Langton Capital – 2018-02-01 – AG Barr, Comptoir, Stride Gaming, shrinkage & other:
AG Barr, Comptoir, Stride Gaming, shrinkage & other:
A DAY IN THE LIFE:
Langton was out and about yesterday and as a result can report that you’ll pay between £14.70 (free house selling Young & Co, Timothy Taylor etc.) and £21.20 (Fuller, Smith & Turner managed) for a round of four drinks in Harpenden, Hertfordshire.
As we had to buy several rounds just to make sure that our pricing was accurate, this was rather a tiring exercise.
Nevertheless, Langton, which is office-less at the moment intends to push on until either its corporate wallet (or its health) gives out or it finally gets to sign the lease on its new, London Wall gaff.
Hence with Croydon (the less said) and Harpenden under its belt, the search for decent drinking holes within 45 minutes or so of Central London goes on.
We might make it shortly to Brighton and probably Reading. Cambridge, though superlative, might be a little far and Oxford is clearly not in the least bit attractive but suggestions will be thirstily received. On to the news:
• Langton has put together a compendium of around 3 dozen 60-seconds pieces (c200 words or so each) for distribution at £200 plus VAT, free to clients. Please let us know if you would like a copy.
PUB, RESTAURANT & DRINK PRODUCERS:
• Comptoir reports FY trading was ahead of reduced market expectations.
• Comptoir Group has updated on FY trading saying ‘despite a difficult market backdrop, the Directors are pleased to report that trading for the 52 weeks to 31st December 2017 was above market expectations.’ It says ‘the Company had a strong trading performance during the second half of 2017, ending in a busy December.’
• Comptoir has ‘focused on controlling its costs and improving its operational efficiencies and margins where possible. The Directors expect this focus to continue throughout 2018.’
• Comptoir opened 3 units in H2. It ‘is on course to open two more restaurants in 2018.’ Comptoir says it is ‘pleased to confirm that it has completed the sale of its CPU for £2.6 million (after costs), as initially announced on 19thOctober 2017. The Company ended the year with net cash of £4.5million.’
• AG Barr has updated on full year trading for the year to 27 Jan saying revenue is up c7.5% at £277m. The group says ‘this positive revenue performance reflects the continued success of our innovation alongside strong trading execution across our core brands.’ AG Barr says ‘it is pleasing that we have continued to outperform the total UK soft drinks market and increased our overall market share. Latest IRI available Marketplace data for the 48 weeks to 31 December 2017 saw the market value up 2.7% and volume broadly flat.’
• AG Barr reports ‘since our announcement in March 2017 that over 90% of our portfolio would be moving to lower or no sugar, we have extended our innovation and reformulation programme such that we now expect that up to 99% of our portfolio will contain less than 5g of total sugars per 100ml before the implementation of the soft drinks sugar tax in April this year.’
• AG Barr reports ‘we have not been immune to the external cost pressures faced by many businesses throughout 2017, particularly in relation to the weakness of sterling, however we remain confident of delivering profit growth for the year in line with our expectations.’
• Re the outlook, AG Barr comments ‘it is expected that 2018 will be another challenging year for UK businesses against a backdrop of continued uncertain economic conditions.’ It says ‘in addition the soft drinks industry faces significant changes in regulation, customer dynamics and consumer preferences, bringing both challenges and opportunities.’ The group says that nonetheless ‘we believe that our strong and flexible business model, our portfolio of brands which reflect the requirements of today’s consumer, and our exciting innovation pipeline, ensure we remain well placed to capitalise on opportunities to grow our business and deliver long-term value to shareholders.’
• GVA has reported that ‘2017 was a great year for the UK hotel sector’. It says ‘performance was strong and development activity continued at pace’.
• GVA reports transaction activity in the UK hotel sector was +18% in 2017 vs 2016.
• GVA says ‘we will continue to monitor the impact of supply in three key markets with big supply increases coming online, notably in Belfast, Manchester & Glasgow’. Supply growth in the London market has not been too shabby either.
• EI Group yesterday bought back 210k of its own shares for cancellation at 136.27p per share.
