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Morning Briefing for pub, restaurant and food wervice operators

Tue 5th Dec 2023 - Marston’s and SSP results, Various Eateries confirms £12m fundraise
Marston’s lfl sales up 7.4% since September, Christmas bookings tracking well and ahead of last year: Marston’s has said its like for like sales are up 7.4% since September and that Christmas bookings are tracking well and ahead of last year. In its preliminary results for the 52 weeks ended 30 September 2023, the operator of 1,414 UK pubs said current trading is “positive” and that it is “continuing to manage inflationary challenges within our control”, with electricity fixed until end of FY2024 and gas until end of March 2025, while offsetting other costs through efficiencies and pricing strategies. “The positive trading momentum from last year has continued, with like-for-like sales in our managed and franchised pubs since year end up 7.4% versus the same period last year, with growth in both,” it said. “Bookings for the Christmas period are promising and tracking ahead of last year. As always, walk-in trade represents a significant proportion of overall sales over the period; however, the booking momentum demonstrates that, despite economic pressures, people still want to go out and celebrate in a pub. We remain cognisant of the current macroeconomic environment, and the resulting challenges this brings in respect of cost inflation and the potential impact on disposable income. However, pubs have historically demonstrated their resilience as an affordable treat and there is no discernible evidence in our trading performance to suggest that there has been a material change to consumer behaviour.” It comes as the business reported revenue increased 9.1% to £872.3m (2022: £799.6m) during the period, with total retail sales in the group’s managed and franchised pubs for the 52-week period up 9.8% on last year, and like-for-like retail sales for the year as a whole were up 10.1% versus FY2022. Underlying operating profit excluding income from associates was £124.8m (2022: £115.4m). Underlying operating margins were effectively flat compared to last year, with a margin of 14.3% (2022: 14.4%); managing price increases, product mix and efficiencies to preserve margins in a period of high-cost inflation. First half margin was 10.6% and second half margin was 17.6%. Underlying operating profit including income from associates was £134.7m (2022: £118.7m), an increase of 13.5%. Underlying profit before tax was £35.5m (2022: £27.7m). Statutory loss before tax was  £20.7m (2022: profit of £163.4m), reflecting the impact of non-underlying items related to interest rate swap movements and property values following an external estate revaluation. Net assets were £640.1m (2022: £648.1 m), with net asset value stable at £1.01 per share (2022: £1.02). During the year, the business generated £54.5m of non-core pub disposal proceeds (net of VAT), which comprised £51.3m proceeds net of £1.1m fees and £2.1m lease liabilities. The net proceeds were above book value. Chairman William Rucker said: “We have continued to make positive progress on our key goals and strategic initiatives. The consumer has remained resilient despite the macro backdrop and Marston's continues to trade well, achieving market outperformance. We anticipate an improving outlook in which cost headwinds are largely abating and like-for-like sales are up over 7% since the year end. This, together with the actions we have taken this year to drive further efficiencies, leave us confident that Marston's remains well-placed to continue to outperform and to grow revenue, margin and profitability. We look forward to welcoming Justin Platt who joins the group as chief executive in January. The business is in good shape and well-positioned to take advantage of the future opportunities open to us to create value for our shareholders under his stewardship.” Platt will replace Andrew Andrea, who stepped down as chief executive last month.

Next Propel Turnover & Profits Blue Book shows sector companies’ profit outstripping losses by £1.87bn, up from £1.82bn last month: The next edition of the Propel Turnover & Profits Blue Book, which will be sent to Premium subscribers on Monday (11 December), shows the profit being made by sector companies is now outstripping losses by £1.87bn. The Blue Book shows the total profit of the 829 companies in the list is £3,826,075,567 and losses are £1,952,918,651. Last month, the Blue Book showed sector companies’ profit outstripping losses by £1.82bn. The Blue Book shows 564 companies in profit and 265 reporting losses. The Blue Book is updated each month and ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Premium subscribers also receive access to five other databases: the Multi-Site Database, which is produced in association with Virgate; the New Openings Database; the UK Food and Beverage Franchisor Database; the Who’s Who of UK Food and Beverage; and the UK Food and Beverage Franchisee Database. 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 kai.kirkman@propelinfo.com 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.

