Langton Capital – 2015-02-01 – JDW, Conviviality, new openings, Bwin & other:
A Day in the Life:
Follow us on Twitter at either @langtoncapital or @brumbymark.
Find previous emails at http://www.langtoncapital.co.uk/daily-notes/
So what is it about homework these days?
I mean I think I remember starting to get it when I was about 13 but our little girl, still nine for a few weeks, is getting it in spades already and, when I say that she’s getting it, I mean her mum is and, when the weekend comes around and I haven’t got office work as a handy excuse, so am I.
Meaning that I now know more about the Ancient Greeks, Andean Wildlife and Space: The Final Frontier than is good for me but I suppose that, whilst writing 500 words on the Solar System or Greek Aqueducts is not really what I need after a week at the grindstone, it’s enhancing my human capital.
Hence if it wasn’t for the fact that I’m self-employed, I might have a word with the boss, ask for a pay rise, at least make the whole thing worth my while. I mean a stockbroker who knows about the force of gravity on Pluto is better than one that doesn’t, right?
Anyway, just left to say that the Mighty Hull City, having breezed through to the last 16 in the FA Cup over the weekend, has drawn Arsenal away in the next round. So that’s the end of that, then. On to the news but if you would like to spread the love and add a colleague or acquaintance to this email list then just let me know. On the other hand, you could just forward it to them & suggest that they hit the ‘subscribe’ button at the bottom and then, via the miracles of modern science, it will bung them on the list.
Pub, Restaurant & Drinks Producer News:
• JD Wetherspoon has announced that it Friday bought back a further 34k shares for cancellation at 672p
• Conviviality reports H1 numbers, says revenue +38% at £252m, EBITDA +43% at £6.5m. PBT +19% at £3.8m
• Conviviality earns 3.8p per share (+3%) in H1. Increases interim dividend by 5% to 2.1p per share
• Conviviality: Says ‘integration of Matthew Clark ahead of plan’ and says LfL sales +0.8% over the H1 period.
• Conviviality: Re Xmas, says ‘strong Christmas trading in the two peak weeks to 3 Jan with Group sales growth 13% above last year’. CEO Diana Hunter says ‘this is a strong set of results during a period of significant transformational change. With Matthew Clark we now have a firm foundation in the expansive on-trade market from which to build on, and our success over the important Christmas period gives us confidence that the second half will deliver further growth. I am pleased with the progress we have made to bring our two businesses together. I would like to thank all of our people, our Franchisees, our on trade customers and our suppliers who have contributed to our success.’
• Pernod Ricard is to acquire the majority stake in Monkey 47, the German gin brand, after signing an agreement with Black Forest Distillers. Pernod Ricard called the acquisition a further investment in the ‘fast growing’ super premium gin category for the French drinks giant.
• American distiller Few Spirits has launched a ‘breakfast’ gin with Earl Grey tea designed to be drunk at breakfast or brunch. The 42.5% abv drink was launched in the US last year and is now available in the UK via Maverick Drinks for £45.95.
• BrewDog has raised £13.5m so far in its Equity for Punks IV crowdfunding campaign launched last April, with 20,335 people having invested an average of £525.55.
• Landlords have warned that the new late-night levy in Camden as it ‘could kill the borough’s nightlife’. JD Wetherspoons, which operates four pubs in the area, has already said it is reviewing its opening hours in light of the new tax.
• ‘Super budget’ branded hotel operator easyHotel’s Benelux franchisee has purchased a 131-room property on Arena Boulevard in Amsterdam. This will be the group’s second site in what is one of the top five most visited cities in Europe, with over 7.5m visitors in 2015 (+2.1% YoY). CEO Guy Parsons commented: ‘Amsterdam is an extremely attractive market for us and this hotel will be a great addition to the easyHotel portfolio. With the development of this hotel and the 107-room easyHotel in Brussels, our Benelux franchisee is set to add 238 rooms to the easyHotel network within the next 12 months and continues to seek to identify good sites for further hotels in the Benelux region.’
• Morrisons is cutting the price of more than 1,000 products for a minimum of three months and will use its own fresh food manufacturing business to keep costs down. Earlier this month the group posted a rise in sales over the festive period, ending three years of declines.
