Organic growth continues in the UK foodservice sector with ... · Organic growth continues in the UK foodservice sector with M&A accelerating strategic plans for several operators

R E S TA U R A NT S, H O S P ITA L IT Y & L E I S U R E | N O V E M B E R 2016

Organic growth continues in the UK foodservice sector with M&A accelerating strategic plans for several operators

2 / AlixPartners Foodservice Growth Report 2016

At A Glance

1 Foreword

2 Industry and investor insight

3 Methodology

4 Top 20 list

5 Top 20 company profiles

6 Sector review


By Graeme Smith, Managing Director, AlixPartners

It was also a year that saw continued change and development in the foodservice sector (or hospitality management, as I’ve heard a few people call it) despite the political turmoil.

Key trends that we observed in the sector over the last 12 months include more choice for clients, as standards as a whole increase, focus on niche subsectors, and increasing convergence with the food retail sector.

M O R E C L I E NT C H O I C EOne of the most encouraging trends in the sector in recent years has been the increasing sophistication and capability of the leading independent operators, which has resulted in more choice for clients when considering a foodservice provider for everything other than very large global accounts. Operators in the business and industry (B&I) space such as CH&Co, Gather & Gather and Westbury Street Holdings (WSH), to name but a few, are winning large, multi-site contracts against the largest global players. In the events space, rhubarb secured the Goodwood estate contract1, which lifted it into the elite league in that subsector. The success of that contract is likely to open up a whole new range of potential contract targets and growth opportunities.

It is a common refrain in any market that competition is getting tougher, and the rising standards in the foodservice sector have undoubtedly required companies to raise their game to stay competitive. However, I believe that this overall improvement has played a significant part in the leading independent operators’ being seen as both genuine and credible alternatives to the global players on larger contracts.

For the leading independent operators, the rewards from that improvement and investment can be seen in the impressive profitability growth shown in this report.

N I C H E F O C U SThe focus on niche subsectors has continued this year, with areas such as education, healthcare, and premium B&I repeatedly featuring in companies’ growth plans. This focus has been a key driver of mergers-and-acquisitions (M&A) activity in the industry in recent times, as larger companies have judged acquisition to be the best way of entering or consolidating in a niche subsector.

Aside from the transactions highlighted later in our sector review, it is worth mentioning a few notable deals that caught the eye in 2016.

We were pleased to have advised the shareholders of leading education catering group, The Brookwood Partnership, on their successful merger with CH&Co2, which is backed by MML Capital Partners (MML). This transaction was the first to be completed by CH&Co following its merger with HCM Group which saw MML, the original financial investor in BaxterStorey, return to the sector. This merger is intended to bolster CH&Co’s education catering capability and provide the group with a broader platform for growth.

That deal was soon followed by an announcement that the UK division of Elior had acquired the specialist education and healthcare catering operator Waterfall Catering Group, which provided private-equity house Lloyds Development Capital with a 2.6x return on its investment after only 18 months3. This is an encouraging deal for the sector as a whole because it suggests confidence in the merits of M&A, as a

You can accuse 2016 of many things, but you can’t accuse it of being dull. This was a year that saw the British public vote to leave the European Union (EU), the installation of a new prime minister, and in Rio, Team GB somehow managing to beat its medal haul from London 2012.

1 http://www.rhubarb.co.uk/news/14-events-news/1100-welcome-goodwood.2 http://www.chandco.net/blog.asp?offset=15.3 https://www.ldc.co.uk/portfolio/waterfall-services.


means to deliver value to an acquirer, following Elior’s acquisition of City of London–based premium B&I caterer Lexington Catering in 2014.

Harbour & Jones, the fastest-growth company in this index in 2014, also used M&A to enter the education sector in the past year, with its acquisition of Principals Catering Consultants4, an education and events caterer based in south-eastern England. This shows that privately funded independent operators can also use M&A to drive value.

Save for Elior and Sodexo (with the latter reentering the M&A market at the very end of our review period), the global groups have so far been notable by their relative absence from the UK M&A market. It will be interesting to see whether they become more acquisitive in 2017.

B LU R R I N G L I N E S W IT H F O O D R E TA I LThe lines between foodservice and food retail continues to blur. As many B&I operators will say, the main competition for city centre B&I contracts is the high street. That competition has inspired a number of leading operators to develop their own brands, use a pop-up approach to bring food trends such as street food to the workplace, or form partnerships with new or established brands to keep workers in the building. Some operators are going beyond that by expanding directly onto the high street (for example Benugo and Apostrophe) or into larger, fixed locations (Sky Garden by rhubarb or City Social by Restaurant Associates with Jason Alterton). The trend stepped up a gear this year, with WSH signing a joint venture with Mark Hix for his restaurant operations5, thereby augmenting the dedicated restaurant division that was set up in 2015.

As consumers’ expectations of the quality and variety of food provision continue to rise, we expect convergence to remain a key trend. It may not be long before we see a foodservice group acquiring a high street restaurant group or a grab-and-go operator.

O U T LO O KThe outlook for 2017 will likely be dominated by developments in the negotiations over Britain’s exit from the EU and the impact of those negotiations on economic activity. In the short term following the vote, the impact has been felt most acutely in the devaluation of sterling, which has resulted in an increase in the number of visitors to the UK who are attracted by comparatively lower prices. The impact has also started to feed through to increasing prices for imported products and services. In addition, businesses are adapting to implementation of the national living wage, which affects the hospitality and leisure sector because it’s a people-driven sector. Those pressures may lead to further consolidation, but we expect the sector as a whole to continue to adapt, evolve, and thrive.

Graeme Smith is a Managing Director in the Financial Advisory Services practice at AlixPartners. He has more than 15 years’ experience in advising corporate and private-equity clients on M&A, fund-raisings, and strategy with specific focus on the hospitality and leisure industries.

Disclaimer The opinions expressed are those of the authors and do not necessarily reflect the views of AlixPartners, its affiliates, or any of its or their respective other professionals or clients.

4 http://www.harbourandjonesevents.com/good-news-for-harbour-jones/.5 http://www.bighospitality.co.uk/Business/Mark-Hix-to-expand-restaurant-estate-following-restructure.


By Chris Sheppardson, Managing Director, EP Business in Hospitality

The report also illustrates just how success and growth can be fickle companions. Of last year’s top 10, only two are in the top 10 in 2016. Of last year’s top 20, 12 companies remain in this list and eight have fallen away. By the same token there are three ever present members of the index in 2016 and four companies have featured in three out of four reports since its launch in 2013.

It is quite remarkable how each year the index shifts and evolves in composition but it is fair to say that the whole market is consistently being challenged to change and to invest in overall service offerings. One senior executive recently remarked that not only were food standards rising in quality each year but that food menu cycles had to be reviewed. He noted that the sector had never before possessed a stronger culinary skill base and that the chefs were the unsung heroes as they would impress customers each and every day – but still it is not enough.

Two years ago, the prevalent thinking was the market was being driven by an emphasis of B2B4C as the high street offered the greatest challenge. Street food options were the trend of the moment. Last year, the focus was creating greater service levels out of smaller kitchen spaces and this required new digital innovation. This year the focus has been on the importance of social hubs and premium restaurant environments. Each year seems to raise the bar, ask more of independent operators and each year they just smile in response and find solutions. There is a general acceptance that the normal commercial model is under constant strain as more and more is being asked of contractors with each passing year.

