Langton Capital – 2018-06-08 – Fuller’s FY, Time Out, Games Workshop, holidays etc.:
Fuller’s FY, Time Out, Games Workshop, holidays etc.:
A DAY IN THE LIFE:
Bit busy with company reports and the football. On to the news:
FULLER’S FULL YEAR NUMBERS:
• Fuller’s has reported 52wk numbers to 31 March saying revenues were +5% (on a 52wk comp) to £403.6m
• FSTA reports EBITDA up 2% (all numbers on a 52wk comp) to £70.9m with adj. EPS up 4% at 62.9p.
• FTSA reports dividend of 19.55p, up 4%.
• FSTA says it has seen a ‘good performance from Managed Pubs and Hotels with like for like sales growth of 2.9%’
• FSTA says accommodation has done well. Tenanted Inns LfL profits are +3%. Beer volumes were flat ‘in a challenging market place’.
• FSTA reports that its redevelopment programme continues with ‘seven transformational redevelopments during the year’. It says it is progressing its digital projects and it bought Dark Star Brewing during the year. The group says it has an ‘excellent pipeline of new sites and capital investments.’
• Re current trading, managed LfLs were +2.5%, just ahead of inflation, in the first 9wks of the current year.
• Tenanted Inns profits were +2% in the first 9wks with beer & cider volumes down 3%. The group has recently acquired ‘four well-located City bars from We Are Bar Group’ and has bought Bel & The Dragon ‘comprising six iconic pubs that are a perfect fit with Fuller’s premium pub portfolio’.
• FSTA CEO Simon Emeny comments ‘the year has seen another good performance with a solid set of results, particularly from Fuller’s Inns. It has been a year of building for the future – with a number of internal projects coming to fruition.’
• Mr Emeny continues ‘our Managed Pubs and Hotels have again delivered like for like sales that are above the industry average and our Tenanted Inns are making real progress with a 3% increase in profits.’ Mr Emeny says ‘although we have seen a marginal drop in total beer and cider volumes, it has been a year of progress for the Fuller’s Beer Company, which has a clear strategy to return to growth and exciting, achievable plans in place.’
• FSTA says ‘while we are still in a time of national and global uncertainty – and we do not underestimate the related wider market and economic issues that we will have to navigate over the months ahead – we believe we are in a strong position.’ It says its ‘assets are backed by a robust financial position and that puts us in a good place to continue to deliver for our shareholders, our customers and our employees.’
• Fuller’s has a great estate and London has been strong. There may, therefore, be just a tinge of disappointment for some in today’s comments. In recent trading, despite the sunshine, Fuller’s, admittedly against strong comps, is not ahead of inflation in its managed or tenanted inns and beer sales are down.
• There are reasons for this, of course, and the group does remain relatively well-positioned.
PUB, RESTAURANT & DRINK PRODUCERS:
• Deliveroo has announced that it will roll out a Point of Sale integration with restaurant partners in order to streamline operations. The measure is estimated to save restaurants ‘millions of pounds’ by allowing them to concentrate staff on front of house operations.
• Jonathan Downey, the co-founder of Street Feast, has told the the MCA that he is disappointed that so few professional chefs have moved into street food.
• Discounts now including Whitbread w. Beefeater 33% off food, Brewers’ Fayre 40% off mains. Elsewhere Pizza Express up to 25% off food and Prezzo 2-4-1 on mains.
• Time Out is to update the market on trading at its AGM later today when it will say ‘at the time of the preliminary results we announced good progress against our plan across all lines of business and this continues.’ It will say ‘our Time Out Market in Lisbon continues to trade very strongly and its success bodes well for the other five Markets already announced, including our Miami and New York markets which are scheduled to open in the second half of 2018.’ The company says ‘overall the Group continues to trade well and in line with the Board’s expectations; we remain confident in meeting our strategic and financial goals for the year.’
• Tesco boss Dave Lewis has blamed some of retail’s problems on business rates. They impact bricks & mortar retailers more than those that trade online. Mr Lewis poses the question ‘are we by stealth lowering corporation tax and increasing business rates to a place which is creating an uneven playing field and forcing people to think about how it is they avoid that cost and find other routes to the market?’
• The Recruitment and Employment Confederation says that severe staff shortages are pushing up wages at the fastest rate in 3yrs.
• NRN reports that LfL restaurant sales growth declined in the US in May. TDn2K’s Black Box Intelligence data suggests ‘the stronger economy is lifting restaurant spending, and 2018 should be better than the last two years.’ However, it says ‘same-store sales growth dropped by 1.5 percentage points compared with April’s rate [which] highlights the fact that the underlying challenges remain.’ It says ‘it will be very hard for chain restaurant sales to rise beyond very modest positive gains.’
• Fuller’s has claimed that it may have ‘got it wrong’ with regards to incorporating wood-fuelled cooking equipment into its kitchens. Paul Dickinson, director of food for Fuller’s said: ‘If we had an oven that was sat there at 350 degrees and we kept feeding it with fuel, the next morning when the chefs came in, it was still sitting at about 120 degrees. It took over 24 hours for that unit to cool down and that’s where I put my head in my hands’.
