Langton Capital – 2018-05-23 – Restaurant Group, Britvic, Easy Hotel, H Bowl & other:
Restaurant Group, Britvic, Easy Hotel, H Bowl & other:
A DAY IN THE LIFE:
Bit busy with results today. On to the news:
RESTAURANT GROUP TRADING UPDATE:
• Restaurant Group has updated on trading ahead of its AGM, which will be held later today.
• RTN says ‘our strategic initiatives are driving improved performance in our Leisure business in a market in which like-for-like sales remain challenging.’
• RTN says LfL sales over the 20wks to 20 May fell by 4.3%. Total sales were down by 3.1%.
• RTN says ‘trading in the period was heavily impacted by the adverse weather and on an underlying basis, excluding the impact of snow, like-for-like sales were down 3.1%.’
• Group says sales were only down by 1.8% in the first 7wks of Q2. Costs are clearly rising and prices are being cut meaning that margins will be under pressure.
• RTN says ‘our Pubs and Concessions businesses continue to outperform the market.’
• RTN has opened 9 new units in the first 20wks of this year. It says ‘the pipeline of new openings within our Pubs business has been further strengthened with the acquisition of four pubs from Ribble Valley Inns. Including these we now expect to open around 10 pubs this year.’
• RTN says ‘strong progress has been made in our Concessions business with expansion into new travel hubs. We now expect to open at least 12 new concession sites this year.’
• RTN comments ‘we have successfully exited a further five closed sites in 2018 bringing the number of sites exited to 26 out of 41 closed sites.’
• Re the outlook, RTN says ‘we are comfortable with the performance in the first 20 weeks of the current financial year and expect to see further benefit from our strategic initiatives as the year progresses.’ The group concludes ‘we expect to deliver results for the full year in-line with current market expectations.’
• Langton comments: With cinema attendances and retail footfall down, the consumer behaving cautiously and competitors cutting prices and discounting, the backdrop for RTN is indeed challenging.
• Moving to things that the group can control, it is cutting prices itself. This is via a structural shift rather than discounting but, with footfall under pressure and prices lower, margins (which are not mentioned here) will be lower.
• In Q2, the weather will not have helped but cinema attendances have picked up and travel hubs should have been busy. The group has good pubs and it is pulling what levers it can.
• The group’s shares have moved up from 220p to 310p or so ahead of today’s statement and there is room for profit-taking.
PUB, RESTAURANT & DRINK PRODUCERS:
• Britvic has reported H1 numbers saying it has seen a ‘strong first half performance’ with revenues +4.5% and adjusted EBIT +9.4%
• Britvic reports a 13.7% drop in PBT to £33.3m (after £21.6m of planned business capability programme costs) and adjusted EPS +12.2% to 21.2p
• Britvic CEO Simon Litherland comments ‘we have delivered a strong first half performance with solid revenue, margin and earnings growth. We have also made good progress in innovating to meet consumer needs, growing our international presence and transforming our supply chain.’
• Mr Litherland continues ‘while it is too soon to guide on the ongoing consumer impact of the soft drinks levy, early indications of the competitor and customer response are broadly as we anticipated. We have exciting commercial plans in place for the second half and I remain confident of continuing to make progress this year.’
• Carluccio’s is reported set to roll out its ‘Fresca‘ transformation programme as early as June subject to a successful CVA. The programme would see major shareholder Landmark inject around £10m to fund capital spending over the next 3yrs. The group intends to create a more vibrant, all day dining experience.
• Restaurant Group’s pub division, Brunning & Price, acquires Ribble Valley Inns for an undisclosed sum. Mary Willcock, managing director of Brunning and Price, said: ‘We have admired Ribble Valley Inns for many years and believe that these well-known and long-established businesses are perfectly positioned geographically for us to enhance our presence in the north of England.’
• New government guidelines will go head to head with coffee chains over childhood obesity, targeting sugar and calories in milky drinks, such as syrupy lattes. Public Health England said children currently consumed more than double the recommended level of sugar; fruit juice alone accounted for about 10 percent of the daily sugar consumption of four to 18-year-olds.
