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Morning Briefing for pub, restaurant and food wervice operators

Wed 16th Mar 2022 - Update: TRG – Wagamama lfl sales up 21% in eight weeks to 27 February 2022
TRG – Wagamama lfl sales up 21% in eight weeks to 27 February 2022: The Restaurant Group (TRG) has this morning reported that like-for-like sales in Wagamama were up 21% in the eight weeks to 27 February 2022, compared to the same period in 2019, and said it had seen strong like-for-like sales outperformance versus market since re-opening for dine-in on 17 May 2021. Like-for-like sales across its pubs division – Brunning & Price – and its Leisure division climbed 11% during the same eight-week period. For the 53 weeks to 2 January 2022, TRG reported total sales of £636.6m (2020: £459.8m), with adjusted Ebitda profit of £81.2m on a pre IFRS 16 basis (2020: £8.7m). During the year adjusted profit before tax stood at £16.6m. (2020: loss of £47.9m). It said that like-for-for sales vs 2019 comparable for the 33 weeks from 17 May 2021 to 2 January 2022, were up 15% at Wagamama, 9% across its pubs and up 14% in its Leisure division, which includes Frankie & Benny’s. The company said: “Management’s current expectations for FY22 remain unchanged, although we are mindful about the consequential inflationary impacts arising from the conflict in Ukraine.” Andy Hornby, chief executive of TRG, said: “2021 was a year of substantial progress at TRG. The recapitalisation of the balance sheet and strong trading performance have allowed us to deliver a robust set of financial results despite the various restrictions that have impacted the sector. I’d like to thank every single one of our teams who have gone the extra mile on so many occasions during 2021 and delivered a market outperformance across all our brands.”

Wagamama: The company said that since re-opening for dine-in on 17 May 2021, Wagamama has seen strong trading with like-for-like sales growth of 15%, representing an 8% outperformance versus the market. It said that customer ratings have remained strong with the December 2021 external NPS scores (as measured by BrandVue) positioning Wagamama as the number two brand within the top casual dining chains in the UK. At the beginning of the year in support of Veganuary, Wagamama made a brand commitment that 50% of its menu would be plant-based (vegan or vegetarian) before the end of the year. In October, it achieved this goal with the launch of a new menu incorporating new plant-based dishes such as our vegan ramens and vegan takes on some of our most popular items including “vegan chilli squid”. It said that vegan participation has increased by +5% to above 20% since introducing its plant pledge. On delivery and takeaway, it said: “Given trading restrictions through the pandemic, we have seen an acceleration of the structural shift of both new and existing customers enjoying delivery and takeaway with our sales mix from these two channels combined increasing from 16% in 2019 to 28% in 2021. Like-for-like delivery sales were up 114% and like-for-like takeaway sales up 76% in the period (33-week period ending 2 January 2022). This strong performance was aided by dedicated operations resource, insight tools and ensuring over 90% of our menu is offered on delivery. We will continue to make investment to improve operational efficiency and reconfigure sites to improve the delivery operation where possible.”

Brunning & Price: TRG said it had seen a consistent outperformance across its pubs division versus the market and continued strong trading with like-for-like sales growth of 9%, representing a 11% outperformance versus the market. Customer sentiment remains strong with social media scores (consolidation of Google, Facebook and Tripadvisor scores) averaging 4.51/5 for 2021, its highest rating over the past five years. It said that there has been a refocus post-covid on increased localisation and premiumisation on its menus. It said: “Within each section we have trialled providing more premium options and ‘when they’re gone, they’re gone!’ blackboards to encourage increased participation and spend.”

Leisure: The company said that the business, which includes the Frankie & Benny’s brand, has delivered an encouraging trading performance, achieving like-for-like sales growth of 14%, outperforming the market by 7%. It said: “Our partnership with Yumpingo has provided greater customer insight on both customer service standards and dish feedback, and we have seen an improving trend on NPS scores (as measured on the Yumpingo platform) for both Frankie & Benny’s and Chiquito.” The key customer initiatives driving the performance have been: Significant investment in food quality and a reduction in the menu content by circa 20% to help improve operational execution and reduce complexity. The company said: “The delivery business has been transformed over the past 18 months due to a combination of customer habits changing due to covid and the investment in our online delivery brands which represent circa 55% of the delivery sales mix. Delivery and takeaway sales now account for 17% of sales (for the 33-week period ending 2 January 2022) compared to only 5% in 2019. Like-for-like delivery sales were up 389% and like-for-like takeaway sales up 31% in this period. We will also look to trial some targeted capital refurbishments across 10-15 sites in our Frankie & Benny’s estate. The sites selected will be based on a number of factors including market capacity, delivery mix, competition and age of the current fit out. The focus of the refresh will be on external works to improve kerb appeal, customer facing areas such as seating & bar areas with targeted replacement of kitchen equipment as required. We expect to spend approximately £250,000 per site. If the trial sites generate a good return on capital, we will explore further opportunities to invest in the estate.”

