Langton Capital – 2018-05-15 – EI Group, Pat Val, G4M, Elegant Hotels & other:
EI Group, Pat Val, G4M, Elegant Hotels & other:
A DAY IN THE LIFE:
We’ve been cleaning the greenhouse, buying seeds, purchasing pots and compost by the hundredweight and preparing and planting out seedlings recently.
And, whilst it may be therapeutic, my back and my wallet are complaining and, at five quid for a bag of muck, a few quid for a pot, purchasing the plants and all the rest, I reckon our tomatoes, if not eaten by slugs, snails, curious birds or hungry squirrels, will cost around £2.50 each before adding in the not-inconsiderable cost of labour.
Which, I am assured, is around 50x what they will cost in the shops when there’s a glut in the autumn but, you may say, they will taste better.
Well on that issue, it remains to be seen but, if last year’s stunted, wizened effort is anything to go by, I would think it’s safer to assume not. On to the news:
E. I. GROUP – H1 NUMBERS. GROUP REMAINS ON TRACK ETC…
EI Group has this morning released H1 numbers for the 6mths to end-March 2019 and our comments are set out below:
• Enterprise reports underlying EBITDA of £139m (2017: £140m)
• Group says underlying PBT is £57m versus the same amount last year
• Underlying EPS is 9.8p (2017: 9.6p)
• The group says it has now completed its £20m share buyback programme with purchase and cancellation of 15m shares at an average price of £1.32
Performance by Division:
• Pub Partnerships’ saw LfL net income rise 0.6% (H1 2017: up 1.6%)
• The group says ‘average annualised net income per pub rose by 4.3% to £80,900 (impacted by churn)
• In Commercial Properties, EIG says it now has 351 pubs (2017: 279) and says these properties are ‘generating net annualised rental income of £25m on assets valued at £289m, representing a yield on the freehold assets of 7.7%’
• In Managed Pubs, EIG reports LfL sales sales growth of 6.6% (H1 2017: 3.8%) with the ‘performance on track’
• Group now has 276 (H1 2017: 136) pubs trading within its 100% owned managed operations business
• There are 43 pubs within the Managed Investments division versus 22 at this time last year
Balance Sheet, Debt etc.:
• EI Group says it has ‘strong operating cash flows and robust balance sheet’
• It generated £125m of cash-flow in H1 vs £117m last year
• The group benefited from disposal proceeds of £34m which ‘largely funded capital investment of £42m’
• The group says it has ‘sufficient available bank facilities to repay at par the £100.5m corporate bonds due in December 2018’
Company comments on performance:
• CEO Simon Townsend says ‘as we look to 2020 and beyond, our strategy continues to evolve, reflecting our successes to date, changes in the marketplace and our continuing drive to unlock embedded value within our estate.’
• Mr Townsend says ‘we aim to optimise the returns delivered from each of our assets by ensuring they trade in their optimal format and operating model.’
• Momentum has been maintained ‘despite challenging trading conditions’
• The group confirms ‘we are on track to deliver positive like-for-like net income growth in our leased and tenanted business for the full year.’
• Managed will become a larger part of the business. Mr Townsend says ‘our managed investments and commercial properties businesses are successfully building the value-enhancing characteristics of portfolio quality and scale, consistent with our objective to monetise their value over time.’
• The group will continue to ‘deliver returns to shareholders’ via buybacks etc. ‘when appropriate and to drive long-term growth in shareholder value.’
• EIG has reassured that its strategy remains on track and that it has weathered (no pun intended) recent tough trading relatively well.
• The group’s evolution continues.
• Running a managed business is materially more hands-on, and this process will take time.
• There is some evidence that wet-led units are holding up better than food-led outlets and this should support Enterprise leased and tenanted units.
• Into 2017, the bid for rival operator Punch Taverns helped sentiment but much of EIG’s recovery has been down to self-help and the reorganisation.
• EIG’s plan appears solid. Execution remains a challenge and there are some external concerns, Brexit, the pubs code etc. but trading is in line with expectations.
• This would appear, though these are early days, to be working. The group’s shares are cheap but normalisation is critical. Buy-backs are useful but a dividend would be helpful as a gesture of commitment going forward.
PUB, RESTAURANT & DRINK PRODUCERS:
• Patisserie Holdings has announced a 9.1% increase in revenue to £60.5m and a 14.2% rise in pre-tax profit to £11.1m in its first half results to 31 March 2018. The group’s diluted earnings per share grew 13.2% to 8.92p and a 20% increase to its interim dividend to 1.44p was also revealed. Patisserie opened 10 new stores in the period, all funded from operating cash flow, and now trades from 206 sites. Executive chairman Luke Johnson commented: ‘The group has delivered a strong set of results in a sector which has well documented challenges. Our vertically integrated and flexible business model enables us to deliver consistent profits with our affordable treats remaining popular with our very diverse customer base. We remain focused on organic growth and with a strong balance sheet continue to assess acquisition opportunities which will have a strategic and cultural fit.’
• Michael Saunders, the former head of Bibendum, has been announced to be returning to the group by C&C Group. C&C CEO Stephen Glancey commented; ‘We are delighted to have Michael and James back in the business. Bibendum is a real jewel and under Michael’s leadership, we expect to see Bibendum continue to flourish, working hard to deliver the very best wines, spirits and services to our customers’.
• The MCA has reported that Deltic has secured a new £20m debt facility from HSBC as the group states it sees opportunities in the casual dining sector and has several sites in the crosshairs.