• J Sainsbury has been told it must pay at least 160p per share for Home Retail Group after meeting with its two largest shareholders, Schroders and Toscafund. The investors have indicated that an offer at that level, or preferably closer to 165p, would be enough for them to support a bid and pressure Home Retail’s board to accept a deal.
• BGF-backed Barburrito is back on track to reach its 25 site goal after bouncing back from a soft December, writes M&C. The group recently acquired its Scottish rival, Pinto Mexican Kitchen, for an undisclosed sum. Morgan Davies said the Mexican chain is building momentum and expanding its horizons, adding: ‘we’re currently looking at sites in cities we don’t operate in, and we’re always looking at good sites in London as well.’
• The private equity owners of event caterer and restaurant operator Rhubarb, ECI Partners, is thought to be looking for advisors to assess its options. M&C writes that a sale of the business might be set up in the future for the business, which was valued at c£30m in 2012, when ECI bought its £12m stake.
• Electronic Point of Sale (EPoS) provider Zonal has posted its sixth year of consecutive sales growth for the year to 30 June. Its £3.4m of EBITDA is a record for the company, and CEO Stuart McLean had this to say: ‘Our continued investment in our people and technology has delivered another year of strong growth for the business. The acquisition of liveRES in April has further cemented our position as the market leader in the end to end hospitality solutions. It’s been an amazing journey over the last 36 years; we have transitioned into true innovators, adopting new technology at pace for the benefit of our customers.’
• Doctors and health experts are urging the House of Lords to support a bill to lower the drink-driving limits for England, Wales and Northern Ireland.
• Kopparberg is launching its first fruit lager in select convenience stores from April, with packs to be initially available for £5. Kopparberg senior marketing manager Jodie Alliss, said: ‘Our research demonstrated that fruit is still a hit with our millennial drinkers, as our fruit ciders remain number one in the category. By launching Fruit Lager, we are extending the drinking occasion for those consumers, via an innovative product that combines subtle premium lager bitterness with Kopparberg’s expertise in fruit refreshment that fans know and love.’
• CAU operator Gaucho is believed to have set up a £20m capex facility in order to fund as much as two thirds of its openings over the next five years. The group is thought to be looking to add sites internationally as well as in the UK, writes M&C.
• Hotel Chocolat has transformed its trading performance, with group sales up 10.2% to £81.1m and operating profits increasing to £3.5m for the year to 28 June 2015. The results come following a £7m pre-tax loss in 2014.
• Tesco is to stop 24-hour trading at 76 of its biggest stores and just under a quarter of these will now close from midnight to 6am. The rise of online shopping has helped to contribute to lower footfall in the early morning hours, but Tesco has reassured affected employees that they will be supported with roles elsewhere in the estate.
• Global hotel transaction volumes are projected to hit $70bn in 2016 – down 15-20% on 2015 numbers, according to JLL’s Hotel Investment Outlook 2016’ report. The figure would still be higher than 2014 levels, however, and would mark the second-highest year for transaction volume totals in the current cycle.
• The Las Vegas Sands Corporation saw declines across most metrics in both its Q4 and FY 2015 due to ‘weaker operating results across (the) Macao (China) property portfolio’. Net revenue for Q4 2015 decreased 16.2% to $2.86bn, compared to $3.42bn for the same period in 2014, while consolidated adjusted property EBITDA fell 21.9% in the quarter to $1.05bn.
• The ‘2015 EVP Barometer by American Express Global Business Travel’ shows business travel spending rose by 1.42% in 2015. The growth was more than double the 0.7% forecast in the 2014 report thanks to more businesses embarking on international expansion plans.
• Alibaba revenue rose 32% to $5.3bn in the quarter to December, with mobile revenues up by some 192% year on year. The Chinese e-tailing giant remains focused on global imports and rural expansion.
• Bwin reports Court Friday sanctioned scheme of arrangement by which the recommended offer by GVC is being implemented. Trading in Bwin shares has now been suspended. The cancellation of the group’s listing should go ahead from tomorrow morning
• Some US unicorns limping badly. Zynga (social games) now down 75% from IPO, Groupon down 85%. Even Twitter 30% off
Finance & Markets:
• US economy grew at an annualised rate of 0.7% in Q4, down from an annualised 2% in Q3.
