Langton Capital – 2017-11-16 – Young & Co, Dart Group, easyHotel, burgers & other:
Young & Co, Dart Group, easyHotel, burgers, costs & other:
A DAY IN THE LIFE:
What is it about Lycra and silly plastic hats with fins on them that turns ordinary people into entitled, sanctimonious, arrogant & rude examples of the ‘holier-than-thou’ brigade now making itself felt across the country?
Because I’ve lost count of the times that I’ve been nearly knocked off the pavement into traffic by cyclists in London who don’t seem to know where the road stops and the pavement begins (and who often want to avoid a short stretch of one-way road – the wrong way – by pushing pedestrians out of the way on their part of the thoroughfare) and yesterday, whilst attending a graduation at York Minster, we were assailed on a number of occasions by bell-ringing cyclists seeking to ride at 20mph or so through a throng of perhaps 1,000 celebrants and their foot-shuffling families.
I mean think St Paul’s Courtyard. This is not really a road but, I’m sure if you ring your bell loudly enough and make angry enough gestures, bemused people will get out of the way to avoid getting a bicycle-tyre shaped mess on their new frock. I know I did but that’s enough of that. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Young & Co H1: Reports ‘industry-leading performance driven by customer-focussed approach’. Revenues +6%
• Young & Co H1: Co says adjusted operating profit +10% at £27.8m. PBT unchanged at £22.1m. EPS down 7.1% at 35.6p
• Young & Co H1: Co says it has seen ‘another period of strong performance’. It says its ‘well-invested and premium positioned managed houses delivered a 6.8% increase in total revenue and a 4.6% rise in like-for-like sales’.
• Young & Co H1: Reports tenanted LfL sales +1.6%. Group says ‘cash generation remained strong at £33.2 million, with net debt reduced by 7.0% to £117.7 million, improving our net debt to adjusted EBITDA ratio to 1.7 times’
• Young & Co H1: Dividend up 6% at 9.41p, the 21st consecutive year-on-year interim dividend increase. CEO Patrick Dardis comments ‘we are very pleased with our excellent performance during the period, which once again underlines the strength and effectiveness of a consistent, premium strategy and customer-focussed approach.’ Mr Dardis says ‘the pub is still the go-to place in Britain for drinking and eating out and, while much has been written about the challenges facing the pub industry, we believe that providing customers with well-invested pubs, a quality offer and outstanding customer service is key to our success.’
• Young & Co CEO Patrick Dardis reports ‘despite the continuing unpredictability of our trading environment, we have made a strong start to the second half of the year.’ He concludes ‘our expectations for the full year remain unchanged and we are confident about our long-term prospects thanks to our premium offer, well-invested and prime located pubs, and the talented teams we have in place across our business.’
• Young & Co H1: Recent trading. Sales up 7% in total and 4.9% LfL in the last 6wks. The co says ‘despite the strong start to the second half of our financial year, we continue to monitor trading conditions closely. The political environment remains unpredictable and this ongoing uncertainty is unhelpful when it comes to the strength of the broader economy.’
• Young & Co says ‘we remain concerned around the impact that the Brexit negotiations are having on the pub industry, especially in relation to attracting and retaining the best people in our pubs.’ The group concludes ‘nonetheless, our expectations for the full year remain unchanged and we remain confident about our long-term prospects thanks to our premium offer, well-invested and prime located pubs, and the talented teams we have in place across our business.’
• The CMA has unconditionally cleared Just Eat’s proposed purchase of Hungry House.
• US market speculates on whether Coca Cola could enter the alcoholic beverages market. And why not? If Pepsi can move into snacks and into (and out of) the restaurant market, then why shouldn’t Coke look at parallel markets. Mars makes pet food, after all. Coca Cola hosts an analysts’ day for investors in the US today.
• NPD has suggested that the British foodservice industry will grow by around 83m visits next year (up +0.7% on 2017).
• NPD says growth will come despite negative wage growth and high inflation. Delivery and the growing breakfast market will continue to boost trade. The dinner market could shrink over the next two years. NPD says ‘delivery shows no signs of running out of steam over the next two years and will help to bring home the bacon in Britain’s £55 billion foodservice industry. Burgers, casual dining, breakfast and lunch are also thriving and should help operators shrug off fragile consumer confidence, as well as inflation and stagnant wages, to achieve growth.’
• NPD continues ‘we are especially bullish about burger chains and casual dining as these restaurants are meeting the consumer’s appetite for a contemporary experience that also offers a family-oriented treat. Regardless of a soft Brexit or a hard Brexit, any foodservice operator that invests for the future, and gives consumers the value, product quality and service quality they want, can look forward to growing their business in 2018 and 2019.’
