Langton Capital – 2017-09-29 – Brighton Pier, Comptoir, Richoux, fads or trends & other:
Brighton Pier, Comptoir, Richoux, fads or trends & other:
A DAY IN THE LIFE:
Yesterday I saved one of our ducks from the mouth of a fox.
I mean, literally.
The nasty verminous animal, the fox I mean, ran up almost to the side door of the house, caused a commotion amongst the ducks (who were busily eating rotten, windfall apples and staggering around like drunken sailors) and ran off with one in its mouth.
This led me, before I had a chance to rationally think the thing through, to leap to my feet and chase the beast across the grass.
Now I don’t know quite what I would do if I caught the sharp-toothed raider. I would have bet on me to win the fight but I might have picked up a few unwelcome punctures though, on this occasion, I was spared the embarrassment of perhaps losing a tussle with an animal a quarter of my size as the fox dropped the duck and sauntered off through the hedge with a ‘not me governor’ look on its face.
Anyway, I got the bragging rights but there are other occasions when we get to stretch our legs, too.
Indeed, a little while ago Langton 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.
CAPACITY – SEE ALSO LANGTON NOTE REFERENCED ABOVE:
• The Local Data Company has reported that the number of new food and beverage outlets opening across Great Britain has reached a new peak in the last 12 months.
• LDC reports the average number of new F&B outlets opening p.a. has been 743. Last year, some 1,333 opened.
• LDC reports that the level of churn (openings & closures) for F&B units rose in the last 12mths to around 20,981 outlets. In the 5yr period to June 2017, some 104,746 outlets opened or closed across the UK.
• LDC reports West Midlands & Wales have seen the fastest increase in new F&B openings over last 12mths.
• LDC reports cafes, coffee shops & grab-n-go units are growing most rapidly. Indian restaurant numbers, pubs, night clubs & Chinese restaurants are on the way down. LDC says ‘the growth of food and beverage outlets across Great Britain have been consistent and strong. For many high streets, shopping centres and retail parks it is now an essential part of their offer where one in ten units would have been typical to see, to now one in four or even three being the norm across all locations.’
• LDC comments ‘the current uncertainty across the country around inflation, interest rates and Brexit means that many more operators’ margins will be squeezed so hard that they will have to close. This will be very location specific, as the report data illustrates the significant variances that exist up and down the country in terms of economic consumer health and density of F&B outlets.’
60 SECONDS ON EXPERIENCE, ESPORTS & ELUSIVE PROFITS:
Blah blah blah experience blah blah blah theatre
• If you want to sound like you know what’s up, just figure out a way to get ‘experience’, ‘esports’, ‘ping-pong’, and ‘food courts’ into a sentence or two.
• For example: ‘I’m so tired of boring old pubs serving evil, corporate lager — I’m much more into esports — more like THE sports, am I right! — and I love buying new experiences at my local food court. Most of all though, at the end of the day, I just want to drink cocktails and play ping pong in a basement somewhere.’
• This doesn’t have to make much sense, it’s just the sort of thing you should be saying these days.
Show me the money!
• As cool as adult-only ball pits (not kidding) might be, these experiential ventures are not a license to print money.
• Far from it, in some cases. A walk through Companies House accounts can yield some pretty eye-watering losses.
• Bounce lost £1.4m in the year to September 2016 and Flight Club made a loss of £298k in the year to December 2015.
• Operators with video games, mini-golf courses, ping pong tables, high-tech dart boards, etc. might sound new, but they make their money from F&B sales, just like everyone else.
No really, show me the money…
• Esports is here to stay, but continues to search for a sustainable business model. Many companies have come, spent money, and gone.
• Game Digital has its BELONG division for social gaming, but it will take a while before this makes a meaningful contribution to group sales.
• Even then, we are unclear how exactly these social gaming sites will make money.
• Gfinity, meanwhile, has taken on the bold role of bringing competitive esports to the UK in a big way.This will take time and a considerable pile of cash.
• In such a rapidly evolving industry, the surest bet looks to be Sweden’s MTGx, which owns flagship esports brands Dreamhack and ESL.
PUB, RESTAURANT & DRINK PRODUCERS:
• Brighton Pier Group reports FY numbers saying revenue is +39% at £31.3m with PBT up 278% at £3.5m.
