Langton Capital – 2016-08-15 – Summer trading, new openings, property & other:
A Day in the Life:
So our dog has been getting excited about the Olympics.
Indeed, he’s keen to join in but the only sports that he’s really interested in – eating very quickly and chasing rabbits – are not yet represented at the Games.
However, he remains deeply committed to his training and I think, deep down, it’s the training that does it for him, if he never gets to compete on the world stage, he’ll still be deeply satisfied with his performance.
And, elsewhere, the Premier League season has started with a bang. The Mighty Hull City – which is for sale, has no manager and which has a squad of only 13 including two goal-keepers – were top of the League for slightly more than a day and, although I have to accept that we will have reached our high point on the first day of play, the win against Leicester does take us to nearly a third of the total points that Derby County managed to scrape together in their disastrous 2007-08 season.
Anyway, on to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Greggs’ CFO Richard Hutton has sold 41,170 shares in the company at a price of 1050p per share
• The backlash from workers and the government over Deliveroo’s new pay scheme has led to a new offer of a guaranteed £7.50 per hour during peak times. The food delivery service presently pays £7 an hour plus a £1 delivery, although the Department for Business, Energy and Industrial Strategy (DBEIS) has said workers must be paid the national living wage of £7.20 an hour, unless HMRC or a court ruled they were self-employed.
• Thorntons is re-launching into households with a £4.9m media investment this September focussing on authenticity, ingenuity and the hand crafted products. Customer development director, Levi Boorer commented: ‘By being an affordable luxury that consumers trust, we are able to bring great emphasis on the proud and passionate Thorntons approach that delivers high quality sweets and chocolates that are lovingly crafted with a personal touch. These core values have been in place since 1911 and we have reflected these within the new positioning and supporting campaigns.’
• Sushi chain Itsu saw a 22% surge in revenues to £82.6m last year following its expansion outside London, although this growth has eating into profits (down from £1.6m to £434k). The chain opened 10 restaurants last year and now operates more than 60 and now acknowledges that ‘over-aggressive growth’ and acquiring unprofitable sites are the brand’s principal risks going forwards.
• Hydes Brewery has credited a ‘strong performance’ for FY15 to ‘significant investment’, resulting in a 24% increase in turnover to £27.7m and a rise in profits to £2.4m. The group acquired Woodward & Falconer in September for £6.5m in cash, which added four high-quality, food-led pubs to Hydes’ estate. Its managed estate now stands at 32 houses and trade in the first two months of the year have proven ‘very pleasing’, although concerns remain re. competition and the implementation of the Living Wage.
• Vapiano has reported revenues of £11.4m in the year to end-December 2015, up from £9.2m the year before. EBITDA was £1.1m. Elsewhere north-west brewer and pub company Hydes has reported turnover +24% at £27.7m in the 53wks to 3 April. PBT was £2.03m per Propel.
• The Local Data Company reports a 46% drop in retail & leisure property activity in July 2016 vs the same month last year. It says ‘July’s numbers are significant when you look at the 12-month view and see what impact the political and consumer volatility has had over the last two months. The net result has been a freeze in normal activity levels which are mirrored in many other areas of the economy.’
• The Restaurant Group has appointed Spencer Ayers as the new managing director of Frankie & Benny’s, writes MCA.
• Carluccio’s has opened its one hundredth site in the UK, at the Intu Metrocentre in Gateshead, and is preparing new units in Edinburgh, York, and Swindon.
• Deliveroo is trialling a new £3.75 per delivery rate in parts of London, Brighton, and Bristol, in order to improve job flexibility for its drivers.
• Carlsberg UK’s transformation continues with the creation of a premium brand and sales division called the House of Beers. The House of Beers brand portfolio is comprised of the group’s premium and craft beer and cider brands including Backyard Brewery, Bad Apple, Grimbergen, and Mahou.
• American Craft Brewery, Founders Brewing Co., has entered into a UK distribution partnership with Bedford-based brewer Charles Wells. Supplies of one of their most popular beers, the award winning 4.7% ABV Founders All Day IPA, will be available in keg and 355ml bottle and can formats in the UK from mid-August.
• Hogs Back Brewery is hoping to double the size of its hop harvest this September to between 40-50 zentners (2,000-2,500 kg).