• The BBPA has estimated that boosts in pub sales as a result of the royal wedding will result in £70m in tax contributions. BBPA Chief Executive Brigid Simmonds commented: ‘The royal wedding was a fantastic spectacle with the Great British pub providing the perfect place for the nation to celebrate. The relaxed licensing hours were welcomed by pub-goers looking to make the most of the historic occasion, whilst providing a real boost to the pub trade. Given that a third of the price of a pint in a pub goes straight to the taxman, the Chancellor will also be celebrating’.
• The chief executive of Enotria, Troy Christensen has warned that Brexit will bring ‘seismic reshaping of the on-trade second only to the credit crunch’. Troy continued with: ‘The on-trade is the home of disposable income so you see the biggest impact in there in times of adversity. Food inflation is up 9% at the moment and it’s a bit of a Brexit wasteland with the likes of Jamie’s Italian and Carluccio’s suffering’.
• The MCA has reported that spring and summer menus are set to introduce a 2% price rise. The modest rise represents a slowdown from the previous year, where a 3.1% increase was observed.
• Tesco will remove its best before labels from most of its fresh produce lines in an effort to reduce waste. Mark Little, Tesco’s head of food waste stated: ‘We know some customers may be confused by the difference between ‘best before’ and ‘use by’ dates on food and this can lead to perfectly edible items being thrown away before they need to be discarded’.
• Equity for Punks V has reached £16m in funding and will help BrewDog build two craft heer hotels, an airport bar in Edinburgh, and an Australian brewery.
• A study commissioned by Royal Mail has found that 65% of UK SME craft and design retailers have seen an increase in their sales over the last twelve months.
• Marks & Spencer will now close 100 stores by 2022 as it accelerates its radical transformation programme. This includes 21 sites which have already closed. All of the branches concerned are clothing and home stores.
• Tesco will close its Tesco Direct website that sells general merchandise, which the retailer calls a ‘small, loss-making part of the business’ with ‘no route to profitability’. The decision puts 500 jobs at risk. Charles Wilson, Tesco’s UK chief, said the retailer wanted to focus on one website so that customers could buy groceries and non-food items in one place. ‘This decision has been a very difficult one to make, but it is an essential step towards establishing a more sustainable non-food offer and growing our business for the future,’ he said.
EASY HOTEL H1 NUMBERS:
• Easy Hotel has reported H1 numbers to end-March. Revenues are +51.7% to £4.76m with total system sales +33.6% at £16.1m
• EZH reports adjusted EBITDA +51.0% at £0.98m with a PBT of just £90k (up 52.5%).
• EZH is to pay a cash dividend of 0.07p per share, down from the 0.11p paid last year.
• EZH reports owned hotels’ REVPAR rose by 11.2% over the period. It says this has materially outperformed the market
• EZH franchise revenue is up by 13.5%
• EZH has opened 3 new hotels totalling 269 rooms opened during the period, all are ‘trading in-line with expectations’. The group will open four owned and five franchised hotels this calendar year. It has likewise increased the size of its pipeline.
• EZH says it has a ‘strong balance sheet with significant headroom to fund investment pipeline with net cash as at 31 March 2018 of £58.1m (30 September 2017: £21.2m) following the recent fund raise.’
• EZH CEO Guy Parsons comments ‘easyHotel delivered another strong performance in the first half of our financial year, growing market share in every market in which it operates.’ Mr Parsons says ‘the Group’s successful £50 million fundraising is already fuelling further expansion and since the placing completed in March 2018 we have been delighted to announce further additions to our development pipeline with new sites acquired in Cambridge and Chester.’
• EZH cautions somewhat saying ‘as has been widely reported, industry data points to more challenging trading conditions in the overall UK hotel market whilst the European market continues to perform well. Our growing portfolio of European hotels are trading strongly. Whilst we remain mindful of UK consumer sentiment we believe our super budget offer is appropriately aligned to the needs of discerning and value conscious customers.’
• EZH says despite its caution, ‘group trading remains in line with our expectations and we expect the brand to continue to outperform the market.’
