Patisserie Valerie reports turnover and profit boost: Patisserie Valerie has reported sales up 9.7% to £114.2m (2016: £104.1m) in the 12 months ended 30 September 2017. Online sales were up 26% to £4.8m (2016: £3.8m) and gross profit was £89.3m, up by 9.8% (2016: £81.3m). It reported Ebitda of £25.6m up 15.7% (2016: £22.2m) and growth in pre-tax profit to £20.2m up 17.1% (2016: £17.2m). It opened 20 stores in the year including stores in 12 new geographical locations and expansion outside of England continues with two stores opened in Republic of Ireland, a second store opened in Northern Ireland and two new stores in Scotland. A first store was opened under the Philpotts brand – all new stores were profitable from first day of trading and funded from operating cash flows. It was trading from 199 stores at end of year (2016:184). A total of 20 new stores targeted for 2018 with four opened since the financial year end. Patisserie Valerie into a supply only agreement with Sainsbury’s during the year, trading from 18 Sainsbury’s counters by the year end. Luke Johnson, executive chairman, said: “We have delivered another year of excellent financial results, achieving our targets in a challenging environment. We opened 20 new stores many of which are performing ahead of expectations, and the performance of our new bakeries in the Republic of Ireland is encouraging. Our indulgent, affordable treats remain attractive to customers, and our flexible business model has enabled us to mitigate inflationary cost pressures. With a highly cash generative group, strong brands and a focused management team I remain confident of another year of growth and achievement.” Chief executive Paul May added: “In 2014 we acquired the Philpotts brand which is a premium sandwich and salad retailer. In the year under review we opened our first store under this brand in Manchester’s financial and professional services hub at Spinningfields. Since opening, this store has consistently ranked in the top three performers under the Philpotts offering. The success of this store provides potential for a roll-out of the Philpotts brand. We continue to engage with our customers via social medial platforms. We have run a number of online competitions in the year, one of which resulted in the customer designed Madame Valerie gateau. This type of engagement has boosted our Facebook followers by over 100% to 140,000 followers (2016: 70,000 followers). Cake Club membership continues to grow and is up 11.9% to 404,000 members (2016: 361,000 members) with pleasing growth on other platforms such as Twitter and Instagram. All of these online channels help increase our brand profile, and contributed to an increase in online sales of 26% to £4.8m (2016: £3.8m). We have serviced the group over the last few years from our main bakery in Birmingham and from seven satellite bakeries across the UK. Although we have excess capacity in our bakeries, as our geographical footprint expands, we have started to review how we best serve our estate from a production and logistical stand point. We are currently reviewing options for an additional production facility in the Manchester area with capacity to serve approximately 70 stores as well as instore baking of morning goods from within all of our stores. Both of these initiatives will provide additional capacity to the group as well as releasing savings and efficiency and improving product quality. We finished the year encouragingly and this momentum has carried into the first eight weeks of 2018. We have just launched our new festive range, which includes two new limited edition slices, and are looking forward to another successful year ahead.”

Douglas Jack – there is a cost to Revolution delaying merger talks with Deltic: Peel Hunt leisure analyst Douglas Jack has argued there is a downside risk to Revolution (RBG) shareholders in delaying merger talks with Deltic. He said: “We expect the 30 November AGM to show circa 1% like-for-like sales, but we are cutting our 2018E PBT forecast by 5% to reflect cost saving delays. In comparison, Deltic’s recent like-for-like sales were up 9.1%; if RBG is to merge with Deltic (as voted for), the longer it delays engaging, the greater the risk that terms shift in Deltic’s favour. RBG’s next trading update is due on 30 November. RBG last reported that like-for-like sales were up 0.3% in Q1 (July-September). We expect like-for-like sales to have strengthened to c1%, reflecting an improvement in pub sector trading (the pubs constituent of the Peach Tracker rose by 1.4% in October vs falling by an average of 0.3% between July and September). RBG has a pipeline of cost saving initiatives. In our view, it is inevitable that there will have been a delay in some of these initiatives during the period when the board had recommended the 203p/share cash offer. Management had committed to a hard target of £1m of cost savings (with £2m a possibility in our view). We are assuming the delays cost £0.5m in 2018E. The stock market is often accused, unfairly, of being short-termist. To their credit, the long-only institutions took a long-term view in turning down the 203p/share cash offer, understanding that the share price would likely fall in the short term, but still made what they believe was the right decision, which requires the merger with Deltic to proceed in order to maximise value. We estimate that RBG/Deltic would offer an 18% equity FCF yield at 151p/share, by retaining the synergies for shareholders. A 10% equity FCF yield would be worth 270p/share, by our estimates. Deltic’s recent like-for-like sales were up 9.1% in a market that has benefited from 40% supply reduction since 2006. The performance gap could soon shift merger terms in Deltic’s favour. RBG is currently valued at 4.8x EV/Ebitda, below the 5.9x that Deltic (as Luminar) was last valued at by the market in 2007-10, in the middle of license reform, the smoking ban and the financial crisis. This implies that, with 40% less supply, Deltic would now enhance, not dilute, RBG’s market rating. Our target price reflects the fact that we believe shareholders voted for RBG to merge with Deltic. The majority view is that this should wait until the New Year (typically a quarter of RBG’s Ebitda is earned in December), although we believe the downside risk of early engagement is now smaller than the downside risk of late engagement.”

Nick Backhouse to step down from Marston’s board: Nick Backhouse has stated his intention to step down from the board as a non-executive director of Marston’s at the conclusion of the 2018 AGM in January having served six years with the company. In preparation for this, Marston’s PLC has announces that Matthew Roberts will assume the role of chairman of the audit committee at that time. Roberts has been a member of the audit committee since his appointment to the board as a non-executive in March 2017. He is a qualified Chartered Accountant (FCA) and is currently chief financial officer of Intu Properties. Carolyn Bradley, senior independent director, will also join the audit committee from the same date. Roger Devlin, chairman of Marston’s, said: “I would like to thank Nick on behalf of the board for his valued contribution to Marston’s during his tenure with the company. He leaves with our very best wishes and we wish him well in his future endeavours.”