Langton Capital – 2018-07-09 – Political upheaval, Novus, GNK, EAT, Carluccio, deliver etc.:
Political upheaval, Novus, GNK, EAT, Carluccio, deliver etc.:
A DAY IN THE LIFE:
Looking at the parched grass and celebrating the fact that I haven’t had to cut it for more than a fortnight, I can’t help wondering what will happen when it rains.
Because the stuff isn’t dead, it’s just sleeping and, when it gets a bit of moisture on it, it’s sure to pay me back by sprouting a foot or more overnight and then spewing several hundredweight of grass seed all over our flowerbeds and vegetable patch.
Anyway, that’s a problem for tomorrow. For the moment we’ve got the football and, whilst I have to admit to rejigging commitments for next Sunday, we’ve got to get through Wednesday first.
And there I’ve managed to engineer it that Langton spends the afternoon in the company of like minded people. There is no question of meetings going on past 5.30pm unlike Sunday when a mother had invited Freya around for a 3pm party.
I mean 3pm, were they serious? Anyway, to looks of annoyed consternation we delivered her a full half hour early & made it back in time for the kick off. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Novus Leisure — the owner of Tiger Tiger nightclubs — has been put up for sale by its private equity owner, HayFin Capital Management, and has hired advisers at Sapient Capital to help in the process per The Sunday Times. Novus, whose other brands include Balls Brothers and Tank and Paddle, has 41 bars and nightclubs.
• Greene King has announced a proposed restructure of its Bury St Edmunds and Burton-upon-Trent office-based teams, with about 100 roles at risk. The pub group currently employs 39,000 people across 2,855 pubs, restaurants and hotels. A spokesperson for Greene King said: ‘The industry in which we operate is facing considerable cost pressures, and we are not immune. We need to focus on supporting our pubs and believe the proposed structure will deliver a simpler, more effective way of working and, at the same time, reduce costs.’
• The founders of Eat intend to resign following a restructuring that has resulted in the closure of almost one in 10 of its sandwich shops, per Daily Mail. Losses more than doubled to £3.7m due to rising rents, steep business rates and the cost of ingredients. The chain has closed 10 stores over the last two months, including sites in Cardiff and Glasgow, allowing it to avoid a CVA.
• The latest Pub Market Report from MCA shows that pubs have put up food prices by 2.7% in the past year, compared to a c3% increase in food prices, although drinks prices in pubs rose by an average of 3%.
• Loungers has announced the appointment of Gregor Grant as CFO, who will ‘play an important role in Loungers’ development towards a 200-site business’. As of today, the group has 128 sites. Nick Collins, CEO of Loungers said: I am delighted to be welcoming Gregor into Loungers. We are fortunate to have someone of his calibre and considerable experience joining the team. I know he will fit very well culturally and will complement and build on the senior management team’s expertise, alongside driving further improvement in the performance of the business.’
• Carluccio’s has delivered accounts to Companies’ House for the year to September 2017 showing that it made a loss for that year including write-downs of £27.7m.
• Numbers reported to Companies House show that London Union made a loss of £1.5m in the year to end-December. Revenue was £12.7m against £9.1m last year.
• We Are Bar Group has reported losses for the year to end-September 2017 of £745k (last year loss of £2.0m).
• Coffee #1 has reported profits for the year to end-Sept 2017 of £1.56m on revenues of £27.2m.
• Deliveroo has opened its first Editions in Paris in the north-west of the city, with 12 kitchens in a warehouse in Saint-Ouen. French restaurant brands Blend, Petit Cambodge, Tripletta and Santosha will be available, as well Miss Saigon the Vietnamese concept from Taster, a start-up led by former executive Anton Soulier which creates virtual restaurants for Deliveroo.
• Oakman Inns’ CEO, Peter Borg-Neal, has been recognised with a Pub & Bar Award at the 35th Annual ‘Cateys’ on the same day the group acquired its 25th pub, Lock Fyne in Farnham, Surrey.
• Hugh Osmond is understood to be considering a bid for struggling steak chain Gaucho, with Core Capital and ESO Capital also thought to be interested, per Sky. Insiders said that the three bidders were expected to offer less than the £50m owed by Gaucho to its lenders and that advisers at KPMG were trying to conclude a deal this month.
