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Wed 10th Oct 2018 - Patisserie Valerie owner suspends shares, Marston's buys 15 former M&B sites, BrewDog et al
Patisserie Valerie owner suspends shares after discovery of ‘accounting irregularities’: Patisserie Holdings, the owner of Patisserie Valerie has suspended its shares after the discovery of “potentially fraudulent, accounting irregularities”. The company stated: “During the course of 9 October 2018, the board of directors of the company has been notified of significant, and potentially fraudulent, accounting irregularities and therefore a potential material mis-statement of the company’s accounts. This has significantly impacted the company’s cash position and may lead to a material change in its overall financial position. As a result the company has requested its shares be suspended from trading on AIM while it conducts a full investigation with its legal and professional advisers into its true financial position. In the meantime Chris Marsh, the chief financial officer, has been suspended from his role. The company will make further announcements in due course as the results of the investigation become known.” Chairman Luke Johnson said: “We are all deeply concerned about this news and the potential impact on the business. We are determined to understand the full details of what has happened and will communicate these to investors and stakeholders as soon as possible.” 
Marston’s acquires 15 former M&B pubs from Aprirose, reports record revenue and pre-tax profit: Marston’s has acquired 15 former Mitchells & Butlers’ pubs from Aprirose as it reported record revenue and pre-tax profit for the year ending 29 September 2018. The company stated: “We have reached agreement to acquire 15 former Mitchells & Butlers’ pubs from Aprirose, a property investment company. These well located, community pubs have good potential and are highly complementary to our business model. We expect to complete and lease-fund this acquisition in the first half of 2019 and will invest about £4m post acquisition with a target Ebitda of about £0.5m in 2019 and at least £1m in 2020.” Meanwhile, the company also revealed like-for-like sales in the most recent ten weeks were up 1.6% in its end of year trading update. The company stated: “Strong trading during the World Cup and warm summer weather contributed to our achieving record revenue and underlying profit before tax for the financial year. Group turnover was up 15% to more than £1.1bn and we anticipate reporting underlying profit before tax of about £104m (2017: £100.1m) with higher operating profits in each of our trading segments offset by higher interest charges. Total pub sales increased 3.2%, including like-for-like sales growth of 0.6% and the contribution from our pub expansion programme. In the most recent ten weeks, like-for-like sales were up 1.6%. Our wet-led Taverns pubs performed strongly with managed and franchised like-for-like sales growth of 3.8% including growth of 3.8% in the past ten weeks. This good performance from our community pub estate was boosted by the World Cup and warm summer weather, although trading has been consistently strong throughout the year. Like-for-like profit in our leased estate is around 2% up. As previously reported, our food-led Destination pubs were impacted by poor weather in the first half-year, and weaker trading during the World Cup as expected. In Premium pubs and bars, Pitcher & Piano and Revere Country traded well. Like-for-like sales were 1.2% behind last year, with growth in both drink and accommodation offset by weaker food sales. In the past 10 weeks momentum has improved with like-for-like sales up 0.1% on last year. We have maintained a keen focus on cost control and continue to remain disciplined in terms of pricing, discounting and promotion, with operating margin expected to be around 0.5% below last year. Marston’s Beer Company achieved strong growth with total volumes up about 47% in the year benefiting from the acquisition of Charles Wells Brewing and Beer Business (CWBB) in 2017, good summer weather and the World Cup. We have made significant distribution gains in the last year and our portfolio, which includes an outstanding range of premium ales, world lagers and craft beers, further increased market share. Marston’s now distributes to one in four of the UK’s 46,000 pubs nationwide. Sales of own and licensed brand volumes exceeded one million barrels for the first time this year, and we distributed around 2.5 million composite barrels of drinks to the on and off trade sectors. Around 90% of ‘own brand’ volume is now sold outside Marston’s own pubs. We continue to grow our estate, opening 14 pub restaurants and bars and seven lodges in the year. As previously reported, we plan to open ten pub restaurants and bars and five lodges in 2019.” Chief executive Ralph Findlay said: “2018 was a strong year for our Taverns and Beer businesses. We have seen clear benefit from our balanced portfolio having achieved good growth in wet-led pubs and from brewing, maximising the trading opportunities provided by the good summer weather and World Cup. This year has been transformational for our market-leading beer business, with the benefits of the acquisition of CWBB and the new distribution contracts delivering strong profit growth. Although trading in Destination food-led pubs was weaker, this predominantly reflects issues beyond our control relating to unseasonal weather extremes and the World Cup. However we are encouraged our dining pubs are now seeing improving momentum and we expect to make further progress in 2019. We are meeting the demands of our customers and continue to manage the inflationary cost environment well, which gives us confidence for the future.”
