Langton Capital – 2017-10-03 – Revolution Bars, Gregg’s, food prices, Monarch & other:
Revolution Bars, Gregg’s, food prices, Monarch & other:
A DAY IN THE LIFE:
I heard the word ‘chav’ uses as a verb over the weekend.
A staff member at one of the major supermarkets was talking to a colleague about an argumentative customer saying that the latter have ‘chavved off’ at him about the price of his cigs or whatever and, whilst I’m in two minds about the bastardisation of the English language as a general rule, I knew immediately what the person meant and could visualise the altercation clearly in my mind.
I mean colourful, isn’t it, language? For example see yesterday’s comments on the power of (vacuous or shallow) slogans.
We had our fill of them during the Brexit campaign where they pretty much won the day & now the party conferences are replete with what are meant to be snappy one-liners but which have all the stopping power of a 60yr old vicar telling risky jokes about knickers or bodily functions south of the navel. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
Headings include Why the Increase in Supply, evidence of oversupply, consequences of oversupply with a case study comprising a City of London walk.
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.
REVOLUTION BARS FULL YEAR NUMBERS:
• Revolution Bars FY numbers. Says ‘LFL sales and capital investment [are] driving growth in underlying earnings’
• RBG. September trade is ‘disappointing’. Outlines bid options.
• RBG says FY revenues +9.2% at £130.5m with LfL sales +1.5%. Opened six sites in the year. Group says ‘based on trading levels achieved to date, the new bars are on track to deliver excellent returns on capital, consistent with the five new openings in the prior period, which achieved returns on capital of 32% in their first full financial year.’
• RBG adjusted EBITDA of £15.1m (vs 2016 restated £13.0m). Growth ‘driven by a solid underlying performance from like-for-like venues, full year mature contributions from five venues opened in the comparative period, and part-year contributions from six openings in the current period.’
• RBG group margin +82bps, EPS 8.2p vs 8.8p last year with a final dividend of 3.3p (unless the group is bought first)
• RBG shareholders to vote on Stonegate offer on 17 October. RBG says ‘the Board is also engaged with Deltic Group as a possible offeror for the Group.’ RBG says ‘Deltic has indicated that, in order to put forward its merger proposal and discuss it with the Group’s shareholders, it will in due course publish its own profit forecast and a quantified financial benefits statement in respect of a merger.’ Deltic must put up or shut up by 10 October.
• RBG on current trading, group says ‘LfL sales in the first quarter of the current period are at +0.3%. July and August returned to a more normal trading pattern following the terrorist incident in Manchester in May, whilst September trading, for the sector as whole, has been disappointing, largely due to this year’s very wet and cool weather compared to record temperatures in September last year.’
• RBG has opened one new venue in the financial year to date. It says ‘the Board is confident in the current strategy, the underlying financial strength of the Group, its brands and strong customer propositions, which have underpinned three years of consistent like-for-like growth.’
GREGG’S Q3 TRADING UPDATE:
• Gregg’s Q3 update. Group says it is seeing ‘continued good trading’. Total sales +8.6% in Q3 with LfL sales +5.0%.
• Gregg’s has opened 98 new stores in the year to date and closed 32. It has undertaken 120 refits.
• Gregg’s says it ‘traded well in the third quarter’ and adds ‘the investment in our new forecasting and replenishment system is resulting in greater product availability for customers; in addition the seasonal changes to our range have been popular and we have further developed our Balanced Choice options. Sales at breakfast time continue to grow strongly along with participation in our great value deals.’
• Gregg’s reports ‘work on our supply chain investment plan is progressing’ and concludes ‘our investment in greater product availability and service has benefitted recent trading.’
• Gregg’s cautions that ‘food ingredient cost pressures are a headwind, although we continue to expect that the rate of increase will begin to ease towards the end of the year.’ The group says ‘accordingly, our expectations for the full year outturn remain unchanged.’
RISING FOOD PRICES:
• Foodservice price inflation rises to 9.3% in August from 7.0% in July per CGA Prestige Foodservice Price Index. The Index comments ‘foodservice price inflation was well ahead of historical averages throughout the summer months, and is significantly higher than consumer-side inflation as measured by the Office for National Statistics.’