• EZH concludes ‘easyHotel now has a growing network of stylish hotels, a strengthening brand, a talented team and strong, asset-backed balance sheet with significant headroom to fund further investment.’ The group says ‘we will continue to seize opportunities in our UK, European and international markets, balancing our owned hotel development between UK and European assets to create value for our shareholders and underpin the long-term growth of the easyHotel brand.’
• Langton Comment: EZH continues to turn in impressive numbers.
• Its brand works and, as the UK market becomes more challenging, its units should become more appealing to consumers looking to save money.
• The group’s pipeline will see it remaining busy for the foreseeable future and, in Europe, trading remains strong.
HOLIDAYS & LEISURE TRAVEL:
• Three million Brits are prepared to book holidays on the day of the actual departure, according to new research for Atol. Almost 8% were willing to leave it to the last few days before departure, with men more likely to book later than women.
• China Lodging acquires a 4.5% stake in AccorHotels, developing the partnership the two have had since the end of 2014.
• STR reports US RevPAR growth of 4.2% was driven by rate growth of 3.3%, with Easter comps not seeming to have too much of an impact.
• ‘The Whey Aye’ project is set to be Europe’s tallest observation wheel, located in Newcastle. The project would see more than £100m invested in the city and create up to 550 jobs.
• US gas prices, now at $3 a gallon, could hurt summer travel in the country, according to the Orlando Sentinel. GasBuddy analyst Patrick DeHaan said ‘High gas prices are starting to eat away at the travel plans of many, and the number will likely rise as gasoline prices appear poised to continue moving higher in the weeks ahead’.
• New York expects UK tourist growth in 2018 with 1.244m visitors expected, CEO of NYC & Company, Fred Dixon, said ‘We saw a slight dip from the UK last year, which we largely attributed to currency and some mixed messages coming out of the US.’ In 2017 figures fell 2.2% to 1.212m.
• Rank has confirmed that it is to buy the entire issued share capital of QSB Gaming Limited, owner of Spanish digital bingo business YoBingo.es for €21m. Rank says it will thereby secure a ‘strong digital bingo and casino presence in Spain’. Rank says ‘Spain is an exciting high-growth regulated market which we believe offers strong multi-channel potential. The YoBingo Group is a well-established operation that we intend to further develop and to cross-sell into our established Spanish retail operations.’
• Hollywood Bowl reports H1 figures with revenue growth of 9.3% yoy to £63.6m and profit before tax up 17.4% to £14.6m. LfLs were 4.0%, up 2.8% on last years figures with two new centres opened in H1 and a pipeline including sites in Swindon and Southend. The company’s centre rebrand and refurbishment programme is on track with significant returns reported with one refurb and two Bowlplex rebrands completed in the half. Net debt fell 46.7% to £7.2m. CEO Steve Burns said ‘This customer focus, combined with our disciplined capital and cost management, gives us confidence in delivering another year of progress, and reporting results in line with Board expectations.’
• Stride Gaming reports interim net gaming revenue up 14% to £44.9m with adjusted EBITDA down 1% to £8.7m. The company’s interim dividend was up 8% to 1.3p per share with net cash of £22.4m. Real Money Gaming NGR generated on proprietary platform was up 25% to £29.7 million but on non-proprietary platforms down 2% to £15.1 million. The chairman’s statement said ‘the Board will continue to appraise the best growth options for the Group. Our focus will now shift towards accelerating our international growth plans in line with our strategic focus to diversify the business and expand in attractive regulated markets globally.’ and ‘the UK remains the largest regulated online gaming market in the world it is experiencing greater regulatory and fiscal focus than ever before which is making it a more challenging market to operate in.’
• Sony announced it will pay in the region of $2.3bn to acquire EMI and its catalogue of more than 2 million songs. The deal is part of current CEO Kenichiro Yoshida’s mission to make revenue streams more stable with rights to entertainment content.
FINANCE & MARKETS:
• Government borrowing fell in April to the lowest number in that month since 2008. The government was £7.8bn in the red per the ONS. Borrowings for the year to end-March amounted to some £40.5bn. The deficit was down to 2% of GDP from the 9.9% that it stood at when Labour lost power in 2010.
