Langton Capital – 2017-05-08 – Fulham Shore, craft brewers, cheaper holidays & other:
Fulham Shore, craft brewers, cheaper holidays & other:A DAY IN THE LIFE: I’ve been telling the dog that he must work on his ‘delayed gratification’ because, in many studies that have been done with children, the ability to trade in a positive thing now for two positive things later (e.g. not extending your playtime in order to get better grades) has been found to correlate most closely with future success. But our hound just doesn’t get it. No, not at all because no matter how many times I tell him, the bowl does well to even get to the floor before he’s got his snout in it and does he look embarrassed about it later? Well hell, no. So, Hull City, hey, what are we going to do with them? They string you along, give you some home and then bang but I suppose somebody had to lose to Sunderland at some point this season and, I suppose, it was always likely to be us. On to the news: PUB, RESTAURANT & DRINK PRODUCERS: • Fulham Shore’s David Page tells The Times the group ‘targeted smaller, slightly off-pitch sites, enabling it to avoid punitive high street rents’. This allows it to ‘deliver a high-quality product at a price — the average spend is £10 a head — that he claims is “30 per cent cheaper than any comparable pizza operator”’. • Fulham Shore Chairman tell Times ‘the success of Franco Manca has…attracted interest from overseas’. • Fulham Shore’s David Page tells Times ‘the market was challenging, but argued that many of the sector’s woes were self-inflicted.’ He says ‘a load of capital has been thrown at the sector. People who don’t know what they’re doing are opening restaurants, so there’s been a lot of wasted capital.’ • Only 20% of Franco Manco staff are British, company reveals. Says ‘Brexit-related uncertainty, inflation & rising costs such as business rates and wages have increased the impact of the surge of new restaurants on an already competitive casual dining sector’. • Cote reports full year numbers to end-July 2016 saying ‘the Company achieved period on period revenue growth of 12.5%.’ The group comments ‘during the period the Company opened a further 15 restaurants with a further restaurant under construction at the period end. At the date of signing these accounts 86 sites were open and trading, with builders onsite in a further 2 locations.’ • Cote reports revenues of £121.5m for year to end-July with PBT of £10.0m (2015: £13.9m). • Visa has reported that consumer spending online has dipped 0.1% yoy for April. Overall consumer spending for April has risen 0.5%, the weakest pace of growth since Q4 2013. Leisure & Hospitality was the best performing sector with 9.2% growth yoy, supported by Easter. • Restaurant Brand’s, which owns Burger King, Tim Horton’s and now Popeyes Louisiana Kitchen, is to redeem its preferred stock. Moody’s says that the transaction will increase leverage. • Moody’s reports Heineken’s buy of remaining stake in Lagunitas is Credit Negative. It says ‘the acquisition is credit negative because it will adversely affect Heineken’s credit metrics, which are already stretched for its rating and have limited scope to absorb any potential deterioration in the company’s operating performance.’ Moody’s reports ‘despite the lack of financial details for the transaction, we expect the acquisition to result in an approximately 0.15x deterioration in Heineken’s Moody’s-adjusted debt/EBITDA, which at December 2016 was 3.6x, already above the 3.5x quantitative guideline to maintain its Baa1 rating.’ • Moody’s reports ‘we expect Heineken to pay a high EBITDA multiple for the stake in Lagunitas, which is the fifth-largest craft beer manufacturer in the US. In recent months we have observed a number of brewing asset transactions with multiples in the mid to high teens, and the strong growth of craft beers in the US demands some premium. In 2015, when Heineken acquired its first 50% in Lagunitas, the company spent €543 million in total for acquisitions of associates and joint ventures, of which, we assume, Lagunitas was a large component.’ • Moody’s concedes ‘the Lagunitas acquisition is a good strategic fit for Heineken in light of its premium positioning and the strong momentum for craft beer in the US market. According to the US brewers association, craft beers composed 21% of the US beer market and grew at 10% in value terms during 2016 (12.3% of volume and 6.2% growth in volume terms). According to Heineken, Lagunitas during 2016 outperformed the beer category and is the market leader in the India Pale Ale segment, the fastest-growing sub-segment within craft.’ • Anheuser-Busch has acquired US-based craft beer brewer Wicked Weed, the company operates four facilities across North Carolina. • Beef has become the top protein for out of home dinners, the MCA reports. MCA’s Menu & Food Trends 2017 has found 25.9% of out of home dinners ordered beef dishes, this is a 1.3% rise on the same period last year, replacing chicken as the most popular protein choice. • Longshot, parent company to Bel & The Dragon, has removed the company from the market after completing a £5.3m debt finance deal, the MCA has reported. The seven strong premium country inn business has been on the market since September last year. • Chairman of Davy’s Wine Bars, James Davy has stated his desire to bring the business back up to c35 sites, as the group look at alternative locations outside central London, the MCA reports. The family wine merchant company currently operates c30 sites and hopes to find two more sites during this financial year. • Both private equity groups and trade buyers are looking to acquire, the Piper-backed premium cocktail bar chain, Be At One. The MCA has reported that Bowmark Capital, Duke Street Capital and Stonegate Pub Company are among those interested in buying Be At One valued at c£50m. • Bordeaux vineyards in southwest France could lose about half of their harvest this year after two nights of frost damaged the crop at the end of April. Including lost earnings at wine industry sub-contrators, the total damage is estimated at one to two billion euros ($1.1- $2.2bn), with wine production set to fall by about 350 million bottles. The chairman of Mitchells & Butlers warned delegates at the ALMR’s 25th anniversary Spring Conference that the pub and bar industry faces unprecedented headwinds. Bob Ivell said: ‘In all my time, I’ve never seen the kind of headwinds that are currently being thrown at us as an industry. We’ll have to work hard just to stand still. We’ve got some difficult time ahead of us, whether we like it or not.’ • Third party delivery is a growing opportunity for operators, according to CGA commercial strategy director Graeme Loudon. • US restaurants continued to add workers in April, creating 26,200 jobs last month, according to the Bureau of Labor Statistics. • Premier Foods announces to extend deal with Mondelez, keep Cadbury cakes franchise to 2022 with extension to 2025 HOLIDAYS, LEISURE TRAVEL & HOTEL • ‘Super budget’ branded hotel operator and franchisor easyHotel has opened its new 115 room hotel in Manchester, with prices as low as £20. The Grade 2 listed location, known locally as the ‘Flat Iron building’, is centrally located in the City’s Northern Quarter and houses 115 rooms. easyHotel Manchester is the Group’s latest ‘new look’ hotel and follows recent openings in Brussels, Amsterdam Arena and Birmingham, which opened earlier this year. • Western Mediterranean hoteliers have ‘dropped their arrogant outlook’ and have come back to UK operators with a ‘deluge of deals’ to fill their beds, according to Classic Collection’s Nick Munday. The supplier had been battling against 20% price rises but hotel rates have recently reached more ‘sensible’ levels, helped in part by the pound creeping back up to 1.19. • Falling fares helped boost global airline demand by 6.8% year-on-year in the three months to the end of March, according to new Iata figures. The overall load factor climbed by half a percentage point to 80.4% – a record for the month – as capacity increased by 6.1%, although the figures do not take into account the UK and US laptop cabin bans on certain routes which came into play late in the quarter. FINANCE & MARKETS: • Brexit & General Election: o Boris still absent from the scene. Also, clueless o Dianne Abbott having a rest o B of England to warn household incomes will come under severe pressure this year as wages fail to keep pace with inflation o Election surely coincidental. Get another 5yrs under belt whilst pre reality dawning o France steadies the EU team ship. Leaves UK looking ‘a bit out there’ in terms of nuttiness o Goldman’s reports it might have a “smaller footprint” in London after Brexit. • The US added 211k jobs in April, ahead of estimates. The US rate of unemployment has fallen to 4.4% from 4.5% in March. • Rise in US employment levels makes June rate rise that bit more likely. Some three quarters of those polled believe rates will rise • Bank of England to warn this week that disposable income growth is to fall to zero, will cut GDP estimates says The Times. Bank to say ‘the domestic consumer is the source of the weakness versus expectations in our view, with real household disposable income under pressure as inflation has picked up sharply.’ • Oil bounces to $49.74 • Sterling up at $1.2958 • Pound higher vs Euro also at 1.1808 • UK 10yr gilt unchanged at 1.12% • World markets: UK markets up on Friday with Europe & US also higher. Asian markets mostly up in Monday trade YESTERDAY’S LATER TWEETS: • Later tweets: Oil price down 8% in 2dys & industrial metals prices also weak. Should help depress some other price rises in the pipeline • Mortgage lending down as London house prices fall. Rate of growth of consumer lending also ‘down’ but still running 10.2% up on last year • Shake Shack halo slips as erstwhile $1bn company disappoints on sales. Group still only has c130 stores worldwide • Drinking trends. Youngsters turning away from drink, peak consumption now > a decade ago. Tabloid headlines are fighting the last war • DP Poland comes up with the goods. LfL sales accelerate in March to take Q1 to +21% for systemwide LfL revenue growth RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The big story on the front pages of the Saturday papers was the Tory triumph in the Local Elections (including the narrow victory of ex-John Lewis boss Andy Street in the West Midlands Mayoral election), but the big story on the Business pages was the appointment of Retail veteran Archie Norman as the next Chairman of Marks & Spencer and there were lots of photos of the great man in his youth, to accompany the upbeat headlines, eg “M&S stock rallies to hail arrival of “Mr Turnaround”” in the Telegraph. The Times article (“Better late than never for Norman at M&S”) flagged that he was approached back in 2004 to be Chairman and turned the job down. The FT went to town on the news and also had a background feature on how “M&S investors pin hopes on turnaround specialist”. Lex column in the FT looked at the “Norman conquest” and the outlook for M&S and
• Sunday Press: The big feature in the Sunday papers was the annual Sunday Times Rich List and although we already knew that the embattled Philip Green had his estimated fortune fall by £433m since last year to £2.87bn we didn’t know where that put him on the list…and the answer is a mere 41st. The glossy Sunday Times supplement said that it had cut the estimated value of his stake in Arcadia from £1.9bn to £1.55bn and also had a feature on “a chastening year for the rag trade tycoons”, Philip Green and Mike Ashley (who was down to 54th position on £2.16bn). Otherwise, there was plenty about M&S and Archie Norman, with both the Observer and the Jeremy Warner column in the Sunday Telegraph noting that the current Chairman Robert Swannell has been “completely ineffectual” and that the M&S business has drifted while he’s been in charge, whilst the Business editorial in the Sunday • Today’s Press and News: The main story on the front pages of today’s papers is the decisive victory of the pro-European centrist Emmanuel Macron in the French Presidential Election (although the Daily Express leads with “Broccoli pill to save your life”). The headline in the Times is “Landslide for Macron” and the Guardian goes for “Macron wins French presidency but country remains divided”, but the Telegraph’s angle is “France’s new hope puts cloud over Brexit”. Otherwise things are a bit thin, although there are plenty of articles about Warren Buffett’s admission that he regrets not investing in Google and Amazon and the Times flags that the Online beauty retailer The Hut has reported strong results, prompting more speculation about an eventual IPO. • Weather Watch: Despite yesterday’s sun, it has been not very spring-like in London recently, but memories about “the weather” are always notoriously short-term, so, ahead of tomorrow’s BRC-KPMG Retail Sales survey for April, we turned to the Retail weather consultants Planalytics for their regular monthly overview of how last month’s weather “should” have affected trading on the High Street. And their headline for April was “A mild and dry month”, noting that early spring warmth supported seasonal demand. Overall the UK was 1.4 degrees warmer than last year, at 8.5C, with a third of the normal rainfall. The net impact on “Weather-driven demand” for garden furniture should have been +17%, with sandals +12% and T-shirts +5%, compared to April 2016. • News Flow This Week: Things are quieter this week, as we move further on into May. The BRC-KPMG Retail Sales for April are out first thing tomorrow, Wednesday brings the Vertu Motors finals and then the SuperGroup Q4 update is on Thursday. |
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