Langton Capital – 2017-02-22 – Hotel Chocolat, innovative brands, business rates & other:
Hotel Chocolat, innovative brands, business rates & other:
A DAY IN THE LIFE:
I suppose it’s a sign of the times but the booklet of Xmas-themed stamps that I bought in late November looks as though it’s going to make it into March.
In fact, with six of them left, there’s a very good chance that they’ll make it to Xmas 2017 because who, these days, sends letters?
Fair enough, you have occasionally to forward the hard copy of something that you’ve already signed, scanned and emailed to a recipient but when did you last pay a bill by post or send anyone a cheque.
Well I know it still happens but, with even the scouts, the after-school football club and our daughter’s drum lessons (yes, drums, who’s idea was that?) taking payments online, I think my cheque book still has stubs in it going back to 2014 or even 2013.
So, as with the hospitality industry, change is the only constant.
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PUB, RESTAURANT & DRINK MANUFACTURERS:
• Hotel Chocolat reports H1 numbers to end-Dec saying revenue +12% at £62.5m with underlying EBITDA +27% at £13.7m
• HOTC H1: Reports PBT +28% at £11.2m with EPS 7.8p vs 6.2p. Group says it has seen strong sales growth ‘across retail, digital & corporate channels’
• HOTC H1: Group opened 10 stores in H1 & launched a new website last month.
• HOTC H1: CEO Angus Thirlwell reports ‘this has been another period of good progress for Hotel Chocolat with strong growth in both sales and profitability. The critical Christmas period was very successful, helped by good availability, popular and innovative new ranges and significantly increased digital transactions. We have strong plans in place for the key spring seasons of Mother’s Day and Easter and are confident of further progress.’
• HOTC H1: CEO says ‘we continue to make good headway against our three key strategic objectives of opening more stores, improving our digital capability and increasing our production capacity.’
• Be At One sale could flush out buyers unable to rev up sales across their own estates reports MCA. It says Turtle Bay and Franco Manca are among brands that could materially change the growth prospects for a company that owned them. MCA says Be AT One is also in that list.
• Be At One. MCA reports group is ‘on course to report turnover of c£36m in its current financial year [end March] …up from £29.3m in the previous 12 months.’
• Be At One: MCA suggests LfL growth of 9% over the last 5yrs. Stonegate could be a buyer. The latter may IPO at some stage
• The Scottish finance minister has announced a cap on business rates for hospitality companies, meaning 8,500 restaurants, pubs, cafes, and hotels will benefit from the 12.5% limit. The Scottish Tourism Alliance, which recently warned of the potentially ‘devastating’ impact of the first rates rise in seven years, has welcomed the ‘pragmatic’ cap.
• Industry experts have warned that replacing critical EU workers within the hospitality industry if their rights are not protected would be a major struggle.Ufi Ibrahim, chief executive of the British Hospitality Association, which represents more than 40,000 businesses including hotels, restaurants and attractions, said replacing European workers with domestic employees would be extremely difficult and take years.
• ‘Replacement of the numbers, given [that] unemployment figures are the lowest they have been, will require our industry to reach the economically inactive and long-term unemployed, which will take time,’ Ms Ibrahim said. David Davis said something similar yesterday as well.
• Cracker Barrel has turned in its 11th successive quarter of LfL sales growth with store sales +0.6% in the quarter to December. Operating profit margin is +150bps at 10.7% and diluted EPS is +9% at 201c. CEO Sandra Clchran reports ‘I am pleased to report another significant increase in earnings per diluted share.’ She says ‘as we look to the second half of this fiscal year, our teams remain focused on executing at the store level.’
• Texas Roadhouse has reported revenue +7% in Q4 to $485m. Net income is down, however, and EPS is down 10% at 29c.
• Texas Roadhouse reports LfL sales growth of 1.2% in Q4. Margin was 44bps lower at 17.1% and profits fell. Group says ‘wage rate inflation and higher costs associated with payroll taxes, insurance reserve adjustments and gift card fees more than offset the benefit of lower food costs’. CEO Kent Taylor reports nonetheless ‘we are pleased to deliver another strong year of results including a 19% increase in diluted earnings per share driven by double-digit revenue growth and restaurant margin expansion. We also delivered impressive comparable restaurant sales growth during 2016 with an increase of 3.5%, and we extended our streak of consecutive quarters of comparable restaurant sales growth to 28 with our fourth quarter increase.’
