Langton Capital – 2017-11-27 – Pat Val, pubs roundup, new openings, footfall & other:
Pat Val, pubs roundup, new openings, footfall & other:
A DAY IN THE LIFE:
The aerial pretty much blew off our roof a few weeks ago and, what with the Internet, an Amazon Fire Stick, Netflix and what-have-you, we realised that we didn’t need one.
Meaning that the next question is, if you only need a TV licence to watch live television, does a 30-second delay (on football matches, the news, political coverage etc.) do the trick because, if it does, that’s another £147 we can move into our beer fund. On to the news:
PRIOR WEEK ROUND-UP. WHERE ARE WE NOW?
• Tough times for pub operators reports FT. But eating & drinking out remains aspirational & a premium-to-GDP growth offer. You just need to get that offer right – and you need to swerve all that capacity that’s being put on.
• FT says ‘there were glum faces round the bar last week’ and, with M&B saying that its dividend was under threat, so there were. Greene King & Marston’s report H1 and FY numbers on Thursday respectively.
• Greene King is expected to show a reduction in profits as indigestion post its transformational but high-price purchase of Spirit Group feeds through. Marston’s on the other hand, which has stuck to modest purchases in the beer industry and new-build sites, is forecast to have made further progress.
• Telegraph reports ‘Greene King will be crying into its beer this week when it reveals a drop in profits, as pubs face rising costs on several fronts.’ Marston’s also announces numbers on Thursday. The latter is forecast to report an increase in its key metrics.
• M&B says ‘we are in uncharted waters”. CEO Phil Urban says this is partly due to the ‘fragility of the political climate’. He says ‘if there is a snap election, we’d look stupid if we hadn’t thought about it’. Mr Urban told analysts last week that, if Labour were propelled to power on the back of Tory weakness, M&B’s cost base might be radically altered.
• Fuller’s reported good numbers on Friday (slightly less good than those of Young & Co) but CEO Simon Emeny said ‘I cannot remember a time when we have faced such an array of additional cost pressures’.
• City Pub Group nonetheless managed to list its shares on Thursday.
• Enterprise did pretty well on Tuesday, too. It is transforming the shape of its business. This process, which is not without risk, is ongoing.
• The current shift towards an acceptance that austerity may go on for some years, has seen spending on drink hold up better than that on meals. The latter has also suffered due to capacity issues largely driven by the over-expansion of the casual dining market where Byron, Prezzo and many others are suffering from LfL sales declines, bottom line losses and where the industry as a whole seems to have turned to discounting to prop up headline sales.
• Many unit owners are crowding the exits. Luke Johnson writing in the Sunday Times has said that the days of valuing companies on their fundamentals are over. He says the advent of almost free money, in the wake of the financial crisis, means capital is being misallocated on an unprecedented scale. He has said that advisors are being inundated with vendors trying to sell businesses. Risk Capital Partners and/or Mr Johnson are reported to be looking to exit both Gail’s and Lane Pub Co.
PUB, RESTAURANT & DRINK PRODUCERS:
• Patisserie Holdings reports 12mth numbers says sales +9.7% at £114.2m with EBITDA +15.7% to £25.6m. Market cap is £314m. Group has net cash at year end of £21m meaning that EV was a lower £293m.
• Pat Val reports basic EPS +19.1% at 16.4p. The group will pay a final dividend of 2.4p per share
• Pat Val reports it has opened 20 stores in the year to end-Sept. it has opened 2 stores in the Republic of Ireland, a second store opened in Northern Ireland and two new stores in Scotland. It is now trading from 199 stores.
• Pat Val says its ‘costs [are] tightly controlled with inflationary wage and ingredient cost pressures mitigated in the year.’ Chairman Luke Johnson reports ‘we have delivered another year of excellent financial results, achieving our targets in a challenging environment.’ He says ‘our indulgent, affordable treats remain attractive to customers, and our flexible business model has enabled us to mitigate inflationary cost pressures. With a highly cash generative group, strong brands and a focused management team I remain confident of another year of growth and achievement.’
