Langton Capital – 2018-04-10 – Pizza, Hostelworld, promotions, Conviviality, gin & other:
Pizza, Hostelworld, promotions, Conviviality, gin & other:
A DAY IN THE LIFE:
So, in one of those triangular theorems that often leave me with a headache, we believe that we’re able to prove that our dog is an idiot.
Because, one, we’re told that the ability to defer gratification is a sign of intelligence. One biscuit today or a pack of biscuits tomorrow? A three year old may waver but a four year old would probably get it and two, we’re told that dogs can understand English.
Of course both theories could be wrong but, if I ask our dog if he would like one biscuit today or a whole lorry load of biscuits tomorrow – or even in two minutes’ time, for that matter – he will always take the single biscuit.
Hence, ipso facto or whatever Latin phrase is appropriate, he either can’t understand English or he’s an idiot or, and here’s the puzzler, both. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• MCA’s Steve Gotham has said that pizza remains a key high street offer but says ‘the dangerous combination of oversupply, weakening demand and accelerating cost increases is likely to burn the fingers of a few more operators yet.’
• The MCA suggest ASK is improving but that Franco Manca has it on value. Carluccio comes out quite well but Prezzo, ironically one of the chains with the most prominent discounts on offer ‘has also seen the largest decline in perceived value for money year on year.’
• Promotions have become embedded. MCA says ‘to help assess the extent that customer traffic has become dependent on offers, it is instructive to look at the reasons behind why consumers are electing to visit different brands.’ Here it says its analysis ‘highlights a number of useful points, not least the much higher importance of food quality over promotional offers in the wider restaurant market.’ It says ‘the danger for Prezzo, however, is that unlike ASK Italian, it is not winning on any other consumer metric and seemingly, not delighting sufficient numbers of consumers when they do visit.’
• Conviviality has sold its retail arm to national wholesaler Bestway for £7.25m, securing continued employment for c2,300 employees and ensuring trade for suppliers and franchisees. The board has admitted that, with Conviviality’s businesses sold, there is unlikely to be sufficient assets to provide any return to shareholders.
• Spirit producers, The Lakes Distillery, is increasing its distribution in World Duty Free shops at airports across the UK.
• Harrogate-based premium spirits brand Slingsby Gin has also signed a deal with World Duty Free that will see its popular London Dry and Yorkshire Rhubarb gins sold at shops in Leeds Bradford, Newcastle, Humberside and Doncaster airports.
• Global Champagne sales are ‘more balanced’ than ever before, with a strong base of medium-sized markets for future growth. In terms of volume, the president of the UMC (Union des Maisons de Champagne) said that France had represented 65% of sales 30 years ago, but today accounts for 50%, with another 25% of shipments going to Europe and the final 25% to the ‘rest of the world’.
• Data from Barclaycard and the BRC report LFL in-store sales of non-food products fell by 4% in the three months to March. However, total spending grew by 2% YoY in March, down from 3.8% in February.
• The BBPA has welcomed the Department for Transport’s release of a document stating the next steps for UK aviation development. The documents outlines the importance of infrastructure connecting roads and rail to airports.
• UK Hospitality has likewise welcomed the moves on aviation saying ‘we are active contributors to the debate, to promote awareness of existing laws prohibiting the in-flight consumption of duty free purchases.’
• The Inn Collection Group has finished renovations to The Seaton Lane Inn in Durham, the 18 room lodge again open for trade.
• Walmart has completed due diligence on the acquisition of the Indian ecommerce firm Flipkart. The US giant is believed to planning a $10-12bn move on Flipkart for a 51% stake in the company.
HOLIDAYS & LEISURE TRAVEL:
• Hostelworld says FY numbers in line but headwinds in Europe & via currency movements remain a feature.
• Hostelworld reports FY numbers, says FY performance was in line with the board’s expectations.