At the same time, sustainability has moved from a peripheral focus to become the core of many operating philosophies. Every company needs to possess both knowledge and policy on a topic area that is broad and

yet important to the emerging generations. Innovation too has risen to the fore and everywhere there is discussion about the need for original thinking and original solutions.

Each of these trends naturally increases the resource – and overhead – that foodservice companies commit to their clients, so it is really quite remarkable to see how the results show depth across the key foodservice markets. The large companies do not have it all their own way; the independents can be agenda changers, the catalysts for the market and even this picture can be complex to understand.

The only real constant about the sector is change itself. Each company faces the challenge of evolving each week; faces winning and losing regular client companions and knows that the market will pose new questions. The result is not just change but new solutions.

The old traditional barriers between sectors are breaking down and players crossing from one sector into another. In the last year, WSH joined forces with HIX Restaurants through a joint venture which marks an exciting move into the restaurant arena. An increasing number of hotel groups are open to outsourcing options which could mark a new surge of foodservice players focusing on this area.

The top 20 index may change each year and in many ways, it is great news that it does, as it shows that the market is alive, well and kicking.

Chris Sheppardson is Managing Director of EP Business in Hospitality, the magazine launched in 2005 to provide a communications source for leaders in the industry. His vision was inspired by the desire to look at the real people and characters who make up the industry, and to provide constructive debate on issues which affect the industry at a number of levels.

Disclaimer The opinions expressed are those of the authors and do not necessarily reflect the views of EP Business in Hospitality, its affiliates, or any of its or their respective other professionals or clients.

Each year the Foodservice Growth Report offers a thought provoking insight into the market and how it is evolving. Each year, the report challenges perceptions as it so hard to accurately predict which companies will lead the index but this only reflects the genuine depth and substance that lies within the sector.


By Catherine Roe, Chief Executive, Elior UK

A GLOBAL OPERATORS’ VIEWPOINT: AN EXCITING BUT CHALLENGING LANDSCAPEThe UK foodservice sector is an exciting but challenging landscape. While its steady market growth has continued in 2016, there have also been stones in the road.

The uncertainty caused by Brexit has certainly played a part. At the time of writing, the pound hasn’t been trading lower since 1985. While the drop will make the UK attractive to foreign investors, there is legitimate cause for concern over the rising cost of goods.

While the attitude of many has been one of ‘business as usual’, others are putting investment on hold. As for how things will progress in terms of business confidence, only time will tell as market volatility is unlikely to end until there is greater clarity regarding Brexit.

Despite this uncertainty, foodservice has shown itself to be a very resilient sector. While market forces may change how businesses operate, people will always need to eat. One great example of how the market has evolved is the way foodservice operators have reacted to the space race in metropolitan areas.

Where space is at a premium, rising rental costs and business rates have been fanning the street food flame, with more new players moving into the growing market.

Yet another disruptive development is the increasing digitalisation of the market, with several new players delivering high street restaurant food to homes and offices around the country.

Facing increasing competition from the high street, contract caterers have continued to innovate; coming up with new trend-led pop ups and concepts to help them compete in the B&I and higher education space and transforming hospitals with fresh new retail offers.

The past two years have also seen an increase in acquisitions, with lots of exciting new players springing up with fresh ideas and a number of larger businesses looking to acquire both new and established catering companies.

Traditional factors, such as a recognition of the associated efficiencies of scale, are certainly one reason for the increase. Low interest rates may have also played a part, with more capital available for the right type of businesses in the right areas. And if there’s one thing this industry has shown – it’s resilience; the ability to innovate and evolve in response to new challenges and opportunities.

For Elior UK, it has been an active couple of years too, acquiring City of London firm Lexington Catering, and more recently Waterfall Catering Group; the largest independent provider to the care, welfare and education market. There have also been wider group acquisitions across Europe & US.

While acquisition has clearly been a part of many businesses’ growth strategies in the last few years, ensuring you’ve chosen the right business and that the acquisition is handled in the right way is paramount for longer term success and integration of teams.

Industry and investor insight

Facing increasing competition from the high street, contract caterers have continued to innovate.

– C A T H E R I N E R O E

From my perspective, there are a number of things I always look for when considering acquisitions; similar or complimentary characteristics are essential, as smooth integration will depend on a willingness to work together in a positive manner.

A good cultural fit is also important, although often underestimated. I always look to make sure any businesses we’re evaluating share the same values as our existing colleagues towards excellence in service and outstanding customer care.

Another crucial element to consider is the brand identity and market perception of the chosen company. Ideally you are looking to help the acquired party develop the brand and accelerate growth, whilst providing added benefits for both sets of clients through additional resources, innovation and operational efficiency.

Making sure your clients are comfortable with the acquisition is absolutely vital. We have gone to great lengths to inform and reassure our clients about our recent acquisitions, and have not seen any contract loss as a result. The key to that is good communication and a coordinated seamless approach.

Catherine Roe is chief executive for Elior UK, one of the largest foodservice operators in the country. With more than 20 years’ experience within the foodservice industry, Catherine is inspired by building on Elior’s industry leading reputation for great service and innovation.

During her leadership, Catherine has been responsible for delivering the company’s UK growth strategy.

In addition to her work at Elior, Catherine was delighted to be asked to join the operating board at Women of the Year (WOYLA) in 2003. The organisation recognises the achievement of women from all walks of life.

In 2013 Catherine was inaugurated in The Women 1st Top 100 Club. This network of the most influential women in hospitality, passenger transport, travel and tourism, act as ambassadors and role models for the female leaders of tomorrow.

Catherine spent her earlier career at Sodexo, where she was purchasing director for the UK and Europe. Prior to that, she was at the Ladbroke Group and Hilton International.

Disclaimer The opinions expressed are those of the authors and do not necessarily reflect the views of Elior Group SA, its affiliates, or any of its or their respective other professionals or clients.


By Patrick Harbour and Nathan Jones, Founders, Harbour and Jones

A N I N D E P E N D E NT O P E R ATO R S’ V I E W P O I NT: O U R J O U R N E YIn 2004 Patrick Harbour and Nathan Jones founded Harbour & Jones, a premium B&I operator that has progressively expanded and augmented its service offering over the last 12 years to become one of the largest remaining independent operators in the UK market. Below, Patrick and Nathan describe their journey.

“We never set out to be the biggest,” explains Harbour, “we wanted to be selective, and to be the best in chosen sectors of the B&I market”. Initially concentrating on low risk legal, financial, insurance, creative and media markets on cost plus management fee contracts, it took six months to land the first contract and from there things grew rapidly.

E A R LY G R O W T HBy year four Harbour & Jones was focusing on quality conference and banqueting business and also moved into visitor attractions, historical venues and concessions, while continuing to build upon its established business and industry client base. It launched an events and parties business, known as Harbour & Jones Events, and set up a production kitchen to support this.

With the business prospering, in year seven Patrick and Nathan identified the need to establish a reception services element, at this stage primarily for existing hospitality contracts. The business was branded H&J Upfront.

The original business plan was to achieve a turnover of £30 million in the first ten years. The company achieved £33 million by the ten year anniversary in 2013.

D I V E R S I F I C AT I O N T H R O U G H A C Q U I S IT I O NEarly in 2015, as part of the strategy to accelerate growth, the Directors decided to diversify the business through acquisition. This would be supported by ongoing organic growth, with the objective to increase the turnover steadily to £100 million plus in a three to five year period.

In preparation for this period of growth, Harbour & Jones recruited two commercial accountants, a procurement director and a school development chef, and split its marketing function into internal (customers, clients, colleagues) and external (the outside world). It also enhanced the operations senior team.