• Brighton Pier reports EPS of 10.4p, up from 4.1p last year. Group says it has ‘exciting plans to upgrade the bars and restaurant at a cost of £1.3m over the coming winter.’
• Brighton Pier chairman Luke Johnson reports ‘the results for the year now include the first full year of trading since the acquisition of the Brighton Palace Pier.’ He says ‘during the period the group doubled adjusted earnings per share. This financial progress demonstrates the success of our strategy.’
• Brighton Pier concludes ‘the Group continues to rationalise the bars division together with driving operational and financial improvements across the estate. During the period, we have successfully disposed of six marginal sites and in the last few days we have let the lower floors of our freehold site in Derby to a new restaurant owner on a 20 year lease.’
• Richoux sees ‘no consistent improvement in trading conditions’.
• Richoux reports H1 numbers to 9 July saying turnover fell 20.2% to £5.65m to give a loss after tax of £1.1m (vs £0.6m loss)
• 17-strong Richoux says, despite losses, it had £4.7m of cash at its h1-end.
• Richoux reports ‘during the first half, we have focused on improving our restaurant teams, food and premises, as well as laying the foundations for significant improvements in our digital capabilities.’ Some 3 sites have been disposed of.
• Richoux comments ‘over the last six months we have continued to refresh our estate, and have focussed on restaurant design, food and service quality. We have experienced some growth in trade of the rebranded restaurants but, in line with the industry, not at the level we had hoped for and we currently see no consistent improvement in trading conditions from those prevailing when we last reported in April this year.’
• Comptoir Group has announced that it has raised c£4.0m via a placing of 26,7m shares at 15p. Six months ago, Comptoir’s shares were 52p. A year ago, they were over 80p.
• Comptoir Chairman Richard Kleiner reports ‘the Company announced within its interim results on 15th September 2017 that it required further funds to meet its financing needs associated with the opening of 2 new sites before the end of the current financial year.’ He goes on to say ‘I am pleased to be able to report that the Company has raised the minimum of £2.0 million financing and, in addition, a further £2.0 million to target further openings in 2018.’
• Comptoir Chairman concludes ‘I am pleased to report that the Company has continued to see during September the stronger trading that the Group experienced in July and August and that the board retains its confidence of achieving expectations for the full 2017 financial year.’
• GfK has reported that UK consumer confidence edged up to a 4mth high in September. GfK says confidence was minus 9 in September, up from minus 10 in August.
• GfK news may harden Bank attitude to rate rise in November. GfK says ‘consumers are still spending out there, and have repeatedly defied predictions of a downturn since last year’s Brexit vote.’
• GfK says UK is in a ‘live now, pay later’ frame of mind.
• KERB’s Camden Lock street food market will re-open on 7 October following a three-week rebuild. It will feature 34 custom built kiosks for the traders. There will be a number of new traders, including Spice Box, Only Jerkin’, Wei Wei’s and The Big Cheese.
• Cinnamon Collection has announced that it will open a Cinnamon Kitchen in Battersea Power Station in late November.
• Casual Dining Group CEO Steve Richards said at the recent MCA conference that the company will slow its UK expansion over the coming 12-18 months. Instead, the Bella Italia and Café Rouge owner will focus on growing its international presence, where it is building franchise networks in the Middle East, India, and South Africa. The group has a total of 15 UK sites planned for this year, with the bulk of these being concession sites in UK airports and Centre Parcs.
• BBPA CEO Brigid Simmonds has welcomed yesterday’s move by Manchester City Council to encourage local pubs to apply for pub-specific business rate relief. The trade body is also calling for comprehensive business rates reform, as its own research shows that pubs pay 2.8% of the total business rates bill, despite generating just 0.4% of the UK’s rateable business turnover.
• Franco Manca is to further strengthen its presence in London with an opening in King’s Cross and is understood to have secured a site at 62-68 York Way. The unit is slated to open before the end of this year.
• Europe’s largest KFC franchise operator, The Herbert Group, has added a further 27 stores to its portfolio after agreeing a major refinancing deal with Danske Bank, providing the group with £27m of new funding. The expansion plans will create a further 100 jobs in Northern Ireland, where the group is located.
• A survey conducted by Eventbrite, has found that millennials are shunning booze for wellness and a wider range of experiences other than getting drunk. Millennials consume around five alcoholic units per week, with the survey stating ‘Millennials are also looking for new types of experiences, with four in 10 at immersive events such as Secret Cinema, Crystal Maze, etc’.
