Langton Capital – 2017-12-07 – C&C, Apps, Whitbread, Ladbrokes, disruption & other:
C&C, Apps, Whitbread, Ladbrokes, disruption & other:
A DAY IN THE LIFE:
Early meetings this morning so we’d better move straight on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• C&C reports this morning that ‘all conditions of its investment in Admiral have now been satisfied and the transaction has completed.’ It says ‘in addition, Admiral confirms today that it has completed on the acquisition of a portfolio of 17 pubs in England and Wales from Heineken’s Star Pubs & Bars business.’
• CGA Peach reports that there has been a rise of 400% in the number of high street hospitality brands seeking to develop their own app over the last 12mths.
• The latest GO Technology report from Zonal and CGA suggests that 82% of would-be consumers are ‘more likely to use a restaurant’s own app as opposed to a third-party provider.’ This is on the basis of trust – but it could lead to phones and the like becoming clogged with apps where a single aggregator (or a single aggregator plus a couple of the most frequently-used sites) would be more efficient.
• Occasionally individuals say one thing to a surveyor but, over time, they may do another. Evidence with regard to the travel market has shown that aggregators, TripAdvisor, Booking.com etc. do have a very major role to play alongside some of the stronger brands. Only brands with a material degree of loyalty attached will remain on screens over time.
• The Go Tech report does point out that proprietary apps do have the advantage that information gathered therefrom is owned by the operator rather than a tech company. It says that 72% of companies using apps ‘are ready to engage with and share their data in return for instant offers.’ Zonal says ‘feedback from GO Technology shows that mobile ordering and payment are now mainstream and will continue to grow. It’s no coincidence that operators want a slice of the action, with trust and control being key drivers whereby they can surprise, delight and engage consumers directly with their brand.’
• Whitbread shares rose by 7% yesterday as it was announced that activist investment fund Sachem Head held a 3.4% stake in the company. Whitbread had no comment to make
• The FT says that other plants and animals (apart from cattle, pigs, sheep & chickens), perhaps insects and other nuts, should be a part of the human food chain. Coincidentally, NRN today runs a story suggesting that consumers should be willing to eat invasive species. Rabbits might be OK, iguanas perhaps a little less so.
• Luke Johnson, serial F&B sector entrepreneur, has stated that he is not looking to exit the eating and drinking out market, following diversifications of his business interests, the MCA has reported. Mr. Johnson commented about the F&B sector: ‘It’s a £70bn a year market that is very diverse and still very vibrant and offers lots of opportunities. You can always take share even if markets aren’t growing. There has been some ill-advised investment and over-expansion in the sector and there will be a shake-out as a result of that, but that will also create opportunities’.
• The BRC-KPMG sales monitor found that food sales increased 4% in the three months to November, with overall UK retail sales only rising 0.4%. The BRC chief executive Helen Dickinson said: ‘Food sales were responsible for pretty much all the growth this month as higher prices continue to absorb more of the weekly shopping budget. Non-food sales – the focus of Black Friday – fell, as the squeeze on household incomes continues to impact discretionary spend.’
• EI Group has bought back 75,625 shares for cancellation at 144.8p
• The MCA’s Pub Brand Monitor has found that during Q3 2017 pubs have continued to deal with tough trading conditions, while benefitting from high perceptions of value for money.
• Over two thirds of UK consumers have revealed they choose where they buy food based on a venue’s food hygiene rating, according to research conducted by the Food Standards Agency.
• Just Eat’s recently established ‘Restaurant Services’ division could facilitate the supply of catering equipment to the 30,000 restaurants it serves in the UK. The group recently surveyed more than a thousand restaurants on how the delivery firm might add more value for its customers. Robin Clark, business partnerships director at Just Eat, commented: ‘The average restaurant probably spends about £40,000 to £50,000 pounds to set up the equipment in their kitchen. And if you think about the replacement cycle, perhaps once every nine or ten years, then do the maths, people have told tell me this might be right or wrong, but maybe it’s about a £300m market with our restaurants.’
