Langton Capital – 2017-07-17 – EasyHotel, Conviviality, food spend, staff turnover & other:
EasyHotel, Conviviality, food spend, staff turnover & other:
A DAY IN THE LIFE:
So, having decided over the weekend that the grass could go another week before it needed cutting, I can see now that that was a mistake and, rather than having a few beers, a BBQ and a general laze around over the weekend, I should have been working.
But hey, what are you gonna do about it?
It’s Monday now, I can’t turn the clock back and, whilst regrets aren’t exactly for losers, they’re often a waste of energy unless you can learn from them. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Conviviality retail has reported full year numbers to end-April 2017 saying revenues rose 85% to £1.56bn with margin +1.3ppts and adjusted EBITDA +102% at £60.9m. Adjusted PBT is +147% at £22.5m with fully diluted EPS +136% at 10.4p and the full year dividend +33% at 12.6p.
• Conviviality reports on year highlights, says acquired Bibendum & has seen ‘a transformational year with the integration of the recent acquisitions ahead of plan, resulting in a doubling of profit and delivery of £6m of synergies in the financial year.’ Group says current trading is in line with Board expectations. It reports ‘Conviviality Direct continues to trade strongly with sales 9.0% above last year. It is particularly pleasing to see the continued improvement and confidence of Conviviality Retail with like for like sales +0.5% and Wine Rack up 4.0%.’ CEO Diana Hunter reports ‘we firmly believe there is exciting potential for significant organic growth for our businesses, with further potential opportunities to build on the current platform.’
• Stock Spirits reports it is to buy a 25% equity interest in Quintessential Brands Ireland Whiskey Limited for up to €18.3m. Stock Spirits says ‘the investment is in line with Stock Spirits’ stated strategy of expanding its portfolio through strategic investments and bolt-on acquisitions in order to enhance shareholder value.’ CEO Mirek Stachowicz comments ‘we are delighted to be partnering with Quintessential Brands in an exciting Irish whiskey business and to be adding these outstanding brands to our portfolio.’ He says ‘we see significant potential for the brands globally, including in our core markets of Poland and Czech Republic, and are confident that they will complement our strong market positions in vodka, herbal bitters, brandy and limoncello.’
• Just Eat has teamed up with the UK’s largest peer-to-peer lending agency, Funding Circle, in order to offer loans to the 30,000 restaurants servicing its takeaway app. Just what we need, more debt.
• Cardlytics research shows that consumers are spending an increasing portion of their personal budgets on restaurants. The study of three million bank customers’ bank cards reveals that, while overall spending in the second quarter was up 3% year-on-year (Q2 2-16: +9%), spend at restaurants and quick-serve restaurants (QSR) as a proportion of the total rose by 2% to 9%. Spending at QSR was up 8.5% on Q1 2017, and up 19% on Q2 2016, while spending at restaurants was up 9% on Q1 2017 and 9% on Q2 2016. This backs up recent research from the British Hospitality Association that found the restaurant industry has outpaced the every other sector in terms of growth and contribution to the economy since the 2008 downturn.
• Some 711 drinks-led pubs have closed in the past 12 months, according to William Grant & Sons’ 2017 Market Report, while 385 circuit bars and 330 café bars have also shut up shop in the last year. The BBPA noted that these figures come in above their estimates but are lower than the CGA 2016, which indicated 23 closured per week.
• Tim Martin really is the poster boy for Brexit. A pro-Brexit campaign is featuring a picture of the JDW chairman superimposed upon a Union Jack with the message to Bregretters to ‘put a sock in it’. Various liberal elitists such as MPs and journalists, are pictured gagged and unable to put their views across. Mr Martin told the Morning Advertisers that he had meant that bodies such as the CBI should put a sock in it rather than individuals.
• Oakman Inns & Restaurants has revealed a 12.4% increase in like-for-likes for its Q1 ending 2 July 2017. The fast-growing group is aiming to reach 30 units within the next two years and has raised £24m of funds to realise its goal. Oakman Inns’ CEO, Peter Borg-Neal, commented: ‘We are absolutely delighted with our performance over the first quarter and it reflects a lot of hard work by my very talented colleagues. The good weather has been a factor in the 12.4% Like for Like growth – as has our investment in some of our older sites last year. However, when you strip everything back our Comparables are at +4.4%, demonstrating the health of the underlying business. We now face the task of maintaining this excellent core performance whilst embarking on a very aggressive expansion plan. I have every confidence that Alex Ford, Operations Director, and his team are up to the task.’
• Oakman has strengthened its team with the promotion of Jill Scatchard to the position of Human Resources Director. Scatchared has been central to the development of the group’s internal training and development programme, ‘Oakmanology’, and in Oakman being named as 8th Best Employer in the Sunday Times Best Companies to Work For 2017.
