Langton Capital – 2018-04-23 – Whitbread, Prezzo, Pizza Hut, consumer confidence etc.:
Whitbread, Prezzo, Pizza Hut, consumer confidence etc.:
A DAY IN THE LIFE:
Clearing out the spooky and oft-neglected cupboard-under-the-stairs along with the shed and the garage over the weekend left us thinking that the worst thought to have when it comes to keeping your house tidy and clutter-free is ‘it’ll come in useful one day’.
Because it likely never will and, if it would have been useful, it may have been forgotten, become technologically outdated, rusty and warped or just plain embarrassing.
And you’ll buy a new one anyway, forget you had the old one, use the addition a bit and then consign that one to the depths of some cupboard where that one too could ‘come in useful one day’.
Hence, and largely because we’re all often more human than we are analytical, we took everything out of said dumping grounds, dusted them off a bit and put them back again meaning that, if I ever want to brew more beer, keep gerbils again or spark up the aquarium, or find a use for 50m of rusty wire and several cubic feet of polystyrene, I’ll know where to look.
On the other hand, we could combine a visit to the tip with a monster car boot sale and get rid of the lot. Here’s the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Whitbread boss Alison Brittain to open door to break up of the group at Wednesday’s results suggests Sunday Times.
• Elliott Advisors has taken a stake in Whitbread and is championing a breakup. The idea has been around for many years.
• Marketing Week believes JDW was right to drop its social media participation because its online relationships ‘are almost worthless.’ It says JDW had c44k Twitter followers but it serves 3m pints a week.
• The latest Deloitte Consumer Tracker has shown that confidence rose slightly at the start of this year. It says non-essential spending was flat. Consumers were able to spend on utilities bills, transport and food and drink.
• Deloitte says ‘it remains to be seen to what extent consumers will continue to exercise caution in 2018, and not-too-distant memories of tougher times could yet outweigh consumers’ willingness to spend’.
• Consumers are more confident about their own positions but less confident on jobs and the economy. This is not consistent over time. Delotte reports ‘confidence has crept up against a backdrop of consumer-friendly economic conditions. Unemployment has hit a 43 year low and is stoking wage pressures while falling inflation will boost consumer spending power and has eased the pressure for rate rises.’
• Deloitte comments ‘consumer business, and in particular the retail and casual dining sectors, have had to face unprecedented challenges over the last year. Cautious spending, increased competition and rising labour and rental costs have been the cause for much head scratching across the sector.’
• YO! Suchi has acquired West London-based sushi manufacturer Taiko as part of the group’s plans to create a global multi format and multi brand sushi business. Last November, YO! acquired the 600-strong North American chain Bento Sushi in a c£60m deal. The combined businesses – YO!, Bento and Taiko – have recorded sales of approximately £200m over the last twelve months. YO! Sushi chief executive Richard Hodgson said: ‘This acquisition takes YO! into the next stage of its development, and further expands its global multi-format and multi brand sushi business with extensive manufacturing operations in both the UK and North America.’
• US private equity firm Carlyle Group is readying itself for a possible takeover of Prezzo as the restaurant group negotiates with creditors to secure breathing room on its debt covenants. The Telegraph writes that Carlyle owns more than a third of Prezzo’s senior ranking loans — enough to allow it to block company requests to creditors.
• Conviviality’s auditors KPMG could be investigated by the Financial Reporting Council, which is ‘looking closely at the reported accounting issues at Conviviality.’ Conviviality collapsed after two manual errors on separate spreadsheets sparked a crisis of confidence among its suppliers and lenders, tipping it into a cash flow crisis following a spate of debt-fuelled acquisitions.
• Less that half of KFC’s 900 restaurants are offering customers a full meny more than two months after stores were closed due to chicken delivery problems. Some 700 shops were shut in February after switching from food distributor Bidvest to DHL and Quick Service Logistics.
• Pizza Hut Restaurant’s management team has completed a buyout of the UK chain from its private equity owner Rutland Partners, with funding from Pricoa Capital Group. More than £60m has been ploughed into the company since 2012 as part of a turnaround plan that has increased EBITDA by £17m over the five year period. Jens Hofma, CEO Pizza Hut Restaurants UK said: ‘Five years ago, we began an incredible journey and we’re now experiencing the true extent of the positive impact Rutland Partners’ investment and guidance has made to the business.’
• Star Pubs & Bars’ managing director, Lawson Moutstevens, has told MCA about plans to convert around 100 retail contract agreements under Punch’s Falcon model to Star’s own Just Add Talent agreement. Commenting on trading, Mountstevens said it has ‘been a bit of a mixed picture this year. January and February were ok but March was very difficult. Easter was a bit of a respite but it’s not been easy.’
• Crispin Holder has stepped down as chief financial officer of Jamie Oliver Restaurant Group just six months after joining the operator, per MCA. Ting Ou Yang, who has previously worked for Busaba Eathai and Wagamama, is understood to have joined as interim finance director.