HOLIDAYS & LEISURE TRAVEL:
• Elegant Hotels Group, the owner of seven freehold hotels and a restaurant on Barbados, grew revenue 8% to $38.8m in the six months to 31 March 2018. Revenue per available room (RevPAR) was up 5% to $292 and average daily rates were also pushed up 2% to $433, although this was not enough to stop a 7% slide in adjusted profit before tax to $11.4m. Elegant says it has a net asset value per share of 199p compared to its share price of 87p. The group’s CEO, Sunil Chatrani, said: ‘The high end hotel market in Barbados appears to be stabilising after several challenging years, and we have a strong pipeline of bookings for the remainder of the financial year. As a result, we remain comfortable with the FY18 outlook versus market expectations and confident in the Group’s longer term prospects.’
• Thomas Cook could be about to pull the plug on Club 18-30, as the group are ‘exploring options’, which could involve a sale.
• Asian hotelier Dorsett Hotels has earmarked £700m for opening new sites in London and Manchester, building on its existing two London sites in Aldgate and Shepherd’s Bush.
• Accor has bought Chile’s 11-strong Atton Hoteles management for $105m, extending the French hotel giant’s presence in Latin America.
• Le Shuttle passenger traffic numbers fell 9% yoy to 221,654 last month, with Eurotunnel blaming ongoing industrial action in France.
• Gear 4 Music reports FY numbers saying sales rose by 43% to £80.1m with EBITDA down 4% at £3.458m
• G4M says it is seeing ‘continuing strong revenue growth across the business’. It says its ‘gross margin of 25.4% is down 160bps due to planned investment in customer proposition’
• G4M CEO Andrew Wass says ‘this has been a transformational year of investment for Gear4music.’ He says ‘we move into the new financial year with a market leading e-commerce platform, infrastructure and customer proposition. Whilst still early in the financial year, I am pleased to say that trading to date is in line with expectations and we are confident of achieving our objectives and hitting expectations for FY19.’
• Online bingo operator Jackpot Hoy saw gaming revenue increase 13% to £80.7m in its quarter to 31 March 2018 and halved its net loss to £7.7m for the period. Adjusted EBITDA fell 7% to £27.1m. On current trading, the group says: ‘the first quarter has been in line with expectations and we anticipate that this momentum will be maintained during the course of FY18’
• US betting ruling paves the way for sports betting to be legalised in the country. Horse racing is currently the only legal form of sports gambling in the US.
• Sportech says it ‘welcomes today’s US Supreme Court decision which effectively permits each state to now adopt legislation to permit and regulate sports betting.’ The company says it ‘is well positioned to act quickly and decisively in states that pass legislation permitting sports betting in the wake of this decision.’
• Sportech CEO Andrew Gaughan says ‘it is a very positive decision and supports Sportech’s initiatives, investment and focus on US growth opportunities. We have over 600 staff already deployed across the US providing gaming solutions to our business and retail clients and while there is plenty of work ahead of us, we believe we are well positioned.’
• CBS Corp is suing its largest shareholder, National Amusements, owned by Sumner & Shari Redstone, in order to reduce its voting rights.
• Elon Musk has said that Tessla is undergoing a ‘thorough reorganisation’.
• Roger Devlin, chairman of William Hill, has warned that slashing maximum bets on fixed odds betting terminals will leave the company at risk of a takeover from overseas rivals.
• Following the Cambridge Analytica scandal, Facebook has suspended 200 apps in the first stage of its review.
FINANCE & MARKETS:
• Sterling down vs dollar at $1.3541 but up vs Euro at €1.1366
• Oil up a buck and a half or so (on Israeli riots) at $78.28
• UK 10yr gilt yield up 5bps at 1.47%
• World markets: UK down yesterday with Europe also lower. US higher but Far East mostly down in Tuesday trade.
• Brexit etc.:
o David Miliband & others make the case for staying in the EEA.
o Brexiters say ‘will of the people’ is to cut all ties with Europe.
o Mrs May says to trust me. But it would appear that a slight majority in her Cabinet do not.
o Jeremy Hunt warns Boris Johnson not to rock the boat.
o Thinking about Tessa Jowell etc., it’s hard not to conclude that our politicians were somehow better 15yrs ago.
o National Crime Agency says threat of corruption greater if UK cuts ties with Europe
PRIOR DAY LATER TWEETS:
• Later tweets: Snow (twice) & heatwaves (twice) in little more than 2mths make comps hard to read. Throw in early Easter, late May B Holiday and who knows?!
• Grim stats from Visa, Springboard etc. See e/m. EY Item Club says Royal Wedding to help sales of commemorative mugs. Not enough on its own!
• Bad footfall stats will hit F&B operators dependent upon retail customer footfall. Restaurant Group to update on trading on 23 May.
• Springboard re footfall drop: ‘It is clear…retail trading is doubly challenged by a thrifty consumer…[&] predisposition towards leisure’
• Brexit Crackpots vs Experts row continues. Both a bit discredited but would you want your dentist to be a crackpot or an expert?
• Likely CVAs from Carpetright & Mothercare. High Street in trouble. WH Smith selling toothpaste for £8 in hospitals. Why? Because it could
• High St CVAs. Property companies in trouble? If it quacks like a duck & walks like a duck. Yes, they’re in trouble…
START THE DAY WITH A SONG:
Yesterday’s song was Gangster’s Paradise by Coolio. Today, who sang (or snarled):
Don’t want to hear about it,
Every single one’s got a story to tell
Everyone knows about it
From the Queen of England to the hounds of hell
RETAIL NEWS WITH NICK BUBB:
Nick is back on Friday.