• Nine of the ten categories of food and drink measured by the index rose. Only sugar & confectionary items were cheaper.
• CGA Prestige Index says: ‘key factors driving inflation include the weak pound, which is pushing up the price of imports from overseas; and rising oil prices, which are adding to the costs of transportation and packaging.’
• Fish prices up 22.7% in year to August per CGA Prestige Index. Oils & fats +15.4% and Milk, Cheese & Eggs +14.7%.
• Brexit talks ‘may lead to shortages of migrant pickers for domestic fruit and vegetable growers from 2018, weakening supplies and increasing the UK’s dependence on imports’ reports CGA Prestige. The Index comments ‘we are now experiencing the highest year on year movement since the index began. We have seen high increases in nearly every category compounded by a weak pound and a number of supply issues in key categories.’
• CGA’s Graeme Loudon comments: ‘after a couple of months of a modest easing of pressures, our latest Foodservice Price Index reveals another upswing in inflation.’ He adds that all of the factors impacting price (The weak pound and increased oil costs, the weather etc.) ‘are outside the control of the foodservice supply chain in the UK’ though he adds ‘by carefully monitoring trends and refining purchasing strategies, foodservice businesses can at least mitigate some of the inflationary impacts.’
PUB, RESTAURANT & DRINK PRODUCERS:
• Coca Cola HBC ‘today announces with deep sadness the death of its CEO, Dimitris Lois, on 2 October 2017.’ Group says ‘we are deeply saddened by the news of Dimitris’s death.’ The company adds ‘Michalis Imellos will continue in the role of Acting CEO. Further announcements will be made in due course.’
• Britvic has announced that it proposes to close its Norwich manufacturing site. It says ‘following a detailed review of our manufacturing sites and distribution network Britvic is today announcing a proposal to transfer production of Robinsons and Fruit Shoot from our Norwich site to our manufacturing sites in East London, Leeds and Rugby.’
• Britvic says Norwich will close ‘towards the end of 2019.’ CEO Simon Litherland comments: ‘this is not a proposal that we make lightly’ and says ‘the changes we are proposing today present significant productivity and efficiency savings in our manufacturing operations, deliver environmental benefits and, coupled with our ongoing investment programme in our GB manufacturing operations, ensure that we have the flexibility and capability we need to respond to changing consumer trends faster and more efficiently.’
• Strada has emailed would-be customers to remind them that its Pizza Bolognas are only £5 on every Monday this month.
• Fundraiser is fundraising. Seedrs has now lost £7.5m since incorporation. The group is said to be ‘engaged in a fundraising process and, based on its status as of the date of these financial statements, the directors are confident that the process will be completed in a satisfactory manner’. The company had £5.2m cash at bank as of 31 December last year.
• The High Street. If it didn’t exist, would you build as much of it as we now have? I think we know the (probable) answer to that question. Next has said that it has costed up various scenarios pricing in continued Internet attrition and has assumed (as a fall-back position) that it will take no new space. The company does concede, however, that ‘we are likely to open some profitable cash generative new space’.
• What price the High Street. Next says that ‘if High Street sales remain so subdued, it is likely that retail rents will decline’. It says ‘over the last 6mths we have renewed 8 leases, their combined rent reduced from £2.9m to £2.2m’. Next points out that its average lease is now only 7yrs.
• Time Out Group plc, has announced that it will open a new Time Out Market in Boston in H1 2019. The group opened its first market in Lisbon in 2014, with another market set to open in Miami in 2018. The Lisbon market recorded a YoY revenue growth of 115% with some 3.1m visitors.
• Julio Bruno, CEO of Time Out Group plc, said: ‘Opening new Time Out Markets is a core part of our growth strategy and adding Boston to our portfolio is another great milestone. We have found a unique location that has been at the heart of the city since 1929; this is a vibrant neighbourhood and a very dynamic community that some of the most innovative companies call home.’
• Chinese wine imports have climbed 15.76% in volume and 8.48% in value ($1.723bn) over the first eight months of the year. France is China most popular country for wine imports, consisting of 42.5% of the import market.
