Langton Capital – 2018-01-15 – Jamie’s, Byron, discounting, experiential, W Hill & other:
Jamie’s, Byron, discounting, experiential, W Hill & other:
A DAY IN THE LIFE:
Don’t know where the time went. But it’s run out. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• MCA reports Byron’s CVA shows that LfL sales fell by 17% in the final two weeks of its 2017 financial year. They were down 5.9% over the year as a whole. Revenue for the last year was up by around 10% at £88m with more than 100% of the increase coming from new stores. Potential new owner Three Hills Capital requires the write-off of c£21m of debt.
• Discounting. Pizza Express 2-4-1 on mains. Zizzi 50% off mains. Café Rouge ditto. ASK 40% off food. Bella Italia 2-4-1. Brown’s 25% off food, Pizza Hut 41% off food etc. etc.
• Fleurets has reported on late 2017 leisure trading saying that ‘the Autumn budget brought about significant change for the pub market at the end of 2017. Beer duty was to be frozen; changing from the initial plan which was to increase in line with RPI. Instead a new duty band will be created, targeting drinks with ABV’s of 6.7% to 7.5%.’
• Fleurets reports ‘the market for ‘competitive socialising’ has gained further traction; Ei Group has launched their first pub ‘Escape Room’ at The Hope in Farringdon, London. In addition, Brighton Pier Group are planning more acquisitions to benefit from this trend, following their purchase of Lethington Leisure (Paradise Island Adventures Golf) for £10.5 million.’
• Moves to premiumisation. Fleurets reports ‘there has been an increase in consumers choosing premium drinks, mixers and craft beers. This has mainly been by young adults (18-34 year olds) with 54% stating they would now choose higher quality drinks.’ Gin is on the up with Fleurets saying ‘over the last year £729 million worth has been sold in bars and restaurants.’
• NFD reports ‘retail food and foodservice will remain in a low growth environment’. It says ‘our aging population is shifting more consumers into lower consumption life stages at both restaurant and retail.’ It adds ‘at the same time, emerging generations illustrate eating patterns that are a departure from established trends of the past.’
• It’s a dog-eat-dog world. NPD reports ‘in a stagnant market, there will be retailers, brands, and restaurants that find growth through a differentiated value proposition, on-trend attributes, and/or superior quality, but that growth will be mirrored as declines for other players.’
• NPD reports ‘almost 8 percent of NPD’s measured universe of $1.8 trillion in consumer purchasing is now online.’ It says ‘in some industries, online penetration is as high as 30 percent. In both retail food and foodservice, e-commerce penetration is far lower than the average across industries but the gap is shrinking fast.’ NPD says ‘we are now at a tipping point where a critical mass has adopted ecommerce in groceries, restaurant meals, and subscription meal kits.’
• Brewhouse & Kitchen reports LfL sales +5.25% in December.
• Imbiba, which backed Drake & Morgan and which now backs Darwin & Wallace, Camm & Hooper and other operators, is looking to raise up to £10m with Enterprise Investment Partners in order to seek out further growth opportunities.
• NRN reports that earnings announcements from US restaurant chains over the Christmas period have been mixed. The US reported its first positive quarter in terms of LfL sales in 2yrs in Q4 2017.
• Premier Foods has commented on weekend speculation that it was exploring the possibility of selling its Batchelors unit to Nissin for over £200m saying ‘Premier Foods plc notes weekend press speculation…The Board has made no changes to its strategy since the strategic update communicated in our preliminary results announcement on 16 May 2017.’ PFD says ‘the Board remains focussed on our strategic objectives, including that of reducing the ratio of net debt to EBITDA below three times.’ It adds that it ‘regularly reviews options to deliver value for all its stakeholders’ but says that discussions with third parties, including Nissin, have ‘not gone beyond an exploratory stage.’ The group is due to update on Q3 trading tomorrow.
• EI Group has bought back another 151,500 of its own shares for cancellation at 141.8p per share
• Research from alcohol education charity Drinkaware shows that almost three in five (58%) of people aged 18-75 who drink alcohol are doing so to cope with the pressures of everyday life. The data is roughly equal across gender, however people in lower social grades were found to be drinking to forget their problems at a statistically higher rate.