• Richard Kershaw, Chairman of the North West Executive of the BBPA and Chief Executive of Joseph Holt has welcomed the appointment of Sacha Lord as night-time adviser for Greater Manchester, stating: ‘Congratulations to Sacha for becoming the first ever night-time economy adviser of Greater Manchester. This is an exciting time for the region and I look forward to working with Sacha to make the 2,000 pubs in the area stronger and better-connected, so Greater Manchester will be even more attractive for night time revellers’.
• Spanish wine group Faustino believes that China will become its most important wine market within the next five years, according to its CEO.
• Just over a quarter of adults in the UK have reduced their spending on alcohol to save money and be healthier, according to new figures from Mintel. The trend is more noticeable among the key group of 25-34 year-olds, where 34% of respondents say they are drinking less due to more healthy lifestyles and economic uncertainty.
• Berlin-based meal kit company Marley Spoon has announced its intention to float in Australia and is aiming to raise around $53m. The business currently operates in Australia, the US and four European markets.
• House of Fraser plans to close 31 of its 59 shops, including its flagship London Oxford Street store, putting 6,000 jobs at risk. If the struggling retailer gets 75% of its creditors to agree to the terms of its Company Voluntary Arrangement (CVA) on 22 June, 2,000 House of Fraser jobs will go, along with 4,000 brand and concession roles.
• UKHospitality has met with the Low Pay Commission (LPC) this week to discuss wage rates and the impact on the sector. UKHospitality Chief Executive Kate Nicholls said: ‘Increases in the rate of National Minimum or Living Wage will put more money into the pockets of our customers, but the Low Pay Commission needs to be cautious about further tightening margins for employers. Increases to wage rates must take into account the economic pressures being faced by employers, or the jobs themselves could be under threat. It is crucial that the LPC recognises this, along with recent closures in the sector when making its recommendations to the Government.’
• House of Fraser and Poundworld have separately announced moves that will see hundreds of shops close and put more than 13,000 jobs at risk. House of Fraser filed proposals for a CVA that would close 31 of its UK stores and finds itself ‘unsustainable in its current form’. Meanwhile, Poundworld has filed a notice of intention to appoint administrators, giving it 10 working days to negotiate a sale as a going concern.
• UKHospitality has called on the government to provide a fairer playing field by ensuring that transactions on online platforms are taxed appropriately. UKHospitality Chief Executive Kate Nicholls said: ‘There needs to be a level-playing field between online and property-based businesses and digital companies. The current tax system is completely inadequate to deal with the complexities of the digital age and hospitality businesses find themselves at a disadvantage.’
• McDonald’s is planning layoffs in the US as part of a $500m annual cost cutting drive.
• Marks and Spencer directors have missed out on bonuses this year after the retailer’s remuneration committee decided its results were too poor to warrant a payout. M&S’s pre-tax profit in the year to March 31 fell 62 per cent to £67m, or £581m before exceptional items — below the £585m threshold at which bonuses start to be paid and well down on the £663m required for a full payout.
HOLIDAYS & LEISURE TRAVEL:
• Mintel reports that value conscious consumers are turning to cheaper holiday destinations in Europe. It says staycations should continue to prosper.
• Mintel cautions ‘a number of factors are likely to prove challenging for the holiday market in 2018, including limited real wage growth, the rising price of oil and the fluctuating pound.’ It says ‘this could mean a slight reduction in the growth of overseas trips as some consumers opt for staycations.’
• Merseyside Police have opened up investigations into two claims management companies over the recent rise in fake holiday sickness claims. The news follows Manchester-based law firm Horwich Farrelly launching its own private prosecutions against CMCs.
• Minor International, a Thai hospitality firm, is bidding to takeover NH Hotel Group in a deal worth €620m. Minor will acquire a 25.2% stake in the Spanish chain, up from a 9.5% shareholding previously. Minor confirmed plans to launch an all-cash offer to acquire NH Hotel Group’s remaining shares, valuing the Spanish company at €2.5 billion.
• Julian Monaghan, a British Airways pilot, faces jail after arriving at Gatwick four times the legal alcohol limit.
• The Foreign and Commonwealth Office warns holidaymakers about carrying medicines abroad, as some commonly prescribed drugs in the UK could be ‘controlled drugs’ in other countries. Examples include cold remedies that are banned in Japan, or sleeping pills which require a license in Singapore.
• The U.S. hotel industry reported occupancy rose 0.1% to 64.1% during the week of 27 May to 2 June, while ADR increased 2.1% to $122.58 and RevPAR rose 2.3% to $78.61, per STR.
• Games Workshop has updated on trading saying it is ‘pleased to announce that the sales and profit growth, which was discussed in the trading update released on 4 May 2018, has continued in the period to the end of the financial year.’ It says ‘sales growth has been across all sales channels.’
• Games Workshop says sales for the 53wks to 3 June will be approximately £219 million and the Group’s profit before tax should be not less than £74 million.’
• Amazon announces a groundbreaking deal to stream 20 Premier League football matches a season for three seasons from 2019. Amazon UK Prime Video members will be able to stream the matches for free. It is the first time that packages of live streaming matches have been offered by the Premier League.
