Langton Capital – 2017-10-02 – Monarch, Hippodrome, discounting, Prezzo, Chipotle etc.:
Monarch, Hippodrome, discounting, Prezzo, Chipotle etc.:
A DAY IN THE LIFE:
Why is it in films, the bad guys have the best lines?
I mean it’s amusing and all the rest but in real life it can be a bit counter-productive, surely, as you can’t talk yourself into economic success etc. any more easily than the warriors that the colonialists steamrollered in the nineteenth century could wear magic warpaint to deflect bullets.
But let’s get real, a snappy slogan goes a long way.
I mean, ‘let’s try hard’ just doesn’t cut it and ‘why don’t we all be nice?’ or ‘let’s be sensible’ don’t really inspire whilst the Leave campaigners had: Take back control, The hell with the liberal elite, We’re sick of experts, Pluck Brits object to Project Fear, Damn the Remoaners, they’re precious little snowdrops etc. etc. and this carried the popular vote and won the day.
There must be a lesson there, somewhere. It’s not wasted on Boris or Jeremy, certainly, as both of them are busily promising everything to everybody in the knowledge that they won’ have to deliver. At least not in the short term.
Anyway, it’s chilly and windy. 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 (in money, beer or pizza subject to negotiation), then please drop us a line.
PUB, RESTAURANT & DRINK PRODUCERS:
• Discounting in F&B: Offers in the digital mailbox over the weekend. Café Rouge, 40% off mains. Bella Italia, £10 off two mains. Smashburger & Harvester, free drink. Pizza Express, starter & main for £9.95. Strada 40% off or £10 voucher. Las Iguanas, 2-for-1 on next visit.
• Chipotle UK has reported numbers to end-December 2016 saying that, the group generated revenues of £7.8m in the year, down from £8.2m in the prior year with LfL sales down 6.8%. The group says ‘our sales and profitability were adversely impacted throughout 2016 as a result of a number of food-borne illness incidents associated with Chipotle restaurants in as many as 15 US states, which were widely reported during the fourth quarter of 2015 and the first quarter of 2016. Comparable restaurant sales decreases were driven by a decrease in the number of transactions for the full year 2016, and to a lesser extent by decreases in average check.’
• Chipotle made a loss for the year to end-Dec of £4.3m, down from a loss of £4.7m in the prior year. Chipotle has made accumulated losses since incorporation in the UK of some £12.2m.
• NRN reports that fast-casual pizza is one of the new big things in the US. It says ‘established brands like Blaze Fast-Fire’d Pizza, MOD Pizza and Pie Five Pizza Co. are changing up their menu offerings and in some cases modifying their service models to maintain consumer interest in an increasingly competitive market.’ It says ‘while fast-casual pizza chains are dwarfed by conventional pizza giants with thousands of units, like Pizza Hut, Domino’s, Little Caesars and Papa John’s, they are making their marks with distinctive menu items that the larger brands don’t offer.’
• Sunday Times reports Prezzo unofficially put up for sale by owners TPG Capital. Group separately marketing some sites. Co made a loss of £16.3m last year.
• Prezzo has reported that Stephen Holloway, property director, ceased to be a director on 15 September. He joined last year after 13yrs at Costa. Prezzo has also announced that Kuldip Singh Sehmi has ceased to be a director.
• Crowdfunding platform Seedrs lost £3.8m last year on revenues of £1m. The group says ‘we are now on track to nearly doubling revenue in 2017 without a significant up-tick in overheads.’
• Seedrs says 2016 loss was because of investment in growth, says group ‘actually exceeded our expectations.’ Business Insider reports group CEO saying ‘Seedrs made a number of specific investments into the business during 2016, recognising early that product innovation and scalability were two of the most fundamental prerequisites to long-term success.’
• Dark Star Brewing reports numbers to end-Dec 2016 to Companies’ House. Retained earnings drop by £566k, suggesting that the group made losses during the period.
• Be At One has completed a £20m refinancing deal with Santander as it looks to accelerate its national expansion programme. The Piper-backed bar group currently has 33 sites and plans to expand to 70 over the next 5 years.
