Langton Capital – 2018-01-03 – Greene King, discounting, rum, Staycity, music & other:
Greene King, discounting, rum, Staycity, music & other:
A DAY IN THE LIFE:
First day back yesterday and Windows 10 told me that it needed updating.
‘Look’, it said to me. ‘We’ve warned you every day for a week & now we’re really not kidding. Turn this thing off and we promise it’ll work better.’
Or words to that effect but, at stupid o’clock on the first working day of the New Year, just how sensible was it to take the thing on trust?
Well, not very, as it turns out.
‘Your computer may turn itself off and back on again, several times’, the machine told me. And this will take ‘several minutes’.
Well it certainly did. In fact, it may still be turning itself on and off again now, some 24hrs later, because I had to blow the dust off an older bit of kit and cobble an email together as I ran out of time and, though the Soviet-era machine that I’m using at the moment is coal-powered, it seems to work fine. On to the news:
• So how was it? There may not be many readers fully back at their desks this week but please take a moment to let us know. And, perhaps more importantly, how does January feel? Results & feedback later in the week.
ADMIN UPDATE, RESEARCH ETC.
• Langton is between offices. The new office (on London Wall) should be functioning shortly. Please use email with details of phones, address etc. to follow.
• We are putting together a compendium of 60-seconds pieces for publication this month. Suggestions for topics (e.g. delivery, discounting, input prices, cinema attendances, High Street malaise etc.) welcome. The doc will be available for £200 plus VAT, free to clients. Please let us know if you would like a copy.
• Re MIFID II, which will be in force from today, we’re done talking about it. If you believe you shouldn’t be receiving research that you don’t pay for, then either pay for it or hit the unsubscribe button.
PUB, RESTAURANT & DRINK PRODUCERS:
• The Times reports on ‘whispers’ that the recent share price slump has seen a number of PE houses take an interest in Greene King. The paper reports that Patron Capital ‘has been quietly sounding out potential partners for a move on Greene King.’
• Harvester is offering 40% off main meals at selected units. JDW has cut prices for January. Demand tough to measure in what will be a strange week this week. Next week should see trading ‘normalise’. There is a degree of concern as to just what ‘normal’ will turn out to be.
• The MCA has reported that pub operator JD Wetherspoon is cutting prices across its drinks range this January, with the group’s chief executive John Hutson stating: ‘Department stores and shops hold their sales in January so it is the perfect time to have a sale in the pub too. The range of drinks on sale in the pub is aimed at suiting a wide variety of tastes and I believe the January sale will prove popular with customers’.
• The value of the global food services equipment market is set to grow 4.7% over the next 10 years, new research from Future Market Insights suggests. The growing adoption of digital menus and online ordering facilities are key factors driving the rise in demand for kitchen equipment. The industry is expected to be worth £49.1bn by 2027.
• Pret A Manger has increased its discount offering to customers who bring in a reusable coffee cup, from 25p to 50p.
• Wagamama has apologised after workers from one of its London units were threatened with disciplinary action if they called in sick over the festive period.
• A Captain Morgan’s rum advert on Snapchat has been banned following fears that it may be encouraging children to drink.
• UK rum sales are expected to have exceeded £1bn in 2017 following the festive period, just a year after gin passed the same figure. The latest market report released by the Wine and Spirit Trade Association (WSTA) shows that total sales in the UK to September 2017 reached £991m (+5% year-on-year), with sales in the 12 weeks to 9 September up 6%. Citing craft cocktails as a key driver of growth, chief executive of the WSTA Miles Beale said: ‘We are pleased to see a rapid growth in the number of distilleries in the UK which has enabled our innovative spirit makers to expand their ranges with many introducing a rum into their portfolio. In turn, this has led to more and more rum bars emerging and established bars stocking a greater range of rums behind the bar.’
• Big Hospitality reports that Italian marketplace concept Eataly is to open its first unit in the UK, in London’s Broadgate, later this year
UNLISTED COMPANY RESULTS:
• Beds & Bars has reported year-to 1 April 2017 numbers to Companies’ House saying that revenues rose to £47.8m (2016: £41.9m) with EBITDA before exceptional items of £4.5m (2016: £3.9m). Exceptional items were positive. A profit on disposal of assets of £1.5m was recorded as well as a £1.9m gain from refinancing.
