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Morning Briefing for pub, restaurant and food wervice operators

Thu 21st Sep 2023 - Update: City Pub Group H1 lfls up 14%, SSP, Thai Leisure Group
City Pub Group H1 lfl sales up 14%, well placed to take advantage of new acquisition opportunities: City Pub Group, the owner and operator of premium pubs across southern England and Wales, has this morning reported that its trading continues to be strong, with like-for-like sales up 14% in the 26 weeks to 25 June 2023. It said that the strong like-for-like performance is being driven by its strategy to further premiumise its estate and a “continuous, relentless focus on customer service”. For the first 38 weeks of the year like-for-like sales were up 12.4%, which the business said was “very encouraging given the wet summer we have recently experienced and the recent ongoing train strikes”. Revenue for the half year stood increased 21% to £31.7m (H1 2022: £26.1m), while adjusted Ebitda was £3.3m (H1 2022: £3.4m) and adjusted pre-tax profit was £0.8 million (H1 2022: £1.3m). Current net debt is circa £8m and the director’s valuation of the pub estate, now including the Mosaic Pubs is circa £171m. During the period, the 42-strong business acquired The Bridge in Barnes for £0.5m, and disposed of The Yard in Cambridge surrendering the lease. It also invested circa £2m on upgrading six of its existing sites. The company said: “As the UK economy continues to adjust to higher interest rates, the group continues to adopt a measured approach to its expansion programme. It believes its focus on organic growth and acquiring circa five new pubs per annum will stand the business in good stead for when the economy starts to improve.” In June, the business took control of Mosaic Pub and Dining Group through owning 53% of the equity. It said it will make a further offer to the remaining shareholders before the end of the tax year, i.e 5 April 2024. Mosaic operates nine pubs of which six are in London and three in Birmingham, seven are freehold and two are leasehold. These are currently being integrated into the City Pub trading estate. It said: “We anticipate future sales growth from these pubs and cost savings. Whilst the Mosaic Group is well invested, we anticipate some investment in refurbishment to enhance trading performance.” It said that trading across the summer since the half year end had remained positive and that it “continues to trade in line with full year expectations”. The company said it anticipates continued trading momentum in H2 FY23 which benefits from a very active sporting calendar. It said that Christmas bookings are ahead of where they were this time last year. Clive Watson, chairman of City Pub Group said: “The company is in a strong position with very low net debt and what we believe is amongst the lowest gearing in the sector. We look forward to a strong second half – Christmas bookings are significantly up and the company is well placed to take advantage of new acquisition opportunities. The Mosaic estate has been integrated and is showing significant increases in like-for-like sales. The economy remains challenging but we are well placed to take advantage of any future upturn. The group remains in a very strong financial position with low levels of bank debt and operational gearing, as well as owning a predominantly freehold pub estate (63%). From a retail perspective, we continue to premiumise our offer and aim to achieve further organic growth from the existing estate. We seek to become as efficient as possible without compromising our levels of hospitality through further savings across the estate, whether it be better use of energy as a result of our ESG approach, better labour scheduling or improved development of our food menus. The market for pubs has now become more realistic and whilst our continued focus remains on delivering organic growth, we are currently engaged in negotiations on a small number of appropriately priced acquisitions. The ambition within City Pub Group remains strong. We have an experienced and committed head office team whose focus is to make City Pub Group one of the best independent pub retailers on the market. All our retail staff are incentivised with a weekly bonus which not only helps improve their renumeration but encourages them to engage in an entrepreneurial way. The pub sector, despite all challenges it has faced in the last three to four years, remains resilient. Undoubtedly, there will be winners and losers going forward. Those pub groups that embrace technological change will be able to further increase their market share and increase returns for their shareholders. As a group we are focused on being innovative, improving sales per square foot, generating a high level of operating margins and retaining a strong freehold backed balance sheet with low levels of bank debt. The group continues to improve its financial strength – it has a clear vision of where it wants to be over the medium term. We are targeting an estate of circa 60 quality pubs located in some of the greatest cities across England and South Wales. City Pub Group has become very adept at reacting quickly where we need to, to minimise risk and take advantage of opportunities. Bookings for H2 FY23 are looking strong, particularly around the Rugby World Cup and the important Christmas trading period.”

Hotel operators among 56 new businesses joining updated Premium Database of Multi-Site Companies: Hotel operators are among the 56 new multi-site companies being added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released on Friday, 29 September, at midday. The updated database, which is produced in association with Virgate, features A Curious Group of Hotels, which was founded by Peter and Jessica Frankopan and currently operates two sites in the UK, the Drakes Hotel in Brighton and The Portobello Hotel in London. RAD Hotels, which operates eight hotels in Scotland and is owned by Robert and Vivien Kyle, is also featured. Anderbury – which operates the St George’s Hotel in Llandudno, Hatherley Manor Hotel near Gloucester and Rowton Hall in Chester – is also included. Premium subscribers will also receive a 4,000-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 2,983 companies. Premium subscribers are also to receive access to all the videos from this month's Propel Multi-Club Conference and summer party. They will be sent 12 videos on Friday, 29 September at 9am. Premium subscribers also receive access to five other databases: the New Openings Database; the Propel Turnover & Profits Blue Book; the UK Food and Beverage Franchisor Database; the UK Food and Beverage Franchisee Database; and the Who's Who of UK Food and Beverage. 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. Premium subscribers 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.

