Langton Capital – 2017-09-28 – TUI, Langton Research, Leon, new sites & other:
TUI, Langton Research, Leon, new sites & other:
A DAY IN THE LIFE:
Occasionally we get to stretch our legs.
And that’s what Langton did a little while ago. It re-did a short walk, three miles or so, that it had undertaken in 2006 from St Paul’s to Holborn to The Aldwych and back to St Paul’s and we counted the pubs, restaurants, fast food outlets and grab and go stores and compared them with the situation just before the financial crisis.
The results, to say the least, were interesting.
And yes, it’s a micro-market and yes, the City of London is atypical and yes, we may have missed the odd one or counted it twice but, if you’d like to know the results, see the links highlighted below. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
• 6,500 words on over-capacity, discounting & the medium-term outlook.
• One operator comments: ‘Bang on the Money’.
• Headings include Why the Increase in Supply, evidence of oversupply, consequences of oversupply.
• Also: Case Study – City of London, the changing face of F&B, the explosion in grab-n-go outlets, East Asian offers, the C-stores, recent profit warnings & more.
• It’s an easy (if at times queasy) read & if you’d like a copy at £200 + VAT, then please drop us a line.
PUB, RESTAURANT & DRINK PRODUCERS:
• SSP updates on FY trading saying revenues +14.8% in Q4 in constant currencies with 3% coming from contract wins.
• SSP actual currency revenue +17.5% in Q4. LfL sales in the quarter +3%.
• SSP reports FY revenue +11.4% in constant currencies but +19.3% in actual currencies. Group says ‘the trends seen in the operating margin in the first half of the year have broadly continued during the second half.’
• Re the outlook, SSP says ‘looking forward, whilst a degree of uncertainty always exists around passenger numbers in the short term, particularly in the current environment, we are well placed to continue to benefit from the structural growth opportunities in our markets and to create further shareholder value.’
• Restaurant operator Leon has filed its 25 December 2016 accounts at Companies House. The group generated revenue of £42.1m in the year, up from £26.6m in 2015.
• Leon 2016 operating profit fell to £609k from £812k in 2015. Group reported a loss before tax of £322k (2015: profit £359k). Financing costs, at £931k, up from £453k in 2015, did the damage.
• Leon says it is ‘a pioneer in the rapidly evolving contemporary fast food market’. It refers to its sub-set as ‘naturally fast food’.
• Leon says ‘the business has continued to trade extremely well in its established sites’. LfL sales were +7.6% on the back of +7.8% last year. The group says ‘during the period the business incurred exceptional administrative expenses principally comprising of costs arising from abortive sites’.
• At end-2016, Leon had 34 owned and 9 franchised sites.
• Leon has positive shareholders’ funds at £2.5m but it has accumulated losses of £8.4m. Financing costs often keep private companies in the red but, ultimately, it would be a positive development if they made profits.
• Market Town Taverns has filed numbers for the year to 4 February with Companies House. The operator reported turnover down by around 0.4% to £7.1m and it reported a pre-tax loss of £185k.
• Consumer borrowing. Corbyn says he will intervene, May says we have to ‘deal with our debts’. Both seem to agree there is something of a problem developing.
• Propel reports Glendola Leisure has bought Handmade Pubs
• The Food & Drink Federation has said it ‘is heartened by Labour’s focus this week in Brighton on the importance a new industrial strategy can play in boosting prosperity across the country.’ It says ‘it is welcome to hear the Opposition’s support for those EU citizens already here in the UK to stay. They are a valued part of our workforce. Our businesses need time to prepare and plan for a new UK-EU relationship, and a proper transition phase is vital so we can continue to give consumers the quality, choice and value they rightly expect.’
• Former CFO of Restaurant Group, Stephen Critoph, is to join Carluccio’s, replacing outgoing Jonathan Blanchard.
• Five Guys, the better burger chain, has announced it will open a new site at the former Ping Pong restaurant Westfield Stratford site. The MCA reported that the 79 UK store strong chain hopes to open by Christmas.
• Brakspear is to expand its managed operations, by moving two of its leased and tenanted pubs into its in-house managed division. The two pubs are located in Henley-on-Thames and Wokingham.
• Corked wines are perceived to be 15% better quality than those closed with a screwcap, according to research conducted by Professor Charles Spence of Oxford University. Prof Spence said: ‘The sound and sight of a cork being popped sets our expectations before the wine has even touched our lips, and these expectations then anchor our subsequent tasting experience’.
• Facebook is testing ad hiding technology, that could enable users to hide alcohol related ads while using the social media network.
