Langton Capital – 2017-07-25 – Fuller, Revs, Time Out, Fevertree, Dominos, Goals & other:
Fuller, Revs, Time Out, Fevertree, Dominos, Goals & other:
A DAY IN THE LIFE:
Busy today, on to the news:
E-SPORTS IN THE UK; GROWTH CONTINUES:
The rapid rise of eSports:
• eSports has become somewhat of a sensation in the last few years, reaching an audience of 191m global enthusiasts according to Newzoo.
• Professional gaming teams will fight it out in the competitions, which have prize pools well into the millions of dollars for the biggest games.
• The competitions span the globe with teams from Europe, North America, South America and Asia all vying to be top dog.
The leisure industry’s lost generation:
• With young people spending less on alcohol and less time in pubs, maybe it’s time publicans in the leisure industry changed tack?
• eSports fans represent the tech savvy, ad-blocking, younger generation that is hard to reach through traditional marketing.
• It seems inevitable that eSports are going to grow in popularity as well as commercially, with companies such as Gfinity listing on AIM (LON:GFIN). Kids now grow up watching their favourite Youtube personalities play through games which means they will at least be ‘aware’ of the big events in gaming, if not follow them.
eSports in the leisure industry?
• It could be that the leisure industry adapts by creating spaces to watch these events in the pub. In fact there are already a few eSports bars in London such as the Loading bars in Stratford and Dalston.
• If one thing is for certain, it is that the leisure industry will have to work smarter to attract these elusive young people and keep them spending.
PUB, RESTAURANT & DRINK PRODUCERS:
The nought-to-sixty club: it costs money to join:
• Five Guys JV in the UK has reported full year numbers to 25 Dec 2016 saying that revenue rose to £90.4m from £63.3m in 2015.
• Five Guys UK JV reports 2016 EBITDA of £10.5m (2015: £9.6m) but a net loss of £13.4m (2015: loss £8.4m). Preopening costs amounted to around £7.3m of that loss (2015: £2.9m). The group had £7.3m of finance costs in the year suggesting that, before financing and pre-opening costs, the group made a profit.
• Five Guys UK says it opened 19 stores in the UK in 2016 (taking the total to 59). It says UK sales growth ‘has been driven by store openings and improved core store performance’. During the year, Five Guys UK also opened two stores in France & one in Spain. The first French store is averaging £163k per week in sales. The group says ‘we have a strong property pipeline for 2017, including expansion in Paris and other regions in France.’ Re Spain, the group says ‘we are planning to roll out several new restaurants in Spain in 2017’.
• Five Guys UK now has £32.8m of retained losses accrued in the period since it commenced operations in the country.
• Fuller’s updates on first 22wks, says ‘the Company has made a very good start to the year with like for like sales in our Managed Pubs and Hotels rising 6.6% during the period. Like for like profits in our Tenanted Inns were up 5% and total beer and cider volumes in The Fuller’s Beer Company rose 5%. The perfect summer weather, which has dominated much of the period, has been instrumental in enticing people to come out to our pubs for a great experience.’
• Fuller’s CEO Simon Emeny comments ‘we are very pleased with the new trading year so far and remain on course, despite the previously noted cost headwinds that are buffeting our industry including increased business rates, the impact of the National Living Wage and the introduction of the Apprenticeship Levy.’ He continues ‘we have a world leading hospitality sector in the UK and we urge the Government to consider our needs as it negotiates the country’s exit from the European Union.’ Fuller’s concludes ‘we have a clear, long-term vision and an offer across all parts of Fuller’s that is relevant and attractive to today’s consumer. With outstanding pubs, great brands and well trained and motivated people to deliver excellent service, we are well-positioned for further progress.’
• Revolution updates on FY trading, says ‘total sales for the Period increased by +9.2% to £130.4m (2016: £119.5m).
• Revolution reports FY LfL sales rose by 1.5%, down from the 1.7% reported after 44 weeks. It says ‘the terrorist attacks in Manchester on 22 May and in London on 3 June impacted business during the days that followed, particularly in the north west where the Group has a significant number of venues’
• Revolution says recent sales growth ‘has since strengthened, up by 2.7% over the last six weeks’.
• Revolution reports ‘the Directors remain confident of the current strategy, the underlying strength of the business, its brands and the strong customer proposition, which has resulted in over three years of consistent like-for-like growth.’
