Langton Capital – 2018-03-02 – Revolution, G4M, Wagamama, Prezzo, pre-packs & other:
Revolution, G4M, Wagamama, Prezzo, pre-packs & other:
A DAY IN THE LIFE:
Well, we’ve finally lost the last of our ducks.
It turns out the local fox had simply been waiting for the pond to freeze such that the poor fowl had nowhere to run (or splash in this case) and then it was sayonara from the ducks with one of them currently frozen inside the ice making me feel guilty and the others presumably somewhat warmer inside the fox.
Anyway, it is what it is, and they certainly died from natural causes. Moving on, if the school can manage to open today, it’ll be back to something resembling normal. On to the news:
REVOLUTION BAR GROUP H1 NUMBERS:
• Revolution Bar Group has this morning reported H1 numbers to 30 Dec saying sales rose to £73.8m from £66.7m
• Adjusted EBITDA was £8.9m vs £8.7m and adjusted EPS was 9.4p against 10p last year. H! DPS is unchanged at 1.65p
• RBG LfL sales +0.4%. It says: ‘this reporting period comparison was distorted by the absence of New Year’s Eve, one of the most significant trading days in the current period, whereas it was the last day of the comparative period.’
• RBG points to normalised LfL sales growth of 1.9% (if NYE is included in both periods).
• RBG added 4 sites in H1. The Revolución de Cuba opened in Belfast in July has been particularly successful. Currently, the Group trades from 58 Revolution and 14 Revolución de Cuba venues.
• RBG will open 2 more units this financial year with 3 in H1 of 2018/19. The group says the pipeline for further sites remains strong.
• RBG says ‘the Board is confident in the strength of the Group’s brands and its ability to operate and grow, particularly given the scale and strength of its pipeline of new venues and the strong returns achieved from new openings within the last two years.’
• Stressing that it has a future as an independent company, RBG says ‘the Board believes that, given its clear and focused strategy, the quality of Revolution’s sites and customer proposition, and the talent within the business, it is well placed for further growth.’
• New COE Rob Pitcher is to join the company shortly.
• RBG executive chairman Keith Edelman comments ‘I am delighted with our sales performance in the second quarter and over the Christmas period which shows the clear underlying strength of our business and continues to demonstrate the appeal and potential of our brands. New openings are performing particularly strongly, and site refurbishments are delivering healthy returns, meaning the group can pursue its strategy of profitable growth and drive like-for-like sales in its core estate. The business is well set for the arrival of Rob Pitcher in the coming months.’
• Comment: Revolution is trading relatively well but competition remains acute. The fact that last year’s bid from Stonegate was agreed by the company suggested (at least at the time) that Revolution believed it would better serve its shareholders interests by selling out and becoming part of a bigger group.
• Shareholders rejected the deal. Deltic (was Luminar) was (and is) interested as well and the medium-term future of Revolution is up for discussion.
• For the meantime, however, the group remains independent and its comments (and its unit openings) suggest that it believes it can prosper as a standalone company.
• Results appear reasonable, the rating is not demanding and the group maintains that it has further expansion opportunities. Please contact us if you would like to discuss this developing situation further.
PUB, RESTAURANT & DRINK PRODUCERS:
• Discounts continuing into March as pre-packs & CVAs kick in. Pizza Express 25% off food, ASK 30% off mains, Toby two-for-£10 meals
• Speaking of the move to sell Loch Fyne, MCA says it has ‘never delivered the returns Greene King obviously hoped and planned for’. It suggests that an attempt was made to sell the business for £100m two years ago. Loch Fyne is perhaps a special occasion destination.
• The creditors and investors in Prezzo are believed to have signed off on its CVA. In the region of 100 stores will close. Chimichanga will go altogether. Prezzo was founded in 2000.
• CBRE has reported that 2017 turned out to be a good year for the leisure sector in terms of asset values and investment. It may be less good this year for those asset-owners handed back the keys in one of the various pre-packs currently going on. CBRE says operators were ‘poring over any good quality stock and estates yielding opportunities in a sector which was robust.’
• CBRE says macro-economics may define this year but it says leisure ‘fundamentals remain strong’. Whilst there are some that would disagree, CBRE says that ‘the trading environment remains solid at present, suggesting strong UK and European performance for well invested operational real estate.’ UK domestic holidays may be a bright spot but HotStats and yesterday Merlin have said that London remains a challenging market, partly due to oversupply.
