Langton Capital – 2018-02-22 – EasyHotel, discounts, jobs, Accor, interest rates & other:
EasyHotel, discounts, jobs, Accor, interest rates & other:
A DAY IN THE LIFE:
Langton was in trade yesterday evening in Cambridge.
And very pleasant it was too but, as the evening ended at some unknown hour with a kebab, as many good evenings do, we’re a little pressed for time this morning. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Vouchering: Where is the road back to full pricing?
• Discounts still much in evidence. Prezzo 2-4-1. Toby, kids eat for £1. Bella Italia, Beefeater & ASK at 30%, 33% and 25% off food respectively. Delivery pizza also to be had at one third off.
• NPD reports that 28% of foodservice visits currently involve some kind of promotion. The group says that this drives 3bn visits annually or £14.5bn of spend. NPD says that it is difficult for individual operators to stand out in the market. Consumers are used to vouchers and they expect them. NPD reports ‘consumers love saving money and a deal or promotion is perfect for this. To really stand out from the crowd, deals and promotions need to be really impactful. Offering a free product (with nothing expected in return from the customer) will be a welcome surprise.’ NPD continues ‘equally, offering a substantial and worthwhile reduced price for a limited time only is a great way to drive footfall. It’s also a great tactic for creating a buzz with a good chance that news of the promotion will spread via word of mouth.’
• UK Hospitality has been officially launched post the merger of ALMR and BHA. The combined trade body reports it ‘will be the voice of a sector that generates £130bn revenue each year, providing an authoritative voice to over 700 member companies, operating 65,000 venues in a sector that employs 2.9 million people.’
• UK Hospitality reports that ‘hospitality has faced myriad cost pressures in recent years which have severely impacted the sector, with 2017 restaurant insolvencies alone up by a fifth on the previous year.’ The new trade body will be chaired by Nick Varney of Merlin with Kate Nicholls as CEO. Ufi Ibrahim, formerly head of the BHA, is to leave the organisation.
• EI Group yesterday bought back another 228,976 shares at 127.5p per share.
• A group of European retailers has taken some Nestle products from its shelves in a dispute over pricing.
• More than 600 of KFC’s nearly 900 units are open once more following the great chicken shortage of early 2018.
• The new boss of Jamie’s Italian has admitted that complacency and a lack of investment are primarily to blame for the group’s troubles. Jonathon Knight, who became CEO in October, said his ‘root and branch’ review showed Jamie’s Italian had failed to keep up with the competition and had also started to open sites in the wrong locations.
• US-based Cracker Barrel outperformed the rest of the US casual dining industry in its second quarter, with sales up 1.1% despite foot traffic falling 0.9%.
• Operators should increase their draught cider offer as it continues to outperform, and take share from, the rest of its category. Statistics from data experts CGA showed that total cider volume rose marginally by 0.2% over the past 12 months measured as moving annual total (MAT), while draught cider volume increased by 4.6%. Draught cider also accounts for 71% of all cider volume and its share grew by 4.6%.
• Vietnamese brand HOP has taken on a fourth site, in London Wall, and is preparing to launch another fundraise of between £2-£2.5m to finance the opening of up to 10 sites, per MCA.
• The owner of Brighton community pub The Bevy has told PMA that expensive craft beer is ‘pricing out’ drinkers on lower incomes. Licensee Iain Chambers said that artisan brewers are ‘uninterested in appealing to the masses’, adding: ‘The balance between fair wages, good food and decent prices for everyone is very hard to achieve. It is almost impossible for us to run at anything other than break even if you want to keep prices down for people who have low incomes. If the £5 pint becomes the standard for craft beer, then that will be it for craft beer as far as our community is concerned because they don’t have the money for it.’
• The chairman of SSP, Vagn Sorensen, is facing an investor revolt amid concerns that director holds an excessive numbers of boardroom roles. Mr Sorensen’s other current roles include chairmanships of Air Canada and FLSmidth.
• Data from the MCA indicated that pubs are continuing to win share from restaurants as customers demand perceived value for money. Between Q4 2016 and 2017 pubs increased their cut of dinner visits from 27.6% to 28.2%.
• Euro Garages has acquired the 97 Dutch Esso site strong group, NRG Value Retail.