• English wine producers are producing their best and biggest vintage ever as a result of the heatwave currently settling over the UK. Speaking to The Drinks Business, Stephen Skelton MW, consultant viticulturist for a number of English wine producers, said: ‘It’s the best I’ve ever known it… the size of the flowers was very good so we will have big bunches and an early harvest, maybe up to two weeks early for some varieties, and disease pressure is very low at the moment.’
• Direct-to-consumer drinks brand Dirty Lemon Beverages, which sells its drinks (made from ‘pure lemon juice, ocean minerals and sea salt’) in the US and Canada via text message, is preparing to make its UK debut.
• Plant-based ingredients business Roquette has unveiled new additions to its pea-protein line in response to consumer demand. The European meat substitute market grew by around 7% last year.
• Jake Berry, the minister for the high street, claims town centres should offer an hour’s free parking and bring back bandstands to drive footfall back onto the high street.
• Moody’s has reported that the proposed strategic alliance between Carrefour and Tesco is a credit positive for them. It says, however, that this is a potential negative for suppliers
• Kentucky’s Bourbon industry worried as EU and Mexico impose 25% tariffs on US whiskey while Canada has put on a 10% surcharge
HOLIDAYS & LEISURE TRAVEL:
• Following a government crackdown, the number of claims management companies deling with holiday sickness claims has gone down by a third. The Ministry of Justice’s Claim’s Management Regulator said 140 CMCs were dealing with holiday sickness claims when it last monitored them in January 2018, down 37% from 225 in the previous survey in August 2017.
• Iata warns jet fuel prices will increase by more than a quarter this year as global passenger demand increased by 6.1% in May yoy.
• Fosun International will spin off its tourism and hotels unit that includes Club Med on the Hong Kong Stock Exchange. Local reports suggested Fosun was aiming for a listing valued at around $500 million, according to Bloomberg News.
• The RAC says more than half of UK airports have increased their parking charges in the last year, with Luton and Stansted putting prices up more than 10%. Parking at Luton can cost as much as £8 for up to 30 minutes, or £17 if you go over an hour. However the airport said cheaper options were available.
• STR reports US hotel occupancy up 2.1% to 75.8%, ADR up 3.1% to $131.36 and RevPAR up 5.2% to $99.59 for the week ending 30 June.
FINANCE & MARKETS:
• The Brexit debacle & associated political instability is not going to be positive for investment in the UK.
• UK productivity slipped by 0.4% in Q1 this year per the ONS. This suggests that UK workers put in more hours to produce slightly less. Productivity is driven by investment, work methods and investment. The latter has come under downward pressure as a result of Brexit uncertainty.
• Ernst & Young Item Club says there has been a ‘clear relapse’ ” in UK productivity.
• UK house prices fell 0.7% in Q2 per Halifax. Prices up 1.8% (down in real terms) in the year to date.
• US added more jobs than expected in June.
• Sterling up at $1.3296 and level at €1.1305
• Oil $77.40
• UK 10yr gilt yield up 2bps at 1.27%
• World markets all up. Far East up in Monday trade.
• Politics, Brexit etc.:
o Government in turmoil as David Davis resigns in protest that Brexit deal that he agreed to on Friday.
o Telegraph says a ‘wave of departures’ is expected as the Chequers deal looks like upsetting both sides
o Tory party imploding as Brexit debacle drags on. Labour standing in front of an open goal. Could still fumble the ball. A simple commitment to a People’s Vote would surely see them in No10.
o David Davis says it is looking ‘less and less likely’ that the Tories will deliver on Brexit. David Cameron now denies that he said Mrs May’s proposals were the worst of all worlds. Though they do look like annoying or disappointing both leavers and remainers.
o Mr Davis has steered Brexit to this point, says that, with less than 9mths to go, he is leaving the country with a ‘general direction of policy [that] will leave us in at best a weak negotiating position, and possibly an inescapable one.’
o Sky calls resignation & subsequent Cabinet position a ‘bombshell’. Sky says resignation is ‘shocking’ after ‘every single member of the cabinet – admittedly some with their reservations – all agreed that they would support the prime minister’s proposals and they would defend them in public.’
o Jacob Rees Mogg says this ‘raises the most serious questions about the PM’s ideas. If the Brexit Secretary cannot support them they cannot be very good proposals. It was an attempt to bounce the cabinet. It was a seriously mistake.’
o Challenge to PM possible if 48 MPs suggest it in writing.
o Dublin says staying in Customs’ Union (i.e. not really taking back control of trade) would do it for the Republic.
o In comments that proved shortly not to be correct, Michael Gove says Cabinet supports Mrs May. Boris said to be criticising the deal. FT says Mrs May said negotiating with the EU was never going to be a discussion between equals & that the UK needs to accept this to move forward.
o Airbus says government has no idea how to take the UK out of the EU without damaging the country.