• Patisserie Valerie is set to increase its presence in the retail sector with further tie-ups with Debenhams and Sainsbury’s, writes MCA. The brand currently operates 16 sites with Debenhams and believes there is the potential for a further 50 to be set up in the retailer’s estate.
• The New World Trading Company will its sixth brand in its portfolio, the Canal House, next month.
• Bristol-based healthy eating concept Friska has secured £3m of growth capital from YFM Equity Partners, which has also backed Bagel Nash and Firezza. The company aims to double its estate over the next two years.
• Bosses are calling for a freeze in the national living wage, which is currently £7.50 an hour for workers aged 25 and over and is set to rise to about £8.75 by 2020. More than 40% of companies have cut back on planned investments because of the Brexit vote, according to a survey by the CBI, while the British Chambers of Commerce has also acknowledged that the inflationary squeeze and rising uncertainty since last year’s EU referendum has led to a more cautious approach to business.
• TUC reports public sector workers are around £3,800 poorer than they would have been if pay had not been suppressed. Chancellor Philip Hammond reports that public sector workers are still 10% better off than those in the private sector if their pensions are taken into account. Job security may be generally higher.
• Walkers is offering customers the chance to keep their favourite crisp flavours or risk losing them to a brand new flavour in a campaign called ‘Choose me or Lose me?’ Walkers will be offering consumers the chance to vote between classic and new flavours by purchasing a pack or voting online; this will be between three core flavours and three new flavours with Salt & Vinegar being challenged by Lime & Black Pepper, Prawn Cocktail taking on Paprika and Smoky Bacon or Bacon & Cheddar. The three new flavours are all best sellers in other countries.
• Visa is considering offering incentives to UK businesses to go cashless after introducing a similar scheme in the US, where it has selected 50 small companies to receive $10,000 if they only use cards. The companies have to bid for the money by explaining how going cashless would affect them, their staff and customers. However the idea has been sharply criticised by consumer groups, who say cash is still vital for many people. ‘It is easy to categorise it as a bribe, but ultimately they are incentivising companies to do away with cash, and that’s not the job of people like Visa,’ said James Daley of Fairer Finance.
Losses versus profits:
• Profits good, losses bad. Profits good, losses bad. Are we missing something?
Losses rise at high-profile growth companies:
• London Union files 1 Jan 2017 accounts with Co House. It lost £1.2m compared with a loss of £968k in 2015. Revenue rose from £4.9m to £9.1m. Unit EBITDA rose from £1.5m to £2,7m and total directors’ remuneration rose from £128k to £552k.
• London Union reports ‘the directors are pleased with the progress London Union made during this period. The co, which operates the Dinerama site amongst others, opened four street markets in London. The group reports ‘all units were profitable’. Unit EBITDA margins were slightly lower.
• London Union shareholders’ funds fall. The group has shareholders’ funds of £2.7m (down from £3.6m) as a result of losses incurred during the year mitigated by additional funds raised.
• Bounce Ping Pong reports FY numbers to 30 Sept 2016. Reports sales +65% at £10.7m but co moves from £418k profit to £1.5m loss.
• Bounce Ping Pong reports ‘the business has continued to successfully grow organically.’ It says a second London unit opened in October 2016 and the group has opened in Chicago where ‘ACE Bounce is the Group’s flagship USA venue’.
• Bounce Ping Pong says it is targeting gross profit, which is £8.6m (a margin of 81%), rather than net profits at this stage of its development. The group says current losses ‘represent pre-opening costs of breaking into the US Social Entertainment Venue market’.
• We Are Bar Group (formerly Kornicis) has reported an operating loss of £1.3m for the year to 1 Oct 2016 (2015: loss £1.2m). The group has 17 units including Jamies & Smolenskys in central London. We Are Bar Group reported a loss before tax of £1.9m (2015: £2.4m). The group reports turnover up sales up 1.2% at £14.5m with underlying EBITDA of £0.7m vs £0.1m last year. The group reports that it disposed of its Groveland Court unit during the year. Shareholders’ Funds stand at a negative £3.8m (up from negative £2.0m) as a result of ongoing losses. We Are Bar Group is 80% owned by Isfields Investments LLP.
Casual diners, Thai restaurants to be more precise, losing senior staff:
• Busaba Eathai, the Jason Myers-led Thai chain has announced that COO Marc Lombardo had his position as a director of the company terminated on 30 June. Mr Lombardo joined the company early last year.
• Busaba Eathai made an operating loss of £380k in the year to end-May 2016 (2015: loss £260k). The business made a loss after financing costs of £806k (2015: £546k).