• Tim Hortons, the Canadian based coffee chain, has said that it needs to work through a number of challenges before publically declaring further expansion plans beyond its first UK site in Glasgow. CCO of Tim Hortons, Neil Littler, said: ‘What’s important for us, because it is a very unique Canadian proposition, bringing it over to the UK poses some issues and challenges and some things we need to work through. So making sure that we take our time and be disciplined in our development as well as validate the proposition in the UK is going to be important to us rather than open a store every single day’.
• The latest data release from the CBI shows that over half of retailers say sales volumes were above last year’s levels for September. A total of 56% of retailers said volumes were up, compared to 15% reporting a decline, giving a balance of 42% — the highest in two years. Anna Leach, head of economic intelligence at the CBI, drew attention to increasing pressure on UK consumers, however.
• In the three months to 29 July, Toys R Us net sales were $2.17bn, down from $2.28bn in the same period last year. Net loss at the group, which has been put into bankruptcy, widened in the quarter to $166m versus a loss of $95m in the three months to 29 July 2016. Same store sales fell by 4.4%, with domestic stores dropping by 6.8%.
• The Brewers Association has released a report that found US craft beer contributed $67.8bn to the US economy, as well as providing 456,000 jobs, in 2016.
• Kettle Foods has bought the British popcorn maker, Cornpoppers, for an undisclosed fee.
TUI TRAVEL FULL YEAR TRADING UPDATE:
• TUI has updated on full year numbers saying ‘our results and trading performance show that we are consistently delivering our growth strategy.’
• TUI says ‘our hotel and cruise brands continue to perform very well, having further expanded their unique offering this year; and the growth in Source Market customers demonstrates the strong appeal of our holidays and distribution capability.’
• Group says ‘overall trading for future seasons remains in line with our expectations.’
• TUI adds ‘whilst there are at times external factors which can create uncertainty in specific markets and destinations, we are confident that our balanced portfolio, content led growth strategy and integrated model leave us well positioned to continue to deliver against our plans.’
• TUI reiterates ‘guidance of at least 10% growth in underlying EBITA for the financial year 2016/17.’ The group says ‘trading [for summer 2017] since our last update has remained in line with our expectations.’ The group says ‘the Source Markets’ programme is almost fully sold, with good growth in customer volumes, especially in Nordics, Germany and Benelux.’
• TUI says in France, ‘the lates market has been very competitive, with an adverse impact on margin.’
• TUI says winter is also trading in line with expectations. TUI concludes ‘whilst there are external factors which can impact specific parts of the business, we are confident that our balanced portfolio, content led growth strategy and integrated model leave us well positioned to continue to deliver against our plans.’
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• A third strike this month by Thomas Cook Airlines pilots planned for Friday has been suspended, but industrial action may be stepped up next month. The British Airline Pilots Association warned that strikes could take place over eight days in October. The union said it was consulting its members on the way forward in Thomas Cook dispute over pay and conditions.
• Leisure demand has helped UK hotels maintain profit growth, according to data gathered by HotStats. Despite slowing demand from commercial customers, UK average room rate increased 3.1% to £112.89, RevPar climbed 2.3% to £92.64, however, occupancy did decline 0.6% to 82.1%.
• EasyJet announced on Wednesday that the group aims to be flying travelers on electric passengers jets on short-haul flights within the next decade. CEO of EasyJet, Carolyn McCall said: ‘For the first time, our industry can envisage a future which isn’t wholly reliant on jet fuel and its harmful CO2 and NOX emissions’.The group is currently planning to reduce its carbon emissions by 10% by 2022, by using more fuel efficient jets.
• Paddy Power Betfair is the first UK bookmaker to recommend heavy curbs on betting machines that critics have labelled the ‘crack cocaine of gambling’. Breon Corcoran, chief executive of the FTSE 100 bookmaker, said the debate around fixed-odds betting terminals that offer games such as roulette in betting shops has become ‘so toxic’ that nothing but decisive action would ‘address societal concerns’.
• Facebook founder Mark Zuckerberg has dismissed comments made by US president Donald Trump that the site is ‘colluding’ with Twitter and is ‘anti-Trump’.
• Dreamscape Immersive, a VR startup, has raised $20m with movie theatre chain AMC leading the round. Other investors included Warner Bros, 21St Century Fox, MGM, IMAX and Steven Spielberg
FINANCE & MARKETS:
• Theresa May has said that one of the key tasks facing the country is ‘continuing to deal with our debts.’ She says that ‘to abandon that balanced approach with unfunded borrowing and significantly higher levels of taxation would damage our economy, threaten jobs, and hurt working people.’