• The BBPA has welcomed proposals for the extension of the Youth Mobility Scheme. It has also called for an urgent debate on how immigration restrictions could limit the access to labour. The BBPA says ‘the Youth Mobility Scheme is for young people who want to live, work and travel in the United Kingdom for a period of up to two years. It is only open to countries which have a reciprocal agreement with the UK, which are mainly in the Commonwealth.’
• BBPA CEO Brigid Simmonds says ‘for the beer and pub sector to succeed post-Brexit, the immigration system, particularly for young people, needs a comprehensive review. Over 80% of UK pubs are small businesses, it is vitally important they have access to the skills they need without the burdensome nature of the current visa system.’ Ms Simmonds adds ‘the BBPA and our members are working hard to attract UK nationals to work with us, but an extension of the Youth Mobility Scheme and revision of the ‘Tier’ system would be hugely beneficial.’
• France is to ban “buy one, get one free” offers on food products in supermarkets. It believes this will help to guarantee better income to struggling farmers & it may also help to combat obesity.
• Moody’s reports that Dr Pepper’s leveraging via its Keurig merger is credit negative. It says that it expects leverage to increase. Moody’s accepts that ‘the companies said they expect KDP to realize $600 million in annual synergies by 2021.’ It says ‘we also expect that they will focus on significantly improving working capital.’
• ALMR says that a radical taxation overhaul is needed to bring business tax into the 21st Century. It says that it ‘has warned that without Government action to overhaul business taxation, the hospitality sector will overpay business rates by £10billion by 2025.’ CEO Kate Nicholls reports ‘the influential Treasury Select Committee rightly pointed out that business rates damage the competitiveness of shops on the high street relative to large out-of-town distributors and online retailers.’ Ms Nicholls says ‘the current system is archaic, completely unfit for purpose and sees hospitality businesses shouldering the burden as high streets are slowly strangled. The Government needs to act on its manifesto promise of root and branch reform otherwise businesses will be waiting until 2025 before they see any change, by which time it will be too late for many.’
• McDonald’s UK extended its McDelivery service to 270 restaurants in the fourth quarter of 2017 in what was its 47th quarter of sales and guest count growth. Paul Pomroy, the CEO of McDonald’s UK, added that over 1,000 restaurants have now been converted to its Experience the Future model, which features self-order kiosks.
• McDonald’s believes a lower overall tax rate of around 25-27% (compared to 31-33%), as a result of December’s tax cuts, will help speed its turnaround plan. The decline will equate to a cash flow benefit of some $400m-$500m in 2018, but not all of the savings will translate to the bottom line. At an investor meeting in March 2017, McDonald’s said it would take several years to complete its Experience of the Future, or EOTF, turnaround, which includes self-ordering kiosks and improved interiors and outdoor eating spaces.
• Britvic’s Pepsi MAX ended 2017 with record high market share, while its Robinsons brand extension Refresh’d was the number one Soft Drinks innovation last year. The soft drinks producer commented: ‘As consumers continue to prioritise health and wellness and opt for low and no sugar soft drinks, Britvic’s recent brand innovations are rising to the challenge of meeting the ever-changing needs of consumers, and driving growth within the category as a result.’
• Service business checklist provider, Trail, has secured a partnership with Filmore & Union, which will implement the checklist platform in all 15 of its restaurants and take-out delis. This latest addition to Trail’s growing portfolio comes after a transformational 2017 where it added a series of notable client partnerships from across the hospitality sector, including: Ei Group, Deliveroo, Bill’s, Bella Italia, Café Rouge, New World Trading Company, Bone Daddies and Tossed, to name a few.
• Amazon has been credited for helping small British businesses increase their exports by over a quarter last year, from £1.8bn to £2.3bn. The news was welcomed by Liam Fox, the International Trade Secretary. ‘The growth in SME exports on sites such as Amazon shows what can be achieved, and I welcome the company’s commitments to help more small companies go digital so they can grow their businesses and create jobs up and down the country,’ he said.
• BBC research into ‘shrinkflation’ has found that, of the 19 products included in its study, 18 of them had been slimmed down.
• Electra Private Equity has called in advisers to work on the possible sale of the British arm of American-themed restaurant chain TGI Fridays. Sources told Sky News that Electra, which bought TGI in a £225m deal from two other private equity investors in 2014, would also consider acquiring rival chains but is more likely to exit the a tricky UK casual dining sector.
