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
Easyhotel, Cau & Gaucho, shop closures, sugar & other:
A DAY IN THE LIFE:
After the dog has done something disgraceful, usually involving biting, trying to bite or threatening to bite a random innocent person or thing, he has a habit of looking at me to say ‘a simple thank you would suffice’.
That because I tend to react badly when he brings us into disrepute and he simply cannot understand why and, I believe, if he could understand why, he still wouldn’t get it but would rather put my opprobrium down to some weird human fetish that he neither understood nor intended to waste the brainpower attempting to.
Anyway, in common with a number of us on our best days, he does serve a purpose of sorts I suppose. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Gaucho collapses, administrators blame over-supply and most restaurants close straight away.
• Gaucho has appointed Deloitte as administrators. Some 22 Cau restaurants are to close immediately and 540 people will lose their jobs.
• A further 16 Gaucho sites will remain open for a little while at least. Deloitte says ‘unfortunately the Cau brand has struggled in the oversupplied casual dining sector with rapid overexpansion, poor site selection, onerous lease arrangements and a fundamentally poor guest proposition all being factors in its underperformance.’ It continues ‘as such, the decision has been made to close this loss-making part of the group with immediate effect, unfortunately resulting in today's redundancies.’
• Hackney councillors have approved a licensing policy for Hackney that will introduce “core” midnight curfews for all new venues. New sites will have to close at 11pm during the week unless they can persuade licensing authorities otherwise.
• Kantar has suggested that the UK’s beer & cider-makers are enjoying a boom thanks to the World Cup and the continuing hot weather.
• Telegraph reports some 11,151 shops have been closed or earmarked for closure this year. It says ‘Britain’s high street has endured a terrible year so far’. Over 20k jobs have been lost or put at risk.
• Domino’s Pizza Inc has disappointed investors in the US after reporting a slower-than-expected international rollout. Domino’s CEO said on a conference call with analysts the company was ‘particularly pleased with the performance of our U.S. business, led by outstanding same-store sales and yet another quarter of solid, sustained momentum.’
• Domino’s has 6,592 stores in the US and sees the opportunity to take the total to around 8,000 over the next 10yrs. Domino’s says ‘we recognize that our store growth internationally is slower than we expected for the first half of this year.’ The company continues ‘we do not believe there is any structural or material market-specific reasons for the net store growth results for the first half of the year, and we reiterate our global net store count guidance of 6 percent to 8 percent annual growth over the next 3 to 5 years.’
• Poundworld has announced the closure of its remaining 190 stores, which will result in the loss of 2,339 jobs.
• A new low sugar version of Cadbury’s Dairy Milk will be released next year. The bar will contain 30% less sugar, a bigger reduction than required by the government.
• Subway has announced to the MCA that it expects its move into delivery with Just Eat will open new peak dayparts away from its traditional walk-in busy periods.
• Heineken has begun its £6m ‘Now You Can’ campaign for its alcohol-free beer.
• Quentin restaurants, the Soho House joint venture, has put together a pipeline for its new concept Mollies Motel & Diner, reports the MCA. The concept seeks to ‘disrupt the roadside’, with the first unit opening at the end of this year at the former Buckland Services site on the A420.
• Martin Williams, the UK restaurateur and former managing director of Gaucho, has stated he tried to buy the struggling chain. His efforts were rebuffed however, and the group is expected to enter administration.
• The founder of Papa John’s International is believed to have been in talks with Wendy’s about merging the pizza and burger brands. The Wall Street Journal quoted people close to matter: ‘The talks between Wendy’s officials and Mr. Schnatter, who still sits on the board and owns 29 percent of Papa John’s, were preliminary and began before he stepped down as chairman last week’.
• The demand for barbeques and World Cup-fever have failed to boost retail sales in June, with the ONS reporting sales down 0.5% between May and June. ONS senior statistician Rhian Murphy said: ‘Consumers stayed away from stores and instead enjoyed the World Cup and the heatwave’.
• Ozone Coffee acquires Has Bean, with both businesses set to retain their identities but consolidating back-office systems.
• China’s drinks industry registered growth in H1 despite sharp price increase for some products. Baiju, which is mostly consumed domestically registered the sharpest growth.
EASYHOTEL SITE IN DUBLIN, SOME EXTRA COSTS…
• easyHotel has announced that it has acquired a Dublin freehold site for a new, purpose-built hotel. The group says it is strengthening its development team ‘to support increased focus on Continental European expansion’.
