Langton Capital – 2018-03-12 – Escape Hunt, spending, rates, CVAs, GDP & other:
Escape Hunt, spending, rates, CVAs, GDP & other:
A DAY IN THE LIFE:
Looking around in the Capital last week at the cranes, builders’ lorries and all the high-vis jackets in general prompted the thought ‘when will London be finished?’
And by that we mean finished as in complete rather than finished as is ruined by Brexit and the answer is, possibly, never.
True there may be a bit more wattle-and-daub and a little bit less glass and concrete in its future than there has been in its recent past but, in the nearly three decades that I’ve known it, London has done nothing but evolve such that change is the only constant and you can get a pint at 8pm in the Square Mile along with several thousand other City workers any day of the week.
But capacity in general and overcapacity in particular is a whole other thing. We’ve written on it in the past, notes available now for just £100 plus VAT. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Times reports ASK & Zizzi owner Azzurri Group is the subject of ‘casual’ bid interest as PE companies look over the sector for value.
• Wet-led pub co Stonegate has been meeting analysts to outline how its units are currently outperforming the UK industry as a whole.
• EI Group has bought back a further 129,571 of its own shares for cancellation at 125.3p per share.
• Visa has reported that consumer spending fell by 1.1% in February vs the same month last year. This follows a 1.2% fall in January. It says consumer spending has now declined for all but one of the past 10 months.
• Data from the BRC and Springboard shows that footfall at High Streets, shopping centres and retail parks fell 0.5% in February. Visa reports ‘February’s cold snap certainly didn’t alleviate this situation, particularly when we shine a spotlight on high street spending, and recreation and culture in particular, which saw its biggest decline since April 2010.’
• Visa reports ‘as we look ahead into March, consumer spending is at risk of posting one of the worst first quarters on record. Retailers will no doubt be hoping that the milder weather will put a spring in shoppers’ steps.’
• Casual Dining Group subsidiary Las Iguanas has lodged accounts for the year to 28 May 2017 with Companies’ House. Las Iguanas made a profit of £1.7m in the year on revenues of £76.1m.
• La Tasca, owned by Casual Dining Group, has reported results for the year to 28 May 2017 to Companies’ House saying the co made a loss in the year of £2.05m on revenues of £14.4m. Revenue was sharply down on the prior year (which was a 66wk period) partly as a result of the number of units declining from 24 to 14. In the 66wk period to may 2016, the company made a loss of £11.9m.
• Howard Schulz, the Starbucks boss, has said the coffee chain has nothing to apologise for regarding its past low tax payments in Britain as it is ‘very hard to make money in the UK’, per the Telegraph.
• Well-run independent operators could take back market share following a wave of site closures by casual dining brands, writes Lynx Purchasing. Director Rachel Dobson said: ‘Since the start of 2018 we’ve seen a number of well-known casual dining operators announce branch closures, renegotiate with their landlords, and cut back on expansion plans. It’s clear that some brands had over-extended themselves. While every business is dealing with the challenges of more cautious levels of consumers spending, there are still customers ready to eat out if they are offered good value and quality.’
• A coalition of industry and consumer bodies, including UKHospitality, The British Beer and Pub Association, Campaign for Real Ale and the Society of Independent Brewers, has written to the Chancellor the Exchequer ahead of the Spring Statement. The letter calls for a review of the business rates, with UKHospitality Chief Executive Kate Nicholls commenting ‘With cost pressures continuing to squeeze many businesses and with the UK’s withdrawal from the EU fast-approaching, the time is right for the Government to provide decisive support for hospitality businesses’.
• British consumers have spent an estimated £4.46 bn on spontaneous drunk purchases, according to data from Finer. On average people spent around £291.07.
• Sanpellegrino Sparkling Fruit Beverages is to undergo a total relaunch of its premium adult soft drinks range.
• Average spend for breakfast has risen by 9% to £5.42 in February 2018 compared to the same period last year, reports the MCA.
• Mondelez, Ferrero and Mars have signed up to the Be Treatwise campaign, which promotes responsible snacking.
• Larry Tanenbaum O.C. and Junior Bridgeman have signed a non-binding Letter of Intent to acquire the Coca-Cola’s Canadian bottling and distribution business, Coca-Cola Refreshments Canada (CCRC). The acquirer will be a Canadian-based joint venture between Tanenbaum, a prominent Canadian businessman and philanthropist, and Bridgeman, a former NBA player, renowned entrepreneur and current President and CEO of Kansas City-based Heartland Coca-Cola Bottling Company.
HOLIDAYS & LEISURE TRAVEL:
• Parkdean Resorts has promised to spend $42m on its UK holiday parks, which will take the group’s total investment to some £130m since 2016.
• Increased long-haul travel helped Gatwick to its 60th consecutive month of growth in February, with passenger numbers up 0.7% to three million.
• Tui Group is targeting Mexico as a major growth long-haul destination and will increase the number of its hotels in the country from 18 to 20 by the end of the year. Mexico is the fifth largest destination after Spain, Egypt, Greece and Turkey within Tui’s Hotel & Resorts business.
