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Thu 2nd Aug 2018 - Update: Applegreen buys Welcome Break, M&B trading
Applegreen buys majority stake in Welcome Break: Applegreen, the petrol forecourt retailer with operations in the Republic of Ireland, the United Kingdom and the United States, has entered into contracts to acquire a majority holding in Welcome Break. The transaction constitutes a reverse takeover of the company under the AIM rules for companies. The company has entered into an agreement with NIBC European Infrastructure Fund to acquire its entire 55.02% holding in Welcome Break by the acquisition of shares in Appia Group and unsecured subordinated Eurobond fixed rate notes issued by Appia Europe for a cash consideration of approximately €361.8 million. Applegreen said it was a transformational acquisition in the UK of a long established, well invested and cash generative business, Welcome Break and fulfils a strategic objective since IPO of achieving critical mass in the large and stable UK market while deepening the group’s exposure to non-fuel food and beverage revenue. Welcome Break is comprised of a portfolio of 24 Motorway Service Areas (MSA’s), two trunk road service areas and 29 hotels across 35 locations in the United Kingdom. Its sites are open 24 hours a day, 365 days a year and attract circa 85m motorway customers per annum. Formed in 1959, Welcome Break has over 55 years’ experience in the sector and 5,000 plus employees operating food and retail brands such as Starbucks, KFC, Burger King, Subway, Waitrose, Harry Ramsden’s and WH Smith. Welcome Break also operates 22 Days Inn and seven Ramada hotels across the UK motorway network. The transaction will be financed by a new debt facility of €300 million and a proposed equity fundraising of a minimum of €100 million. The debt facility has been underwritten by NatWest Markets and Lloyds Bank, whilst the Equity Fundraise has been fully underwritten to the value of €140 million on a standby basis by Goodbody and Shore Capital. Bob Etchingham, chief executive of Applegreen said: “Welcome Break is a fantastic business, it has led the way in providing the very best food and beverage facilities on the UK motorways. We were attracted to Welcome Break because of the strength of its franchise, the excellent management team and the committed staff at each of its 35 locations. We look forward to continuing to grow the Welcome Break business and to offering the c. 85 million customers who visit Welcome Break each year the very best experience on UK motorways.” Darren Kyte, managing director of NIBC Infrastructure Partners and chairman of Welcome Break Group added: “This is a transformational transaction in the UK MSA sector, and I am sure that the combination of the Applegreen Service Area operations in the UK with those of Welcome Break, and combined management capabilities will help build further upon the consistent and strong earnings growth seen by both businesses over the past decade.”

M&B reports like-for-likes up 0.9% in most recent 11 weeks: Mitchells & Butlers has reported like-for-like sales for the 11 week period to 28 July grew by 0.9%. Drinks sales like-for-likes were up 3.9% whilst food sales like-for-likes were down 1.8% in the 11 weeks to 28 July. The company reported a “very strong performances in our wet-led estate being offset against more challenging conditions in food-led businesses, reflecting the impact of the World Cup and sustained sunny weather”. It added: “The overall performance therefore reflects the relative positioning of our estate across these two main offers. Total sales have increased by 0.4% in the 43 weeks of the financial year-to-date. Cost headwinds remain largely unchanged and, as previously advised, are expected to lead to margins being lower than last year. We have opened five new sites and completed 228 conversions and remodels in the financial year to date.” Phil Urban, chief executive, said: “Sales performance since the half year was impacted by England’s prolonged success in the World Cup and the sustained hot weather. Trading was polarised across the company, with the wet-led part of the business delivering very strong growth, but some of the more food-led formats, particularly the carvery businesses, were negatively impacted. However, we have been encouraged to see sales recover now that the World Cup has finished and as we continue on our longer-term journey. We remain confident of delivering a full year performance in line with the board’s expectations. The second wave of transformation activity is beginning to bear fruit and momentum behind this programme of work continues to grow.”

Merlin Entertainments reports sales up, profit down: Merlin Entertainments, the world’s second-largest visitor attraction operator, has reported sales grew 3.5% to £709m in the 26 weeks ended 30 June. Profit before tax dropped 13.7% to £43m. The company said its first half of the year represents a seasonally quiet period, with approximately 70% of annual Ebitda typically generated in the balance of the year. Resort Theme Parks organic revenue grew by 9.7% with like for like growth driven by successful product investment, the continued recovery at Alton Towers and favourable weather. Legoland Parks organic revenue increased by 7.8% against very strong trading in the period last year, reflecting the full period benefit of Legoland Japan and the `opening of 644 accommodation rooms. Accommodation revenue grew by 29.2% on a constant currency basis to now represent 21% of theme park revenue (2017: 18%). The decline in operating profit of £10 million (14.3%) was due primarily to adverse foreign exchange movements and a higher depreciation charge due to New Business Development. It reported continued progress against long term opportunities, with Legoland New York under construction, good development on new brands, and progress on the ‘productivity agenda’ to address ongoing cost pressures. Chief executive Nick Varney said: “Organic revenue growth of 4.5% has been largely driven by our New Business Development with the early transition of Legoland Japan into a resort through the addition of a Sea Life Centre and a 252 room hotel together with the expansion of on-site accommodation at our Legoland resorts in California and Germany. In the existing estate we have been pleased with trading in the Resort Theme Parks Operating Group which saw organic revenue growth of 9.7%. We have had strong customer reception to our product investments and we continue to see the anticipated recovery at Alton Towers. The business has also undoubtedly benefited from the recent warm weather in Northern Europe which due to the natural balance of our portfolio has conversely had an adverse impact on our indoor Midway attractions. Trading in Midway attractions more broadly has been satisfactory although it is too early to judge if there are definitive signs of a recovery in London. Trading in Legoland Parks has been solid but year on year comparatives are challenging due to 2017’s strong Easter, two Lego movies and momentum behind the ‘Ninjago’ based capex investments rolled out across the estate over 2016 and 2017. Having so far traded in line with expectations we are now entering our peak season where we generate the majority of our annual profit. With many exciting new initiatives and launches to come in the future, we remain confident in our long term prospects.”

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