fees of up to £699 and up to 14% commission, and its customers 50p service fees. With no exclusivity arrangements between restaurants and Just Eat, we saw an opportunity to take market share with a better deal for restaurants and customers – our customers pay no fees and can make savings with our loyalty scheme, and our commission to restaurants is only 10% with no joining fees. Our only fixed costs on each order are card processing fees and we have no involvement in cooking or delivery. Unlike Deliveroo, no capex is required to run a delivery fleet so we believe our model is low cost and easily scalable. From 2016, we focused on improving the platform and concentrating our restaurant base in Birmingham. As a result, revenues have been modest but we believe this work has put us in a strong position for an aggressive marketing push to expand rapidly to other key regions and grow revenues with our ultimate target being an exit via initial public offering.”

Costa Coffee storefronts to appear on Corrie’s cobbles as part of ITV product placement deal: Costa Coffee storefronts are to appear on the famous cobbles of television soap opera Coronation Street after owner Whitbread signed a product placement deal with ITV. The broadcaster has signed a similar deal with Co-op, with the brands’ storefronts to be part of a new extended Weatherfield set. It is the first time ITV has entered such partnerships. Both facades will be fully branded and appear from this spring, with other assets such as posters, bags and cups integrated across the TV soap. The new agreements also include digital and brand-licensing aspects for both brands, enabling them to use Coronation Street assets and extend the partnership off-air. Eric Tavoukdjian, commercial marketing director for Costa Coffee UK and Ireland, said: “As the nation’s favourite coffee shop and a presence on the UK high street for more than 40 years, we feel it’s perfect to have a presence on one of the nation’s favourite and most iconic soaps.” ITV sales director Mark Trinder added: “Incorporating product placement on this scale is something we have wanted to do for some time and we’re delighted with this exciting opportunity.”

Linda Lee to launch chicken-focused sister site for On The Bab brand on Friday: Restaurateur Linda Lee, who operates four London restaurants under her Korean cuisine brand On The Bab, is to launch a sister site in Covent Garden that focuses on chicken dishes. On The Dak – “dak” is Korean for “chicken” – will open in Monmouth Street on Friday (2 February) offering dishes to eat in or take away. The menu will offer four flavours of Korean fried chicken in small, medium or large alongside Chitang (chicken soup noodles); Chibun (spicy Korean barbecued or fried chicken with cabbage); and Chibab (chicken and salad with rice). A meat-free Chibab will also be available alongside sides such as kimchi, salad, rice and chicken dumplings. On The Dak will be the seventh London site for Lee following Koba, the Korean barbecue restaurant she launched in Fitzrovia in 2005, four On The Bab sites, and Korean “rice bowl deli” Mee Market in Soho, which she opened last month. Lee said: “Koreans love chicken, whether it’s fried, in soups, on noodles or with rice, and in all my restaurants chicken dishes are among the most popular. So I wanted to bring all my favourite chicken dishes, plus some new ones, under one roof.”

Leeds city centre bar and restaurant enters administration: Yorkshire-based operator Ricci’s at Leeds, which traded as 53 Degrees North and Ricci’s Tapas and Cicchetti, has entered administration. Entrepreneur Michael Ricci began expansion of his Ricci’s Tapas and Cicchetti restaurant and 53 Degrees North cocktail bar concepts with a double opening in Leeds in July 2016. The tapas restaurant and adjoining cocktail bar are at grade II-listed Goodbard House. The former Allied Irish Bank site was split in two, with both venues offering access to secret basement gin bar The Vault, while the restaurant also had a private space for ten diners. Mike Kienlen and Mark Ranson, insolvency practitioners at Armstrong Watson, have been appointed joint administrators. The company has ceased trading with immediate effect and all employees have been made redundant. Kienlen said: “Following our appointment as joint administrators, the difficult decision was made that the company should cease trading immediately due to its ongoing financial obligations. Regrettably, this has resulted in the redundancy of all 27 employees. It is early in the administration process to comment on the likely payment to creditors and will depend on the extent of the company’s liabilities. The assets will be marketed for sale, including the fully furnished leasehold premises in Leeds, by Sanderson Weatherall.” A separate company operates Ricci’s Tapas and Cicchetti and 53 Degrees North venues in Halifax, as well as Mediterranean restaurant Ricci’s Place in the town. 