• G1 Group reported turnover of £74.5m for the year ended 31 March 2017, up from £70.5m the year before. EBITDA increased to £17.6m, up from £16.4m last year. Investment expenditure was more than £20m over the course of the year, with G1 saying it was continuing to invest selectively in Scotland.
• Leading Japanese conveyor-belt sushi chains Akindo Sushiro and Genki Sushi plan to merge, in doing so they would create a domestic titan with global ambitions. The combined group will have around 630 stores in Japan and control about a third of the ¥625bn domestic conveyor belt sushi market.
• Following Caffe Nero’s acquisition of Harris + Hoole last year, Harris + Hoole insists there is enough differentiation between the two coffee chains to be able to exist in the same high street locations. Speaking at Lunch! 2017 Josh Brown, head of commercial development at Harris + Hoole, said ‘We have a lot of difference, and that is one of the key things about the two businesses that we would both highlight as a strength.’
• Manchester-based brewer and pub operator Hydes saw its managed house division grow LfL sales by 4.9% in the year to 2 April 2017. However, its tenanted division reported a 5% drop in operating profit. The company has 33 managed pubs and 19 tenanted pubs. Group turnover was up 15% to £31.1m. Managed LfL sales in the first 8 weeks of the new financial year were up 4.5%.
• Per MCA, Sun Capital Partners will trial a similar concept to Coppa Club in Marylebone which will be called 31 Below.
• CAMRA reports only 15% of UK beer drinkers think the price of a pint in the UK is either Very or fairly affordable. Over the past year the price of a pint in the UK has risen 13p to £3.60 on average, with inflation still pushing it higher. CAMRA also points to increases in business rates as a contributing factor, saying English pubs will have to sell 20,000 more pints per year to cover rate rises.
• New research from MCA shows the value of the UK branded bakery market will reach £1.4bn in 2017. The research points out the growth has been fuelled by an increase in contemporary and artisan bakers alongside continued growth by traditional operators such as Greggs and Krispy Kreme.
• Morrisons has launched a £5 veg box in stores following online success which saw the veg boxes sell at a rate of 2,000 a week.
• The Food Standards Agency (FSA) is investigating the 2 Sisters Food Group after receiving reports that the group were breaching safety protocol at one of its chicken processing plants. The guardian and ITV News found that workers for the group had been changing the slaughter dates of chicken, in order to extend the shelf life of the product. A spokesperson for the FSA said: ‘Should we find any evidence of any risk to public health, any products on the market which we believe to be a cause of concern will be urgently removed from sale.’
MONARCH AIRLINES CEASES TRADING:
• Administrators have been appointed to Monarch Airlines after the group failed to have its Atol licence renewed.
• Monarch faced collapse at 4am this morning. Travel Weekly reports ‘it is the largest UK airline ever to enter administration and leaves 110,000 people abroad and 300,000 forward bookings that will be cancelled.’
• Monarch’s 110,000 customers currently abroad will be repatriated over the next 7dys. The most recent large collapse was that of XL Leisure Group in September 2008 when 85,000 passengers had to be brought home.
• The CAA reports ‘as all of Monarch’s flights due to depart from the UK have now been cancelled, customers should not go to their UK airport. Affected customers still in the UK should check monarch.caa.co.uk for further information.’ Long-standing owners the Mantegazza family sold the business in 2014 after declining to finance a further bail-out.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• The cruise operator, Carnival, is to offer ’game-changing’ wi-fi connectivity on its passenger ships.
• European hotels have recorded an impressive 7.1% y-o-y growth on gross operating profit per room this month. Room occupancy increased to 78.7%, with RevPAR climbing 5.7% to €117.55.
• The scottish hotel, The Boath House, has asked to have its Michelin star removed, as the group wishes to ‘move boath House in a new direction’. Wendy Matheson, one of the owners of the group said: ‘We believe that the expectations from Michelin are at odds with achievable profit margins and put an enormous stress on a small family-run business like ours.’
