Langton Capital – 2018-05-24 – Young & Co, Hawthorn, EasyHotel, C&C and other:
Young & Co, Hawthorn, EasyHotel, C&C and other:
A DAY IN THE LIFE:
Bit busy, on to the news:
YOUNG & CO – FULL YEAR NUMBERS:
• Young & Co has reported full year numbers to end-March. Revenue is up 3.9% at £279.3m with adj. PBT up 1.6% at £37.6m.
• YNGA reports adjusted EPS up 2% at 67.7p with the dividend raised by 6% to 19.61p per share. Net assets are £11.24.
• YNGA says it has had ‘another highly successful year, despite a challenging market backdrop’.
• YNGA says ‘managed house operations outperformed the sector once again with revenues up 6.9% to £266.4 million, underpinned by industry-leading like-for-like sales growth of 4.2%;’
• YNGA’s leased operations saw LfL revenue +1.6%.
• The group says it is making a ‘continued investment in future growth – £53.0m of investment made during the year through acquisitions and upgrades to our existing estate’.
• YNGA says it is ‘highly cash generative, with operating cash flow of £61.4 million – net debt to adjusted EBITDA ratio is one of the lowest in the sector at 2.0.’
• Re current trading, YNGA says it has seen a ‘good start to the current financial year since the period end; managed house revenue in the first seven weeks was up 11.0% in total and up 7.5% on a like-for-like basis, despite very strong comparatives.’ These are extremely good numbers but they will have been helped by the warm spells in April and by the warm Bank Holiday.
• YNGA CEO Patrick Dardis comments ‘I am delighted with this strong set of results, delivered against a challenging market backdrop, as they demonstrate the benefit of our strategy of running a differentiated, premium and well-invested pub estate in superb locations and with a highly customer-centric approach.’
• Mr Dardis says ‘we have continued to invest in our future growth through a combination of exciting acquisitions and investment in our existing estate while also upgrading our technology to enhance the customer experience and realise productivity gains.’
• The group has ‘started the year well and, despite being up against very strong comparatives in the previous year, managed houses revenue in the first seven weeks was up 11.0% in total and up 7.5% on a like- for-like basis.’
• Over the longer term, YNGA says ‘although uncertainty prevails in both the political and economic environment, we are confident that our strategy will continue to deliver superior shareholder returns.’ CEO Patrick Dardis comments ‘I am a firm believer that the traditional British pub will never go out of fashion and, as a result, I’m both excited and optimistic about the year ahead.’
• Comment: these are good numbers but, as always with an excellent but expensive company such as Young’s, the question is ‘are they good enough?’
• They may well be. But they need to support a share trading on a multiple of around 23x forward earnings which, though full to the brim with tremendous (often river-front) freehold assets, is not immune from the pressures felt by other operators on the High Street and beyond. Get in touch if you would like more comment.
PUB, RESTAURANT & DRINK PRODUCERS:
• REIT New River has announced that it has bought the 298-strong Hawthorn Leisure pub estate for £106.8m. New River says ‘the acquisition of Hawthorn Leisure is absolutely aligned with our strategy of investing in retail & leisure assets at the heart of the communities across the UK.’
• C&C has reported that chairman Sir Brian Stewart ‘after eight years in the role, will retire from the Board at the conclusion of C&C’s Annual General Meeting on 5 July 2018.’ The group says ‘following a thorough selection process, Stewart Gilliland, who joined the Board as a non-executive director in 2012, has agreed to succeed Sir Brian as Chairman.’
• Lower inflation (see below) should help household incomes & free up some spending money (or, less likely, provide funds to pay down debt).
• MCA’s Eating Out Panel Consumer Dashboard depicts a heavy decline in April visits at lunch and dinner time as a result of weak consumer confidence and the early Easter weekend.
• Private equity firm Terra Firma has put Wyevale Garden Centres up for sales and has appointed Christie & Co to find potential buyers. Combined portfolio turnover is in excess of £330m which includes garden retail sales, food & beverage and concession rental income.
• The owner of the Gaucho restaurant chain, Equistone, is exploring a sale of the business as part of a review that includes the closure of its underperforming Cau outlets. The decision to kickstart a review of options comes just a fortnight after it emerged that Gaucho had drafted in advisers to examine whether to close or sell Cau’s 22 restaurants, putting roughly 750 of its 1,500 staff at risk of losing their jobs.
