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Fri 16th Nov 2018 - Update: TRG gets Wagamama deal boost, M&B, Luke Thomas, Eagle Eye secures Burger King contract
TRG gets Wagamama deal support from proxy advisor: The Restaurant Group’s (TRG) campaign to persuade shareholders to back its £559m takeover of Wagamama has received a boost after a proxy adviser backed the deal. Institutional Shareholder Services said the purchase of Wagamama was “supported by strong strategic rationale and substantial synergies”. It said despite negative market reaction, which had sent shares in TRG down 30% over the past fortnight, the acquisition warranted “qualified support”, reports The Times. ISS also gave qualified support to a £315m rights issue because it was “instrumental to the financing of the headline transaction”. On Wednesday (14 November), two American investors in TRG, Grizzly Rock Capital and Vivaldi Asset Management, called for the Wagamama deal to be halted, claiming it was “overly risky and expensive”. ISS advised investors to support the acquisition and the rights issue before a shareholder meeting this month, saying that the price was “reasonable when considering the expected synergies”. TRG has 511 restaurants. Wagamama has almost 200 restaurants, of which 133 are in the UK. Shares in The Restaurant Group rose 3.5p to 230p yesterday (Thursday, 15 November).

Goodbody – M&B progress is ‘encouraging’: Goodbody leisure analyst Paul Ruddy has said Mitchells & Butlers progress is “encouraging”. Issuing a ‘Hold’ note on the shares with a target price of 275p, Ruddy said: “M&B will issue preliminary results for FY18 to the end of September on 22 November. Sales figures have been released with like-for-like sales growth of 1.2% and total sales growth of 0.5% (includes the impact of 80 disposals in FY17). We forecast reported full-year revenue of £2,155m, down 1.1% year-on-year but up 0.5% when adjusted for one less trading week. We take this opportunity to make marginal changes to our model to reflect recent trading updates. We expect operating profit of £300m, down 4% year-on-year as cost inflation was only partially offset by cost savings. We expect full-year profit after tax of £140m broadly in line with consensus. Net debt will be at a similar level to the half-year stage (£1.7bn). On the estate, the group has completed 232 conversions and remodels during the year and has opened seven new sites, capex spend will be circa £180m as guided. We retain our hold rating on the stock. A recent meeting with management highlighted to us the progress that has been made under this team and we think M&B is doing the right things by investing heavily in the estate. There is evidence of operational improvements and we expect this to continue in FY19. Trading on 6.8 times EV/Ebitda, it is worth keeping on the watch list.”

Chef Luke Thomas opens first standalone London restaurant: Chef Luke Thomas has opened his first standalone restaurant in London. Thomas has launched the venture on the ground floor of Tintagel House, The Office Group’s 95,000 square foot flagship development at Albert Embankment in Vauxhall. Covering 1,700 square foot, the restaurant is an all-day venue with a grab-and-go offer. Thomas became the youngest head chef in the UK when he headed up a restaurant at Sanctum on the Green hotel in Cookham at the age of 18. Alongside work placements at Michelin star restaurants such as The Fat Duck, Thomas has appeared on various television programme including Junior MasterChef, Great British Menu, and a biographical BBC Three documentary titled Britain’s Youngest Chef. Shelley Sandzer acted on behalf of The Office Group on the deal. Tony Levine, high-street leasing agent at Shelley Sandzer, said: “Securing aspiring chef Luke Thomas for this prime opportunity was driven by The Office Group’s desire to find someone unique for the space, and it’s great to see how well the concept has already been received. Given its great location there were many established operators in the running but choosing a chef with a real point of difference brings added appeal and ensures delivery of the very best dining experience for the people who will be using Tintagel House.”

Eagle Eye secures first QSR customer with Burger King deal: Eagle Eye, the SaaS technology company that validates and redeems digital promotions in real-time for the grocery, retail and hospitality industries, has secured a contract with Burger King UK, making the company its first quick service restaurant customer. Eagle Eye reported the deal in a trading update ahead of its annual general meeting today (Friday, 16 November), with revenue in the first quarter up 26% compared with the previous year. The company stated: “At the start of the year we set an objective to expand into new sectors. We recently signed a three-year contract with Burger King UK for 74 outlets, our first quick service restaurant customer, demonstrating the attraction of the platform outside our traditional grocery and food and beverage sectors. The AIR platform and Digital Wallet have broad applicability across sectors and we have a growing pipeline of additional opportunities, both in the UK and internationally. The group’s momentum has continued into the current financial year and the first quarter has delivered revenue growth of 26% compared with the previous year, with revenue generated by the AIR platform growing by 36%. The growth has been driven by the impact of wins at the end of the last financial year, transaction growth from activity through brands together with continued deepening of existing customer engagements. Redemption and interaction volumes were 200.5 million for the quarter, a 507% increase compared to the same period last year, driven predominantly by the continued expansion of Loblaw’s PC Optimum loyalty programme and the deepening of the relationship with other Tier 1 retailers. The quarter saw new customer wins, together with the addition of new issuance partners, providing our customers a wider audience to which they can promote. We expect both of these aspects to translate to further volume growth through the platform during the year, in line with expectations. The challenge we have set ourselves this year of running the business ‘Better, Simpler, Cheaper’ is now well under way and the initial impact of these initiatives, supported by the growth in revenue, have meant that the group’s adjusted Ebitda loss has materially reduced compared with the previous year. We remain on track for our move to Ebitda profitability, in line with management expectations. The group’s funding position of cash and its £5m banking facility with Barclays are in line with management expectations and continue to be sufficient to support the group’s existing growth plans. The growth in revenues and volumes is expected to continue into the second quarter, from the annualisation of Tier 1 contracts, the impact of new wins and the strong growth of the issuance network in the first quarter. With our recurring revenue remaining high, at 72% of group revenue, very low levels of customer churn and an expanding addressable market opportunity, the board looks to the remainder of the year and beyond with confidence.” Meanwhile, Eagle Eye has appointed Robert Senior as a non-executive director. Senior’s career in advertising spans 30 years, including most recently having held positions as UK chief executive, chief executive of EMEA and worldwide chief executive at Saatchi and Saatchi where he also chaired the Worldwide Creative Board. Eagle Eye non-executive chairman Malcolm Wall said: “I am pleased to welcome Robert Senior to the board of Eagle Eye. He is well-regarded for his knowledge and expertise in the marketing services and brand industry, which will bolster the group’s opportunity within the brands customer segment. We look forward to Robert’s participation as we continue to execute our strategy to become a global leader in personalised digital marketing.”

Tennent’s ends brewing and packaging deal with Innis & Gunn: C&C Group brand Tennent’s has ended its brewing and packaging contract with Scottish brewer and retailer Innis & Gunn. Tennent’s has had a brewing and packaging relationship with Innis & Gunn since 2014, producing a range of beers for it at Tennent’s Wellpark Brewery in Glasgow. Following extended dialogue with Innis & Gunn on its production contract, Tennent’s has served notice of its intention to terminate the brewing and packaging arrangement with effect from September 2020. Patrick Morrissey, Tennent’s group operations director, said: “We are pleased our world-class facilities and brewers in Glasgow have played a major part in the development of Innis & Gunn beers and we wish it well for the future.” 

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