BBPA – latest UK beer sales show pressing need for another cut in beer duty: Figures from the quarterly Beer Barometer survey by the British Pub & Beer Association (BBPA) have revealed beer sales in Britain fell by 1.5% in 2015. The decline represents a loss of 114 million pints from Britain’s pubs, bars and restaurants, as off-trade sales in shops and supermarkets held steady in 2015. With the Budget looming on 16 March, campaigners said the figures showed a pressing need for another one-penny cut in beer duty to boost Britain’s pubs. Campaigners said rising costs from the National Living Wage, higher business rates and the Apprenticeship Levy would all hit the bottom line for Britain’s hard-pressed pubs. UK beer drinkers already pay some of the highest beer taxes in the EU – twice the European average, and 13 times higher than in Germany, where beer duty is only 4p a pint compared with 52p here. Brigid Simmonds, BBPA chief executive, said: “The figures are certainly not all bad news as, overall, Britain’s beer sales have stabilised over the past three years following years of sharp decline, due to the disastrous tax policy of the beer duty escalator, which saw beer tax rise by 42% from 2008 to 2013. Since then, we have seen growing confidence in the sector, but the figures show this is no time for complacency, and any return to tax rises would wipe out this fragile recovery. We need another one-penny cut in the Budget – to safeguard jobs and much-loved pubs, and to help Britain’s hard-pressed beer drinkers.”

Nick Batram – Just Eat’s £100m acquisition makes sense even though sales are just £5m at companies it is acquiring: Peel Hunt leisure analyst Nick Batram has argued yesterday’s (Friday, 5 February) acquisition of four companies by Just Eat makes sense even though the companies turned over just £5m in 2015 and lost €16m. He said: “(Just Eat’s) bolt-on acquisitions are fully in line with the stated strategy and bolster existing leading market positions. On the face of it, the price looks full and there is a question as to whether Just Eat might just have left the businesses to fail. However, we see the deals as positive, with Just Eat taking control of its own destiny and ultimately, if £10m Ebitda is delivered, then the price is reasonable. Recent share price weakness suggests room for a rebound. Mexican businesses of foodpanda. Strategically, the deals boost Just Eat’s existing number one positions in all four markets. The Brazilian business will be injected into the group’s joint venture in due course. With integration and transaction costs, Just Eat is effectively buying the four businesses for circa £100m. The businesses lost €16m in the year to 31 December 2014 and we understand 2015 revenue was around £5m. However, management expects the acquisition to be earnings per share-accretive in 2016 and add £5m of Ebitda in 2017, rising to £10m in 2018. This reflects the high level of drop-through by simply bolting in the sales to Just Eat’s existing platform. In its relatively short quoted life, Just Eat management has already established a record of under-promising and over-delivery, so we see £10m Ebitda as a real target. Given the relatively small top line and large losses at the bottom line, the question is whether Just Eat could have left these businesses to die a natural death, as opposed to spending £100m of cash on them? Management argues that these businesses don’t tend to die that quickly and could prove a competitive drag for some time. By acquiring the businesses, Just Eat is actively controlling its destiny, and if £10m of Ebitda is delivered then the price is worth paying. The shares have been weak as competitive concerns have grown against the backdrop of volatile stock markets. While we have long pointed out our longer-term concerns, we don’t see a material threat to the business in the short term. Yesterday’s deals make strategic sense, while further positive financial newsflow should see the shares recover some of their recent losses. Longer term we see the risk of branded restaurants getting their delivery act together, along with the ability to add real value to its business-to-business customers, presenting challenges to the business. This drives our ‘Hold’ recommendation.”