Langton Capital – 2017-03-27 – Domino’s Pizza Poland, Wagamama, sugar & other:
Domino’s Pizza Poland, Wagamama, sugar & other:
A DAY IN THE LIFE:
So, are the supermarkets providing a service when they offer huge Mothers’ Day cards at £4.99 or £5.99 and stupid cuddly toys at £20 or are they exploiting the guilt felt by (admittedly tardy and thoughtless) children that they’ve not spent enough time with their mums over the last year?
Or perhaps they’re doing both but, as the nation’s grocers continue to sneak through price increases – kitchen roll in Sainsbury has just moved up to £1.20 (it was £1.00 pre Xmas & jumped to £1.10 in January) – I’m inclined towards the latter view which, undoubtedly, the higher-ups in said organisations will have rationalised as being in the best interests of the country’s citizens in any case. Time for the news:
DOMINO’S PIZZA POLAND – FULL YEAR NUMBERS:
• Company has today reported full year numbers for the year to end-December. It reports an ‘accelerated store roll-out and strong like-for-likes’
• These have ‘driven sales volume and improved contributions from corporate stores and commissary’
• The group now has 39 stores open, with 4 having been added this year. Six new stores are currently under construction. The roll out to new towns and cities is set to continue.
• DPP expects to pass 50 stores this year
• System sales are +62% on the year with LfL system sales +27%. These data were previously announced on 8 Feb
• Group has hit 17 consecutive quarters of double digit like-for-like System Sales growth
• Total store EBITDA +76% with the top 3 corporate stores averaging £88k each in 2016 vs £58k in 2015
• Commissary gross profit is +155% at +1.71m PLN (+£321k).
• Group EBITDA losses marginally reduced at £1.58m. Opening new stores is (and always has been) a drag on profits
• Group LfL sales in Jan & Feb +16%. March should be +20%. CEO Peter Shaw reports ‘our accelerated store roll-out plan and strong like-for-like performance drove sales volume and improved contributions from corporate stores and commissary.’
• Mr Shaw adds ‘we will continue to drive sales volume growth through 2017 and anticipate Group EBITDA losses further reduced for YE 2017.’
• Re the future, DPP reports ‘during 2017 we expect to cross the 50 store mark, which will be a key milestone for Domino’s Pizza in Poland, as we extend our footprint and seek further economies of scale in this market of 38.5 million people.’
• Group maturing as growth phase continues:
o DPP reports ‘today we have 8 sub-franchise partners, 6 more than we had this time last year and we expect to welcome more in the coming year.
o It is adding new cities & towns
o LfLs will become more challenging but c18% in Q1 is anticipated
o There is no reason not to believe that the Polish market could ultimately be between 50% and 60% the size of that in the UK
o DPP says ‘we expect sub-franchised stores to be a key growth engine in the medium to longer term.
o DPP says ‘we can foresee the introduction of national television advertising; we believe this will mark a further step change to the performance of the Domino’s business in Poland.’ It certainly did in the UK.
o DPP expects ‘an inflection point when the relative costs of running a high growth business steadily reduce in proportion to the growth in revenues and improvements in Group EBITDA.’
PUB, RESTAURANT & DRINK PRODUCERS:
• Financier Edi Truell is reported to be considering a £530m takeover of Wagamama reports The Sunday Times
• Pret A Manger pours cold water on renewed speculation that it plans to list on the New York Stock Market, reports the MCA. Sources from the US had been reporting that the private equity firm behind Pret, Bridgepoint, was in communication with Solebury Capital in a bid to find investment banks for an IPO.
• Britvic has confirmed it will pass the cost of the sugar levy on to its customers and ‘expect[s] retailers to do the same thing’.
• Active Private Equity has invested in the three-strong all-day dining concept Caravan, which has additional sites lined up in the City and Fitzrovia. MCA writes that the group has additional plans for a new coffee roastery. Active Private Equity also backs Honest Burgers, Soho House, and Leon.
• MCA data suggests the branded South East Asian market is set to grow sales by 23% in 2017 to a value of £255m. At first glance, that seems rather a high rate of growth to get to rather a low number.
• The BBPA has called the government’s new amendment on pub planning issues in the Neighbourhood Planning Bill ‘has moved a very considerable distance to address [its] concerns’. CEO Brigid Simmonds commented: ‘Under this new amendment, rather than being placed in a class of their own, pubs would remain in the A4 use-class, with the specific right to extend restaurant use of the pub without requiring planning permission – we had been very concerned that food-led pubs could have been disadvantaged by the House of Lords’ original amendment. This proposal should also remove an incentive for local authorities to pursue Article 4 directions and for ACV ‘mass listings’, which would be a positive step.’