• Henderson Park has acquired the London and Birmingham Hilton Metropole hotels for £500m.
• The number of British tourists travelling to Cyprus grew by 6% year-on-year in July to 176,880 and by 7.9% in August to 185,831 as the island enjoyed a bumper summer. Travel from the UK to Cyprus in the first eight months of the year was up by almost 8.6% to 874,055.
• Ryanair has been told by the Civil Aviation Authority to issue a press release and update its website FAQ to clarify the options available to customers affected by two sets of flight cancellations.
• The Hippodrome reports full year numbers to end-2016 saying in the year ‘the company increased both revenues and operating profit.’
• Hippodrome reports ‘live gaming, electronic and slots, cabaret, restaurant and bars all grew in popularity with both existing and new customers driving 1.5m visits to the venue in the course of the year.’
• Hippodrome reports that operating losses of a bingo business bought for incorporation into the casino dragged down headline numbers. The group reports ‘as a result of the continued success of the business the company’s bankers advanced a further £10m of senior debt during the year, made available for the specific purpose of repaying shareholder preference share debt.’
• Hippodrome revenue in the year was £70.9m (vs £62.2m) with a profit before tax of £5.0m (2015: loss £6.5m). The Hippodrome has accumulated losses of £13.7m)
• Ladbrokes is under investigation regarding the allegation that staff watched a gambling addict take out payday loans to fund hundreds of pounds of bets on fixed-odds betting terminals, according to The Guardian.
• Koch Media has announced it is making a tiny version of the Commodore 64, it will hit stores in early 2018 and will retail at $80. This follows Nintendo finding success after re releasing the NES last year.
• Rovio, the mobile phone game maker responsible for Angry Birds, is preparing to buy up other players in the gaming industry following its listing on Friday.
FINANCE & MARKETS:
• UK economic growth rate revised down in Q2 to 1.5% from earlier estimates of 1.7%. Growth in Q2 itself only 0.3%. ONS reports ‘there was a notable slowdown in growth in the first half of 2017. The often buoyant services sector was the only area to grow in the second quarter, mainly due to increases in computer programming and retail.’
• FT reports UK has fallend from the top to the bottom of the league of G7 leading economies in the year since the Brexit vote.
• Bank Governor Mark Carney says interest rates will rise in the “relatively near term.” The next opportunity to do so is 2 Nov
• Service sector growth slowed in Q3 reports CBI. ONS says it was weakening in Q2 (see above)
• London house prices down for first time in 8yrs. UK-wide growth at 4yr low of 2% reports Nationwide
• Oil down at $56.56
• Sterling down at $1.3365
• Pound down vs Euro at €1.1348
• UK 10yr gilt yield 1bp down at 1.37%
• World markets: UK, Europe & US higher on Friday. Asia mostly up in Monday trade.
o Tory civil war hardly a secret. Boris un-sackable. Setting out his stall in the knowledge that incumbents can’t deliver the Brexit the UK population voted for.
o Matthew Parris says ‘this paralysed government is done for and it will now take a bold challenger for the leadership to save the party’
o BCC says public disagreements between cabinet ministers are undermining business confidence
o Liam Fox says Britain should have draft free trade agreements outlined before 2019 +2yrs. Canada took 7yrs.
o Boris said to believe Theresa will be gone in a year
o Oxford Economics reports a hard Brexit would lead to a slump in exports. Says would fall by 40% in the absence of a deal
o Bitter losers talking down Britain and we’re sick of experts say Brexit supporters.
YESTERDAY’S LATER TWEETS:
• Later tweets: Local Data Company say number of new food & bev outlets opening across UK reached new peak in the last 12 months.
