Langton Capital – 2017-08-15 – Revolution Bar Group, Deltic, JDW, US market & other:
Revolution Bar Group, Deltic, JDW, US market & other:
A DAY IN THE LIFE:
Langton is walking in the rain in Wales. It will then be walking in the rain in the Lake District. Then it will walk in the rain in Scotland. Minimising the risk of skin cancer. Canny, huh? Back properly after the Bank Holiday but, for the meantime (and rural internet permitting), the email will go out in shortened form. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Deltic (formerly Luminar) has suggested that it merge with Revolution Bar Group. Deltic says ‘Revolution’s recent poor share price performance resulted in its 31 July, 2017 announcement of the possible and opportunistic offer by Stonegate Pub Company Limited (“Stonegate”) to acquire the entire issued and to be issued share capital of Revolution at 200p per share. Deltic believes that if a firm offer by Stonegate is made, and is recommended by the Revolution Board, it would be a disappointing outcome after two years of roll out and investment to merely return to its shareholders the same value of the business as at its 2015 IPO.’
• Deltic comments that it ‘has observed in Revolution a business with solid growth potential and some great trading outlets that has been negatively impacted by financial management setbacks, whilst having limited scale to retain investor support for a publicly traded company. Deltic believes that a combination of its business with Revolution would transform the scalability of the enlarged group, provide scope for material synergies and enable the operational issues within Revolution to be better addressed through Deltic’s management team taking responsibility for both businesses, creating a powerhouse group in its sector that can exploit further opportunities to both expand and consolidate the market.’
• Deltic comments it ‘has proposed to Revolution that they explore on an expedited timescale an all share merger subject to negotiation of appropriate merger terms, reciprocal due diligence and Revolution shareholder approval, a transaction which would be effected through an acquisition of Deltic by Revolution using Revolution shares as consideration.’
• Presently Revolution ‘has determined that it does not wish to engage in discussions with Deltic on this basis, so denying its own shareholders the opportunity to consider a choice between exploring the benefits of a potential merger with Deltic and the possible Stonegate offer’ says Deltic. The group says it ‘is disappointed by this outcome and believes that Revolution shareholders should be aware of alternatives to the possible Stonegate offer.’
• JDW has announced that it yesterday bought back 200k of its own shares for cancellation at 1040p per share
• Brewdog has reported to Companies House that the appointment of Gareth Bath as a director of the company has been terminated. Mr Bath was appointed to his position earlier this year. At the time, Brewdog co-founder James Watt told the MCA ‘Gareth Bath has had an insane influence on our growth as a company over the past two years, increasing our UK sales by 790%, and living and breathing our culture every single day.’ He said that the appointment, now terminated ‘gives Gareth the opportunity to have the same impact on our mission on a global scale.’
• Brewdog also reports that Luis Garrido is no longer a director of the company. He was appointed in December 2015.
• The ALMR has reported that millions of pounds worth of promised business rates relief has still not been made available to pubs and restaurants. It says ‘the promised package of support announced at the Spring Budget, including £1,000 in relief for pubs with a rateable value of £100,000 or below and a £300 million discretionary fund for local authorities, has not been received by hard pressed businesses.’
• ALMR CEO Kate Nicholls said: “The fact that this relief has been made available to local authorities and is still not getting through to where it is most needed, proves we need immediate and wholesale reform of a broken system.’ Ms Nichols adds ‘pubs and restaurants are in urgent need of financial assistance and have already seen some closures across London due in part to spiralling business rates bills and these delays risk others suffering the same fate.’
• NRN reports that same-store sales in the US ‘unexpectedly fell in July, according to the latest MillerPulse index, putting a pause on the industry’s recovery amid a continued uncertain environment.’
• NRN reports ‘Wall Street’s enthusiasm for the restaurant industry seems to have waned.’ It says ‘industry stocks, which began surging just before the election and were seemingly on a nonstop trend upward, have taken a breather recently.’ Most shares are ‘are now down for the past three months.’
• Sainsbury’s is putting on hold its £130m bid for convenience chain Nisa until the UK’s competition watchdog has ruled on Tesco’s £3.7bn takeover of Booker.
• Telegraph reports ‘British businesses brace for darker days as shoppers run out of cash.’ It says ‘those who have kept up a shopping spree in the last year run out of “borrowed time and borrowed money”’.
• The MCA’s Eating Out Panel shows ‘a further setback for the UK Eating Out market last month.’ It says ‘total occasion frequency dropped to the lowest level for two years after significant decreases at every day-part. With consumers facing heightened financial pressures and confidence back down to a post-Brexit low, eating out occasions have not proved immune to impact.’
• MCA reports ‘the breakfast boom has certainly stalled, as average occasions per head fell to the lowest monthly levels since March 2015. Dinner visits have decreased at a similar rate, leaving lunch, which tends to be a less discretionary out-of-home occasion, accounting for a growing share of meals.’