• Ryanair CEO Michael O’Leary said at the Airlines for Europe (A4E) Aviation Summit that ‘the next downturn is imminent’ after three good years for the industry.
• Travelzoo reports three out of four Europeans and North Americans are uncertain about travelling in driverless vehicles, with two in five ‘completely unwilling’. However, the study also showed that people were supportive of Hyperloop travel and the return of supersonic aircraft.
• STR reports US hotel industry saw both RevPAR and ADR grow between 2-4% yoy, despite occupancy being between 0-2%.
• Accorhotels has been cleared by the Australian Competition and Consumer Commission to acquire the Mantra Group, although the move still requires approval from Mantra stakeholders, the Federal Court, and the Foreign Investment Review Board.
ESCAPE HUNT TRADING UPDATE:
• Escape Games company Escape Hunt has updated on trading saying that it has opened its first UK owner-operated site in Bristol. It says ‘this site is the first of three to open this month, alongside Birmingham and Leeds, with a further five locations to open in the coming months.’
• ESC says ‘all of these venues are located in prime sites in the centre of town with high footfall and in close proximity to potential large corporate customers.’ The group acknowledges that have been ‘delays in opening the initial UK sites and their associated revenues but the company has a strong pipeline of sites.’
• ESC says ‘in the week before Christmas, the Company acquired an escape room business in Bournemouth from a single site competitor for a nominal sum. This is a well-invested site with four games rooms which had only recently opened.’
• ESC says there has been a ‘rebranding of the business.’ It says ‘the resulting quality and differentiation of these initiatives has opened up the possibility for exciting partnerships with content providers and franchise opportunities.’ The group will offer ‘higher quality and scalable games alongside the rebranding. This will enable the company to better take advantage of the significant market opportunity, and to consolidate its position as the premium escape room operator for both corporate customers and consumers. The Board carefully considered the consequential delays to the opening programme resulting from this strategic work and determined that the shift in the site opening plan to be well worthwhile and believes it will lead to enhanced longer-term benefits.’
• ESC CEO Richard Harpham reports ‘we are delighted to have opened our first UK site and are excited about the further openings in the coming months. I am proud of the team for delivering such a good quality site and the learnings from our first opening will help our UK roll out and benefit the international franchise network.’
• Langton Comment: Escape Hunt will be the first major player to operate in the UK in what is becoming an interesting area within the experiential space.
• Consumers increasingly demand an activity to either go with their food & drink or alternatively to replace it altogether and Escape Games are expanding into this space.
• And, talking of space, there is likely to be little shortage of it going forward either on the High Street or on retail parks. We await initial trading details of ESC’s newly-opened sites with interest.
• Esports co Gfinity has reported that its Elite Series is to stream exclusively on Facebook until end of 2018. It says ‘the agreement also extends to new territories which are part of Gfinity’s global expansion plans. The agreement provides a major new customer for Gfinity and significant revenue stream.’
• Gfinity CEO Neville Upton comments ‘Facebook is a leading global brand with over two billion people on the platform and this partnership brings to life their commitment to drive innovation and engagement in esports with their huge gaming community. This pioneering deal will enable us to accelerate our plans for growth to reach our Gfinity World Series goal.’
• Online gambling firm GVC has been granted shareholder approval in its acquisition of Ladbrokes Coral. GVC reported net revenue up 17% to €925.6m in 2017.
• If the Government drastically cuts stakes on fixed-odds betting terminals, GVC warned it will be unable to prevent Ladbrokes Coral betting shops from closing. The stakes on FOBT could be cut from £100 to £2.
• Lego has been voted the strongest brand in the UK in the annual Superbrands ranking, beating out other heavyweights including Apple and Gillette. British Airways, meanwhile tumbled from top spot to outside the top 20.
FINANCE & MARKETS:
• Bank of England reports on inflationary attitudes & says the view across consumers is that inflation is currently 3.1% rather than the 2.9% expected in November. Consumers expect inflation in 5yrs time to be 3.4% (down from an expectation of 3.5% in November).
• NIESR reports GDP growth slowed to 0.3% in the quarter to end-February. It says ‘we estimate that economic growth nudged lower to 0.3 per cent in the 3 months to February. Activity has eased slightly and is likely to slow further in March when the full impact of the recent extreme weather conditions will be realised. Economic growth continues to be driven by both the manufacturing and the service sectors, supported by a buoyant global economy, while construction output lags.’
• The ONS reports construction has seen its biggest monthly decline (in January) since 2012. Output fell by 3.4% in the month. The ONS says ‘construction continues to be a weak spot in the UK economy with a big drop in commercial developments, along with a slowdown in housebuilding after its very strong end to last year.’
• US Labor Department says the country added 313,000 jobs in February. This strong number means that interest rate rises are more likely.
• UK visible trade deficit rose to £12.3bn in January. Overall trade deficit fell to £3.9bn.
• UK is seeking (and has so far not got) an exemption to President Trump’s new tariffs.
