Langton Capital – 2017-04-07 – SA Brain, Byron, H/wood Bowl, US restaurant sales & other:
SA Brain, Byron, H/wood Bowl, US restaurant sales & other:
A DAY IN THE LIFE:
Sorry to report that it is now statistically impossible for the Mighty Hull City to get into Europe next year. But only just as the middle of the table remains compacted & Hull is the team in form. That form may take a knock over the weekend as we visit Manchester City but hopefully even there we may grab a point (or more).
Anyway, what are we doing talking about football when we’re searching for the sun-cream? Wimbledon doesn’t start for another three full months but the sun is shining and the beer gardens are full. It would be nice if it could stay like this until next weekend. On to the news:
S A BRAIN FULL YEAR NUMBERS:
• SA Brain. Good numbers but coffee market expanding at a slower rate, more competition etc.
• SA Brain has reported full year numbers for the year to 1 Oct saying that it ‘saw good progress being made across many of the fundamental areas of the business.’
• The co says ‘it is encouraging to see the improvement in our key performance metrics.’ Revenue is up by 6.8% at £135.4m
• SA Brain operating profit before exceptional items of £5.9m (2015: £6.4m) and reports a profit for the financial year of £3.6m against a post-exceptional loss of £1.3m last year). Earnings per share are £260 with a dividend of £1.66 held constant from 2015.
• SA Brain reports ‘Coffee#l expanded further in terms of store numbers, locations and profit contribution to the Group’
• Re confidence, SA Brain reports ‘although we had started to witness improving consumer confidence during the year, the referendum vote to leave the EU in June has created a degree of uncertainty that we will have to manage for the foreseeable future.’
• SA Brain reports ‘trading over the year was inconsistent, with a very positive start due to the Rugby World Cup matches held in Cardiff. Festive trading in 2015 happened late, but was reasonably good overall. Spring was as planned and the summer period was mixed. Our Managed House estate outperformed the overall UK market in sales terms across the year’.
• The co reports ‘although the coffee market slowed a little, we enjoyed strong momentum through Coffee#1’.
• SA Brain’s managed house sales ‘were up 3% versus last year, but on a like-for-like basis were up 1.5%, which outperformed the main market indicator by 0.8%.’ The company says ‘food continues to provide the strongest level of growth with sales up 5%.’
• SA Brain reports Coffee#1’s total sales grew by 28% driven by new store openings. The co says ‘we opened 14 new stores taking the total to 70 at the year-end.’
• SA Brain reports a slowdown in coffee growth saying ‘like-for-like sales in the core estate grew by just 0.4%, which was significantly lower than the previous year and a little below the performance of the coffee market as a whole. This was mainly as a result of the softer market, but also an increase in competition affecting a number of our key stores and the team’s focus on the higher number of new store openings during the year.’
• Brain reports ‘we have a clear strategic plan in place which outlines our key priorities and the future financial position of the Company. We remain positive about the development of the business and are anticipating further significant growth.’ The co says, however, that ‘in the short term, despite improved economic indicators as a whole, given current macroeconomic uncertainties, we expect consumer demand to remain subdued in 2017 and therefore have to assume that trading conditions will remain relatively benign.’
BYRON FULL YEAR NUMBERS:
• Byron reports FY numbers for year to 26 June saying sales rose by £11.5m to £80.5m. Group had 85 restaurants at year end, up from 52 in the prior period.
• Byron reports operating profit of £815k (2015: £5.5m) as GP margin falls to 12.1% from 17.1% in prior year.
• Byron reports PBT of only £194k after £5.0m in the prior year. The company says it ‘incurred exceptional costs during the period of £1.5m…relating to a senior management restructuring, consultancy fees in relation to a full review of the business’ supply chain and, in the prior year only, costs relating to moving the Company’s head office.’
• Byron says somewhat slower growth is down to ‘increasing intensity of competition in the sector and the timing of new openings during the year’. The company says it has ‘accelerated its capital investment programme and invested £1.8m in refurbishing older restaurants in the estate.’ The group says it has also ‘launched a delivery service which augmented the sales growth seen through new openings and the performance cross the existing estate.’ This may have negatively impacted margins somewhat.