• LDC. Big new openers? Cafes, coffee shops & grab-n-go units. Units closing? Indian & Chinese restaurants, pubs & night clubs
• Langton research on capacity. It’s rising. Very, very hotspots in certain areas / genres. LDC seems to agree
• Comptoir raises capital at 1/5 of prior shareprice, Richoux sees ‘no consistent improvement in trading conditions’. See email
• Langton comments on experiential leisure & asks ‘where’s the money?’ See email
• GfK has reported that UK consumer confidence edged up to a 4mth high in Sept. Is a ‘live now, pay later’ economy
• Barnier says ‘may be months’ before trade can be discussed. Labour tries to keep schtum. Close mouth, avoid foot. Looks a shoe-in for no10
• UK growth revised down to 1.5% in year to Q2. Up 0.3% on Quarter. ONS says services contracted by 0.2% in July
• Bank governor Carney says rates must rise in ‘relatively short term’. Warns on ‘reckless borrowing’ and ‘frothy growth’
• London house prices down in year to Sept for first time in 8yrs. Down 0.6%. Nationally prices rose 2.0%, slowest in 4yrs
START THE DAY WITH A SONG:
Friday’s song was Kate Bush ‘Hounds of Love’! Today’s song:
Thought you were clever when you lit the fuse,
Tore down the house of commons in your brand new shoes
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The front page headline of the Guardian on Saturday was “Supermarkets pull chicken in safety row”, flagging that M&S, Aldi and Lidl have stopped using the UK’s biggest chicken supplier 2 Sisters Food, following revelations about poor hygiene and food safety standards. Otherwise, the big story was the much-delayed start of the Tesco accounting trial, with the prosecution alleging that the 3 accused Tesco UK bosses “bullied staff to massage the figures”, according to the Times headline (the FT and the Guardian also covered the story). The Telegraph noted that the new Brazilian owners have named the former L’Occitane US chief David Boynton as the new Body Shop boss. The market report in the Times picked up the rally in Card Factory on Friday, which was helped by some modest buying support from CEO Karen Hubbard, and the veteran FT commentator Neil Collins
• Sunday Press: Tesco remained in the spotlight in the Sunday papers, ahead of its interims on Wednesday, with the Sunday Telegraph flagging that it is likely to restore the dividend at last, although the Sunday Times focused on the fact that it is will have to reveal the scale of its pension deficit woes and the Observer noted that it will face “a grilling” over its chicken supply polices. On a similar theme, the Mail on Sunday highlighted that British clothing manufacturers are seeing an explosion in demand from High Street and Online retailers selling fast fashion, but that there are fears that this has led to a growth in rogue factory operators as well as legitimate ones. The Mail on Sunday also highlighted a River Island bonanza as the Lewis family dividend trebled to £90m last year, whilst the Sunday Telegraph leapt at the fashion model photo opportunity presented by the news that
• Today’s Press and News: There are plenty of previews of this week’s results and updates, eg from Tesco, with Greggs highlighted in the Telegraph. The Telegraph also flags that the embattled HMV has reported improved market share and profits for last year. The FT notes that struggling H&M is under pressure to improve its disclosure and has promised an open day for analysts and investors in February. The Small Cap column in the FT looks in downbeat fashion at Card Factory and concludes that investors liked receiving special dividends: “It made Card Factory look different. Now they realise that Card Factory is very ordinary”. The Daily Mail highlights that City brokers are still bullish about Boohoo. Finally, on page 15 of City AM there is a list of the nominees for the “Analyst of the Year” award at the City AM Awards on Nov 9th, which includes yours truly (partly for the success of
• Sainsbury Impulse Buy Watch: We decided to pop into the big Sainsbury’s superstore at Heyford Hill on the southern bypass around Oxford on Saturday morning to buy a quick family lunch…and walked out with a new suitcase and a yoga mat, inter alia, thanks to its large Non-Food section (which includes an Argos concession)!
• News Flow This Week: As October (and Q4) gets underway, this week is quite busy, with the highlight being the Tesco interims on Wednesday, but it’s also an important week in the world of furniture and furnishings, with the ScS finals tomorrow, the Topps Tiles pre-close on Wednesday and the DFS finals on Thursday. But we also get a Greggs trading update tomorrow, together with the JD Sports EGM on its Sports Zone joint venture deal in Spain/Portugal on Thursday.