• CBRE says ‘the availability of finance is as strong as it has been and if there is a drop in transaction volumes, the increased depth of lender in these sectors should ensure good and still relatively cheap support from a wide range of sources.’
• Food hall Eataly has announced it will open its first UK site in London at Broadgate 2020. The group currently has 40 outlets in 12 countries.
• Wagamama has increased UK LfL sales by 8.2% in its Q3 to 28 January, in the year-to-date, UK LfLs are up 7.3%. The group saw revenue climb 12.5% to £72.1m in the most recent quarter. Chief executive Jane Holbrook stated: ‘We’ve continued to perform strongly with 8.2% UK like for like sales growth in the third quarter and are pleased to have continued to trade ahead of the competition consistently for over three years’.
• Per Telegraph, Casual Dining Group – owner of Bella Italia and Cafe Rouge – is set to increase its number of sites in transport hubs and overseas markets. CEO Steve Richards claimed brands that were relying solely on high street footfall were the ones ‘falling over’ in the current environment.
• The Food & Drink Federation has welcomed an announcement by Prime Minister May stating that EU citizens and their families who arrive in the UK during the Brexit transition period will be able to apply to settle in the UK. The FDF commented: ‘We employ 117,000 highly valued EU workers within the food and drink sector and they play a vital role in guaranteeing the success of the £112 billion ‘farm to fork’ food chain. Since the referendum, EU workers in the UK have lived under a cloud of uncertainty. This announcement will provide clarity for them and their families, and help businesses make decisions in relation to the future of their workforce’.
• The price of the same-line dishes have risen in 55% cases, compared to last year, data from the MCA has indicated. The MCA has reported that 28% of operators have increased their prices by more than 5%.
• One in three customers are using their mobile phone’s payment capabilities, with usage of mobile payments up 328% y-o-y. The number of in-store mobile phone contactless transactions reached 126m this year, worth a total of £975m.
• Family visits to the pub fell 0.6% in 2017, according to data from NPD Pub Tracker. The tracker found an increase in importance of deals and promotions, with a rise of 1.4% of visits prompted by offers (30.8% of all visits).
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook has dropped its summer programme to Cape Verde due to lack of demand and customers who have booked a package holiday to the destination are now being offered a refund or an alternative holiday with a £30 discount per person.
• European hotels have had a strong start to the year, with profit per room 16% year-on-year in January thanks to robust revenue growth and cost savings, per HotStats. The 5.8% year-on-year growth in RevPAR recorded by hotels in Europe in January, to €82.70, was due to a 1.4-percentage point increase in room occupancy, to 58.2%, as well as a 3.3% increase in average room rate, to €142.21.
• Manhattan RevPAR bucked a 10-quarter-long declining trend in the fourth quarter of 2017. An STR report cites the market’s ‘resilient occupancy levels’ as the primary reason for growth, with a 3.7% increase in demand outstripping 2.6% of new supply for the year as a whole. Pricing remained an issue throughout the year, however, as average daily rate fell 1.6% year over year, which led to full-year RevPAR dropping 0.5% year over year.
• Gatwick issued a travel alert warning of a ‘large number’ of cancellations yesterday and urged travellers to check with their airlines before travelling to the airport, due to the ongoing winter freeze. As many as 200 passengers stranded overnight at Glasgow airport where emergency volunteers handed out Red Cross beds and bedding.
• La Quinta reports Q4 performance declined due to hurricanes, but said Wyndham’s acquisition of the company’s franchise and management businesses is expected to close in Q2 2018. During the fourth quarter, 7% to 8% of La Quinta’s hotels were out of service because of damage caused by Hurricane Harvey and Hurricane Irma, President and CEO Keith Cline said.
• The U.S. hotel industry reported flat occupancy during the week of 18-24 February, but ADR increased 1.9% to $127.03 and RevPAR rose 2% to $83.31.
• The German National Tourist Board reports a 3.6% rise in the number of international overnight stays to 83.9m in 2017. Petra Hedorfer, CEO, said ‘Germany is booming on the international market as a holiday destination.’
• Gear4Music has updated on FY trading saying UK sales rose 27% whilst overseas sales rose 69%. Group sales +43%.
• G4M reports website conversion is improving & active customer numbers rose 39% over the year to 474.6k.
