Langton Capital – 2017-06-07 – More IPOs, branding, US travel, e-sports, Brexit & other:
More IPOs, branding, US travel, e-sports, Brexit & other:
A DAY IN THE LIFE:
So, the ‘drought’, like so most others in the UK, has gone away.
In fact, it drowned as there has been no shortage of rain to welcome us back to the country and, given the height of the grass, it was probably pretty wet last week as well.
All of which has cheered up Tory Party Central Office who believe, on the basis of good evidence, that the damp puts off their opponents’ would-be voters and they’ll be keeping their fingers crossed for tomorrow.
Which could pull their backsides out of the fire given that their campaign has been poor, there have been U-turns aplenty and Mr Corbyn has managed to keep his dark side hidden in a sack for most of the last six weeks.
Only Ms Diane Abbott has given him real cause for concern and, given that elements of the Press have made the absolute most of her abysmal performances, it says something about Ms May’s unpopularity that she is not 20-30pts ahead in the polls.
Ah well, it’ll all be over (bar the shouting) by tomorrow evening. Then just got the next 20-30yrs of Brexit-adjustment to get through & it’ll be Nirvana, paradise, you name it. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Online food delivery start-up Delivery Hero has confirmed that it is to IPO later this year. The group is backed by Rocket Internet
• Delivery Hero to raise €450m via IPO. Issue will value the company at around €3.5bn. -backed company since the tech group listed in 2014. CEO Niklas Östberg says that the operator offers investors exposure to fast-growing emerging markets in the Middle East, Asia and Latin America. Delivery Hero reported LfL sales +71% to €347m for 2016. The group has never made a profit and last year it made an EBITDA loss of €116m, compared with a loss of €175m in 2015. Rivals Just Eat and Takeaway.com are both already listed.
• Rocket-backed HelloFresh may also IPO this year.
• Lancashire-based pub operator, Thwaites, has posted a 4% rise in turnover to £84.4m for the year to 31 March 2017 as pre-tax profits grew 19% to £5.7m. During the year the group acquired Middletons Hotel in York and Langdale Chase Hotel on the banks of Lake Windermere and sold 16 sites, writes MCA. Chairman Ann Yerburgh said trading in the pubs estate had started strongly in the first half but had then encountered ‘a period of more sluggish sales that did not pick up again until the spring’. Furthermore, Yerburgh cautioned: ‘The financial year has begun with some initial signs of a consumer slowdown and growing political uncertainty as we enter negotiations for the UK to leave the European Union.’
• Highland Spring is launching a £5m marketing campaign called ‘Brave by Nature’.
• Daniel Land and Jeremy Sanders are to leave London-based quick-service Italian concept Coco di Mama, which they founded in 2011 before selling the chain to the Azzurri Group for c£13m in July 2015. The casual dining specialist has appointed Roberto Moretti, former Bill’s chief operating officer, to oversee the running of the now 17-strong Coco di Mama while a permanent replacement is found. MCA writes that Azzurri believes it is time for the brand to move from an entrepreneurial and fledgling business to a major London quick-service brand.
• US tech giants Google, Apple, Microsoft, Amazon, and Facebook are the five most valuable global brands, according to rankings released by WPP and Kantar Millward Brown. The BrandZ Top 100 Most Valuable Global Brands ranking saw Google retain its top spot with a brand value of more than $245bn, while Amazon rose three places to number four after achieving the highest dollar value growth (increasing by $40.3bn to $139.3bn). Other brands making the top ten included AT&T, Visa, Tencent, IBM and McDonald’s.
• Deltic Group CEO Peter Marks sees the potential for the group’s Bar & Beyond format to grow to between 20 and 30 sites and expects another two or three openings this year, per MCA.
• US operator Ignite Restaurant Group (Joe’s Crab Shack & Brick House Tavern & Tap) has filed for bankruptcy. The group has recently reported declining sales. The operator listed its shares in 2012 and took them off the market again this April. The group’s ‘s CEO Joseph Tibus comments ‘amid continued declining same store sales trends, the degradation of restaurant-level margins, and broader concerns that surfaced in media and analysts reports regarding the casual dining and restaurant sector as a whole, these trends created an extremely challenging backdrop for investors.’
• Discounter-fuelled growth has powered the recent growth in grocery spend. IGD forecasts a further c50% increase in spending across the nation’s hard-discounters by 2022.