• Texas Roadhouse says re 2017 that LfL sales in the first 55dys of Q1 were up by 1.5% despite tough trading in the US restaurant industry.
• Street food and coffee shop operators have the greatest potential to grab market share in the food to go market, per MCA’s Food To Go Report 2017. The coffee shop sector is predicted to rise from 9% this year to 10.3% by 2020, having already grown from 8% in 2014. Street food is expected to see growth moderate slightly, with overall market share potentially rising from 5.6% to 6.2%.
• Chancellor Philip Hammond has told MPs he is ‘listening’ to concerns about the upcoming changes in business rates, which will bring them in line with property values for the first time in seven years. Ministers say three quarters of businesses’ rates will either go down or stay the same but others argue that some operators will be disproportionately affected.
• Buster Grant, owner and Head Brewer of Brecon Brewing in Wales, has been appointed the new Chairman of the Society of Independent Brewers (SIBA).
• Pub operator and brewer The Laine Pub Company has seen operating EBITDA grow by c23% to £3.9m in the year to 30 June on turnover growth of more than 10% to £30.4m.
• Asda suffered its 10th consecutive quarter of falling sales in the three months to 31 December, with sales falling by 2.9%. Walmart CEO Doug McMillon admitted: ‘In the UK, we faced some challenges this past year and we’re addressing this with urgency. We still have a lot of work to do.’
• Restaurant Brands International Inc. is set to buy Popeyes Louisiana Kitchen Inc. for $1.8bn. RBI already operate Burger King and Tim Hortons. Popeyes has over 2,600 sites, mainly in the US, with RBI promising to push ahead with domestic and international expansion. RBI CEO, Daniel Schwartz stated ‘Popeyes is a powerful brand with a rich Louisiana heritage that resonates with guests around the world’.
• Global sales of UK food and drink have surpassed the £20bn mark for the first time in history, helped by a 10% growth in UK exports in 2016. Food and drink sales to the US — one of Britain’s biggest markets — rose by 12%, while China is becoming one of the UK’s fastest growing markets, with the export value of pork skyrocketing to £43m (+70% year-on-year)..
LEISURE TRAVEL & HOTELS:
• Utrip, the machine learning travel planner start has raised $4m in series A funding. The key investors in the company were Plug & Play, Tiempo and Acorn Ventures.
• STR data shows that the US hotel industry started the year positively with regards to key performance metrics in January. Occupancy was up 0.5% reaching 54.1%, average daily rates climbed 3.2% to $120.72 and RevPAR rose 3.8% to $65.33.
• Verizon will pay $350m (£281m) less than originally agreed for Yahoo’s core internet business. The deal was in doubt after it was revealed that Yahoo had suffered from two major hacks in 2013/14. The reduced figure that Verizon will pay for Yahoo’s business is around $4.48bn.
FINANCE & MARKETS:
• Britons are now more concerned about the economy than they are about terrorism or immigration, per a survey by Nielsen. Some 28% of the 504 participants of the online poll named the economy as one of their top two concerns at the end of 2016, up 12 percentage points from a year ago. Meanwhile, 20% of people named terrorism or immigration in their top two concerns, down 12 points and 2 points respectively since the end of 2015.
o Telegraph reports Peugeot may get sweeteners from tax payer to keep Vauxhall jobs in UK
o FT reports S&P, Moody’s & Fitch may leave UK post Brexit as there is (as yet) no UK regulator to oversee them
o Economic worries are now reported to be more important to voters than immigration or terrorism
o French presidential candidate Emmanuel Macron has said UK banks and workers should relocate to France. He says ‘I think that France and the EU are a very attractive space.’
