Langton Capital – 2018-03-26 – Casual dining ‘crisis’, High Street, discounts & other:
Casual dining ‘crisis’, High Street, discounts & other:
A DAY IN THE LIFE:
First of two short weeks this week. The email will be going out in somewhat shortened form as Langton will be away from the office until next Wednesday. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• KPMG has said that the UK’s casual dining crisis will ‘last long into 2018’. Since we are a quarter of the way through the year already, that perhaps isn’t saying much.
• KPMG comments on recent and rumoured CVAs and says that at least a quarter of casual dining companies had recorded an operating loss at least once over the last two quarters. The accountants point to a cocktail of rising prices & cost pressures alongside capacity increases and a sluggish consumer. KPMG says ‘we certainly anticipate this wave of restructuring to continue over the months ahead, as stakeholders take measures to ‘right size’ their estates to a more profitable core, with the ultimate aim of safeguarding their long-term futures.’ Some 78% of operators have seen debt levels rise over the last 6mths.
• KPMG says ‘with profit margins being squeezed and debt burdens increasing, and all economic indicators pointing to signs that things aren’t going to improve any time soon, restaurant businesses are looking for cost cutting measures through operational and financial restructuring, including negotiations with lessors and in some cases, considering the need for a CVA.’
• Accountants UHY Hacker Young have reported that profits at the UK’s top 100 restaurant groups have fallen 64% in the last year. Hacker Young says 35 of these restaurant chains are now loss-making. The accountants say ‘the restaurant industry has grown ahead of demand in recent years and is now going through a necessary period of consolidation and restricting to remove excess capacity.’ It continues ‘the industry’s woes should be temporary while it deals with this process, as long as consumer confidence can be maintained.’
• Britain’s retailers are facing what has been called a ‘perfect storm’ by UK boss of McDonald’s, Paul Pomroy. The restaurateur said many businesses may be squeezed to corporate failure due to cost inflations. Mr Pomroy said: ‘Food inflation is running at between 4% and 7% across retail, there’s pressure on wage inflation, interest rate movements and now you are seeing businesses becoming less brave in their decision-making’.
• Prezzo has received approval from the majority of its creditors for its CVA. The CVA will see 94 of the chain’s restaurants close, most likely in April and May. Chief executive Jon Hendry-Pickup said: ‘I would like to thank our creditors and landlords for supporting our Transformation Plan. While we continue to be profitable, the pressures on our industry have been well documented. Despite this being a tough decision, the support given today by our creditors shows that they believe we have the right approach to transforming Prezzo in the eyes of teams, customers and stakeholders’.
• The FT has claimed that Carluccio’s has approached multiple groups including Duke Street and Bridgepoint in effects to secure a sale.
• Telegraph reports ‘fears are growing for the future of House of Fraser after it emerged that the chain’s heavy borrowings scuppered an attempt to raise fresh financing.’ It says talks re a cash injection of £40m had collapsed.
• Discounts running into Easter week & possibly April. Pizza Express 25% off food, Prezzo 40% off mains, ASK 30% off mains
• Restaurant and bar group, Drake & Morgan, is to open its second Manchester city centre site, naming the new site The Anthologist. Jillian Maclean, Managing Director of the group said: ‘I’m delighted to be launching our second site in Manchester on the back of The Refinery in Spinningfields. Manchester is a modern and vibrant city that Drake & Morgan loves being a part of, and we are confident that The Anthologist will provide the city with a refreshingly independent bar that comes with a few new exciting additions for our lovely customers’.
• China is set to introduce an extra 15% import tariff on American wine as part of its retaliation against the new tariffs imposed on $55obn worth of Chinese imports.
• HelloFresh has acquired the organic meal kit business Green Chef for an undisclosed sum.
• Brewdog has grown EBITDA 47% to £8.9m for the year ended 31 December 2017, with revenues climbing 55% to £111.5m. The group has said it has a eight more bar launches globally planned for
• Patron Capital is believed to have bid for 60-strong Laine Pub Co, the MCA has reported. The MCA reports that Patron has beaten Duke Street Capital to the deal.
• Next has seen annual profits fall 8% to £726.1m in the 12 months to January, the third year of profit decline. The group saw full priced sales down 7% but online retail increased by 11.2%.
HOLIDAYS & LEISURE TRAVEL:
• The government reports more students in England were taken on holiday during term time over the last academic year. 16.9% of children missed at least a half day of lessons during 2016-17, compared with 14.7% in the previous 12 months.
