I would like to say how much I enjoy the e-mails from Langton Capital on a daily basis. I use the newsletter as an ideal way of keeping me up to date with what is going on financially in the drinks industry.
Tenanted pub company
DP Eurasia, Gym Group, easyHotel, Travelodge etc.:
A DAY IN THE LIFE:
Bit busy with results but, walking back from the JDW results on Friday last, we passed around 150 pedestrians walking in the opposite direction. How many were phone zombies, smoking, carrying a coffee, listening to music or doing none of the above etc.?
Well, around 55% were doing nothing much visible other than getting where they were going. Around 26% were tapping on their phones or reading from them compared to around 3% that were actually talking on them.
About 11% of pedestrians were carrying cups of coffee (it could have been a higher proportion half an hour earlier) and only 3% were smoking. About 2%, those retro-throwbacks, were actually listening to music.
Hence, if you bump into a phone zombie listening to music whilst carrying a coffee in one hand and a cigarette in the other, he/she is very much in the minority. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• DP Eurasia has reported full year numbers to end-Dec saying its number of stores rose to 643 (567) and group system sales rose by 32.8% to 859.8m TRY.
• DP Eurasia reports that online ordering drove growth in Turkey & Russia. The group reports it ‘is confident in the pipeline for the remainder of the year.’ CEO Aslan Saranga reports ‘DP Eurasia has had another successful year.’ He says ‘we have seen strong performance in both of our geographical segments. Turkey and Russia had solid top line growth driven by our store additions and like-for-like growth. This top line growth translated into a significant increase in our adjusted EBITDA, where we also saw increases in the adjusted EBITDA margins as a percentage of system sales in Turkey and Russia.’
• Re current trading, DP Eurasia comments ‘we had a strong start to 2018 in line with our expectations with like-for-like growth of 10.7% and 25.0% in Turkey and Russia, respectively, and the Board remain confident in the business and its growth opportunities for the rest of the year.’
• Paul has announced results for the year to end-Dec 2017 saying that turnover rose by 9.6% to £35.4m with growth of 2.4% on a LfL basis.
• Paul reports post head office EBITDA of £3.2m, up 0.7% on last year. The group opened 3 new units last year.
• Paul comments on current trading, says it plans to open two units this year. It says that ‘investment in the estate continues to finish the overall refurbishment plan, started three years ago.’ UK CEO Jean-Michel Orieux comments ‘this is solid and pleasing performance from Paul in the light of challenging trading conditions such as rising property costs, fall in sterling and increased minimum wage. Closer ties with suppliers and improved menu engineering saw costs controlled, allowing us to continue to strategically and carefully expand.’ Mr Orieux continues’ we will continue to evolve our product range and are confident that PAUL will continue to engage with our customers and perform well.’
• EI Group yesterday bought back another 190,915 of its own shares for cancellation at 117.9p per share.
• The online subscription market is now believed be worth £2bn globally, Pragma Consulting has calculated. The biggest successes of this industry have been meal kits, fashion and beauty. Target have recently announced that they plan to launch a new baby clothing subscription box in the US.
• Diana Hunter, CEO of the troubled Conviviality, has stepped down with immediate effect. The company has had its shares suspended following the announcement that it had failed to account for a tax bill of £30m. The Conviviality board said: ‘The Board of Conviviality announces that Diana Hunter, Chief Executive Officer of the Company, is stepping down from the Board of the Company with immediate effect. Ms Hunter will remain with the Company for a period of time in order to provide transition support. David Adams, non-executive Chairman of Conviviality, is today stepping into the role of Executive Chairman until further notice’.
• Iced drinks company, Polar Krush, has increased turnover by 50% in 2018. The group’s sales director, Michael Reid commented: ‘All of the pieces are now in place for 2018 to be our most successful year yet. The hard work in planning and preparation by the whole Polar Krush team is really paying off as we are set for another fantastic year. Our sugar free offer is what sets us apart from the crowd, we really have created the utopia of children’s drinks’.
• UKHospitality Chief Executive Kate Nicholls has remarked on the Government’s Draft Withdrawal Agreement from the EU, stating: ‘The plan will provide businesses with more peace of mind and give employers a chance to begin drawing up their plans for their businesses post-Brexit. A full right to remain during the transition period with a chance to work towards full status, will provide non-UK EU workers with an opportunity to come to the UK with a sense of security and stability. With a significant portion of the UK’s hospitality workforce coming from outside the UK, this is the clarity and assurance that we have been calling on the Government to deliver’.
• Brakspear has announced it will stop serving plastic straws across its 11 managed pubs and will strongly advise its c120 tenanted pubs to do the same.
• Shares in Carpetright and Mothercare tumbled 14% and 12% respectively yesterday amid fears about the retailers’ futures. Mothercare is partway through a store closure programme, while a recent report suggests that Carpetright is looking to cut jobs and shut stores as part of a rescue plan to stop it going into administration. If Carpetright were to enter a company voluntary arrangement, it would join a growing list that includes New Look, Jamie’s Italian, Prezzo, and Byron, with others rumoured to be considering similar arrangements.
• Paula Nickolds, managing director of John Lewis, has backed the High Street to overcome its current troubles.