• Ex-Punch CEO Duncan Garrood has been brought in to lead c80-strong Bill’s into a ‘new phase of development and expansion across the country’, per MCA.
• Treasury Wine Estates has reported a 37% jump in net profit after tax to AU$187.2m, with core markets ‘outperforming expectations’. Chief Executive, Michael Clarke, commented: ‘I am very pleased to report another strong result in 1H18. Performance was delivered sustainably, with all regions contributing to EBITS growth and margin accretion. ‘Fixed’ regions, Asia, Europe and ANZ, are outperforming expectations, and we are now taking some exciting steps to really transform our route-to-market in the United States, and further strengthen the long-term outlook for the Americas region.’
• Aldi has announced its intentions to half its food waste by 2030.
• Byron has gained approval from creditors for as it implements a CVA that will see a ‘number of restaurants’ close. The CVA will see existing investor Three Hills Capital Partners become the majority shareholder, with Hutton Collins selling half of its current holding to them.
• East Coast Concepts have reported strong trading in their restaurants and bars over christmas with LfL sales up 10% in the six week period ending 7th January 2018, while overall sales increased 48%. Revenue for the group reached £10m for the year up from £6.3m last year.
• The closure of two major UK Coca-cola sites, in Milton-Keynes and Northampton, will affect 288 employees. The sites will be closed in 2019, with CCEP relocating to elsewhere in the UK and expecting to create 121 roles.
• KP Snacks, owner of Hula Hoops, Butterkist and McCoy’s, is set to raise its prices in stores.
• M&S plans to close 14 stores after a disappointing Christmas trading period, a move which will affect 468 staff. Six stores are set to close by April.
• A cut in the fee ATM operators receive from banks each time a customer uses their machine could lead to the closure of thousands of free-to-use cash machines, according to the industry.
HOLIDAYS & LEISURE TRAVEL:
• Technomic has reported that (in the US) ‘the hotel food and beverage space continues to show growth, with overall consumer spending increasing 4.9% in 2017 and showing a robust 5.5% annual growth since 2011.’ It reports that ‘total spending by consumers within hotels, which includes all restaurants, bars and lounges, banquets and catering, room service, in-room minibars and other areas, totaled $48.7 billion in 2017. For 2018, Technomic is forecasting continued growth of 5% in consumer spending, as demand remains strong.’
• KPMG public policy director, Mark Essex, has told inbound tourism leaders to forget any hopes of reversing Brexit, saying ‘The chances of reversing the Brexit decision are about 2%, based on the possibility of a major political event [derailing the process].’
• The boss of IAG, Willie Walsh, is urging government to follow through on a pledge to relax visa rules for Chinese businesses and tourists. Walsh said ‘The USA charges £119 for a ten year visa while Britain charges £767. Making it easier for Chinese businesses and tourists to come to the UK is critical to boosting our economy and enhancing global trading links, especially post Brexit.’
• Stride Gaming will update on trading at its AGM today saying it has ‘positive trading momentum and [is making] continued strategic progress’. The group says ‘Stride Gaming is well positioned to capitalise on further growth opportunities and deliver value for all stakeholders.’
• The Red Card, which analyses the influence of top European football clubs on Chinese social media, reports Manchester United as still the most popular club online in China, with Real Madrid and Bayern Munich second and third respectively.
• Facebook’s overhaul of its News Feed has reduced the amount of time people spend on the social media site, leading to a quarterly decline in users in the US and Canada. Facebook has been making the changes amid increasing scrutiny of its ad business, role in political campaigns and broader social impact. Boss Mark Zuckerberg called 2017 ‘a strong year … but … also a hard one’. The group’s latest results show revenue soared 47% last year to more than $40bn (£28.2bn), while profits jumped 56% to nearly $16bn.
FINANCE & MARKETS:
• Unemployment across the eurozone remained stable at 8.7% in December.
• Eurozone CPI rose by 1.3% in the year to December. It was 1.2% in the year to November.
• Sterling up a shade at $1.4193
• Pound a touch stronger vs Euro at €1.1421
• Oil up at $68.99
• UK 10yr gilt yield at near 2yr high of 1.51%. It was 1.46% on Wednesday
• World markets: UK down yesterday with Europe also down. US up and Asia mostly higher in Thursday trading.