BrewDog eyes IPO: Scottish brewer and retailer BrewDog wants to float on the stock market by 2020, but has not decided whether to list in London or New York. The company is exploring options with its financial advisers and is strengthening its internal systems ahead of a potential initial public offering, according to James Watt, its co-founder. Watt told The Times: “It is something we are actively looking at and exploring with some banking partners. We are making preparations for inside our company from a systems, accounting and financial perspective, as well. It is not to say we are going to do it, but we would like to be in a position internally that we could if it was the right strategic choice. I think our preference would be to do it in the UK as it is our home, but we haven’t discounted doing it in the US.” As well as potentially raising cash to fund further expansion, a listing would give existing shareholders an option to exit. US private equity firm TSG Consumer Partners paid £213m for a 23% stake in BrewDog last year, valuing the business at £1bn. The company also has thousands of small retail investors, which it calls equity punks, who have bought into the business in crowdfunding initiatives. The latest valued the company at £1.7bn and is due to close on Monday (15 October). It is in line to raise more than £23m from 46,000 investors, which would mean BrewDog has raised about £64m from such schemes and will have more than 90,000 shareholders. Watt and Martin Dickie founded the business in Fraserburgh in 2007. It has breweries in Scotland and the US, with construction under way on another in Brisbane, Australia. The company runs 70 bars around the world. It made a £1.4m pre-tax profit on revenue of £111.6m in 2017.
Third of under-25s now drink no alcohol: Almost a third of under-25s abstain from alcohol, with experts saying it is becoming “mainstream”. Today’s 16 to 24-year-olds are the most sober in recent history, consuming considerably less than their parents, a study involving almost 10,000 youngsters found. Researchers found 29% called themselves non-drinkers, up from 18%, while half of those surveyed said they had not drunk in the past week. The data, published by journal BMC Public Health, revealed the proportion of “lifetime abstainers” rose from 9% in 2005 to 17% a decade later. Experts from University College London studied data from the annual Health Survey for England. In 2005 two in five (43%) admitted drinking above the recommended limits, but this fell to just 28% ten years later. Dr Linda Ng Fat, lead author of the study, said: “Increases in non-drinking among young people were found across a broad range of groups, including those living in northern or southern regions of England, among the white population, those in full-time education, in employment and across all social classes and healthier groups. That the increase in non-drinking was found across many different groups suggests that non-drinking may becoming more mainstream among young people which could be caused by cultural factors. The increase in young people who choose not to drink alcohol suggests that this behaviour maybe becoming more acceptable, whereas risky behaviours such as binge drinking may be becoming less normalised.”
Domino’s appoints David Bauernfeind as chief financial officer on permanent basis: Domino’s Pizza Group has announced the appointment of David Bauernfeind as chief financial officer on a permanent basis. The company stated: “David was initially appointed on an interim basis, and following a successful consultancy period, the company is delighted to make the role permanent. David is an experienced chief financial officer, having held the position at Connect Group until June this year and at technology services provider Xchanging for five years between 2011 and 2016. At Xchanging, he was part of the successful transformation of the business and oversaw a period of disciplined growth. David is currently a non-executive director at photonics technology business Gooch & Housego. The board is confident David’s previous experience and entrepreneurial spirit make him the right choice for the position.” Chief executive David Wild said: “I am delighted David is joining Domino’s at an exciting time for our business, with the prospect of further domestic and international growth on the horizon. He has considerable experience at this level, with growing and successful listed businesses like ours, which we believe makes him a perfect match for the fast-moving culture of Domino’s.” Bauernfeind added: “I have spent the past two months learning about the company and getting to know my new colleagues and I am thrilled to be joining such a talented and ambitious team on a permanent basis. Domino’s is an iconic and market-leading brand, but it is also an entrepreneurial and innovative business with enormous potential both in the UK and overseas.”