• Fevertree reports H1 numbers, says sales +77% at £71.9m with EBITDA +102% at £25.2m & EPS +106% at 16.7p. H1 dividend is +96% at 3.01p.
• Fevertree says it has seen ‘strong growth across all regions, channels and flavours’. It says it has registered ‘exceptional growth of 113% in the UK as distribution gains continue to drive performance’. CEO Tim Warrillow reports ‘we are delighted to report another strong performance in the first half of 2017, continuing the momentum seen in 2016. We achieved growth in all our regions, driven by further distribution gains and underlying rate of sales growth as the two key trends of premiumisation and mixability continue to gather pace globally.’
• Fevertree CEO Tim Warrillow reports ‘we continue to invest and improve our infrastructure, relationships with key suppliers and customers as well as adding to our senior team. The strength of our brand and first mover advantage means we are well positioned as the opportunity for premium mixers continues to gather momentum across our key markets.’
• Fevertree says ‘given the strong performance in the first half of the year, the Board anticipates that the outcome for the full year will be materially ahead of its expectations.’
• Time Out Group, ‘the global media and entertainment business with food and cultural market’ has released an in-line trading update for the six months to 30 June 2017, with revenue expected to grow by 13% year-on-year to c£18.7m. Time Out Digital delivered digital revenue growth of 25%, whilst there was, as expected, a small decline in revenue from print operations of 3%. Within digital revenue, advertising grew by 8%, Premium Profiles by 55% and e-commerce by 51% compared to the prior year. Meanwhile, food market division Time Out Market ‘has shown strong year-on-year revenue growth of 59%’.
• Julio Bruno, CEO of Time Out Group plc, stated: ‘Time Out has seen good progress in the key development areas of e-commerce, Premium Profiles and Time Out Market which in Lisbon continues to deliver an excellent performance demonstrating the strength of the format. We are well positioned to drive further growth, transactional traffic and monetisation of our unique content as millions of people rely on Time Out to experience the very best of the world’s greatest cities.’
• Domino’s Pizza Group has reported a 10.5% increase in group system sales for the 26 weeks to 25 June, although the rate of like-for-like UK growth has tumbled from 13% to 2.4% (ex splits). This like-for-like figure fell to -2.3% once accounting for store splits — the group opened 40 new units in the UK, with most new openings now set to split existing territories. Underlying profit before tax for the group rose by 9.1% to £44.6m and underlying basic EPS grew by 9.9% to 7.3p.
• Online sales increased by 11.5% in the UK and now represents 75% of total sales, while its New Warrington supply chain centre is set to go live in Q1 2018 at a net cost of £3m. Domino’s UK has invested £21m in ‘attractive International growth opportunities’ and is putting another £4m of gross investment into its UK division so that it might ‘grow more strongly’. It is also accelerating its store roll-out to 90 UK sites this year and has announced its intention to resume share buy-backs.
• Commenting on the results, Chief Executive Officer David Wild, said: ‘The first half of 2017 has been another period of good progress for Domino’s Pizza Group, despite a more uncertain UK economic environment. The core business delivered strong year-on-year system sales, continuing to take pizza market share, with good like-for-like performance… We’ve taken controlling positions in our Nordics operations and completed the acquisition of the Dolly Dimple’s pizza chain in Norway, giving us immediate scale with promising early results in attractive markets, which are, as yet, underdeveloped.’
• JDW has reported that yesterday it bought back another 50k of its own shares for cancellation.
• Forward ordering App company Ordoo has reported that 49% of Millennials who have not yet tried mobile ordering, intend to do so by the end of this year.
• Tesco is launching a same-day delivery service across the UK.
• Banks have been accused of a “spiral of complacency” in lending to consumers who may struggle to repay their debts. Alex Brazier, who is in charge of financial stability at the Bank, said ‘household debt, like most things that are good in moderation, can be dangerous in excess. Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.’ Outstanding car loans, credit card balance transfers and personal loans have risen 10% over the last 12 months. Mr Brazier said ‘lending standards can go from responsible to reckless very quickly. The sorry fact is that as lenders think the risks they face are falling, the risks they – and the wider economy face – are actually growing.’
• Two in five Brits say they now eat less in restaurants as a result of convenient delivery apps that have made it easier to order takeout, according to research from Nectar. Some 48% of respondents admitted they would rather order dinner from an app than visit a restaurant, while nearly two thirds (64%) said they look at online delivery services when ordering food, whereas just 16% check the restaurant’s own site. Younger customers and those with children are leading the charge.
