Langton Capital – 2016-10-04 – Revolution, Gregg’s, trading in Scotland & other:
Revolution, Gregg’s, trading in Scotland & other:
A DAY IN THE LIFE:
Have you ever noticed that, whether you’re with your family or in the workplace, if you ask who’s done what jobs around the place, you’ll always get an answer that adds up to more than 100% of the work that’s actually been done?
And this isn’t just because people lie.
They do, of course, but more than that, they have a clear and present impression of what they have done themselves – but what other people have done fades into the background and can be ignored even if, when asked, an individual may grudgingly admit that they weren’t always the person who cleared out the fridge or emptied the office bins.
In fact, I think the equation in an office might be something like: X = 120 + ((square root of the number of people) times 10)
Hence in a four-person office, the ‘work done’ would add up to 120 + the square root of 4 x 10 = 140% and in a nine-person office, it would add up to 150%. Of course in a one-man office the number would be 120% and, as hypocrisy is alive and well and lives at Langton, that sounds about right. On to the news:
• With the above in mind, it’s probably worth bearing in mind that over-confidence is a major issue. And we all suffer from it at times – otherwise why would the Langton mobile constantly be losing its wing-mirrors as a result of whistling through tight gaps at 30mph and why would the Langton bank balance need defibrillating because it had been expecting one or other sources of income to come through when in fact they didn’t?
• Hence books on failure may be at least as valuable as those on success.
• We’re hard wired to believe that we’re going to win the X-Factor, play in the Premier League and scoop the lottery but what we find more difficult to accept is that we may try hard and get nowhere.
• Or even, heaven forbid, get things wrong.
• There may be room for Langton to write a book (You Too Could be a Failure Like Us) but, in the meantime, we’ve been doing a bit of reading.
• Bernie Madoff, Wizard of Lies. Lessons: 1) if it looks too good to be true, it probably is, 2) it’s hard to cheat an honest man, 3) secretive salesmen selling to your greed may be up to no good, 4) sometimes (perhaps often) the King really has got no clothes on, 5) an ebb tide shows who’s not wearing a bathing costume.
• Eliot Spitzer, Client 9. Lessons: 1) never underestimate any man’s ability to make an utter fool of himself, 2) the people whose fingers you trample on when you’re on the way up will likely kick you in the nuts on your way down, 3) don’t antagonise billionaires with access to private detectives on your way to the whorehouse.
• Enron, The Smartest Guys in the Room. Lessons: 1) accounting rules may bend and bend. Cumulatively, you can end up in a bad place, 2) if you have earnings but no cash, then you maybe don’t really have any earnings, 3) some people can be too smart for their own good.
• LTCM, When Genius Failed. Lessons: 1) take care when snatching nickels from in front of a steam-roller, 2) you can’t expect a 10yr track record to highlight 100yr events, 3) when financially prostrate, think twice before opening your books to certain Wall St banks, 4) if you’re going to crash your fund to zero, don’t buy > half of it back personally before you do so.
• None of the above comments are new. Some of them are pre-biblical. They’re nonetheless relevant for that.
PUB, RESTAURANT & DRINKS PRODUCERS:
• Revolution reports FY numbers, says seeing ‘strong growth, record profits, development to plan, progressive dividend’
• Revolution reports FY sales £119.5m (2015: £111.8m) with LfL sales +2.3%. Adj. EBITDA up £1.0m at £15.6m
• Revolution FY. PBT £7.1m (2015: £2.9m), EPS 12.1p (2015: 4.6p) with 3.3p dividend. Group opened 5 sites in H1. These are ‘trading well’.
• Revolution current LfL sales (first 12wks of 16/17) +1.8% with 5 sites planned this year, 3 in H1. CEO Mark McQuater reports ‘we are delighted to have delivered excellent growth in revenue, margin and profit in our first full year as a listed company.’ Mr McQuater continues ‘reflecting our confidence in our strong operating model and overall debt free balance sheet we will open another 5 bars in our current year building on the success in 2015. Three new Revolucion de Cuba bars in Harrogate, Reading and Aberdeen are expected to open before Christmas 2016.’
