As previously reported, Numis – the respected UK institutional stockbrokers and corporate advisors – hosted its annual Travel & Leisure conference on Thursday 21 May. Domino’s Pizza, Enterprise Inns, Fuller Smith & Turner, Marston’s and Revolution Bars Group all presented at the conference, and below are some of the key points that were made.
- Domino’s Pizza (BUY; TP 985p) is “very confident” it can increase UK store numbers by 50%. After all, new stores are “doing better year by year” (average spend per address for new stores rose by 8.4% in 2014). With rising brand awareness and penetration levels, it can open in much smaller towns (at £250k capex/store), which are uneconomic for McDonald’s (£1.2m) or KFC (£750k), leaving Domino’s as the only global QSR operation in town.
- Domino’s franchisee profits per store rose 26% last year. Franchisees are spending this on marketing (LFL volumes rose 12% last year) and opening new stores. Over 70% of sales are ordered through digital channels, mostly through mobile devices (via over 8m downloaded Apps). Here, the list of opportunities and objectives (including increasing App conversion rates, local digital marketing and more online interaction/up-selling) is greater this year than last.
- Enterprise Inns’ (ADD; TP 150p) EBITDA is falling more slowly than net debt, aided by rising rental income. The company intends to boost EBITDA through converting almost 800 pubs to managed over the next five years, with ‘mainstream’ managed having the greatest execution risk. To date, the commercial lease portfolio has been valued externally at 12x EV/EBITDA.
- Fuller Smith & Turner (ADD; TP 1150p) is continuously improving its range to cater for increasing demand for premium and differentiated products. It only sells fresh food and is trading longer hours. Its in-house coffee brand (Brewer Street) should soon sell 2m cups pa and the roll out of Stable Pizza is accelerating.
- Marston’s (ADD; TP 180p) franchised estate (excluded from the MRO) is generating 6% LFL profit growth. The franchised model will soon be rolled out into the bottom end of the Destination estate. Expansion returns should now benefit from a slightly higher ratio of leaseholds and a higher number of adjoining accommodation lodges. In brewing, 75% of output is premium beer, weighted to bottled beer, a market that should double over the next five years.
- Revolution Bars Group (BUY; TP 265p) now has only one un-invested bar in an estate of 58 branded outlets. Recent improvements to the food range should help the company to maintain LFL food sales momentum (up 13.9% in H1). Targeting larger space than casual dining operators, the company typically pays lower rents per square foot, helping returns to average 43%.
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