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Morning Briefing for pub, restaurant and food wervice operators

Thu 27th Jul 2023 - Update: M&B and Boston Tea Party trading, Swingers secures $52m of new funding
M&B reports like-for-like sales up 10% year-to-date versus pre-covid levels as trading remains strong in third quarter, undergoes refinancing: Mitchells & Butlers (M&B) has reported like-for-like sales for the 43 weeks ended 22 July 2023 were up 10.0% versus FY2019, with growth driven by spend-per-head. Like-for-like sales were up 8.9% compared with last year as it experienced continued strong trading in the third quarter. Like-for-like sales in the third quarter increased by 9.7%, as the business “continued to outperform the market and with both food and drink volumes in growth”. Food like-for-like sales were up 11.6% in the third quarter and drink like-for-like sales increased 7.4%. For the year to date, like-for-like food sales are up 7.9% and 10.7% for drinks. The company, which has also undergone a refinancing, stated: “We achieved a record-breaking Father’s Day in June and sales performance across the quarter was relatively consistent outside of weeks impacted by industrial action on national transport systems. We continue to focus on investment in the estate and in the year to date we have completed 116 conversions and remodels and opened four new sites. In June 2023, we completed the acquisition of the remaining 60% in 3Sixty Restaurants, owners of Ego Restaurants. Ego is a collection of Mediterranean-inspired pubs and restaurants where guests can enjoy freshly cooked food, cocktails, cask ales and wine from across the continent. It currently has 26 sites, including 16 that are leased from Mitchells & Butlers. We have successfully refinanced our unsecured debt facilities that were due to expire in February 2024. The new revolving credit facility (RCF) has been increased in size to £200m based on a wider banking group, including the continued support of all existing banks, and extends for a further three years to July 2026. The RCF remains unsecured, with a negative pledge in favour of participating banks, and is based on two main financial covenants – net debt to Ebitda to not exceed 3.0 times (as before) and Ebitdar to rent plus interest of not less than 1.25 times (reduced from 1.5 times). The facility is undrawn at the current time. We are delighted to announce that the trustees of the M&B main pension plan, working closely with the company, have now successfully completed a full scheme buy-in with Standard Life. This transaction follows on from the completion of the buy-in of the executive plan announced last year and eliminates substantially all remaining pensions risk in the group. Committed contributions are all being made into blocked escrow accounts and, after many years, will cease altogether in September this year. There are indications that cost inflation is now starting to abate such that the current year cost headwind should be at the bottom end of the 10%-12% range previously identified. We are working hard to mitigate these pressures as far as we are able, both through driving sales growth and implementing efficiencies, which should allow margins to start to rebuild towards pre-covid levels from next year. While we remain mindful of the challenging macroeconomic environment, and pressures on the consumer in particular, an improving cost outlook and continued strong trading through the third quarter give us confidence that the current year outturn will be at the top end of consensus expectations, with continued momentum into FY 2024.” Chief executive Phil Urban said: “We are very pleased to report continued strong like-for-like sales growth through the quarter based on outperformance against the market and underpinned by volume growth in both food and drink. We remain focused on our Ignite programme of initiatives and our successful capital investment programme, driving cost efficiencies and increased sales. Combined with our diverse portfolio of established brands, value proposition and enviable estate locations, we believe this leaves us well positioned to continue to outperform the sector and deliver a strong full-year performance.”

One day to go before release of updated Premium Database of Multi-Site Companies, 17 businesses being added: A total of 17 new multi-site companies, operating 52 sites, have been added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released tomorrow (Friday, 28 July), at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, includes regional café operators, growing restaurant brands, and expanding experiential concepts. Premium subscribers will also receive a 1,300-word report on the new additions to the database. The comprehensive database is updated monthly and provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. The database now features 2,883 companies. Premium subscribers will also receive the next edition of the New Openings Database on Friday, 4 August, at midday. It focuses on newly announced openings and upcoming launches in the sector and is updated every month. The next edition also includes a 4,000-word report on the new additions to the database. Premium subscribers also receive access to three other databases: the Who’s Who of UK Food and Beverage; the Propel Turnover & Profits Blue Book; and the UK Food and Beverage Franchisor Database. Propel will next month launch the UK Food and Beverage Franchisee Database – the first time that profiles of 100 of the top food and beverage franchisees have been available in one place in the UK. The go-to database, which features many of the big franchise operators running Costa Coffee, McDonald’s and Domino’s sites, brings together a wealth of information on an increasingly important part of the market, and the first edition will feature more than 32,000 words of content. The sixth major database exclusive to Premium subscribers, it will be sent out bi-monthly, including new entries and updates to existing entries. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around the company’s background, site numbers and board make-up. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email to upgrade your subscription. Premium subscribers are also being given exclusive access to the recording and slides to Propel Multi-Club Conferences. They also receive their morning newsletter 11 hours early, at 7pm the evening before; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

