Langton Capital – 2017-11-13 – Ladbrokes, run up to Xmas, Laine, GDP & other:
Ladbrokes, run up to Xmas, Laine, GDP & other:
A DAY IN THE LIFE:
Ran out of time. On to the news:
THE RUN UP TO CHRISTMAS:
• Langton forecast. Christmas will happen. But it will be late and the number of keys handed back in January could be up on last year. And don’t be fooled. A business in which customers go out 3x a week instead of 4x a week, and in which they buy 5 drinks at £4.50 rather than 6 drinks at £5.50 will see its revenue fall by? See bottom of this section for the answer.
• Observer comments on hospitality & F&B operators struggling to find staff as it quotes KPMG as saying up to 75% of waiting staff and 25% of chefs are from the EU. It points to ‘an exodus of European workers, and a dearth of new arrivals post-Brexit.’ Presumably it means post the Brexit vote as the UK is not due to leave the EU for another 16mths or so.
• Business continues to slow with costs rising, demand under pressure and over-building still a major issue in certain areas. Imbiba’s Darrel Connell tells investors some markets, such as London and Manchester, may have too much capacity already.
• NIESR and others say the UK economy may ‘rebase’ away from the consumer and more towards exports. That may be healthy but, in the short term, it could lead to dislocation as the UK will have too many shops, restaurants, poodle parlours and the like and too few factories.
• Eating out frequency (per MCA) is slipping. Retail footfall (BDO et al) is under pressure and tourists are not reliable spenders.
• More businesses on offer. Luke Johnson, whose Risk Capital is reported to be looking for buyers for its Laine Pub Co, comments in Sunday Times that advisors are being inundated with approaches from business owners looking to exit their businesses.
• See Langton research on a part of the Central London market based on a walk taken through the City and mid-down twice; once in 2006 and once earlier this year. Capacity along that 3-mile stretch of the UK’s capital has risen sharply over the last decade. Copies £200 plus VAT.
• It’s still possible to make hay. But you need to be good, authentic and reasonably priced. And it would help not to have overrented units. To have been very canny when signing leases and not to be too exposed to shoppers, cinemas etc. Some would suggest that such a premise excludes a disturbing amount of operators already.
• Answer. The revenue of the operator discussed in the first paragraph of this section will fall by almost 50%. By 49% in fact and, whilst we are not suggesting that such a drop is remotely likely, it’s interesting to note that the units in question would still look, to the naked eye, pretty busy.
PUB, RESTAURANT & DRINK PRODUCERS:
• Eating out frequency has fallen to an all-time low in Q3 2017, the latest MCA Eating Out Panel report has found. The average number of visits per month fell 13% to 14.3.
• The Times has reported that Laine Pub Co could be looking for a valuation over £60m, as the 55-strong pub chain appoints BDO to help with the group’s funding of their ‘next chapter’. The group, which has been a leader in the incorporation of ‘experiences’ into the pub offer, had revenues of £30.3m in the year to end-June 2016. It has bought pubs, notably 6 from New Pub Co earlier this year, since. Historic EBITDA was £3.86m and PBT was £488k.
• Hundreds of pubs near Britain’s great national trails will benefit from a £1.2m new tourism promotion. Chief Executive of the BBPA, Brigid Simmonds stated: ‘There are hundreds of great pubs on Britain’s walking trails with many now also offering fantastic accommodation. This campaign will really bring this to the attention of overseas tourist markets’.
• BrewDog has announced that its UK sales have increased 93% to the end of September. Steve Ricketts, BrewDog’s head of UK sales, said: ‘Craft beer continues to buck the sales trend in the UK and our phenomenal year so far is testament to that fact.’
• Exactly a week after the food service company, Bakkavor, had cancelled its IPO, the group has completed its pricing of its floatation.
• The better burger chain, Five Guys, aims to open up 30 sites across Continental Europe next year, with a further 15-20 UK venues, reports the MCA.
• Castle Rock Brewery has opened its 24th pub, called Yarn, inside Nottingham’s Theatre Royal & Royal Concert Hall. The venue is a £3.3m joint venture by Castle Rock and CGC Event Caterers.
• The Vietnam government is selling stakes in drinks producers Habeco and its bigger southern rival Sabeco, attracting international attention from multinationals such as Anheuser-Busch InBev, Heineken and Carlsberg.
• The Guiseley, Leeds Morrisons has opened the first ever bar inside a supermarket called Baritsa according to the Yorkshire Evening Post.
• Per Telegraph, UK retail has started its end of year sales poorly with a 2.3% footfall drop yoy according to Springboard. Some analysts are doubting that consumer holidays Black Friday and Cyber Monday will be able to turn the tide for the highstreet.