• James Moir, managing director of Nectar, said restaurant businesses need not despair because the amount of information they have about customers means they can offer specific experiences. ‘Ultimately, diners now have more choice, so restaurants need to respond,’ he said. ‘They will be even more keenly judged on value, quality and service. With so much data from online and in-restaurant purchases now at their fingertips, restaurants can know their customers better than ever before.’
• The latest Barclaycard data on spending patterns shows that a fifth of Brits foresee an increase in their spending on leisure and entertainment.
• Sadiq Khan says that London nightlife must include more than just after-hours drinking in pubs and clubs and is ready to set out plans to better support late-night theatres, restaurants and shops. Philip Kolvin, a lawyer specialising in licensing who is running the mayor’s Night Time Commission, said the mayor’s office wanted to challenge the view that nightlife was a ‘negative beast to be tamed’.
• The Vurger Co, a pop-up, plant-based burger group looking to kickstart a meat-free ‘revolution’ in fast food, has become the fastest restaurant ever to hit its target on crowdfunding platform Crowdcube. It ended its crowdfunding drive on 6 July after raising £300,000, 66% above its target, in just 77 hours.
• The Office for National Statistics says manufacturers have been engaging in ‘shrinkflation’ for the past five years across thousands of different items in shops.
• Per MCA, Prezzo has placed a package of 27 sites on the market in a move to consolidate its estate of around 300 sites. The sites will be located across the UK and will include 9 Chimichanga restaurants.
• Heaven Hill Brands has bought two Irish whiskey liqueurs – Carolans Irish Cream and Irish Mist – from Gruppo Campari for $165m. Heaven Hill is one of the largest Bourbon makers in the US and the largest that is still family-owned.
• AB InBev acquires Hiball, expanding its non-alcohol portfolio with Hiball’s signature energy drink brand, as well as Hiball’s sparkling waters and juices brand Alta Palla.
• Private equity firm Carlyle is asking for £300m for Graze, a retail snacks specialist selling boxes of nuts, seeds and similar healthy products.
• The ONS reports shrinking pack sizes of sugar, jam, syrups, chocolate and confectionery products contributed 1.22 percentage points to the rate of inflation of those items since 2012. This has also been attributed to manufacturers’ rising raw material costs, such as sugar and cocoa.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• HNN reports that hotel owners are weighing the costs of their loyalty programmes. It says ‘as an owner, the question is, ‘How much more money will it cost us to get our guests?’”
• HNN reports that Dublin expects to add another 3,000 hotel rooms by the end of this decade.
• British holidaymakers are paying hundreds of millions of pounds in unnecessary charges when they use their credit and debit cards overseas.
• Information collected from TUI and Thomas Cook by Bernstein suggests the cost of package holidays could rise by as much as 9% next year as currency hedges are set to expire.
• The latest annual Post Office Travel Money Family Holiday Report shows that family holiday costs in esorts in the Eastern Mediterranean and the Balkans can be under half those found in more expensive destinations in the west of Europe. Marmaris was identified is the resort with the lowest costs due to a 24% slump in the value of the Turkish lira against sterling since last summer. The others are Sunny Beach, Bulgaria (£63.56); Crete (£69.88); Limassol, Cyprus (£69.90) and Porec, Croatia (£73.75). The only western European resort to come close was the Costa del Sol (£63.11) – the cheapest in the eurozone.
The number of foreign travellers entering the UK declined in May. Inbound passengers fell by 2% year-on-year compared to a 28% jump for the first four months of 2017, according to data from the British Hospitality Association. ‘A factor in the decline of Europeans visiting the UK could a be a short-term impact of the recent terror attacks in London and Manchester,’ the BHA said.
A decline in European visitors was partially offset by ‘robust’ growth from North America up 35%, according to the association’s monthly Travel Monitor. ‘The differentiation in inbound tourism growth from the two continents could show long-haul travel holding up better in the wake of the terrorist incidents due to the longer booker period to travel,’ the BHA added.
• The laptop ban on flights from the Middle east and north Africa could be scrapped and replaced by new security measures as early as this week.
• Ministry of Justice officers have swooped on the premises of several firms suspected of encouraging bogus holiday sickness compensation. The clampdown has hit 34 unlicensed firms helping to fuel the rise in the number of fake claims being made by British holidaymakers. The industry watchdog also found evidence of solicitors carrying out malpractice.
• Ryanair has put ‘contingency plans’ in place to deal with the potential impact of Brexit on its flights that includes potential measures including moving its UK-based aircraft to continental Europe.