• Byron suffered immigration raids shortly after the above period ended but it reports ‘the directors believe that the quality of Byron’s offer sets it apart from the competition and will ensure that with continued focus the Company will perform well and meet its growth objectives.’
PUB, RESTAURANT & DRINK PRODUCERS:
• Derby Brewing Company is offering its customers the chance to become a part of the business by releasing up to 10% of its equity after a decade of unprecedented growth of more than 700%. The brewer hopes to make 2017 a big year in which it opens a new site and ‘share its great beers with the world’.
• Coca-Cola is to axe its Coca-Cola Life brand in the UK from June as sales continue to fall. Nielsen data indicate that the product, which is marketed as a more natural alternative to other Coke variants as it is partially sweetened with stevia extract, saw volume sales fell 73.1% and dropped 74.6% in value terms. The company said that after pulling the Life brand it would focus on promoting the remaining three variants: Coca-Cola Classic, Coca-Cola Zero Sugar and Diet Coke.
• Global food prices fell in March after reaching a two-year high last month. The Food and Agriculture Organization’s price index, found the average price of a basket of common foods fell 2.8% compared to the previous month.
• Ruby Tuesday tells it how it is in the US.
• Ruby Tuesday reports results for quarter to end-Feb, says total sales down 16.8% to $225.7m due to disposal of 105 sites
• Ruby Tuesday says LfL sales down 4.0% vs 3.1% drop in Q3. Various closure costs & net loss of $19.8m.
• Ruby Tuesday outgoing CEO Lane Cardwell comments ‘the casual dining environment remains highly challenging, promotional, as well as price competitive and our sales trends are reflective of these conditions.’ He says, however, ‘we are building momentum through the hard work and dedication of our entire team who are executing the key strategies of our Fresh Start initiatives.’
• Ruby Tuesday continues to ‘explore strategic alternatives in order to maximize shareholder value and position the business for long-term success.’ It says ‘the Board of Directors will consider all strategic alternatives including, but not limited to a potential sale or merger of the Company, and has retained UBS as its financial advisor to assist in the process.’
• Ruby Tuesday has appointed Jim Hyatt as its new President & CEO. Former CEO Lane Cardwell will remain on the board.
• Results from Ruby Tuesday represent its 19th straight quarter of revenue decline. The group’s shares have halved over the past year
• Constellation Brands has reported full year numbers saying that beer sales rose by 17% (13% organically) and Wine & Spirits sales were +6% (up 4% organically). CEO Rob Sands reports that every beer brand had at least a ‘solid performance’. The group reports ‘our wine and spirits business achieved strong earnings growth and margin expansion driven by our fast-growing, high-margin Focus Brands, which collectively delivered depletion growth of 9% for the year.’ It concludes ‘we continue to gain distribution for our newly-acquired High West whiskey brands, as well as The Prisoner and Charles Smith wine brands, all of which posted strong, double-digit depletion growth for the year.’
• MCA quotes Ted Schama, partner at Shelley Sandzer, as saying that ghost restaurants (i.e. units set up to service the delivery sector) should not impact values on the High Street. NPD has suggested that the delivery sector rose by 10% last year which, all other things remaining equal, makes the suggestion that the High Street will not be impacted, somewhat unlikely. Deliveroo is said to be considering 30 such kitchens over the medium term. It is fair to say that delivery cannot replicate the experience of a restaurant (and the chips shouldn’t be cold) but, nonetheless, the industry continues to grow.
• China’s bottled wine imports slumped in terms of both volume and value for the first two months of the year, according to figures released by the China Association of Imports and Exports Association for Wines & Spirits.
• Deliveroo CEO Will Shu has called new platform Deliveroo Editions as the future of food delivery, per MCA. Around five Editions trials are ongoing and Deliveroo aims to be working with more than 200 restaurant operators at 30 different sites by the end of 2017. Meals delivered from Deliveroo’s off-site kitchens will be subject to increased commission charges on account of Deliveroo shouldering most of the operational costs. Operators to have signed up so far include MEATLiquor, Gourmet Burger Kitchen, Busaba Eathai, Senor Ceviche, On The Bab, Yoobi, Dirty Bones, Franco Manca, and Motu Indian Kitchen.