Looking for a business with good cultural fit, Nathan and Patrick started talking to John Durden of Principals Catering. Nathan had worked with John earlier in his career and had assisted with the launch of Fare. John was considering retirement and wanted to place his business in safe hands, aligning with an independent company with similar values. The two talked and planned a yearlong deal.

F I N A N C I N G T H E D E A LVarious options were considered, including both private equity and bank loans, but after reviewing the finances Patrick and Nathan opted to fund privately, using Directors’ loans and an overdraft facility on the cash reserves within the Harbour & Jones and Principals businesses. In order not to relinquish share capital, they proposed deferred payments over two years, striking a deal that was based on income protection over the term.

We never set out to be the biggest... we wanted to be selective, and to be the best in chosen sectors of the B&I market.

– P A T R I C K H A R B O U R


N E W C H A L L E N G E SThe acquisition took Harbour & Jones into the previously unexplored territory of education catering. It also added a traditional banqueting business with 15 additional City venues, including livery halls, to complement the established venue and conferencing business.

While not without challenges, the integration has been a success. Accounting processes have been streamlined, key senior appointments made and 800 new team members added to the payroll.

Principals has added 56 new contracts and successfully retained all but one of its schools, after 70% of its contracts went out to tender this year at the end of their contract term. This added a combined annual turnover of £2.6 million, taking the schools business to over £10 million and 146 schools.

R E B R A N D I N G T H E B U S I N E S SAfter the dust had settled, it seemed a good time to refocus and strengthen the identity of all the brands and after many months of hard work, these went live in early October.

The operating brands of the business are now:

¬ Harbour & Jones – the overarching company for all five brands

¬ H+J – business & industry restaurants and hospitality, venues and visitor attractions

¬ Fare – conference and banqueting in traditional venues and livery halls

¬ Tonic – experiential event caterer ¬ Upfront – reception services in business & industry

sites and venues ¬ Principals – education caterer in primary and

secondary schools

Jones says, “We are incredibly excited by the opportunities for growth both in our core business and in newer markets. We have recently achieved and opened over £6 million of annual new business gains and have retendered and retained a further £70 million. These contracts have a combined turnover

of £55 million over a three to five-year term.”

Patrick Harbour and Nathan Jones met while working at Houston & Church after its acquisition by Wilson Storey Halliday in 2001. After a relatively short time they decided to set up their own business and launched Harbour & Jones in January 2004. By 2008 the business was generating over £13 million of annual revenue but has continued to deliver strong year-on-year growth and is expected to commence 2017 with a turnover in excess of £60 million.

Disclaimer The opinions expressed are those of the authors and do not necessarily reflect the views of Harbour & Jones, its affiliates, or any of its or their respective other professionals or clients.

£60MHarbour & Jones is expected to commence 2017 with a turnover in excess of £60 million.

We are incredibly excited by the opportunities for growth both in our core business and in newer markets.

– N A T H A N J O N E S

The market response to the merger has ultimately been extremely positive, however, the business has had to work hard to achieve this.

– R I C H A R D M A Y E R S


Richard Mayers, Partner, MML Capital Partners

AN INVESTORS’ VIEWPOINT: THE CH&CO STORYIn June 2015 MML Capital Partners (MML) backed Bill Toner and his management team to facilitate the merger of Host Catermasters and CH&Co to create the CH&Co Group with sales in excess of £180 million. This oversimplifies an extremely complex transaction that took over 12 months to come to fruition and involved some 30 stakeholders all with different aspirations. The opportunity was to combine two well-known businesses with more than ten brands and in so doing crystallise significant synergies, primarily through purchasing efficiencies, but crucially without losing focus on customer service or the unique heritage of each business.

The key challenges to overcome were the aspirations of the two different founder shareholder groups as to respective enterprise value, ongoing stakes and roles in the combined Group.

Structuring was complex and heavily negotiated with each of the stakeholders, and agreed in principle prior to due diligence. Whilst diligence always throws up issues, each of the stakeholders continued to approach the transaction with a “can do” attitude; understanding that given the personalities involved, any attempt at one-upmanship would likely lead to the negotiated deal falling apart.

The transaction ultimately saw no one party hold a majority stake. Each of the founders crystallised the same proportion of value in cash, reinvesting their residual value for minority stakes. Senior management substantially reinvested their value to enhance their stake in the combined business whilst MML invested to become the largest single minority shareholder.

The subsequent 12 months have seen considerable change in the CH&Co Group, probably unsurprising given Bill’s inimitable experience and reputation in the sector. However, just as Bill and his senior team have sought to drive commercial best practice across the

Group so they have also worked extremely hard to retain the exceptional service culture that underpinned CH&Co’s reputation in the market. Preserving this legacy, a culture instilled by Robyn and Tim Jones, was pivotal to unlocking the original transaction and has been aided going forward by Tim’s continued involvement as Chairman of the Group.

The market response to the merger has ultimately been extremely positive, however, the business has had to work hard to achieve this. Whilst for certain (national) clients the enlarged footprint spoke to credibility, for others it was important that CH&Co Group retained a small company obsession with service and quality. It’s not been easy but Bill and his team have worked consistently to build and retain existing client relationships and, as a result, the business has been able to benefit from significant contract extensions as well as new customer wins.

Whilst driving commercial efficiency through scale was a key pillar that underpinned the merger to form CH&Co Group, the key challenge in a mature contract catering market is always going to be top-line growth. The Group has approached this in three ways:


1 Organic growth – through targeted sales hires (both announced and unannounced) to enhance the customer proposition;

2 Strategic acquisition – CH&Co Group’s recent merger with The Brookwood Partnership (Brookwood) materially enhances its capabilities within the state and private education sectors. Founder shareholders in Brookwood crystallised significant value but remain incentivised to work with the Group to ensure a successful transition both of customers but also importantly staff into the Group. MML had been tracking the Brookwood business since 2013;

3 Reinventing the core proposition – current and potential collaborations with renowned chefs such as Tom Sellers, John Williams and Oliver Dabbous drive enhanced interest from potential clients, as does the joint venture with SOHO Coffee Co.

In addition, the market is facing significant challenge from the National Living Wage (NLW), from a chronic shortage of trained chefs and potentially from the Apprenticeship Levy. CH&Co Group is seeking to make positive change from these challenges. By putting in place quality apprenticeship academies (via Learning Curve Group) not only can the Group seek to address the widespread challenge of experienced chef recruitment and the challenge of NLW, but also differentiate itself as the catering employer of choice.

In 2016 CH&Co Group will deliver in excess of £225 million revenue. Whilst the business has made great steps in the past 12 months, the journey has only just begun and we, as investors, remain extremely positive both for CH&Co Group and for others within this exciting sector.

The transaction was jointly led by Richard Mayers and Ian Wallis both of who sit on the Board of CH&Co Catering Group (Holdings) Limited. Ian Wallis previously led MML’s investment into Westbury Street Holdings (Baxter Storey).

Richard Mayers is a partner at MML Capital Partners, an international private equity fund with 14 deal professionals based in London, New York and Paris. The firm is currently investing its 6th Fund having raised €438 million earlier this year. MML specialises in providing “Partnership Capital”, investing alongside exceptional management teams to help them grow their business. With complete flexibility over the entire capital structure, MML is able to structure complex transactions, often involving multiple competing stakeholders and, as a truly aligned partner to management, MML is equally as comfortable in a minority position as with a majority stake.