• G4M CEO Andrew Wass reports ‘we are very pleased to have grown our revenues from £56m last year to £80m this year, particularly given the heightened economic uncertainty that has impacted many retailers during the last 12 months.
• Mr Wass continues ‘as previously communicated, in 2017 we focused on scaling-up our business to ensure we have the capacity for further growth, investing into our European distribution centres, our new Head Office in York, and expanding our platform development capability.’
• The CEO says ‘EBITDA for the second half of FY18 will be ahead of the six-month period ended 28 February 2017, although as a result of the investments we have made during the year into our customer proposition, infrastructure, staff, systems and marketing, we expect EBITDA for the full financial year ended 28 February 2018 to be in line with our FY17 result.’
• G4M concludes ‘we are confident that we are well placed to significantly grow both revenues and profitability during the next 12 months, as margins normalise, and the up-front investments we have made clearly demonstrate their ongoing value to the business.’
• Escape Hunt has reported that its latest branch opens today in Toulouse, France.
• Sky has signed a deal with Netflix bolstering customer experience by offering Netflix content to ultra HD Sky Q subscribers.
• 2017 was the highest-grossing year ever for UK cinema with around £1.38bn coming in the UK and Ireland.
• UK Interactive Entertainment (Ukie) reports the UK games market growing 12.4% to £5bn in 2016, crediting the growth to online and digital games.
• Mark Zuckerberg has sold nearly $500m of his Facebook shares in February to fund his philanthropic vehicle, the Chan Zuckerberg Initiative (CZI).
FINANCE & MARKETS:
• UK Manufacturing PMI eased slightly in February to 55.2 from 55.3 in January. The Construction PMI will be released at 9.30am
• Nationwide reports that house prices fell for the first time in 6mths in February. They finished the month down 0.3%. Nationwide says that house prices rose by 2.2% in the year to Feb, down from 3.2% in Jan. it says that consumer confidence has declined, household incomes are lower in real terms and mortgage activity is subdued.
• Having said the above, mortgage approvals bounced slightly in January to 67.5k.
• Sterling up a shade vs dollar at $1.3785 but down against the Euro at €1.1244
• Oil down at $63.89
• UK 10yr gilt yield down 5bps at 1.46%
• World markets: UK, Europe & US all down yesterday. Far East lower in Friday trade.
• Brexit, politics etc.:
o Two former PMs who served for 17yrs between them have said that a second referendum on Brexit is called for
o John Major accuses current government of putting politics and their own careers ahead of the interests of the country
o Blair says Brexit is an historic mistake. He says EU should make concessions in order to allow the UK to remain in
o Blair told Sky that he believes there is 50% chance that Brexit will not happen
o Donald Tusk has told PM if Ulster is to stay out of the EU, she must come up with a more workable proposal
o Government’s Business, Energy & Industrial Strategy Committee says ‘hundreds of thousands’ of jobs will be lost in the car industry in the event of a Hard Brexit
o Mrs May to speak today & lay out last Thursday’s (already unravelling) Brexit fix.
o ‘Red lines’ being dropped left and right (e.g. rights of migrants) making a nonsense of Brexit in any case. it is arguably being shaped into the child of a hard core of xenophobic Tories when it was perhaps only an irritated protest vote against the impact of globalisation. Which will persist in any case.
PRIOR DAY TWEETS:
• Later tweets: Prezzo, Jamie’s etc. Restaurants will survive but pain for landlords, restaurant winners will still win but capacity will take time to come out
• HotStats says UK hotels facing challenging start to year due to rising costs, with profit per room declining 3.9%. Too much capacity perhaps?
• Merlin shares bounce on OK update. Group says Midway London was below expectations. Sees 17% drop in market over summer
• EU, Ireland, Labour (& soon voters) now calling out Tories on Brexit. Debacle opening door to Labour, reality hitting the fan etc.
• June 16 Boaty McBoatface protest vote has consequences unforeseen at time? £40bn bill, slower growth, worse services, loss of N Ireland etc.
• Nationwide reports UK house prices down 0.3% in Feb. Up by a below-inflation 2.2% on year. Lower confidence, real incomes, mortgage demand
• Carpetright in talks w bankers. Squeaky bum time for Landlords. Big ticket joins party, demand down as punters maintain spend on essentials
• Gov. sees retail as ‘self-healing’. I.e. doesn’t give a damn. Not till voters notice city centre decay, vandalism etc. Tumbleweedsville R Us
• Mothercare wobbles blamed on likely discounted Toys R Us stock clearance. We’d argue it goes deeper than that
• Toys R Us closure to negatively impact retail park restaurants? I mean, why wouldn’t it? It’s not positive news re footfall, is it?
