Langton Capital – 2017-11-28 – Optimism, Vianet, Yo Sushi, Shaftesbury, strategy etc.:
Optimism, Vianet, Yo Sushi, Shaftesbury, strategy etc.:
A DAY IN THE LIFE:
I imagine ‘bots’ will ultimately make our lives easier but, for the moment, I think some of them may have bitten off more than they can chew.
I mean bots putting out research? An early warning is that the email titles you Dear Mr Mark or some such and then the company that’s being researched is filled in at random in a sentence that says something like Restaurant Group (where the clue is very much in the title) is a company operating in the pubs and restaurant sector. It has a market cap of X and its shares have varied between X and Y over the last year.
And that’s probably it. There may be some mention of Fibonacci waves or double tops or testing the 200dy moving average or whatever but it’s arguable at this stage as to whether any value has been truly added.
In a rare moment of wisdom, MIFID II has said that the above does not count as ‘research’. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Richard Hodgson, the former PizzaExpress chief exec, is set to replace Robin Rowland at the helm of YO! Sushi! Rowland will remain involved in the Mayfair Equity-backed business, which has just confirmed the £59.2m acquisition of the 600-strong North American chain Bento Sushi, as a non-executive director.
• Vianet yesterday announced that it had won a significant contract for its Smart Machines division. The contract, with an unnamed coffee machine company that operates ‘in ten different markets covering Western Europe, Australia and New Zealand’, should ‘add 7,000 new machines to Vianet’s platform in calendar year 2018 with further acceleration in 2019 and 2020.’ CEO Stewart Darling comments ‘we are delighted to announce this significant win with a highly valued customer. They are a prestigious world class blue chip business delivering high end quality coffee and hot drinks and this contract is a strong endorsement of our capability, vision and strategy for the Smart Machines division.’
• Vianet chairman James Dickson reports ‘this is a win of great strategic importance for the team and demonstrates that our focus on the vending sector and premium coffee, in particular, is being well rewarded.’ Mr Dickson concludes ‘as businesses increasingly seek and rely on actionable data, business intelligence and insights, Vianet’s proven IOT capability means we are well placed to deliver compelling results for our customers and accelerate our own growth in what are rapidly evolving market’.
• EI Group has bought back another 61,892 of its own shares for cancellation at 145.4p per share
• CBI survey finds optimism across hotels, bars & travel firms is at a 6yr low. It says optimism fell again in Q3. Prices are rising but sales volumes are falling. This against the backdrop of ‘unprecedented’ cost pressures. CBI economic intelligence head Anna Leach reports ‘it’s no surprise that consumer services firms are having a tough time, as people feel the pinch in their pockets from higher inflation.’ She continues ‘while weaker demand appears to have hit employment in consumer services last quarter, firms are looking to resume hiring next quarter as demand stabilises.’
• Food producer Cranswick has this morning reported H1 results saying revenues rose by 23% to £714.6m and LfL sales rose 18%. The group has reported H1 PBT of £44.4m, up 17.2% on last year. CEO Adam Couch says ‘during the period we have strengthened our asset base, enhanced market positions and developed new customer relationships.’ Mr Couch adds ‘we continue to make good progress against each of our strategic objectives and we are well placed to continue our successful development in the current financial year and going forward.’
• BBC reports Black Monday was relatively quiet. Telegraph reports ‘the early sales are a disaster for traditional shops.’ It says ‘the whole idea of the Black Friday weekend (or week) is commercial madness’. US reports suggest that Cyber Monday stateside was big with sales up around 17% on last year.
• The ALMR has called on the Government to support the eating and drinking out sector following the publication of its Industrial Strategy. ALMR Chief Executive Kate Nicholls said: ‘The Government’s progress on its Industrial Strategy should help provide the eating and drinking out sector with additional avenues to secure support and stimulate growth… The Government is clearly serious in its aims to make the UK the most productive country in the world – a great start would be to address the tax and regulatory burdens on a sector that creates 1 in 6 of all new jobs and pays £63 billion in turnover.’
• The BBPA’s Brigid Simmonds said of the Industrial Strategy white paper: ‘In particular, the huge strategic importance of the food and drink sector is recognised, of which British beer and pubs are such a crucial part. And on places, it is essential that high streets and new housing developments have access to pubs, to provide leisure opportunities and great facilities for local people… We are already working closely with DEFRA on a £100m export strategy for British beer, and also through the Courtauld Commitment to deliver a 20% per capita reduction in food waste by 2025. I am sure other valuable initiatives can be fostered through government working closely with industry.’