• CEO Paul May reports ‘we finished the year encouragingly and this momentum has carried into the first eight weeks of 2018. We have just launched our new festive range, which includes two new limited edition slices, and are looking forward to another successful year ahead.’
• EI Group Friday bought back another 80,780 of its own shares for cancellation at 141.6p per share
• Hi Spirits has announced that Blackwoods has launched a 2017 vintage for its popular gin and vodka range, the former in both 40% and 60% ABV variants
• Fulham Shore’s The Real Greek is opening in Bristol
• The Evening Standard writes that the City of London’s bar and restaurant trade is ‘still booming despite Brexit’ despite slowdowns in other areas.
• Former Little Chef owner R Capital, which specialises in buying troubled businesses, is one of the bidders planning a cut-price takeover of better burger chain Byron. Potential bidders had indicated ‘a wide range of valuations for Byron’, a source insisted on Sunday; some have offered as little £25m for the burger chain. That would be a far cry from the £100m price tag attached to Byron when it last changed hands and underlines the challenges facing any new owners. Information distributed to potential bidders shows that 13 of its sites are loss-making or marginal, and fall into a category entitled ‘exit immediately’. A further dozen restaurants are marked for review and could be vacated by a new owner ‘with or without a premium’, according to Byron.
• High Street footfall was down 4.2% this Black Friday compared to a year ago, casting fresh doubt over the American retail import’s introduction to a lukewarm British audience. The figures, compiled by Springboard, were significantly worse than an expected decline of just 0.6%. Saturday footfall was more resilient, down 0.9%, with retail parks busy with shoppers collecting purchases made online. Springboard says that consumers have grown wise to the fact that discounting continues after Black Friday.
• Unwanted subscriptions are costing people an average of £50 a month because they are too difficult to cancel, according to research from Citizens Advice.
• Booths, often dubbed ‘the Waitrose of the North,’ is reported to be looking for a buyer. The Telegraph reports ‘the move comes amid signs Booths is struggling to keep up in the competitive grocery market after floods in its North West heartlands in 2015. Booths reported a £6.3m loss last year and came close to breaching the terms of its loans this summer.’
• AB InBev has announced plans to build a new $250m brewery in Nigeria.
• Lloyds Bank has completed its first green loan with Ei Group, the £50m loan requires Ei group to fulfil certain green covenants. The head of Global Corporates at Lloyds Bank, John Feeney said: ‘The pub industry is of huge importance to local communities across the UK and this deal, supporting Ei Group’s energy saving initiatives, is another clear example of how Lloyds Bank is helping Britain prosper. The CRE Green Lending Initiative continues to be of real interest to many of our property-owning customers, as we work with them on sustainability issues’.
• The latest data from the MCA’s Eating Panel has found that the frequency of eating out has declined at all three meal-times in October. Dinner has fallen the most with a 12% reduction in visits.
• Gordon Ramsay has agreed a deal with SSP to launch a premium grab-and-go concept (Gordon Ramsay Plane Food To Go) for airports worldwide. Gordon Ramsay said: ‘Plane Food To Go is a truly revolutionary concept that will roll out worldwide and build upon the massive success of the original Plane Food dining experience from London Heathrow’s Terminal 5’.
• Wine commentators agree that the weaker pound will benefit the England wine industry by growing exports, writes the FT. On the other hand, French exporters are concerned about their second-biggest market becoming more expensive to sell into. The French wine industry’s FEVS export federation said exports fell 0.8% to €7.9bn in 2016, ‘mainly due to the impact of the pound sterling [fall] on champagne sales in the United Kingdom’.
• Artisan coffee house Grind passed its £750,000 crowdfunding target within hours of launching its campaign, which sets a target of opening a further 10 sites in the next five years. The current campaign is Grind’s second crowdfund, after its £1.3m ‘Grind Bond’ in 2015. CEO David Abrahamovitch commented: ‘This fundraising will allow us to deliver the next phase of our growth, doubling the size of the business to open ten new Grind restaurants in the next five years, plus at least five café-bars in airports and train stations in the next three years.’
