Margaritaville Controlled Express Catering To Raise $491.3m. Valuing Company At J$2.5 Billion

Highlights

  • The company has concession arrangements to sell food and beverages at the Sangsters International Airport in Montego Bay with a number of reputable international and local brands
  • Raising J$491.3m from the sale of 327.5m shares at J$1.5 per share. Valuing the company at ~J$2.5b
  • Would become the 4th largest public company in the Caribbean in the Hotels, Restaurants & Leisure industry
  • Owned by the Margaritaville St. Lucia Inc.
  • Currently profitable. Earned net profits of US$1.1m in 2016 from sales of US$14.1m (compared to profits of US$590k in 2015 and sales of US$13.6m)
  • Recently launched its US$3.5m 7 year preference share to raise funds
  • Recently entered an agreement to operate the Starbucks coffee franchise. Construction to begin within 6 months

 

Express Catering Ltd is aiming to raise J$491.3m from the sale of 327.5m shares at J$1.50 per share. The company, which is controlled by the Margaritaville Group (who will be selling shares in the initial public offering) currently has a number of concession arrangements to sell food and beverages at the Montego Bay Airport in Jamaica. The company earned net profits of US$1.1m in 2016 from sales of US$14.1m (compared to net profit of US$590k in 2015 and sales of US$13.6m).

 

The Offer

The company is offering 327,500,000 shares for sale, inclusive of the following Reserved Shares for priority applications from certain persons

  • 16,500,000 Company Reserved Shares  
  • 32,750,000 Mayberry Reserved Shares  
  • 245,625,000 Key Partners Reserved Shares
  • Additionally 32,625,000 General Public Shares are available.

Any unsold Reserved Shares will also be made available for purchase by the general public. All Sale Shares, including the Reserved Shares, are priced at J$1.50 per Share.

 

Key Dates

  • Registration and issue of Prospectus: Wednesday 5 July 2017
  • Opening Date: Wednesday 12 July 2017
  • Closing Date: Wednesday 19 July 2017*

 

The Company

Express Catering Limited is a Jamaican company that was formed in 2001 to carry on food and beverage operations at the Sangster International Airport in Montego Bay (“Sangster Airport”). Over the years, the Company has grown to be the exclusive provider of food and beverage operations at the Sangster Airport inclusive of the following branded restaurants and concessions:

  • Quiznos Subs and Salads, Dairy Queen, Nathans Famous Hot Dogs, Domino’s Pizza, Auntie Anne’s Pretzels, Wendy’s, Cinnabon, Moe’s South Western Grill, Island Deli, Viva Fresh Market Grab & Go, Cricket Sports Bar, Connections Bar, Air Margaritaville Arrivals Bar, Jamaican Bobsled Café, Groovy Grouper, and The Bar

The Company is completely focused on maintaining a high standard in its food and beverage facilities and also, to ensuring that its food and beverage offerings remain relevant to consumer demands in the marketplace. The Company currently employs over 270 persons on a continuing basis with additional persons brought on during peak seasons.

The Company is a 100% owned subsidiary of the Group, owners and operators of the Jimmy Buffett’s Margaritaville franchise throughout the Caribbean. The Group, through its various subsidiaries and partnerships, owns and operates a diverse portfolio of restaurant and nightclub concepts in Jamaica, the Cayman Islands, the Turks and Caicos Islands and most recently, St. Thomas in the US Virgin Islands.

Margaritaville Caribbean, the holding company of the Group, owns and operates a diverse portfolio of companies and its strategic plan involves the development of the Group’s restaurants and attractions in these and other locations in the Caribbean utilizing innovative and efficient approaches, and product consistency.

The Group’s growth strategy has been predominantly focused on developing the Jimmy Buffett’s Margaritaville brand in its various locations. Over the last 5 years however, the Group has broadened its strategy and is currently aiming to provide multi-branded food, beverage and entertainment requirements for major transportation hubs.

Both its recognizable brands and their strategic placement throughout the airport have assisted the Company to increase average customer spend from approximately US$5.95 in 2012 to over US$7.30 per passenger currently.