• Commenting, Drinkaware Chief Executive Elaine Hindal said: ‘Whilst people might think having a drink after a hard day can help them relax, in the long run it can contribute to feelings of depression and anxiety and make stress harder to deal with. This is because regular, heavy drinking interferes with the neurotransmitters in our brains that are needed for good mental health.
• ‘Twenty first century living can be hard but using alcohol to help cope with its pressures, particularly for people who already struggling, for whatever reason, to keep their heads above water is not the solution… Drinkaware is here to help people make these better decisions by providing a wide range of information and support, like the Drinkaware app, which can help people to track and monitor their drinking.’
The Company Voluntary Arrangement (CVA) proposal document for Byron shows that the burger operator saw like-for-likes tumble 17% in the last two weeks of its 2017 financial year. The document, seen by MCA, reports total revenue for the year stood at £88m compared to £80.4m in the 2016 financial year, although the group slipped from a £91k profit to a loss of £10.3m. Current LfL sales are reportedly -4.4% and Three Hills Capital Partners is only willing to become the new majority shareholder if the CVA is approved and some £21m of debt is written off.
• Mintel research suggests that 40% of out-of-home hot drinks consumers wouldn’t mind paying extra for drinks served in 100% recyclable cups. More than half (51%) of 20-24-year-olds are particularly supportive of more environmentally friendly coffee cups, while 58% of all consumers asked think coffee shops should offer a discount to those who bring in their own mugs. However, nearly three quarters admit that such a move, while supported, would make them cut back on out-of-home drinking. The study also found that 82% of Brits believe coffee shop outlets should provide recycling bins, while three quarters (75%) agree restaurants should use recyclable packaging for takeaway/home delivery.
• Jamie’s Italian is set to close 12 sites with a spokesman saying the Jamie Oliver Restaurant Group was ‘exploring plans to restructure its Jamie’s Italian restaurant estate’. Branches at risk include St Albans, Milton Keynes, Glasgow, Bristol and Cardiff.
• Per Sunday Times, dry January could last all year as Public Health England (PHE) calls for a ‘calorie cap’ on fast-food chains and ready-meals as well as claiming the UK’s alcohol rules are too lax. PHE is set to announce a plan in March.
• Per Sunday Times, Lyceum Capital has pulled a £400m fundraising for Eat, as well as dismissing a raft of senior staff. The private equity firm blamed Brexit, saying international investors ‘are taking a more cautious approach’.
• EY and KPMG are reportedly scrutinising the restaurant sector for businesses in distress as waning consumer confidence and oversupply cause a crisis in the industry.
• Per FT, high street and shopping centre retail has endured a bad start to 2018 as shopper numbers dropped 3.5% in December. Consumers this year were increasingly attracted to shopping online from home rather than trekking to the stores.
• The Telegraph also reports on the drop in footfall for high street retail, saying it was the biggest fall since March 2013. BRC chief executive Helen Dickinson said falling footfall reflected squeezed incomes and a move towards e-commerce.
• Pernod Ricard has called for an end to the use of plastic straws and stirrers, banning them within all parts of its business and encouraging affiliates to do the same.
• Axle Brewing Co’s newest beer will be called ‘Very Stable Genius’ in reference to Donald Trump’s twitter rant last weekend.
• Fortnum & Mason report strong Christmas trading with LfLs up 13% in the five weeks to 31st December, with online sales up 23%.
• Cadbury is set to launch a new brand positioning that will see a greater emphasis given to kindness and generosity that is seen every day.
HOLIDAYS & LEISURE TRAVEL:
• The number of hotel rooms under construction in the US has fallen year on year for the last 3 months according to data from STR. There were 179979 rooms under construction in December down 3.7% on the same month last year.
• Gatwick has announced a record breaking 2017 with annual passengers up by 5.2% to 45.6m. The Airport anticipates that it will handel 50m passengers in the near future.
• The private equity firm, Duke Street has acquired the German operator A-ROSA.
