Langton Capital – 2017-09-19 – Delivery, J Holt, price checks, Everyman & other:
Delivery, J Holt, price checks, Everyman & other:
A DAY IN THE LIFE:
Got a bit carried away on the delivery section below & ran out of time. On to the news:
DELIVERY – WHAT’S THE FUTURE:
• Having watched the kids’ animation Wall-e again recently, where obese humans on a space ship fleeing a polluted earth become so, well, lazy, that they can’t do anything for themselves, it made me ponder delivery.
• You could write a book. And we may do, but not here and not at stupid o’clock on a Tuesday morning so these will be brief comments.
• We get it, you’re watching the telly:
o When you’re just back from a night out & get the munchies or when you simply can’t leave the TV because the X-Factor’s on, you may value a delivery.
o Laziness by another name, let’s call it convenience, becomes a priority.
• We also get that restaurants need to play the game.
o If rivals offer delivery, you may have to offer delivery.
o But why so it if you can avoid it?
o You take a massive margin hit.
o You have bikers and others clogging up your pass.
o You lose control of the brand. If the food arrives in a poor condition, your brand may suffer. Etc. Etc.
• But what, if anything, happens during the journey from the restaurant to your table, that actually improves the food?
o Absolutely nothing.
o The food will be colder. Or it may be randomly hot and cold.
o It may be late.
o The delivery company may not be able to find your house & text you up after you’ve gone to bed to apologise.
o Pizzas may be upside down.
o You can’t send it back.
o Nor can you complement the chef but, realistically, would you ever want to?
• So where to from here?
o We would contend that ‘delivery driven growth’ is almost something that the restaurant industry could do well without.
o That said, see our comments on ‘play the game’ above.
o Delivery companies need to be profitable. The risk, surely, is that they get found out before they can become so?
o That said, pure delivery operators, such as Domino’s and perhaps even Just Eat, could have created a permanent niche.
• Comments – albeit a small sample size.
o To be honest, it’s pricey & I know I should rather cook.
o It’s got legs but it’s anti-social.
o I feel guilty when I use delivery. It costs too much & I don’t like to think of myself as lazy.
PUB, RESTAURANT & DRINK PRODUCERS:
• Manchester brewer & pub company Joseph Holt has delivered FY accounts to Companies’ House. The group reports revenues in the year to December 2016 of £59.2m, up from £54.3m last year.
• Joseph Holt reports 2016 profits before tax of £2.43m, up from £2.40m last year.
• Joseph Holt reports ‘the brewing industry continues to experience tough trading conditions. The company has made significant efforts in developing its managed estate, tenanted opportunities and free trade business. Turnover and gross profit both increased by over 9% in 2016. Notwithstanding the significant investment made in establishing the Pub Restaurant Division and in developing the new pub concepts in the Community Division, each of which the Board is confident will generate substantial growth in the future, this impressive performance has driven 4.2% growth in EBITDA and 1.3% growth in operating profit.’
• Joseph Holt reports ‘the business remains under pressure from cost increases and the general unease in the economy and 2017 will prove no less challenging.’
• Price check. 300ml bottle of Black Sheep. Sainsbury 180p. ASDA 150p (as a part of 4 for £6 multibuy). Meanwhile Aldi has the beer at 129p.
• Price check: Batchelors fancy 4-sachet packet soups. Sainsbury 135p, ASDA (as a part of a multi-buy) 60p.
• Price check: 227g (or 250g) vacuum packed filter coffee. Sainsbury 350p and 330p. Aldi 129p. Not tasted it yet, but it smells OK and, if it’s caustic, it’ll do for the office in the aftermath of a hard night out.
• Price check solution / conclusion? Sainsbury is weeing on my leg and telling me it’s raining. So, suggest you buy your bags for life in Waitrose & Sainsbury and do you shopping in Aldi. Or ASDA.
• McDonald’s sales recovery is said by NRN magazine in US to be causing problems for its smaller rivals. Now everyone is smaller to McDonald’s but, it transpires, NRN means operators such as Sonic, Jack in the Box and Steak ‘n’ Shake. Yes, exactly.
• Jollibee Foods Corp, which boasts a huge following in its home of the Philippines for its sweet-style spaghetti and fried chicken, is considering a $1bn bid for Pret a Manger. Sources familiar with the matter said the $1bn valuation was based on Pret’s 2016 core earnings of just over £93m and would mark one of the biggest ever outbound deals from the Philippines. Reuters reported earlier this year that Pret’s private equity owner, Bridgepoint, was preparing for a New York listing later this year. Jollibee’s most recent expansion move was the acquisition in 2015 of a 40% stake in Smashburger, a U.S.-based chain, for roughly $100m, a deal that already marked a shift towards higher end ready-to-grab meals.