Jamie Rollo – some company incentive targets are getting easier, use of non-financial terms rising: Morgan Stanley leisure analyst Jamie Rollo has argued some company incentive targets are getting easier, while the use of non-financial targets is rising. He said: “Investors continue to ask us about how the management of travel and leisure companies are incentivised and how this is changing. We note targets are becoming less demanding for some companies, the use of non-financial targets is increasing, and we highlight examples where disclosed incentivisation schemes extend beyond top management. Our theoretical exercise assumes management achieves maximum thresholds, from which we explore implied share price upside. Overall, targets are becoming less demanding. (For example) Merlin’s earnings per share growth (maximum at 10%) and return on capital expenditure targets (maximum at 10%) are lower than a year ago (14%/13%). We found few, if any, examples of where metrics were becoming more demanding. The use of non-financial metrics is increasing. Merlin has added a 20%-weighted ‘strategic performance condition’ to its performance share plan. A total of 12 of our companies have non-financial metrics in their annual bonus schemes. This potentially offers a means to reward executive teams for focusing on key performance indicators within the business (customer satisfaction, productivity) or those important for long-term sustainability. Some incentivisation is below ‘C-Suite’. JD Wetherspoon pays an annual bonus (equivalent to about one-third of Ebit in FY18) to its employees, of which 97% was paid to staff below board level and 82% to staff working in its pubs in FY18. Disclosure of incentives throughout a company, rather than just top management, could be a growing theme in the coming years.”
Hollywood Bowl Group reports like-for-likes up 1.8%: Hollywood Bowl Group, the UK’s largest tenpin bowling operator, has reported like-for-like sales increased 1.8% for the year ending 30 September 2018. The company stated: “The group has continued to trade well driven by the successful execution of its strategy to invest in its centre refurbishment and rebrand programme and innovation of the customer experience. Total revenue grew 5.8% with like-for-like revenue growth of 1.8%, and the group expects to report profit before tax growth of 10%, in line with market expectations. The group continues to benefit from the significant cash generation and returns from both its ongoing investment programme and core business. The board remains committed to continuing to invest in the business through its ongoing cash generation, in addition to considering the appropriate use of surplus cash to enhance shareholder returns. Therefore, in line with the capital structure and cash allocation priorities outlined in the group’s FY 2017 results announcement, the board is considering returning additional capital to the group’s shareholders. A further update will be given in the group’s FY 2018 results announcement, which is expected to be published on 10 December 2018.” Chief executive Stephen Burns said: “We are very pleased with our full year performance. We have delivered good results in line with expectations, through the effective execution of our customer-led strategy, which is underpinned by our capital expenditure programme. Our centre teams have worked very hard to ensure our customers continued to enjoy fun-filled, great value for money leisure experiences, whilst carefully managing costs and improving our margins.”
City Pub Group raises £6.2m through share placing: City Pub Group, led by Clive Watson, has announced it has raised £6.2m by way of a share placing. The company has issued 2,823,365 new ordinary shares of 50 pence each in the capital of the company at a price of 220 pence per placing share. The placing was conducted by way of an accelerated bookbuild process. Liberum Capital and Berenberg, acted as joint book runners. City Pub Group stated: “Following admission, the company will have 61,302,514 ordinary shares in issue. No ordinary shares are held in treasury. The total number of voting rights in the company is 59,377,514.” Yesterday (Tuesday, 9 October), City Pub Company revealed it has three sites in negotiation – a freehold pub in the south Midlands, a freehold site in Wales and a leasehold property in the south west of England. All three sites are expected to open in November. City Pub Group stated: The company stated: “The net proceeds (from the raise) will increase the available cash reserves of the group to enable it to capitalise on opportunities to selectively acquire more pubs and take advantage of softer pricing in the current market.” City Pub Group currently has 43 sites trading.

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