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Wed 29th May 2019 - Update: GBK like-for-likes up 8.1%, Crussh to open debut healthcare site
GBK like-for-likes up 8.1% since year-end, Wimpy sees sales growth: Gourmet Burger Kitchen’s (GBK) like-for-like sales are up 8.1% in the 12 weeks since 28 February 2019, its parent company Famous Brands has stated. Famous Brands said sales are improving as “remedial measures implemented during the year gained momentum”. Famous Brands stated of GBK: “In the review period, being the 52 weeks ended 24 February 2019, the business recorded an operating loss before non-operational items of £4.6m (2018: £3.6m). The operating margin declined to minus 5.7%. (2018: minus 4.1%). GBK system-wide sales for the period declined 7.0%, while like-for-like sales decreased by 4.2% (2018: minus 6.8%). Despite the constrained consumer spend environment, GBK started to perform better as remedial measures implemented during the year gained momentum. GBK like-for-like sales in the first six months were minus 9.7%, improving to positive like-for-like sales of 1.4% in the second six months. In the 12 weeks subsequent to year-end, the brand recorded like-for-like sales growth of 8.1%, trading ahead of the market. These results are largely based on our intensified focus on re-establishing the gold standard across the product and customer experience; streamlining the operation to deliver improved efficiencies, enabling management to prioritise its relationships with staff and customers; targeted investment in refurbishments and a high street storefront facelift programme; and growing online sales through a multi-vendor delivery platform. Under new leadership, the restructured operations team implemented a range of key interventions, which benefited the business. A focused menu design, rationalisation, product innovation and renovation has resulted in a more relevant offering and a reduction in stockholding. A new corporate identity was also rolled out across all branded customer touch points. In line with the brand’s premium positioning, we implemented order and pay-at-table functionality in all of the restaurants, complementing the at-counter system; this innovation has delivered encouraging uptake rates, improved the customer experience and increased per-head spend and table turns. In addition to these operational improvements, the company voluntary arrangement (CVA) programme completed during the period is expected to have a positive impact on the long-term sustainability of the business. GBK’s network was reduced from 106 restaurants to 80, with the closure of 24 stores in the UK during the period, including closures which took place prior to the CVA.” Of its Wimpy business, Famous Brands stated: “We continued consolidating the estate to ensure optimum health of this portfolio. A total of 12 stores were closed due to centre redevelopments, franchisee liquidations and inferior standards or non-performance. The network now comprises 67 restaurants. Notwithstanding the closure programme, positive like-for-like sales growth of 5.5% was recorded. Revenue in Rand terms rose to R113m (2018: R104m). Revenue in sterling was 4% higher. Operating profit increased by 16% to R18m (2018: R15m), while the operating margin grew to 15.7% (2018: 14.7%). Where appropriate, we collaborated with GBK to leverage purchase volumes to extract favourable procurement pricing on core products. During the period, Wimpy’s delivery capability was expanded to 50% of the network. Customer response has been favourable and we will continue to roll out the offering with our multi-partner model across the rest of the estate. The roll out of revamps to the new store design progressed positively, with sales in these post-revamp sites up to 20% higher.”
Crussh to open first healthcare site as it makes debut outside London: London-based healthy food and juice brand Crussh will open its first healthcare site, in Birmingham Children’s Hospital, this summer. The new opening will be Crussh’s first site out of London and is in partnership with Sodexo. The announcement follows last year’s franchise deal between Crussh, and Sodexo which will see Crussh open outlets across all of the Sodexo business from workplace catering to universities, hospitals and government locations across the UK and Ireland. The new cafe will offer its custom menu, including breakfast pots, salads and, wraps alongside freshly pressed juices, smoothies and organic coffee. Crussh chief executive Shane Kavanagh said: “This is a really significant opening for us, and provides an incredible opportunity to bring our brand of healthy food and juice to a new audience in locations where we think we can make a real difference. Healthcare is an area we’ve been passionate about for a long time, and we’re delighted to be opening in Birmingham Children’s Hospital.” Stuart Winters, chief executive of healthcare, Sodexo UK and Ireland, said: “Extending our ten-year partnership with Birmingham Children’s Hospital was a clear opportunity to review and overhaul patient dining and retail provision. Bringing in brands such as Crussh will help us deliver our goal to ensure that we give the right nutrition to children and young people to help them heal and recover and play a part in the hospital’s staff continuing to deliver the best possible care.” Crussh opened its first site in partnership with Sodexo, at City, University of London, in March.