Swingers secures $52m of new funding, lines up Dubai and Las Vegas openings: Competitive Socialising, the owner of Swingers, the crazy golf brand, has secured $52m (£40.2m) of new funding to aid its further expansion, which will include new openings in Las Vegas and Dubai, with the latter being its first franchise site. The business, which was founded in 2014 by Jeremy Simmonds and Matt Grech-Smith, said the new Series-C growth capital investment was part funded by existing backer Cain International, which followed on its Series-B investment of 2018. It was joined in the round by a number of third-party institutional investors. Swingers, which currently operates five sites, two in London and the three in the US, will open a flagship location in Las Vegas’ Mandalay Bay Resort and Casino in autumn 2024. Swingers Las Vegas will comprise 40,000 square-foot and comprise five crazy golf courses over three floors. The company said the venue will take the “trademark Swingers English countryside theme to a whole new scale with the introduction of its immersive and theatrical English ‘country house’ concept”. In spring 2024, Swingers will also open a new location in Bluewaters Island, Dubai, which will be its first franchise, in partnership with Daud Investments. Swingers forecasts it will turn over $60m in 2023. The company said it expects to reach at least 15 locations by 2026, bringing in nearly $150m in annual revenue, resulting in a valuation of approximately $500m. Grech-Smith said: “Our journey to becoming a global brand in some ways feels meteoric, until you consider the ten years that it has taken to get here! We never anticipated as we opened our pop-up in a London warehouse in 2014, that ten years later we would be opening in Las Vegas – it has been an incredible journey.” The company said with the new infusion of capital, it is perfectly placed for the next phase of its international expansion. Jonathan Goldstein, chief executive of Cain International, which also backs Prezzo, and chair of Swingers, said: “It has been a privilege to witness Swingers grow from a London pop-up to a global brand since Cain’s initial investment in 2018. We remain hugely confident in consumer appetite for experience-centred entertainment and are delighted to continue our support of the brand as it delivers its unique offering to new markets.”

Draft anti-terror Bill’s focus on capacity ‘fails to address real risk of attacks’: A draft anti-terror Bill fails to address the real risk of terror attacks, a report by the Home Affairs select committee has warned. Onerous new anti-terror regulations could place small businesses and voluntary organisations at risk of closure but fail to make a difference to public safety, the committee said. Following pre-legislative scrutiny of the Draft Terrorism (Protection of Premises) Bill, the committee has called on the government to ensure safety measures are based on risk and not on the size of a venue. The Draft Terrorism (Protection of Premises) Bill was introduced by the government in response to recommendations made in the inquiry into the 2017 Manchester Arena attack. It sets out how venues should assess the risk of terror attacks and take measures to mitigate their consequences, with different standards for venues above 100 and above 800 capacity. But the report said: “The committee finds that in its current form the bill would place a significant and disproportionate burden on smaller venues while failing to ensure adequate safety measures at all public events at risk of terror attacks. Thousands of small organisations, many of them reliant on community and volunteer support, would be required to implement potentially costly safety measures without adequate resources to do so. Yet other events and venues with a greater history of terror attacks or with a higher footfall fall out of scope such as farmers markets or Christmas markets. The committee is also concerned that the Bill’s objectives are unclear, with the bill promoted as terror prevention legislation while most of its measures relate to mitigating the consequences of attacks. The committee supports measures in the Bill that would improve the response to terror attacks in larger venues. It calls on the government to introduce the legislation in stages, beginning with these larger venues, and review its implementation annually to assess its impact. The ability of on-site staff to provide immediate medical treatment in the event of a terrorist attack could be the difference between life and death. The government should ensure all premises covered by the bill provide mandatory life-saving training to staff and medical kits required on site. Adequate funding needs to in place to enable smaller venues or voluntary to implement the Bill’s requirements, particularly if they fall within the enhanced tier of more than 800 capacity.” Michael Kill, chief executive of the Night Time Industries Association, said: “We are in agreement with the select committee in that the Bill needs further clarity and evaluation to inspire confidence in its ability to effectively address and prevent terror attacks in the future. The lack of specific details and the range of uncertainties raised by the sector regarding the Bill’s implementation and implications reinforce the committee’s report, which suggests the Bill requires significant improvement and refinement before it can be considered a practical and viable measure to enhance public safety in public spaces.”
Boston Tea Party says team stability key to sales recovery, optimistic about future growth: All-day dining casual cafe brand Boston Tea Party has reported that team stability was key to its sales recovery as it saw net sales increase 71% to £22.8m in the year to 19 October 2022 (2021: £13.3m), as it said it was optimistic about its future growth. The Sam Roberts-led company opened two new cafes in Leamington Spa and Torquay during the period, ending the year with 25 sites. It posted a pre-tax loss of £1.04m (2021: £450,813). The company said it continued to invest in its team through pay as well as training and development and 12-month team turnover remained below industry benchmarks at 69%. Roberts said: “The stability of our team is a key factor in our sales recovery. I’m proud that we had our lowest ever team turnover coming out the back of the pandemic. One of our goals is to be the best place to work in hospitality and we continue to invest in our team, listen to them and provide opportunities to grow. We continue to have industry leading service scores which reflect the quality of experience our teams deliver.” Over the year, the business continued to benefit from the government backed Coronavirus Business Interruption Loan Scheme with the support of Santander. The company said its shareholders remain supportive of the management growth plans and working from a conservative model. The company said: “The biggest risk to the sector continues to be the long-term effect on the high street, work patterns, consumer behaviour and inflationary pressures. The company continues to mitigate those risks by delivering a great customer experience and menu innovation as well as being well positioned in residential and non-high street locations. The company remains well positioned through its cash reserves and facilities. At year end it had drawn £3.5m of term debt with a £1m overdraft facility.”