• Kitchup has exceeded its £100,008 target on Seedrs and is currently over-funding. The group has raised £113k off a pre-new money valuation of £900k.
• Pret A Manger is to increase the discount for bringing in a reusable cup from 25p to 50p from the first week in January. In the UK, it is estimated some 2.5 billion disposable coffee cups are thrown away every year and, while recyclable, in practice only a fraction of these are disposed of sustainably.
• Jack Daniels maker Brown-Forman Corp. saw a sharp increase in net income thanks to strong sales both in the US and abroad. The group upgraded its full-year earnings per share projection to a range of $1.90 to $1.98 and pointed to improving economic conditions in emerging markets as further cause for optimism. The company’s CEO, Paul Varga, said: ‘We believe that an ever-improving combination of investment, resource allocation, revenue management, innovation and geographic expansion are important contributors to our acceleration in fiscal 2018.’
• Coca Cola HBC has announced the appointment of Zoran Bogdanovic as the Company’s new Chief Executive Officer with immediate effect.
HOLIDAYS & LEISURE TRAVEL:
• Research from Europe’s largest online travel agency, eDream Odigeo, has found London to be this year’s destination of choice for European and UK travellers. London saw a 24% jump in visitors from other parts of Europe, with the Brexit-related drop in sterling thought to have played a part. eDream’s latest European travel trends and booking behaviour study also shows a rise in UK staycations. The news comes in spite of a tough year for the UK capital, which suffered multiple terrorist attacks in 2017.
• Annual arrivals to the US from China are expected to reach 97m by 2023, causing US hotel companies to tailor goods and services for future Chinese guests. These range from F&B to mobile payment solutions.
• Gatwick has hired construction firm Bechtel to more than double the size of Pier 6 in the North Terminal, a project set to cost £180m and be operational by 2022.
• Europcar will acquire Goldcar after receiving approval from the EU Commission. The deal will expose Europcar to the Mediterranean region, the leisure segment and the low-cost segment.
• GVC may buy Ladbrokes Coral. Price 32.7p in cash plus 0.141 GVC share per Ladbrokes share.
• This amounts to c161p, which compares with Ladbrokes Coral’s share price yesterday of 135.7p. There is a ‘potential further 42.8p’ depending upon how the FOBT review works out.
• Ladbrokes & GVC have announced ‘they are in detailed discussions regarding the possible combination of the two businesses, following the receipt by Ladbrokes Coral of a non-binding proposal from GVC regarding a possible offer for the entire issued and to be issued share capital of Ladbrokes Coral.’
• The two companies say: ‘it is expected that the Possible Offer would be structured as a scheme of arrangement pursuant to which GVC would acquire the entire issued and to be issued ordinary share capital of Ladbrokes Coral.’
• ‘Under the terms of the Possible Offer, Ladbrokes Coral shareholders would be entitled to 32.7p in cash and 0.141 ordinary GVC shares for each Ladbrokes Coral share, and a potential further value of up to 42.8p structured as a contingent value right (“CVR”). The value of the CVR, which would be satisfied by the issue of loan notes by GVC (the “Loan Notes”), would be determined by reference to the outcome of the Department of Digital, Culture, Media and Sport’s current ‘Review of Gaming Machines and Social Responsibility Measures’ (the “Triennial Review”) relating to the regulation of Category B2 Fixed-Odds Betting Terminals (“FOBTs”) and its estimated impact on the run-rate profitability of Ladbrokes Coral’s UK business, after giving effect to any mitigations.’
• Amazon Fire TV will cease having YouTube on it from the start of 2018, according to Google. Experts claim this is the escalation of a business row in which consumers are caught in the fallout.
FINANCE & MARKETS:
• Bitcoin passed $14k yesterday. The value of Langton’s hoard remains at zero.
• A study by the OECD suggests that there are 100k ‘zombie’ companies clogging up the economy of the UK. It says ‘zombie firms represent a drag on productivity growth as they congest markets and divert credit, investment and skills from flowing to more productive and successful firms and contribute to slowing down the diffusion of best practices and new technologies across our economies.’