• Pasta and pizza diner Vapiano is preparing to open sites in travel hubs through its partnership with HMSHost.
• Cornish Orchards has launched its new Dry Cider in keg and 500ml bottles. Patrick Gardner, General Manager at Cornish Orchards, said: ‘We’re really excited about this new product. We looked at typical draught cider ranges available at the bar and noticed there was a definite gap in the market for a drier, less sweet option. Dry Cider is perfect for the drinkers who are looking to move away from the sweet ciders that currently dominate the market.’
• Sainsburys is to trial an electric bike delivery service as the group looks to develop its sustainable initiatives.
• Sky News has reported that the Australian owners of Homebase are enticing bidders for the DIY chain with a huge dowry as the group look to exit the UK retail sector.
HOLIDAYS & LEISURE TRAVEL:
• Travel agencies have refuted research indicating the industry is struggling more than any other on the high street. The recent research has shown a net reduction of high street travel stores of 326 in 2017.
• Manuel Muniz, dean of the IE School of International Relations in Madrid has stated that travel and tourism is threatened by growing inequality, a ‘hollowing out of the middle classes’ and ‘a loss of faith in democracy’. Mr. Muniz continued stating a growing inequality is reflected in ‘pessimism and anti-elite sentiment’, he said, in an ‘anti-liberal sense of barbarians at the gate’.
• PwC reports that London, Amsterdam and Prague will see Europe’s highest hotel average occupancy during 2018 at around 82%. PwC said this was due to a strengthening eurozone economy and strong demand from international tourists. Europe welcomed 671 million overnight visitors in 2017, with international tourism arrivals delivering yoy growth of 8%.
• STR reports Q1 European hotel occupancy up 2.2% to 54.5%, ADR up 2.6% to €100.61 and RevPAR up 4.8% to €64.89.
• Airbnb is moving into business events with its new website plug-in tool ‘Airbnb for Events’. Planners can do everything themselves by filling out an online form with details of their event.
• InterContinental Hotels Group will debut its Holiday Inn Express brand in partnership with Al Hokair Group in Saudi Arabia, with 10 sites planned over the next 15 years.
• Sportech, which reports full year numbers tomorrow, has said it has agreed to sell its racing business in the Netherlands to RBP Luxembourg for up to €3.25m. Sportech reports ‘the Proposed Disposal represents an attractive opportunity to realise value following the successful licence extension and restructuring of the business by management as we increase focus on US growth opportunities.’
• The Stars Group has announced that it has agreed to acquire Sky Betting & Gaming from CVC Capital Partners and Sky in a cash and stock transaction valued at $4.7 billion. It says ‘this combination will result in the world’s largest publicly listed online gaming company. “The acquisition of Sky Betting & Gaming is a landmark moment in The Stars Group’s history,” stated Rafi Ashkenazi, the Company’s Chief Executive Officer. “SBG operates one of the world’s fastest growing sportsbooks and is one of the United Kingdom’s leading gaming providers. SBG’s premier sports betting product is the ideal complement to our industry-leading poker platform.’
• Stars Group comments ‘this acquisition will provide The Stars Group with multiple operational and financial benefits.’ It says ‘SBG’s Yorkshire base will operate as a major hub of the enlarged group.’
• Premier League football clubs scored record revenues of £4.5bn last season, up nearly a quarter against the previous year thanks to new broadcast deals. Operating profits doubled to a record £1bn in 2016-17, according to a report by business advisory group Deloitte. Combined pre-tax profit was £500m, against a loss of £110m the previous season and more than twice the former record of £200m reached in 2013-14.
FINANCE & MARKETS:
• EY Club says Bank of England is likely to raise interest rates twice this year. A rate rise could come in May.
• EY Club forecasts growth of 1.6% this year and 1.7% next.
• Nissan is to cut ‘hundreds’ of jobs at its plant in Sunderland. Jaguar last week said that it would lay off 1,000 contract staff.
• Eurozone consumer confidence index rose in April.
• Sterling down vs dollar at $1.4014 but up vs Euro at €1.1419
• Oil price up at $74.06
• UK 10yr gilt yield down 2bps at 1.49%
• World markets. UK & Europe up on Friday but US down and Asia lower in Monday trade.
o Find corner, box yourself in.
o Various suggestions over the weekend that the UK would stay in the customs union after Brexit.
o This would ‘solve’ the Northern Ireland problem but would probably also entail free movement and continued contributions into EU coffers even after the c£40bn divorce bill had been paid.
o The EU has said that selective membership is not an option.
o Remaining in the customs union would prevent the UK from negotiating its own trade deals
o Despite weekend comment that No10 believed it needed to propose remaining in the customs union, it has this morning reiterated Tory plans to leave it altogether.