Disclaimer The opinions expressed are those of the authors and do not necessarily reflect the views of MML Capital Partners, its affiliates, or any of its or their respective other professionals or clients.

£225MIn 2016 CH&Co Group will deliver in excess of £225 million revenue

Profit growth is measured by compound annual growth rate over three years, based on statutory accounts.

In the AlixPartners Foodservice Growth Report, the term profit is defined as earnings before interest, taxes, depreciation, amortisation, and exceptional items, with directors’ remuneration added back so as to account for differences in the means by which entrepreneurs extract cash from private companies. We therefore remove that variable to avoid any potential distortion.

T I M E F R A M EProfit growth is measured by compound annual growth rate over three years, based on statutory accounts. The analysis has a cut-off date for account filings of 30 September 2016. Companies that have filed their 2016 accounts will have profit measured from 2014 to 2016, whilst companies that had not yet filed 2016 accounts will have profit growth measured for the same length of time from their most-recently-filed accounts, which report 12 months of trading.

Q U A L I F Y I N G C O M PA N I E SQualifying companies must have a turnover of at least £8 million in their latest accounts and profit of at least £250,000. They also must have been profitable in all three years and have achieved profit growth in their latest financial year.

Businesses must be UK registered and be independent and unquoted. UK subsidiaries of European businesses are included in the analysis. However, only their performance in the UK has been considered. Companies that have grown through acquisition qualified for inclusion. We exclude companies with turnover in excess of £1.0 billion. Companies focusing primarily on facilities management (FM) services have also been excluded, but catering subsidiaries, when reported separately, qualified for inclusion. Traditional catering companies expanding into FM services have also been included.

Methodology


Rank 2016

Change since 2015 Company Turnover (£m)6 Profit (£m)6 Profit CAGR (%)

1 New Global Infusion Group 17.0 2.0 67.9

2 New Mellors Catering Services 19.2 1.1 47.1

3 3 Company of Cooks 32.4 2.7 40.2

4 New Cucina 10.9 0.8 35.2

5 12 Catering Academy 33.1 2.2 33.3

6 Re-entry Best Parties Ever 13.7 1.4 32.2

7 Re-entry Alliance in Partnership 21.9 3.6 30.2

8 10 Entier 39.7 2.2 29.9

9 Re-entry rhubarb 47.0 4.8 29.9

10 8 Olive Catering Services 22.8 1.8 25.3

11 4 Independent Catering 12.2 1.2 24.0

12 4 Connect Catering 12.7 0.4 22.1

13 Re-entry Dine Contract Catering 29.2 2.4 21.8

14 New CGC Events 21.5 2.0 19.9

15 1 Pabulum 23.2 1.4 18.7

16 7 Harbour & Jones 37.0 3.4 18.6

17 7 Wilson Wale 21.8 2.2 18.0

18 6 Blue Apple Contract Catering 10.5 0.6 17.9

19 16 CH&Co Catering7 116.2 3.4 15.3

20 13 Westbury Street Holdings8 638.6 54.3 14.9

Key: CAGR = compound annual growth rateSource: Company statutory accounts

Top 20 list

6 Most-recent-filed accounts reporting 12 months’ comparable trading.7 CH&CO Catering reflects the last 12 months standalone comparative statutory accounts to 31 March 2015, pre-merger with the HCM Group in June 2015 and before

merger with The Brookwood Partnership in July 2016. 8 Westbury Street Holdings’ 53-week reporting period prorated for 52 weeks.


Top 20 company profiles

1 G LO B A L I N F U S I O N G R O U P

Latest turnover: £17.0 million

Profit CAGR: 67.9%

Key personnel: Tony Laurenson, Managing Director; Bonnie May, Global Operations Director

Backer: Privately funded

2015 ranking: n/a

Leading the index for 2016, the Global Infusion Group (GIG) has a long and distinguished history in the global events catering space, having emerged from the Eat to the Beat (ETTB) business created by Managing Director Tony Laurenson more than 32 years ago.

ETTB is one of the most recognisable names in the world of live events, providing specialist backstage catering services for the music, entertainment, film, and TV industries. The business initially focused on the music arena and now serves major events such as Glastonbury, the Reading Festival, and major concerts in Hyde Park. GIG has also had recent success through its Sports division, which served London 2012, the 2015 European Games in Baku, and the 2016 Rio Olympics.

Based in Chesham, Buckinghamshire, the business now also operates from offices in Studio City, California; Shanghai; and Dubai to deliver a truly global service offering. It has been progressively expanded over three decades to deliver bespoke events planning and delivery at accredited venues through GIG…fyi and events logistics support through GIG...e2B.

GIG won a Queen’s Award for Enterprise in International Trade 2014 and has achieved stellar compound profit growth of 67.9% over the past three years, supported by 16.7% turnover growth in the past financial year. With an established brand that boasts genuine longevity as well as recognised but diverse events skills, the business appears well-placed to continue its growth trajectory in the coming years.

2 M E L LO R S C AT E R I N G S E R V I C E S


Profit CAGR: 47.1%

Key personnel: Tim Timmerman, Chairman; Mark Timmerman, Managing Director; Tony Trainor, Chief Operating Officer


2015 ranking: n/a

A new entrant for 2016, Mellors Catering Services (Mellors) is one of the leading contract caterers in northern England and North Wales. The company manages staff restaurants, coffee, and deli bars across the B&I sector as well as the primary, secondary, and further education sectors. Since launching in 1995, Mark Timmerman has expanded this family-owned business with a regional menu offering to operate across almost 200 sites and employ more than 1,000 catering staff, serving 80,000 customers every day.

Mellors purchases 55% of food locally, and around 75% is prepared from scratch, which results in fresher ingredients and better-quality food. Having previously been voted Best Company of the Year for Sustainability by the Chartered Institute of Management Accountants in 2007, the business illustrates a genuine commitment to local produce, charities, and the environment, setting it apart from many of its competitors.

The business diversified its sector offering during 2013 with successful contract wins with three large clusters of schools and also through a contract with the Ministry of Justice, supporting 31.6% revenue growth in the most recent financial year.

Mellors typically contracts for three to five years, and the business recently secured a number of new deals with major construction clients, which will drive further growth in 2016 having achieved profit CAGR of 47.1% in the past three years.


3 C O M PA NY O F C O O K S


Profit CAGR: 40.2%

Key personnel: Michael Lucy, Founder


2015 ranking: 6

Company of Cooks was founded in 1996 by Mike Lucy and has become a market leader in the concessions sector. It operates at prestigious venues such as RHS Garden Wisley, the National Portrait Gallery, Southbank Centre, and the Royal Opera House. Mike has steadily expanded the business during the past three years to reach almost £33 million in annual revenues, working with concession partners to deliver high-quality, bespoke services at restaurants, champagne bars, and retail units.

With continued margin improvement, and despite a small dip in turnover in 2015, the business has improved its position in the index this year, driven by hands-on cost control and investment in key systems to optimise cost management. As a result, Company of Cooks achieved 40.2% average profit growth in the past three years, with 5 to 10-year contracts secured at some of London’s most iconic venues.

4 C U C I N A


Profit CAGR: 35.2%

Key personnel: Steve Quinn, Chief Executive; Stuart Lenton, Managing Director


2015 ranking: n/a

Cucina aims to bring restaurant-quality food to secondary school education and B&I organisations across the UK. Rather than operating canteens, food halls, or cafeterias, all of Cucina’s outlets are intended to be full-scale restaurants with trained chefs and with meals cooked from scratch using local, fresh ingredients where possible. Cucina’s online cookbook is an ever-growing collection of delicious, original recipes created by Cucina’s own award-winning team of chefs.