• Several private equity groups are circling Costa, as Whitbread look to separate the group from its core operations. Those thought to be considering a move on Costa include Bain Capital, CVC and TPG.
• The food industry has failed to hit the government’s 5% sugar-reduction target for the first year of its plan to reduce childhood obesity. Public Health England (PHE) said: ‘Whilst this doesn’t meet the 5% ambition, PHE recognises there are more sugar reduction plans from the food industry in the pipeline’
• McDonald’s workers in 9 cities have alleged sexual harassment, stating that they were propositioned by managers.
• McDonald’s shareholders plan to demand the fast food giant rethinks its policy of distributing plastic straws globally at its AGM. The group announced that it will phase plastic straws out in the UK.
• The Scotch Whisky Association reports the UK trade deficit would be 3% higher in 2017 were it not for the success of Scotch whisky exports. Last year for every £100 of goods exported, £1.30 was Scotch whisky.
• Just Eat has taken on former Dragons’ Den star Sarah Willingham to provide advice to the 29,000 restaurants that use its service.
• Casual Dining Group has signed UK franchise agreements to operate restaurants at two UK hotels. CDG will create and operate a bespoke premium offering at the Hotel Indigo, London Paddington, as well as introduce a Bella Italia at the newly built Holiday Inn, in Wigstone.
• Local Data Company rates Five Guys as the top fast food brand in the UK. Five Guys opened 24 stores in 2017.
• Cask Marque are delighted to announce two new appointments as non-executive directors in Suzanne Baker of Stonegate Pub Company and Paul Harbottle, the Group Commercial director of EI Group.
• The justice secretary has announced financial incentives for businesses to employ ex-offenders.
HOLIDAYS & LEISURE TRAVEL:
• EasyHotel yesterday hosted a meeting for analysts to discuss its H1 figures. The company outlined growth plans & said it would increase its focus on European new-build and franchised opportunities in order to balance the business.
• EasyHotel says that it has four new hotels committed and nine owned units in development. It has a further 10 franchised hotels in development.
• EasyHotel expects its European assets to continue to outperform and it will build the infrastructure needed on the Continent to devote more capital to development there.
• EasyHotel says new units are trading in line with expectations, Old Street is coming along and there are a significant number of new opportunities that the Board is considering. Barcelona opens in the summer.
• EasyHotel says ‘the UK is weaker, particularly London’. This is, arguably, down to a glut of supply rather than weak demand. Sterling is lower but this has now annualised and ‘new’ new business will need to be earned.
• UKHospitality has asked Sadiq Khan to ensure fairness and transparency in the short-term letting of homes via platforms such as AirBnB. Kate Nicholls, CEO of UKHospitality, said ‘Flagrant breaking of the rules by landlords to act as a business means that they can avoid the legislative and tax pressures that other accommodation providers must adhere to. Not only does this give them an unfair competitive edge, it puts the safety and security of customers at risk.’ The Mayor of London has recognised that legislation may be required in the sector.
• Uber is set to expand into Japan via partnerships with taxi companies. The initial trial will be conducted on the island of Awaji.
• Hilton has entered a strategic partnership with Country Garden, a Chinese hotel group. Hilton will manage numerous Country Garden hotel properties under the DoubleTree and Garden Inn brands. There are six hotels now owned by Country Garden trading as Hilton-branded properties or in the pipeline, according to the news release.
• Data from STR shows April European hotel occupancy up 1.5% yoy to 73.2%, with ADR increasing 2.9% to €108.03 and RevPAR up 4.4% to €79.13.
• Airlines for America forecasts 246.1m people to fly on US airlines between 1 June and 31 August, representing a 3.7% yoy increase.
• Sportech is to update on trading at its AGM. It will say ‘since we reported our Final Results on 24 April 2018, Sportech welcomed the US Supreme Court decision on 14 May 2018 which effectively permits each state to now adopt legislation to licence and regulate sports betting.’ It says ‘we believe that Connecticut, where Sportech owns and operates a network of off-track betting facilities and a licensed online and mobile betting services, will be an early adopter of a comprehensive and rigorous regulatory framework for sports betting.’