• Post Office reports some sharp falls in in-resort costs. It says some items such as meals & drinks could be 40% down on a year ago. It says falls of 20% or more were recorded in 8 destinations due to year on year gains by Sterling. Sunny Beach in Bulgaria is the best value location.
• Wm Hill updates on trading saying it is ahead of expectations. Group says its ‘full-year adjusted operating profit for 2017 is expected to be c£290m, c11% up on 2016. This is ahead of expectations, reflecting good momentum in both the UK and US markets, stronger gross win margin and the benefits of the transformation programme.’
• Wm Hill says ‘in the nine weeks since the trading statement on 20 November 2017, Retail and Online gross win margins were ahead of expectations and significantly ahead of the same period in 2016, due to favourable football and horseracing results. As a result, wagering growth rates slowed but overall net revenue was very strong. Gaming growth rates continued to accelerate in Online but slowed in Retail. Internationally, the US continued to grow at double-digit rates while Australia was affected by reduced credit betting volumes.’ CEO Philip Bowcock says ‘we have delivered a strong result in 2017, reflecting our focus on rejuvenating Online, growing the US and building an attractive omni-channel proposition. At the same time, we are continuously improving how we enable customers to gamble responsibly. We are excited about the opportunities ahead in 2018 – a World Cup year – with our
FINANCE & MARKETS:
• Rightmove reports house prices +1.1% in Jan this year vs December last.
• Oil up to $69.94
• Sterling stronger vs dollar, now at highest level since Brexit vote at $1.3748
• Pound modestly higher vs Euro at €1.1247
• UK 10yr gilt yield +1bp at 1.33%
• World markets: UK up yesterday with Europe & US also higher. Far East up in Monday trade
• Brexit, government etc.:
o Government apparently ignored warnings on Carillion last year
o Nigel Farage supports second referendum. Telegraph says Farage is deranged.
o Bloomberg says the point is academic as UK parties Labour & Tories are on a Brexit path. FT poll puts Remain at 55%. Will of the people and all that?
o Three times married UKIP leader under pressure after dumps wife no3 for 25yr old model. Latter subsequently makes racist remarks re Royalty, black people and other.
o Labour apparently still worried about losing voters to UKIP. If these are the sort of voters you are worried about, then surely you’d be better off without them?
ADMIN UPDATE, RESEARCH ETC.
• Langton is between offices. Please communicate via email. MIFID II is now in operation.
• We are putting together a compendium of 60-seconds pieces for publication this month at £200 plus VAT, free to clients. Please let us know if you would like a copy.
PRIOR DAY LATER TWEETS:
• Later tweets: M&B says sales performance ‘encouraging’. Xmas period strong & Christmas Day itself was record-breaking
• Discounting. Bella Italia emails offer 50% off mains all weekend. How do competitors not follow suit? Where is the road back?
• US restaurants Q4 in first positive quarter of LfL sales in 2yrs at +0.4% per NRN. But below inflation & footfall negative. Overcapacity
• London hotel boom coming to an end. STR says positive ‘Brexit Effect’ is beginning to wear off. Demand c0% but supply +3%
• Nigel Farage calls for new referendum. Sadiq Khan says no-deal Brexit to cost UK £50bn.
• Search for revenue goes on, LEGO bar to open in secret London popup this year. Okaaaay?
• Banks cut back on unsecured lending. Horse, bolted etc. B of England says it’s still rising at 9.1%, however, some 4x rate of wage growth
START THE DAY WITH A SONG:
Last Friday’s song was America by Razorlight. Today, who sang:
Who is gonna come and turn the tide?,
What’s it gonna take to make a dream survive?
Who’s got the touch to calm the storm inside?