QUESTIONS, QUESTIONS (5):
• Will the recent snow hurt pub companies? Well, yes, it will. But it’s the reverse of playing your joker in that, if you’re going to have snow, it’s better to have it in February than April or, heavens forbid, the second half of December. Nonetheless, the snow will have been a negative. Expect some companies, those where customers have to travel to reach their destination pubs, to make comments accordingly.
• Langton has got the keys to its new office. Triumph of persistence over bureaucracy. Decorators in at present but we feel able to reveal the address. Clearly, property prices in the area should be expected to rise once it’s known that we are in residence. We’ll be occupying rooms 80-81, no65 London Wall, EC2M 5TU. We should be in early next week but, for the moment, please communicate via email. MIFID II is now in operation.
START THE DAY WITH A SONG:
Yesterday’s song was Californication by the Red Hot Chili Peppers. Today, who sang:
I check my look in the mirror,
I want to change my clothes, my hair, my face
Man I ain’t getting nowhere
I’m just living in a dump like this
RETAIL NEWS WITH NICK BUBB:
• ASOS: Rather oddly, ASOS has announced that the “the Board have been informed by Helen Ashton of her desire to move on from her current role as the Group’s Chief Financial Officer”. And, er, that’s about it, apart from the further information that she will leave at the end of April and that the CEO (and ex-FD) Nick Beighton will fill in until a replacement is found. So we don’t know what “the next stage of her career” will be or what her plans are…A further odd twist to the story is that Helen Ashton is married to the former Home Retail CFO, the well-respected Richard Ashton, who since stepping down from that role has apparently devoted himself to becoming a full-time “Ironman” athlete, at the ripe old age of 50…
• BDO High Street Sales Tracker: We flagged on Wednesday that mighty John Lewis had a mixed time last week, with continuing weak Home sales. And today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday Feb 25th, also flags that things remained poor, with Fashion Store LFL sales down by 4.4%, even though the comp of -4.5% last year was very soft. Including Homewares and Lifestyle chains, total Store LFL sales were also down, by 2.4% (vs -3.5% a year ago). However, overall Online sales were up by 15.4% (versus only +11.5% a year ago), with Online Fashion sales 19.2% up.
• Trade Press (1): Today’s front cover of Retail Week magazine is a photo of M&S CEO Steve Rowe, headlined “Sparking a turnaround”, to flag up the main feature article on “How former M&S Saturday boy Steve Rowe is overseeing the transformation of a national treasure”. RW also has features on “For sale signs” (“How hard would Philip Green find it to sell the Arcadia stable?”) and “Coolest Campaigns” (“The retailers using digital marketing to reach new customers”). In terms of News stories, RW focuses on the news that Primark’s half-year sales will be dented by the warm weather in October and that Marks & Spencer and Tesco have revealed their gender pay gaps. RW went to print before the confirmation of the collapse of Toys R Us and Maplin, but the Editor gets his retaliation in first, thundering in his column that “Amid retail’s travails, don’t miss the successes”. He also
• Trade Press (2): In Drapers magazine today, the Editor looks in her column at the recent redundancies at the much-hyped Online fashion business Missguided and thunders that “Restructuring is a long game, not a quick fix”. The main News story is that the inexperienced new CEO of embattled House of Fraser, Alex Williamson, is assembling his turnaround team, with the appointment of ex-Fenwick’s David Walker-Smith as Chief Product and Trading Officer getting a surprisingly good reception in the trade, but it quotes our trenchant view that the “The HOF business needs more money just to keep going. The risk is still that the banks will require more new equity to be injected than the Chinese owner is willing to stump up”. Drapers also flags that Jones Bootmaker has been sold to fellow footwear chain Pavers through a pre-pack administration (the second in less than a year) and that the
• News Flow Next Week: Next week kicks off with the Tesco/Booker merger completion and the MySale interims. Tuesday then brings the BRC-KPMG Retail Sales for February and the latest monthly Kantar/Nielsen grocery sales figures. On Wednesday we get the Lookers finals and the start of the two day “Retail Week Live” conference in London and then Thursday brings the much-awaited John Lewis Partnership finals.