The business celebrated 10 years of operation in 2015, alongside a management restructuring as Steve Quinn moved to the position of CEO and Stuart Lenton took over as Managing Director to help support further growth in the next three to five years.

In association with the School Food Trust, the Food for Life Partnership, and other organisations, Cucina works diligently to promote higher standards of

food in education. Recent accomplishments include gaining Vegetarian Society approved status for the second consecutive year as well as earning the Soil Association’s coveted Food for Life Gold Catering Mark, which recognises the highest standards of provenance and traceability. Recently, professional MasterChef champion Ash Mair joined Cucina to lead its development team in creating new food styles and menu ranges for 60,000 school customers nationally.

5 C AT E R I N G A C A D E MY


Profit CAGR: 33.3%

Key personnel: Louise Wymer, Kevin Cannon, and Stacey Rose, Founders and Directors


2015 ranking: 17

Founded in 2004, Catering Academy primarily serves clients in the B&I and education sectors. In 2013, the company made an investment to gain a foothold in the healthcare sector, and the business experienced significant growth in the past 12 months.

During the past year, Catering Academy also brought all of its key training in-house, which has resulted in improved contract performance and team motivation. The company’s focus on food innovation, exceptional service and growth in new markets has underpinned the company’s £33.1 million annual turnover and helped it break through £2 million in annual profit. As a result, the business rose 12 places in this year’s index, with 36.9% in-year profit growth.

With continued growth in the core commercial sector and further growth in the healthcare space, two years after entering the sector, Catering Academy has also entered the leisure and heritage markets, delivering high-quality catering services to individual sites and for group contracts via four regional offices across the UK. Revenue and profit have increased on average 10.9% and 33.3%, respectively, during the past three years.

6 B E S T PA RT I E S E V E R


Profit CAGR: 32.2%

Key personnel: Jeffrey Hilliard, Thomas Hilliard, and Peter Stevens, Founders and Directors


2015 ranking: n/a


Best Parties Ever (BPE) organises all-encompassing events at 22 locations across the UK and is popular for large corporate Christmas parties catering to more than 300 guests. BPE is one of the country’s leading hosts of Christmas parties, having entertained 176,000 guests in 2015. Each event provides guests with specially designed entertainment, engaging themes, and exceptional service.

In 2016, BPE will be hosting for the first time one of its renowned Christmas parties at the Three Counties Showground in Malvern, Worcestershire, with a glamorous Midnight in Monte Carlo theme. The event will offer live music, canapés, acrobatic performances, and a four-course meal and is available for mixed bookings or for exclusive hire.

Despite operating in a space more susceptible to economic conditions, the business has shown growth in turnover and profit during the past three years. Annual turnover grew 14.1% in 2015, and annual profit grew at a compound annual rate of 32.2% in the past three years.

7 A L L I A N C E I N PA RT N E R S H I P


Profit CAGR: 30.2%

Key personnel: David Weller, Chief Executive; Paul Rogers, Managing Director; Sally Tyson, Sales Director; Angela Austin, Financial Director

Backer: Key Capital Partners

2015 ranking: n/a

Re-entering the index this year, Alliance in Partnership (AiP) is a specialist education caterer incorporated in 1998, initially partnering with schools in Worcestershire and Herefordshire. Chief Executive David Weller joined AiP in 2004, having previously held roles at the likes of Compass and Haden (Balfour Beatty). Having established a platform with a genuine sector speciality, David led an £11 million management buyout of the business in 2013, backed by buyout specialist Key Capital Partners. AiP later acquired Class Catering Limited, which has contributed to its current portfolio, estimated at 250 contracts.

AiP aims to provide freshly made, balanced, and nutritious meals to more than 50,000 students in schools across the Midlands. With its school partnerships either Silver or Gold Food for Life Catering accredited, AiP actively involves students, parents, and the wider community in activities that provide further education in healthy, ethically sourced ingredients.

Following the management buyout, AiP has maintained its growth trajectory, generating turnover of £21.9 million in 2015, with profit of £3.6 million. In October 2015, AiP secured new contracts across Coventry, valued at more than £0.4 million, in support of the continued expansion of this specialist operator.

8 E NT I E R


Profit CAGR: 29.9%

Key personnel: Peter Bruce, Chief Executive; Scott Campbell, Finance Director


2015 ranking: 18

Rising 10 places in the 2016 index, Entier primarily offers top-quality food and service to the offshore oil & gas industry from offices in Aberdeen, Houston, and Perth, Australia. The business was formed in 2008, when Olive Garden Catering Company joined forces with the founding directors to create a new, independent catering company, specialising in the offshore sector and initially servicing Apache’s portfolio across the North Sea. In 2016, the business was also awarded the Queen’s Award for Enterprise and expanded into the B&I and education sectors.

Entier has continued to augment its service offering since 2008, operating across 56 sites in 40 countries for businesses and education establishments. As a result, turnover increased from £32.2 million in 2013 to £39.7 million in 2015 — despite wider macro-pressures in the oil & gas sector — with profits growing from £1.3 million to £2.2 million, a compound annual growth rate of 29.9%.

The business invested £1 million in a state-of-the-art training and production facility in 2015 to support the preparation of quality cooked food in-house, which is then transported to client facilities, representing a significant commercial benefit for clients with operating space at a real premium. At the same time, Entier launched a retail grab-and-go concept called Fresh, designed specifically for the workplace and events, which will be rolled out on the high street in the next few years.

9 R H U B A R B


Profit CAGR: 29.9%

Key personnel: Stephen Alexander, Chairman; PB Jacobse, Managing Director

Backer: ECI Partners

2015 ranking: n/a


Premium events and restaurant operator rhubarb returns to our index in 2016 following strong contribution by its flagship Sky Garden restaurant at the top of 20 Fenchurch Street, which opened at the start of 2015.

The business, led by Managing Director PB Jacobse who was appointed in 2005 and led the ECI Partners–backed management buyout in 2012, continues to set the standard for premium event and venue catering at prestigious locations, including Royal Albert Hall, the London Eye, and Gallery Mess at the Saatchi Gallery. As of March 2016, rhubarb added the Goodwood estate to its stable; hosting numerous events throughout the year, including the Festival of Speed, Goodwood Revival, and 19 horse race meetings that includes the Qatar Goodwood Festival.

The venue division includes (1) the operation of travel-based restaurants located at Heathrow and London City Airports and (2) service delivery for American Airlines first-class and business-class lounges with an exclusive buffet-style menu at Heathrow and on-board catering services for luxury airlines.

Centred around rhurbarb’s defining character — consisting of a bespoke approach, creative food presentation, and deliciously different menus — the business substantially improved operating margins in 2015 to post a 29.9% profit CAGR and is well-placed for further growth on a truly international basis in the coming years.

10 O L I V E C AT E R I N G S E R V I C E S


Profit CAGR: 25.3%

Key personnel: Sally-Ann Bradley and Damon Brown, Directors and Co-founders; Andrew Norrie, Finance Director and Co-founder


2015 ranking: 2

Olive Catering Services (Olive) has continued its history of steady year-on-year growth during the past 12 years, adding three high-profile contracts — Carpetright Plc, DFS, and Samsung — in the past financial year.