BrewDog promises European openings as Equity for Punks V incentive: Scottish brewer and retailer BrewDog has launched a set of incentives for people in Europe who invest in its Equity for Punks V crowdfunding campaign. The company has stated it will open a bar in any country in which investors raise £500,000, or a brewpub if the figure tops £1.5m. BrewDog said in its blog: “As Equity for Punks V is seeing even more investment from across Europe than ever before, and with the deadline to invest having been extended until 15 October, we will do a couple of extra-special things for our BrewDog Equity Punks across Europe. First up, to celebrate hitting the 70,000 mark in our number of global investors, we are pledging that if Equity Punks from the same country raise more than £500,000 in our latest raise, we will endeavour to open a BrewDog bar there! And if those newly assembled Equity Punks invest over £1.5m, we will get to work planning a brewpub in that country.” The company said it also plans ten collaborations with European craft brewers, each from a different country. The Equity for Punks V campaign has secured £12,066,591 so far from 25,679 investors.

SSP opens restaurant in Metz railway station: UK transport hub foodservice specialist SSP Group has opened a restaurant at Metz railway station in north east France. The company has launched Terroirs de Lorraine with French chef Michel Roth in partnership with subsidiary SSP France and SNCF Stations & Connections. Roth’s menu includes perch fish and chips, Lorraine stew, and Rossini beef fillet. The 130-cover restaurant features additional terrace seating. Gare de Metz, which has been a classified historic building since 1975, was named the most beautiful station in France in 2017. The restaurant is part of a wider programme to refresh the food offering at stations across France in partnership with renowned French chefs. Gerard d’Onofrio, managing director of SSP France and Benelulx, said: “We are particularly proud to be working in conjunction with Michel in this outstanding venture. It underscores our commitment to innovation and high culinary standards.” Last week, SSP reported like-for-like sales increased 2.7% for its first quarter ending 31 December 2017. Like-for-like sales growth in the UK and continental Europe was “in line with expectations, driven by the ongoing roll-out of strategic initiatives and increasing passenger numbers”.

London-based Chinese hot pot concept Shu Xiangge opens second site: London-based Chinese hot pot concept Shu Xiangge has opened its second site, in Gerrard Street in the heart of Chinatown. Founder Terry Zhao has launched the 2,930 square foot, 110-cover restaurant, having previously agreed a deal with landlord Shaftesbury. Shu Xiangge, which opened its first site in Holborn in 2016, offers diners an authentic taste of Chinese hot pots cooked in the traditional way using broth, seasonings and cooking utensils directly from Sichuan province in south west China. The new site features traditional ceramics, wooden vases, crafts and a hand-painted Chinese mural across one wall depicting the "Along the River During the Qingming Festival" masterpiece. Zhao said: “Following the explosion of the hot pot trend from China, we identified a gap in the UK market for traditional Sichuanese hot pots. Chinatown London’s diverse and authentic east Asian restaurant scene was the perfect place for us to open our second restaurant, building upon our success to date and introducing even more people to our delicious, spicy hot pots.” Julia Wilkinson, Shaftesbury group restaurant strategy executive, added: “We are delighted to welcome Shu Xiangge to Chinatown London, further cementing the area as the number one destination for food and unique east Asian experiences in the capital.” CDG Leisure represented Shaftesbury while Shu Xiangge represented itself.

Neville and Giggs’ revised plans for £200m Manchester mixed-use scheme fall foul of Historic England again: Revised plans for the £200m Manchester city centre development by the St Michael’s Partnership, fronted by former Manchester United stars Gary Neville and Ryan Giggs, have fallen foul of national heritage body Historic England for a second time. The organisation has written to the city council to say while the new proposals have less of an impact on surrounding listed buildings than previously, it still cannot back them, reports the Manchester Evening News. Neville’s development vehicle has already ripped up one set of proposals for the St Michael’s project after Historic England objected to initial designs almost a year ago. The new proposal spares the historic Abercromby pub in Bootle Street, which dates to the Peterloo Massacre in 1819 and was the inspiration of the television series Life on Mars. Historic England north west director Catharine Dewar said in her submission to the council: “We are unable to support the application on heritage grounds due to the cumulative harm that would be caused to highly-graded listed buildings. It requires clear and convincing justification to overcome the great weight attached to preserving heritage assets.” The revised scheme features 148,000 square feet of grade A office space, 30,000 square feet of food and drink space, 189 luxury apartments, a 216-bedroom five-star international hotel with gym, spa and pool, a 30-bedroom boutique hotel, a synagogue, a public square outside the refurbished Abercromby pub, and a rooftop garden.