• The Jones Family Project is set to open its second site in Grosvenor’s Eccleston Yards, the MCA has reported. The group have also announced a third site is in the pipeline for later in 2018.
EASYHOTEL SHARE PLACING & TRADING UPDATE:
• EasyHotel has announced the placing of 45,454,546 new Ordinary Shares at 110.0 pence per share. The placing will raise around £50m before costs.
• EasyHotel reports the proceeds of its £50m placing will be ‘primarily utilised to fund the acceleration of the Group’s owned hotel roll-out strategy.’ The group says it has a ‘targeted owned hotel pipeline of 1,122 rooms across the UK and Europe in popular business and leisure city centre destinations.’
• EasyHotel reports that it will build on its existing pipeline & it says that ‘trading for the year ending 30 September 2018 is in line with Board expectations.’ EZH says it ‘expects its committed owned hotel pipeline under development to make a significant contribution to system sales, revenue and adjusted EBITDA going forward and further expects the investment of new capital in the hotel pipeline to be earnings per share enhancing in the medium term.’
• EZH CEO Guy Parsons comments ‘the Group has made excellent progress in line with its strategy to speed up owned hotel development and accelerate the roll-out of franchise hotels to drive returns on investment.’ Mr Parsons continues ‘the strong and ongoing market outperformance of our growing owned hotel portfolio has continued into the current financial year with RevPAR up 10.9% against their competitive set as measured by STR.’ EZH concludes ‘the proceeds from today’s placing will enable us to continue the acceleration of our owned hotel development pipeline, allowing us to take advantage of the significant opportunities within our markets, delivering enhanced returns for our shareholders and underpinning the long-term growth of the easyHotel brand.’
• Langton Comment: Facility creep has created a gap beneath Premier Inn (and to a lesser extent Travelodge) into which EZH has been able to grow.
• The brand is well-recognised & trusted and is synonymous with value. Opportunities continue to present themselves. Demand for today’s placing would appear to have been strong and the discount is narrow. As the group says, the new purchases will materially impact earnings over the longer term.
HOLIDAYS & LEISURE TRAVEL:
• AccorHotels reports strong growth in net profit up 66.4% to €441m with the company doing particularly well across its key markets. Over the course of the year 301 hotels with 51,413 rooms were opened bringing totals to 4,283 hotels and 616,181 rooms. Revenue rose 7.9% to €1.9bn with Chairman and CEO Sebastien Bazin saying ‘AccorHotels’ earnings for 2017 mark another leap in performance, with excellent operating results and record development. The group continues to benefit from positive market trends with a confirmed increase in volumes.’
• Andrew Flintham, former commercial director for Tui UK, will succeed Tui UK managing director Nick Longman instead of joining Thomas Cook as UK chief as many suspected.
• STR reports that occupancy across US hotels in January 2018 rose by 0.9% whilst ADR was up 2%. REVPAR was some 2.9% higher.
• A website glitch has postponed the sale of Eurostar London to Amsterdam tickets. Instead the tickets will go on sale tomorrow.
• Citymapper has dropped its bus service, instead the business will move to taxis with more details expected in the coming weeks.
• MGM Resorts International has said that it is confident 2018 will be a strong year. It told analysts ‘MGM has undertaken a remarkable transformation, aligning all of our brands into one global entertainment brand.’
• The founders of Spotify are to retain control of the company when it goes public this year. The co will employ a controversial share structure that is popular among Silicon Valley tycoons but scorned by many investors
FINANCE & MARKETS:
• UK unemployment rose slightly for the first time in 2yrs in the quarter to December. The number rose by 46k to 1.47m. Some 4.4% of the workforce is unemployed against 4.3% in the last month.
• With a ‘tight’ labour market in some areas and rising wage rates as some EU staff go home, unemployment was not expected to rise. The rise is the largest amount in nearly 5yrs.
• Pay growth has picked up to 2.5% from 2.4% in the year to the prior month of November
• UK borrowing for the financial year to date has fallen to £37.7bn, down by £7.2bn on the comparable period last year. Current estimates are for a full year outturn of around £49.9bn.