• Former All Star Lanes boss and co-founder of Bounce, Adam Breeden, has got the first site for his new golf-based restaurant concept Puttshack. According to MCA, the new concept is believed to have exchanged on a unit at the new £150m leisure extension at Intu Lakeside for an opening in late 2018 or early 2019.
• Consumer spending was up 7% year-on-year on Black Friday, per data from Barclaycard, despite some retailers launching their promotions early this year in response to a weak September.
HOLIDAYS & LEISURE TRAVEL:
• The Foreign and Commonwealth Office has extended its Christmas markets terror warning to Sweden and Switzerland, warning travellers to remain vigilant. The list already included Austria, Belgium, Denmark, France, Germany and Italy.
• Gatwick half-year revenues were up 5.5% to £470m with EBITDA increasing 9.9% to £290m and passenger numbers up 5.1% on last year.
• The FT reports Monarch Airlines’ former owners could walk away with profit on their investment despite it being unlikely that secured creditors will be repaid in full.
• Jackpotjoy plc has announced that it has secured a c.£388.5 million Senior Secured Term and Revolving Credit Facility. CFO Keith Laslop reports ‘we are thrilled to have secured the new Facilities which clearly demonstrates the growth as well as stability of our underlying businesses. The significant reduction in interest costs, alongside further future rate reductions, allows us to further drive shareholder value through accelerated deleveraging and investment in the long term growth of the business.’
• Escape Hunt, the largest player in the escape games industry, has announced that it is to open a multi-room site in Leeds next year
• Vue International is looking to combine with Odeon into a £3bn cinema giant. Odeon is the largest of the three big cinema chains operating in Britain, with 360 picture houses. Vue has 212 sites — typically larger multiscreen venues. Cineworld, the second-largest chain with 221 cinemas, is listed on the London Stock Exchange and valued at £1.7bn.
• William Hill confirmed it is in preliminary discussions to merge its Australian business with CrownBet, of which 62% is owned by Crown Resorts.
• Rovio, developer of Angry Birds, reported Q3 sales of €70.7m up significantly on last years €50m. However, the firm announced a pre-tax loss of €500,000 compared to last year’s €4.6m profit.
FINANCE & MARKETS:
• BBA reports mortgage approvals across the UK fell to 40.5k in October against 41.6k in September
• Oil up another 40c or so to $63.85
• Pound up vs dollar at $1.3317
• Sterling lower vs Euro at €1.1167
• UK 10yr gilt yield unchanged at 1.25%
• World markets: UK down on Friday but Europe & US higher. Far East down in Monday trade. Early indications that UK FTSE100 will open down 6 points
• Ministers reported to be planning to boost UK productivity post EU. Historically, this has been more easily said than done
• Brexit & lame government:
o Mrs May was in Brussels on Friday to sort things out. Little seems to have changed. Cash & Ireland top of agenda (still)
o Brussels reported to have given the UK 10dys to come up with a better cash offer & firm guidance on Northern Ireland
o UK told Friday offer (thought to be €40bn or £40bn) is not good enough. Some talk that the government may up the offer by another 25% to 50% but keep terms secret permanently to avoid political backlash
o Liam Fox has said that Britain will not resolve the question of the Irish border after Brexit until it has signed a trade deal
o Ireland is saying it will ‘hang tough’ on the border issue
o DUP, which is supporting the UK’s minority Conservative government, says it will not allow Northern Ireland to be treated any differently from the rest of the UK
o FT reports ‘Brexit ‘calamity’ haunts UK farmers’. It says quotes agricultural sources as saying the industry, which will need UK government support, wants a 10yr transition period
o The Times reports conservative no2 Damien Green offered to secretly funnel money to the DUP in an attempt to keep its deal terms confidential
PRIOR DAY TWEETS:
• Later tweets: Good recent trading numbers from Fuller’s. Just not quite as good as Young & Co. LfLs at FSTA +3.6% at H1 and +3.7% to wk33.