• However, the Local Data Company reports high street closures falling to their lowest levels in seven years. The study says 2,564 outlets closed in H1 2017 with 2,342 opening, a net deficit of 222 stores. Tobacconists, coffee shops and beauty salons increased in number, whereas charity shops, women’s clothes shops and shoe shops were worst hit.
• TD4 Brands is expanding its milkshake concept The Shake Lab in a nationwide rollout expected to create around 100 jobs. Six stores will be opened in the next four months as Barclays supports the rollout with £650,000 with BGF having provided £4m since 2013.
• Alibaba raked in $25.4bn on its biggest Singles Day shopping festival yet, with Chinese shoppers spending $1bn on mobile phones, shoes and lipstick every hour. The massive effort saw 777m parcels shipped with the online giant aiming to be bigger than the world’s fifth-biggest economy by 2036. The group forecasts total revenues to be up 49-53% this year.
HOLIDAYS & LEISURE TRAVEL:
• Jet2holidays has announced the expansion of its fleet with 14 more Boeing 737-800 aircraft this winter and another four in time for summer 2019. Steve Heapy, CEO, said ‘This financial year, our Atol licence was for 2.27 million customers, representing growth of over 3,500% in the last seven years and making Jet2holidays the UK’s second largest tour operator.’
• It was a mixed performance for London hotels in October, with occupancy down 1.9% to 83.4% year-on-year after a 4% increase in supply. Average daily rate grew 2.3% to £152.27 and revenue per available room rose 0.4% to £126.96. This means that, while October occupancy was at its lowest in the capital since 2006, ADR was at its highest October rate since 1994.
• Monarch’s failure led to reduced passenger growth figures at Gatwick last month, although the 1.4% increase in numbers to 3.9 million year-on-year was still a record for October. Monarch accounted for 4.5% of the airport’s flights and prior to the airline’s administration, Gatwick’s monthly average passenger growth this year averaged 7.1%.
• EasyJet has appointed former Tui Group chief Johan Lundgren to replace Carolyn McCall as CEO. McCall is stepping down to head up ITV but will remain with easyJet until 31 December to help with the transition.
• Uber has lost its bid to overturn to overturn a tribunal decision that says the taxi company’s drivers deserved workers’ rights such as the minimum wage. Uber is currently also battling to keep its license in London.
• Hertz surpassed analyst expectations in its third quarter with an adjusted profit of $1.42 per share.
• WTTC head Gerald Lawless has claimed that former prime minister David Cameron was poised to allow a resumption of flying to Egypt’s Sharm el Sheikh. Speaking at the second annual International Travel Crisis Management Summit in London last week, Lawless said the change of government post-referendum put the issue ‘on the backburner’.
• Ladbrokes updates on trading says this is positive with a ‘performance in-line with expectations’
• Ladbrokes reports group net revenue in Q3 up 3% (was down 2% in Q2). Says digital revenue +12%. Retail LfL revenue down 1%.
• Ladbrokes CEO Jim Mullen says ‘the four-month period to 29 October represents another period of positive trading performance for the Group as well as solid delivery on the key operational and financial targets for the year including the swift integration of people, operations and platforms.’
• Ladbrokes adds ‘in UK Retail, performance improved in line with our expectations primarily driven by the return of all horse-racing content to our shops.’
• Re the regulatory situation, Ladbrokes reports ‘we have existed with the uncertainty caused by the review since we were created and hope that the announcement of a 12 week consultation heralds a positive step to reaching a final outcome. We will take a full part in the consultation.’
• Tencent Holdings, the Chinese gaming and social media company, has flagged video games and ad sales as areas it can improve Snapchat after acquiring a 12% stake in parent company Snap Inc.
• Hasbro Inc has made an approach to acquire rival Mattel.
• In the US, the Justice Department has said Turner Broadcasting, owner of CNN, must be cast aside as part of a $85.4bn merger between AT&T and Time Warner. People close to the deal have said the sale of DirecTV may be an alternative resolution, according to the New York Times.
FINANCE & MARKETS:
• NIESR reckons UK GDP rose by a quite-impressive 0.5% in the quarter to end-Oct. it says ‘we estimate that economic growth recovered to 0.5 per cent in the three months to October from 0.4 per cent in the third quarter. Although economic growth is likely to be stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year and this at a time when growth in other OECD countries has strengthened.’
• NIESR says ‘looking ahead, we expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand.’
• NIESR says there may be a case ‘for the Bank of England to gradually raise the policy rate to stop the economy from overheating. Consistent with that view, our latest forecast for the UK is conditioned on a 25 basis points increase in Bank Rate every six months such that the policy rate reaches 2 per cent in 2021.’
• UK industrial production beat expectations in September. Construction was a shade below estimates whilst industrial production was higher.
• European shares had their worst week in 3mths last week.
• UK trade deficit was better than expected in September.