• Jack Daniel’s is targeting the UK cider market with the launch of Bourbon-infused Jack Daniel’s Tennessee Cider to the on-trade.
• Sales in the out-of-home tea market are underperforming against the wider coffee shop category, according to Allegra World Coffee Portal. The UK coffee shop sector increased by 12% in turnover to reach £8.9bn in 2016, with tea contributing just £308m to the total sales and suffering a 0.3% fall in coffee shop market turnover share to 3.8%.
• Online sales now comprise 41% of the total at Mothercare after further ecommerce sales growth of 13.6% for the 11 weeks to 25 March.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• The Spanish owner of Heathrow airport has stated that Brexit negotiation uncertainty has put a halt on further investment in the UK. Chairman of Ferrovial, Rafael del Pino, said he saw ‘no opportunities’ in the UK currently, but went to later say that EU exit talks could have ‘positive side effects’ with regards to a more favourable view towards the expansion of Heathrow.
• Saga Cruises have announced that they will replace both of their ocean cruise ships with two new purpose-built vessels. Saga’s Chief Executive, Robin Shaw, said ‘This new ship, Spirit of Discovery will allow us to go to places we wouldn’t normally go to such as Greenland and, of course, we will also go across to the States.’
• Arnold Donald, chief executive of Carnival Corporations has challenged UK travel agents to boost the UK back to number two in the world cruise rankings. The UK recently fell behind Germany in passengers carried numbers (the UK carried 1.89m compared to Germany’s 2.08m). Donald went on to say ‘A lot of what cruising is today started in the UK, and then the US eventually passed the UK in passenger numbers’.
• The Supreme Court has ruled against the holiday dad, John Platt, for taking his daughter to Florida during school term-time. The landmark case triggered a national debate about travel costs being higher during school holidays. The Judges claimed that schools should get to interpret what counts as ‘regular’ attendance with PM Theresa May saying ‘It’s right that the individual head teacher has that flexibility to make that decision,”.
• The latest reports from Iata are showing that the suspended US travel ban has not harmed global air travel as air fares continue to get cheaper. The underlying growth rate for February was estimated at 8.6% as the cost of air travel in real terms has reduced by more than 10% over the past year.
• Electra has sold a further 27.7m shares in Hollywood Bowl at 152.5p per share. The
• Reports suggest Spotify may forgo an IPO in favour of a direct listing, the Swedish company is supposedly aiming for a valuation of $10bn (£8bn). The music service has more than 50 million subscribers as well as just having signed a new long-term licensing deal with Universal Music Group.
FINANCE & MARKETS:
• ECB boss Mario Draghi has said that an accommodating monetary policy (i.e. very, very soft) is still necessary. Minutes from the latest ECB meeting suggest that members believe that the Eurozone economy is improving.
• Brexit. PM May says she will get the best deal she can for Gibraltar. That isn’t saying much. Nothing, in fact.
• Brent up sharply at $55.68
• Sterling down vs US$ but up vs Euro at 1.247 and 1.1712 respectively (see Draghi comments above)
• UK 10yr gilt yields unchanged at 1.10%.
• World markets: UK mixed yesterday with Europe & the US higher. Far East lower in Friday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: FOMC minutes suggest may need to ‘reduce the Fed’s balance sheet’. That’s coded language for reversing QE. Not just stopping it.
• UK service sector in good growth. Consistent with 0.6% GDP expansion in Q1. Scotland, meanwhile, shrank in Q4 last year
• Mild March good for pubs, neutral at this time of year for indoor attractions, not helpful to cold weather producers, e.g. Premier Foods
• STR says no early signs of hotel cancellations after Westminster crash, stabbing. Too early to tell & also skewed by Easter, however
• Supermarket multi-buys said to be at 11yr lows. Multi-buys & temp. price cuts now only 26% of products per Nielsen
• Commodities. Softs & sweets, esp. Soy, Sugar, OJ etc. now at 6mth lows. Little changed on last 12mths after earlier blip up
RETAIL NEWS WITH NICK BUBB:
• Overall View: Well, everything that Mothercare sells in the UK can be bought on Amazon, by and large, but the strength of Online sales at Mothercare UK in the last few weeks shows that specialists can still do well in today’s marketplace
• NB Just to remind you, “The Daily Retailer” is currently being produced from the ski slopes of the Rocky Mountains of Colorado (where we are 7 hours behind BST).