Led by Sally-Ann Bradley, Damon Brown (both of whom previously worked together at Catering Alliance), and Andrew Norrie (ex-PwC), Olive retains a minimum of

25% of profit generated each year to reinvest in the business, ensuring both clients and staff benefit from a first-class platform and market-leading service. This is demonstrated by an industry-leading client retention rate of 98% and industry recognition, having won Cost Sector Catering’s Contract Caterer of the Year Award, in 2016.

Earlier this year, Olive opened its first London restaurant with specialist health and life insurance company Vitality. Having developed a strong relationship with Vitality at its Stockport office, Olive won the opportunity to collaboratively design and build a new restaurant offering freshly prepared breakfasts and event catering for more than 200 staff. The contract marks the beginning of plans to grow in the City, led by operations manager Stuart Williams.

Olive is now a national player, serving more than 100 contracts from Scotland to the South Coast. The business improved operating margins for the fourth consecutive year in 2015, benefitting from enhanced scale, achieving 11.3% annual turnover growth and 25.3% profit CAGR in the past three years.

11 I N D E P E N D E NT C AT E R I N G


Profit CAGR: 24.0%

Key personnel: Andrew Saunders and Peter Hine, Directors and Co-founders


2015 ranking: 15

Up four places in the index since last year, Independent Catering (IC) was co-founded in 1996 by Andrew Saunders (former sales manager at Northdowns Catering) and Peter Hine. IC provides on-site catering services for the education sector — predominantly primary and secondary schools in the South of the UK — generating £12.2 million of turnover in 2015.

The company follows a unique profit-sharing model with its clients, designed to support the release of funds derived from over performance at schools, which it either reinvests in its catering offering or other resources. IC recently teamed up with sQuid, an interactive cashless system, in all of its partner schools, thereby making the delivery of school meals easier for schools, parents, and students. IC achieved 15.7% annual turnover growth in 2015 and 24.0% profit growth on a compound basis in the past three years.


12 C O N N E CT C AT E R I N G


Profit CAGR: 22.1%

Key personnel: John Herring, Chairman and Founder; Kate Bendall and Louise Laver; Joint Managing Directors; Sue Clay, Finance Director


2015 ranking: 8

Connect Catering (Connect) is a family-run foodservice provider incorporated in 1989 by John Herring. Based in Oxfordshire, Connect provides catering solutions and consultancy services led by John’s daughters and joint managing directors.

The business added a further £0.8 million to the top line in the past financial year, continuing its record of solid year-on-year profit growth since inception. At the same time, Connect has broadened its customer portfolio and renewed all of its quality awards (such as Investor in People) at Gold standard and placed in the Sunday Times Best 100 Companies to Work For for the fifth year running. Connect currently employs almost 400 staff, serving such clients as the Musgrave Retail Partnership (owners of Londis and Budgens) and the Royal Grammar School in Guildford.

13 D I N E C O NT R A CT C AT E R I N G


Profit CAGR: 21.8%

Key personnel: Jim Cartwright, Chairman and Co-founder; Ian Cartwright, Managing Director and Co-founder


2015 ranking: n/a

Lancashire-based foodservice provider Dine Contract Catering (Dine) was founded in 2010 by father-and-son team Jim and Ian Cartwright. The business has continued its exceptional growth trajectory following two sets of impressive account filings since our most recent report, which would otherwise have also seen Dine qualify last year. Dine operates in the B&I, education, and welfare/care sectors. Since its inception, the family-run business has experienced steady year-on-year growth.

Before establishing Dine, Ian and Jim founded Cygnet in 1995, a foodservice provider specialising in the state school sector, before its sale to Compass in 2011 for an undisclosed sum.

Dine has achieved exceptional growth since it was founded, more than doubling turnover from 2010 to 2011 and continuing that growth trajectory through the last financial year, with 24.1% annual turnover growth. Having achieved a profit CAGR of 21.8% during the past three years, supported by the acquisition of Midlands-based Quartet Catering in 2014 Dine appears set to continue its impressive growth trajectory in the coming years.

14 C G C E V E NT S


Profit CAGR: 19.9%

Key personnel: Darran Coulson, Managing Director; John Burns, Chief Financial Officer, SMG Europe

Backer: American Capital (via SMG Holdings, Inc.)

2015 ranking: n/a

CGC Events (CGC) is one of the leading venue and individual event operators in northern England. Based in Leeds, CGC caters exclusively at eight racecourses in Yorkshire, provides match-day and non-match-day catering for five northern football and rugby stadia, and provides public and event catering at 10 heritage locations, including the Yorkshire Event Centre in Harrogate and Hepworth art gallery in Wakefield.

Having delivered an impressive £21.5 million in annual turnover and 19.9% compound profit growth in the past three years, the business was acquired by the European arm of SMG Holdings, Inc., in February 2015 to broaden its base of foodservice customers in northern England and to complement existing UK venue operations, including the Manchester Arena, First Direct Arena in Leeds, and the Barbican Centre in York.

15 PA B U LU M


Profit CAGR: 18.7%

Key personnel: Deborah Harvey, Chairman; Nelson Williams, Managing Director


2015 ranking: 16

An independent operating subsidiary of the Quarr Group, which specialises in providing support services for the public and private sectors, Pabulum has established itself as one of the leading independent caterers in southern England. Dedicated entirely to education, the business has achieved compound profit growth of 18.7% during the past three years.


The business, led by Deborah Harvey and Nelson Williams, broke through the £23 million revenue barrier in 2015, having made substantial investment in IT infrastructure, secured new business sales of £2.4 million (primarily from Academy-status schools), and developed a new ‘I Love Coffee’ brand, specifically for adult students.

Supported by strong contract retention, achieving an 80% takeup rate on infant free school meals, and having established a new central leadership team, Pabulum has already secured £3.5 million of new contract awards and appears well-placed for further growth in 2016.

16 H A R B O U R & J O N E S


Profit CAGR: 18.6%

Key personnel: Patrick Harbour and Nathan Jones, Co-founders; Nick Thomas, Finance Director


2015 ranking: 9

Harbour & Jones (H&J) has continued its impressive growth trajectory in the most recent financial period to deliver 18.6% compound profit growth in the past three years — an impressive result in the context of a competitive B&I marketplace. The business will further growth in 2016 supported by the acquisition of education and events specialist Principals Catering Consultants (PCC) in December 2015.

2015 was a year of continued growth in H&J’s core operations, with the addition of new B&I contracts — including the Financial Times — and new client wins in the event and fixed venues division, including IET London: Savoy Place and world-famous Abbey Road Studios.

Under the direction of Nick Thomas as Finance Director, H&J’s focus on margin improvement has also contributed to the improved profit achieved in 2015, which will be further enhanced in 2016 with completion of the integration of PCC. Having secured the prestigious Events Caterer of the Year award in 2016, for a second time in two years, H&J continues to be recognised as one of the leading lights in the UK independent foodservice market.

17 W I L S O N VA L E C AT E R I N G M A N A G E M E NT


Profit CAGR: 18.0%

Key personnel: Andrew Wilson and Carolyne Vale, Co-founders and Joint Managing Directors; Esther Brookes, Finance Director


2015 ranking: 10

Wilson Vale Catering Management (Wilson Vale) provides catering services for the B&I and education sectors, down seven places from last year despite an impressive 9.1% growth in annual turnover.

Further enhancing its home market in the Midlands, Wilson Vale recently gained the single-largest contract in its 14-year history to provide full hospitality service at Conference Aston in Birmingham, worth £1.8 million per year. As a result, 2016 is likely to be another strong year of growth, with an expected £23 million in annual turnover. To support that growth, Wilson Vale now employs 600 people, and its ongoing commitment to talent management saw the launch of a new Apprenticeship Programme and Leadership Academy in the past 12 months.