• The third annual Brighton Tap Takeover on April 27-29 will see the city become the centre of the craft beer world once again.
• Bloomberg reports Amazon is interested in acquiring sites from Toys R Us, with the toy-maker currently in the process of winding up its US business. Amazon would turn the sites into its own facilities and did not comment on how many sites it might acquire.
• The Association of Convenience Stores’ 2018 Crime Report recorded 950,000 incidents of theft last year, up from 575,000 in 2016. Retailers are blaming the police for turning a blind eye after Ministers introduced a £200 threshold for pursuing a criminal.
HOLIDAYS & LEISURE TRAVEL:
• Travelodge reports 2017 figures up on 2016 but cautions on current trading & tough comps for this year.
• Travelodge has updates for the year to end-December saying revenue rose 6.6% to £637.1m with REVPAR 0.7ppts ahead of the competition.
• Travelodge reports occupancy for 2017 of 76.1% with EBITDA of £112.4m, up from £110.1m last year. The group opened 15 new hotels in 2017. Travelodge had 558 hotels and 42,110 rooms at 31 December 2017
• Travelodge CEO Peter Gowers comments ‘our continued focus on quality and service is delivering good results. Rising sales from business customers, boosted by our new SuperRooms, helped drive strong sales growth, with like-for-like RevPAR once again ahead of the competitive segment. This helped mitigate the significant macroeconomic and external cost pressures facing the sector and deliver another year of progress for the business.’
• Travelodge continues ‘while we are not immune to the cost headwinds facing many UK leisure and hospitality businesses, with strong underlying demand for budget hotels and a healthy secure pipeline of new hotels to open, we will be well positioned once the current cost pressures abate.’
• Re recent trading and outlook, Travelodge says ‘the UK is currently in a period of well understood macroeconomic uncertainty with significant regulatory and other inflationary cost pressures.’ It says ‘demand for budget hotels has remained positive since the start of the year. However, the market is up against tough comparables for last year, which included strong inbound travel owing to the weak pound, and it also faces the impact of new supply growth in what is traditionally a low occupancy period.’
• For the midscale and economy sector, the first few weeks of the year have seen declines in London RevPAR and somewhat flat performance in the Regions, with the overall midscale and economy sector down (0.5)% in the first 7 weeks of the year.’
• Travelodge CDO Peter Gowers comments ‘in view of the wider economic uncertainty and the well-known cost headwinds, especially those relating to the national living wage, other regulated cost increases and general inflationary pressures, we remain cautious on the immediate outlook.’
• easyHotel reports it has secured a lease for a purpose-built 100 room super budget hotel in Cambridge. It says it ‘has signed a 25-year lease on a site in the city of Cambridge, for the development of a new purpose-built easyHotel.’
• easyHotel comments ‘located on Newmarket Road, the site is situated less than 1 mile from Cambridge City Centre.’ CEO Guy Parsons comments ‘having recently completed a successful fundraising to fund the acceleration of our owned hotel portfolio, this announcement is a clear signal of our intent and ambition to expand our development pipeline, targeting popular business and leisure city centre locations.’ Mr Parsons concludes ‘the Cambridge site takes easyHotel’s pipeline of owned/leased development projects to 1,041 rooms, adding one of the UK’s most thriving and popular cities to our network. The Board looks forward to announcing further opportunities in due course.’
• A couple who made a false holiday illness claim used medical evidence produced by a relative in the firm of solicitors that represented them, raising ‘obvious ethical and legal questions’ according to Tui, the operator involved in the case.
• Gatwick potentially faces strike action by key workers in a row over pay, which has increased below inflation. Strikes could begin by the end April if employees back industrial action, the Unite union warned.
• Ian Taylor reports from ITB in Berlin that top European destinations are having to placate locals regarding tourist overcrowding. Amsterdam claims it is an ‘explosive’ issue with Barcelona council saying ‘it’s impossible to add more people’. Frans van der Avert, Amsterdam marketing chief exec, said ‘It’s time for Europe-wide regulation [of sharing economy accommodation platforms]. The problem won’t go away.’
• Gatwick experienced delays and cancellations on Sunday night due to ice, with Exeter and Bristol airports having similar issues. Manchester airport had to cancel 20 flights on Sunday.
• Uber has suspended its autonomous car project in the US after a 49-year-old woman was killed crossing the road in Tempe, Arizona.
• Gym Group reports FY numbers. Seeing ‘accelerated profitable growth, significant pipeline progress.’
• Gym Group reports revenue up 24.3% to £91.4m with adjusted EBITDA +23.2% at £28m. EPS 7.4p (vs 5.6p) with full year dividend of 1.2p. CEO John Treharne comments ‘we have made considerable progress in 2017 and were the fastest growing low cost fitness operator, substantially increasing our market share and rapidly expanding our estate.’ He reports ‘we continue to see potential for substantial growth in 2018 as we plan to open a further 15-20 new gyms and benefit from the profitability of those sites opened in recent years reaching maturity.’