LEISURE TRAVEL & HOTELS:
• The Association of Leading Visitor Attractions has reported a sharp bounce in overseas visitors post Sterling’s June 23 fall. It says ‘the biggest increase in visitors we’ve seen is to Hampton Court, where the magic garden has drawn in many more tourists than expected.’ The body adds ‘Buckingham Palace’s summer opening is almost sold out, and Scotland is having a great summer too, with a notable rise in tourists from North American and Scandinavia.’ Merlin, amongst others, should benefit. Chairman of Patisserie Valerie, Luke Johnson, has said that his units remain busy.
• Luton airport passenger numbers rose 15.4% in July, meaning 1.5 million passengers moved through the airport’s gates.
• Preliminary STR data for London hotel performance in July shows almost flat occupancy, up 0.2% to 88.4%, with a 3.7% increase in ADR to £156.67 driving a 4% RevPAR rise to £138.51. This marks the first month of 2016 in which the sector has recorded notable RevPAR growth.
• At least four have died and dozens were injured in a series of coordinated bomb attacks across tourist destinations in Thailand. The British embassy in Thailand has updated its travel advice urging tourists to exercise ‘extreme caution’ and to avoid public places.
• Eurostar staff have started strikes in protest of their work-life balance, with two unions committing to four separate strikes this month.
• 888 and Rank Group sweetened their proposed offer for William Hill yesterday.
• Wm Hill reports ‘it received [another] an unsolicited non-binding highly conditional revised proposal’
• It reports the ‘bid’ as 199 pence in cash and 0.860 BidCo shares per William Hill share, and would result in William Hill shareholders owning 48.8% of the combined group. With the exception of William Hill shareholders’ proposed ownership of the combined group, none of the other key terms of the Revised Proposal have changed from the original proposal of 8 August 2016.
• Bid values Wm Hill at 352p
• Wm Hill says ‘the Revised Proposal represents a premium of only 12% to the William Hill share price of 314 pence on 22 July 2016 (being the last trading day prior to the announcement of a possible offer by the Consortium).’
• Wm Hill has once again unanimously rejected the Revised Proposal ‘as it continues to substantially undervalue William Hill and as such the Board continues to see no merit in engaging with the Consortium.’
• The target goes on to say ‘the Board of William Hill continues to believe that the Revised Proposal is highly opportunistic and does not reflect the inherent value of the Group.’ Chairman Gareth Davis says ‘this revised proposal continues to substantially undervalue the company and the cash element of the proposal has not changed. Therefore, the Board sees no merit in engaging. As we have said before, this is highly opportunistic and complex and does not enhance the strategic positioning of William Hill. The Board continues to believe we have a strong team to deliver superior value to our shareholders and trading at the start of the second half gives us renewed confidence in our stand-alone strategy.’
FINANCE & MARKETS:
• Brexit issues:
• Property crunch. Aviva has suggested that its property fund could be gated until 2017. Trading was suspended on 4 July. Aviva says it may need to keep the fund closed for 6-8mths to sell properties adding ‘property sales may be more difficult to execute in the current environment due to market uncertainty. The suspension is likely to be in place for a period of at least six to eight months.’
• Sunday Times reports lack of preparation means Government not intending to exit EU until ‘late-2019’.
• ONS says construction output fell in June but adds there is “little anecdotal evidence” to suggest that Brexit referendum is to blame.
• HR body CIPD & Adecco have said that UK employers have held off on recruitment since the 23 June Brexit vote. They say the fall in recruitment has been “significantly sharper” among private sector firms. The survey suggests ‘while many businesses are treating the immediate post-Brexit period as ‘business as usual’, and hiring intentions overall still remain positive, there are signs that some organisations, particularly in the private sector, are preparing to batten down the hatches.’
• On a brighter note, incoming tourist numbers seem to be on the up. See above.
• Other Finance & Markets:
• Japan’s economy grows by a weaker-than-expected annualised 0.2% in Q2
• Germany’s economic growth slowed in Q2 – though by less than had been anticipated.
• Output and retails sales in China in July fell short of economists’ expectations.
• World markets: UK higher on Friday but US & Europe down. Far East up in Monday trade.
• Oil price higher. Brent at around $47.30 per barrel.
• Rightmove suggests that house prices in the UK rose by 4.1% in the year to August.