• Aprirose Real Estate Investors has sold a package of 13 freehold pubs operated by Stonegate Pub Company to BlackRock at a net initial yield of 5.5%.
• AO World shares have fallen sharply after the electrical goods retailer warned that growth at its UK business was expected to slow ‘significantly’ in the first quarter. The group’s full year operating losses widened to £12m from £10.7m as ‘challenging’ UK trading conditions seen last year persisted in the current period. The latest BRC-KPMG retail sales data for the 4 weeks to 27 May show that, while food sales were up like-for-like, non-food sales were well down, with the electricals sub-category particularly affected by tough Euro 2016 comps for TV sales.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Luxury serviced apartment group Mansley has acquired Strozzi Palace in the centre of Cheltenham. The site will comprise 6 large suites. Fleurets, which handled the sale, comments ‘the Strozzi Palace sale is indicative of a new breed of accommodation coming to the marketplace.’
• STR has suggested that that the US travel industry is seeing ‘business as usual for this stage in the industry cycle.’
• STR expects US hotel average daily rate growth of 2.5% for full-year 2017 and 2.7% in 2018. This should lead to REVPAR growth of 2.2% and 2.5%, respectively. STR expects to see dips in occupancy of 0.3% and 0.2%. Supply growth is expected to slightly outpace demand. STR comments ‘the political and economic climate in the country continues to evolve with uncertainty. That coupled with lower than expected pricing power during the first quarter led us to decrease our ADR growth projections.’
• Elsewhere, Foursquare reports that US tourism has taken hit from travel ban talk. The LA Times says ‘according to a recent blog post by (Foursquare) CEO Jeff Glueck, U.S. tourism share fell by 6% year-over-year starting in October, and continued to decrease through March, when it dropped all the way to 16%.’
• Nonetheless, the USTA reports that international visitor numbers to the US in April increased year-on-year, despite the introduction of a controversial travel ban by president Trump. Although the new data released by the US Travel Association was positive overall, it found that European visitors to the US declined, with the UK falling by 6.1% in April 2017.
• Hilton has agreed a franchise hotel for Kolobrzeg with BB Baltic Park Sp. z.o.o. Construction on the new 128-room hotel will begin later this year, with the opening expected in 2019.
• A harassment investigation at Uber has led to 20 people being fired, with the company saying the sackings were related to sexual harassment, bullying and issues about poor company culture. Since a blog post by a former employee, Uber has been under fire for its treatment of women staff.
• Insurers are claiming that UK holidaymakers could have to pay 15% more for all-inclusive holidays due to the increase in false holiday sickness claims. Abta says gastric illness claims have increased by more than 500% across the industry.
• Marriott International wants to sign up more independent hotels in a bid to increase its portfolio of properties by 50 per cent by 2019. The company has three brands for independent properties, these being: The Luxury Collection, Autograph Collection and Tribute Portfolio.
• Gerard Lyons, Boris Johnson’s former chief economic advisor, told business leaders optimistic about the economy once the UK leaves the EU at the GTMC conference. Lyons said Brexit is a reflection of a “seismic” change impacting the world economy and that too many people have not shared its economic success.
• Cyprus experienced a record month for UK tourism in April, with the number of UK travellers to the island rising by 16.3%. Overall arrivals to Cyprus rose by 26.9% year-on-year to 286,331. The UK and Russia were the main sources for tourism, making up 37.1% and 16.4% of total arrivals respectively.
• The British Airways IT outage has been blamed on human error. An engineer disconnected then reconnected a power supply, creating a power surge which led to travel chaos for 75,000 passengers.
• Trump Organization has announced a new mid-market hotel chain that will be called ‘American Idea’.
• Merlin CEO Nick Varney has called for a new government department to promote tourism and criticised the Department for Culture, Media and Sport (DCMS) for failing to support the industry. Speaking at the summit of the British Hospitality Association, of which he is chairman, he said responsibility for tourism ‘must not continue to reside within DCMS’s remit’ because it was a ‘second tier priority’ for it and should be given to the Department for Business, Energy & Industrial Strategy. ‘It will not be regarded as a serious industry within Government until that happens and the much-aspired-to ‘seat at the table’ will continue to be in another room,’ Mr Varney said.