• Fuller’s CEO says ‘I cannot remember a time when we have faced such an array of additional cost pressures’
• Squeeze is on. IFS says UK set for worst pay-squeeze in 150yrs. Resolution Foundation points to 19 negative quarters for real incomes
• Uncertainty, overspending, overborrowing, under-investment, poor skills & productivity, Brexit & bad government. What’s not to like?
• Advisors said to be ‘inundated’ with requests from vendors of businesses attempting to liquidate their assets.
• Mrs May in Brussels today to sort everything out. But who negotiates by doubling an offer? Would you buy a house like that?
• Next enters Black Friday fray & knocks 70% off. Ouch. Are people really going to buy more bumph – or just the same amount at a lower price?
• BDO says fashion store sales down 2.7% in week to 19 Nov with online +18.2%. Woe is the High Street?
• Words to me as a much younger man. Running a business is like walking a tightrope with your competitors shaking the rope at both ends
START THE DAY WITH A SONG:
Last Friday’s song was ‘Song for Whoever’ by the underrated The Beautiful South. Kicking off this week, who sang:
We only said goodbye with words,
I died a hundred times,
You go back to her,
And I go back to,
I go back to us
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The “Black Friday” spending surge obviously took centre stage in the Saturday papers, but the false alarm about an Oxford Circus terrorist scare on Friday evening also got lots of coverage. The Daily Mail focused on the role of social media in spreading unnecessary panic on Oxford Street, mocking the infamous Tweet of the singer Olly Mars about gun shots inside Selfridges on Friday evening, whilst the Telegraph and the Times both carried on their front pages the Reuters photo of confused Oxford Street shoppers running for shelter…As for “Black Friday”, the 7% rise in Barclaycard spending up until 5pm was widely noted, eg in the Telegraph and the Times, along with the big shift to Online spending. The veteran City Editor of the Daily Mail praised the way in which shoppers on Black Friday “defied the gloom” and noted the “uplifting” way in which the Waterstones boss James
• Sunday Press: There were 2 interesting front page Business scoops in the Sunday papers: the Sunday Times flagged that the family behind the struggling Booths supermarket chain (always known as “the Waitrose of the North”) has decided to put the business up for sale, with a valuation of £130m-150m mooted, whilst the Sunday Telegraph highlighted that the struggling Maplin electricals business is scrambling to reassure suppliers, after credit insurers scaled back their exposure. We couldn’t see much about Black Friday, although the Mail on Sunday News pages noted that disappointing sales on the High Street could have been driven by “bargain fatigue”. There wasn’t much follow up about the Sports Direct/John Ashley back pay story, although the Observer noted, tartly, that the Unite union has pointed out that many agency workers are still owed back-pay by Sports Direct. In terms of feature
Today’s Press and News: The Sunday Times scoop that the struggling Booths supermarket chain is up for sale is followed up by the Guardian, the Telegraph, City AM and the Daily Mail, but the Times follows up instead on the Sunday Telegraph scoop that the struggling Maplin electricals business is scrambling to reassure its suppliers, flagging that its latest results have been brought forward to show that it is still profitable. The Telegraph highlights that John Lewis has given £100,000 backing to two Internet start-ups, WeFiFo and Exaactly, and also notes that High Street footfall fell 4.6% on Black Friday versus last year, according to figures from Springboard (down 3.6% overall, including retail parks and shopping centres).
News Flow This Week: Last week’s discounting bonanza continues today with the wretched “Cyber Monday”…Tomorrow we move on to the Pets at Home interims and the Topps Tiles finals. On Wednesday we get the Motorpoint interims, the ASOS AGM is on Thursday and then the DFS AGM is on Friday. Wednesday evening brings the latest FTSE Quarterly index review (with Just Eat widely expected to get into the FTSE 100 index). And with the end of the month coming up very quickly now, we get the widely followed monthly GFK Consumer Confidence Index first thing on Thursday.