SSP reports lfl sales up 22% over last two months driven by passenger recovery, plans lfl sales growth of 6-10% in 2024, completes refinancing: SSP Group, the operator of food and beverage outlets in travel locations worldwide, has reported like for like sales up 22% over last two months driven by passenger recovery, and said it plans like for like sales growth of 6-10% in 2024. In its full year results for the year to 30 September 2023, the group said: “Since our year-end, trading has remained strong in all key markets, with total revenue during the first eight weeks (from 1 October to 26 November) up 22% on FY2023 levels on a constant currency basis. Our revenue performance is being driven by passenger recovery, a strong customer proposition and robust operational execution.  In addition, revenues are benefitting from net gains as we mobilise our secured pipeline. In the UK, sales increased by 22%, reflecting a strong performance in our air business and an ongoing improvement in rail passenger volumes as commuters continue to return to working in offices. While we face into macroeconomic and political uncertainty, we believe that demand for travel will remain resilient and is well set for near and long-term structural growth. In 2024, we are planning for like-for-like sales growth of between 6% and 10%, reflecting the expectation of an ongoing recovery in passenger demand as well as increased spend per passenger including year on year price increases. In total, we are planning for revenue to be in the region of £3.4-3.5bn in 2024 with a corresponding underlying pre-IFRS 16 Ebitda within the range of £345-£375m and an underlying pre-IFRS 16 operating profit within the range of £210-235m, all stated on a constant currency basis. Our expected performance would represent a further strong recovery in profitability despite the ongoing inflationary pressures on operating costs, which we continue to manage successfully through productivity and pricing initiatives. Reflecting the strong momentum in the pipeline and the timing of openings, we are planning for capital expenditure to be in the region of £280m in the 2024 financial year (which includes c£30m deferred from FY2023) comprising: capital to fund our renewals and maintenance programme of c.£140m; expansion capital for new contracts of c.£80m and c.£60m reflecting the deferral of renewal and maintenance capital expenditure from the covid-19 period. Our capital investment programme is expected to deliver in-year organic net contract gains of c.5% in 2024, with returns in line with historical levels (typically a three to four-year discounted payback).” It comes as the business reported a “significant further recovery in group performance” for the period, with full-year revenue of £3.0bn, up 38% compared to last year and ahead of pre covid-19 levels throughout the year. It reported second half revenue growth of 25% on a constant currency basis, comprising like-for-like growth of 19% driven by a further recovery in passenger number. Ebitda of £280m was up from £142m last year, driven by strong revenue growth and profit conversion. It said profit growth in the UK and continental Europe was impacted by the relatively slower revenue recovery in the rail channel and significant disruption caused by strikes and civil protests. It said the strong recovery in profitability and earnings gives the group the confidence to propose a resumption of ordinary dividend payments, with a final dividend of 2.5p reflecting a payout ratio of 35% on full-year underlying earnings. A refinancing completed in July 2023, “extending our maturity profile and maintaining a high level of liquidity”. The business said: “The secured pipeline of contracts yet to open (at the end of September 2023) now represents estimated annualised revenues of c.£450m, once fully mobilised; in 2024 we expect organic net gains of c. 5% (excluding the full year of the Midfield concessions acquisition, which will add a further c. 2% to sales), all of which should be delivered from the secured pipeline. In the medium-term net gains in the region of 3%-5% on average are anticipated, underpinned by our secured pipeline and current momentum in new business success. We continued to make good progress against our strategic priorities:  pivoting to higher growth markets approximately two thirds of the sales from the secured new business pipeline is planned to come from North America and APAC;  enhanced business capabilities - in particular, strengthened portfolio of partner brands, including new partnerships BrewDog in the UK and Europe, Breakfast Club in the UK and Jones the Grocer in Singapore and existing partners, including Pret, Hard Rock Café, Popeyes and Starbucks.” SSP Group chair. Patrick Coveney said: “This has been a year of strong financial, operational and strategic progress for SSP. We are continuing to lay the foundations for accelerated expansion in key growth markets such as North America and Asia Pacific. We are also making clear strides in enhancing our customer proposition, our digital capabilities and our sustainability initiatives. Our ongoing focus on these areas has led to SSP delivering strong like-for-like growth, high levels of new business, a robust margin recovery, and even closer relationships with our clients and brand partners. We are very pleased to be taking the important step today of proposing to reinstate the ordinary dividend. SSP is in very good shape, and we are excited by the opportunities in front of us. We are building strong momentum across all areas of the business thanks to the efforts of our outstanding colleagues across the world, as well as the ongoing support of our clients and brand partners. The commitment of our people, the structural growth in travel demand and the strength of our business model mean we are well placed to deliver compounding growth and returns in the years to come.”