• Slower US growth diminishes chance of four rate rises this year. First realistic test will be March
• Eurozone headline inflation up slightly. Core inflation, ex food & energy prices, only up by 1.0% in Jan versus 0.9% in Dec
• French economy in fastest growth in four years, with a jump of 1.1% in 2015.
• CBI says UK economy growing at slowed rate since mid-2013 in 3mths to end-Jan, says has had “tough start to the year”. The CBI says ‘manufacturing and business and professional services have struggled to make a mark, but a healthier picture can be seen in the household-focused consumer services and retail sectors.’
• Comments from CBI & elsewhere may stay Mark Carney’s hand when it comes to putting interest rates up
• China manufacturing output in further slowdown in Jan, makes 6th month in row of slowed growth. PMI at 49.4 vs 49.7 in Dec
• World markets: UK & Europe both up on Friday, US markets also sharply higher. Far East up in Mon trading
• Oil price continues to firm, trading at around $35.30 per barrel
Langton Licensed Retail Index – Major Movers
The LRI was up 2.33% last week, while the wider market rose 2.91% as resource, energy and telecoms stocks were the drivers of growth tin the UK markets.
In the larger pub groups, J.D. Wetherspoon and Greene King had a markedly better week. Wetherspoon saw its shares up 7.59% in the week following its Q2 update which disappointed some shareholders when the group announced that ‘profits for this year are likely to be towards the lower end of analysts’ expectations.’ Since then the group has bought back some £4.2m of its shares.
Greene King was up 4.95% ahead of its Q3 update the week after next.
Marston’s was up 2.99% in line with the wider market, but M&B again underperformed, rising just 1.29%.
The London pub groups were both up, though Fuller’s continues to slightly outperform Young’s with the former up 2.23% against a 1.4% rise in Young’s shares. Both groups
The tenanted pub groups were practically unchanged this week, with Punch shares registering no change in its share price at the end of the week while Enterprise shares were down 0.11%.
Domino’s returned to form this week with a 6.55% rise in its shares while Patisserie Valerie was up 8.25% as investors sentiment appears to have recovered. The groups’ share price moves seem to have reacted more strongly than other shares in the sector to market sentiment, perhaps given the shares high rating. Whitbread was up 0.88%, again underperforming both the index and the market as the group’s pre-Christmas update appears to have left a more lasting sense of wariness amongst investors.
The Restaurant Group’s shares were up 1.52%, lower than the index’s rise, perhaps as investors wait to for more updates to see whether the pubs seeming outperformance of restaurants continues to be supported by the numbers. Will Brumby – email@example.com
Langton Food Retail Index – The Grocer’s Dozen
The FRI outperformed in a rare bull week for the FTSE 100 and 250, up 4.08% amid the turbulent oil price and uncertain feedback from various emerging markets. The supermarkets gained the most in the food retail index, more than making up for continued share price weakness from Poundland and Ocado.
Speculation regarding Sainsbury’s (+4.92% to 245.1p) proposed acquisition of Home Retail rumbles on, with both parties attempting to thrash out the details of the £1.3bn deal over the weekend. The two groups have clashed on how to value the Argos owner, with Sainsbury’s proposing 150p a share and Home Retail holding out for 170p. Although Sainsbury’s CEO Mike Coupe has said before that this is not a ‘must do deal’, talks are thought to be at a late stage.
Meanwhile, Morrisons (+7.81% to 173.7p) has embarked on its latest round of price cuts as the supermarkets continue to rebase price levels and bring themselves more in line with discounters Aldi and Lidl. The group is cutting the price of more than 1,000 products, with an average drop of 19% across fruit and vegetable lines.
Tesco (+6.09% to 168.95p) is cutting its costs by halting 24-hour trading at 76 of its biggest stores after deciding the low early-hours footfall is not worth the hassle.