• Bank Governor Mark Carney has said that households are around £900 per annum worse off as a result of the vote to leave the EU and the uncertainty that it has caused. He said that global and European economies were “much, much stronger” than they were in the run up to the vote and the UK has failed to keep up.
• Mr Carney says ‘it’s understandable why businesses are holding back – there are big decisions about to be made, why wouldn’t they wait a little while longer until path is clear?’
• Bank says interest rates could rise six times by 2021.
• Sterling little-changed at $1.3413 and €1.1401
• Oil down at $79.08
• UK 10yr gilt yields up 4bps at 1.52%
• World markets: UK & Europe up yesterday but US down. Asia mostly lower in Wednesday trade.
• Brexit, autumn election etc.:
o Talks continue in Brussels. Boris & others dampen talk re autumn election.
PRIOR DAY LATER TWEETS:
• Later tweets: Shaftesbury: ‘West End remains largely insulated from the economic impact of national short- and longer-term uncertainties and challenges.’
• Shaftesbury says West End immune. Really? Not saying it’s not true but why? And how?
• BBC says higher petrol price will suck money out of consumers’ pockets. So it must be true, mustn’t it?
• Discounts getting worse. Prezzo, ASK & Café Rouge up to 40% off. Frankie & Benny’s 30% off, Beefeater 33% off.
• Restaurant Group trading update tomorrow. Snow, poor footfall etc. won’t have helped. Q1 cinema attendances (Avengers was Q2) down 4%
• Restaurant Group. Much work to be done & tough backdrop. Springboard says Mar/Apr footfall drop worst since 2009.
• B of England says UK economy 2% smaller than it would have been due to Brexit vote. Amounts to £40bn and rising.
• Bank sees 6 interest rate rises in next 3yrs. Sterling jumps. Albeit from 2018 lows overnight.
START THE DAY WITH A SONG:
Yesterday’s song was Four Stars Out of Five by Arctic Monkeys. Today, who sang:
If there’s a bustle in your hedgerow,
Don’t be alarmed now
It’s just a spring clean for the May queen
RETAIL NEWS WITH NICK BUBB:
Marks & Spencer: The much-awaited Marks & Spencer finals today show underlying PBT of £581m, which is a tad better than consensus, but that is before what M&S quaintly call “adjusting items”, ie exceptional costs, which amount to a massive £514m. As highlighted by Mark Kleinman of Sky News last night, the main chunk of that is a £321m provision for the cost of the accelerated store closure programme announced yesterday. CEO Steve Rowe says, blandly, “the first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business. These changes come with short term costs which are reflected in today’s results”. The dividend is maintained, as expected, but the Q4 sales are poor, as we thought they would be, with Food LFL sales down 2.3% and Non-Food sales down 3.7% (both on an
John Lewis Watch: You may have read excitable reports that the Royal Wedding would add a lot to Retail sales, but the truth seems to have been rather different… Yesterday’s weekly sales overview from JLP flagged that w/e May 19th saw gross sales slump by 6.3% up (c7.5% down on a LFL basis, on our calculations): “We saw good sales at the start of the week, but weekend sales were impacted by the hot weather and customers turning their attention to the weekend’s celebrations”. Fashion and Home sales were both down by 8.0% gross and Electricals were down by 0.8% gross. Over the last 16 weeks, John Lewis is now running up cumulatively by 1.1% gross (flat LFL).
Waitrose Watch: Over at Waitrose, the outcome was also disappointing last week, as the comp was weak and the hot weather should have helped picnic and barbecue fare fly off the shelves. But gross sales were only up by 3.2% (c2.5% up LFL) in w/e May 19th, even though Waitrose trumpeted that “the combination of a Royal Wedding, FA Cup Final and good weather proved the perfect match for people to socialise and celebrate the festivities together”, with sales of champagne up by 33%. The cumulative outcome for the last 16 weeks is now +1.8% gross, which is c1% up LFL.
News Flow This Week: A busy week continues tomorrow with the Kingfisher Q1, the Inchcape Q1 and the Shoe Zone interims, plus the ONS Retail Sales figures for April.