o The Tories suffered a Brexit defeat in the Lords on the Customs Union last week and the same could happen in the Commons later this week
o The Times accuses the Tories of ‘marching in circles’
o Telegraph reports EU as undertaking a ‘systematic and forensic annihilation’ of the UK’s proposals for the Northern Ireland border. The paper reports a source as saying ‘none of the UK customs options will work – none of them’.
o MPs have warned that a free trade deal with the EU is ‘crucial’ for UK food producers. The Business, Energy and Industrial Strategy committee said ‘to ensure the continued success of our food and drinks industry, the government must provide clarity and certainty on our future relationship with the EU and seek continued regulatory, standards, and trading alignment with the EU in the processed food and drink sector.’ It says that cheap food imports would hit farmers and cost jobs.
o Bloomberg reports UK negotiating position is hear EU position, remain silent, lose weeks of negotiating time and then accept initial proposals.
PRIOR DAY LATER TWEETS:
• Later tweets: CVAs. Hard to see how they won’t skew the playing field, encourage less cautious behaviour and disadvantage successful operators
• Mark Carney has suggested that there will be a number of interest rate rises over the coming years. Will not say when
• Bank Governor Mark Carney has said that uncertainty around Brexit has stopped what would otherwise have been a ‘surge in investment’
• Carpetright says it will “emerge much stronger” after CVA. And why wouldn’t you if you can dump leases, tear up agreements etc.?
• Credit protection cut by HSBC for New Look suppliers. Could lead to working capital swings though suppliers usually protected in CVAs
• BDO sales tracker for week to 15 April skewed by Easter but shows fashion LfL sales down as much as 12.1%. What price the High Street?
• Weather. It’s sunny out there & tills are ringing. Weds, Thurs trade stellar. Wet better than food. And capacity is down in former, too…
START THE DAY WITH A SONG:
Last Friday’s song was Once in a Lifetime by Talking Heads. Kicking off the new week, who sang:
My baby don’t mess around
Because she loves me so
And this I know for sho
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News: The main Retail-related story in the Saturday papers was the news that the US activist investor Elliott Advisors (which is pushing Whitbread to demerge Costa Coffee) has suddenly declared a 1.5% stake in the embattled shopping centre Hammerson: this was the lead item in the Times’ stockmarket report and the Business editorial in the Times noted that, although Elliott’s intentions are unclear, Hammerson’s beleaguered management is under pressure, as “the two Dave’s” (David Tyler and David Atkins) have a habit of “changing their minds”, given their volte face over the Intu bid. The veteran City commentator Neil Collins went further in his FT column, thundering that unless Hammerson can speedily find a way to realise the mooted 790p NAV per share, “the best thing would be for Chairman David Tyler and CEO David Atkins to resign. Their credibility is destroyed”. In
• Sunday Press and News: The failure of the Hammerson bid for Intu is followed up by the Sunday Times, which highlights research by Jefferies showing that Intu’s main shareholder, the property tycoon John Whittaker, has borrowed heavily against his Intu shares: separately the Sunday Times notes the rumour that Whittaker, “the mercurial and secret Deputy Chairman” of Intu, is “really angry” about the collapse of the deal with Hammerson: “Bungled malls merger leaves Intu tycoon licking his wounds”. The Sunday Times also has a big splash about the news that Intu’s former offshoot, the property company Capital & Counties, is under pressure to revise its Earls Court housing development scheme and hand back part of it to the local council. The Sunday Times also flags that KPMG may be investigated by the industry watchdog over its auditing of the bankrupt Conviviality. The Sunday
• Dreams Watch: On Friday we said that the beleaguered South African retail conglomerate Steinhoff had been on our minds recently, because we still can’t quite believe that running the UK side of Steinhoff was the stepping stone for the well-respected Stuart Machin to become the new Marks & Spencer Food MD (notwithstanding his earlier career at Asda). Unfortunately, we made the mistake (again) of saying that the principal parts of Steinhoff UK are Bensons and Dreams, when we should obviously have said Bensons and Harveys! The beds chain Dreams is owned by the private equity firm Sun European and, under the impressive leadership of the former Mothercare UK MD and Asda Living MD Mike Logue, Dreams has recovered very well from the brink of collapse in 2013 to recently win theSunday Times Profit Track 100 survey (having grown sales by £100m in the last 4 years and profits by no less than
• News Flow This Week: A quieter week in Retailing doesn’t really kick off until Wednesday morning, when we get the Boohoo.com finals, but in the world ofshopping centre landlords the Hammerson AGM tomorrow morning will be very interesting, as will the Intu Properties AGM on Wednesday afternoon…Thursdaybrings the N Brown finals, the Carpetright CVA meeting, the French Connection/Toast EGM and the infamous CBI Distributive Trades survey for “April”. First thing on Friday we get the monthly GFK Consumer Confidence index, closely followed by the Travis Perkins (Wickes) Q1 update.