• Researchers at Cambridge University and University College London have found that moderate drinkers are at a lower risk of diseases such as heart attack, angina and heart failure when compared to teetotallers. Described as the ‘most comprehensive study to date’, the health records of nearly two million people from the “Cardiovascular research using Linked Bespoke studies and Electronic health Records” (CALIBER) programme were used in the research.
• Coffee shops are set to become ‘the new local’ and will outnumber pubs by 2030, according to a study by Project Café2017 UK and led by Allegra World Coffee Portal. The study found that the total UK coffee shop market grew 6% in 2016 with an estimated 22,845 outlets, and expects the total UK coffee shop market to exceed 32,000 outlets by 2025 with a turnover of £16bn and an annual outlet growth of 6%.
• Coffee shops vs the pub. Linger time in coffee shops is lower, they’re not family occasions, there are no TVs, AWPs etc. and there is rarely any accommodation. There’s frequently no car park, the attendants don’t know your name and people very rarely have more than one drink per visit. Food sales are very low. Coffee shops will not, on balance, become the new locals.
• Castle Rock Brewery has become one of the few UK pub operators to win a CAMRA 2017 Pub of the Year award in adjacent areas. The Poppy and Pint, in Lady Bay, is top for Nottingham CAMRA city branch and the Horse and Plough in the market town of Bingham is Pub of the Year for the Vale of Belvoir branch.
• Robotics and artificial intelligence could affect almost a third of UK jobs by the 2030s and could add more wealth and additional jobs in other parts of the economy, per PwC. Jobs in manufacturing and retail were among the most at risk from the new technologies, the report said. The study estimated that 30% of existing jobs in the UK were potentially at a high risk of automation, compared with 38% in the US, 35% in Germany and 21% in Japan.
• Oak Hill Capital Partners acquires US drive-through chain Checkers for $525m. The quick-service restaurant chain currently has 840 units across 29 states and is growing faster than the industry average.
• Hakkasan Group and SBE Entertainment are in advanced discussions over a $1bn merger as the latter looks to establish itself in Las Vegas by putting Hakkasan’s dining properties into its hotels.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• VisitBritain has put an immediate hold on all marketing activity in the wake of the recent Westminster attack.
• Unauthorised school absences increased by 100,000 children due to family holidays in 2015/16 compared to the previous year. This increase follows the ruling last year that overturned fines given to father, Jon Platt, for taking his daughter to Disney World during term time last year.
• Accent Equity and EQT Partners sell remaining position in Scandic Hotels to Novobis and Stena Sessan Rederi. The hotel chain IPOed in December 2015, and this latest investment increases Novobis’ stake to 15.8%.
• Bookings to the Disney theme parks in Orlando have risen by nearly a third in January and February in 2017. Sabrina Hamilton, head of marketing, said ‘It appears that a trip to Florida to visit Mickey and friends is more popular than ever, as Brits try to block out the double whammy of continuing uncertainty over Brexit, and the furore sounding the 45th president of the USA.’
• Paul Grebenc, a US airline pilot who was taken off a United Airlines plane in Glasgow last August for being more than double the drink-fly alcohol limit, has been jailed for 10 months.
• Seaworld owner, Blackstone, will sell a 21% stake in the marine theme park to China’s Zhonghong Zhuoye Group, bringing Seaworld to China for the first time. Zhonghong has agreed to pay $23 a share, up nearly a third on the closing price of $17.31 last Thursday. Last year Zhonghong bought Abercrombie & Kent, a luxury travel company.
• The owners of Tenpin, Harwood Capital, near a £100m float deal, according to the Sunday Telegraph. The 40 site bowling company would follow in Hollywood Bowl’s footsteps, which floated in 3026 and has a current market cap of £244m.
FINANCE & MARKETS:
• German central bank hints that ECB could consider raising interest rates. No timetable suggested. German central bank director Joachim Wuermeling reports ‘the forward guidance of the ECB council now presumes that interest rate hikes are currently to be expected at the earliest after the end of net monetary policy purchases. But here too, everything is in flux.’
o Article 50 to be triggered on Wednesday.
o Jeremy Corby accused (by Telegraph) of trying to scupper Brexit by imposing impossible conditions for his support
o The South African owner of New Look & Virgin Active, Brait, has dropped IPO plans on Brexit concerns
o Sunday Times reports NIESR as saying that import duties & delays could put up the cost of imports ‘by as much as 24%’
• Eurozone businesses are growing at their fastest rate in 6yrs per last week’s PMI readings.