• Oil down 25c or so at $63.55
• Sterling down against dollar at $1.3131
• Pound weaker vs Euro at €1.1264
• UK 10yr gilt yield up 8bps on back of stronger-than-expected production numbers.
• World markets: UK, Europe and US down on Friday. Far East mostly down in Monday trade.
• Times says UK’s largest debt collector, which is attempting to float, could be priced at as much as 5x what some City fund managers think it may be worth.
• Brexit, politics etc.:
o PM Theresa May has said she will not tolerate any attempts to block Brexit.
o Michel Barnier says the UK has 2wks to come up with a divorce offer. In the absence of an offer, trade talks will not start this year.
o Barnier says he is planning for the possible collapse of UK – EU talks.
o Times says 40 MPs say Mrs May must go. Johnson and now Gove in hot water re Iran. Green involved in naughty computer affair etc. Corbyn keeping his mouth shut, doing his butter-wouldn’t-melt act.
o David Davis says both sides should ‘work to find solutions’. No detail on what that means. He says UK & EU are still separated by a ‘few outstanding, albeit important, issues’.
o CBI and BusinessEurope to meet PM today. They will stress need for a transitional deal as near to the status quo as possible.
o British compromise could leave all sides unhappy. Mr Corbyn, as mentioned above, is wisely saying nothing. Could win via a mixture of forced and unforced faults on the part of HMG.
PRIOR DAY’S LATER TWEETS:
• Later tweets: Kerb panel hears street food is ‘good, cheap & accessible’. Requires ‘iconic spaces’. Unavoidably a part of gentrification process
• NRN in the US reports that October LfL sales moved into the black after several months of losses. Bounce back from hurricanes?
• Escape Games company Escape Hunt to open multi-room sites in Birmingham and Oxford next year.
• Brussels suggests that the UK will see the slowest growth of all 28 countries in each of the next 3yrs.
START THE DAY WITH A SONG:
Friday’s song was Everything, Everything. This morning, who sang:
So, take a good look at my face,
You’ll see my smile looks out of place,
If you look closer, it’s easy to trace
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: There were a couple of eye-catching front page headlines in the Saturday papers, with the FT flagging that “Hammond targets VAT shake-up” (the Budget may lower the VAT threshold on small businesses), whilst the Daily Mail went with “Christmas Sales On Already!” (after a rash of High Street discounting broke out last week). The FT review of the week highlighted the weak Food sales reported by M&S and the move by Burberry to go upmarket. The FT also had a couple of interesting columns: the writer Wendell Steavenson argued that M&S Food is “falling between several stools”, whilst the veteran City commentator Neil Collins noted the weakening new car sales figures and argued that “dodgy diesels and changing tastes do not bode well”. The Daily Mail “Hero of the Week” was Archie Norman of M&S, for his honest analysis of M&S’s problems, but the hero of the
• Sunday Press: The main Business sections of the Sunday papers had a couple of eye-catching front page headlines: the Sunday Telegraph led with “Exposed: fined Amazon drivers on less than minimum wage”, whilst the Sunday Times went with “Wall Street banks braced for “disorderly Brexit””. The Sunday Telegraph and the Sunday Times both flagged that the ONS Retail Sales figures for October on Thursday are likely to show a drop of over 0.5% in volume. The key feature otherwise was a Sunday Times profile of the new M&S Chairman Archie Norman (“Archie calls the shots in a bid to revive M&S”), which concluded by quoting our view that although there is a risk that by throwing his weight around Archie Norman alienates the executive management team, the biggest risk is simply that Archie is absolutely right to be cautious about the challenges facing M&S. The Observer noted that John
• Today’s Press and News: The Chinese Online giant Alibaba took a massive $25.4bn in the one-day Singles Day Sale on Saturday (up from $18bn a year ago), according to the FT. Meanwhile, the British High Street is braced for a “Christmas of constraint”, according to the latest BRC-Springboard footfall survey, which is widely covered in today’s papers and shows that footfall fell 2.0% last month. The news that Visa card spending also fell 2% in October is wrapped up in those stories, whilst the Times notes that latest Local Data Company figures on shop closures: “Shop closures fall but it’s all change on the high street”. The Telegraph flags the new Sainsbury TV ad: “Sainsbury’s reveals 2017 Christmas advert featuring real-life customers and colleagues”.
• News Flow This Week: Tomorrow brings the B&M interims and the Land Secs interims, together with the latest Kantar/Nielsen grocery sales data. On Wednesday we get the Game Digital finals and the Card Factory Q3 trading update. Thursday brings the Ted Baker Q3 update, the British Land interims and the ONS Retail Sales figures for October, plus the Asda/Wal-Mart Q3. And it’s been a long time coming, but…by the end of this week the CMA will issue its delayed provisional findings on the Tesco bid for Booker.