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
Nando’s, ETM, Deltic, H Bowl, MLC, Airbnb, Time Out etc.:
A DAY IN THE LIFE:
It being December, we’ve thought it sensible to cram a few study tours onto this week’s agenda.
Early in the week, we’ll be studying casual diners (in the field, as it were) at lunchtimes and pubs in the evening. We might stick to water.
And pigs might fly as we’ll be waving our vouchers around, demanding discounts and then we’ll mix it up a bit by studying pubs at lunchtimes, casual diners from 6pm till 8pm and then, quite probably, pubs again.
Of course, it could be rather tiring by midweek but, in the interest of research, we’ll push on. However, for fear that our money might run out, we’ll be returning to our roots & featuring Sam Smiths’ outlets, the Cittie of Yorke, Princess Louise, the Anchor Tap and the splendid Captain Kidd, from about Thursday onwards. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Time Out has announced it has signed a conditional lease agreement for a new Time Out Market in Chicago. The 50,000 square feet operation should open in 2019. CEO Julio Bruno comments ‘we are very pleased to bring a truly magnificent Time Out Market to Chicago. It is a city that we know very well and where the Time Out brand is hugely popular; our website is getting millions of page views each month and our Time Out Chicago magazine has been loved and trusted since 2005.’
• Nando’s Group Holdings has increased revenue 13.9% to £847.9m, with gross profit rising to £195.8m in the full year up to 17 February 2017.
• Nightclub operator Deltic has reported full year numbers to 25 February to Companies’ House. The group, which operated at its year end 57 premium late night bars & clubs across the UK, reported revenues for the year of £102.2m (2016: £100.8m) with underlying EBITDA down a shade at £13.3m (2016: £13.6m).
• Deltic has reported underlying profit for the year to 25 Feb of £5.6m (2016: £8.6m). Deltic reports ‘the overall trading position of the group has been steady with 1.4% growth in turnover. However, underlying EBITDA…has declined by 2.3%’. The group says ‘a number of factors led to this, including local competition, a warm and therefore quieter summer, and a refurbishment programme that was delayed as a result’.
• Regarding the outlook, Deltic says ‘the late night sector has faced a number of challenges historically’. It says the industry ‘is now in a better place’. The group suggests ‘much of the oversupply has come out of the market, there are no new regulatory issues that can be foreseen and Deltic, along with other town centre operators, are investing in their offerings and have confidence again’.
• Deltic concludes ‘the trading performance continues to improve and there will be further improvements in the future from the continued refurbishment programme’.
• Barclaycard has reported that the ‘younger generation [is] set to spend £570m as trend for spending on ‘experiences’ spills into creating the perfect Christmas Day.’ It says ‘the younger generation is upgrading the traditional Christmas meal into an unforgettable experience, splashing the cash on ‘festive extras’ as a third say their guests’ expectations are higher than ever.’ The day is not just about food & drink. Barclaycard says ‘far from seeing Christmas as simply an extended Sunday roast, this younger generation of hosts plans to spend on average £35 on decorations for the house, £31 on party favours, £29 on decorations for the table and £29 on crackers – all above the national average – to immerse their guests in a holiday experience to remember. Many millennial hosts (70 per cent) will also fork out on festive extras such as Christmas games, films and music to keep their attendees entertained for the whole day.’
• ETM Group has reported 52-week (to 26 Feb) numbers to Companies’ House. The group says ‘the year to 26 February 2017 has been an exciting year for the business, further establishing ETM Group as a key presence in the drinking and eating out market in London.’
• ETM reports in the year to 26 Feb ‘Group turnover for continuing operations (i.e. excl The Gun, which was sold in June) increased by 11.6% from £16.3m in 2016 to £18.2m in 2017.’ The group says ‘this was driven by both positive like-for-like growth (in particular Broadgate Circle +23.0%) and a continued site expansion program with the successful openings of three new sites - Aviary and Burdock at Royal London House, Finsbury Square, and Greenwood in the Nova development, Victoria.’
• ETM reports ‘the year was also a transformational one with a rationalisation of the Group's funding and corporate structures.’ It says ‘Group EBITDA did fall from £1.6m in 2016 to £1.02m in 2017, as a result of new site opening costs and investments in head office in the last quarter of the year.’
• Re the outlook, ETM reports ‘the Directors feel that the platforms are now in place to take the business forward into its next evolution, with the group confirming a further three new site openings, two major refurbishments in this current financial year and the recent opening of its first Brewpub concept in the City, Long Arm-Worship St.’
