Langton Capital – 2018-03-06 – Shepherd Neame, Just Eat, Wm Hill, CVAs, snow & other:
Shepherd Neame, Just Eat, Wm Hill, CVAs, snow & other:
A DAY IN THE LIFE:
Bit rushed this morning but here’s a thought for you, babies born since the Millennium are now adults. Their passports, driving licenses or other proofs of ID will show that they were born in the third millennium. On to the news:
SNOWMAGGEDON…A 60 SECONDS’ VIEW:
Does it matter?
• Well yes, it does really. It disrupts routines, makes travel more difficult etc.
• Hence destination pubs & restaurants are hurt as people don’t want to (or can’t) travel
• But after work drinks are impacted as would-be customers dash home
• And, if trains etc. stop running, the kids are off school & the house’s pipes burst, customers don’t have the time, money or inclination to maintain their spending on F&B
• Elsewhere, deliveries are delayed/cancelled, stock doesn’t arrive & staff can’t get to work
The snow in context:
• Last week’s snow was the worst since 2013. If it came every year it could be discounted (like Christmas, Valentine’s Day etc.) as ‘normally abnormal’
• Snow isn’t good news for the trade but it’s less bad in February or March than it would be in December
• Indeed a washed-out August would be more of a problem than is snow in February
• That said, the weather did clobber pay-week. Some units will have been down by 30%, 40% or more for the best part of a week
• Weather disruption makes judging underlying trading conditions difficult
• There will be some bounce back in spend – but most of any shortfall will have been lost
• Trading numbers will come up short but, with the snow clearing before Mother’s Day (11 March), the impact should be relatively limited in scale
PUB, RESTAURANT & DRINK PRODUCERS:
• Just Eat has FY figures for the period ended 31 December 2017, the group has seen revenue increase 45% to £546m and underlying EBITDA rise 42% to £164m. The group grew international revenue by 75%, now representing 44% of the group’s trade. Chief Executive Officer, Peter Plumb commented: ‘2017 was a record year for Just Eat. We helped 21.5 million customers order 172 million takeaways around the world, growing Group revenue by 45% to £546 million. More Restaurant Partners joined our platform, increasing the breadth of choice for our customers and strengthening the Group’s geographical coverage to over 82,000 restaurants’.
• Shepherd Neame reports H1 ‘solid’ numbers ‘ driven by balanced strategic approach and on-going investment’
• Sheps managed LfLs +2.1% in H1. Tenanted LfL EBITDAR +2.1% and oven beer volumes +4.2%
• Sheps ‘Britain’s Oldest Brewer and owner and operator of 322 high quality pubs in Kent and the South East’ reports H1 revenues +6.3% to £84.1m with underlying EBITDA +4.6% at £12.1m.
• Sheps underlying H1 PBT +2.6% at £5.8m. Underlying basic EPS +4% at 31.2p. NAV per share +3.3% at £13.11. H1 DPS +2.3% at 5.75p.
• Sheps says ‘our pubs have continued to deliver a strong performance against the market’. It adds LfL sales +2.1%. CEO Jonathan Neame comments ‘despite more challenging trading conditions, the company has had a solid and satisfactory performance in the first half of the financial year.’
• Sheps CEO says ‘the strength of the business lies in our balanced strategic approach across each of our trading divisions. Thus, where the rate of growth of food sales in our managed estate has slowed, drinks sales have performed well, the tenanted like-for-like performance has been good and the brewing and brands business has enjoyed strong growth.’
• Sheps concludes ‘we are a well invested business and are well positioned to navigate any future economic and political headwinds. In the second half, we have some exciting plans to develop our pub estate further and the brewery will undergo on-going modernisation. We remain focused on our core objectives of making investments for the long term benefit of shareholders.’
• Sheps has geography on its side. That’s not to say it’s not performing well and, it must be remembered, when booze-cruises were negatively impacting volumes, its geography worked against it. The co is performing strongly and looks set to continue delivering.
• Fuller’s is reported to be considering launching a zero-alcohol version of its popular London Pride beer. Fuller’s has said that low-alcohol is becoming a category that ‘you need to be in’
• Over a third of the UK’s top 100 restaurant groups have been found to be loss making by the accountancy group UHY Hacker Young.
• Despite the unusually cold weather, February saw strong trading for many hospitality operators. Catton Hospitality found that from a data set of 100 organisations revenue increased 0.2% compared to last year.
• EI Group has bought back another 317,317 of its own shares for cancellation at 120.3p per share
• Hayman’s gin has officially opened its London distillery in Balham. The 150 year old family business used to distill in the capital but had since moved to distilleries in Essex.