• Bank governor Mark Carney has said that interest rates may have to rise more rapidly than earlier envisaged
• US Fed suggests that the world’s largest economy is in good shape. Interest rate rises are on the cards but timing remains uncertain. Betting is on two further rate rises this year
• Sterling down vs dollar at $1.3904. Lower vs Euro at €1.1327
• Oil up a shade at $64.99
• UK 10yr gilt yield down 3bps at 1.55%
• World markets: UK mixed yesterday with Europe mostly up and the US lower. Asia mostly down in Thursday trading
• Brexit etc.:
o Boris Johnson has described Brexit as ‘a mess’ in a private meeting with German officials per The Telegraph
o Remainers are reported to be touring the UK in a bus saying ‘Brexit to cost £2,000 million a week says government’s own report. Is it worth it?’ Two wrongs don’t make a how does the saying go?
o Bloomberg quotes U.K.’s former top official in Northern Ireland as saying ‘I have yet to see anybody provide a sensible solution to the Irish border issue and Good Friday Agreement without both sides of the border being in the customs union.’
o FT has described today’s jaunt to Chequers to sort Brexit out as Mission Impossible. David Davis has said that officials will be ‘locked in a room’. Many out here in the real world would have a suggestion as to what you could do with the key.
o Any Cabinet agreement could result in a many-headed monster (would-be) deal that will be immediately rejected by EU27.
PRIOR DAY TWEETS:
• Later tweets: Do it now and do it hard ‘suggest’ Tory Brexit backbenchers as unemployment rises for the first time in two years.
• Wage growth up a bit. Now 2.5% vs CPI +2.7%. Workers still getting a bit poorer in real terms, unemployment flickers upward
• SHOPOCALYPSE NOW (4): Coming to a High Street near you. Rising costs, slowing sales, Internet competition etc. Outcome? Pretty obvious…
• Hotel Chocolat reports sales up 15%. Good but what, just 15%? Shares slide a little on modest re-basing of expectations
• Discounts still much in evidence. Prezzo 2-4-1. Toby, kids eat for £1. Bella Italia, Beefeater & ASK at 30%, 33% and 25%
• David Davis denies Mad Max UK is his longer term plan. Keir Starmer says he (Davis) cannot be believed.
• UK Cabinet retires to Chequers tomorrow to fix Brexit. That’s alright, then though swivel-eyed Tory loons are still dashing for cliff edge
• Langton is between offices. We should be moving into London Wall later this month but, for the moment, please communicate via email. MIFID II is now in operation.
START THE DAY WITH A SONG:
Yesterday’s song was Smells Like Teen Spirit by Nirvana. Apparently, Kurt Cobain wrote the song after incorrectly interpreting someone who said he smelt like teen spirit — Kurt thought she was referring to his ability to inspire the youth when, in fact, Teen Spirit is a brand of deodorant… Anyway, today who sang:
Black as night, black as coal,
I wanna see the sun blotted out from the sky
RETAIL NEWS WITH NICK BUBB:
• Intu Properties: In the world of regional shopping centres the merger of Hammerson and Intu is grinding ahead (although the technical issues seem to be taking an age), but meanwhile life goes and today’s final from Intu put a brave face on things, despite the gloom about non-food retailing, with the headline “Strong results in a challenging retail environment”. Net rental income was up 2.4% LFL in the second half and NAV at year-end edged up from 404p to 411p. CEO Davd Fischel says “These results are an endorsement of the underlying strength of the intu business. Our active asset management, repositioning of the portfolio, investment in our centres and brand in recent years have put intu in a strong position to mitigate the continuing challenging business environment. Because of this, we remain confident in our future prospects and our ability to deliver further like-for-like rental
• Hotel Chocolat: After yesterday’s interims, we were a bit surprised that the shares of Hotel Chocolat took a c4% knock, as 15% growth in both sales and profits didn’t look too shabby, given the margin and cost headwinds. Only 5% of the 15% first half sales growth came from new store openings, so there was plenty of organic growth across the various channels, with the successful new Wholesale accounts with the likes of Amazon and Ocado delivering 6% of the overall 16% Online sales growth (which was held back by the deliberate pause on subscription sales, pending the current relaunch). And CEO Angus Thirlwell waxed lyrical at the analysts meeting about the growth potential of the business, including Overseas, after the successful start to the franchising push in Hong Kong.