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Morning Briefing for pub, restaurant and food wervice operators

Mon 5th Feb 2018 - Upham Group reports like-for-likes up 4.0% as it makes first pre-tax profit
Upham Group reports like-for-likes up 4.0% as it makes first pre-tax profit: Upham Group, the operator of 16 premium pubs across the south of England with its own regional brewery, has reported like-for-like sales grew 4.0% for the year ended 31 December 2017 as it made a pre-tax profit for the first time. The company saw total sales increase 25.1% to £15.6m compared with £12.5m the previous year. Pub sales were up 25.9% to £15.0m compared with £12.0m the year before. Brewery sales (including intercompany rose 1.2% to £667,000. Trading Ebitda more than doubled to £1.26m compared with £624,000 the year before. The company reported profit before tax of £0.5m compared with a loss of £1.2m the previous year. During the year, the company acquired the Weighbridge Brewhouse in Swindon for £3.3m in February. Five new luxury log cabins opened at The Thomas Lord, four further bedrooms were added at The Mill at Gordleton and another at The White Hart in South Harting, taking group total of bedrooms to 159. It had its first £100,000 sales day (gross) on 26 March (Mother’s Day) and four further £100,000 days, including a record breaking New Year’s Eve with sales of £112,000 across the whole estate. The company had its first £500,000 gross sales week in the last week of 2017. It also implemented its training and retention strategy and launched its first craft beer – UB5. The company stated: “Despite the continued challenging economic environment and delicate, broader consumer confidence, the year has seen like-for-like sales across the whole estate grow by 4.0% on 2016, compared with a flat industry average. Group sales of £15.6m are 25.1% up on last year. In the face of significant cost inflation, most notably food costs driven by the weakened pound, overall gross margins have held up well at 73.9% versus 74.2% in 2016. Trading Ebitda doubled to £1.26m from £624,000 in 2016. Levels of employment in the economy continue to present significant recruitment challenges and, in conjunction with the Apprenticeship Levy, pension auto-enrolment and the recent rateable value review, further cost pressures. We continue to seek out efficiency gains wherever practicable. We are always looking to enhance shareholder value by identifying alternative uses for land not required for our trade, and the valuation of surplus land at the year-end added an additional £0.7m to full year Ebitda in 2017. Consequently, full year Ebitda after exceptional items was £1.9m compared with £0.1m in 2016. For the first time, the group recorded an overall profit before tax. This profit of £0.5m compares with a £1.2m loss in 2016. The first half of the year saw a restructure of central management with our previous operations director and marketing manager exiting the business. In addition, we have ended our contract with our retained marketing agency. The addition of a new senior regional manager has added the desired increase in operational and commercial discipline and the appointment of a new training and retention manager is a direct response to the increasing recruitment challenges post the Brexit vote. In February, we completed the acquisition of The Weighbridge Brewhouse. It is a large going concern business in Swindon requiring virtually no refurbishment work where we believe we can further improve revenues and trading margins. Despite only being acquired in February, it delivered £0.4m Ebitda in the year. Through the year, we completed a small refurbishment at The Thomas Lord and a larger kitchen and restaurant refurbishment at The Swan. June saw the opening of five luxury log cabins at The Thomas Lord and the conversion of the house adjoining The Mill at Gordleton into four further letting rooms. A further bedroom was also added at The White Hart in South Harting in September. The first quarter of 2018 will see further significant development within the existing estate, including two further letting rooms at The Winning Post, the updating of bedrooms at four further sites and a number of developments to trading areas both inside and outside the pubs. The brewery continues to perform in line with projections, with sales up 1.2% on 2016 to £667,000. Profitability is steadily improving, with trading loss down to £19,000 from £31,400 in 2016. In the second quarter of the year we launched our first craft beer – UB5, which has been exceptionally well received. Despite being in its infancy, UB5 is one of only ten craft beers selected by Ei Group for a national listing trial and it has secured a regional listing from Tesco from March. The economic outlook for 2018 looks, at best, uncertain. However, 2017 performance gives the board continued confidence in the underlying strength of the business. Despite the expected challenges, like-for-like sales are projected to increase above the rate of inflation. The board also continues to assess all strategic options to ensure the maximisation of shareholder returns.” Chief executive Chris Phillips added: “It has been a good year for the Upham Group, in which we have grown both our sales and estate in the face of a challenging economic environment. We work hard to ensure that all our pubs retain their individual character and meet the evolving needs of their local communities, and I believe this is a significant driver behind their enduring popularity. Our success is also testament to the strength of our team and my thanks go to them for their continued commitment. We have hit the ground running in 2018 and I look forward to further developing the business for the benefit of customers, colleagues and investors.”

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