• Giggling Squid has reported that CFO Mike O’Mahoney ceased to be a director of the company on 7 July 2017. He joined the business in August last year. Mr O’Mahoney said in Q3 last year ‘I am delighted to be joining Giggling Squid. It’s a great business with great people. With really strong like-for-like growth, improving margins and an awesome pipeline, Giggling Squid is well positioned to achieve its goal of becoming the first fully national Thai restaurant operation.’ Mr O’Mahoney is a chartered accountant with over 20 years’ experience in the hospitality and leisure industry, having served with De Vere, the Hotel Collection, Thistle Hotels and Little Chef Restaurants.
• Giggling Squid made an operating loss of £120k and a loss after financing costs of £427k in the year to end-March 2016, according to the most recent accounts filed.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• EasyHotel has reported the signing of Master Development Agreements in Iran and Sri Lanka. It has signed agreements with 3SV Limited and MHA Hatfield Limited in Iran and Sri Lanka respectively. EasyHotel reports ‘the Iranian Tourism industry has seen significant growth in recent years with the Government outlining ambitious plans to attract more than 20 million tourists by 2025. The agreement for Iran is anticipated to deliver more than 500 new easyHotel rooms in the country.’ The group anticipates adding 200 rooms in Sri Lanka. EasyHotel reports ‘in both territories, the new easyHotels are expected to comprise new purpose-built hotels and conversions of existing hotels and/or office buildings.’
• EasyHotel CEO Guy Parsons reports ‘easyHotel has made good progress over the last year against its plans for the international expansion of the brand.’ He says ‘the agreements announced today will add at least a further 700 rooms to our committed development pipeline enabling us to extend our network in these exciting new markets without direct capital investment, as we focus direct investment in our core markets of the UK and Europe.’
• Consumer spending on flights and hotels held steady in the second quarter of the year, while restaurant spend outperformed, as the leisure industry saw a 6% increase in spending year-on-year. Cardlytics international operations president Pete Gleason said: ‘This data shows just how much the UK loves eating out. Even amid a squeeze on household finances, spending in restaurants and cafes continues to go from strength to strength. ‘The increased demand is good for hospitality but with the sector set for further growth in the form of increased competition, brands will have to work even harder to stand out and attract new customers. But elsewhere, with consumers cutting back on spending it’s clear that brands will have to adjust to a new normal of low spending growth and focus on offering value.’
• UK residents made 14.1 million visits abroad, a rise of 8.1% on the same first quarter in 2016. Spending rose by 11.7% to £8.6bn from £7.7bn. However, visits to North America fell by 4.1% year-on-year, with spending down by 1.5% according to the Office for National Statistics. Visits to ‘other countries’ – those outside Europe and North America – saw the largest increase, of 12.4% to 2.9 million. Visits to Europe rose by 7.8%
• Ryanair chief marketing officer Kenny Jacobs has said that Britain’s EU exit could prove ‘a disaster for a period’ and is anticipating ‘an ugly divorce’. Jacobs also reckons that airlines will cut plans for UK growth from 2019 without clarity on air traffic rights by early next year and explained at a Travel Weekly Business event in London: ‘We’ll be planning the summer of 2019 in spring 2018. We hope we have clarity [by then]. If we don’t, you will see every airline pare back growth rates in the UK. We would have liked to grow in the UK by a double digit amount this year, but we’ve pared back because there is this uncertainty that we don’t have in Germany.’
• The executives of Vue cinema may make hundreds of millions of pounds from the company’s imminent sale or float per Press reports. The group currently operates more than 200 sites, has been given a price tag of £1.6bn. Jp Morgan and Rothschild have been given the task to identify possible buyers ahead of planned IPO.
• Esports are attempting to play up to intercity rivalries of traditional sports, in a bid to propel competitive video gaming into the mass-markets. The first teams to do so have been the New England Patriots NFL team and baseball’s New York Mets, in the first serious attempt to create a professional league for esport. Chief executive of the epsort team Immortals, Noah Whinston said ‘It is incredibly important to use that localised model to tap into a fan base of esports that doesn’t exist yet’.
FINANCE & MARKETS:
• Retail sales fell in June for the second month.
o Former PM Tony Blair has said that the EU may be willing to compromise on freedom of movement of workers
o Chancellor Philip Hammond has told the BBC that some businesses are holding off from making investments in the UK due to Brexit uncertainty. He said ‘they are waiting for more clarity about what the future relationship with Europe will look like.’
o City envoy to the EU Jeremy Browne has said in a memo that French authorities were seeking “disruption” in the Brexit process in order to take jobs from Britain. The Mail on Sunday reports Browne as saying ‘every country, not unreasonably, is alive to the opportunities that Brexit provides, but the French go further, making a virtue of rejecting a partnership model with Britain and seemingly happy to see outcomes detrimental to the City of London even if Paris is not the beneficiary.’