YESTERDAY IN A NUTSHELL – SEE LIVE TWEETS ON WEBSITE:
• Restaurant Group to replace CEO Danny Breithaupt. Ex-Betfair CEO Andy McCue to take over on 19 Sept.
• RTN. Group reports ‘a new leader is needed to implement the initial actions and then prioritise the next phase of the review.’
• RTN. Arguably, last time we saw such a wholesale clear-out at board level was post M&B’s hedge-loss debacle back during the credit crunch
• RTN & MAB. Clearout at MAB post credit crunch led to 9yrs in dog-house. RTN different? But competition is more intense, freehold value lower
• Enterprise Inns’ Hunky Dory Pubs has announced that it opened its first pub, in Solihull, yesterday.
• The NIESR has said that employers have reacted to the 23 June Brexit poll result with a mixture of ‘shock, horror and regret’.
• Pubs are being forced to close their doors as a result of high rents and cheaper drinks in supermarkets, according to research from CAMRA
• US hotel industry reported occupancy down by 1.6% in the week to 6 August but rate +2.7%. REVPAR was +1.1%.
• TUI boss Fritz Joussen has said that holiday costs will rise for UK travellers. He says that bookings have not yet fallen
• Initial claims for US unemployment benefit fell 1k to seasonally adj. 266k last week. Claims <300k associated w. strong labour market
• Other tweets: Milk price hitting new lows. Farm gate prices now 20p per litre. Was 34p in early 2014. Good for users, e.g. Premier Foods
• Corn and wheat prices on the way down. Important inputs, they should help keep other prices lower for longer
• Gold and oil prices edging higher. Sign of confidence (hint: no) or a sign that cheap money is causing bubbles?
• IG Index suggests share prices are rising ‘for the wrong reason’. That is due to cheap money, search for yield rather than good performances
• Sterling. Still trading ‘within post-Brexit band’. But it’s hitting lower lows, testing the bottom etc.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: There was a bit of focus on former Poundland boss Jim McCarthy in the Saturday papers, with the Daily Mail highlighting that he will net £23m from the Steinhoff takeover and the Times flagging that he gained £500,000 alone from the 5p increase in their offer last week, but perhaps the most intriguing story was the Times’ revelation that Ted Baker boss Ray Kelvin has borrowed up to £86m from Goldman Sachs and pledged 3.5m of his shares as security (in order to raise funds for private investments without having to sell any shares). The Telegraph noted that Supergroup CEO Euan Sutherland got a 177% pay package increase last year after giving “greater professionalism” to the business. David Wild, Domino’s Pizza’s CEO (and former boss of Halfords), was interviewed in the Times, noting that he is upping the group’s digital strategy and still
• Sunday Press: The Sunday Telegraph had a feature interview with Dixons Carphone’s CEO, the ebullient Seb James, who is still bullish about the group despite “Brexit”: “We’ve been out fixing the roof while it’s been pretty good for us” . The Sunday Telegraph also noted that Sports Direct and Primark are eyeing the rump of BHS’s closed stores, whilst the Sunday Times focused on the new legal row engulfing Mike Ashley over his involvement with Rangers FC. The Sunday Times also had a detailed article about the new Ocado deal with Morrison’s, noting that it had no choice after the arrival of Amazon Fresh but to bend over backwards to keep Morrison’s on board. The Mail on Sunday flagged that Morrisons is to send 1,000 employees from its HQ to stores to help with a rush of customers during the forthcoming expected heatwave,
• Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s Grocer magazine saw Asda beaten convincingly by guest retailer Aldi: the Aldi basket of just £39.03 was a massive £8.52 or nearly 18% cheaper than Asda and Aldi was cheapest on no less than 32 of the 33 items on the list. But for Aldi, Asda would have won again, as its £47.55 basket was £1.67 cheaper than 3rd placed Morrison’s, with Tesco in 4th place on £51.29 and Sainsbury 5th on £52.98.Poor old Waitrose was a distant 6th and their basket of £64.40 was a staggering £25.37 more expensive than Aldi, albeit this outcome was skewed by Waitrose charging as much as £12.42 for a pork joint (generally £6/7 elsewhere). There was more bad news for Waitrose in the separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability, as their store in Horley in