• HMG recorded a £9.4bn surplus (taxes less spending) in January, up £0.3bn on last year. The year to date deficit stands at £49.3bn, down from £62.9bn in the same period last year
• Rightmove has reported that asking prices by house sellers are rising at their slowest rate in 8yrs
• Euro PMIs for manufacturing and services beat expectations for February
• World markets: UK down yesterday with Europe up and US also higher. Asia up in Wednesday trade
• UK 10yr gilt rate up to 1.24% from 1.23% yesterday
• Brent $56.89 (was $56.20)
• Sterling stronger vs dollar at $1.2503 & considerably higher against Euro at 118.57c (versus 1.1755 yesterday)
TODAY IN A NUTSHELL:
• Hotel Chocolat reports H1 numbers to end-Dec saying revenue +12% at £62.5m with underlying EBITDA +27% at £13.7m
• HOTC shares trading on a forward multiple of 33x June 2017 earnings falling to c30x 2018. Looks perhaps a bit rich
• Be At One sale could flush out buyers unable to rev up sales across their own estates reports MCA. Mentions Turtle Bay & Franco Manca as similar brands
• BHA has warned that replacing critical EU workers within the hospitality industry if their rights are not protected would be a major struggle.
• David Davis concedes UK borders will have to remain open for years in order to supply staff for basic industries
• Street food and coffee shop operators have the greatest potential to grab market share in the food to go market, per MCA
• Asda suffered its 10th consecutive quarter of falling sales in the three months to 31 December, with sales falling by 2.9%
• Britons are now more concerned about the economy than they are about terrorism or immigration, per a survey by Nielsen
• HMG recorded a £9.4bn surplus (taxes less spending) in January, up £0.3bn on last year.
• Later Tweets: Gold/oil ratio (no. of barrels per ounce) remains near recent lows at 22 barrels. Was 34 barrels back in scaredy cat March 2016
• Worth remembering oil price is +60% in last 12mths. And that’s in US$s. In ££s, it’s up by 85%. Coffee +62% in $$s (+88% in Sterling)
• Spare a thought for those coffee shops. Coffee +88% in Sterling terms over 12mths. But it’s not as though they had tiny wee margins, is it??
• CBI shows robust activity but price rises on the way. Consumer spending & borrowing driving activity (for the present)
• ARM Holdings goes to Japan but Amazon creates 5k warehouse jobs. UK loses bank HQs but adds billion Deliveroo cyclists. Hardly skilling up…
RETAIL NEWS WITH NICK BUBB:
• Asda: Poor old Asda announced yet more weak sales figures yesterday afternoon, on the back of the Wal-Mart Q4 results, but the spin was that things weren’t as bad as in Q3, when LFL sales slumped by 5.8%…The Walmart CEO, Doug McMillon, put in a good word, by saying on the analysts call that “In the UK, we faced some challenges this past year and we’re addressing these with urgency. We’re encouraged comp store sales improved during the fourth quarter. I visited stores in the market a few weeks ago and the team has us pointed in the right direction”. And CFO Brett Biggs said “Turning to the UK, net sales declined 0.6% and comp sales declined 2.9% in the quarter. We have a lot of work to do in this market, but we’re encouraged by some of the early signs of traction with improvements in the customer value proposition”. Eight months in, there is no sign of the new Asda CEO Sean Clarke
• CapCo: Today’s finals from the London property developer CapCo (which trumpets that “Despite macro-economic uncertainty, London is one of the great cities of the world; desirable as a retail destination and residential location”) are rather mixed…On the one hand, Covent Garden goes from strength to strength with rents still rising and the valuation now up to a heady £2.3bn (up 6% LFL). On the other hand, the investment in the residential development of Earls Court has been written down by 20% to £1.1bn…
• Hotel Chocolat: After its success last year, profit-taking has taken the edge off the Hotel Chocolat share price recently, but there is nothing much wrong with today’s interims, with revenue up 14% and EBITDA up 27% for the 26 weeks to Dec 25th. CEO Angus Thirlwell says “the critical Christmas period was very successful, helped by good availability, popular and innovative new ranges and significantly increased digital transactions” and “Since the end of the period, trading has continued in line with expectations”. Store openings have obviously helped to drive the top-line, but Hotel Chocolat have emphasised that there was good LFL growth as well (without giving a figure) by pointing that new stores only added 4% to total sales.
• John Lewis Partnership Watch: The calendar shift of Valentine’s Day from a Sunday to Tuesday hit trade at John Lewis in the week before last, but there was little sign of any bounce-back last week, with gross sales down by 0.2% (over 1.5% down LFL) in w/e Feb 18th and so the cumulative 3 week run-rate is now only +1.0% gross (c0.5% down LFL). Over at Waitrose, the impact of the Valentine’s Day shift was more striking, with gross sales 7.0% up last week, but over the last 3 weeks combined Waitrose sales are now running up by just 1.8% (down over 1% LFL).