The planned IPO of Burger King UK has been boosted by a strong set of 2021 results published alongside ambitious growth plans. The company, which owns the Burger King franchise for the UK and counts the private equity group Bridgepoint as a major backer, has reportedly appointed Bank of America, Peel Hunt and Investec to explore an IPO.
A time frame for a listing has yet to be announced and is unlikely to be while markets struggle with a combination of geopolitical uncertainty and inflation. However, it is believed the company would, market conditions permitting, prefer it to be sooner rather than later.
Bridgepoint acquired the UK master franchise for Burger King from Restaurant Brands International, the brand’s owner, in 2017. It created Burger King UK, of which it holds around 75% with the remaining equity divided between Restaurant Brands and management.
The company is certainly building a strong case for capital markets with 2021 revenues above pre-Covid levels. Plans for another 200 Burger King around the country were also announced, backed by a belief the brand still has “significant under-penetration in the UK market”.
Burger King UK currently has 509 outlets around the country of which 172 are directly owned with the remainder sub-franchised. 20 sub-franchises were bought out last year as total group revenues grew by 68% to £211.7 million from £118.9 million in 2019. Like-for-like sales improved by 21% compared to the last full year before the onset of the pandemic and lockdown restriction in early 2020.
Underlying earnings improved by even more, almost tripling to £49.5 million. That provided an operating profit of £33.4 million after losses sustained in both 2019 and 2020.
Since the beginning of the current year Burger King UK has bought another 2 sub-franchises and opened 6 new restaurants. The company said that while the war in Ukraine and sanctions levied against Russia were not directly affecting it, it was “closely monitoring the potential impact of economic factors such as inflation in commodity prices”.
However, while the company’s strong performance is a boost to IPO hopes, if market sentiment fails to improve as the year wears on, Bridgepoint could instead decide to try to realise a return on its investment by turning to private equity. But if the environment for small caps improves significantly, a public markets capital raise appears to be the preference.