Turkish restaurateur Salt Bae to open steakhouse restaurant in London for first UK site: Turkish restaurateur Nusret Gökçe, known as Salt Bae, is to open his first UK site, in Knightsbridge, central London. Gökçe is launching Nusr-Et Steakhouse at The Park Tower Knightsbridge. Dishes will include Roasted Asado Short Rib’, Nusr-Et Meat Spaghetti, Lokum’ and the Nusr-Et Special with Gökçe "personally selecting every cut", reports Hot Dinners. Gökçe operates eight restaurants in Turkey as well as sites in Dubai, Abu Dhabi, Qatar, Miami and New York. Gökçe has been dubbed Salt Bae because of the way he sprinkled salt on a steak in a social media video that has been viewed more than nine million times. 

Greene King hosts staff well-being week: Brewer and retailer Greene King is holding a well-being event for staff this week at its head office and depots in Bury St Edmunds and support centre in Burton. The company launched the event last year, which promotes health awareness at work and home and includes workshops, challenges, health promotion activities, webinars, fresh fruit and advice. The “know your numbers” health check allows employees to have their cholesterol, glucose, blood pressure and body mass levels checked. Greene King group HR director Andrew Bush said: “We want to create an environment where our employees can achieve their full potential and, to do this, we need to be aware of and care for our teams’ well-being and mental health. We are a big employer in Bury and Burton so we have a responsibility to care for those who work for us and we believe our people will benefit.” Last week, Greene King reported like-for-like sales growth of 1.6% for the two weeks covering Christmas and New Year’s Eve.

Fourth appoints new chairman: Fourth, the software partner to the hospitality industry, has appointed Steve Rowley as chairman. Rowley has spent more than 20 years in senior positions across the sector, including ten years at IBM and as a public company chief executive at Anite. He has held two further chief executive roles and board positions at several private and public firms. He is currently chairman at CoreHR and MetaPack. Fourth chief executive Ben Hood said: “Steve’s knowledge and experience will be invaluable. We’ve always focused on creating a culture that attracts and retains the industry’s leading talent, an initiative that placed us in 2017’s The Sunday Times Best Companies to Work For. Our latest appointment reflects this as well as demonstrating our ambition to grow the business.” Rowley added: “I have admired Fourth for a number of years and am relishing the opportunity to work alongside Ben and his team. I’ve always had a passion to work at the best tech companies and the timing and fit of this role is perfect.” Fourth is backed by New York-based private equity investor Insight Venture Partners.

Brewhouse & Kitchen to make Welsh debut next month with Cardiff opening: Brewhouse & Kitchen will make its debut in Wales next month when it opens its 18th brewpub. The venue will open near Cardiff city centre at the former Y Mochyn Du (The Black Pig) following a £550,000 refurbishment. The pub will feature large barrel tables, bottle lights, an open kitchen and a copper micro-brewery. Brewhouse & Kitchen chief executive Kris Gumbrell told Insider Media: “I’m a proud Welshman and grew up in Cardiff so it has always been a long-held ambition of mine to open a location in Wales. We’ve been searching for the right location and opportunity so when this pub became available on the outskirts of the city centre, we wasted no time.” Gumbrell said the company was looking forward to working with craft brewers in South Wales while also brewing its own beer on-site. He said the pub would remain bilingual, with signage, printed media and its website all written in Welsh as well as English. Earlier this month, Brewhouse & Kitchen managing director Simon Bunn said the company planned to open seven sites in 2018, including Cardiff and Milton Keynes.

