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Morning Briefing Strap Line
Wed 21st Nov 2018 - Update: Marston’s, NewRiver, SSP
Marston’s – ‘we’ve performed well in a difficult market’: Marston’s has reported underlying profit growth in all trading segments for the 52 weeks ended 29 September. Underlying turnover was up 15% to £1.14bn and underlying profit before tax was up 4% to £104m. It reported a fifth consecutive year of like-for-like pub sales growth – like-for-like sales growth was 0.6% with wet-led pubs outperformed food-led pubs. It stated that a ‘disciplined approach to operating margins drives profit growth in all segments’. A total of 14 pub-restaurants and seven lodges opened in the year. Average profit per pub was up 2%, up 55% since 2012. It enjoyed strong growth in brewing with total volume up 47%, reflecting benefits of its Charles Wells acquisition and World Cup. Over two million barrels of drinks were delivered to one in four of UK pubs. It’s on track to deliver at least £4 million target synergies from the Charles Wells acquisition. It reported clear plans for growth in 2019 with ten new pub-restaurants and bars and five lodges planned and the acquisition of 15 pubs from Aprirose in its Taverns’ division. It is investing in a canning line in Burton and new distribution centre in Thurrock, chief executive Ralph Findlay said: “Marston’s has performed well in a difficult market. Our balanced business model has stood us in good stead, delivering record sales and underlying profits with revenue exceeding £1.1 billion for the first time. Our Taverns wet-led community pubs and market-leading brewing business had an outstanding year, more than offsetting the effects of weather volatility and the World Cup on our food-led pubs. Macro-economic and political uncertainty is reflected in our capital plans this year. However, the outlook for good pubs and brewing remains attractive and Marston’s is well placed to leverage the opportunity this presents with our high quality, well invested estate, leading brands and great people. We expect to make positive progress once again in the current financial year.” On current trading, it added: “Trading has been solid and in line with our expectations for the first seven weeks of the current year, with growth in both pub like-for-like sales and own and licensed beer volumes. As we have highlighted previously, the first quarter trading is heavily weighted to December and the Christmas period. However we are confident our pubs are well prepared to maximise the opportunity which the Christmas and New Year trading period presents. We expect to make progress once again in the current financial year. Since the year end we have secured the additional £40 million accordion facility that formed part of our bank refinancing in 2017. This increases the overall facility to £360 million to 2023 and provides us with additional financing flexibility for the medium-term. The political and economic agenda continues to be dominated by Brexit, contributing to increased uncertainty. However, our business is almost entirely within the UK and the principal risks to us relate to continuity of supply in respect of food and drink from Europe, for which there are alternative sources elsewhere. We are appropriately vigilant but these risks are manageable. Challenges in the casual dining and restaurant sector over the last year or so have been well documented. We continue to see good opportunities for growth, but given the overall sector background a degree of caution is appropriate. As previously announced, we have reduced our openings programme in 2019 to ten pubs and bars and five lodges, and together with a corresponding reduction in organic capex, will cut our capital spend by around £30 million this year.”

NewRiver reports Hawthorn Leisure integration progressing well: NewRiver has reported that the integration of its 298-strong Hawthorn Leisure acquisition, bought in May 2018 for an enterprise value of £106.8 million, is progressing well and expected to complete in Quarter Four of 2019 financial year. It stated it had ‘already successfully unlocked £1.7 million of £3 million of expected annualised operating cost synergies and expect to see the benefit of these from early 2019’. Of its First Half performance, Allan Lockhart, chief executive added: “NewRiver has delivered a robust performance in a challenging market, with resilient cash returns underpinned by solid operational metrics. Our continued focus on the growing sub-sectors of the market characterised by convenience, value and frequent spend on everyday essentials continues to serve us well. During the period we remained active across our retail portfolio, signing leases with growing, best-in class operators and progressing our risk-controlled development pipeline, most recently reaching practical completion at Canvey Island Retail Park in Essex. We continued to diversify our portfolio by investing in high-quality community pubs through the acquisition of Hawthorn Leisure, where integration is progressing well and we remain on track to deliver annualised scale-based synergies of at least £3 million. We achieved all of this while maintaining the strong balance sheet required to support our growth ambitions. Looking ahead, our income profile is well-diversified and we have deliberately avoided sub-sectors such as department stores, mid-market fashion and casual dining, which we believe are most exposed to the structural changes impacting the retail market. The way that people live, work and consume is evolving rapidly and, as an active and specialist owner of community assets with a strong balance sheet, we are well placed to adapt to and benefit from these changes.” 