• Beds & Bars says the £1.5m profit on sale of its Covent Garden operating unit has ‘made funds available to invest in the refurbishment & extension of ‘The Village’ in Borough High Street, London’. B&B says ‘this project will double the bed stock at the site and transform the bar experience’. It says total cost will be £6.5m – but this should generate c£2.2m of revenue and £1.2m of EBITDA per annum going forward.
• Drake & Morgan has lodged accounts to 26 March 2017 with Companies’ House. The group’s operating company generated £34.5m in revenue (2016: £28.8m). LfL sales growth was 5.0% and adjusted EBITDA was £4.2m. The company reported a profit after tax of £1.06m (2016: £1.68m).
• Drake & Morgan is ultimately owned by holding company D&M 2 Ltd. The latter also owns Daisy Bars Ltd (formerly Corney & Barrow). The company reported EBITDA of £5.0m but a loss before tax, largely due to its high depreciation and amortisation and to its financing structure, of some £3.9m. Shareholders’ Funds are a negative £9.1m. Debt net of cash (as at 1 April) was some £34m.
• Wear Inns Ltd has reported accounts for the year to 31 March 2017 to Companies’ House. The group generated turnover in the year of £14.2m (2016: £13.6m) and reported a loss after tax of £363k (2016: loss £475k).
• Wear Inns reports ‘the company continued to trade well through the financial year, achieving an overall turnover increase of 4.25% due to excellent performances in both wet and food sales. Like for like sales increased by 2.40% with the remainder of the increase being due to the planned changes in the composition of the estate during the year.’ The group reports that, despite its headline losses, it generated EBITDA of £3.5m before central costs versus some £3.2m in the prior year.
• Wear Inns reports ‘whilst 2016/17 was a record year, largely unaffected by the uncertainty created by the Brexit vote, the potential ultimate effects of Brexit can still not be assessed with any certainty. There are signs that the ongoing uncertainty over the final exit deal and UK economic performance in general, including possible further interest rate increases, are beginning to have an effect on public confidence in terms of future disposable incomes, which may ultimately start to feed through into discretionary expenditure.’
HOLIDAYS & LEISURE TRAVEL:
• Steve Endacott, chairman of Teletext Holidays, believes Turkey may be a key destination for the UK Travel Industry in 2018. He cites the scarcity of supply in the Spanish market and a nasty ‘Spanish Route’ price war between airlines as the reasons why the Turkish market might be more prosperous for the industry.
• Aparthotel co Staycity has announced 6 new sites for 2018. CFO Colm Whooley reports ‘last year’s results will show growth in turnover and profits for the group’. He adds ‘Brexit and general economic environment have remained a risk but we have attempted to reduce that risk where possible’. CEO Tom Walsh says ‘this year will be a pivotal one for Staycity with several more deals about to be signed on sites across Europe, as well as the opening of our first Wilde Aparthotel.’
• Sunspot Tours have reportedly hired advisors regarding the sale of the business. Recent accounts show the business having revenues of £65.9m and operating profit of £3.5m. A deal could see the company valued at around £50m.
• Storm Eleanor is set to bring gusts of up to 80mph to parts of the UK on Tuesday, according to the Met Office. Chief forecaster, Paul Gunderson, warned of potential travel disruption.
• US hotel industry data from STR has indicated that the week of 17-23 December saw occupancy climb 7.1% to 45.1%, with ADR rising 0.5% to $106.97 and RevPAR up 7.6% to $48.28.
• Kuoni is set to open a concession store in Peter Jones (west London), this will be the group’s 17 store within John Lewis owned premises.
• Israel recorded a 25% increase in tourism numbers to 3.6m in 2017, generating $5.8bn in revenue. The US, Russia, France, Germany and the UK were among the top sources of tourists to Israel.
• In US cinema, Star Wars: The Last Jedi was the biggest film of the four-day New Year’s holiday narrowly holding off Jumanji: Welcome to the Jungle. Star Wars netted $68.4m over the holiday whereas Jumanji brought in $66.5m.
• Spotify has been issued a lawsuit that accuses the music streaming service of infringing the rights of songwriters and publishers. Wixen Music Publishing is seeking damages of around $1.6bn for more than 10,000 songs.
