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Morning Briefing for pub, restaurant and food wervice operators

Mon 31st Jul 2023 - Liberation Group sets sights on becoming leading provider of premium accommodation in south of England, first-half UK lfls up 8.1%
Liberation Group sets sights on becoming leading provider of premium accommodation in south of England, eyes 300 more rooms, first-half UK lfls up 8.1%: Channel Islands and West Country brewer and retailer Liberation Group has reported an 8.1% rise in like-for-like sales for the first half of its financial year across its UK business, as it said it had “set its sights firmly on becoming the leading provider of premium accommodation in the south of England”. The Jonathan Lawson-led business saw like-for-like sales across its UK business, which includes Butcombe Pubs & Inns and the former Cirrus Inns estate, increase by 10.8% in the second quarter, against a 4.6% rise in the first quarter. Drinks sales in the half year rose 9%, with food up 5.2%, and accommodation up 14.7%. The business said like-for-like sales across its Channel Islands estate were down 0.6% in the first half of the year, with the first quarter down 4.2% and the second quarter up 2.2%. The group, which has been backed by Caledonia Investments since 2016, said it has seen occupancy rates consistently in excess of 80% across its business, as it “exploits the gap in the market for high-end accommodation, quality food and drink and incredible hospitality, all under one roof”. The group's accommodation business has grown from less than 100 rooms in 2019 to more than 400. The company said it had identified opportunities to add a further 300 rooms within its existing estate through further investment in rooms and pods, which it said will commence later this year. Lawson said: “Our fantastic teams in the south of England and the Channel Islands have delivered an encouraging start to the financial year in both our pubs and drinks businesses, building upon a solid start to the year and then accelerating in the second quarter, taking advantage of some positive weather in June that has benefited a pub estate where more than 50% of our covers are external, boosting both food and drink and our own pubs which very much links to our roots as a craft brewer and innovator and are a key point of difference in the market versus generic brands. Increasingly we see the group's integrated model as a significant strength in the market, which enables us to exploit sales opportunities, but to also leverage the scale of the group and minimise exposure to inflation that others may experience. We have been particularly encouraged by the strong demand for our accommodation, which has seen occupancy levels consistently exceed 80%, even outside holiday weeks and bank holidays. This is a reflection of our broad appeal for both leisure and business users and a rapidly growing events business that we view as a significant opportunity for growth. Increasingly we see our managed pub estate as being occasion and experience led rather than being led by either one of the three categories of drinks, food or accommodation. Whether it's a business meeting, cinema night, short break away, a comedy night with friends or a wedding, our pubs very much focus on creating reasons to visit and use the pub, rather than just opening the doors. Having navigated a potentially difficult first quarter, which included the integration of the 22 new pubs following the Cirrus Inns combination and an unseasonably cold Easter, we have seen momentum building in both our existing business and the new pubs. This in turn has enabled us to view the rest of the year with some confidence, despite the obvious uncertainty for our customers caused by rising interest rates. We have commenced our investment plans for the year, with two substantial investments completed already in Dorset and Jersey and a further two investments signed off and commencing imminently, one in Somerset and another in Jersey, plus some investment into our Butcombe Brewery to create much-needed additional brewing capacity for next year given the record volumes over the last few months. Once again, we are heartened by the continued strength of our high-quality tenanted pub business, which has shown a resilient performance in the first half of the year and is on track to deliver solid growth on an Ebitda per pub basis by the end of the year. Strong headwinds have continued in the first half of the year, specifically in utilities, food inflation and payroll. In utilities, we have now secured a new contract from October that will significantly improve our costs for the remainder of this year and next. Food inflation has been stubborn, although we never shared the Bank of England's optimism last year that inflation would fall quickly in 2023. We have done our best to navigate this with our food teams and suppliers to provide our customers with the best quality and value possible, whilst also needing to deliver stable and robust gross margins. We are beginning to see the costs of certain food products decline and this is gradually reducing the headline rate of inflation, but this remains a challenge that we believe will last well into the autumn. Payroll has been exposed to significant increases in National Minimum Wage in both the UK and the Channel Islands and we have also needed to ensure that we remain competitive in the markets that we operate in. To mitigate this, we have implemented a significant piece of work designed to improve productivity in our pubs, while also having people where we need them to serve our customers. We have now completed our second recruitment trip to South Africa, which looks to be even more successful than our first venture and we are hugely impressed by both the quality and attitude of some fantastic chefs and managers looking to join our business. Our drinks business has had a strong start to the year, driven by a very strong sales performance from the Butcombe Brewing and drinks business and underpinned by another solid performance from our Channel Islands businesses, where our strong supplier relationships, own brands and experienced teams put us in a great position to exploit each sales channel available. The second half of the year poses a number of uncertainties and challenges, including inflation and the impact of rising interest rates and higher mortgage costs which pose a risk to both consumer confidence and disposable income. But we remain positive about our opportunity to deliver growth and market share in both our pubs and drinks divisions and increasingly see our integrated group as a model that is very much fit for the modern market and where the value of the total proposition is greater than the sum of its parts.” Liberation Group features in the Who's Who of UK Food and Beverage, the first database where full profiles of 714 of the UK's top food and beverage operators are available in one place. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around Ebitda, plans and trading style available. The database merges Companies House information, interviews and other public information to provide an easy to reference and exhaustive guide to the sector. 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 jo.charity@propelinfo.com to upgrade your subscription.


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