• Property company Shaftesbury, whose assets include over 100 restaurants and pub sites in the West End, has reported FY numbers saying EPS has risen by 15.7% to 16.2p. The group will pay a total dividend of 16.0p, up 8.8% on last year. The group says its net asset value has risen by 7.2% and maintains that ‘occupier demand remains healthy and typical-sized space is letting well.’
• Shaftesbury CEO Brian Bickell comments ‘it is pleasing to report another year of good progress and strong results, against a backdrop of economic uncertainty.’ Mr Bickell says ‘the broad economic base of the West End, and its enduring global appeal to visitors and businesses, underpin its resilience and long-term prospects, providing a considerable degree of protection against national economic headwinds. This has been evident in the strength of our performance through different business cycles and operating environments in our 31-year history.’ The group concludes ‘underwritten by the unique features of the West End, we are confident our strategy will continue our long record of growing our exceptional portfolio’s income and value, and, in turn, the returns we deliver to our shareholders.’
• Grind’s crowdfunding campaign has sailed past the £1.5m mark, meaning the coffee chain has now raised double its own target.
• Furniture retailer Feather & Black has fallen into administration just five days after Multiyork collapsed, raising fears about the health of the furniture retail sector. Consumers are putting off big-ticket items as household budgets are squeezed by the return of inflation.
• Revolution Bar Group is opening a trio of new sites, including its sixth bar in London, taking the group’s portfolio to 72 locations across the UK. The new bars are in Solihull, Inverness and Putney, and are set to open in time for Christmas.
• China has announced that it will cut duty on Scotch by 50%, as the country looks to encourage the more spending at home rather than taking overseas trips in pursuit of quality.
• Carlsberg has released its festive range with its limited Carlsberg Christmas Brew, the proceeds of which will be donated to charity.
• Amazon is expected to buy Booths for £150m, with the Preston-based grocer bringing in Rothschild to oversee the sale.
LOUNGERS’ FULL YEAR NUMBERS:
• Lion Capital-owned fast-expanding bar company Loungers has posted full year accounts to 23 April with Companies’ House. Loungers says ‘the last 52 weeks has been another period of significant growth for the business across the Cosy Clubs and Lounges. The growth has been driven by like for like sales growth of 5.3% (2016: 2.2%) versus the prior period (based on gross sales inclusive of VAT) and the Group rolled out another 20 sites (2016: 21) with some excellent performances from the recent openings.’
• Loungers reports revenue £91.8m with operating profits of £4.0m (2016: £1.9m) and profit before tax of £3.2m (2016: £1.2m). The group has an accumulated profit since incorporation of £8.1m.
• Loungers reports ‘our financial performance for the 52 week period ending 23 April recorded a 34% increase in revenue from £68.5m to £91.8m. Underlying EBITDA increased 46% from £8.4m to £12.3m.’ the group says ‘despite operating in an inflationary environment it is very positive to see the profits growing at a faster rate than sales. This is driven by strong cost control and the business renegotiating a number of our key supply contracts in the year.’
• Loungers comments ‘we continue to benefit from the regional operations structure that has been put in place.’ The group says ‘the 2017/18 financial year has seen the roll-out continue with 11 new sites already opened, comprising 10 Lounges and 1 Cosy Club.’ Loungers concludes ‘over the remainder of 2017/181 we plan to open another 12 sites, taking us to 23 sites in the period, and 122 sites in total. We remain committed to the roll-out of both brands.’
• Re current trading, Loungers reports ‘performance in the year has been encouraging despite rising input costs and we remain cautiously optimistic for the 2017/18 financial year.’
HOLIDAYS & LEISURE TRAVEL:
• Hostels are undergoing something of a revolution, according to The Telegraph, with millennials demanding more value and a better ‘experience’. A land grab is underway to meet that demand. London now boasts the world’s only listed hostel owner in Safestay while hotel groups such as Hilton and Accor have also positioned themselves to take advantage of the sector’s growing popularity.
• International Airlines Group has secured the majority of Monarch’s take-off and landing slots at Gatwick airport, according to Press Association. Several airlines, including Easyjet, Wizz Air and Norwegian, had expressed interest in buying the failed carrier’s slots in London.
• The latest Hotstats report shows that UK hotels continue to grow revenue but are coming under increasing cost pressures. The market achieved a 2.1% increase in revpar to £94.20 in October. Hotstats attributes the increase to a 2.4% boost in average room rate and says it comes despite a slight decline in occupancy to 81.1%. Furthermore, room revenue was supported by a 1.1% increase in food and beverage, a 4.9% uptake in conference and banqueting, and a 2.4% improvement in leisure.