• Eataly is planning to list its shares on the Milan stock exchange at some point next year as the group accelerates its expansion in the US. The FT reports executive chairman Andrea Guerra as saying that the group is on target to post sales of €470m in 2017, up from €380m a year earlier. Earnings before interest, tax, depreciation and amortisation are expected to be about €22m this year. Mr Guerra reports ‘we think we can continue to open stores for the next 10 years. We are really scratching the surface. We think we can have a store in every world capital.’
• Residents have appealed to Westminster Council to limit Deliveroo and other delivery companies’ activity in the area because of noisy mopeds. Westminster has c3k restaurants, many of which now offer a delivery service.
• Brewers including Thai Beverage, Anheuser-Busch InBev and Kirin are reported set to bid for a stake in Vietnam’s largest brewer, Sabeco. The auction, of c54% of Sabeco, will be Vietnam’s biggest privatization.
• Telegraph reports Dixons Carphone will report poor numbers this week. It says profits could halve.
• Prestige Purchasing has reported that F&B inflation for caterers ‘will continue to ease in 2018, but most prices [are] unlikely to fall. Prestige reports ‘after hitting a high of 9.3% in August 2017, Foodservice Price Index Inflation is expected to ease to 3.4% by the end of 2018, but many products will still cost more.’ It says ‘restaurant operators and caterers hoping for a return to normal inflation levels in 2018 will be disappointed.’ Prestige says that prices of some fish & butter look to be set to rise. It says ‘with all the current uncertainty that surrounds our exit from the EU, the year after (2019) still looks a very high-risk year for the cost of food and drink.’
• US journal NRN has reported that mobile payments reached a tipping point in 2017. It says ‘what made 2017 so impressive was that it felt more like a tipping point as mobile payments raced across the fast food industry.’ It says ‘almost all the major brands now offer services at scale: McDonald’s, Burger King, Quizno’s, Chick-fil-A, Krispy Kreme, Baskin-Robbins.’ It says that as many as 10% of fast food sales will be made via mobile payments in the next 2-3yrs.
• Vapiano has announced plans for a roll out of 900 restaurants worldwide.
• Abokado, the Kings Park Capital-backed grab and go chain, has disposed of non-core sites earlier this year, the MCA has reported. Mark Lilley, the group’s chief executive, said the decision to exit five sites following the recent problems facing the sector had enabled Abokada to secure better premiums and be in a far stronger position coming into 2018.
• RSM has announced that it is advising Fuel Juice Bars in its restructuring, resulting in part of the group being put into administration. The closure of nine of the group’s sites have been blamed on a ‘deteriorating macroeconomic environment’ in 2016 and 2017.
• Budweiser’s non-alcoholic beer Prohibition Brew is launching its first UK campaign, which will aim to convince consumers not to drink and drive over the festive period. The brand was launched in the UK last month, and the business is now in the process of building distribution in pubs and supermarkets. Prohibition Brew is also targeting a growing number of young consumers who either drink less or are teetotal. Its parent company AB InBev wants 20% of global volume sales to be low or non-alcoholic beer by 2025.
• EI Group has bought back another 111,135 of its own shares for cancellation at 146.6p per share
• Two Florida-based microbreweries have teamed up to create a Krispy Kreme donut-flavoured beer as strong as wine.
• The number of business rates appeals has declined by 95% from seven years ago, according to rent and rates specialists Altus Group. The latest statistics from the Valuation Office Agency (VOA) show that 5.650 firms across England have asked for their business rates to be checked between April and the end of September 2017, compared to 115,220 during the same period 2010.
• Apollo Management is backing a £220m restructuring deal for BrightHouse, which will see it own almost half of the retailer’s shares. The debt-for-equity swap will leave private equity firm Vision Capital with a 3% stake in the business.
HOLIDAYS & LEISURE TRAVEL:
• Airbnb may be close to buying the holiday operations of Wyndham Worldwide for as much as $1bn reports the Sunday Times. The businesses being put up for sale include James Villas, Hoseasons and a number of domestic UK cottage holiday operations. Wyndham, which recently undertook a strategic review, has spent the last few years acquiring the businesses that it has now put up for sale.
• Majority owners of Millennium & Copthorne Singapore City Developments has increased its offer for the company in a move to take the group private. The bid has been raised from 545p per share to 620p (including a 20p dividend).
• Data from Generali Global Assistance has indicated that 40% of Americans plan to travel over the course of the 2017 holiday season. Chris Carnicelli, CEO of the group said: ‘or many, the holidays are an important time of year to connect with loved ones and going to see family is by far the primary reason to travel during the holiday season, with 87% of Christmas travel and 64% of New Year’s travel being dedicated to going to see relatives’.