Bookers (+6.46% to 163.84p) also had a strong week as the group makes progress with its Londis and Budgens sites, while Greggs (+4.77% to 1,041.93p) had its first positive week of what has been a torrid 2016 for the group. Jack Brumby – firstname.lastname@example.org
Retail Roundup from Nick Bubb:
Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s magazine saw a surprise win for Sainsbury over the usual cheapest chain, Asda, with Sainsbury emerging £1.26 cheaper than Asda with its £55.44 basket. Interestingly, the Waitrose basket has in recent weeks regularly come in £10 more expensive than Asda, but this week it was “only” just over £8 higher than Sainsbury. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was also won by Sainsbury, as their 64,000 sq ft superstore at Crystal Peaks in Sheffield topped the rankings, with an impressive score of 91 out of 100.
Trade Press: We didn’t have time on Friday to bring you the highlights of Drapers magazine and their focus on the turmoil at Graziashop.com seemed a bit “left-field”, but Drapers also flagged that more than 20 buyers have expressed interest in buying the bankrupt Brantano UK business, H&M is to upscale its Bluewater store into a 40,000 sq ft flagship, many Fashion retailers are keen to rein in their discounting in 2016 and French Connection is to revive its controversial “FCUK” slogan on five T-shirts in its Spring range.
News Flow This Week: As February gets underway, company news flow is quiet this week, although today has brought some good-looking Conviviality interims. The big day is tomorrow, as that brings the Ocado finals (with an update expected on the vexed subject of the long-awaited Overseas licensing deal), as well as the Sainsbury/Home Retail “PUSU” bid deadline at 5pm…The DFS pre-close update is then on Thursday. Nick Bubb – email@example.com
This was produced for distribution Friday: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:
JDW still buying shares back:
• Nobody to our knowledge has called for the Fourth Official to examine a slow-motion replay but the shareholders who sold out to JDW at around 610p last week must be ruefully looking at where the share price is now.
• Because, whilst nobody forced them to sell their shares, some 625k were sold at 613p – to the company itself for cancellation – meaning that some £363k has been foregone in the last week or so alone (the shares are 671p at the time of writing.
• Anyway, it is what it is.
• But the fact that JDW is going on with its buyback even up here in the mid-660s suggests that it is serious about retiring some stock
• It has spent £4.2m to date.
• This, if it were geared up with a bit of debt to say £6m, equates to around three or four freehold pubs that the group has decided not to build.
• Of course the capex (vs buy back) decision is not binary. There are many other variables but it would appear that the group is firmly moving – at least for the present – down one road rather than the other
Random information, hopefully not all of it useless:
• AG Barr says that the UK market remains tough. Perhaps there is an exodus from sugar? But soft drinks in general are selling relatively well in pubs suggesting that both 1) the on-trade is a relatively small part of the market and possibly 2) that new entrants and quirky suppliers such as Fevertree and Innocent, are continuing to take share.
• Travel stocks weak yesterday as the flip-side of a rising oil price. Carnival, IAG and TUI were in the FTSE100’s top ten losers.
• Overall, markets better. China had its first up day in five. This week the UK should end higher. Will be the first up-week this year.
• Oil & minerals strong yesterday. Tech stocks & defensives lower.
• Sterling down again yesterday. Testing year lows. Dig out all those old stories about more expensive holidays, higher import costs etc.
• Oil price over $34. Some upward moves in non-precious metal prices but soft commodities weak.
• Dairy farmers are apparently due for another tough year in 2016 – see earlier email. We’ve periodically produced the chart below, so this does not come as a surprise to us. The flipside is that input costs for producers such as Premier Foods should remain lower for longer. This will aid margins. Re the chart, the lower line, which flatters to deceive, is for Northern Ireland only. The general UK lines are broadly flat.
• Check out sugar price. Now looking as though it may be rolling over after very sharp fall yesterday. Still up 6% on the last 12mths, however.
• Other softs. Cocoa price now in the doldrums. Had been sharply higher on a rolling 12mth basis but now only up 3% on the last year and down sharply in the last month.
• Coffee price still pants. Down 29% over the last 12mths.
• White meat prices rising a little. Price actually 2% higher on a year. Chicken tends to track hog prices. Meat suppliers tend to prefer slight falls in price. They say rising prices are like Teflon – you pass them straight on and try not to get stuck with them – whilst falling prices are like Velcro, you tend to stick customers with higher prices for a little while and restock at lower costs.