• Brexit etc.:
o Little change, slow-growing UK still mired in Brexit, Mrs May still PM, Tory Party still at war etc.
• Langton is between offices. Please communicate via email. MIFID II is now in operation.
• Later tweets: GfK’s Jan UK consumer confidence survey shows ‘improvement’ from minus 13 to minus 9. Drowning in 9’ of water rather than 13’ is still drowning
• GfK says January’s ‘good news’ re confidence ‘could be a temporary blip rather than a strong sign of recovery’.
• FCA warns hundreds of thousands of homeowners could lose homes if ignore impact of rising interest rates and/or repayment only loan maturity
• Eurozone economy grew 2.5% last year, fastest rate in 10yrs. UK in slow lane. Gov. says Brexit will hurt economy ‘in every way’
• Democracy, which gave us Brexit, Trump & Boaty McBoatface, is still an argument-ender. Second vote likely or unlikely, take your pick
• 9.5% inc. in unsecured lending to maintain consumption unsustainable. Mortgage lending down as we prioritise immediate consumption
• SCS still a bright spot (alongside holidays) in an otherwise very tough market for big-ticket products
START THE DAY WITH A SONG:
Yesterday’s song was Same Jeans by The View, released more than a decade ago now. Today’s song:
Then she lit up a candle and she showed me the way,
There were voices down the corridor,
I thought I heard them say
RETAIL NEWS WITH NICK BUBB:
• News Watch: We were expecting a quiet day for company news, but already Ocado has announced that Luke Jensen (the head of the fast-growing Ocado Solutions IT business) is to be appointed to the Board, Dunelm has confirmed that Nick Wilkinson has started today as CEO, Footasylum has announced that the former JD Sports veteran Barry Bown is to join the company in a consulting role next month (before becoming Chairman on 1 June, as already announced) and, less interestingly, JD Sports itself has announced the formal completion of the merger of its business in Spain and Portugal with Sport Zone.
• M&S Store Closure Watch: We were not surprised to see Putney High Street in yesterday’s M&S 14 stores closure list, as this has always been a dreadful small store in a horrible, traffic-choked High Street. To be fair, the bottom end, near Putney Bridge, is edging upmarket, but the top end, near Putney Station, is pretty downmarket and we assume the M&S site will become another discount store (albeit the old BHS store nearby still seems to be empty)…Loyal M&S Food shoppers have no shortage of other options locally, including M&S Simply Food halls in Barnes, Fulham and Southfields and it’s amazing, in fact, looking at the map, just how many M&S Food stores there are in South-West London (including all the BP stores)…But after April the loyal M&S Clothing customers in Putney will have to venture to Hammersmith, Kew Retail Park, Richmond or Westfield London
• H&M Watch: Constantly falling share prices can often be hard to get excited about and the news that that the struggling Swedish fashion giant H&M saw its shares plunge by over 10% after its final results for y/e November yesterday, after forecasting more disappointing sales in December/January, might generally have just been shrugged off. So top marks to Bloomberg for bringing the story to life yesterday with these words of wisdom about the fact that the shares fell to their lowest since December 2008: “The last time H&M was this low, global financial markets were in crisis, Angelina Jolie was popularizing the maxi dress and Zara didn’t even sell clothing Online”.
• Hammerson Watch: We flagged the snippet yesterday in the Telegraph that Hammerson has announced that sales at its UK shopping centres fell by only 1.3% in December and the full press release had some interesting detail on sales mix, eg Department stores across Hammerson’s UK portfolio reported a strong Christmas, up 3.7% in December sales. Across 2017 as a whole, Hammerson said that “the well-publicised challenges in mainstream women’s fashion continued to impact headline numbers” (and the problems of H&M didn’t do them any favours…). However, reflecting the trend for well-being and ath-leisure, UK sales of sports fashion were up 1.8% in the year and there was a growing appetite for men’s fashion, with the category growing 3.8% across Hammerson’s UK centres. Ahead of the finals on Feb 26th, David Atkins, CEO of Hammerson, said “Our shopping centres performed well at the end of 2017
• News Flow This Week: Tonight brings the Apple Q1 and the Amazon Q4 out in the US. And then tomorrow is Groundhog Day, again…