• Jonathan Cox has announced that he will resign from his directorship of Tynemill Ltd which trades as Castle Rock Brewery.
• The American wine industry is believed to be worth $220bn, according to data from the National Association of American Wineries.
• Tesco has announced Pay+, its new digital wallet payment app, in order to provide customers with a more convenient shopping experience. It replaces Tesco’s previous app, PayQwiq.
• Wonga reports pre-tax losses of nearly £65m in 2016 but claimed its business had been ‘transformed’ after acknowledging it had ‘lost its way’ under old management. The payday loan company expects a return to profit for 2017 after moving towards more responsible lending.
• The private equity owner of struggling rent-to-own retailer Brighthouse has put the business up for sale and is in a race to refinance £220m of bonds due next year. In June the company, which allows shoppers to pay for goods in weekly installments, reported that its earnings had crashed by 79% to £11.7m after changes in sign-up procedures led to a slump in the number of new customers.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Check-in software that is used by many airlines had a failure causing ‘major disruption’ at check-in desks around the world. Some of the airports affected included Heathrow, Paris Charles de Gaulle, Zurich, Washington DC and Melbourne.
• Starwood Capital’s Principal Hotel Company has sold 17 properties and intends to sell another three hotels by the end of the year.
• The US hotel industry reported a 0.7% fall in occupancy to 71.4% for the week ending 23 September. Average daily rate also fell by 1.9% to $128.44, meaning revenue per available room declined by 2.5% to $91.76.
• Israel-based Playbuzz, an interactive storytelling platform, counted Disney and Saban Ventures among its investors in a $35m funding round.
• Google is planning to spin off its shopping division, Google Shopping, in order to avoid further opposition from the European Commission.
• Finnish mobile games studio Rovio Entertainment Ltd is to IPO at the top of its range, giving it a market value of £789m.
• BlackBerry reported a stronger-than-expected quarterly profit on Thursday as high-margin software sales hit a record, sending shares up 14%. Software and services revenue rose 26 percent to $196 million (145.79 million pounds) in the second quarter ended Aug. 31 from a year earlier, boosting hopes of a recovery by the former handset manufacturer.
FINANCE & MARKETS:
• Former PM Gordon Brown warns UK & other major economies are not well-equipped for the next financial crisis. Speaking at an event to mark the 20th anniversary of the Bank of England’s independence, Mr Brown suggested that the G20 was not doing enough to track risk.
• US growth rate revised up. Annualised 3.1% now expected in Q2.
• Oil down 25c or so at $57.50
• Sterling up vs dollar at $1.3412
• Pound down vs Euro at €1.1386
• UK 10yr gilt yield unchanged at 1.38%
• World markets: UK, Europe & US up yesterday. Far East mostly higher in Friday trading.
o B of E’s Mark Carney has suggested that the Bank cannot mitigate all of the turbulence that will be caused by Brexit. Bank may be able to influence how the hit is spread
o Latest round of talks said to have made some progress, but not enough to move onto trade
o Barnier says ‘may be months’ before trade can be discussed.
o Telegraph says Mrs May must prove UK is ready for ‘no deal’.
o Smug Labour believe road to no10 open on tide of youth, Remainer & other disenchantment
o Umunna says Brexit cake & eat it is a myth, Sadiq Khan says promise another referendum & no10 falls to Labour
o Times says: ‘the silence of Labour moderates is shameful’. Don’t want to rock the boat with power in sight
o Millions of hours of time & effort wasted on all of the above.
YESTERDAY’S LATER TWEETS:
• Later tweets: Langton research on over-capacity. Details how some sub-categories have doubled in last 10yrs in certain markets. See e/mail for details
• Co news: SSP storming (partly on £ weakness), TUI in line, Leon sales up but profits down. Market Town Taverns sales down, small loss
• Consumer borrowing. Now an election ‘thing’. How can it rise at 95 to 10% when GDP is 1% and inflation <3%? Crunch coming?
• If consumer borrowing should = GDP + inflation over time, then are we in for a period of un-borrowing? AKA savings? Will be interesting…
• Boohoo director selling. Joins G4 Music, Purple Bricks, Fevertree and others. Actions vs words, cash is king etc.?
