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
Deliveroo, M&B, e-sports, Saga, regional spending etc.:
A DAY IN THE LIFE:
So, where are our conviction politicians?
Well I guess it’s like saying where are all the polite cockroaches. Natural selection has shown them the door and convictions are usually kept hidden like an unsightly spot but perhaps it should be said that there are a few driven individuals around.
But they’re mostly swivel eyed nutters, aren’t they? I’m not so sure about some of our Cabinet members and Mr Corbyn, who has convictions (most of them as far as I can see a bit weird, not a little disturbing and economically suicidal) coming out of his ears, could be in no10 shortly but the current occupant of that distinguished building and most of the wannabes who are unpleasantly circling around her like grinning dogs around a wounded hippo, wouldn’t know a conviction if it hit them on the back of their heads.
And that’s a shame, isn’t it?
Or maybe I’m just being naive as it was Groucho Marx who said ‘these are my principles and if you don’t like them, well, I have others’ and our politicians are certainly behaving as though they’re extras in a Marx Brothers film. So maybe their behaviour is to be expected, even welcomed, as its suitable for the situation that they’ve put us in and all will be well in the end, won’t it?
Anyway, with the weather up North said to be ‘chilly but dry’ over the weekend, it’s nearly time to go home. On to the news:
MILLENNIAL VIEW: 60 SECONDS ON E-SPORTS:
Esports -- the next industry you can’t ignore?
• Some of the world’s most valuable companies operate at the intersection of media and tech. They are all battling for the same resource: eyeballs on screen.
• Think Facebook’s increasing live capabilities, Youtube’s 24-hr streaming channels, Twitch gaming, Netflix, and Prime.
• This drives a race for content. Nowhere is that more clear than in the rapid growth of esports and digital gaming.
• Three powerful trends are driving this growth:
• User Reach. Smartphones are ubiquitous and games consoles are mainstream. Today there are over 2.6bn casual gamers in the world (Unity: 2017).
• Smoother Revenue. Developers can evolve and upgrade games over time, prolonging monetisation. Mobile has freemium games with in-app purchases; consoles have DLC content and season passes.
• Player engagement. There are over 400m esports viewers (Newzoo: 2017), along with a rapidly professionalising troupe of franchisees, teams, leagues, tournaments, superstar players, and agents.
A lot of building remains to be done...
• One listed play is esports business Gfinity.
• Gfinity is still figuring out its business model and so right now is more of a gamble than an investment. This can change.
• Season one of its Gfinity Elite Series attracted c3 million viewers and a second season has been commissioned for 6 October.
• There’s a lot of work to do (and cash to spend) on building up the industry. Having said that, the potential upside is sizeable.
PUB, RESTAURANT & DRINK PRODUCERS:
• Deltic has reminded investors that it ‘has put forward a proposal to the Board of Revolution, which it believes would create a compelling alternative to the Stonegate proposal for Revolution shareholders.’ Deltic adds ‘unfortunately, Revolution's Board has rejected Deltic's merger proposal out of hand and has seen no merit in pursuing merger discussions or conducting any due diligence on Deltic's business or plans for a combined business.’
• Deltic continues, saying that it will ‘progress its own due diligence on Revolution and this has confirmed Deltic's view that the Stonegate offer undervalues Revolution. In order to put forward its merger proposal and discuss with shareholders, Deltic will in due course publish its own profit forecast and a quantified financial benefits statement in respect of a merger, the timing of which will be dictated by the publication of Revolution's full year results, which are expected on 3rd October, 2017.’ The group says ‘in parallel it continues to evaluate a possible cash offer for the entire issued and to be issued share capital of Revolution.’
• The Takeover Panel has said that Deltic must put up or shut up by 5.00pm on 10 October 2017. Deltic says it ‘will make further announcements in due course. In the meantime, Deltic emphasises that there can be no certainty that an offer or other proposal will be made for Revolution nor as to the terms on which any offer may be made.’
• Colliers International’s Norther Soul report suggests that ‘Northerners lead UK spending on eating and drinking out, but the market is reaching capacity.’
• Colliers says that ‘after a number of buoyant years, the food and beverage market in the North of England has entered uncharted waters with much talk of oversupply in a range of locations.’ Colliers’ Ross Kirton reports ‘some locations that have expanded their offer rapidly are now starting to see signs of oversupply, leaving some schemes with a more challenging outlook. However, the most prosperous and sustainable locations will be those which continue to keep the offer fresh, bring new entrants to the region and carefully curate the offer to meet the demands of the local consumer.’
• Big Hospitality reports that a second site of ping pong focused bar Smash will open, in Wimbledon, south-west London, later this month. The (soon-to-be) chain is owned by Eclectic Bar Group, which is part of Brighton Pier.