 

Background

The Company, Express Catering Limited, has been providing food and beverage offerings to the passengers and staff at the Sangster International Airport since 2001 when the first Jimmy Buffett’s Air Margaritaville location was established there. The proprietary and local branded restaurants of the Company inclusive of Bobsled Café, Tastee Patties and Groovy Grouper provided more than 50% of the total food and beverage offerings in the Sangster International Airport up to the end of calendar year 2011.

 

Investment & Performance

The Company’s total investment to date, inclusive of the buy-outs and installation of new concepts, structures and equipment for the establishment of international brand offerings, was in excess of US$6.0 million.

 

The Company achieved Revenue of just under US$14.1 million in the financial year ended May 31, 2016. This represents an increase of US$460,000 or 3.38% over the previous financial year’s Revenue of US$13.6 million. Revenue for financial years 2013 and 2014 was US$10.0 million and US$12.2 million respectively.

 

Gross Margins have remained stable at 74% or more of Revenue, while administrative costs declined to 27.2% of Revenue (this compared to 30.5% in the prior financial year), as a result of better management of the labour component of Total Costs.

 

The Company has recently entered into an arrangement to operate a franchise location under the international coffee brand, Starbucks Coffee Company. The Company anticipates that construction of its new Starbucks branded offerings at Sangster airport will commence within 6 months and will contribute significantly to revenue in the first full year of their operations, which is expected to occur in financial year 2018.

Financial Performance

In the financial year ended May 31, 2016 the Company reported Total Revenue of US$14.1 million, and Net Profit of US$1.1 million (this compared with US$13.6 million in Revenue and US$590,000 in Net Profit in financial year 2015). This represents a 3.4% increase in year on year (YOY) Revenue and an increase in Net Profit of 81.4%. The Company attributes the increase in Net Profit to the growth in top line Revenue and the containment and/or decline of Operating Expenses, Depreciation and Interest Expense. As a result of the foregoing, Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) improved from US$1.8 million in 2015 to US$2.2 million in 2016. The Company recorded Gross Profit and EBITDA margins of 75% and 16% respectively for the financial year 2016.

 

Expenses (inclusive of Management Fees) before taxation for the most recent audited year, being financial year 2016, were US$8.2 million reflecting:

  • Rent of US$2.8m, which increased by 2.6% YOY.
  • Salaries and wages of US$1.4 million, which declined by 4.8% YOY.
  • Group charges of US$2.2 million, which increased by 4.8% YOY.

These items are represented by partial Franchise Fees and Group Recoverable Cost as set out in the Audited Financial Information. The Company also posted Net Profits of US$ 1.1 million and a Net Profit margin of 7.6% in financial year 2016.

 

The Company’s Total Assets stood at US$6.1 million at the end of financial year 2016, down from US$6.8 million the year prior. The majority of this decrease represents depreciation on Property Plant and Equipment of US$0.5 million.

 

Liabilities at May 31, 2016 were US$2.6 million, mainly comprising Total Debt of US$1.2 million (down from US$2.4 million in the prior year) and Trade Payables of US$1.1 million. Approximately 55% or US$0.7 million of Total Debt is short term debt owed to related companies. The Company employs fairly low leverage as reflected by its debt/EBITDA ratio of ~0.5x as at May 2016.

At this price the company is being valued at J$2.5 billion and is almost 12 times the size of Kingston Live Entertainment (KLE), more than 3 times the size of Palace Amusement and more than twice the size of Pulse Investments. Express Catering would become the 4th largest company in the Caribbean by market capitalization in the ‘Hotels, Restaurant and Leisure’ industry behind Supreme Ventures (J$19.7b), Trinidad listed Prestige Holdings Limited (J$12.8b) and Dolphin Cove (J$7.1b).

 

The Last 10 Months

The Company continued to increase year over year (YOY) Revenue, recording US$11.54 million for the 10 months of financial year 2017 compared to US$11.52 million in the 10 months of the prior year. This resulted in EBITDA of US$1.92 million for the 10 months of 2017 compared to US$1.68 million in the comparable period in the prior year. Net Profit before Tax was US$ 1.15 million for the 10 months to March 2017 compared to US$904,144 in the same period the prior year.

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