• The Association of Convenience Stores speculates that Parliament’s inquiry relaunch into reducing bottle waste could result in a deposit return scheme.
• Amazon plans to apply pressure on US online booze sales, following the group’s acquisition of Whole Foods last month. Online booze sales were believed to be ‘amazon proof’ due to the complexity of the regulations surrounding online alcohol sales and delivery, but more than half of the 450 Whole Foods stores purchased by Amazon sell wine and beer.
• L’Arche Green NV, the controlling shareholder in Heineken, will increase its stake in the Dutch brewer by 5%, purchasing €200m worth of shares. L’Arche will be acquiring the shares from Mexico’s Femsa. L’Arche said ‘The participation of L’Arche Green NV in the share offering by Femsa underlines the long-term commitment of the Heineken family towards the Heineken company’.
• Two of Italy’s largest Coffee groups, Lavazza and illycaffe, are opening branded flagship cafes in Milan near to where Starbucks plans its invasion next year.
• Toys R Us bonds fell to a record low ($0.22) on Monday, following reports that the group may file for bankruptcy protection some time next week. The bonds were trading for 97 cents at the start of September. The group’s $400m debt is set to mature in October 2018, bringing many to fear for its long term future.
• British start-up Sthaler will begin its roll-out into convenience stores and entertainment venues, allowing customers to pay for goods usings only their fingers. Sthaler uses technology called Fingopay, which scans the 3D map of a customer’s finger veins, giving each individual a unique ‘key’.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• The UN World Tourism Organisation and World Travel & Tourism Council have warned that government’s failures to recognise the value of tourism remains the biggest challenge to the sector. The president of WTTC, Gloria Guevara, stated: ‘In some cases, tourism ministers are policy makers. [But] in many cases they are not. I was tourism minister in Mexico and you don’t make the laws. Sometimes you are fighting with your own cabinet’.
• Speculation is circulating that Monarch is in talks to offload its short-haul business in a bid restart more profitable long-haul flying. Sky News has reported KPMG have been enlisted by the airlines to help them identify a buyer, with Jet2.com and easyJet potential candidates.
• Thomas Cook Airlines is to launch an Economy PLUS product for short and medium haul flights. Additional services offered with the product are, priority boarding, an increased luggage allowance and in-flight drinks.
• Research produced by the ‘A Fair Tax on Flying’ campaign shows that UK business class travelers are paying double the Air Passenger Duty than economy passengers. Karen Dee, spokeswoman for A Fair Tax on Flying said: ‘We need a decisive cut in APD to open up new routes to emerging markets and make it easier to build up trade and to make the UK an even more welcoming destination for foreign business travellers, many of whom invest here.’
• InterContinental Hotels Group’s new high-quality midscale brand has been unveiled as avid hotels. Keith Barr, Chief Executive Officer, IHG, said: ‘We built our Holiday Inn Express® brand into a hugely successful, leading midscale brand. Now, with the introduction of avid hotels, we’re set to add another one and extend IHG’s leadership position in this segment. With 14 million potential customers looking for the type of hospitality avid hotels will offer, this new hotel brand represents a significant growth opportunity for IHG and our family of owners.’
• The ‘capsule hotel’ market is reported to be growing in Asia. The market is expected to reach $226 million by the end of 2022 per Forbes magazine. A report conducted by WiseGuy Research Consultants says ‘the global capsule hotels market is valued at $159 million in 2016 and is expected to reach $226 million by the end of 2022, growing at a CARG (compound annual growth rate) of 6.03% between 2016 and 2022.’
• Uber will have to dish out £2.9m if the ride hailing company is granted a new licence by London’s transport authority. The general manager of the Taxi & Private Hire division of TfL, Helen Chapman has stated: ‘There has been a huge growth in the industry in recent years and it is only fair that the licence fee reflects the costs of regulation and enforcement. The changes to fees will help us fund additional compliance officers who do a crucial job cracking down on illegal and dangerous activity.’
• Everyman Media Group yesterday announced that had raised £17.0m (gross) via a placing of 10,000,000 new Ordinary Shares at the Placing Price of 170 pence per share. The group says the placing was oversubscribed and CEO Crispin Lilly says ‘we are delighted by the strong level of support we have received from investors as part of this fundraising. The funds raised from this placing will allow us to accelerate the Company’s growth plans by financing additional new cinema openings in 2019 and beyond, creating significant further value for shareholders.’
• Online bingo operator Jackpotjoy plc yesterday announced the launch of a new advertising campaign for its Jackpotjoy brand. The campaign features British television personality, Paddy McGuinness.
• Angry Birds maker Rovio is reported to be targeting a $1bn valuation when it lists on the main part of the Helsinki Nasdaq on 3rd October. The initial valuation at the placing price will be between €802m and €896m.