FINANCE & MARKETS:
• House prices in the UK are rising at an annual rate of 1.9% in the year to May reports The Halifax. This implies a price contraction after taking account of inflation.
• Sterling a shade weaker at $1.3422 and €1.1369
• Oil up over a dollar at $77.00
• UK 10yr gilt yield up 3bps at 1.41%
• World markets: UK & Europe down, US up and Far East down in Friday trade.
• Brexit etc.:
o David Davis has not resigned as he has ‘won’ an end-2021 limit for tying the UK to settle the Irish border question
o CBI says Brexit could put Britain in the slow lane as other developed countries will grow more rapidly for the foreseeable future
o CBI looking for 1.3% growth in 2019 after 1.4% this year.
o Per the BBC, Boris Johnson reportedly told a private dinner that Brexit faces a meltdown. He also apparently said he was ‘increasingly admiring of Donald Trump’.
o Johnson says Brexit will happen but the ‘risk is that it will not be the one we want’.
o A Foreign Office spokesman has told the Independent that a second referendum is ‘possible’
PRIOR DAY LATER TWEETS:
• Later tweets: Costs rising, esp. labour. CV Library says salary offers in hospitality & catering sectors have risen by up to 15% this year
• Race to resign first? David Davis (old age, exasperation, despair, exhaustion). Boris (ditto) and / or Theresa May (ditto times a million)
START THE DAY WITH A SONG:
Yesterday’s song was Tears for Fears’ Everybody Wants To Rule The World. To finish off the week, who sang:
Another lonely night,
Stare at the TV screen
I don’t know what to do
I need a rendezvous
RETAIL NEWS WITH NICK BUBB:
• Games Workshop: We have been waiting all week for the pre-close trading update from the high-flying Games Workshop and it is out today, although there are no growth figures, unfortunately. But the message is that sales growth continued in the last month of the year (despite tough comps) and that “we expect the group’s sales for the 53 weeks to 3 June 2018 to be approximately £219m and the group’s profit before tax to be not less than £74m”. Notwithstanding the 53rd week impact, that is only in line with City expectations, after a stellar year (in y/e May 2017 sales were just £158m and PBT was only £38m) and the new-year is expected to see things drop back…
• Marks & Spencer: All eyes were on the embattled House of Fraser and its store closure plans yesterday, but, having been alerted to the publication of the M&S Annual Report & Accounts, we also spent some time looking through the Remuneration Report, which ran to no less than 21 pages… According to the non-exec Director Vindi Banga, who is the luckless Chairman of the Remuneration Committee, “Remuneration in M&S is aligned with the business performance and is in the best interests of the company and its shareholders”. And “adjusted” profits fell back in 2017/18, to £581m, and there were more huge exceptional costs on top of that, so it would have been no surprise to therefore see that M&S Director bonuses had been reduced. But it was unusual and refreshing to see that bonuses were actually slashed to zero, although only 3 Directors were involved and 2 of them have now
• Today’s Press and News: There is saturation coverage of the embattled House of Fraser and its 31 store closure plans in today’s papers, with some punchy front page headlines: the Evening Standard last night went with “The Fall of the House of Fraser”, whilst i this morning says “Destroyed by internet shopping”. And with the struggling discount chain Poundworld also on the brink of collapse, the FT flags that “High Street crisis leaves 13,000 retail jobs in peril”, outdoing even the Guardian and “Failing High Street chains leave 11,000 more jobs under threat”. The Times takes a slightly different angle for its main Business story: “Retail giant “is making a mockery” of closure rules”, flagging landlord’s anger at House of Fraser’s use of a CVA. The main Business story in the Daily Mail is that M&S CEO Steve Rowe lost his bonus last year.
• Trade Press: Retail Week magazine is only published fortnightly these days and they are off this week, but Drapers magazine has been published and they focus on this week’s Drapers Footwear Awards: eg Ted Baker picked up the awards for both “Men’s Fashion Footwear Brand of the Year” and “Women’s Fashion Footwear Brand of the Year”. The “Sports Fashion Footwear Brand of the Year” award went to Adidas, whilst Vans was chosen as “Brand of the Moment”. And in her column, the Editor thunders that “Footwear’s finest remain a step ahead”. In terms of News stories, the main feature is the fightback by landlords against CVA’s (highlighting that the structure of voting in
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis did not do well last week and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday June 3rd is poor, with footfall said to have been hit by the thundery showers! BDO Fashion Store LFL sales were down by 7.8% (against a tough comp) and, including Homewares and Lifestyle sales, total Store LFL sales were 6.5% down. And overall Online sales were only up by 2.4% (with Online Fashion sales up by 6.5%).
• News Flow Next Week: The World Cup gets under way on Thursday, but there’s plenty going on in Retailing next week, kicking off on Tuesday with the Boohoo Q1 update, the Motorpoint finals and a Ted Baker AGM update. Thursday then brings the Majestic Wine finals, the Mulberry finals, the Morrisons AGM, the N Brown Q1 update and the ONS Retail Sales figures for May. And on Friday we get the Tesco Q1/AGM and the JD Sports EGM on its US deal.