Concessions: The company said: “The international travel sector had an incredibly challenging year due to ongoing changes in government restrictions and the associated cost of covid testing. Our focus in the year was on a measured re-opening programme, only opening in locations with sufficient passenger volumes to support a positive commercial outcome. We also achieved more flexible terms with the vast majority of airport partners with regards to minimum guaranteed rents (MGRs) and mothballing fees. In addition, we have flexed our operating hours to match departing flight times in order to minimise costs whilst ensuring we offer a great service. Like-for-like sales declined by 41%, 18% ahead of the passenger volume decline in the period (for the 33-week period ending 2 January 2022). Sales have benefitted from a higher average spend per passenger (due to longer dwell times and the benefit of a reduced VAT rate) and reduced competition as other food and beverage operators manage their re-opening profile. We expect the level of out-performance to reduce as competitors reopen more sites and VAT reverts to 20%. We currently have 27 sites open, representing c.60% of our total estate. Our opening plans for the remaining estate is dependent on passenger volume recovery and discussions with airport partners on terminal reopening’s. With the recent encouraging news that restrictions and testing requirements are being relaxed, we currently expect to open the majority of the remaining estate over the summer in FY22.”

Expansion: TRG said that the strength of trading of its Wagamama and Pubs businesses since re-opening has strengthened the company’s belief on the site roll-out potential for both businesses. It said that recent openings in 2019 and 2020 have delivered good returns with: Wagamama UK restaurants (excluding delivery kitchens) having delivered over 45% return on invested capital (consisting of ten new openings); Wagamama UK delivery kitchens having delivered over 60% return on invested capital (consisting of five new openings); and Pub restaurants having delivered over 20% return on invested capital (consisting of three new openings). With regard to the Wagamama International business it expects to open three to four new US sites under its JV partnership with the first two sites expected to be in Atlanta and Tampa. The company also expects to open five to eight new international franchise sites predominantly in Italy and the Middle East.

Only 24 of 548 companies in next edition of Propel Turnover & Profits Blue Book generating pre-tax profit of more than £5m:Only 24 of the 548 companies featured in the next edition of the Propel Turnover & Profits Blue Book are generating pre-tax profit of more than £5m. Premium subscribers will receive the latest edition of the Blue Book, which is produced in association with Mapal Group, on Friday (18 March) at midday. The Blue Book shows the effects of the pandemic, with total losses of £7.6bn being reported by 350 companies. However, a further 198 sector companies are still reporting total profits of £828.9m. The Blue Book, which is updated every month and has had 12 companies added to the latest edition, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Premium subscribers also receive the New Openings Database, produced in association with StarStock, and the Multi-Site Operators Database, produced in association with Virgate, which are also updated each month. Premium subscribers are also to be given exclusive access to a new database early next month. The UK Food and Beverage Franchisor Database will be an exhaustive guide to the companies offering a food and beverage franchise in the UK and be updated every two months. The first edition will feature more than 100 companies, providing insight on the offer, locations, cost and other key details. The first edition provides almost 25,000 words of content. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email to upgrade your subscription. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

Red Oak Taverns recapitalises, raises significant capital for growth: Red Oak Taverns, the national pub operator founded by Aaron Brown and Mark Grunnell in 2011, has completed a recapitalisation of its business, which it said provides “significant additional capital to enable it to continue its ambitious acquisition programme”. The transaction includes a debt refinancing with Hayfin Capital Management, a leading European credit investment firm with €23bn in AUM that has invested over €30bn of capital across more than 420 companies since its inception in 2009. The loan was provided via Hayfin’s Direct Lending strategy, which invests in loans to strong European middle-market companies as a long-term partner to support their organic and acquisitive growth ambitions. The recapitalisation also provides the opportunity for some long-term shareholders to exit the business, whilst also providing for remaining shareholders to increase their individual holdings. Grunnell said: “This refinancing is a further step change for Red Oak and creates a platform for us to enter the next phase of our evolution and to grow the business significantly with our existing major shareholders. We have steadily built a relationship with the Hayfin team over the last eight years, and we are delighted to complete this milestone transaction to allow us to work together on the next stage of our journey.” Red Oak completed five portfolio acquisitions in 2021, comprising 34 pubs and recently completed a further purchase in March 2022. Since 2016, Red Oak Taverns have been clients of OakNorth Bank, who became its sole lender in 2018 enabling it to grow the estate from 160 to 206 pubs. OakNorth will be fully repaid from the refinancing. Grunnell said: “OakNorth has been instrumental to the growth and success of Red Oak Taverns. It has provided funding since 2016 and has assisted the business through the difficult covid restrictions. We would like to thank them for their considerable support.” The company said its balance sheet remains strong, despite providing “significant financial support to its tenant partners through the covid restrictions”, and it has now embarked on its largest investment programme to date for its current pub estate in 2022.