• Sportech announced yesterday that it was undertaking a ‘comprehensive review of the business and the capital structure, with all options to optimise value for the benefit of shareholders under consideration.’
• Sportech’s CEO and CFO had given notice of their intention to resign. CEO Ian Penrose will remain with the company until the end of this year, though his resignation from the board is with immediate effect. Sportech says the men are leaving after ‘a successful turnaround in the business under their leadership, in which the Company secured £97m gross receipt from its VAT litigation case, modernised and sold the Football Pools, repaid £65m of debt and returned £21m to shareholders with an anticipated substantial distribution to follow from the Group’s £64m net current assets as at 30 June 2017.’
• Stride Gaming yesterday updated on trading saying ‘strong trading has continued in the second half of the financial year. As a result, the Board is confident of meeting the upper end of market expectations for the financial year which has now closed.’
FINANCE & MARKETS:
• Bank of England governor Mark Carney has said that increases in UK rates over the medium term will be “gradual” and “limited”
• The US Fed is currently raising rates & the ECB is thought likely to commence doing so shortly
• HSBC has said that it expects two rates rises before the end of next year. It had previously not anticipated UK rates rising until the beginning of 2019
• Oil down a little at $55.38
• Sterling a shade weaker at $1.3533
• Pound down vs Euro at €1.1299
• UK 10yr gilt yield unchanged at 1.31%
• World markets: UK, Europe and US markets up yesterday. Asia mostly higher in Tuesday trade
o Bank of England governor Mark Carney has said that ‘Brexit-related uncertainties are causing some companies to delay decisions about building capacity and entering new markets.’ He says ‘prolonged low investment will restrain growth in the capital stock and increases in productivity.’
o A Reuters survey suggests that c10k finance jobs will be shifted out of London in the early years of Brexit
YESTERDAY’S LATER TWEETS:
• Later tweets: DPP H1: LfL system sales +17% in H1. Speeded up to +24% in July & +28% in August on back of increased marketing
• DPP says ‘next step in marketing for Domino’s Pizza in Poland will be the first test of television advertising.’
• DPP expects ‘step change’ in EBITDA next year. Shares up on positive H1 update.
• Discounting on the up across casual dining sector. Prezzo offering 40% off mains. Pizza Express 3-courses for £12.95 & half price wine
• Byron hires KPMG to help advise on site closures, due to rubbish trading. Spade = Spade. Not as easy as some new entrants thought, huh?
• Escape Hunt reports H1 numbers. H1 loss in line but will open 8 sites in UK shortly & remains confident re future.
• UK interest rate betting now 60% in favour of rate rise early November. Likely only a reversal of the last 25bps ‘emergency’ reduction
RETAIL NEWS WITH NICK BUBB:
• French Connection: The interims today from the embattled French Connection are accompanied by a separate announcement about “Directorate Change”, but activist investors looking for a shake-up of the executive management team will be disappointed to see that it simply refers to 2 old non-execs being replaced by 2 heavyweight new non-exec directors, in the form of Sarah Curran and Robin Piggott. Stephen Marks, the veteran Chairman and CEO, is defiant, insisting that “We have definitely seen momentum build in the first half…with improvements across all the divisions, despite difficult trading conditions. With full price sales in Retail up during the early part of the second half, combined with the strong Winter 17 order books in Wholesale and very strong reaction to the Spring 18 collection, I am confident that we will see a good performance during the rest of the year”. Retail
• Ocado: The Q3 update from Ocado today (for the 13 weeks to Aug 27th) looks decent enough, with Retail sales up by 13.1% and orders up by 16%, but there is no mention of any new Overseas customers, which may disappoint the bulls. They had an early opportunity to air their concerns with management via a 7.15am conference call…
• Debenhams: Ahead of the finals on Oct 26th, Debenhams is now in “close season” (y/e August), but it took a few analysts yesterday to see the new Stevenage store that opened on Aug 24th on the quaintly named Roaring Meg retail park. This 70,000 sq ft unit is the first Debenhams store to be opened under the stewardship of new CEO Sergio Bucher, who told Retail Week recently that he stopped all store refurbishment work last November, soon after taking over as CEO, having been “quite unimpressed” by the modernisations. The Stevenage store is intended to be more “inviting and friendly”, but it is not “the finished article” and the real “store of the future” is said to be six to nine months away.
• News Flow This Week: The latest Kantar and Nielsen monthly grocery sales data (for the 4 weeks/12 weeks to Sept 9/10th) is published at 8am this morning. Shoe Zone is hosting a site visit for analysts today in “East London” (including one of its so-called new “Big Box” stores). Tomorrow brings the Kingfisher interims and the delayed ONS Retail Sales figures for August. And there is a Pets at Home Capital Markets Day on Thursday.