• Bounce, which also currently operates two ping pong sites in London, also operates in Chicago, USA. Bounce Shoreditch made a profit in the year to end-September of £939k but parent company Bounce Ping Pong made a loss of £1.46m, suggesting that Chicago has cost rather a lot to set up & operate in its first few months. Big Hospitality suggests that Smash’s move ‘marks the continued growth of the ‘dinnertainment’ sector, where the lines between dining and social activities are being blurred.’ It points out that ‘The Institute of Competitive Socialising, the group behind Swingers, the crazy golf, street food and bar concept, is set to launch a new site in Leadenhall Street in the City.’
• Deliveroo parent Roofoods has reported numbers to Companies House showing that it lost £129.1m in the year to end-Dec 2016.
• Deliveroo parent Roofoods generated revenues of £128.6m in the year to end-Dec 2016, up some 610% on the £18.1m recorded in the year to December 2015.
• Deliveroo says its ‘business operations are capitalising on rapidly changing food consumption habits’. It says ‘its websites & smartphone apps enable consumers to enjoy food from their favourite restaurants, including many that did not previously take orders online’.
• Deliveroo raised £208m during the year to end-Dec 2016 and it ended the year with £180m in cash. Accumulated losses since inception are now around £163m.
• Deliveroo says that it ‘expects significant further growth in sales from current and future customers in all markets’. The group is improving its online presence, is expanding its distribution network and is launching a number of ‘large scale, high impact marketing campaigns’.
• Vouchers on the (online) doorstep yesterday. Prezzo: 50% off mains, Harvester: 33% off mains, Chimichanga: 40% off mains.
• Jinlong Wang, chief executive at PizzaExpress has told the MCA that he sees huge potential in the experience economy, with the brand hoping to capitalise on its live music heritage and newly introduced comedy nights.
• The casual dining sector continues to expand onto the high street, albeit at slower rate, research from AlixPartners and CGA has shown. In the partnership’s new Market Growth Monitor, data has shown a 0.2% increase in licensed premises on the high street in the 12 months to June 2017.
• The Market Growth Monitor report found growth across Britain to be spread pretty evenly, with the fastest pace of casual dining growth to be in the north of England, at 2.8%. The growth in high street venues is believed to becoming at the expense of suburban centres and malls.
• UK pubs are losing customers to coffee shops, with millions less adults visiting pubs last year, research has indicated. The data found that more than 3.6m people visited a cafe in 2017 than did in 2010, a climb of 43%, whereas pub visitors declined by over a million (a fall of 17.5%).
• Compass Group announced yesterday that Richard Cousins is to step down as CEO on 31 March 2018, as he plans to retire. COO, Dominic Blakemore, will succeed him. Paul Walsh, Chairman for the group said: ‘It has been a pleasure to work with Richard and on behalf of the Board I want to thank him for his extraordinary contribution to the Group. In the past 11 years Richard has transformed Compass into an industry leading organisation that delivers excellent food services to our clients, attracts and develops great people and generates significant returns for our shareholders’.
• Ei group, is helping its publicans by partnering up with Molson Coors, giving away 15,000 pints of Sharp’s Doombar between 25 September and 8 October.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Saga has reported H1 numbers to end-July saying that it has seen ‘continued underlying profit growth’. Underlying PBT is up by 5.5% at £110.2m with an interim dividend up 11.1% at 3p.
• Saga says it has seen ‘10.4% growth in our retail broking and travel businesses’ and it adds that it is seeing ‘high demand for Spirit of Discovery [which] supports our decision to invest in our cruise capacity with the purchase of our second new ship, Spirit of Adventure, for earlier delivery in August 2020.’
• Saga CEO Lance Batchelor comments ‘Saga is on track to deliver a fourth consecutive year of growth.’ He says ‘underlying profits are up again and so is our dividend. Our retail broking and travel divisions are performing well. Saga's new ship, Spirit of Discovery, will arrive in June 2019, and pre-sales are very strong. Our confidence in demand has supported our decision to purchase our second new ship, Spirit of Adventure, and to bring forward delivery to August 2020.’
• Saga CEO Lance Batchelor adds ‘I'm delighted to announce the launch of Saga Possibilities, our new membership programme, available to all Saga customers. Saga Possibilities is a critical new offering that will allow us to thank and encourage our customers to enjoy more of what Saga can offer.’ He concludes ‘I believe that these results continue to demonstrate that Saga is growing, has good momentum, and is on track to deliver in line with expectations for the full year.’
• International travellers to US fell by 4% in the first quarter of 2017, with the Middle East showing some of the sharpest declines. Total visitors from Europe declined 10% to 2.6m.
• Cruise operator APT is checking out expansion options in the UK, since the group has trebled its revenue in the UK since 2012.
• British travelers have been advised only to take essential travel to Dominica, after the island suffered greatly from the deadly Hurricane Maria.
• Managing director of Thomas Cook China told listeners at the 2017 FVW Congress in Cologne, ‘In our first year since launch, Thomas Cook China will have looked after 20,000 customers. Over the next 12 months, we plan to grow this number by more than ten times’.
• Research from Heathrow Business Travel Insight Reporter found that London is the most popular business travel destination.
• Heathrow airport has revealed a letter sent to Chancellor Phillip Hammond in which it argues for the Government to scrap Air Passenger Duty on all UK domestic flights.