• Revolution says ‘this financial year has begun well with recent trading robust with like for like sales of 1.8% in the first 12 weeks of the current financial year.’
• Gregg’s Q3 update. Says ‘trading in line with expectations’. Total sales up 5.6% for the 13 weeks to 1 October.
• Gregg’s Q3: Group says managed shop LfL sales up 2.8% for the 13 weeks to 1 October. Completed 145 refits, 103 new shops opened YtD.
• Gregg’s Q3: Says its new Balanced Choice and breakfast products were popular over the summer months. Group says ‘we are making good progress with the first stages of our supply chain investment plan.’ The company continues ‘given trading to date and the outlook, our expectations for the full year outturn remain unchanged. As we look to next year, whilst we anticipate some general industry-wide cost pressures, we expect to make further progress against our strategic plan.’
• JDW yesterday bought back some 155k of its own shares at 937.5p per share.
• Starbucks tea category manager Charlotta Oldham has told Propel about the coffee giant’s aim to make tea big business with its Teavana brand.
• Private equity group Alcuin Capital has reportedly scrapped its £200m London flotation of doughnut-maker Krispy Kreme in favour of a sale to its US parent. Krispy Kreme was established in 1937 and has gone on to open more than 1,000 locations with nearly 5,000 staff. It entered the UK market in 2003, where it now sells about 50 million doughnuts a year through concessions and its own stores.
• G1 has outlined problems of trading against ‘prevailing headwinds’. Says outlook impacted by uncertainty.
• G1 says customers concerned about their disposable incomes post the Scottish referendum and EU Brexit votes. Locally, the group has also had to adapt to a much lower oil price saying ‘the effects have been severe in Aberdeen’. G1 says they have also rippled out across the rest of Scotland.
• The NFU has appointed Nick von Westenholz as the head of its new Brexit unit. Mr Westenholz will be tasked with ensuring ‘the NFU has a co-ordinated and constant presence in its Brexit conversations with government in the crucial months ahead’. A number of farming bodies have expressed concern that the industry may be a net loser post Brexit.
• Fleurets is marketing the freehold of Radio 2 DJ Chris Evans’ pub, The Mulberry Inn at Chiddingford, for £1.15m.
• Wagamama has set a long term target of 100 US sites and 50 within the next five years from its current total of 3 units, writes MCA.
• Franchisees of Conviviality Retail have received the first tranche of shares as part of the group’s Franchisee Incentive Plan.
• Wonga has admitted that it double-charged 7,000 customers for their loans on Friday as a result of an internal system error. The UK’s biggest lender has promised that extra costs and charges will be refunded.
• Consumers are spending more on takeaway services such as Deliveroo and Hello Fresh and are eating out more overall, according to a report from Cardlytics. The study looked at the spending behaviour of six million bank customers and found that spending in the delivery sector had increased 13.5% over the summer months (9 July-27 August) year-on-year, with the majority of the spend was across casual dining and pub brands.
LEISURE TRAVEL & HOTELS:
• Easyhotel reports planning permission received for 204-room easyHotel located on Gran Via, the main avenue of L’Hospitalet de Llobregat. The group says ‘easyHotel’s acquisition of the land for the new build easyHotel is expected to complete in the coming weeks and the hotel is expected to open in early 2018.’
• Virgin Trains East Coast ran a full service yesterday despite a 24hr RMT strike. The union accused the company of running the largest scabbing operation in its history. Some 200 jobs are said to be ‘under threat’ although Virgin has said that no redundancies will be compulsory.
• Pegasus Airlines says Turkish tourism is on the up following President Erdogan’s controversial crackdown in response to a failed coup.
• Scottish travel group Minoan has agreed an extension of its three-year £5m loan from Jersey-based investment fund Hillside International Holdings. The company attributed a recent profit warning to Brexit-related uncertainty, weakness in sterling, and the decline in tourism in Turkey.