SSP plans £150m special dividend as operating profit rises 22.7%: SSP Group, the operator of food and beverage outlets in travel locations worldwide, has reported underlying operating profit of £195.2m, up 22.7% at constant currency, and 19.8% at actual exchange rates for the year ended 30 September 2018. Revenue was £2,564.9m, up 9.5% at constant currency, and 7.8% at actual exchange rates. Like-for-like sales were up 2.8%: driven by growth in air passenger travel and retailing initiatives. It reported an encouraging pipeline, with significant new contracts underpinning future growth, including at Montparnasse station in Paris, 29 Starbucks stores in the NS rail estate in the Netherlands, at Rio de Janeiro and Sao Paulo Guarulhos International Airports in Brazil, at Goa International Airport in India and in North America, at San Francisco and Seattle Airports. It plans a circa £150m special dividend and share consolidation, underpinning confidence in the business. Kate Swann, chief executive of SSP Group, said: “SSP has delivered another strong performance in 2018. Operating profit was up 22.7% at constant currency, driven by good like-for-like sales growth, substantial new contract openings and further operational improvements. We have continued to expand our global footprint, materially extending our presence in North America, delivering excellent growth in India and entering the important Latin American region with two contracts in Brazil. The new business pipeline is encouraging and underpins our confidence in future growth. Our cash flow is robust and, in addition to investing £144m into the business this year, our highest to date, we are also returning circa £150m cash to shareholders.” The company added: “Net contract gains in the year were 5.1% benefitting from the full year effect of some significant contracts which opened in the second half of 2017, including new openings at Chicago Midway and JFK T7 Airports in North America. We also saw a number of important new openings during this year, including at airports in North America at Newark, Seattle, LaGuardia, San Francisco and Toronto, in the rest of the world at Shenyang in China, and Delhi in India, and in Continental Europe at Marseille, Nice, Frankfurt and Barcelona. We continue to focus on retaining profitable contracts, and our contract renewal rate in 2018 was in line with historical levels. During the year, we won a number of important new contracts, including some significant contracts in Continental Europe most notably at Montparnasse station in Paris, a portfolio of 29 Starbucks in railway stations across the Netherlands, and 22 motorway service areas across Germany. In North America we have won contracts at airports in Phoenix, Seattle, San Francisco and LaGuardia, and in the Rest of the World at airports in Moscow, Beijing, Hong Kong, and India, including at Goa. We have also secured our first business in South America, with new contracts at Rio De Janeiro and Sao Paulo airports. We expect to begin operating all of these contracts progressively over the next two years. Looking forward to 2019, we expect net gains to be circa 3%. The underlying operating margin improvement of 70 bps, excluding the acquisition impact of TFS, was driven by good like-for-like sales and further encouraging progress on our strategic initiatives. The additional two months of TFS (12 months in 2018 compared to ten months in 2017, following its acquisition in December 2016), contributed a further ten bps to the overall operating margin, taking it to 7.6%. The improvement in operating margin also benefitted from a significant contribution from the new contracts at Chicago Midway, JFK T7 and LaGuardia Airports in North America, where we have been operating the units ahead of their redevelopment and hence have incurred limited closure periods, pre-opening and depreciation costs. Furthermore, in India, we benefitted from the reversal of the post-acquisition integration costs incurred in the previous year. Looking forward to 2019, we expect the year on year operating margin growth across the group to be nearer to 20 basis points, driven by like-for-like sales growth and on-going operational improvements, but net of closure periods, pre opening costs and higher depreciation as we rebrand units at Chicago Midway, JFK T7 and LaGuardia Airports in North America and mobilise some of the significant contract wins in Continental Europe”

Kate Swann to step down as SSP chief executive in May 2019: SSP Group has announced that after more than five years with the company, Kate Swann has decided to step down from her role as group chief executive on 31 May 2019. Swann will be succeeded by Simon Smith, currently chief executive UK and Ireland. Smith has joined the PLC board with immediate effect and will be appointed as chief executive on 1 June 2019. The pair will work closely during the next six months to ensure a smooth transition. Vagn Sorensen, SSPs Group’s chairman, said: “It has been a pleasure to work with Kate, and on behalf of the board I want to thank her for her enormous contribution to the group. In the past five years, Kate has transformed SSP into an industry leading Food Travel Retail business, which has grown significantly around the world, and she has generated significant returns for our shareholders. Succession planning is deeply embedded into the group and following a thorough process, we are delighted with Simon’s appointment. Simon joined SSP Group in 2014 and has contributed significantly to the performance of the group as chief executive of UK and Ireland for the past four years. Since joining, Simon’s role has expanded and he has taken on wider global leadership responsibilities, most recently looking after the integration and development of our joint venture business in India, which has delivered excellent results. Simon’s strong leadership skills combined with his considerable experience in the food travel and retail space, as well as his track record at SSP, make him well placed to lead SSP to continued future success. Simon will work alongside our chief financial officer Jonathan Davies who has provided excellent support to Kate and will continue to bring his wealth of experience to the board.” Kate Swann said: “Today we’ve announced another record set of results, growing earnings a further 24% and proposing £150m return of cash to shareholders, so I am stepping down at a time when the business is clearly in great shape, with a strong senior management team and enormous future growth potential. It’s been a privilege to work with the many talented people that make up the SSP team and who have contributed to making it a world class business. I look forward to working closely with Simon in the next six months to ensure a smooth handover, and I am confident that he will lead the group to even greater success in the future.” Simon Smith added: “I am delighted to be appointed as SSP’s next group chief executive. SSP is a fantastic business with excellent on-going growth potential. We have a strong senior management team and thousands of dedicated colleagues around the world, and I am confident that together we will continue to build on the success achieved. I look forward to working closely with Kate over the next six months to ensure a smooth transition.” 

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