• Jury out on the better burger. Byron is reported to be in some distress and GBK has recently disappointed its owner, Famous Brands, and lost its CEO. Meanwhile, high premiums have been paid for sites by the likes of Five Guys and new entrants such as Habit Burger and Moody Burger are looking for cash to either expand or to enter the UK. Meatcure has shrunk sites whilst Handmade Burger Co has collapsed into administration.
• Sodexo has agreed to buy Centerplate, a hospitality services company at sports facilities & convention centres, for $675m from Olympus Partners. Centerplate is the fourth largest sports & leisure operator in the US market and has hosted 14 super bowls and 36 presidential inauguration balls.
• In the US, Papa Murphy’s Holdings has struggled with a declining store count and weak sales, with CEO Weldon Spangler citing ‘product consistency’ as a big challenge for the chain. On a two-year basis, its same-store sales have fallen 9.9 percent at the 1500 strong quick-service chain, with 40 stores closing over the last year.
• Premier Foods’ good H1 results mean that it could shed its image as a zombie company says The Telegraph. It says ‘tackling one of corporate Britain’s toughest turnarounds has been slow and painful’ but adds that the company’s CEO Gavin Darby ‘to his great credit, has been chipping away since taking charge.’ Debt is falling and sales are rising.
• Langton has commented in the past on Premier Foods’ pension situation, the bid approach from McCormick and on the perils of ‘anchoring’. By that we suggest that the company’s shares may be completely the wrong price. The stock market is not perfect, particularly re ‘special situations’. Remember, Thornton’s share price was 10p, £1, 10p again and £1.40 all in the space of little more than a year in the run up to the bid be Ferrero Roche
• The Telegraph says ‘these results will go a long way to helping Premier Foods shed its image as a zombie company’. It says ‘a controversial decision to reject a 65p-a-share takeover bid from transatlantic rival McCormick is also somewhat vindicated by an 8pc leap in the share price, though only if momentum can be maintained.’ It concludes ‘it’s early days, but Premier may be close to identifying the missing ingredient that makes it top of the pots again.’
• Game Digital has said that it hopes eSports will aid its recovery. The group aims to become more ‘experiential’.
• Game Digital will open 35 Belong in-store “gaming arenas” by the end of next year with 100 or more over time
• The Morning Advertiser has reported that supermarkets are selling lager and cider for as little as 75p a pint. This news has lead to JDW boss, Tim Martin to call on pubcos to help fight for tax equality against supermarkets.
• The ALMR has reacted to the news that job creation in the sector has fallen by 1.4% (25000 jobs) in the last quarter, with Chief Executive Kate Nicholls saying: ‘This shock drop in the number of jobs created in the last quarter shows that eating and drinking out businesses are approaching a crucial tipping point and proactive support from the Government is needed without delay. The figures show the strength and importance of the sector, employing nearly 1.8 million people – 7% of the private sector workforce – but this drop in employment shows that even a very robust sector is not immune to huge financial pressures’.
• United Chip, the gourmet fish and chip concept, has opened its first site on the corner of Clerkenwell Road and Goswell road in London.
• Chief Executive of the ALMR, Kate Nicholls has responded to the news that a minimum unit price for alcohol will be introduced in Scotland by stating: ‘Any measures that seek to promote healthier attitudes towards alcohol are to be welcomed, although we remain unconvinced that a minimum unit price will have the effect on problematic consumption the Scottish Government is seeking’.
• The Deltic Night Index reports that average spend has increased 9% on a night out to £61.58 over the past year. Pre-drinks spending was up 20.9% yoy to £ 11.46 and spending on drinks in venues was up 11.1% to £18.01.
• Drake & Morgan will open its 22nd bar The Listing within the Cannon Green scheme near Cannon St in the City of London.
• Pret a Manger has signed a deal with Autogrill to open outlets in major airports in North America and Europe.
• Pure Filth, a healthy vegetarian burger concept by chef Gizzi Erskine and Rosemary Ferguson, is set to launch next year following a pop-up at Tate Modern later this month.
HOLIDAYS & LEISURE TRAVEL:
• Dart Group H1: Good numbers and group will ‘materially exceed expectations’.
• Dart Group H1: Group reports revenues +34% at £1.67bn. Operating profit +22% at £204.9m with PBT +30% at £212.5m.
• Dart Group H1: Basic EPS 117.4p (+20%) with H1 dividend +9% at 1.5p. Group says ‘in what has proven to be a strong summer season in terms of passenger volume growth for both Jet2holidays andJet2.com, though a challenging season in terms of pricing, Group operating profit increased by 22% to £204.9m (2016: £167.5m)’.