• Hostelworld reports group bookings increased by 6% (to 7.5m bookings) with core Hostelworld brand bookings up 13%. It says it has seen ‘continued delivery on marketing efficiencies’.
• Hostelworld reports net revenue up 8% at €86.7m with sales rising 10% in constant currencies.
• Hostelworld reports adjusted EBITDA up 10% at €26.4m with PBT up 12% at €21.7m and adjusted EPS up 12% at 22.7c per share. Dividend is 17.1c.
• Hostelworld CEO Feargal Mooney reports ‘in 2017, a double digit increase in Hostelworld brand bookings underpinned a record adjusted EBITDA of €26.4m.’ he says the company has a ‘plan to substantially expand our commitment [to its booking functions in Porto] in 2018 in order to increase the pace and volume of new product features and functionality for our customers and hostel partners.’
• Hostelworld says ‘market conditions, particularly in Europe, remain uncertain and while volume bookings are in line with expectations, weaker exchange rates, particularly for the US dollar, remain a significant headwind.’ The company says the board still has ‘confidence that we will see bookings growth in 2018 and beyond.’
• Drew Brown has been appointed as Managing Director of Dominion Hospitality which owns 28 hotels and pubs in the south of England. Dominion Hospitality is owned Stellex Capital Management LP, a private equity firm that invests in middle-market companies.
• STR reports March 2018 London hotel occupancy down 0.9% to 79.8%, ADR falling 1.2% to £138.55 and RevPAR down 2.2% to £110.52 YoY. London supply growth outstripped demand at +1.9% and +0.9% respectively.
• Hilton is set to repurchase 10m shares from HNA Tourism Group. Pricing for the offering has not been set and is conditional on the closing of the offering.
• Accorhotels has purchased the Glasgow-based restaurant reservation and table management platform, ResDiary. Sebastien Bazin, chairman and chief executive at Accorhotels, said: “I am delighted to see ResDiary join the range of services of the group. Our ambition is to support ResDiary in its global expansion, consolidating its scale, and benefitting from its expertise to provide multiple attractive offers to our guests’.
• Jet2 has been named the UK’s best low-cost airline and the seventh best in the world, according to Tripadvisor Travellers Choice Awards. Virgin Atlantic was named Europe’s top major carrier.
• Uber acquires bike-hire firm Jump, allowing Uber customers to hire the electric bicycles through its app.
• Staff sickness caused Gatwick runway to close four times on Monday with only one air traffic controller out of a scheduled three at work.
• Hollywood Bowl reports total revenue growth of +9.3% and LFL revenue growth of +4.0% for the six months ended 31 March 2018. The company continues to expand its portfolio with its 58th and 59th centres opening in Dagenham and Yeovil
• Jumpsquare, a Dutch trampoline business, has been backed by Nordian.
FINANCE & MARKETS:
• Halifax reports house prices in the UK rose by 2.7% in the year to Q1, almost exactly in line with inflation.
• China’s President Xi has warned the US against returning to a ‘Cold War mentality’.
• US inflationary expectations were flat in March. They had been rising.
• Eurozone investor confidence slipped a little in April.
• Sterling up vs dollar at $1.4095
• Pound down a fraction vs euro at 1.1474
• Oil up over a dollar at $69.05.
• UK 10yr gilt yield unchanged at 1.4%
• Bitcoin down at $6,754
• World markets: UK mixed, Europe up and US higher yesterday. Far East mostly up in Tuesday trade
o Bloomberg quotes YouGov poll as saying UK public would like the chance to vote again.
o Reuters reports UK growth to be slower than all other G7 nations in 2018.
o FT says road to Brexit littered with broken promises. It featured Project Fear on the other side but, at this stage, it risks angering almost everyone.
o FT says promises on NHS, no divorce bill, ECJ rulings, fisheries and now immigration have all proved to be false
o FCA said to be facing a £30m Brexit bill
PRIOR DAY LATER TWEETS:
• Later tweets: IPOs in the news with Pret, Deltic and Brewdog all mentioned over the weekend as likely be seeking exits via flotation
• Sugar tax. Yes, fizzy drink manufacturers have changed behaviour. That’s good but what about sickly sweet coffees, fruit drinks and, well, sugar itself?