• Oil down a dollar to $57.75
• Sterling down vs dollar at $1.3372
• Sterling unchanged vs Euro at €1.1396
• UK 10yr gilt up 5bps at 1.38%
• World markets: UK up yesterday with Europe & US also higher. Asia mostly up in Thursday trade
o Brexit supporters Liam Fox, Boris Johnson & Priti Patel argue that free trade is the best vehicle to reduce poverty worldwide. China and other countries that have industrialised under protectionist regimes would presumably disagree.
o Iain Duncan Smith has said that, if the EU has not begun trade negotiations by December, the UK should leave without a deal. Business has said that this would cost thousands of jobs
o Sadiq Khan has said that the next Labour manifesto should commit to holding another EU referendum. Such a tactical move would likely see Mr Corby propelled into Downing Street, backed by a strange alliance of lunatic 70s Bennites, the young and distraught remainers of all ages
o Ex-shadow business minister Chuka Umunna maintains that Brexit, as sold to the UK population, is not possible
o PM in waiting Jeremy Corbyn maintains that Brexit is a Tory problem. True, the blues’ civil war is more obvious but Labour is not united. Mr Corbyn nonetheless would like to leave the EU in order to implement his policies free from interference. Bombardier is finding out that state aid has consequences when it comes to international trade.
o Labour effectively split on Brexit between old and young.
o Keir Starmer opens up prospect of UK remaining in customs union permanently
YESTERDAY’S LATER TWEETS:
• Later tweets: Langton research, get it while it’s hot. See our daily email for details of note on capacity, discounting & other
• Telegraph picks up on suggestion that restaurant discounting is on the rise as owners feel the bite from rising costs.
• Observers saying casual dining has a lot of debt & ‘there are ‘quite a number of store closures to come’. See email
• MOD Pizza UK is ‘gearing up for its next stage of growth’ and will open up to 10 new sites over the next 12mths. Just what we need?
• NRN in US says current ugly period of trading means that US ‘fast-casual revolution is over’. Lesson to be learnt?
• Labour flirts w exchange controls or do I read body language wrong? Would be legal again post EU exit? All aboard Ship Corbyn…No getting off
• Hotel Chocolate. No LfL data. Is growth rate sufficient to support share multiple? Good company, they say, but the jury’s out
START THE DAY WITH A SONG:
A few of you got yesterday’s song — The Chain by the ‘evergreen’ Fleetwood Mac! Well done. Today, who sang:
Who am I to disagree?
I travel the world and the seven seas
Everybody’s looking for something
RETAIL NEWS WITH NICK BUBB:
• Boohoo.com: We said yesterday that it would be interesting to see how the high-flying share price of mighty Boohoo reacted to the news of stellar sales growth and margin pressure, but the 16% slump smacked of more than just some disappointment that the full-year profit upgrades weren’t as big as had been expected…and it has been announced this morning that Joint CEO Carol Kane sold a hefty lump of stock yesterday, 4.65m at c230p…At the analysts meeting, her main focus was on how the 4 brands in the business are working social media to plug the endorsement of celebs from popular TV shows like “Made in Chelsea” and “Love Island”.
• Retail Sales Watch: As we always say, the wretched CBI Distributive Trades survey really isn’t worth the paper it’s printed on, but, as the first survey of monthly Retail Sales, it is still followed slavishly by City economists…and yesterday’s view of an encouraging bounce in “September” gets the usual uncritical coverage in today’s papers…It is, alas, just a snapshot of industry sentiment (as the survey was completed mid-month) and it only tries to assess movement in sales volumes (which are less useful when inflation is high, eg in Food). And little more than 50 retailers take part, so the fact that 56% of them said that sales volumes were up in September on a year ago, whilst just 15% said they were down, giving a balance of +42%, is not that interesting, even though it was well above expectations (of +19%) and much better than last month’s performance (of -10%). When the BRC-KPMG
• Sale Watch: If you thought that the launch of yesterday’s “Mid Season Sale” by Debenhams was a bit close to last week’s “New Season Spectacular” Sale, then you would almost certainly be right…but we actually can’t recall the pattern of Sale activity at this stage last year. Ahead of the Debenhams finals on Oct 26th, we don’t quite know the views of the new CEO Sergio Bucher on discounting, but many of their peers, including Next and HOF, have been on Sale recently…
• Next Share Buyback Watch: Further to our comment yesterday that the notoriously shrewd “Mr Share Buyback Man” has been in action again recently at Next, he bought c£4m worth of shares at an average price of £52.04 yesterday.
• News Flow This Week: With the end of the month coming up quickly now, the widely followed monthly GFK Consumer Confidence Index is out first thing tomorrow morning.