• The BPI reports that music sales in the UK rose last year at the fastest rate since before the Millennium. Music consumption, largely driven by sharing services such as Spotify, rose by 9.5% last year.
FINANCE & MARKETS:
• UK manufacturing PMI dropped from 58.2 in Nov to 56.3 in Dec. Any number above 50.0 implies growth. Q4 as a whole was the best for over three years.
• Halifax reports that Cheltenham saw the fastest growth in house prices in 2017 at around 13%. Most of the fastest rises were in the south, the slowest growth in Scotland and the North.
• Sterling up vs dollar at $1.3603
• Pound stronger vs Euro at €1.128
• Oil price down c60c at $66.57
• UK 10yr gilt yield up 10bps at 1.29%
• World markets: UK down yesterday with Europe also lower but US higher. Far East markets mostly higher in Wednesday trade.
• Brexit etc.:
o Trade secretary Liam Fox has said that ‘obsessive criticism’ of Brexit ‘must end’.
o FT reports Theresa May is not set to remove David Davis, who was side-lined as Stage I talks reached their conclusion last year, from his role as Brexit Secretary. He is said to be ‘frustrated’ with the job.
o The Times warns that the anti-elite tide that spawned Brexit cannot be turned back in the short term.
o Pessimism is ‘self-defeating’ reports trade sec Liam Fox
o Sacked ex-minister Priti Patel has demanded an investigation into Remain campaigners’ spending
o David Davis has said that he wants financial services included in any trade deal with the EU. EU negotiator Michel Barnier has previously said that there were currently no deals with external countries that allowed unrestricted access for financial services
PRIOR DAY TWEETS:
• Later tweets: Dry Jan is upon us. One day in, it’s getting tricky chez Langton. Bulk of NY resolution brigade still hanging on in there.
• Sky says Pat Val is looking to raise £35m from shareholders to part fund c£150m purchase of Gail’s cafes
• Pragma suggests click & collect could rival delivery, not least, one would hope, for F&B. Get out the house, why doncha?
• YouGov reports most Britons believe job to be safe in 2018. Optimism bias? Circa 0% of newly weds believe they will get divorced…
• Barclaycard says F&B spend > inflation in 2017 whilst other discretionary purchases were cut. Elsewhere, low-earners told to save for Xmas 2018 now.
• Mortgage approvals slip. Oil price at $67. Market down in early 2018 trade. Interest rates to rise further etc. etc.
START THE DAY WITH A SONG:
Yesterday’s song was Police with ‘message in a bottle’. Plenty of those knocking around after Christmas. Today who sang:
‘You start a conversation you can’t even finish it,
You’re talking a lot, but you’re not saying anything
When I have nothing to say, my lips are sealed’
RETAIL NEWS WITH NICK BUBB:
Next: As scheduled and as usual, Next has been the first retailer to report on Christmas trading and the news is a bit better than expected…For the 54 days up to Dec 24th, full price sales were generally expected to be down by c0.5%, but the outcome was up by 1.5% and Next say, inevitably, that “we believe part of this improvement has been down to much colder weather leading up to Christmas”. The sales split was again stark, with Retail down by 6.1% (c8% down LFL) and Online/Directory up by 13.6%. Clearance sales since Christmas have been in line with expectations and so Next have marginally increased their full year profits guidance to c£725m and, although cautious about the year ahead, they have said they can broadly hold that in the new year and so have committed to send another £300m on share buybacks in the new year, which is a useful sign of confidence…,
New Year Tip Watch (1): Having flagged up the press 2018 share Tips yesterday, it’s time, as promised, to unveil our own much-awaited 2018 Tip. And we again have a very hard act to follow, because, following the success of our 2016 Tip of an Online retailer, Boohoo.com, (+264%) we also did pretty well in 2017, with a Food Retail specialist, in the form of good old Greggs, which rose by 44%, from 970p to 1399p. Funnily enough, we thought at one point that we should have stuck with Boohoo, as that continued to soar away in the first half of 2017, peaking at 266p, whilst Greggs took time to get going, but in the end Boohoo was “only” up by 40% over the year, at 189p, so the tortoise beat the hare…
News Flow This Week: Only mighty Next was scheduled to report on Christmas trading this week and there is no sign so far of anybody having to bring forward their scheduled announcements from next week…