• Goals Soccer updates on H1 trading, saying that sales for the period rose by 2% with LfL sales +1.4% versus a drop last year of 1.9%.
• Goals announces it has agreed a contract to form a 50:50 Joint Venture with City Football Group to expand in North America. CFG will be granted a licence to use the group’s brands.
• Goals reports that 223 arenas have been fully invested and a further 25 will be refurbished in H2. Merger talks with Powerleague have ended. Chairman Nick Basing reports ‘with the necessary overdue investment being made in our UK estate and a refocus on our consumer proposition, I am pleased to see some early signs of top line momentum. However, the UK consumer economic environment remains uncertain in the medium-term outlook.’
• Goals CEO Mark Jones comments ‘we continue to make progress re-investing in the business to offer our customers a premium product. We are a substantial way through the programme to upgrade the pitches and have now embarked on phase two of giving customers an enhanced clubhouse experience in which they wish to spend time.’ He concludes ‘the Company is totally focussed on delivering attractive returns for shareholders from its assets and the opportunities in the UK and USA.’
• PayPal Holdings has invested in LendUp, which has specialised in online loans to credit-troubled consumers
• Esports business Gfinity has acquired the entire issued share capital of CEVO, ‘an American based, industry renowned, global provider of technology and services to the esports market’ for up to $2.7m in cash and shares. Neville Upton, Chief Executive of Gfinity, said: ‘We are delighted to have acquired one of the most reputable esports technology players in the in the industry, which further strengthens our position as a market leader in esports technology. It also demonstrates our determination to become a leading global player in the industry having previously delivered events in the UK, France, Mexico and USA since the start of this year.’
FINANCE & MARKETS:
• Consumers are less able to spend on holidays, cars and household appliances reports HIS Markit.
• Eurozone manufacturing PMI down to 56.8 in July from 57.4 in June
• Oil up 75c of so to $48.87
• Sterling up vs US$ at $1.3032
• Pound stronger vs Euro at €1.1177
• UK 10yr gilt up 1bp at 1.19%
• World markets: UK, Europe & US down yesterday. Far East down today (so far)
YESTERDAY’S LATER TWEETS:
• Later tweets: 50% chance of recession says Fathom Consulting. C Suisse says 33%. How many of today’s go-go operators have dealt with one of those before?
• Pig & chicken co Cranswick says it has ‘made a positive start to the current financial year.’ Certainly has. LfL sales are +21%
• US restaurant data shows a continued weakness, as customer traffic turned negative in the last quarter. Overbuilding. Lesson for UK?
• MCA reports 27 Prezzos up for sale. A step too far? Will it lead to downward pressure on rents? At least for new leases
• European talk on ‘tapering’ in the Autumn buoys Euro. Less chance of US rate rise, Euro up, dollar down.
• UK Q2 GDP numbers Wednesday. Anaemic 0.3% expected. Better than Q1’s 0.2% but not good.
RETAIL NEWS WITH NICK BUBB:
• Jimmy Choo: Despite widespread speculation about bidding interest from a plethora of private equity companies, as well as trade rivals like Michael Kors, it has been surprising to see the share price of the luxury shoe business Jimmy Choo drift back below 200p in recent days. It peaked at nearly 215p a month ago and closed at 195p last night. But today has brought an agreed cash bid of 230p from…the US luxury accessory business Michael Kors, valuing Jimmy Choo at £896m. It is claimed that represents a premium of approximately 36.5% to Jimmy Choo’s share price of 168.50p at the close of business on 21 April, the last business day before the Jimmy Choo Directors announced the commencement of the formal sale process. That implies an enterprise value multiple of about 17.5 times Jimmy Choo’s adjusted EBITDA for the 12 months ended 31 December 2016.
• News Flow This Week: We get the latest monthly Kantar/Nielsen grocery market share data at 8am. Tomorrow brings the Joules finals, the Halfords AGM and the Hammerson interims. The Intu Properties interims, the Inchcape interims and the Bonmarche AGM are on Thursday. Friday brings the start of dealings in the Quiz IPO, as well as the latest GFK Consumer Confidence survey.
• Clash Watch: It’s good to see that, in order to avoid a clash of Sainsbury’s proposed interims reporting date with M&S, Sainsbury had the good grace yesterday to move its interims date from Wednesday 8 November to Thursday 9 November (covering the 28 weeks to 23 Sept).