• easyHotel reports ‘the [Dublin] site already has planning permission in place for a 96-bedroom hotel. However, the Group believes there is potential to extend the development further to a 130-bedroom hotel and will apply to vary the existing planning permission accordingly.’ EZH has paid €9m for the site. It reports ‘the 130-bedroom hotel is expected to have a total investment cost of €18m and will be funded using cash from the Group's balance sheet, together with local debt financing.’
• Dublin is easyHotel's ‘second owned hotel investment in Europe with the Group's first owned European hotel, easyHotel Barcelona (204 rooms), due to open this summer.’ EZH says that, as a result of slower growth in the UK, it ‘intends to balance the number of owned hotel openings between the UK and Continental Europe, where recently the Group's franchised hotels have delivered a particularly strong performance.’
• The group is to appoint a Group Development Director for Europe and says ‘the costs associated with these appointments will have a small impact on earnings for the current financial year and are expected to reduce EBITDA by c£750,000 in the 2019 & 2020 financial years. However, the Group believes that the additional Continental European hotels this team is targeted to deliver will be significantly earnings enhancing from 2021.’
• EZH reminds observers ‘four new owned hotels (517 rooms) are expected to open by the end of the current calendar year. easyHotel Maastricht opened at the beginning of July taking the total number of hotels in the Group to 28. There are a further four new franchised hotels (336 rooms) nearing completion, and although the official openings have been delayed, they are still expected to open by the end of the current calendar year.’
• EZH CEO Guy Parsons says ‘the Dublin site takes our pipeline of owned/leased projects to 1,280 rooms in addition to the 1,782 franchise rooms currently under development.’ Mr Parsons adds ‘Europe holds a number of attractive opportunities for the easyHotel brand and we are keen to achieve a balance in our development pipeline between the UK and Continental Europe, as we look to accelerate our presence in these markets.’
• The group concludes it ‘has a strong owned hotel development pipeline already established in the UK and this additional operational resource announced today will ensure that we are well positioned to take advantage of more opportunities in Continental Europe, creating value for our shareholders and underpinning the long-term growth of the easyHotel brand.’
HOLIDAYS & LEISURE TRAVEL:
• Busiest holiday weekend of the year coming up. ABTA expects a record 2.5m holidaymakers will travel overseas this weekend. ABTA says Spain remains the top destination with ‘strong growth’ to Turkey, Egypt, Greece, Bulgaria and Croatia.
• Popular European destinations such as Barcelona, Paris, Rome and Amsterdam head the list for city breaks.
• Worldpay has reported that customers are spending nearly 11% more on their holidays this year versus last. Sterling is weak but Worldpay says that holidaymakers are increasingly travelling further afield. Worldpay says ‘looking at our data we predict a surge in last-minute bookings in August with holidaymakers taking advantage of cheaper prices on flights and accommodation, especially if we see a turn in the weather.’
• Next summer Tui is set to add two Family Life properties in Turkey and Crete as well as two adults’ only Sensimar resorts in Egypt and Majorca. The move will bring Tui up to 174 concept hotels across 48 destinations.
• Two days of strikes by Ryanair crew has forced the airline to cancel up to 600 flights affecting up to 100,000 passengers.
• Ronald James, 68, has been fined £230 after shouting at a stewardess on a Tui flight over a lack of bacon rolls.
• Hogg Robinson has been acquired by American Express Global Business Travel in a move which will offer clients and travellers a ‘wider range of products and services, bringing together the best of both businesses including technology, people and a comprehensive geographic footprint’.
• Plans for the next 20 years for Cardiff airport include a new terminal, four star hotel, multi-storey car park and doubling passenger numbers to 3m a year.
• The US hotel industry has reported positive results in its three key metrics during June 2018, according to data from STR. Occupancy has increased 1.7% to 74.5%, average daily rate is up 2.8% to $132.66 and RevPAR climbed 4.6% to $98.85.
• The US hotel industry has announced mixed y-o-y results for the week of 8-14 July 2018, STR has reported. Occupancy is down 1.6% to 76.1%, ADR has fallen 1.2% to $132.14 and RevPAR has also decreased 0.4% to $100.56.
• Comcast is believed to be the new owner of Sky, the BBC has reported. This would mean that Rupert Murdoch’s 21st Century Fox has failed in its bid to take full control of Sky
• MGM Resorts has caused a backlash after it filed a suit against shooting victims of the October 2017 mass shooting in Las Vegas. The company isn’t seeking money from the victims; rather, it’s asking a federal judge to decide if the 2002 Safety Act shields it from liability from the shooting.
FINANCE & MARKETS:
• Donald Trump has said he is ‘not happy’ that US interest rates are rising.
• Sterling weak at $1.3018 and €1.117.