• Dart Group H1: Says ‘since the half year end, we have seen a further strengthening of customer demand, particularly for our flight-only product.’ It says ‘this has resulted in future Leisure Travel bookings for this financial year performing ahead of expectations. As a result, the Board is optimistic that market expectations of Group profit before foreign exchange revaluation and tax for the year ending 31 March 2018 will be materially exceeded.’
• DTG says ‘we are seeing the emergence of certain cost pressures as we continue to invest in our airport operations, colleagues and other related areas. Nevertheless, and despite the current uncertainty around the ”Brexit ” negotiations, we remain confident in the resilience of our Leisure Travel business, supported by our recent elevation to the UK’s second largest Package Holiday Operator.’
• EasyHotel has announced two new franchise hotels in The Netherlands. The developments will add 162 rooms.
• EZH reports ‘an 87-room easyHotel will open at The Hague Scheveningen Beach, one of Holland’s most popular seaside resorts.’ It says a further ‘75-room easyHotel, will open in Maastricht City Centre, at Het Bat 10-12, Maastricht. A city of historical and political significance, Maastricht is a thriving cultural and regional hub attracting over 3,000,000 tourists each year.’
• EZH says ‘both hotels are scheduled to open in the second half of 2018 and will expand the Group’s portfolio in the Netherlands to seven hotels.’ CEO Guy Parsons reports ‘the Netherlands is our second biggest market after the UK and is home to a number of busy and popular tourist and business destinations. We are delighted to be extending our presence in a market in which we have seen consistent demand from travellers for affordable and comfortable accommodation.’
• Deloitte reports that Amsterdam is the most attractive European city for hotel investment for the second year in a row. Second through fifth places were Barcelona, Dublin, London and Madrid respectively.
• STR reports the US hotel pipeline for October consisted of 183,187 rooms in 1,407 developments, a 0.1% decrease yoy.
• STR reports the European hotel pipeline for October saw 5 major markets have more than 3,000 rooms under construction, the markets include London, Munich, Istanbul, Moscow and Dublin.
• Research by American Express claims Britons will spend £2.2bn on holidays during Christmas this year, with those travelling abroad shelling out £457 each on average while those who holiday in the UK are set to spend £255 each on average. A quarter of travellers are planning to meet family abroad, 22% want to experience Christmas in a new place and 17% just want to escape the bustle.
• Following the military coup in Zimbabwe, British people in Harare are being urged to stay indoors due to political uncertainty.
• The UK travel industry faces a downbeat 2018 sector forecast and has been warned that a cut in Air Passenger Duty may be ignored in next week’s budget, according to MHA MacIntyre Hudson.
• Sportech has declared a distribution of 29p per share. It says ‘the Distribution follows the successful sale of The Football Pools business, completed in June 2017 and the subsequent approval of the Company’s application to reduce its capital by approximately £55.7 million by the Edinburgh, Court of Session this week.’
FINANCE & MARKETS:
• Eurozone trade surplus rose to €25bn in September from €21bn in August
• Oil price up 60c or so to $62.01
• Sterling a little stronger vs dollar at $1.317
• Pound up vs Euro at €1.1176
• UK 10yr gilt yield down 2bps at 1.29%
• World markets: UK down yesterday with Europe & US also lower. Asia mostly up in Thursday trade
START THE DAY WITH A SONG:
Yesterday’s song was Portishead with Glory Box. Could be a big response. Today who sang:
And the public gets what the public wants,
But I want nothing this society’s got
RETAIL NEWS WITH NICK BUBB:
Ted Baker: The Q3 trading update today from Ted Baker covers the 13 week period from 13 August to 11 November, so it is bang up to date, but October was a challenging month for fashion retailers. Against that background, Ted has continued to grow, with Retail sales up by 5.1% in constant currency (albeit average space was up 5.6%) and Wholesale was up 15.4%, with gross margins in line with expectations. Christmas is still to come, but the great Ray Kelvin, the Founder and CEO, says: “The business has continued to perform well and develop in line with our expectations, reflecting the strength of the Ted Baker brand and the quality of our collections…we remain confident of meeting our expectations for the full year”.
Planet ONS Watch: In the real world, October (the 4 weeks to Oct 28th) was a poor month on the High Street overall, as per the recent BRC-KPMG Retail Sales survey, with Clothing and Non-Food sales suffering from the warm weather. But we will find out at 9.30am what life was like last month on that bizarre parallel world, the Planet ONS, as per the Office of National Statistics Retail Sales figures for October…Our friends at Capital Economics have pencilled in a 0.8% month-on-month rise in seasonally adjusted sales volume, which would put the year-on-year growth rate at +0.2% in October, but the City consensus is that month-on-month volume will be down a tad (to leave the year-on year movement at -0.6%). We will obviously be focusing on the non-seasonally adjusted sales value figures and the volatile ONS figures for “Small Businesses”…