• Princess Yachts has nearly doubled its sales, reaching £640m, a climb of 85% on last year. The group plans to invest £100m to expand its product range and improve process at its Plymouth HQ.
• Manchester United has recorded revenues of £581m for FY 2017, with broadcasting revenue climbing 38% to £194.1m.
• IG Group has reported record revenue of £135.2m in the three months to the end of August, a rise of 21% on last year.
• Google has bought part of HTC’s smartphone operations for $1bn.
FINANCE & MARKETS:
• UK government borrowings fell to their lowest August level since 2007 this year. The deficit fell to £5.7bn on the month, down from £7bn last year.
• S&P has cut China’s credit rating.
• Oil up to $56.38
• Sterling up vs dollar at $1.358
• Pound little changed vs Euro at €1.1355
• UK 10yr gilt yield up 2bps at 1.37%
• World markets: UK down yesterday but Europe up. US down and Asia down in Friday trade.
• Euro-zone consumer confidence up in September
o Ms May to speak in Florence today. BBC says she will offer €20bn for two years’ membership
YESTERDAY’S LATER TWEETS:
• Later tweets: M&B reports ‘following a strong sales performance in early summer the market has been more challenging in recent weeks’. Margins down
• M&B says weather comps tough, drink sales down. Last 10wks LfL sales still +0.3% (wet down 1.2%, food +1.4%)
• PwC suggests UK hotel sector growth buoyed by the slump in the value of sterling will slow next year as economy stagnates
• ONS reported buoyant sales yesterday. Says ‘non-essential’ spending particularly strong. Seems rather odd??
START THE DAY WITH A SONG:
Being a proud supporter of the 'mighty' hull tigers I can relate with yesterdays song. It was 'you're in love with a pyscho' by Kasabian: Today's Song:
They're forming in straight line,
They're going through a tight wind,
The kids are losing their minds
RETAIL NEWS WITH NICK BUBB:
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis had a terrific time in Fashion last week, thanks to the autumnal weather and the BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e Sept 17th saw Fashion Store LFL sales bounce by 7.8%, against a very weak comp of -8.4% LFL a year ago. Including Homewares and Lifestyle chains, total Store LFL sales were down by 7.7% last week (versus -5.2% a year ago), whilst overall Online sales jumped by as much as 34.6% (against a notably weak -1% a year ago).
• Today’s Press and News: Thin pickings today, although there is plenty of coverage of yesterday’s interims from the Co-op, with headlines very similar to the one in the Telegraph: “Co-op Group sheds last of Co-op Bank stake as it enjoys rising food sales”. The FT market report notes that Kingfisher gave up most of Wednesday’s gains yesterday, with JP Morgan re-iterating its Underweight stance. The Daily Mail picks up the Retail Week scoop that Microsoft is close to securing its first UK store, on Oxford Circus. And according to the Thurrock Gazette Primark will be opening a store in the Bluewater shopping centre in 2019!
• Trade Press (1): Today’s Retail Week magazine is a special Fashion edition masterminded by the Guest Editor, Belinda Earl of Marks & Spencer. The striking front cover, headlined Future Fashion, flags up three features: an interview with Missguided's Nitin Passi, a focus on “The disruptors: Who will be the next Asos?” and an article about the changing face of High Street fashion. In terms of News stories, RW focuses on the news that Dixons Carphone’s Graham Stapleton has been named the new Halfords boss and John Lewis Partnership profits halved in the first half despite a modest sales increase. In her column, the guest Editor thunders that “Nurturing young talent is the key to fashion’s future”. And on the website last night Retail Week had a scoop that Microsoft is on the cusp of securing its first UK store, on Oxford Circus, the prime site currently occupied by Benetton.
• Trade Press (2): Today’s Drapers magazine has an equally striking front cover, highlighting some of the key highlights of New York Fashion Week (“Sweet Like Candy”). The Editor devotes her column to some upcoming research on the Multichannel market and thunders “Fulfil your customers’ multichannel desire”. In terms of News stories, the focus is on the fact that currency hedging pressures are adding to the woes of retailers ahead of the next quarterly rent day on 29 September and that French Connection has bolstered its Board with 2 new non-exec Directors.
• Store Watch: We have been asked where the Shoe Zone “Big Box” store is in East London that analysts were taken to on Tuesday. And the answer is the retail park at East Beckton, anchored by Asda. We have also been asked where French Connection’s first new store opening for 10 years will be in Manchester this autumn. And the answer is that French Connection is returning to Manchester city centre to open a new concept store inside the Royal Exchange building, close to its original Manchester shop on the corner of St Ann's Square, which closed last January.
• News Flow Next Week: Another busy week kicks off on Monday with a SuperGroup Capital Markets Day. Tuesday brings the Card Factory interims and the MySale finals. On Wednesday we get the Boohoo interims and the Hotel Chocolat finals. The Moss Bros interims are on Thursday and then the widely followed monthly GFK Consumer Confidence Index is out on Friday morning.