• Hotstats says leisure demand buoying UK hotels. Tourists spend less, however. Just ask those London restaurants…
• Sadiq Khan says Labour should commit to hold 2nd referendum. Chuka Umunna says Brexit as promised can’t be delivered
• PM in waiting Jeremy Corbyn maintains Brexit is a Tory problem. Meaning? Your civil war is worse than ours. I’ll slip in the back door…
• Labour civil war: 70s Bennite nutters vs Europhile younger members. Tory civil war: Features something altogether darker?
• Promise 2nd referendum (Sadiq Khan et al) & Labour sweeps into power? Probably & would remove Bennites ‘year-zero’ chance to ruin economy
START THE DAY WITH A SONG:
Thursday’s song was a popular one — Sweet Dreams by Eurythmics. Today, who sang: His little heart
It beats so fast
And I’m ashamed of running away
RETAIL NEWS WITH NICK BUBB:
• Consumer Confidence Watch: The widely followed monthly GFK Consumer Confidence survey was published overnight and the overall index edged up to -9 in September from -10, against the predictions for a fall to -11 in a Reuters poll of economists. GfK’s Head of Market Dynamics Joe Staton highlighted the resilience of UK shoppers: “Consumers are still spending out there, and have repeatedly defied predictions of a downturn since last year’s Brexit vote, partly by running down savings and/or borrowing more. Indeed, the major purchase indicator has crept up for a second month in a row and the savings index has sagged. It’s live now, pay later. This defiant consumer mood seems to be the ‘new normal’. But how long can it last?”
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis had a surprisingly good time in Fashion last week, even though the weather turned warmer, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains last week includes the Sunday (which was very warm) and although w/e Sept 24th overall did see Fashion Store LFL sales edge up by 0.9%, that was against a very weak comp of -8.1% LFL a year ago. Including Homewares and Lifestyle chains, total Store LFL sales were also up by 0.9% last week (versus -5.1% a year ago), but overall Online sales jumped by as much as 41.6% (against a weak +13.4% a year ago).
• Trade Press (1): The cover of today’s Retail Week magazine is a graphic, showing Inflation and Wages “On a collision course”, to flag up a feature article on “Can retailers keep prices down as consumers feel the squeeze?” that focuses on the likes of Aldi and Iceland and includes a column from Capital Economics arguing that “Thankfully, inflation is nearing its peak”. Following the brief tenure of Hobbycraft boss John Colley, RW also has a feature on “Retail’s briefest executive tenures”. In terms of News stories, RW focuses on the news that Microsoft is to launch its first UK store on Oxford Circus, House of Fraser has posted deeper losses and weaker sales as transformation costs bite, Sainsbury’s is trialling checkout-free app payments in-store and M&S is piloting one-hour food delivery. And in his column the acting Editor of RW thunders that “Grocers must come clean about online
• Trade Press (2): In today’s Drapers magazine the Editor looks in her column at the bizarre decision of Harvey Nichols to drop its CEO role and thunders that there needs to be “A bespoke approach to industry challenges”. The main feature article is about how EMEA president Rino Castiglione is taking Wrangler back to its roots, but Drapers also highlight that Bonmarché is betting on new jeans cuts to help revive its fortunes and there is an interview with Next’s Creative Director Gemma Metheringham about Next’s “Label/Mix” designer brand project. In terms of News stories, the focus is on the fact that Harvey Nichols’ aforementioned decision to cut the chief executive role has generated mixed responses from headhunters…and that the new HOF boss Alex Williamson is bullish about House of Fraser’s prospects.
• BRC Dinner Watch: Last night’s prestigious Annual Retail Industry Dinner of the industry body the BRC switched locations, from the usual Grosvenor House hotel in the West End to the palatial surroundings of the Banqueting House in Whitehall. The keynote address was delivered by the broadcaster Andrew Neil. And it was announced that Richard Pennycook will succeed Richard Baker as the next Chairman of the BRC.
• Next Share Buyback Watch: The notoriously shrewd “Mr Share Buyback Man” was in action again yesterday at Next, but only modestly, picking up just c£1m worth of shares at an average price of £51.99 (having been buying c£5m worth before).
• News Flow Next Week: As October (and Q4) gets underway, next week is quite busy, with the highlight being the Tesco interims on Wednesday, but we also get a Greggs trading update and the ScS finals on Tuesday, the Topps Tiles pre-close on Wednesday and the DFS finals on Thursday (together with the JD Sports EGM on its Sports Zone joint venture deal in Spain/Portugal).