• Oil up 60c or so to $49.08
• Sterling stronger at $1.3095
• Pound up versus Euro at €1.1423
• UK 10yr gilt yield up 2bps at 1.31%
• World markets: UK down on Friday with Europe also lower. US markets up & Asia mostly higher in Monday trade
• Rightmove has reported that house prices in the UK rose by 2.8% in the year to July.
YESTERDAY’S LATER TWEETS:
• Later tweets: US restaurant LfL sales down for 6 Qtrs running. Down 1% in Q2. Overbuilding said to be to blame. Lesson to be learned?
• Brexit debacle opens door to Hard Left. Fears it may experiment w. economy etc. unencumbered by moderation from Brussels (or anywhere else)
• BDO says online sales +17.8% w. to 9 July (+23.6% last year). Begs question: If all these shops didn’t exist already, would you build them?
• Consumer outlook tough. Cheerleaders for sector say all’s well. But money talks, shares at multi-year lows, etc.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: On a quiet news day, the sale of the Dixons Carphone business in Spain got the attention of the Times, which highlighted that the company wants to focus on countries where it is a market leader. The Times also flagged that Matalan faces the threat of a strike by warehouse staff and that the luxury business Jimmy Choo has attracted a host of buyers, including Michael Kors. The Daily Mail’s “Hero of the Week” was Marco Gobbetti , the new boss of Burberry (for saying that he will be “transparent”). The Daily Mail’s main Business story was “John Lewis staff sent to theatre school”, flagging that new MD Paula Nickolds is sending the staff at the new John Lewis store in Oxford opening this October to be trained in “the tools and techniques of the theatre”, to help improve customer service and the customer experience. The Guardian had a feature about “photo shopping” and how
• Sunday Press: The big focus in the Sunday papers was on Mike Ashley and Sports Direct, with a universal prediction that the final results on Thursday will show that profits have more than halved, as per articles in the Sunday Times, Sunday Telegraph and Mail on Sunday. With the verdict due shortly in the well-publicised High Court case with Jeff Blue…the Observer’s headline for its results preview was “Sports Direct’s health may make Ashley sick”. In other news, the Sunday Times flagged that the struggling fashion chain Jack Wills is fighting back, now that founder Peter Williams has returned to the business, and has moved out of loss, with a focus on full-price sales. Finally, the ”Inside the City” column in the Sunday Times looked at Debenhams and its drooping share price and said that it is an “Avoid”, thundering that “Nail bars and pizzas may not save Debs”, but the Business
• Conviviality: The fast-growing drinks wholesaler and retailer Conviviality has been one of the stockmarket stars of the year so far and their fan club will not be disappointed by today’s bumper final results for y/e April, which focus on “A transformational year with the integration of the recent acquisitions ahead of plan, resulting in a doubling of profit and delivery of £6m of synergies in the financial year”. Adjusted PBT was just under £46m on sales of £1.56bn and adjusted fully diluted EPS was up 48% to 21.0p. Current trading is good and “in line with Board expectations”, with Conviviality Direct sales 9.0% above last year in the first 9 weeks of the year, whilst Conviviality Retail is +0.5% LFL and Wine Rack is up 4.0%. CEO Diana Hunter says “…we firmly believe there is exciting potential for significant organic growth for our businesses, with further potential opportunities
• Quiz IPO Watch: We flagged on Friday that we had heard nothing since June 15th about the float of Quiz, the Scottish-based fast fashion retailer, but it appears that things are on track, according to filings with the Stock Exchange, with first dealings due to start on July 31st. Whether the mooted £200m valuation is reached remains to be seen.
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Tesco win again, as its £56.61 basket was £2.35 cheaper than Morrisons and £2.90 cheaper than Asda (which had to dish out a hefty £4.91 voucher for failing its guarantee to be at least 10% cheaper). Sainsbury, on £60.60, was in 4th and poor old Waitrose was a long way off the pace again, on £67.24…The separate regular Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Sainsbury, as its 50,000 sq ft store in Hessle, in Hull, came top, scoring 82 out of 100 (the Waitrose store in Nailsea in Somerset came bottom, with a score of 61, having got 0 out of 20 for stock availability). One of the main features in the magazine was on the “Christmas in July” seasonal range shows held by the big supermarkets.
• News Flow This Week: As we head into the second week of July (with Wimbledon now over, alas, for another year), the big day is Thursday, with the much-awaited Sports Direct finals, the Howden Joinery interims, the Mothercare Q1 update and the ONS Retail Sales for June. On Friday there will be an AGM update from AO World (aka AO.com).