• Re current trading, Gym Group reports ‘we have had a strong start to 2018 and are excited about the future and confident in our team’s ability to maximise our opportunity.’ The group says ‘the new financial year has started well and current trading is in line with the Board’s expectations with 664,000 members at the end of February, an increase of 9.4% since the year end.’
• Jackpotjoy reports FY numbers to end-Dec. Revenue +14% at £304.6m with adjusted EBITDA of £108.6m against £102.2m last year.
• Jackpotjoy reports adjusted net income of £1.02 per share vs £1.13 last year. Re the outlook, the company reports ‘the 2018 financial year has seen a solid start with a healthy double-digit progression in Group revenues.’
• Jackpotjoy’s executive chairman Neil Goulden comments ‘the record financial results we achieved in 2017 reflect the dedication, ambition and work ethic present in employees across the business.’ He says ‘we are confident of our prospects for growth against a healthy market backdrop in global online gaming and determined to ensure we present an entertaining, fun and responsible environment for our customers to enjoy.’
• The Gambling Commission recommends the maximum stake on a fixed-odds betting terminal (FOBT) should be ‘at or below £30’, down from the current maximum of £100. Shares in bookies rose on the news as the ruling put an end to speculation that the commission could set the maximum stake at £2.
• A new Escape Hunt branch in Casablanca opened last Saturday.
• Facebook’s security has been brought into questions after reports detail Cambridge Analytica - the firm credited with helping Donald Trump win the election - acquiring and using customer information. Consequently, Facebook’s shares were down more than 6% Monday mid-morning.
FINANCE & MARKETS:
• Rightmove reports London house prices continued to fall last month. it says prices fell by 0.6% in the year to March
• Sterling up vs dollar at $1.4024 and higher vs Euro at €1.1368
• Oil price higher at $66.58
• UK 10yr gilt yield unchanged at 1.44%.
• World markets: UK, Europe & US down yesterday with Asia lower in Tuesday trade.
• UK PLC. French co Michelin is buying Fenner. GKN may go to an American (or Melrose). The French want Hammerson, ARM is now owned by the Japanese & our chocolate industry is long gone as the UK struggles to raise £10bn per month from asset sales to pay for trade deficit.
• Michelin says it ‘values the skills, experience and industry knowledge of Fenner’s management and employees.’
• Brexit etc.:
o UK & EU agree to agree. Transition is 21 months. Default position on Ulster is it will stay in single market unless a better solution can be found.
o Nothing is agreed until everything is agreed. Sterling up on news of deal.
o Broken promises mount up. No divorce bill, there’ll be a massive Brexit dividend, there’ll be no more free movement after 29 March, new migrants will be treated differently, Ulster will not be carved out, there will be no border in the middle of the Irish Sea, we won’t slump to last place in the G20 etc. etc.
o Boaty McBoatface protest vote in June 2016 delivering up a sub-optimal outcome for the UK.
o DUP said to be unconcerned re outlook for border in Ulster.
PRIOR DAY LATER TWEETS:
• Later tweets: JDW shares down Friday on good numbers but tougher outlook in H2. Snow here & gone but wage costs, slower economy etc. to weigh on numbers
• Gambling Commission recommends maximum stake for FOBTs should be "at or below £30". Could have fallen to £2. Let off for the bookies?
• Escape Hunt reports latest branch (in Casablanca, Morocco) opens today. Group to report FY trading on 4 April
• Staffing restaurants harder per Observer. Some chefs hired on ‘emergency’ basis costing £000s per week each
• London tourist attractions seeing lower number of visitors. What’s going on there, then? Lower Sterling was meant to ignite a boom
• BCC slightly raises growth estimate to 1.4% for 2018 & 1.5% next year. Says UK will be among worst performing G7 economies
• Silver, silver, all you can buy. Hammerson may go French, GKN American. ARM to the Japanese, Heathrow Spanish etc. etc.
• CPI tomorrow, may show price rises abating. Elsewhere, hearing that hospitality labour costs +6% or so, chefs much, much more
START THE DAY WITH A SONG:
Yesterday’s song was Zombie by The Cranberries. Today, who sang:
Advertising looks and chops a must
No big hair!
Songs mean a lot
When songs are bought
RETAIL NEWS WITH NICK BUBB:
• Carpetright: The share price took another ominous lurch down yesterday, to just 44p (capitalising the company at only £30m), but there has still been no official update from Carpetright since it warned on March 1st that it had breached its banking covenants and the weekend press said that it is considering a CVA to dump some of its worst stores…
• Ocado: Today’s Q1 update from the Online grocery tech company that is Ocado covered the 13 weeks to March 4th, so the last week included the week of all the snow disruption and they say that delivery problems that week knocked nearly 1% off Q1 sales, but otherwise the business operated at maximum capacity and Retail revenue grew by 11.7%. The next warehouse in Erith (CFC 4) is on track to open by “mid-2018” and the feisty CEO Tim Steiner is firmly optimistic about the future…
• News Flow This Week: Tomorrow brings the Kingfisher finals and ScS interims (along with the New Look CVA vote). Thursday brings the Ted Baker finals and the ONS Retail Sales figures for February, together with the “Retail Week Awards” (aka “the Retail Oscars”) in the evening. Then we get the much awaited Next finals on Friday.