• Parkdean Resorts has been voted the 29th top private mid-market growth company in the Sunday Times Grant Thornton Top Track 250. As of December 2015 the combined Group had revenue of £400.7m, increased from £370.7m in 2014, and EBITDA of £106.6m up from £92.1m.
• The government has announced its intention to make the UK ‘the natural home of the sharing economy’.
FINANCE & MARKETS:
• Sterling has fallen to a 3yr low vs Euro on back of confirmation of Brexit timing & Hammond comments re lack of deficit reduction
• UK manufacturing was strong in Sept on back of a lower pound. The Markit/CIPS PMI rose to 55.4 from 53.4 in Aug
• Chancellor Philip Hammond has officially dropped commitments to balance the UK budget saying he will spend on homes & transport
• Chancellor concedes deficit will need addressing “in due course”. That’s another one to leave to the kids to sort out, then?
• Chancellor Hammond has warned that the economy could be on a “bit of a rollercoaster”. He told the Tory Party Conference ‘the British people elected us on a promise to restore fiscal discipline. And that is exactly what we are going to do. But we will do it in a pragmatic way that reflects the new circumstances we face.’
• Citi has said that jobs in London are under threat if/when the UK leaves the EU. The bank employs some 9k people in London
• World markets: UK & Europe up yesterday but US down. Far East markets mostly higher in Tuesday trading
• Oil settling above $50. Brent Crude currently changing hands around $50.80 per barrel.
• The UK faces a ‘critical rental shortage’ and a building programme must be established to focus on providing for tenants, according to the Royal Institute of Chartered Surveyors. Rics says at least 1.8 million more households will be looking to rent rather than buy a home by 2025 and as a result is calling on the government to provide tax breaks to encourage building and investment in the sector. The number of UK households renting property rose from 2.3 million in 2001 to 5.4 million in 2014.
• General Motors and Ford have both seen US auto sales fall.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• FT reports a new brewery opens every 3dys in UK. Some 134 opened last year to take the total to 1,692.
• Chinese takeaway delivery chain Hotcha reported to have secured £7.5m investment to fund national expansion plans
• Restaurants that fail to reduce sugar content of portion sizes could be named and shamed as part of a drive to tackle obesity in the UK
• Jamie’s Italian biggest contributor to Jamie Oliver Group in 2015 as its 9% increase in turnover to £116.1m in group total of £158m
• Enterprise Inns has reached 100 managed pubs with the opening of the Caerphilly Cwtch in Caerphilly, Wales
• Monarch thought likely to announce fleet order of up to 45 new planes after securing bank and shareholder funding
• VisitEngland says number of day trips rose to its highest level since 2012 in August, with 151m trips and record spend of £5.5bn
• PM Theresa May says she will trigger Article 50 by end of next March at the latest. The UK should then leave the EU by March 2019
• UK services sector +0.4% in July per ONS. Good news. GDP grew by 0.7% in Q2. Further rate cuts delayed
• Other Tweets: Pound flirts w. post-Brexit vote lows (again). Chartists say may go 115c vs US$. They’ve been known to be wrong but could import inflation
• Sterling weakness could see FTSE100 o/perform wider index. It has an embedded put on Sterling given overseas earnings
• Stats last week seem to imply no short term recession. Fingers crossed on that one. Business confidence is key forward indicator
• UK now up to 1,692 breweries, adding >2 per week. Might be a few hundred too many? Market has poor braking mechanism re capacity expansion
• ETI & Punch transition to a part-managed model going on apace. ETI now 100 managed units. Longer term lessees could be the losers
• ETI move to managed implies fewer ‘good’ units to be left in the hands of lessees. More may have to be wage-slaves to stay in industry
• Is it just me or does Theresa look like the cat who got the cream? Wouldn’t she give anything, anything, to remain in the job…
• Milk price in the UK very slightly better in July vs June. Now just >20p per litre. Was >34p 2yrs ago. Cheaper input for Premier Foods etc.