• Tui Group has urged the UK government to bring key issues like aviation and climate protection to the forefront of Brexit negotiations. Commenting on the uncertainty surrounding Brexit the group said: ‘This is a concern for the tourism industry because it has to be aware of the terms of that deal to be able to plan for the 2019 summer season. This is predominantly in the interest of countries in the south of the European Union which are highly dependent on British tourists. Almost one in four holidaymakers in Spain comes from the United Kingdom’
• ABTA has also highlighted the importance of addressing visa-free travel and aviation access in Brexit negotiations. Mark Tanzer, chief executive of the group said: ‘It is vital that the importance and scale of the travel industry are recognised in the discussions. The UK outbound travel industry generates over €37bn for the economies in the EU, and £28bn for the UK. It also supports hundreds of thousands of jobs and businesses, both here and abroad.’
• Hollywood Bowl Group has reported FY numbers to end-September saying revenues rose 8.8% to £114m with adj. EBITDA +13.7% at £33.4m
• Hollywood Bowl reports LfL sales +3.5% at its units after rising 6.5% in LfL terms in the prior year.
• H Bowl FY: Group reports PBT of £21.1m vs only £2.6m last year with EPS of 12.2p (2016: 1.1p) and a dividend of 3.95p (2016: 0.19p) with a special dividend of 3.33p per share
• H Bowl FY: Group says its ‘refurbishment and rebranding programme [is] progressing well, delivering returns, ahead of expectations’
• H Bowl FY: Co says its new centre opening plan is on track with 3 opened in the year under review ‘all performing strongly’. CEO Stephen Burns says ‘I am delighted to report a strong operational and financial performance for our first full year since IPO. Our rebrands and refurbishments have delivered significant returns and new centres opened in the year have performed ahead of expectations. The investments we have made in improving our brand and customer offer have been well received by customers, resulting in more visits and increased spend per game across our portfolio. We will continue to trial and implement more new initiatives in order to ensure the best possible leisure experience for our customers.’
• H Bowl FY: Group CEO says ‘looking forward, our strong balance sheet and cash generative business model allows us to capitalise on our healthy pipeline of new sites and we remain committed to growing our high quality portfolio through selective new openings and acquisitions.’ Mr Burns concludes ‘we expect to continue this positive momentum as we intensively manage the portfolio for growth and deliver a high-quality customer experience, which continues to be great value for money.’
• Buzzfeed undergoes restructuring plan by cutting jobs in the UK and focusing on new revenue streams such as ecommerce, video and licensing.
• Apple is believed to be close to buying the music recognition app Shazam for about $400m.
• Two of the world’s most popular online music streaming services are acquiring shares in one another, with reports suggesting the Spotify and China’s Tencent aiming to take 10% stakes.
• Lego has won its case against Chinese copycat products. This is the first time the toy company has won a competition case against its Chinese rivals.
FINANCE & MARKETS:
• UK manufacturing grew for the 6th month in a row in October reports the ONS. Month on month growth in October was 0.1%.
• US jobs growth was ahead of expectations in November. A rate rise in the US this month is now all but certain
• NIESR says the UK economy grew by 0.5% in the 3mths to end-November
• Consumers expect inflation to remain above the Bank of England’s target rate of 2% over the next two years reports a Bank survey. Consumers surveyed expect inflation to be 2.9% in 2yrs’ time.
• L&C Mortgages has said that deposits for an average first time buyers’ house in London may be as high as £250k by 2017. That’s a distant forecast.
• Japan has achieved its longest period of growth in more than 20yrs. Its economy grew by an annualised 2.5% in the quarter to September.
• Bitcoin up, down, up and down again.
• UK total trade deficit up to £1.41bn in October from £1.14bn in September.
• Oil up nearly a dollar at $63.19
• Sterling down vs dollar at $1.3391
• Pound down vs euro at €1.1368
• UK 10yr gilt yield up 3bps at 1.28%
• World markets: UK up on Friday with Europe & US also higher. Far East up in Monday trade.
• Brexit etc.:
o EU officials have said that EU businesses may get some guidance as to future EU / UK relations in the New Year
o David Davis has said that he wants a Canada plus, plus, plus deal for the UK. No details. The Canada deal took 7yrs.