• The Times has reported that Jamie’s Italian has recorded a full-year pre-tax loss of £9.9m (from a profit of £2.4m last year), following the group’s £10.9m hit from closing six sites.
• Coca-Cola has announced that it will refresh its Schweppes brand, alongside launching a range of ‘craft’ premium mixers called Schweppes 1783, Marketing Week has reported.
• Per the FT, London’s craft brewing industry is experiencing a boom with more than 80 breweries around today, up from around a dozen a decade ago. The craft breweries power on, pumping up the volume and finding new markets overseas but a few are taken over by the giants of the industry, such as Meantime who were taken over by SABMiller.
• BBPA Chief Executive Brigid Simmonds has responded to Michael Gove’s speech on reward and return schemes for drinks containers. Simmonds said ‘In many cases, such schemes won’t be the most efficient way of supporting recycling. Supporting existing local recycling schemes is likely to deliver better results…There are real concerns that small premises like pubs and shops do not have the storage space’
• The digital revolution has put pressure on retail jobs, with data from the ONS indicating that retail employment fell by 62,000 last year. The retail sector fell by more than any other group, with most sectors reporting increased headcount substantially. Retail employs almost 2.9m people in the UK.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• The BBC has reported that the collapse of Monarch Airlines will affect hundreds of thousands of customers and threaten the jobs of 2100 staff. The BBC went on to say that the group suffered from the fall in sterling affecting their ability to purchase fuel; increased competition from the likes of EasyJet and Wizzair; it had moved away from more profitable long haul flights and terror attacks in Turkey and Egypt.
• On the Beach Group is contacting customers to help them with repatriation after Monarch’s collapse. The Group has Scheduled Airline Failure Insurance which should go some way to recompensing On the Beach, nevertheless the Group anticipates a one-off exceptional cost. A full year trading update is expected on 19 October 2017.
• EasyJet could hire the hundreds of air crew left in the cold after the collapse of Monarch. This week the budget airline will host recruitment days for Monarch cabin crew at Luton and Gatwick. The same opportunity may be in place for some pilots.
• Thomas Cook and Canadian Air Transat have agreed a winter aircraft exchange deal. The seven year deal provides both airlines with fleet flexibility and allows the airlines to take advantage of each others seasonality.
• The shadow chancellor has said Labour will oppose Heathrow expansion over environmental concerns.
• Uber’s head of northern Europe affairs, Jo Bertram, is leaving the company amidst its battle to have its London license renewed. Uber claims her departure is not connected with recent events.
• Vegas murders likely to adversely impact travel to what is one of the world’s largest hotel markets
• The cost of repatriating Monarch’s 110,000 stranded passengers will be about £60m, according to the Civil Aviation Authority (CAA).
• IHG announces Claire Bennett, previously of American Express, as the new Chief Marketing Officer.
• Placing in Ten Entertainment. Harwood Capital has sold 15.7m shares in TEG at 180p. In addition, management including Nick Basing (chairman, 226k) and Graham Blackwell (chief commercial officer, 56k), have sold a further c300k shares at the same price. The sellers had entered into a lock-up agreement with Numis but the broker waived the lock-up provisions with regard to this placing. The lock-up therefore continues until 19 April 2018.
FINANCE & MARKETS:
• UK manufacturing PMI fell in September to 55.9 from 56.7 in August. Any number over 50.0 implies growth. The market had been looking for around 56.2. Sterling, UK bond rates etc. fell on the news
• Philip Hammond has said that a Labour government would undermine the UK economy. Hammond said that Corbyn had in mind a “socialist fantasy” in the UK along the lines of those seen in Cuba, Venezuela & Zimbabwe. After the UK has left the EU, Mr Corbyn (or any government) will be unconstrained
• Countrywide has reported that the average person in his or her 20s will spend half of their post-tax income on rent
• IHS Markit says ‘on balance, the continued solid progress of manufacturing and export growth is unlikely to offset concerns about a wider economic slowdown.’
• IHS Markit says ‘the upward march of price pressures will add to expectations that the Bank of England may soon decide that the inflation outlook warrants a rate hike.’