• For the week of 12-18 November 2017, the U.S. hotel industry reported occupancy rose 0.8% to 66.1%, ADR rose 1.9% to $124.65 and RevPAR increased 2.6% to $82.42, per STR.
• KPMG’s first creditors report on Monarch reveals that the failed airline owes £466m to creditors, with just £600,000 available to repay unsecured creditors. Former owners Greybull are the largest creditors with £157m of secured debt are likely to walk away with a loss.
• TfL has seen lower growth in demand for its services than expected this year, citing Brexit uncertainty and ‘economic factors affecting the whole of the UK’ as the reason.
• According to Reuters, Thomas Cook has bid for Monarch’s take-off and landing slots at Gatwick which could be valued at £60m. EasyJet, IAG, Wizz Air and Norwegian are reportedly interested in the slots at Gatwick and Luton.
• Hollywood Bowl has completed its £350,000 refurb of its site in Norwich, marking the completion of its 2017 investment programme with £13m spent across its sites.
• Twitter blocked the New York Times for 24hrs this week by error.
FINANCE & MARKETS:
• Oil down 20c or so at $63.64
• Sterling up vs dollar at $1.3333
• Pound a shade up vs Euro at €1.1198
• UK 10yr gilt yield up 1bp at 1.26%
• World markets: UK, Europe & US down yesterday with Asia mostly down in Tuesday trade.
• Brexit, lame government etc.:
o Meghan Markle does the government a favour, deflects attention from its own problems for a moment or two.
o NIESR says richer local authorities in the UK, predominantly in the south, will be hit harder by Brexit. It does not suggest that any local authority areas will be better off. The City of London is worst off at down 4.3% in terms of GDP if there is a hard Brexit. Aberdeen is second, followed by a number of southern authorities.
o FT reports founder of PE house AnaCap as saying his firm is likely to drop the UK as an investment destination because of the Brexit-related currency devaluation, worker exodus and tariff risk.
o Former BT boss Sir Mike Rake comments ‘we have moved from one of the fastest growing economies in the EU and OECD to one of the slowest with the inevitable fiscal and income consequences.’
o Luke Johnson and others say that advisors are being inundated by requests from business vendors to get them out of their UK investments
o CBI president Paul Drechsler says re Brexit ‘the investment effects are further off and will have additional impact on our future growth and potential.’
o FT quotes a number of other grandees saying the same thing.
o Brexit supporters suggest UK may simply unilaterally decline to put up a border in Northern Ireland
PRIOR DAY TWEETS:
• Later tweets: It’s tough for pubs but authentic offers will prosper. Some evidence drink sales holding up better than food
• Tough times for pub operators reports FT. But eating & drinking out remains aspirational & a premium-to-GDP growth offer.
• Barclaycard has Black Friday spend +7% but Springboard says H St footfall down 4.2%. Suggests online & retail parks were stronger
START THE DAY WITH A SONG:
Amy Winehouse performed yesterday’s song, Back to Black. Today, who sang:
People dancing all in the street,
See the rhythm all in their feet,
Life is good, wild and sweet
RETAIL NEWS WITH NICK BUBB:
Ocado: Yesterday’s share price squeeze was driven by rumours of a tie-up with the Swedish supermarket chain, ICA (which could well have been the previously undisclosed European regional player anyway). But today’s announcement of a major licencing deal with the big French group Casino for the development of a CFC in Northern France will shake the bears, as Ocado says that it expects this deal to create “significant long term value to the business”. The analysts call at 8am will no doubt get into the detail. More news on this tomorrow
Pets at Home: Today’s interims from Pets (for the 28 weeks to Oct 11th) show an 11% drop in PBT to £41.7m, but the key news is improved momentum in Merchandise trading (Q1 was +1.5% LFL and Q2 was +5.1% LFL), “as a result of our omnichannel initiatives, accessories range innovations and pricing changes”.
Topps Tiles: In the pre-close back on Oct 4th Topps warned that “market conditions remain challenging and the group expects adjusted pre-tax profits for the 52 weeks to 30 September 2017 will be at the lower end of the current range of market expectations” and today’s final show that adjusted PBT tumbled by 16% to £18.6m. But the surprise news is that Topps has seen a return to LFL sales growth, of 3.2%, over the last 8 weeks and CEO Matt Williams, who also announces a new move into Commercial Tiles, says “While we are retaining our prudent view of market conditions for the year ahead, we are encouraged by this return to like-for-like sales growth”.
News Flow This Week: Tomorrow we get the Motorpoint interims, whilst the ASOS AGM is on Thursday and then the DFS AGM is on Friday. Tomorrow 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 amazingly quickly now, we get the widely followed GFK Consumer Confidence Index for November first thing on Thursday.