Hostel operator Safestay reports 15% rise in UK revenues, remains focused on growing its portfolio: London-headquartered hostel operator Safestay has reported a 15% increase in UK revenues to £8.5m in the year to 31 December 2017, while the company remains focused on growing its portfolio. The rise in revenues included a 15% increase in ancillary income that reflected management’s focus on growing this area of its business, the company said. All four of its UK hostels grew sales and occupancy, particularly Kensington Holland Park where occupancy rose 32% to 73% over the previous year. The UK average bed rate remained stable during the year at £20, with “scope for future increases”. The company saw 43% growth in total revenues to £10.6m including acquisitions, while like-for-like occupancy increased 13.5% to 74%. Acquisitions during the year increased the group’s hostels from four to nine, plus a development site in Paris and 34 apartments in Madrid that are under development. The company also started work on an extension to its Elephant and Castle site in London. The number of beds rose from 1,526 to 2,306, while 330 beds will be added when Paris and the Elephant and Castle extension open. The European hostels combined contributed total revenues of £2m for the period under Safestay’s ownership. Chairman Larry Lipman said: “We remain focused on growing the portfolio and our marketing platform, both organically and by acting as a consolidator through the acquisition of individual sites and small chains of hostels, as well as procurement of sites for development. We have in place the operational backbone to support a much larger business across multiple geographies.”

Hollywood Bowl Group reports increase in trade at Bradford site following £350,000 revamp: Hollywood Bowl Group, the UK’s largest tenpin bowling operator, has reported an increase in trade at its Bradford site following a £350,000 refurbishment. The redevelopment, which was the final investment of 2017 for the group, saw a complete redesign of the 28-lane centre, which now features new furnishings, contemporary American décor, and upgraded music and lighting. With a new Hollywood Diner, the company is placing extra focus on its food and drink offering. Gourmet burgers, hotdogs, freshly made shakes served in retro milk bottles and signature desserts now feature on the newly developed menu, as well as speciality house cocktails served from a new American-style bar. In addition, the centre’s amusement area has received an upgrade. Chief executive Steve Burns said: “We’ve seen fantastic results following the completion of the refurbishment, with an increase in trade and very positive customer reviews. These results set us up nicely for our programme of investments planned for 2018, some of which are already under way.”

Douglas Jack upgrades Domino’s Pizza forecasts by 2% after fourth-quarter results ‘ahead of expectations’: Peel Hunt leisure analyst Douglas Jack has upgraded his forecasts on Domino’s Pizza by 2% after its fourth-quarter results were “ahead of expectations”. Issuing a ‘Buy’ note on the shares with a target price of 425p, he said: “Total UK and Republic of Ireland sales grew by 10% in the fourth quarter, with expansion weighted to quarter four. Like-for-like sales in quarter four would be +5% if an extra day in the prior year is excluded. This outcome is still ahead of our consensus-in-line 2017E forecast, which we are upgrading by £2m in relation to profit before tax. This upgrade is split £1m less investment in gross margin (£3m rather than the £4m guidance figure); and £1m extra volume from that investment. Innovation is technology-focused. GPS tracker was in 244 stores at year-end, ahead of the 200 store year-end target. Online sales (delivery and collection) rose by 14.5% in the quarter and are now at 77% of UK system sales. Using Similarweb data, we believe Domino’s website activity lead over other pizza delivery companies is continuing to grow. A total of 95 stores opened in the UK in 2017 (versus 81 in 2016), including 37 in the fourth quarter of 2017, again ahead of expectations and contrary to the bears’ theory that franchisees do not want to open stores. We continue to forecast 80 new UK stores in 2018E, with franchisees expanding in high footfall locations, helping to increase collection from 33% towards potentially 50% of orders, which should drive material labour, distribution and marketing efficiencies. Overseas trading was strong in the fourth quarter. Like-for-like sales rose by 10.4% in the Republic of Ireland, 21.9% in Switzerland, 1.9% in Iceland and 16.2% in Norway. Six overseas stores opened in the quarter. Domino’s has bought back 11 million shares for almost £40m over the past year. With the company targeting 1.75 to 2.5 net debt/Ebitda, we estimate the company could buy back another £100m to £200m of equity to reach those ratios over the next two years, although no time-frame for leveraging has been set; and it may choose alternative uses of capital. The shares have surged in recent months, helped by strong like-for-like sales, the share buy-back programme and the stock on loan position falling from 15% to 10%. We believe these trends should continue in the first half of 2018E, assisted by the company’s improved price positioning, use of technology and favourable like-for-like trading backdrop.”

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