• Oil little changed at $72.73
• UK 10yr gilt yield down 3bps at 1.19%
• World markets: UK up yesterday on a weak Pound but Europe & US down. Far East down in Friday trade.
• Brexit & other:
o Leave campaigner and Brexit Secretary Dominic Raab was in Brussels yesterday to hold his first talks with Michel Barnier.
o EU briefing paper warns of potential disruption to aviation industry & movement of goods.
o Ireland says it will need 1,000 new customs officials to police incoming goods even if there is a deal with the UK.
o Plans are being drawn up to issue up to 7m driving permits to Britons to allow them to drive on the Continent after March.
o Dominic Raab calls for ‘renewed energy, vigour and vim’. EU says ‘everyone must now step up plans for all scenarios and take responsibility for their specific situation.’ Boris Johnson says there may be some suboptimal outcomes adding ‘that obviously makes it very uncomfortable and some horrendous consequences.’
o Mrs May is to tell the EU they should drop their inflexible view on the Irish border.
PRIOR DAY TWEETS:
• Later tweets: Gaucho to appoint Deloitte as administrator, 1,500 jobs at risk? Who called whose bluff? But it wasn’t a bluff at all…
• DPP growth slows slightly, LfLs still +13% in H1. Rate of openings to slow, less cash burn as maturing stores hit profit
• Lower cheese price helps DPP margin. Every cloud etc.?
• PFD hints disposals? Looking at ‘other strategic opportunities to accelerate the Company’s turnaround to create value for shareholders’
• Goals warns on trading, amends banking covenants. Says H1 is ‘materially below market expectations’. Blames weather etc. Shares clobbered
• Who’s driving Brexit? British people, Mrs May, Boris, Jacob Rees Mogg or, and here’s a thought, nobody at all?
• Trump to meet Juncker next week. Where do you start? Probably a meeting (dialogue of deaf etc.) it would be interesting to attend
• Internet impact? Material drop in price of footwear & clothing (early H St sales etc.) holds inflation down (but can’t go on forever)
START THE DAY WITH A SONG:
Yesterday’s song was Stromae with Papaoutai. Today who sang:
I've waited for a long time,
Yeah the slight of my hand is now a quick pull trigger
I reason with my cigarette
And say your hair's on fire, you must have lost your wits, yeah
RETAIL NEWS WITH NICK BUBB:
Trade Press: Retail Week/Fortnight has not been published today, but Drapers magazine is out and focuses on Athleisure, with a feature article on how emerging brands and the sector’s giants are seeking new niches to satisfy customers and secure growth, whilst the Editor thunders in her column that “Athleisure is fighting fit and raring to grow”. In terms of News stories, Drapers flag that fashion suppliers are struggling to find routes to market for big-volume orders (as credit insurance is withdrawn from troubled High Street retailers), John Lewis will launch its largest own-brand fashion label (John Lewis & Partners) this autumn and the Asos CEO Nick Beighton has defended the group’s new focus on infrastructure.
Planet ONS Watch: In the real world the hot weather and the World Cup boosted the BRC-KPMG Retail Sales for June, but “seasonally adjusted” life was not so good last month on the High Street on that bizarre parallel world, the Planet ONS (aka the Office of National Statistics)…The official Retail Sales figures confounded the economists expecting a 0.5% rise in month-on-month seasonally adjusted sales volume, as there was a 0.5% fall, but, despite the usual uncritical coverage in the press of the ONS figures, the fact is that the non-seasonally adjusted sales value figures were fine, with total sales up 4.4% year-on-year (vs 6.4% growth in May), led by 5.8% growth for Food retailers. Interestingly, the weak Non-Food sales (only 1.6% up), were depressed by unusually weak figures for Small Businesses (the wretched ONS usually has it the other way round…).
BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis wilted again in the continuing heatwave last week, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday July 15th, is reasonably solid, reflecting its relatively low exposure to “indoor”/household goods. BDO Fashion Store LFL sales were only 1.6% down, but including Lifestyle very weak Homewares sales, total Store LFL sales were down by 2.5%. Overall Online sales (which are separately reported by BDO) were only up by 6.6%, because of a collapse in Homeware sales, but Online Fashion sales alone were up by 19.2%.
News Flow Next Week: Next week is busy again, in terms of Retail news, kicking off on Monday with the McColl’s interims, closely followed by the latest monthly Kantar/Nielsen grocery sales data on Tuesday. Tuesday also brings the Halfords AGM, whilst the Joules finals are on Wednesday. Thursday then brings the Howden interims, the Inchcape interims and the Bonmarche AGM. And there are also back-to-back interim results from the big shopping centre landlords, with Hammerson on Tuesday, CapCo on Wednesday and Intu Properties on Thursday.