• BBA reports number of mortgages granted in UK in Feb slipped to 42.6k from 44.2k in January
• OPEC is to consider extending its output restrictions for a further 6mths
• Brent very little changed at $50.67
• Sterling up vs US$ at 1.2525 per pound
• Pound down vs Euro at 1.1549
• UK 1o year gilt yields unchanged at 1.24%
• World markets: UK and Europe lower on Friday with US also down. Asian markets mostly lower in Monday trade
• Price of industrial commodities remains high. Copper, iron, lumber. Also cotton +30% over year (in $s), up 57% in Sterling. Impacts textiles
• Have US pols delayed Trump healthcare vote till late Friday just to ruin President’s weekend jaunt down to Trump Mansion, Florida?
• Statisticians arguing over veracity of Feb retail data. ONS shows massive jump by ‘small retailers’ at +10.5%. Doesn’t sound right
• RTN etc. Retail Week reports sharp drop in footfall at retail parks in February. F&B operators shun the High Street at their peril
• Customer service is key. When goods become more homogenous, service is all there is. Drapers mag says J Lewis the best, M&S & NXT the worst
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The main story in the Saturday papers was that the ailing Jones Bootmaker chain has been saved from collapse by the turnaround firm Endless, which has thrashed out a “pre-pack” deal, saving 72 of its 170 shops. In other news, the Times flagged that the South African investment company, Brait, which owns New Look, has cancelled a plan to list its shares in London, citing concerns about the markets after Brexit. The Times also flagged that Pret A Manger is considering listing its shares in New York rather than London (”Three quarters of its sandwich shops may be in Britain, but only one in 50 of its job applicants is British”). The FT had a big article about the store closures at the US department store Sears and the lead Business story in the Daily Mail was, dramatically, headlined “British shops quake as big US names shut thousands of stores”. The News pages of the FT
• Sunday Press: The spotlight in the Sunday papers fell on Brexit, ahead of the fateful triggering of Article 50 next week, with a number of articles about its likely impact on various sectors of the economy. The Sunday Telegraph flagged that trouble at “Store Twenty One adds to High Street woes”, with the discount fashion chain Store Twenty One said to be struggling to make rental payments, despite the CVA last year. The Sunday Times revealed that “Mothercare is set for pay row over bonuses”, with Mothercare said to be considering reducing the targets for the next long-term bonus plans for senior management. The Retail correspondent of the Sunday Times, Oliver Shah, had a feature interview with the Retail Week “Retailer of the Year”, Alex Baldock of the home shopping group Shop Direct (“Banker drags Littlewoods into 21st century”), with the front-page headline “Retail Robot” turning
• Today’s Press and News: Thin pickings today, although the Daily Telegraph has a big feature on the privately-owned Booths supermarket chain (“the Waitrose of the North”) and CityAM picks up the Sky News story that Tesco is negotiating with the SFO to pay a big fine (over £100m) to settle the 2014 accounting fraud scandal. And users of Waterloo station will be delighted to hear that the bus company Stagecoach has lost the South-West Trains franchise and will be replaced by a joint venture between First Group and MTN, the Hong Kong metro operator.
• News Flow This Week: Tomorrow brings the Card Factory finals and the Moss Bros finals. The Game Digital interims are on Wednesday. And the Booker finals and DFS interims are on Thursday, with the latest monthly GFK Consumer Confidence survey coming out first thing on Friday.
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda return to the winning enclosure, after being pipped at the post by Morrisons last week, with its basket of £68.71 coming in £1.16 cheaper than Morrisons. But Asda still had to dole out a chunky £5.74 Price Guarantee voucher, for failing to be at least 10% cheaper than its main rivals. Tesco came third, with a £71.13 basket, but after its instant £3.41 Brand Guarantee discount it was actually 99p cheaper than Asda… Sainsbury was a long way behind, on £74.33, and, as usual, Waitrose was in last place, on as much as £80.43 (albeit that was skewed by charging over £5 more for a pork shoulder joint). The separate regular Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Tesco, as its 30,000 sq ft supermarket in Montrose in