• Hammond to say that he sees ‘light at the end of the austerity tunnel’.
• Sterling up at $1.3858 and €1.1246.
• Oil up nearly two bucks over weekend at $65.53
• UK 10yr gilt yield up 2bps at 1.49
• World markets. UK, Europe & US up on Friday. Far East mostly higher in Monday trade.
• Brexit etc.:
o Times suggests government privately now working on damage limitation re Brexit rather than anything else. It says ‘it is becoming clearer by the day that Theresa May is leading the country towards a Brexit that she does not truly believe is in the national interest.’ It says of Mrs May re Brexit that she ‘sees it as her duty to implement it.’
o Oliver Wyman & Clifford Chance say over 75% of the impact of Brexit will fall on 5 sectors, financial services, automotive, agriculture, food & drink, chemicals and plastics. The report suggests that smaller firms will be able to do little to mitigate the damage.
o Sky reports David Davis is to ask again for a transition deal.
o Bloomberg reports government does not believe it can meet October deadline for agreeing deal with EU.
o Boris Johnson has told the Telegraph that a no-deal Brexit should ‘not hold any terrors’.
PRIOR DAY LATER TWEETS:
o Later tweets: Best of bunch Fulham Shore warns on profits, scales back rate of openings. Headline EBITDA will be below expectations.
o Monster share price move at Bargain Booze & Matthew Clark owner Conviviality PLC on profit warning. Shares fell by 59%.
o BDO says fashion store sales down 31% in the snow. That’s quite an achievement. People still bought food.
o Landlords akimbo. New Look said to be after 60% rent cuts on some units. Froth well & truly blown off.
• Langton has got the keys to its new office. Triumph of persistence over bureaucracy. Refurb delayed & now moving in hampered by recalcitrant furniture & telecoms operators (‘we’re in no rush, mate’). We’ll be occupying rooms 80-81, no65 London Wall, EC2M 5TU. No telephone number yet so for the moment, please communicate via email. MIFID II is now in operation.
START THE DAY WITH A SONG:
Last Friday’s song was Take Me Out by Franz Ferdinand, which became something of an anthem for a new wave of Noughties indie guitar bands. Kicking off the week, today who sang:
But ya, but ya, one in a million,
Cause you got that shotgun shine
Shame about it, born under a bad sign
With a blue moon in your eyes
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The big story in the Saturday papers was the Daily Mail scoop that the man behind the mysterious Chinese leisure firm Wuji that has gained control of House of Fraser is the controversial tycoon Ji Changqun and that he is a “very close strategic partner” of the previous Chinese tycoon that was backing HOF, Yuan Yafei of Sanpower, who has said “we will support House of Fraser collectively”. The Daily Mail also flagged that the American parent company of Claire’s Accessories is close to going bust. The continuing share price collapse at Conviviality was the lead story in the Times’ stockmarket report (“Accounting error bursts Conviviality’s bubble”), noting that Director buying on Friday failed to arrest the fall, whilst the Daily Mail market report said, colourfully, of the Conviviality profit warning, that “the whole episode has gone down like a creamy White Russian on a
• Sunday Press: Thin pickings in the Sunday papers, in terms of Retail stories, although there was plenty of focus on the Spring Budget Statement by the Chancellor on Tuesday: the Business Leader column in the Observer said the “Chancellor has the surplus to sweeten the bitter taste of eight years of austerity”, but the Economics correspondent of the Sunday Times flagged that the Chancellor can’t go on a spending spree as “the Treasury fears, rightly, what lies ahead for the public finances”. The Observer review of last week had snippets about the news that the John Lewis Partnership Bonus fell to a 64 year low and that Next faces a £30m equal pay claim. The Mail on Sunday maintained the focus on the Conviviality profit warning, highlighting that its wholesale arm Matthew Clark has been putting pressure on suppliers for some time, whilst the Midas investment column in the Mail on Sunday
Today’s Press and News: The Guardian picks up on the weak Visa card spending report for February (spending fell 1.0%) to trumpet “Slew of bad consumer news set to dampen Hammond’s message” and the Telegraph also features the Visa spending news prominently, wrapping it up with the latest BRC-Springboard footfall report for February (which was only 0.5% down). The Guardian also flags that the IPO of the luxury fashion website Farfetch could be valued at £4bn and that the veteran Bill Grimsey is set to lead a second review of the state of the High Street. The Times has a big profile of the 30 year old Old Etonian Liam Rowley, who has become Sports Direct’s Head of Strategic Investments, and also sticks the boot in again on the embattled Dignity, by revealing that it charges more than double the price for funerals in some of its locations than elsewhere.
News Flow This Week: The big event this week is the great Cheltenham Festival of horseracing, which kicks off tomorrow afternoon (and “Honest Nick” will be bringing you his Tips each day). Otherwise tomorrow bring us the French Connection finals and the Spring Budget Statement. Wednesday is then a busy day, with the Dignity finals, the Morrisons finals, the Inditex finals and the Signet Q4/finals in the US.