C&C Group – FY2022 finishes with a robust return to trading: C&C Group has said that its FY2022 finished with a robust return to trading driven by strong consumer demand. The company said it expects to report a FY2022 operating profit in the range of €45-47m. It said: “In January 2022, restrictions in our core markets of the UK and Ireland were eased and we are pleased to see positive trading in the on-trade. We were back trading with 81% of direct delivered outlets in February 2022 versus February 2020, with corresponding volumes at 68% and momentum building as outlets continue to re-open. Our focus continues to be on ensuring that we provide market leading service for our brands and partnership brands to our customers as trading recovers. We are operating in an evolving inflationary cost environment, however we are afforded a degree of protection through our successfully executed €18m cost reduction plan, our recent price increases and input cost hedging. Over and above effective management of both operating and input costs, our well invested network and technology-led system continues to provide the platform for C&C to be the pre-eminent brand led drinks distributor in the UK and Ireland. Throughout the year, we focused on liquidity management and net debt reduction. Underlining our strong balance sheet position, we expect net debt to be approximately €263m at the end of FY2022 compared with €442m at the end of FY2021. This significant reduction in net debt, together with an improving business performance, will substantially enhance our financial flexibility and enable C&C to deliver our strategic objectives, to drive growth for C&C and returns for shareholders.”

Social Bite opens first cafe outside Scotland, in London: Social Bite, which campaigns against homelessness while running a string of cafes across Scotland, has opened its first site in London. The business opened its newest location in the “epicentre of homelessness in the UK” opposite London’s Charring Cross Station, earlier this week. The new cafe is on the Strand, near Covent Garden, with the location chosen because the London borough of Westminster has an “exceptionally high” number of rough sleepers. Founder Josh Littlejohn, hailed the new London branch as an “incredible milestone” for the charity. He said: “We are delighted to be able to launch a new coffee shop in central London. It’s such an incredible milestone for us all here at Social Bite. There are many great charities already working in London, but we truly believe that our social impact programme is life-changing and provides something unique, having helped the lives of thousands we are excited to bring this change to the streets of London. We would love to try and open a Social Bite coffee shop in other cities such as Manchester, Birmingham, Bristol, Cardiff and many more. If the London shop is a success, it will give us a great test case to expand the model further afield.” The London site will also include a ‘Pay-It-Forward’ system allowing customers to buy food and drinks in advance for homeless people to redeem later on. Littlejohn said: “Over the last ten years we have grown to a chain of seven cafes, where a quarter of our staff are from homeless backgrounds and we distribute over 140,000 items of food to homeless people. We have also launched a range of fundraising initiatives such as Sleep in the Park, which saw tens of thousands of people sleep out and raised millions of pounds to tackle homelessness. These funds have been used to build a village for homeless people and on nationwide housing programs which have now housed almost 1000 people.”

Oowee Vegan lines up flagship restaurant site in Brighton: Bristol-based Oowee Vegan is to open flagship restaurant site in Brighton later this summer. The company said: “After a year of delivery pop-ups around Brighton we’ve found a permanent home in The Lanes, and we couldn’t be more excited. The new location seats 30 and will be ideally located for click & collect and delivery.” Last summer, the company launched its first site in the north west, in Manchester, when it opened a site in the Deliveroo Editions in the city. It currently also operates two sites in Bristol and two in London – Dalston and Brixton. Oowee Vegan was founded in 2016 by Verity Foss and Charlie Watson. The first Oowee in Bristol opened as an American-style diner serving meat dishes. Last year, the company submitted plans to open a site in Cardiff. The proposed restaurant would be in Wellfield Road on a former Flying Tiger site.

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