START THE DAY WITH A SONG:
Last Friday’s song was Joy Division’s ‘Love Will Tear Us Apart Again’. Today who sang the following:
The horse he sweats with fear we break to run,
The mighty roar of the Russian guns,
And as we race towards the human wall,
The screams of pain as my comrades fall
RETAIL NEWS WITH NICK BUBB:
Saturday Press: The main focus in the Saturday papers was on the continuing disasters at the beleaguered and scandal-hit Steinhoff International retail conglomerate, as the share price slumped further (to make a 3-day fall of c85%). The Business editorial in the Times mocked the fact that the Steinhoff bond holders include the ECB and it also noted that Moody’s have cut Steinhoff’s credit rating sharply. The FT highlighted private correspondence in which the disgraced former CEO Markus Joote (who was the Daily Mail’s “Zero of the Week”) admitted to making “bad mistakes” and it also focused on the huge financial and reputational hit taken by the South African boss Christo Wiese, whilst the FT leader column flagged the damage also being done to the business reputation of the whole of South Africa. And the main Business story in the Daily Mail was the news that Poundland is “on the brink”, noting our view that it is most sellable asset that Steinhoff has in the UK. In other news, the Daily Mail also noted the generous pay package for new Debenhams CEO Sergio Bucher revealed in the Annual Report & Accounts on Friday, as well as the 800 store management job cuts at Asda, whilst the stockmarket report in the Daily Mail noted the boost to Dunelm and Boohoo on Friday from a Deutsche sector report (which was also highlighted in the Evening Standard on Friday). The FT market report noted that Morgan Stanley issued a cautious note on ASOS on Friday. The lead story in the Telegraph market was that Hammerson got a boost from Goldmans on Friday, on optimistic thoughts about the Intu takeover, whilst the Telegraph also had a snippet about the news that Moody’s have cut the credit ratings of both House of Fraser and New Look to high risk/junk levels.
Sunday Press: There were no great new revelations about Steinhoff in the Sunday papers, although the Mail on Sunday highlighted that “Scandal-hit New Look magnate in big brands sell-off”, noting our view that a fire-sale of non-core UK assets by Christo Wiese does not bear thinking about in the current retail climate, whilst the Sunday Times flagged that the Moody’s downgrade of New Look’s credit rating deep into junk territory poses big problems for the beleaguered South African magnate, Christo Wiese (and his other vehicle, the Brait investment fund). The Sunday Times, however, gave front-page prominence to the news that Moody’s have warned about the creditworthiness of House of Fraser…The Sunday Times also had a detailed background overview of the split opinion about the Hammerson/Intu merger, whist the Sunday Telegraph had an interesting Business editorial about the growing chances of “Fantasy M&A” in Retailing, like a M&S and Sainsbury merger. Otherwise, Food Retailers were in the spotlight: the Observer had a detailed article about how Asda is cutting staff costs to help it withstand the pressure from Aldi and Lidl, the Mail on Sunday had a feature interview with the newly knighted Malcolm Walker and the way in which Iceland is moving its food range upmarket and the Sunday Telegraph noted that hedge funds are stepping up their short bets against Ocado despite the talk of more Overseas licensing deals. In terms of upcoming news flow, the Sunday Times and the Observer both flagged that Mike Ashley is likely to lose his Sports Direct EGM vote on Wednesday over the £11m back pay owed to his brother, John Ashley, whilst Dixons Carphone was in focus ahead of its interims, with the Sunday Telegraph saying that the profits slump will lead to more store closures, although the Observer noted that fading battery lives could soon kick-start the smartphone replacement cycle. Finally, the “Inside the City” column in the Sunday Times looked in detail at the embattled Dignity and said the shares are best avoided.
Today’s Press and News: The widespread snow yesterday in central England gets plenty of coverage on the front pages and given the lamentable performance of Heathrow yesterday it seems unwise for the airport to have put out a monthly update today crowing over the 3.5% increase in passenger traffic achieved in November…Meanwhile, customer footfall to the shops was subdued in November, according to today’s monthly BRC-Springboard survey, and the Times highlights that Visa card spending fell by 0.9% last month, despite Black Friday. There are plenty of previews of the Dixons Carphone interims on Wednesday, focusing on the performance of the new iPhone and the Telegraph has a helpful “SWOT” analysis on Carpetright ahead of their interims tomorrow.
News Flow This Week: A busy week kicks off tomorrow with the Carpetright interims and the Joules pre-close update, as well as the latest Kantar/Nielsen grocery sales figures (for the 4/12 weeks to Dec 2nd/3rd). Wednesday brings the Dixons Carphone interims and the Sports Direct EGM about the back pay owed to Mike Ashley’s brother. Then on Thursday we get the Sports Direct interims, the Ocado Q4 sales update and the ONS Retail Sales figures for November.