• The American heavy metal band Metallica is planning to launch its own whiskey brand.
• Celebrity chef Jamie Oliver says that obese poor people eat ‘c***’ because they think in a ‘different gear’ and has criticised lectures about healthy food as middle-class. Lifestyle economics head at the Institute of Economic Affairs Christopher Snowdon responded: ‘the anti-obesity crusade is largely a patronising upper middle-class reform movement’, adding it bordered on offensive to claim the disadvantaged have no willpower.
• Drinks group Pure Wild Spirits is looking to raise £750,000 after launching the UK’s first birch sap spirit, Freya, in 2016.
• Brazilian coconut water brand Obrigado is expanding into Europe and the group’s global marketing director for brand owners Grupo Aurantiaca, Mark van de Grift, said: ‘We believe that Obrigado is exactly what the British coconut water category is missing with the brand’s unique patented extraction method which allows the product to be 100% pure, nothing added. Consumers today have an ‘always on’ lifestyle but are ever more health conscious; they also have a real focus on provenance.’
• Shake Shack has announced plans to add more UK sites in 2018, looking at sites either inside or outside of London.
• The calorie content of fast food should have to be cut by 20% by 2024, following recommendations from the UK government health agency. Executing such a directive will be interesting to observe.
• Google is to sell Zagat to The Infatuation for an unspecified amount, according to the The New York Times. Google had acquired the restaurant review company in 2011 for $151m.
HOLIDAYS & LEISURE TRAVEL:
• Colliers International’s latest UK Hotels Market Index reports Edinburgh as the UK’s top hotel development region. Second and third place were Bath and Belfast respectively.
• Industry leaders have warned others would be fraudulent holiday illness claimants, following the sentencing of a couple who made false claims in Turkey. The couple said they had fallen ill with food poisoning while visiting Belek in July 2015, but later plastered pictures of their luxury trip on Facebook.
• UKHospitality, the new association resulting from the merger of the Association of Licensed Multiple Retailers and British Hospitality Association have welcomed the launch of a consultation on the National Planning Policy Framework and has called on the government to ensure protection for hospitality venues.
• William Hill has announced the disposal of William Hill Australia to CrownBet Holdings Pty for an EV of A$300m, equivalent to an equity value of A$313.7m. The company says ‘the disposal follows William Hill’s announcement in its Trading Statement on 15 January 2018 that the Business was undergoing a strategic review as a result of the credit betting ban in Australia and the likely introduction of a Point of Consumption tax in a number of states applying increasing pressure on the profitability of the Business.’
• Wm Hill says ‘the disposal is expected to complete following regulatory approvals’. CEO Philip Bowcock adds ‘we are pleased to announce the sale of William Hill Australia to CrownBet. The disposal follows a strategic review of the Business, launched in January after its profitability came under increased pressure due to the recent credit betting ban and the likely introduction of a Point of Consumption tax. The disposal will allow William Hill to focus on continuing to grow our UK Online and US businesses, particularly as we prepare for the decision on the PASPA appeal due in 2018.’
• The UK games market records £5.11bn worth of sales in 2017, up 12.4% on 2016, in a year which saw Nintendo Switch and VR headsets boom. Console sales grew 30% to £659m, reversing a declining trade and VR headset sales grew 23.5% yoy to over £100m.
• GVC Holdings has agreed to acquire 51% of the shares in Mars, owner of Crystalbet, for €41.3m cash. The betting firm will acquire the rest of the stake in 2021. Completion of the first phase of the deal is expected by the end of March.
• WeChat, the Chinese messaging app, has reached one billion monthly users for the first time. The group still lags Facebook’s 1.5bn users monthly users.
FINANCE & MARKETS:
• PM May says she will make it easier for shops to be converted into residential use. Langton & others have commented that there is no obvious replacement for the CD, DVD, games, electrical & other shops that are leaving the high street. There are simply not enough cash-for-gold or charity shops to fill the gaps. Artisanal use, experiential and residential will have to fill the space. We’ve also got about enough F&B to keep us going.
• UK Services PMI came in for February at 54.5 compared with 53.0 in January. Observers had been expecting around 53.3. The number was a 4mth high. Markit reports that the three PMIs that have been released suggest a quarterly growth rate of around 0.4%, unchanged on Q4 last year.
• Better PMIs suggest early rate rise, potentially in May. Markit reports ‘with Bank of England policymakers sounding hawkish even following the January fall in the PMI to a one-and-a-half-year low, the February upturn in the surveys surely leaves a May rate hike very much in play.’