Turnover grew by £1.8 million to £21.8 million, and the business has also delivered bottom-line results, breaking through the £2 million barrier and resulting in a highly impressive 18.0% compound profit growth rate in the past three years.

18 B LU E A P P L E C O NT R A CT C AT E R I N G


Profit CAGR: 17.9%

Key personnel: Brian Allanson, Chief Executive; Ruston Toms, Sales Director


2015 ranking: 12

Down six places since last year, Blue Apple Contract Catering is a Berkshire-based caterer founded in 1998 by Ruston Toms and Brian Allanson. The business differentiates itself by bringing high street café culture to the workplace as well as by offering hospitality and vending services. This independent caterer has experienced steady organic growth during the past 18 years, delivering a range of workplace solutions such as deli, grab and go, and mainstream vending services to B&I clients primarily in southern England, but also high profile charities such as Help for Heroes as far north as Catterick. The business also secured its first contract in the City of London during the past 12 months as it continues to cement its brand in the B&I market.


19 C H&C O C AT E R I N G


Profit CAGR: 15.3%

Key personnel: Tim Jones, Chairman; Bill Toner, Chief Executive; Madeleine Musselwhite, Chief Financial Officer

Backer: MML Capital Partners (minority investor)

2015 ranking: 3

Founded in 1991 by industry stalwarts Tim and Robyn Jones, the past 12 months of stand-alone performance proved to be another period of strong growth for CH&Co Catering (CH&Co) in advance of a merger with the HCM Group in June 2015, which was supported by investment from original BaxterStorey shareholder, MML Capital Partners.

Based on the latest 12-month period of comparable accounts, the business, now led by CEO Bill Toner, achieved 15.3% compound profit growth and, based on the contribution from the newly merged entities, will take a significant step forward in profitability during 2016 as the combined group benefits from substantial economies of scale. Indeed, the enlarged entity, including the former HCM Group business, generated pro forma annual revenues of more than £175 million in the seven months of trading post merger, with adjusted annualised profit over £8 million, thereby highlighting the significant benefit to operating margins from enhanced scale and merger synergies.

The business further diversified its service offering through a merger with independent schools caterer The Brookwood Partnership and its sister company, ABsolutely Catering (advised by AlixPartners) in July 2016, which will propel the enlarged group to more than £225 million in annual revenues, creating one of the largest independent foodservice operators in the UK.

20 W E S T B U RY S T R E E T H O L D I N G S


Profit CAGR: 14.9%

Key personnel: Alastair Storey, Chairman; Noel Mahony, Chief Executive; Marc Bradley, Chief Financial Officer; Simon Esner, Sales Director

Backer: Intermediate Capital Group (minority investor)

2015 ranking: 7

Perennial index participant Westbury Street Holdings (WSH) — parent company of well-known catering and hospitality brands such as BaxterStorey, Benugo, and Searcys — has cemented its position as the leading UK independent foodservice operator following another strong period of growth in 2015.

More impressively, given its scale, the business has been able to deliver continuous organic growth across all of its operating brands, with additional contribution from premium restaurant and events specialist Searcys, which was acquired in 2014. 2015 was further bolstered by several multimillion-pound contracts — including a new five-year deal at the Barbican arts venue in London — which adds around £5 million in annual revenues via Searcys — extending its 25-year tenure and demonstrating the benefit of joint service offerings — with Benugo securing its first contract at the venue, worth a further £3 million a year.

With annual pro forma profits of £54.3 million, WSH now sits enviably alongside — and in some cases, ahead of — many larger publicly quoted operators as it continues to set the standard for pure-play independent foodservice in the UK market and further afield. Having recently entered into a joint venture with HIX Restaurants, which will help build out its new dedicated restaurant division, the business appears well-placed to continue its stellar growth trajectory in 2016.

Source: Company statutory accounts, public press releases, tradepublications and AlixPartners analysis


by Tom Cox, Director, AlixPartners

P O S IT I V E M O M E NT U M D R I V I N G D E A L SThe independent foodservice sector has continued to thrive in our latest review, which primarily considers trading activity during 2015 and early 2016. It will be interesting to see how operators manage the impact of the national living wage from April 2016, alongside the management of wider food cost pressures which could impact margins in the next 12 months when we review performance in our 2017 report. It is likely that efficient procurement and robust infrastructure, areas in which many operators have invested over the last three years, will increasingly come to the fore, separating best-in-class players from the competition.

Of course, smaller independent operators may be partially insulated from the threat of food price inflation where so-called ‘local sourcing’ is a key mantra in service delivery. However, given that only 15% of all fresh fruit and 55% of vegetables sold in the UK are grown at home9, with the majority of the balance coming from the EU, margins could inevitably be squeezed if sterling remains weak.

As we highlighted last year, the foodservice sector is heavily influenced by economic growth and the macro environment. External-events budgets and general public-sector spending are aligned with consumer confidence and management of national spending deficits. These headwinds may have an impact on the foodservice sector in the next 12 to 18 months. Weak sterling may, however, boost venue concession and retail outlet sales in the short term with increasing tourist numbers and domestic business not travelling abroad.

We have seen further consolidation in the marketplace during the past year. In January 2016, Servest Catering acquired national contract caterer Accuro Catering10, thereby expanding its presence in the education, hospital, and healthcare sectors and continuing its brand transition with 47% of services now provided

in a white collar context. Later, in July, Elior acquired Waterfall Catering Group from Lloyds Development Capital, thereby continuing the invigoration of Elior’s UK business following the acquisition of Lexington Catering in 2014. At the same time the merger of the Brookwood Partnership (advised by AlixPartners) with CH&Co will further boost efforts to build a platform capable of competing directly with the larger, multinational players. At the very end of our 2016 review Servest was back in the market, closing the acquisition of Catering Academy to further expand its presence in the education and healthcare sector.

Other operators have strengthened their positions via integration (for example, the acquisition of Pride Catering by IFM operator Churchill Property Services in October 201511) or diversification (for example Harbour & Jones’s acquisition of education specialist Principals Catering Consultants in December 2015 and ABM’s purchase of the business and assets of care sector operator Talkington Bates Midlands in April 201612). These transactions demonstrate the potential of M&A to drive value through substantial cost synergies or enhanced capabilities.

The private-equity market continues to see attraction in the sector with Partners Group’s acquisition of Vermaat in the Netherlands in December 201513, while Lloyds Development Capital has made great strides with Amadeus, the event-catering operation of the NEC Group, which grew turnover by £10 million in 2015 and delivered £6.2 million in earnings before interest, taxes, depreciation, and amortisation14.

Sodexo also signalled its intent to boost its foodservice activities in the UK through two quick fire acquisitions which were completed in October. Indeed, Sodexo initially closed the purchase of fresh food procurement firm PSL15, as part of its wider strategy to identify data led businesses that can add value to its clients, swiftly followed by the acquisition of five public contracts historically operated by Peyton and Byrne which will continue to be operated under the old brand banner16.