• The World Travel & Tourism Council (WTTC) reports UK travel and tourism’s contribution to UK GDP grew by 6.2% in the year to £214 billion, above the 4.6% growth in the sector’s global GDP contribution and four times faster than the 1.5% overall growth in UK GDP. The annual study reported a near 8% rise in spending by international visitors to Britain in 2017 and a 5.8% increase in domestic travel.
• Club Med reports total sales up 26% for winter 2017-18 yoy. Total bookings are up 71% and online bookings up 127% with this trend expected to continue for the rest of the season.
• A plan has been put forward to expand Doncaster Sheffield airport that would almost quadruple passenger numbers to 4.7m by 2037 and 11.8m by 2050. Peel Airports claims the scheme would create 70,000 new jobs and bring a £238m tourism boost to the region.
• Travel and tourism contributed to one in five new jobs around the world in 2017. The WTTC’s annual Economic Impact Research study found that the sector added seven million new jobs.
• The first scheduled non-stop flight between Australia and the UK has landed in London’s Heathrow Airport.
• Uber is selling its South Africa ride-share and food delivery business to its regional rival Grab. This follows Uber’s retreat from the Chinese market, where it sold its Chinese operations to local rival Didi Chuxing in 2016.
• Steve Wynn has sold off his entire 11.8% stake in Wynn Resorts for $2.1bn, according to Reuters. Macau’s Galaxy Entertainment purchased 5.3 million of those shares, equating to about 5% of the company with two long-term institutional investors taking the rest.
• Moody’s reports Wynn Resorts’ sale of newly issued stock to Galaxy Entertainment Group is credit positive
• Moody’s further reports that Vivendi’s sale of its stake in video gaming company Ubisoft is credit positive. It says Vivendi is to sell its stake at €66 per share, yielding €2 billion of proceeds for Vivendi.
• Facebook has lost $58bn in market value after its handling of a historic data breach, with Mark Zuckerberg apologising to the 50m affected users. The #deletefacebook movement has been gathering momentum as a result of the current situation.
FINANCE & MARKETS:
• Treasury Secretary Steve Mnuchin has said that, despite threats of retaliation from China, Donald Trump will not back down over trade sanctions
• Sterling up a shade at $1.4161 and €1.411
• Oil up through $70 for the first time in a few months. Trading at $70.32
• UK 10yr gilt yield up 1bp at 1.44%
• World markets: UK, Europe & US down on Friday with Asia mostly down in Monday trade
• Car sales in Britain set for further slowdown this year says Moody’s. UK will be worst performing market in Europe
• Conference Board reports that UK will miss out on a European productivity revival and an uptick in growth that would see it return almost to pre-financial crisis levels.
o Bloomberg reports ‘plot to stop Brexit is gaining strength, and the European Union is helping.’
o Bloomberg says move for new referendum gaining momentum.
o David Davis says it is ‘incredibly probable’ that UK will reach a deal with the EU.
o Jacob Rees Mogg has accused his party of giving away ‘almost everything’
o Cambridge Analytica whistle blower says the company did work for a pro-Brexit group in order to influence opinion ahead of the June 2016 referendum
o Currently unsubstantiated stories also have Russia involved in promoting Brexit, working towards little-nation-ism and disunity in the West
o Vote Leave has been accused of breaching spending limits.
PRIOR DAY LATER TWEETS:
• Later tweets: Fever-Tree co-founder Charles Rolls finds himself long of £82m cash after selling about a quarter of his stake in Fevertree. Nice…
• Begbies says more restaurants in distress. Tell us about it. Hit by sluggish spend, cost increases, discounting & overcapacity
• Conviviality fund raise could wipe out shareholders who don’t follow their money. Tough but such is life
• More British people are choosing to staycations over traveling abroad per WTTC. Hankies for hats, trousers rolled up. Here we go
• Brexit concerns within EU side-tracked by Russia as the latter splits the west. Trump, Brexit, tariffs, jingoism etc.
• Next says ‘in many ways 2017 was the most challenging year we have faced for twenty-five years.’ Full price sales down 7%
START THE DAY WITH A SONG:
Last Friday’s song was Pure Shores by All Saints, but today who sang the following:
Taskmaster burst the bionic zit-splitter
Breakneck speed we drown ten pints of bitter
We lean all day and some say that ain’t productive
That depend upon the demons that you’re stuck with
RETAIL NEWS WITH NICK BUBB:
• “The Daily Retailer” is going to be on holiday now until after Easter. Nick will be back, bright and early, on Tuesday April 3rd.