• Varney also warned against the ‘dangerous bidding war’ surrounding minimum and living wages on the campaign trail, adding that pay should be left to the independent Low Pay Commission. These and other costs ‘threaten the existence of some and put all under pressure’, Mr Varney claimed. There was also a renewed plea for the next government to reduce VAT on tourism-related industries, something he called a ‘silver bullet solution’ to help the sector deal with rising costs and competition from other countries.
• Pepsi brand Mountain Dew is to sponsor three ‘powerhouse global e-sports teams’ in a move that confirms (in our view at least) the growth of e-sports as a real thing. Mountain Dew will sponsor Team Dignitas (in Philadelphia), Splyce (in New England) and Team SK Gaming (in Germany). Mountain Dew reports ‘we are excited to expand our support of esports through these partnerships with three world-class teams.’ It continues ‘industry-first partnerships and authentic integrations that align with core Mountain Dew values and resonate with gamers and DEW Nation will continue to inspire us as a business.’
• E-sports advertising or sponsorship may put products into contact with an audience that would be otherwise hard to reach
FINANCE & MARKETS:
• Brexit & election:
o Theresa May has said that she will resurrect the Board of Trade, which was set up in Victorian times.
o Boris Johnson has pointed out that 93% of humanity live outside the EU. They also live a bit further away.
o Post terrorism UKIP rally could (slightly) reduce swing of Leavers to Tories.
o Telegraph points out Corbyn was ‘person of interest’ for Special Branch in 70s etc.
o Critics point out that Ms May was at Home Office when police numbers were cut
o Rain tomorrow. Traditionally benefits the Right.
o Poll of Polls suggesting slightly increased Tory majority
• Eurozone investor confidence rose in June from 27.4 to 28.4.
• Oil up through $50 (just). Trading at $50.03
• Sterling a shade down vs US$ at $1.2898
• Sterling also weaker vs Euro at €1.145
• UK 10yr gilt yield down 6bps to 0.99% on stagnation concerns
• World markets: UK down yesterday with Europe and US also lower. Far East mostly down in Wednesday trading
YESTERDAY’S LATER TWEETS:
• Later tweets: MERL & RTN shares amongst the losers yesterday as Times suggests London sales could drop 30%. Seems a bit severe.
• UK election uncertainty overhangs market. Tories should win but early hopes of 100 seat majority look misplaced.
• US$ at 7mth lows. Eurozone production at 6yr highs. Is this the EU ‘not working’?
• BRC re sales. Food up (inflation), non-food down. AO World says market ‘challenging’ & sees ‘significantly’ slower sales growth
• Comptoir stunned market yesterday with warning. Costs, new openings & existing LfL sales all poor. Shares 75% off in 9mths.
• Compoir, Richoux, Tasty. Here’s an idea; get the product, the pricing & the sites right & you may do OK. If not, then not so much
RETAIL NEWS WITH NICK BUBB:
• Shoe Zone: Discounting may be working wonders for the likes of Aldi/Lidl and B&M etc, but discount shoe retailing doesn’t seem to be a land of milk and honey, with the interims today from Shoe Zone (for the 6 months to April 1st) showing sales and profits slipping. Oddly, no LFL sales figures are provided (albeit total store numbers have edged down from 510 to 504) and the big £0.9m loss on FX hedging is treated a s a non-underlying item, with the declared gross margin up from 61.1% to 62.8%…Still, the good news is that the interim dividend has been edged up and the so-called “Big Box” store trial has performed well and the company will accelerate the roll-out of the concept during the second half. CEO Nick Davis says “The group has traded broadly in line with management’s expectations since the period end and the Board continues to look to the future with confidence”
• John Lewis Partnership Sales Watch: The weekly John Lewis sales figures were pretty lacklustre in May and last week’s sales figures did not exactly kick June off on a great note, despite the warm weather. Total sales were only 2% up gross (not much more than flat LFL) in w/e June 2nd and that left John Lewis running up only 0.8% gross (c1% down LFL) on a cumulative basis over the last 18 weeks. Fashion sales were up by 12.5% gross last week, helped by Beauty promotions, but Home was 1.8% down and Electricals were 5% down gross. Over at Waitrose the warm weather in w/e June 2nd only lifted sales by 1.1% gross (nearly 1% down LFL) and so over the last 17 weeks combined Waitrose remained at +1.8% gross (about flat LFL).
• News Flow This Week: Tomorrow brings the much-awaited General Election, so it will be a very good day to bury bad news, although none is expected in the Q1 update from mighty Boohoo…