• Sportech says Racing is in line with expectations. It says ‘Bump 50:50 continues to make encouraging progress’ and says ‘revenue growth in our retail Venues division for the year to date has been higher than the previous year, although below Board expectations, given the investments made in 2016 and 2017.’
• Andy Murray has invested in a tennis app called Deuce, set to launch prior to Wimbledon this year. The app aims to make tennis accessible and affordable for everyone.
FINANCE & MARKETS:
• Comcast is reported to be in the late stages of preparing a bid for Rupert Murdoch’s 21st Century Fox. Disney has already agreed to pay $52.4bn for the business and any rival offer could spark a bidding war.
• UK CPI fell to 2.4% in April, its lowest in over a year. The prospect of an interest rate rise in August receded somewhat. The ONS reports ‘the downtrend inflation continues. CPI inflation eased to 2.4% in April from 2.5% in March & its recent peak of 3% in December. Inflation will likely continue to fall over the course of the year as the effects of the Brexit-induced currency deprecation fades. This will be offset to some extent by rising wages and higher unit labour costs. Lower inflation & higher nominal wages will help lift household real income growth this year.’
• ONS reports the pace of growth for UK house prices has continued to slow. It says prices in London are showing the weakest growth since 2009.
• ONS reports London house prices fell by 0.7% in the year. Net migration is down and foreign buyers have been holding off due to uncertainty caused by Brexit, prospect of another election etc.
• Sterling down vs dollar at $1.3367 but up a shade vs Euro at €1.1416
• Oil up at $79.46
• UK 10yr gilt yield off 8bps at 1.44% on reduced chance of interest rate hike.
• World markets: UK and Europe lower yesterday. US up but Far East down in Thursday trade.
• Bitcoin below $8k at $7,621
• Brexit, politics etc.:
o Boris Johnson, who had been quiet for almost a day on Brexit, has told PM Theresa May to ‘get on with it’.
o Speaking from 7,000 miles away in Buenos Aires, Mr Johnson said the UK needed control of its tariffs and its laws. He declined to say if he would resign should he not get his way.
o HMRC has warned that proposed Brexit customs changes (maximum access) will cost businesses up to £20bn. Mrs May’s option would cost less but ‘would take up to 5yrs to implement’.
PRIOR DAY LATER TWEETS:
• Later tweets: RTN says ‘our strategic initiatives are driving improved performance’ but ‘LfL sales remain challenging.’
• RTN: LfL sales first 20wks down 4.3%. Total sales were down by 3.1%. Trading in most recent 7wks only down 1.8%
• EZH reports adjusted EBITDA +51.0% at £0.98m with a PBT of just £90k (up 52.5%). Says UK market ‘more challenging’
START THE DAY WITH A SONG:
Yesterday’s song was Stairway To Heaven by Led Zeppelin. Today, who sang:
Well pick me up with golden hand,
I may see you, I may tell you to run
You know what they say about the young
RETAIL NEWS WITH NICK BUBB:
• Kingfisher: The Q1 trading update does not make happy reading, with LFL sales down by 4.0%, but the company blames nearly all of that fall on “the weather”. In the UK, 6% of the 9% LFL slump at B&Q is blamed on “the weather”, whilst in France 4% of the 8% LFL fall at Castorama is blamed on “the weather”. The CEO Véronique Laury, says: “It was a challenging start to the year with exceptionally harsh weather across Europe and weak UK consumer demand. This impacted footfall, especially sales of weather related categories. February and March were particularly affected with sales improving over the course of April and into May…Market conditions continue to be mixed. The UK is uncertain, as demonstrated by recent weak retail sales data; France is encouraging, but volatile; whilst Poland continues to be supportive”.
• Planet ONS Watch: In the real world, April (the 4 weeks to April 28th) was a tough month on the High Street, judging by the BRC-KPMG Retail Sales survey, given the impact of an early Easter and the cold snap. But we will found out at 9.30am what seasonally-adjusted life was like last month on the High Street on that bizarre parallel world, the Planet ONS, via the Office of National Statistics Retail Sales figures for April…For what it’s worth, our friends at Capital Economics are looking for a 0.9% rebound in month-on-month seasonally adjusted volume, rather worse than the +1.2% consensus.