Langton Capital – 2017-03-23 – Adnams, mobile ordering, domestic terrorism & other:
Adnams, mobile ordering, domestic terrorism & other:A DAY IN THE LIFE: I think that stock market chartists have taken a leaf out of the well-established ‘influence the people’ book in that they have invented their own language. It brings with it a certain mystique. I mean think Latin, chanting and incense in the middle ages or the gobbledegook that goes with any number of modern cults, focus groups etc. and consider the chartists in that light. I mean they talk about ‘exhaustion gaps’ as though they mean something. And then they tell us that the recent ‘hammer candle’ is immensely positive (or is it negative?) and they tell us that there are bearish flags and this and that and the other. Certainly, it allows them to create a barrier to entry but don’t they just mean that this share went up and that share went down? And, when this stock fell near 500p, people started to buy it and when it hit 800p, sellers emerged? On to the news: PUB, RESTAURANT & DRINK PRODUCERS: • Adnams reports FY number, says it ‘saw strong growth in 2016 with our own beer sales passing 100,000 barrels for the first time in our history, a 9% increase over 2015 and sales of our own spirits grew by 66%.’ • Adnams FY: Says ‘overall turnover was also a record high at £70.3 million and operating profits were £3,937,000. Our operating result was 3.8% behind the previous year with the largest impact coming from the fall in Sterling in the second half of the year. We have substantial Euro and US Dollar costs relating to wine and hop purchases.’ • Adnams FY: Group says its ‘profit before tax at £5,020,000 was 23% ahead of 2015 driven mainly by the profit that we made on the sale of the UK distribution rights for Lagunitas beer.’ • Adnams re the future: Group says ‘we have confidence in the underlying performance of the business and the growth that we have been seeing.’ The group says ‘the economy has been reasonably robust, though the overall beer market has continued its long downward trend and pubs continue to close.’ • Adnams group chairman Jonathan Adnams comments ‘I observed earlier that the economic climate in 2016 was better than many expected. There are, at the start of 2017, similar concerned voices and a worry that inflation induced by currency depreciation will outrun wage growth, leading to a squeeze in living standards and reduced consumer spending. It remains to be seen what happens when the UK leaves the EU, however our focus will continue to be on the longer term and we are investing accordingly, notably in the brewery and the Swan Hotel. I would like to thank our shareholders for their support.’ • Brasserie Bar Co restaurant EBITDA increased 14% to £6.5m (from £5.7m) in the year ending July 2016, Propel has reported. In 2015 the group raised £13.5m to fund an expansion of at least 20 sites. Chairman Ian Edward stated ‘It is hard to articulate the transformation that the company has undertaken over the last two years – a transformation delivered across the estate by the financial year ending June 2016.’ • Novus Leisure CEO Toby Smith has told MCA that the business has continued to make significant process in the past year. The group invested in Late Night and Balls Brothers, introduced a new Pizza and Beer concept called Tank and Paddle in Fenchurch Street, and added three-strong Rocket Restaurants to our estate for investment over the summer. • Scottish whisky workers have called for greater transparency around the effects of leaving the EU on their trade. GMB Scotland organiser Louise Gilmour said: ‘Whisky is a massive success story for Scotland but our efforts to get protective measures from the UK Government amid Brexit uncertainty have so far been met with silence. We need some honest answers. If the UK Government cannot provide our members with the reassurances they need for the future defence of their livelihoods then we need to gauge how others see us, which may mean some hard truths from Europe on future trading arrangements.’ • Barclays hospitality and leisure team relationship director Bob Silk has told operators that they must be flexible if they are to survive Brexit. Speaking at a panel discussion earlier this week, Silk said: ‘I can see a time when, more than ever before, it is the nimble and fleet of foot that will survive. Those who are not fleet of foot will struggle and not survive. However, this is not a good time to be speculative.’ • Rooster’s Brewing Co. has been awarded three medals at the 2017 International Brewing Awards. Rooster’s Head Brewer, Oliver Fozard, commented on the brewery’s success: ‘I’m incredibly proud of our team. To win the bronze medal two years ago was a real honour, but to come away with three this time around is an exceptional achievement – especially given the calibre of the judging panel and the competition we faced.’ • Starbucks’ CEO Howard Schultz has told his company’s AGM that the co ‘plans to create more than 240,000 new jobs globally (68,000 in the U.S.) as it reiterates intent to open 12,000 new stores globally and 3,400 new stores in the U.S. by FY21’. • Starbucks says it has ‘reinforced its long-term commitment to driving performance through the lens of humanity.’ Hum… • Starbucks reminds investors that its success is driven by ‘the 330,000 people who proudly wear the green apron.’ • Starbucks’ incoming CEO Kevin Johnson announces the expansion of its Mobile Order & Pay platform. • HIS Markit has suggested that rising inflation has led household confidence to decline. It says this threatens to slow the economy. Markit says that households are under more financial pressure than at any time since 2014. The period of rising household incomes may prove to have been brief. • With three new coffee shops opening every day in Britain, the rapidly expanding industry is now worth over double the value of the on-trade wine industry in the UK. The Wine and Spirits Trade Association values the on-trade wine industry at £4.2bn, and the on-trade spirits industry at £5.8bn, while the coffee industry in the UK is estimated to be worth £8.9bn. Harper’s Bazaar notes that the number of coffee shops in the UK is set to overtake the number of pubs by 2030. • Gwendal Poullennec, Director of the International Development for the MICHELIN Guide has highlighted the importance of food as one of the leading attractions in travel and tourism, in a speech given at the Global Restaurant Investment Forum. He went on to remark ‘Studies clearly show that memorable dining experiences have a decisive impact, turning a visitor into a promoter of the destination.’ MOBILE ORDERING – A QUICK ROAD TEST: JD Wetherpoon: • With mobile quickly becoming the latest battleground in the UK food and drink on-trade, Langton decided to sample Wetherspoon’s new ‘Order & Pay’ app at the local. Order and Pay allows you to enter your table’s number and desired order, alongside card payment details, allowing the waiter to come to you once the order is ready to serve and thus skipping the wait at the bar. • Such an innovation should result in efficiency for both the consumer, who no longer waits in line, and for the operator, which no longer requires so many people to queue up. Trade can be lost through inefficiency during busy hours and apps like this present the potential to further streamline processes. • Three separate attempts yielded two successful orders and one in which the app could not process the card details. A sample of three, admittedly, is not statistically significant but our anecdotal findings suggest there is very much a space for Wetherspoon’s app (and others like it). • We note that ‘Order and Pay’ now has over 50 thousand downloads on Google Play Store and a rating of 3.1, while the itunes version has a rating of 3.4. The reviews appear to reflect Langton’s two-out-of-three experience: a great idea that fulfils its function but could do with minor fine-tuning. • While JDW has the scale and brand power to justify its own app, the same might not be said for other operators. Mobile ordering apps sound good when the likes of McDonald’s, Starbucks, and Domino’s Pizza pioneer their own versions, but for many others an aggregator akin to Just Eat might be more cost efficient. Other providers: • Starbucks & McDonald’s are doing their own thing. • But for cafés and coffee shops looking for an ‘order and pay’ service, a generation of new apps led by the likes of Ordoo are springing up to service this market. Not quite the same as Wetherspoon’s table ordering service, Ordoo seeks to act as a click and collect function for small to mid-size chains and independents who don’t have the brand awareness and depth of funds of a Starbucks to make justify their own app. • Now that mobile ordering is being championed by the likes of the world’s biggest coffee operator as the next big thing, it might be too expensive for others not to get involved. HOLIDAYS, LEISURE TRAVEL & HOTEL • Merlin, London hotels, pubs & restaurants in the capital etc. Yesterday’s terrorist incident in Westminster, whilst an outrage in its own right, will be a negative for domestic tourism. • MERL has previously commented with regard to Paris, Brussels & older Irish terrorism, that its markets recover 6-9 months after a terrorist incident. • Terrorist attacks in Egypt have led to a fall in annual tourism revenue of almost 80% since 2010, according to the WTTC. In 2010 revenues from foreign visitors were E£141.9bn but in 2016 this had fallen 45.4% to just E£29.8bn, due to factors such as the Arab spring. During the same period, visitors collapsed from 14m to 5m. • The Patron-backed, Generator Hotels, has announced an expansion of its dining options to its European portfolio. The group successfully trialled the idea in Stockholm and Amsterdam last year, and will now roll the concept out in its Paris, Hamburg and Copenhagen properties. • Data according to STR has found European hotels have grown in the three key performance metrics in February 2017. Occupancy rose 2.9% to 64.5%; the average daily rate climbed 1.8% to €100.08; and RevPAR increased 4.7% to €64.59 • A Mexican firm has bought the Voyager cruise ship from All Leisure Holiday Group’s (ALG) administrators. The exact details of the transaction are confidential. OTHER LEISURE: • Betting company GVC reports FY numbers, says revenue +11% in constant currency to €873m with EBITDA +26% at €205.7m. CEO Kenneth Alexander reports ‘the acquisition of bwin.party in February 2016 was our most ambitious transaction to date and through the hard work of our people we have once again demonstrated our ability to create significant shareholder value through selected acquisitions. Our strategy of pursuing international diversification and scale through leveraging our proprietary technology, is more appropriate today than at any time in our history. The organic growth opportunity is equally exciting and we are confident of delivering further growth in 2017.’ • Portsmouth football club are in advanced takeover talks with the former chief executive of Disney, Michael Eisner. The 75-year-old American plans to acquire the League Two side through his media investment company, called The Tornante Company. FINANCE & MARKETS: • Bank of England’s agents’ summary business conditions suggests ‘moderate rates of activity growth had continued overall.’ The survey suggests retail sales volumes growth had eased. • B of E agents expect sales growth to slow further during the year ahead as the fall in sterling fed through to higher prices, reducing households’ purchasing power.’ • Exports up a bit. Investment up a bit. demand growth ‘moderate’. B of E says ‘a lack of visibility of the United Kingdom’s future trading arrangements was weighing on longer-term plans for some contacts.’ Bank says ‘the fall in sterling was being passed through into higher manufacturing output and consumer goods price inflation. Business and consumer services price inflation had edged higher.’ • Bank says housing market activity ‘little changed’. • Bank sees labour market as quite tight adding ‘recruitment difficulties had increased and were moderately above normal’. This perhaps suggests that wage growth could pick up. That would help consumption but could threaten to embed inflation back into the system. The Bank says ‘consumer goods price inflation had picked up markedly following the fall in Sterling’. • Brent up at $50.99 • Sterling little changed at 124.84c vs US$ • Sterling up a shade vs Euro at 115.71c • UK 10yr bond yield down sharply at 1.18% (was 1.26%) on economic slowdown fears. • World markets: UK down sharply yesterday & Europe also lower. US staged a recovery & Far East markets up in Thurs trade YESTERDAY’S TWEETS: • Later tweets: US market wobbles on fears all President Trump’s policies could be rubbish. World having an OMG moment? • Inflation in the UK. Pushing on a piece of string, yes but, with input prices now rising at 19.1%, some of this is going to hit the consumer • B of England to raise rates? Not likely. Perhaps needs to feel the wind beneath its feet before it will acknowledge the cliff has an edge • Crown slipped? Waitrose sales running down 2% LfL over last 7wks. John Lewis down 0.5% LfL. With inflation at 2.3%, that’s down 2.8% real… • With 3.4 coffee shops opening per day in UK, when will we have enough? Come to think of it, when could you last not find one..? • Overcapacity in the coffee market? A feature of it becoming a problem is that everyone insists it isn’t a problem… RETAIL NEWS WITH NICK BUBB:
• Next: As we noted yesterday, Next guided back on Jan 4th (after a disappointing Christmas and start to the January Sale) that their central forecast for full year Group profit was £792m, which could “increase or decrease by £7m depending on trade in January” and today’s outcome is in line at £790m. And given cost pressures, the 2017/18 guidance was for profits to drop further, to between £680m (-14%) and £780m (-2%) and although Next are well-known for being over-cautious and beating expectations, with the High Street off to a sluggish start in 2017/18, that full-year guidance has been maintained at this stage. CEO Simon Wolfson says “The year ahead looks like it will be tough with a combination of economic, cyclical and internal factors working against us. Our reaction to these challenges will be, as it has been in the past, to acknowledge where we can improve and focus on our core • Ted Baker: Today’s finals from Ted Baker will be overshadowed by mighty Next, even though Ted Baker is hardly a small company, with a market cap of £1.25bn, and the CEO and founder Ray Kelvin is always good value for money. And he says “I am pleased to report another good year of progress in Ted Baker’s expansion as a global lifestyle brand. We have continued to trade well and develop despite a backdrop of on-going external challenges across our global markets. This success reflects the strength and appeal of the brand as well as the outstanding quality of our collections. Our Spring/Summer collections have been well received and we have a clear strategy for continued growth across both established and newer markets”. The analysts meeting in the City is at 10.30am.
• Today’s Press and News: We haven’t had much time to look at the papers yet, as we have to dash to get to the Next results meeting in the City (which, by tradition, is held inconveniently early at 8.45am and is not webcast live), but there is obviously saturation coverage of the terrorist incident in Westminster yesterday afternoon…As for the finals from the Anglo-French DIY group Kingfisher, Lex column in the FT focuses on the growth of Screwfix in a piece entitled “The turn of the screw”, noting that “Brits are no longer fixer-uppers so much as caller-uppers of tradesmen. As with a wall shifting on its base, cracks will eventually show. Perhaps for this reason, Kingfisher no longer publishes a profit number for Screwfix”. The main article about Kingfisher in the FT is headlined “French woes wipe out boost from Screwfix”. The other news is that the Brantano shoe chain has tumbled
• Planet ONS Watch: In the real world, February (the 4 weeks to Feb 25th) was a bit better for Food Retailers, but disappointing for Non-Food Retailers, as per the BRC-KPMG Retail Sales survey last week. But we will find out at 9.30am this morning how life was like last month on that strange parallel world, the Planet ONS, via the Office of National Statistics Retail Sales figures for February. For what it’s worth, our friends at Capital Economics think that, given three successive monthly falls in volumes, it wouldn’t be surprising to see that things ticked up a little overall in February and have pencilled in a 0.5% month-on-month rise in “seasonally adjusted sales volume” (although this would still leave Retail Sales on track for a poor Q1). We will, as usual, be focusing on the year-on-year movement in “non-seasonally adjusted sales value” (and the “Big Retailer” versus “Small • Kingfisher Mockery Watch: We were amused by this stream of consciousness about Kingfisher from the FT’s stockmarket correspondent on yesterday’s FT Alphaville “Markets Live” webcast: “Was there ever a time when Kingfisher wasn’t in a five-year restructuring programme? They seem to be permanent, and it’s always drab stuff like trying to move more own-brand rawlplugs and changing the store cleaners’ mops for cheaper mops. Even for a retailer – where the whole sector calls the necessary expense of store refits a transformation plan because it sounds like the costs will roll off – Kingfisher’s seems epic and entirely without visible results”. |
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