Langton Capital – 2015-10-02 – Daily Wrap: Casual Dining Group, meat prices, deliveries & other:
Leisure Wrap & Other:
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. As always, contact us if you’d like further details:
• At yesterday’s Fourth Conference, CGA Peach’s Peter Martin reaffirmed a number of trends that we have commented on recently. He believes:
o Artisanal craft beer has been ingrained in the people’s psyche.
o Theatre is important, people wanted to be excited, ‘wowed’.
o Authentic fruit and vegetable juice bars are on the up, ‘health’ as an issue is here to stay
o The majority of growth is coming from branded restaurants moving outside of London ‘without a shadow of a doubt’.
o We believe that fastest growth is coming from new entrants. Mr Martin suggests the same, saying that those with fewer than 25 sites are the most dynamic players
Casual Dining Group:
• Over 50% of Langton attended the Fourth Hospitality Conference yesterday and very informative it was too, thanks to all involved.
• CDG’s Steve Richards spoke, saying that he would like to double the size of his business over the next 2yrs.
• Without a burger, chicken or pizza offer, that’s quite a task.
• Perhaps aiming for 300 Bella Italia outlets is a shade ambitious but, as new entrants continue to shake up the market, there may be more acquisition opportunities around going forward.
• The ‘rapide’ concept (Pret-style takeaway at Café Rouge could increase sales, though it is unclear whether would-be customers will be willing to pass half a dozen Pret & EAT stores in order to get to a Café Rouge.
• However, Mr Richards was able to point out that debt was now only 2.5x EBITDA and he said that capex (‘oxygen for an expanding business’) was back on the table.
• Bella is reported to be set to open in Mumbai in the near future.
• Perhaps in the same way that we expect an IPO from Stonegate in the next couple of quarters, a listing by CDG is by no means unlikely
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Red meat prices on the slide. Prices at 1yr lows, down 26% on year.
• Corn & wheat prices up a little & sugar showing first signs of life for over a year.
• Food retail shares giving back a little of their recent gains.
• European economy. There’s a ‘broad softening’ of the recovery going on. However, the only Euro manufacturing PMI now <50 (i.e. implying contraction) is that in Greece.
• Waitrose seems to be having a less good time of it. See Nick Bubb comments in earlier email. Looks as though the group is about flat in terms of LfL sales for its week 8 (week to 26 September) but it’s down around 1% LfL for the cumulative 8wk period to date.
• Amazon is set to shake up the grocery delivery market promising one-hour deliveries. It is currently trialling the service in Birmingham for its Prime customers. Sainsbury yesterday suggested that Amazon would have its work cut out if it thought that it could dislodge the incumbents.
• Fourth Conference: CGA Peach’s Peter Martin may have managed to upset the best part of 5m people when he opined that ‘Birmingham is the new Manchester’.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Casual Dining Group boss Steve Richards has told Fourth Conference that he would like to move his estate to c600 units (see email)
2. Punch Taverns received shareholder approval yesterday to proceed with the sale of its 50% share of Matthew Clark to Conviviality Retail
3. BBPA has ‘expressed concerns over proposals from the Institute of Licensing to create a ‘standard pool’ of licensing conditions
4. Diageo is to ‘future-proof’ its brands by improving its marketing to female consumers so its drinks can become ‘unisex cultural icons’.
5. Brewdog has raised more than £10m with its Equity for Punks IV
6. The National Minimum Wage increased 1 Oct to £6.70 for adults, to £5.30 for 18-20 year olds + to £3.87 for 16-17 year olds.
7. UK retail + tourism businesses call on gov. to offer 10-year tourist visas to Chinese visitors. Could increase numbers by 265k per year
8. World growth slows show latest PMI surveys. Growth lower in China, Far East, Europe with N America steady.
a. ONS figures show productivity across the UK increased at its fastest rate in four years in the second quarter of 2015.
b. Director General at the IEA, Mark Littlewood has told the Telegraph that Jeremy Corbyn’s proposed policies could harm the poorest.
9. Leisure, Week Ahead: Gregg’s updates on Q3 trading on Tuesday. Tesco H1 Weds, services PMI Mon + new car reg. Tues