Various Eateries confirms intention to raise £12m for expansion, ‘no guarantee that any transaction will proceed’: Various Eateries, the Coppa Club and Noci operator, has confirmed it will this week tap investors for £12m as it seeks to expand amid rivals’ difficulties, but warned there is “no guarantee that any transaction will proceed”. Sky News reported yesterday that Various Eateries had drawn up plans to raise the funds to open a pipeline of new sites during the next couple of years. City sources said that institutional investors had been sounded out about the cash call in recent days, with the fundraising expected to be announced sometime this week. “The company notes the recent press speculation and confirms that it is in advanced stages of conducting a potential fundraising of up to £12m at 25p, and a potential debt for equity conversion; with any potential transaction subject to, amongst other matters, shareholder approval,” it said. “Accordingly, there can be no guarantee that any transaction will proceed. The group is well positioned to capitalise on the opportunities that have been presented post covid, particularly changes in consumer behaviour, and also, both the availability and the commercials of sites. Building upon the success of Coppa Club and Noci, any monies raised from the transaction (less fees) would be used to accelerate growth across the group with the further rollout of both brands.” Shares in Various Eateries closed on Monday (4 December) at 27.5p, giving the company a market value of £24.5m. The group said trading performance for the year ending 1 October 2023 was in line with expectations, with revenues slightly higher than market expectations at £45.5m (unaudited), up from £40.7m in 2022, largely driven by new site openings. 

Inactive workers ‘holding back the economy’: The British economy has been held back by a flight of workers from the jobs market and staff electing to work fewer hours after the pandemic, tied to overly generous covid government spending, a report has claimed. Participation in the labour market is still below its pre-pandemic level, which the Bank for International Settlements (BIS), the central bank of central banks, said had been caused by “health concerns” and “large” government pandemic fiscal support. “Workers’ preferences have shifted in favour of fewer working hours,” the BIS said, adding that “subdued growth in working-age population” in Britain and other developed countries had tightened labour markets. The UK and other advanced European countries rolled out unprecedented job protection measures, such as the furlough scheme, during the pandemic, reports The Times. While that limited economic scarring, the BIS said it may have damaged the long-term labour supply. Britain is grappling with a sharp increase in economic inactivity, when someone is unemployed and not looking for a job, which has prevented companies from expanding. An increase in long-term sickness, linked with large NHS waiting lists and the lingering effects of covid, has driven a reduction in workforce participation. The BIS said that anticipated difficulties in hiring workers amid a tight labour market had prompted businesses to “hoard” staff, helping to keep unemployment low. Typically, during periods of weak growth, joblessness increases. However, the BIS said companies had elected to reduce working hours instead of trimming back staffing levels.

Foreign ownership of UK listed firms hits record high: The latest data on ownership of UK-listed shares found that the proportion owned by overseas investors had risen to a record 57.7%, according to official figures. The proportion owned by UK-resident individuals fell to 10.8%, down from 12% in 2020, 16.5% in 1997 and 54% in 1963, reports The Times. The ownership of UK-listed shares by British pension funds and insurers has also slumped to its lowest level since records began. The proportion of the overall London share market owned by those institutions had fallen to 4.2% by the end of last year, from 4.3% in 2020. That compares with 45.7% in 1997 and a high point of 52.1% in 1990. Cara Spinks of OAC, the actuarial consultancy, said: “With UK stocks continuing to underperform, it is perhaps unsurprising that these companies which have a fiduciary duty to protect their members’ savings have shifted capital away from UK shares.”

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