Goodbody upgrades forecasts on M&B: Goodbody leisure analyst Paul Ruddy has upgraded its forecasts on Mitchells & Butlers’ (M&B) on the back of its interim results. Issuing a ‘Buy’ note with an upgraded target price of 350p, Ruddy said: “We upgraded M&B to ‘Buy’ in January as we believed the improving quality of the estate would drive revenue out performance, cash generation was improving, Ignite 2 would continue to drive efficiencies and the valuation discount was not merited. The recent interim results have given us further confidence in this thesis with strong like-for- like growth, a good margin outcome and excellent cash generation leading to upgrades to forecasts. We upgrade FY19, FY20 and FY21 Ebit estimates by 2% to reflect the strong trading and margin performance. Importantly, cash generation is better than we had anticipated, which drives profit before tax upgrades of 6% to 7% across the forecast horizon owing to lower interest. Interestingly, management recently indicated it will be close to covering its bond amortisation from cash flow this year, which would indicate circa £140m of cash flow to pay down debt and the pension deficit. This is a higher level of cash generation than we currently forecast and supports our view there is a considerable debt to equity transfer unfolding. We value M&B at 7.5 times FY19 EV/Ebitda, in line with its ten-year average valuation. This is a discount to its peer group, which is conservative given the improving profit trajectory in the business. This is equally weighted with our EV/capital employed approach. With circa 20% upside to the current share price and offering an 11% free cash flow yield, we reiterate our ‘Buy’ recommendation with 350p target price (prior 310p).”
EasyHotel reports adjusted Ebitda up 48.2%, updates on pipeline: EasyHotel, the owner, developer and operator of super budget branded hotels, has reported adjusted Ebitda increased 48.2% to £1.46m in the six months to 31 March 2019, compared with £980,000 the year before. Total system sales rose 25.3% to £20.2m, compared with £16.1m the previous year. The company made a pre-tax loss of £123,755, compared with a profit of £90,119 the previous year impacted by the temporary closure of Old Street and higher depreciation from new hotels. Company-owned hotel revpar was up 10.1%, outperforming the market by 9.7% while franchise like-for-like revpar was down 3.5%, “driven primarily by the hotels in the Benelux region”. EasyHotel invested £14.2m in new hotel development, with £30.3m of cash and £33.9m of bank financing headroom – committed and uncommitted – to continue to expand hotel estate. Three hotels totalling 290 bedrooms opened during the period, all trading in-line with expectations. Five hotels totalling 517 bedrooms are due to open during the second half and a further nine company-owned hotels, comprising a total of 1,096 bedrooms, are planned to open in next 24 months. A total of 354 company-owned hotel bedrooms have been added to the development pipeline, including the group’s first company-owned hotel in France. Chief executive Guy Parsons said: “EasyHotel has delivered a market outperformance and good profitable growth in the first half of the year against a challenging market. The tactical decisions taken early in the period to drive market share through our online travel agency strategy has underpinned this, and we have continued to benefit from the impact of our ambitious opening programme. Our UK network of owned hotels is already well established, with a strong opening programme in place for the next two years. The group is now focused on replicating this success across Europe. The hotel market outlook remains uncertain, particularly in the UK where the ongoing Brexit negotiations continue to dampen consumer confidence. We are by no means immune, but the maturing profile of our hotels and our strong development pipeline will support continued growth and enhance our earnings profile. Combined with the careful control of our central costs, these efforts give the board confidence in meeting its expectations for the year ending 30 September 2019.”

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