SSP reports encouraging underlying trading momentum: SSP Group, the operator of food and beverage outlets in travel locations worldwide, has reported “encouraging underlying trading momentum” and that it expects a strong full year performance. It said that its revenue for the last 16 weeks of the year (from 12 June to 30 September) is expected to be at circa 116% of 2019 levels, on a constant currency basis. It said: “This represents an underlying improvement in trading since our statement on 21 June (covering the ten-week period from 1 April to 11 June), where trading was at 112% of 2019 levels on a constant currency basis. Our revenue performance is being driven by the continued recovery in passenger numbers, particularly in the air sector, as well as our stronger customer offer and digital proposition. In addition, revenues have benefitted from price increases and further net contract gains. North America, which now accounts for approximately a quarter of group revenue, continues to be a key driver of our performance. Over the last 16 weeks of the financial year, revenues are expected to strengthen to circa 127% of 2019 levels, on a constant currency basis, driven by robust domestic air passenger numbers and strong like-for-like performance. Our performance includes a sales benefit from the acquisition of the Midfield Concession business, with the transfer of six of the seven airports completed. In Continental Europe, revenues are expected to be at c.115% of 2019 levels, on a constant currency basis, driven by strong summer air travel volume and despite the impact of protests and travel disruption in France. In the Rest of the World, revenues are expected to rise to c.132% on a constant currency basis, as we saw further improvements in passenger numbers across the Asia Pacific region, with particularly strong performances in India and Egypt. In the UK and Ireland, sales are expected to strengthen to c.100%, reflecting both the improving performance and the higher mix of the air channel, despite the rail sector continuing to be impacted by ongoing industrial action.” For the second half as a whole, group revenues are expected to rise by 22% versus last year (at actual exchange rates), which the business said reflected the strength of it’s like-for-like performance in addition to further net gains. In the full year, group revenues are expected to be circa £3.0bn vs £2.2bn in the prior year (at actual exchange rates), representing growth of circa 37% year-on-year. The company said: “The strong organic growth momentum has been maintained throughout the second half. The pipeline of secured net contract gains is now expected to add over £700m to overall revenues compared to 2019, on an annualised basis, representing at least an additional £75m to the £625m reported at our Interim results in May 2023. We expect these units to open over the next two years, with the normal level of pre-opening costs and maturity profile. Our expectations for FY2023 remain for revenue and Ebitda to be at the upper end of the planning assumptions provided at our Preliminary results in December 2022. This would represent full year revenue of circa £3.0bn and Ebitda of circa £280m with a corresponding EPS towards the lower end of the previously indicated range of 7.0-7.5p. We expect to deliver these results despite the significant strengthening of Sterling against most of our major currencies during the year.” Patrick Coveney, chief executive of SSP Group, said: “We are enjoying a good finish to the year, and there is real momentum across the business as we enter FY2024. Our focus on higher growth markets such as North America and Asia Pacific, as well as our ongoing efforts to enhance our capabilities and increase efficiencies, is delivering strong results. Looking ahead, we continue to see significant opportunities for SSP to drive growth and returns.”

Thai Leisure Group – strongly placed to benefit from the ongoing trend towards Asian food: Thai Leisure Group, operator of Thaikhun and Chaophraya, has said it believes it is strongly placed to benefit from the ongoing trend towards Asian food. The company said it has traded above budgets since September 2020 and that for the financial year to 30 January 2023, its recorded profits ahead of 2019 before the pandemic. It said: “During the first quarter of the following financial year, the company’s continued to trade strongly in a tough economic environment, reporting good sales, profitability and a continued healthy cash position.” Last summer, the business exited its company voluntary arrangement (CVA) earlier than expected. It said that the CVA had provided the financial resources to allow the repositioning of the business behind two key brands – Chaophraya and Thaikhun. The company said: “The directors believe each of these brands to be market-leading within their respective sectors and believe they are strongly placed to benefit from the ongoing trend towards Asian food.” It also reiterated its decision to curtail its expansion plans and focus on refreshing its existing estate. It said: “Following the completion of the CVA, renegotiation of the banking covenants and the strong cash position, the directors believe the company to be resilient to future challenges.” Turnover for the year to 30 January 2023 was £32,820,587 – up from £26,664,756 in 2022, as it posted a pre-tax profit of £18,339, (2022: £1,820,521).

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