• Sector trends/share prices: The All-Share index edged down by 0.3% yesterday, but the Food Retail sector was up a tad (MRW -0.7%, OCDO +2.1%, SBRY -1.1%, TSCO -0.5%, HOTC +2.6%). The General Retail sector was up by 0.3% overall (ASC -5.7%, BOO -2.8%, PETS -1.5%, BME +2.3%, CPR +2.1%, MOTR +4.6%, MTC +3.3%, SMWH +1.3%, TPT +2.2%).
• Mothercare: The City was pleased with Mothercare’s Q4 update yesterday (for the 11 weeks to March 25th), with UK sales up by 4.5% LFL (thanks to c15% Online sales growth) and International sales down by 1.7%, at constant currency. CEO Mark Newton-Jones said: “Following a solid final quarter, our overall Group performance remains broadly in line with market expectations for the year. We have made further progress in the period, with the UK performing particularly well on a like-for like basis…In our International business, we have seen strong sales in China, Indonesia and Russia supported by currency tailwinds, whilst the continuing economic conditions in the Middle East remain challenging”.
• Motorpoint: Having noted the bumper March new car sales figures the other day, we ought also to report that the recently floated Motorpoint, ”the UK’s largest independent vehicle retailer”, put out a trading update yesterday for the year ended 31 March and said that it expects the group’s Profit Before Tax for FY17 to be at the upper end of the range of current market expectations, reflecting the improving trading performance in the second half.
• Today’s Press and News: The main focus is on the Mothercare results (“Mothercare to lift prices over slide of pound” is the FT headline), but the weak BDO High Street sales review for March gets some coverage, whist the market reports note the downgrade of ASOS by Credit Suisse yesterday.
• BDO High Street Sales Tracker: We flagged on Wednesday that the comp with the post-Easter period last year hindered trading at John Lewis last week, particularly in Electricals, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e April 2nd saw Fashion Store LFL sales up by 2.8% against last year. Including Homewares and Lifestyle chains, total Store LFL sales were also up by 2.8%, albeit against a very soft comp, whilst overall Online sales were up by as much as 20.5% (on top of 18.6% growth a year ago).
• Trade Press (1): In Retail Week magazine today the front cover comprises photos of four of “The Top contenders: whose CVs might turn Philip Green’s head as he seeks new Topshop boss?”, featuring Alison Loehnis, Liz Evans, Emma Wisden and David Sheperd. In terms of News stories, RW focus on the news that Tesco could be forced to offload hundreds of convenience stores (amidst concerns from rivals and shareholders over its £3.7bn Booker deal), John Lewis has warned that there is likely to be more redundancies this year (following the revelation last month that it was axing 400 roles) and H&M has revealed that it will unveil its new fascia Arket in London this autumn.
• Trade Press (2): In Drapers magazine today the main News story is that “discounting continues to drive prices down while the costs of doing business steadily increase”, but Drapers also flag that Evans has become the latest Arcadia group chain to lose a senior member of its management team (Fiona Ross has resigned as MD) and that H&M’s new format Arket (“sheet of paper” in Swedish) will make its global debut in the former Banana Republic unit at 224 Regent Street in London this autumn and John Lewis will attempt to increase in-house brands to 50% of its total product mix and encourage customers to book one-on-one time with staff (as it seeks to reinvent department store retailing). The main feature is another excellent “Hit or Miss” survey; this time a review of Menswear stores in Milton Keynes by Drapers’ undercover reporter: Next again came top, with 9 out of 10 (“Top marks for
• News Flow Next Week: Things are quite busy next week, running up to the long Easter weekend, with Tuesday bringing the BRC-KPMG Retail Sales for March and the JD Sports finals, whilst on Wednesday we get the Tesco finals, the WH Smith interims and the Dunelm Q3 update.