• Oil down at $55.89
• Pound down at $1.3252
• Sterling weaker vs Euro at €1.1319
• UK 10yr gilt yield down 4bps at 1.33%
• World markets: UK, Europe & US all up yesterday. Asia mostly higher in Tuesday trade
o Exit Brexit demonstrators politely ask the government to have a rethink.
o Boris denies he is scheming. Doesn’t want to steer Brexit, rather criticise it from the side-lines. Have cake & eat it etc.
o Tory party seems to be two parties (EU vs non-EU) as internal divisions rise to surface.
o Smug Labour (which should also be two parties, old 70s has-beens & younger members) is saying as little as possible
YESTERDAY’S LATER TWEETS:
• Later tweets: Chipotle made a loss for the year to end-Dec 2016 of £4.3m on turnover down to £7.8m from £8.2m partly due to food-poisoning scare
• Sunday Times reports Prezzo unofficially put up for sale by owners TPG Capital. Is also marketing a number of sites
• Crowdfunding platform Seedrs lost £3.8m last year on revenues of £1m. Darkstar lost c£566k in year to Dec.
• UK economic growth estimate cut in Q2 to 1.5% from earlier estimates of 1.7%. Growth in Q2 itself only 0.3%.
• Governor Mark Carney says interest rates will rise in the “relatively near term.” The next opportunity to do so is 2 Nov
• Manufacturing in growth per PMI but (at 55.9 vs 56.9 last month) still showing growth. Service growth slowed in Q3 per CBI
• Foodservice prices rose 9.3% in year to August per CGA Prestige. All bar confectionary sub-sector costs more. Milk & cheese up 14.7%
START THE DAY WITH A SONG:
Well done to those yesterday who recognised the classic ‘Eton Rifles’ by the Jam. Today’s song:
Bloodstains, ball gowns, trashin’ the hotel room,
We don’t care, we’re driving Cadillacs in our dreams
RETAIL NEWS WITH NICK BUBB:
• ScS Group: This is an important week in the world of furniture and furnishings, with tomorrow bringing the Topps Tiles pre-close and the DFS Furniture finals announced on Thursday. Today the Sunderland-based sofa retailer ScS has kicked things off with some reassuring noises on the back of is finals for y/e July: PBT rose 10% to £12.0m, which was slightly above expectations, even though LFL sales orders declined 0.7% against very strong comps. And over the last 9 weeks sales order intake has been up 3.0% on a LFL basis with trading since the start of the year said to be in line with the Board’s expectations, despite the cloud over “big ticket” spending.
• Greggs: Today’s trading update (for the 13 weeks to 30 Sept) is headlined “Continued good trading” and there is certainly nothing too shabby about 5.0% LFL sales growth. Greggs report that “sales at breakfast time continue to grow strongly along with participation in our great value deals” and trumpet that “we have launched our autumn/winter menu including a new ‘all day breakfast’ wrap and added Thai Chicken Soup to our Balanced Choice range”. The statement ends by noting that “food ingredient cost pressures are a headwind, although we continue to expect that the rate of increase will begin to ease towards the end of the year. Accordingly, our expectations for the full year outturn remain unchanged”.
• News Flow This Week: This week’s highlight is the Tesco interims tomorrow, but we also get the Topps Tiles pre-close update tomorrow, whilst the DFS finals are on Thursday. Thursday also brings the SMMT new car sales figures for September and the JD Sports EGM on its Sports Zone joint venture deal in Spain/Portugal. And there is a Motorpoint trading update on Friday.
• Rick Greenbury: The recent obituaries about the late Marks & Spencer boss Rick Greenbury made clear that he was “a man of contradictions” and it was interesting to read in the Times’ obituary that he did not list the famous Greenbury report on Directors pay in 1995 as one of his achievements in his “Who’s Who” entry. But none of the obituaries mentioned the disastrous Littlewoods acquisition of July 1997, which was announced on the day of the AGM, with M&S flushed with success after hitting the £1bn profit barrier in y/e March. M&S paid £193m for 19 prime Littlewoods variety stores, which brought 600,000 sq ft of space, on top of an already robust expansion drive. It resulted in the creation of “satellite stores” in towns where M&S already had a store and we often think of this ill-fated move when we visit Kingston and see two M&S stores within a hundred yards of