• MCA reports Wasabi grew like-for-like sales 8.1% in 2016, with turnover growing 21.5% to £98.1m.
• Sainsbury is piloting a 30 minute click & collect service at its Pimlico store in London
• Scottish salmon exports hit a record value of £346m in the first half of 2017 – up 70% on the same period last year
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Turnover at Mark Warner fell by 14% last year after the group pulled its sales to Turkey
• EU finance ministers are to discuss the tax treatment (or non-treatment) of Airbnb
• ONS data shows that the average holidaymaker will pay £68 in tax travelling abroad this year. The total Treasury take is £3.1 billion
• Jackpot Joy reports Q2 numbers, says revenue +17% with adjusted EBITDA +28% at £30m. Re the outlook, the group reports ‘the trading momentum witnessed during Q1 and which continued during Q2 and the early stages of Q3, helped to deliver a solid performance across the Group.’ It says ‘we continue to expect robust top-line growth through H2. As previously flagged, there will be an impact on profitability in the second half from the introduction of UK point-of-consumption tax on bonuses scheduled to commence in August 2017. Likewise, and also as previously highlighted, marketing spend will be weighted towards the second half of the financial year.’
• Jackpot Joy CEO Andrew McIver comments ‘the second quarter has been another good quarter of growth across the Group with revenue increasing 17%, including top-line growth of 18% at our leading UK bingo brand, Jackpotjoy. Group adjusted EBITDA1 also grew strongly at 28%. This solid performance across the Group in the first half of the year allows us to reconfirm our full-year 2017 outlook.’
• Southampton football club has been taken over by Chinese real estate magnate Jisheng Gao
FINANCE & MARKETS:
• The UK has set out an “ambitious new customs arrangement” proposal for the EU post Brexit. It amounts to a temporary customs union.
• Oil down at $50.76
• Sterling down at $.2965
• Little changed vs Euro at Euro 1.1006 per pound
• UK 10yr gilt yield 1.07%
• World markets: UK, Europe, US up yesterday with Asia up in Tuesday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Demand softer & economy slowing but little comment from larger F&B operators. No prizes for being the first with bad news
• Actions speak louder than words. Unit closures, unit sales, share buybacks rather than expansion seem the order of the day
• US data. On a 2yr basis, LfL sales in July were some 4.2% below levels seen in July 2015. Perils of over-building??
• UK CPI due tomorrow. Rebound from 2.6% in June likely. Puts pressure on real wages. CIPD expects only 1% wage growth in next 12mths
RETAIL NEWS WITH NICK BUBB:
• Today’s Press and News: The big news today is that Sainsbury has suspended its well-publicised talks with the struggling convenience store group Nisa (not that the company itself has thought this sufficiently important to issue an RNS announcement…): the Times flags that Sainsbury’s has told Nisa that it cannot make a formal offer until the CMA competition watchdog has ruled on Tesco’s proposed bid for Booker and so has lost its period of exclusivity (“Sainsbury’s stalling may let Co-op pounce on Nisa”). But the Business Editorial in the Guardian thunders hat “Sainsbury’s is right to delay Nisa deal after Tesco-Booker concerns”. The other big story is that Amazon has closed down its DVD rental service Lovefilm because of waning demand and the growth of streaming…
• Dixons Carphone: After the savage downgrade of Dixons Carphone on Friday by Exane, which highlighted the unhelpful structural trends in the UK mobile phone market, the company’s joint broker, Deutsche, rushed to the rescue yesterday, with a Buy note (reiterating their 400p target price), emphasising that theQ1 trading update on Sept 7th should be reassuring. But our eye was also caught by a column on the Retail Week website by the Retail design guru John Ryan (headlined “Are Dixons Carphone’s three-in-one stores its problem?”), flagging that the Carphone Warehouse section of the new “three-in-one” stores “looks almost like something that has been beamed down at the 11th hour to be part of the whole” and that “at a time when there tends to be a move towards smaller, more specialist shops, putting everything you can think of under one roof looks curious”.
• Mall Watch: You may have read recently that the giant Mall of America in Minneapolis has just celebrated its 25th anniversary…It opened on August 11th 1992 and we well remember its huge indoor theme park (with roller-coasters etc) located right in the centre of the mall, which is still going strong (as Nickelodeon Universe, however, rather than Camp Snoopy). Those entertainment areas still pull in the tourists, but, given the well-documented pressure on footfall to US shopping malls, we were interested to see if the original anchor department store tenants are still going…And the answer is that they are, amazingly (at least for the time being), as Nordstrom, Macy’s and Sears still anchor three corners of the mall, on three levels. But the shops selling music cassettes (Sam Goody), VHS film videos (Suncoast) and books (B. Dalton) are long gone…
• News Flow This Week: After today’s interims from the Motor retailer, Marshalls, its rival Lookers reports its interims tomorrow. Thursday morning brings the Kingfisher Q2 update and the ONS Retail Sales figures for July. And Thursday afternoon brings the Asda/Wal-Mart Q2 update.