• High street travails with H of Fraser, Mothercare, New Look & others considering options, Adidas withdrawing from Bricks & mortar etc
START THE DAY WITH A SONG:
Yesterday’s song was Bittersweet Symphony by The Verve. Today, who sang:
Don’t believe in fear
Don’t believe in faith
Don’t believe in anything
That you can’t break
RETAIL NEWS WITH NICK BUBB:
• Card Factory: Today’s finals from Card Factory will be very interesting to see, as the share price has been under a lot of pressure since a modest profit warning back on Jan 11th. This is a well-managed, defensive business that generates a lot of cash, but the City is worried that the special dividend money tree has dried up and that core trading is weakening, as High Street footfall continues to decline and gross margins tighten. Company guidance is for EBITDA of £93m-95m in y/e Jan, down from £98.5m a year ago. At 190p, a lot of bad news is priced in, but the onus is on management to communicate the key issues more clearly and set out a more positive outlook.
• French Connection: There is plenty of gloom around about Fashion retailers, but yesterday’s announcement that the Toast premium women’s fashion chain is being sold to the big Danish group Bestseller (which owns Vero Moda and Jack & Jones, inter alia, as well as a big chunk of ASOS) was an unexpected piece of good news, as the agreed price of £23.3m represents an EV multiple of as much as 12.2x Toast’s EBITDA for the year ended 31 January 2018. French Connection only owned 75% of the Toast business, but, even so, net proceeds of £13.9m to the company will be a useful source of funds, to finance the ongoing turnaround of the core business. Toast sells its products through three channels (Online, a network of twelve retail stores and wholesale arrangements with John Lewis) and generated £19.0m of revenue in y/e Jan. Stephen Marks, the veteran Chairman and CEO of French Connection,
• BRC-KPMG Retail Sales for March (5 weeks to March 31st): We flagged yesterday that the impact of all the snow disruption last month was likely to have offset the benefit of the early Easter to leave overall LFL sales pretty flat, but the outcome of +1.4% LFL was a bit better than expected. Progress, however, was heavily skewed to Food Retailers and although the exact Food/Non-Food LFL sales split in March was, as usual, buried in the 3-month moving averages (of +4.2% and -1.8% respectively), it looks as if Food was well over 6% up LFL and Non-Food getting on for 3% down LFL. The early Easter also boosted Furniture and Furnishings, so the underlying Non-Food outcome was poor, despite a pick-up in Online Non-Food sales growth to 7.9% (which would mean that Store Non-Food LFL sales were nearly 5% down, despite the early Easter). As an early Easter usually adds c1.5% to March sales, the
• Today’s Press and News: The sale of Toast by French Connection gets lots of coverage in today’s papers, not least given the sharp share price rally and the fashion model photo opportunities that it provided on a quiet news day: the headline in the FT is “Toast of the City: Glee over stake sale by French Connection”, whilst the Times runs with “French Connection sells piece of Toast”. Lombard column in the FT looks at the Motor dealers, noting how their share prices shrugged off the poor March new car sales figures, but thundering that “dark clouds are massing over the sector” and that “shares in the Motor dealers, at well under 10 times earnings, are hardly expensive. But that is for a very good reason”. The better than expected BRC-KPMG Retail Sales figures for March also get plenty of coverage: “Glorious food wins the retail stakes” is the headline in the Times.
• News Flow This Week: This morning brings the Card Factory finals. The big event this week is the Tesco finals tomorrow, although the ASOS interims are also tomorrow. Thursday brings the WH Smith interims, the Dunelm Q3 update, the QUIZ pre-close and the Mothercare Q4.