• Oil down over a dollar at $61.35
• Sterling down vs dollar at $1.3365
• Pound a shade lower vs Euro at €1.1332
• UK 10yr gilt yield down 4bps on slow-growth concerns to 1.23%
• World markets: UK mixed yesterday with Europe and US also down. Asia mostly up in Thursday trading.
• Brexit, lame duck government etc.:
o The UK government has no impact assessments of leaving the EU per David Davis. Last year ago, Mr Davis said his department was ‘in the midst of carrying out about 57 sets of analyses’ on different parts of the economy.
o David Davis has suggested that there is no point in planning. This due to the scale of the likely changes.
o With some justification, himself shambling but occasionally energetic near-septuagenarian Labour leader Jeremy Corbyn was able to call the Brexit process a shambles.
o Lib Dems called the Tory government an “ongoing farce”.
o David Davis comments ‘I am not a fan of economic models because they have all proven wrong.’
o Responsible adult Philip Hammond has said that the £40bn Brexit bill will have to be paid even if talks with the EU fail
PRIOR DAY’S LATER TWEETS:
• Later tweets: Give us strength to endure as David Davis & Jeremy Corbyn neck & neck in shambolic economically destructive delusional old person contest
START THE DAY WITH A SONG:
Yesterday was The Stranglers with Golden Brown. Today’s lyrics are:
I’m about to give you all of my money,
And all I’m askin’ in return, honey,
Is to give me my propers,
When you get home
RETAIL NEWS WITH NICK BUBB:
Merger Watch: Although one of the headlines about the planned Hammerson and Intu Properties merger was that it will create a £21bn asset company, that figure is, of course, the gross asset value, before debt. Intu Properties is heavily indebted and the lowly state of its share price implied that some feared that not only were its assets over-valued, but that it would have to tap investors for more money to prop up its balance sheet and finance its shopping centre development programme, eg in Spain. The fact that Intu’s investors, like John Whitaker’s Peel Holdings (the founders of the Trafford centre in Manchester) were so ready to roll their holdings into 45% worth of new Hammerson shares (with no cash alternative) certainly implies they were not confident about Intu’s options otherwise. And that may explain why not all of Hammerson’s investors will have been thrilled by the
Steinhoff: We were driving to our Mum’s yesterday to supervise the delivery of a new bed and mattress from Benson Beds (see below), when we heard on the radio that Steinhoff’s shares had crashed due to an announcement about “accounting irregularities”. Our instant reaction was that accounting practices in furniture retailing had always been a bit dodgy, although it seemed surprising that the reasonably well-regarded South African CEO Markus Joote had felt the need to fall on his sword over the situation. It turns out that the problem partly relates to a long-running legal challenge over the ownership of the Conforama furnishings chain in France and that Steinhoff may have been consolidating more of its profits than it should have done…Yesterday’s expected results announcement was postponed and a material profit shortfall would be very problematical, because of the size of Steinhoff’s
Bed Watch: In the UK Steinhoff own Harveys and Bensons, as well as Poundland and Pep & Co, so we were amused to read on the Retail Week website yesterday a gushing interview with Poundland and Pep & Co’s European expansion guru Sean Cardinaal, in which he flagged that Poundland has kicked off a trial selling vacuum-packed mattresses from stablemate Bensons for Beds across 20 of its UK stores this week. Priced at £79 for a single mattress and £99 for a double, this foray into the homewares market is obviously a far cry from its previous single-price proposition…
Weather Watch: It is going to feel cold in London over the next few days, but memories about “the weather” are always notoriously short-term and it’s easy to forget that November was relatively warm, so we turned to the Retail weather consultants Planalytics and their regular monthly overview of how last month’s weather “should” have affected trading on the High Street…And their overview for November was that there was mixed demand for Autumn products. The average temperature across the country was slightly above normal at 7.0C, and 1.1 degrees above last year. A sharp cooldown mid-month saw a spike in demand for seasonal products such as outerwear, but “weather driven demand” for the week of Black Friday was actually negative at -11% and the month overall averaged -6%.
News Flow This Week: The ABF (Primark) AGM update is tomorrow morning.