9 https://www.theguardian.com/business/2016/jun/25/brexit-raise-cost-of-clothing-and-food-warns-next-boss.10 http://www.servest.co.uk/servest-group-acquires-accuro-catering/.11 http://www.pridecatering.co.uk/pride-catering-partnership-acquired-by-churchill/.12 http://www.abmcatering.co.uk/news-flash/.13 https://www.partnersgroup.com/de/news-meinungen/investitionsmitteilungen/archiv/detail/article/partners-group-acquires-vermaat-groep-bv-the-dutch-market-leader-

in-outsourced-catering-and-hospitality-services-1/.14 http://www.amadeusfood.co.uk/updates/news/amadeus-celebrate-an-impressive-year-of-growth.

Sector review


R E P O RT T R E N D S 20162016 represents the fourth year of our Foodservice Growth Report (FSGR), which reviews the financial performance of qualifying participants during the previous three years but encapsulates wider analysis of trends in the UK independent sector since 2010.

Consistent with prior periods, we’ve seen a mix of new entrants, exits, and re-entries in the 2016 report; and whilst competition remains tough in the B&I and events marketplace in the past 12 months, those subsectors continue to represent a key element of participants’ core proposition, with B&I or event services delivered by 70% of the top 20. Given the lagging nature of historical statutory reporting, the makeup of the index is perhaps no surprise, with last year’s trend towards a relatively buoyant UK market continuing to support growth through increased B&I and event expenditure across the industry. In light of more-challenging economic conditions and macro uncertainty in the UK, the index may have a different composition next year, as other, potentially more-defensive subsectors return to growth.

On one level, we may have already started to witness this transition as index participation from education specialists has continued to grow, from 25% in 2014

to 35% in 2016. That growth is likely to continue during the next 12 months, with such businesses as Elior, Harbour & Jones, and CH&Co broadening their horizons by way of specialist acquisitions in order to diversify and drive growth.

Another recurring theme in 2016 — that was highlighted last year — is the level of consistency from certain players in the top 20 — especially given that our report now tracks six years of performance data. Indeed, three of the operators placing in 2016 (Harbour & Jones, Wilson Vale, and WSH) have not only featured in each edition of our report but also achieved year-on-year margin growth during a period in which industry margins have generally contracted as independent players invested in people and infrastructure to support the next wave of growth.

Even though four operators have placed in three out of four reports (Alliance in Partnership, Blue Apple, Connect Catering, and Olive Catering) and also achieved impressive year-on-year margin gains, they have been unable to match the sheer consistency of the three leading lights, who have each achieved compound annual revenue growth of more than 10.7% in the past five years17. No mean feat.

15 http://uk.sodexo.com/home/media/press-releases/newsListArea/uk-press-releases/sodexo-acquires-psl.html.16 http://uk.sodexo.com/home/media/press-releases/newsListArea/uk-press-releases/sodexo-to-acquire-peyton-and-byr.html.

Venues and events B&I B&I/Education Education Education/Healthcare Offshore Full service

Source: Company statutory accounts

FIGURE 1: Top 20: sub-sector services (2014 to 2016)

FSGR 2014 (%)

20

50

10

1025% 30% 35%

55

5

FSGR 2015 (%)

15

4020

10

10

FSGR 2016 (%)

30

2515

20

55


Nevertheless, it appears infrastructure investment in a relatively buoyant market has proven worthwhile with both annual revenue and compound profit growth increasing for the top 20 in the last 12 months when compared to prior years. Across the index, average annual revenue growth reached 14.7% this year versus 9.9% in 2015 and against an average 10.3% across the prior three reports, highlighting robust top line performance across the board this year.

During periods of recurring annual growth, the delivery of further incremental gains become increasingly challenging due to prior year comparatives. However, the 2016 index suggests independent operators have achieved this, successfully converting new contracts into profit and at higher margins. Average profit CAGR across the top 20 in 2016 was 28.1% (15.7% in 2015), arresting the decline in compound growth that had been observed in our most recent two reports.

With the index comprising a higher proportion of niche or premium sector operators in 2016, and with strong top-line growth driving economies of scale across purchasing and central overheads, average operating margins across

the top 20 have also increased this year, reaching 8.2% (versus 6.0% in 2015), the highest average annual margin that we have tracked in our reports.

Building on past successes, we expect specialist or niche service operators to continue to thrive. More traditional B&I players may look to broaden their horizons via diversification to de-risk contract portfolios. Regardless, it is likely that the best-in-class players will remain key M&A targets for the larger consolidators seeking to drive returns from operating synergies or boost foodservice revenues in the UK.

Tom Cox is a Director in the Financial Advisory Services practice at AlixPartners. He has more than 12 years of advisory and banking experience, with a specific focus on advising corporate and private-equity clients on their debt finance options and strategies.

Disclaimer The opinions expressed are those of the authors and do not necessarily reflect the views of AlixPartners, its affiliates, or any of its or their respective other professionals or clients.

Source: Company statutory accountsNote: Note: High to low figures represent the highest- and lowest-profit CAGR observed amongst the top 20 participants in each report. Average CAGR represents the average CAGR for all members of the top 20 index in each individual report.

FIGURE 2: Top 20 – profit CAGR (2013 to 2016)

Average prof i t CAGR (%)

-

30.0

50.040.0

20.010.0

60.070.0

9.6%

65.3%

46.5%

32.5%

4.6% 3.1%

30.6%

14.9%

67.9%

20.8%15.7%

28.1%

FSGR 2013 FSGR 2014 FSGR 2015 FSGR 2016

Source: Company statutory accountsNote: High to low figures represent the highest and lowest annual profit margins observed amongst the top 20 participants in each report. Average profit margin represents the average reported profit margin on a last-12-months basis for all members of the top 20 index in each individual report.

FIGURE 3: Top 20 – four year profit margin (2013 to 2016)

Annual prof i t margin (%)

-

12.0

16.0

8.0

4.0

20.0

7.2%

16.0%

2.4%3.4%

15.4%

7.3%

2.4%

9.4%

6.0%

2.9%

16.3%

8.2%

FSGR 2013 FSGR 2014 FSGR 2015 FSGR 2016

17 Source: Company statutory accounts and AlixPartners analysis; five-year revenue CAGR: Harbour & Jones (14.8%); WSH (12.0%): Wilson Vale (10.7%); Blue Apple (8.5%), Connect Catering (8.9%) and Olive Catering (10.6%).


A B O U T T H E A U T H O R SFor more information, contact: Graeme Smith, Managing Director on [email protected] or +44 (0) 20 7332 5115 and Tom Cox, Director on [email protected] or +44 (0) 20 7332 5072.

A B O U T U S In today’s fast paced global market timing is everything. You want to protect, grow or transform your business. To meet these challenges we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication, and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters. alixpartners.com

The opinions expressed are those of the author and do not necessarily reflect the views of AlixPartners, LLP, its affiliates, or any of its or their respective professionals or clients. This article regarding AlixPartners Foodservice Growth Report 2016 (“Article”) was prepared by AlixPartners, LLP (“AlixPartners”) for general information and distribution on a strictly confidential and non-reliance basis. No one in possession of this Article may rely on any portion of this Article. This Article may be based, in whole or in part, on projections or forecasts of future events. A forecast, by its nature, is speculative and includes estimates and assumptions which may prove to be wrong. Actual results may, and frequently do, differ from those projected or forecast. The information in this Article reflects conditions and our views as of this date, all of which are subject to change. We undertake no obligation to update or provide any revisions to the Article. This article is the property of AlixPartners, and neither the article nor any of its contents may be copied, used, or distributed to any third party without the prior written consent of AlixPartners.

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Organic growth continues in the UK foodservice sector with ... · Organic growth continues in the UK foodservice sector with M&A accelerating strategic plans for several operators