Call to end ‘tourist tax’ in London: London’s business chiefs have stepped up their campaign to persuade chancellor Jeremy Hunt to restore tax-free shopping for international visitors to help to boost the economy. The BusinessLDN group, whose members include Primark, Starbucks and several London airports, told The Times the “only winners” of the “tourist tax” had been cities such as Paris, Madrid and Milan that had schemes in place. In a submission to the Treasury, the not-for-profit lobby group presented analysis based on a report by Oxford Economics, which showed the capital could be given a boost of £1bn and 13,400 jobs if the government restored duty-free shopping for international visitors. The scheme was abolished after Brexit. “The tourist tax is an economic own goal,” John Dickie, the chief executive of BusinessLDN, said. “Re-introducing the VAT reclaim scheme would boost UK’s flatlining economy through increased spending from international visitors in our shops, restaurants, hotels and more.” A spokesman for the Treasury said: “VAT-free shopping does not directly benefit Brits ­– it lets foreign tourists who buy items in the UK to claim back VAT as they return home. The scheme could cost British taxpayers around £2bn a year at a time when we’ve already had to take difficult decisions to get debt falling and fewer than one in ten non-EU visitors used the previous scheme.”

Britvic reports robust trading, acquires Jimmy’s Iced Coffee: Britvic has reported a “robust” third-quarter performance, with volume growth and a positive price/mix, resulting in revenue growth of 9.9% to £476.7m versus the prior year. In Great Britain, it said that revenue grew 10.1% versus the prior year, with volume growth in both retail and hospitality channels, as well as the impact of revenue growth management actions in response to inflationary pressures. It said full-year revenue and Ebit are anticipated to be within the range of current market expectations. The business has also made two acquisitions – Jimmy’s Iced Coffee in the UK, and energy brand Extra Power in Brazil. It said that the two acquisitions will be financed from existing facilities, the combined value of which will have “a nominal impact on our debt leverage of approximately 0.2 times net debt/Ebitda”. The company said: “The UK ready-to-drink iced coffee category is both large and fast-growing, with a retail sales value of £280m last year, an annual increase of 15.3%. Founded in 2010, Jimmy’s Iced Coffee is the fastest growing brand in the segment, thanks to its uplifting brand personality, refreshing range of products, differentiated packaging and multi-channel presence. In the year to June 2023, Jimmy’s Iced Coffee generated a retail sales value of £17m, up 43% on the previous year. We intend to further accelerate the growth of Jimmy’s through the utilisation of Britvic’s market-leading customer relationships to drive new listings and increase distribution, while increasing cost efficiency through Britvic’s supply chain expertise and procurement capability. Jimmy’s is well aligned to our ‘Healthier People, Healthier Planet’ pillar, with lower calories per serve than the category average, fully recyclable packaging and compliance with HFSS legislation.” Simon Litherland, chief executive of Britvic, said: “Trading in the quarter has been strong, with revenue increasing 9.9%, driven by positive price/mix and volume growth. Consumer demand for our portfolio of leading family favourite brands remains buoyant ahead of the key summer trading period, as we continue to offer consumers great quality and value at affordable prices. We expect to deliver full-year revenue and profit within the range of current market expectations. We are also announcing two targeted acquisitions. In Great Britain, we will expand our portfolio through the addition of Jimmy’s Iced Coffee, another highly appealing consumer brand in a strongly growing market segment. In Brazil, we are extending both our brand portfolio and our regional footprint in the Centre-West though the acquisition of the energy brand Extra Power. These transactions are aligned to our strategic priorities and provide further opportunities to accelerate our strong growth trajectory.”

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