• IG suggests profit growth may be ‘the wrong sort’. Says cost cutting, Sterling one-off and supply reductions could boost profits short term
• Grocer 33 shows ASDA now less cheap than Morrison’s. The former’s price cuts not that ferocious after all?
• Aldi says would like to have ‘a site in every town’. Not concentrating on profit-maximisation yet, then?
RETAIL NEWS WITH NICK BUBB:
• ScS: The final results from the sofa retailer ScS today (for the 53 weeks to July 1st) are strong, with LFL order intake up by 14.8% and EBITDA up from £11.3m to £16m, helped by a turnaround in the performance of the House of Fraser concessions. The big weeks of the new-year are yet to come, but LFL sales order intake is up 4.5% for the 9 weeks to 1 October and three further stores in Plymouth, Thanet and Edinburgh are targeted to open on Boxing Day. CEO David Knight says “We are encouraged by our trading performance since the start of the current financial year which is in line with our expectations. However, we are mindful that the Group continues to face very strong comparatives during the remainder of the year”. This is a big week in the world of Furniture and Furnishings Retailing, with the Topps Tiles pre-close tomorrow and then the Dunelm Q1 and DFS interims on Thursday. ScS
• Greggs: Today’s Q3 trading update (for the 13 weeks to Oct 1st) is reassuringly headlined “Trading in line with expectations”, with LFL sales up by 2.8%, supported by “the popularity of our summer menu including an extended range of Balanced Choice salads and yoghurts”. Rather revoltingly, Greggs also trumpet that “Chipotle Pulled Beef, Fiery Pulled Chicken and Onion Bhaji burritos are exciting new additions to our successful hot sandwich range”, but overall the message is that “given trading to date and the outlook, our expectations for the full year outturn remain unchanged”. There is an 8.30am conference call with analysts.
• Majestic Wine: Yesterday afternoon’s analyst’s trip to the revamped Majestic Wine store in Welwyn Garden City wasn’t just an excuse for another wine tasting…as there was a 48 page presentation from the management team that went on for nearly 2 hours, with appearances from Rowan Gormley (Group CEO), John Colley (Majestic Retail Managing Director), Josh Lincoln (Customer Director), Louise Ellis (People Director) and Richard Weaver (Buying & Merchandising Director), with the overall message that “1) We have a good team; 2) A simple plan, on track and 3) A disciplined environment”.
• SuperGroup: Further to our note on Thursday that SuperGroup was showing analysts and investors around its “next generation” Superdry store in the Arndale Centre in Manchester, we have been asked what is so different about the store. Well, we haven’t seen the store ourselves yet, but according to the management presentation from Nick Tatum, the Global Retail Director (who Joined SuperGroup from Tesco last November) Arndale was selected for the trial because it was a large store (12,900 sq ft) with “representative operational metrics” since it opened in April 2012. The aim of the refit was to “increase product option density, expand circulation space, enhance the music and multi-media experience and achieve a store layout that emphasises inspiration and enhances category clarity”. The changes are most obvious at the front of the store, with a wider store opening to encourage more
• Chelmsford Watch: Having noted on Thursday that the first ever John Lewis store in Essex opened in Chelmsford, we have also been asked how a town of only 120,000 people justified the new upscale 300,000 sq ft Bond Street development by the river, behind the High Street. Well, the answer is that it is a big commuter town, with good train links to the City and has an affluent catchment, but it does have 2 shopping centres already, at either end of the High Street. The Meadows centre, anchored by the now defunct BHS, is a sad affair, but the recently extended High Chelmer centre is pretty solid and is anchored by Primark, Next, Boots, Top Shop and River Island etc. And the pedestrianised High Street is not bad, with a sprawling Debenhams and a dull Marks & Spencer. But there is a shortage of premium or lifestyle brands, so the attractive Bond Street scheme developed by the local