• Heavy snow in late February and into March will impact March numbers. B of England could see through this & raise rates in May.
• WTO warns Trump proposed tariffs could create trade war, cause ‘deep recession’. WTO calls for ‘calm’ and says we must prevent the dominoes from falling. EU is said to be plotting retaliation against the US.
• New car registrations down 2.8% in February vs a year ago reports the SMMT. Diesel sales were down by 23.5%, driven by government conflicting advice etc., whilst demand for petrol cars was +14.4%.
• SMMT expects a ‘further softening’ in March. Jaguar Land Rover has stopped production because of ‘water shortages’. Severn Trent has said there is nothing to stop the firm from using water normally. JLL could not be immediately reached for comment on its when production would resume. Aston Martin is considering IPO off a valuation of perhaps as much as £5bn.
• CBI reports growth picked up in 3mths to Feb.
• Sterling up vs dollar at $1.3845 and higher vs Euro at €1.1297
• Oil up a dollar at $65.55
• UK 10yr gilt yield up 2bps at 1.49%
• World markets: UK up yesterday with Europe & US also higher. Asia higher in Tuesday trade
• Brexit, politics etc.:
o Nothing to say, all fixed post Chequers & PM’s speech. Hard Left government in waiting still, well, waiting.
PRIOR DAY TWEETS:
• Later tweets: Trade hit by snow. Hoping it will have cleared in time for Mothers’ Day (next Sunday). It should have done. It did hit pay-week, though
• Destination pubs impacted but city centres also quiet as people either didn’t travel or dashed home quickly, forgoing evening drinks
• Lesson for the UK? US analyst Recount says number of restaurants in US fell 2% last year. Says are ‘just too many restaurants…’
• Carluccio’s may CVA. Joins Byron, Prezzo and others. Puts companies that haven’t ‘failed’ at disadvantage. Restaurant Group FY on Wednesday
• Casual Dining Group has good (but very, very historic) trading w. LfL growth of 2.2% in year to 28 May 2017. Market worsened thereafter
• Trump says trade wars are good & easy to win. Give me strength. Europe draws list of US products (bourbon, Harleys etc.) to hit in response
• Mrs May asks EU to be flexible. Cake, eat it, blah blah. UK concedes on divorce bill, on EU migrant rights etc. N Ireland remains unresolved
• UK services PMI shows bound in activity. Markit reports 54.5 against 53.0. Any number over 50.0 implies expansion
• Langton has got the keys to its new office. Triumph of persistence over bureaucracy. Refurb delayed ‘by the snow’. We’ll be occupying rooms 80-81, no65 London Wall, EC2M 5TU. Hopefully before too much longer but, for the moment, please communicate via email. MIFID II is now in operation.
START THE DAY WITH A SONG:
Yesterday’s song was ‘Losing My Religion’ by R.E.M. Today who sang:
You see my old man’s got a problem,
He live with the bottle that’s the way it is
He says his body’s too old for working
RETAIL NEWS WITH NICK BUBB:
• BRC-KPMG Retail Sales for February (4 weeks to Feb 24th): We said yesterday that February was likely to again have had enough Food sales momentum to more than offset the weakness in Non-Food and the outcome was indeed just the same as it was in January…and December…and November, as the survey reported +0.6% LFL growth for the 4th month in a row. But although the good Food/weak Non-Food theme persisted, beneath the surface some shifts were going on and, although the exact Food/Non-Food sales split for February is still buried in the 3-month moving average, it looks as if Food sales growth slackened somewhat, to c2.5%, whilst the overall decline in Non-Food sales looks to have eased a bit, to less than 1%. Indeed, Helen Dickinson, the CEO of the BRC, highlighted that “Furniture, often considered the bellwether of consumer confidence, actually saw sales improve in February as shoppers
• Sports Direct: Fresh from his announcement on Friday morning that “We see huge value for both companies in a strategic partnership between Debenhams and Sports Direct”, Liam Rowley, the new Head of Strategic Investments at Sports Direct, is in the spotlight again this morning, this time with Findel, after the company announced that its Express Gifts business is extending supply trials with Sports Direct and that the hard working Rowley “will attend Board meetings as an observer”. Sports Direct is Findel’s largest shareholder and the man himself now says “We remain a supportive and long-term shareholder in Findel and see significant benefits from developing a deeper commercial agreement between Sports Direct and Express Gifts”. Findel has a market cap of £185m.
• News Flow This Week: The latest monthly Kantar/Nielsen grocery sales figures are out at 8am. Tomorrow brings 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.