RETAIL NEWS WITH NICK BUBB:
• Saturday Press (1): We had expected the main focus in the Saturday papers to be on the strong trading update from B&M on Friday morning, but instead the spotlight was on another Sky News scoop on Friday night, that the embattled fashion chain New Look is eyeing the closure of up to 60 UK shops, via a potential CVA. The Telegraph flagged that Deloitte’s have been brought in to advise New Look on a potential restructuring and the Times highlighted that the value of New Look’s imperilled bonds rallied slightly on the back of the news. In terms of Retail trading updates, there was, bizarrely, almost more coverage of the news that the venerable London department store Fortnum & Mason reported 13% growth in LFL sales at Christmas (as highlighted by the Telegraph and the Times) than of the trading news from mighty B&M, although there was a bullish comment about B&M in the
• Saturday Press (2): In other news, the main story in the stockmarket report in the Daily Mail was that Jalal Kamani, the brother of the joint CEO of Boohoo, the estimable Mahmud Kamani, appears to have just sold down a chunk of his shareholding in Boohoo, as also noted by the FT market report. The Money section of the Times had a good overview of the winners and losers on the High Street at Christmas, whilst the FT overview of the week highlighted that supermarkets won the battle for share of wallet over Christmas. The Money section of the FT noted that Superdry was tipped as a Buy and Mothercare as a Sell in its sister magazine, the Investors Chronicle, on Friday. The Daily Mail’s “Hero of the Week” was Paula Nickolds of John Lewis and its “Zero of the Week” was the disgraced former owner of BHS, Dominic Chappell, whilst it also profiled Julian Dunkerton of Superdry as its “Big Shot
• Sunday Press (1): After last week’s news overload, Retailing wasn’t front page news for the Sunday papers, although the Sunday Telegraph highlighted an internal memo from new Asda boss Roger Burnley, claiming that it outperformed its main supermarket rivals at Christmas, whilst the Mail on Sunday went big on the news that “vulture funds” are looking to take control of New Look, by buying up its bonds on the cheap. The Sunday Telegraph also flagged that the Directors of many of the “losers” on the High Street, eg Debenhams, Mothercare and Card Factory have been buying their shares, whilst it found a fashion model photo opportunity in the upcoming Burberry trading update next week (which was also flagged up by the Observer). The Observer’s lookback at last week flagged that it had been “a good week” for Rowan Gormley of Majestic Wine and “a bad week” for Steve Rowe of M&S, with the
• Sunday Press (2): The Sunday Times also noted that ex-Waitrose boss Mark Price has urged struggling middle market retailers to fix their “fundamentally flawed” business models. The Sunday Times also highlighted that the upmarket London jeweller Asprey is still losing money, whilst it profiled Mo Iqbal, the former Tile Giant founder and now the boss of the up-and-coming Online business Tile Mountain, and the “Inside the City” column in the Sunday Times looked at Greggs and concluded that although it is “on a roll” its share price is “fully baked”. The Mail on Sunday flagged that Waterstones boss James Daunt wants to stay with the business if it is sold by its Russian owner to private equity and it also noted the strong results posted by The White Company. And the Business Leader column in the Observer looked at the poor Christmas trading results from many High Street retailers,
• Today’s Press and News: The bankruptcy of the Government contractor Carillion is the big story today, but in the world of newspaper publishing the focus is on today’s launch of the new-look tabloid Guardian (it looks just like the old and late-lamented Independent), which has a feature on the success of the Oxfam website. The Times highlights the success of the new BHS website and also flags that the former boss of the collapsed wholesaler Palmer & Harvey, Chris Etherington, has hit back at claims that the business was mismanaged. The FT notes the weak December High Street footfall figures released by BRC-Springboard and the Telegraph also notes the view of the prestigious KPMG-Ipsos Retail Think Tank that the health of the Retail sector deteriorated in Q4 for the first time since 2012 and is set to fall further in Q1.
• News Flow This Week: A rather quieter week lies ahead, but there’s still plenty going on, kicking off tomorrow with the Dunelm Q2 update, the Greggs Q4 update and the JD Sports update. Wednesday brings the Burberry Q3 and the Hotel Chocolat update. Then on Thursday we get the Halfords Q3 update and the ABF (Primark) update, as well as the Ocado new segmental reporting update. And on Friday we get the Bonmarche update and the Pets at Home Q3 update, as well as the ONS Retail Sales figures for December.