START THE DAY WITH A SONG:
Last Friday’s song was What’s Love Got To Do With It by Tina Turner. Kicking off the new week, who rapped:
I’m out for presidents to represent me (say what?),
I’m out for presidents to represent me (say what?)
I’m out for dead presidents to represent me
PRIOR DAY TWEETS:
o Later tweets: Brewdog grew UK sales by 78% in 2017. Adjusted EBITDA was £8.98m (2016: £6.10m). Reported PBT for 2017 is £1.4m, down from £3.8m
o Casual Dining Group to operate a delivery only brand. Blazing Bird will launch at a selection of its Las Iguanas restaurants
o Cutting capex, along with cutting marketing spend & other ‘invisibles’ is often a lead-indicator of concern re missed earnings targets etc
o Demand for flights to Russia is up 256% day on day per Lastminute.com. There’s some football going on.
o Mark Carney says that expectations re rate rise seemed well-placed. Betting now 60% on an August rise.
o Chequers. Mrs May: Cabinet has ‘duty’ to back her. Soft proposal likely & will upset all parties. David Davis says it is ‘unworkable’.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): Marks & Spencer was in focus in the Saturday papers, with the Times making a big splash of the news that Archie Norman and Adam Crozier, the new Chairmen of M&S and ASOS respectively, used to work together at ITV (“Ex-ITV double act go head to head at M&S and Asos”), noting that ASOS is now the bigger company by market cap and highlighting the shameful news that M&S has decided not to issue a Q1 trading statement next week…And a FT article flagged the pressure on the loss-making M&S food supplier 2 Sisters Food to close factories, whilst a FT markets column noted that the M&S share price may have benefited last week from M&S being seen as the supplier of the now famous waistcoat worn by England football manager Gareth Southgate (“World Cup fever tailor-made for M&S shareholders but other investors not feeling it”).
• Saturday Press and News (2): Majestic Wine was also in focus, with the Times highlighting that its admirable CEO Rowan Gormley has again refused a pay rise and is now paid less than the FD , whilst the Daily Mail flagged that the CTO, Derek Hardy, bought a chunk of shares last week. The Daily Mail also had a feature about the way in which the Angling Direct chain is defying the High Street gloom (along with the likes of Next and JD Sports). Dave Lewis of Tesco was the Daily Mail’s “Hero of the Week” for the deal with Carrefour, but the embattled Chancellor Philip Hammond was the Daily Mail’s “Zero of the Week” for refusing to overhaul Business Rates. However, the FT had a lengthy Opinion piece arguing that “Angst ridden retailers are too quick to blame Business Rates”. Finally, Lex column in the FT highlighted the dismal share performance of Nanjing Cenbest (the parent company behind
• Sunday Press and News (1): Business Rates continued to be a hot topic, with the estimable Oliver Shah of the Sunday Times penning a column arguing that “The worst is yet to come for the High Street”, noting that an Online sales tax would be “incredibly difficult to administer” and concluding that “the brutal truth is that we have too many shops – and many more are going to close, Rates or no Rates”. The Business Leader column in the Observer, however, thundered that “High streets will go on suffering until the digital economy pays more tax”, arguing that “shopkeepers are essentially correct: Business Rates are pre-internet and have become archaic”.
• Sunday Press and News (2): The fast-growing Mountain Warehouse and its founder and CEO Mark Neale were the subject of a bullish feature in the Sunday Telegraph, noting his view that “The High Street is changing, not dying” and the news that the business has been valued at more than £300m in a private equity deal with Inflexion that will hand a useful £45m windfall to the bosses of the business. The Mail on Sunday had a rare interview with Veronique Laury of Kingfisher, at the B&Q stand at the Hampton Court Flower Show (“The French boss transforming B&Q debunks a retail myth”), highlighting her view that it nonsense to say that young people are not interested in DIY, because of all the DIY videos on YouTube. The Mail on Sunday also flagged that fashion retailers have enjoyed booming sales from the recent heatwave, using as an example the City forecast that ASOS will report 25%
• Mothercare: If you thought the much discussed refinancing and restructuring of Mothercare had been completed by now, then you should think again, because it’s all still dragging on, but the company has announced today that it has “made good progress” .The highly dilutive £32.5m capital raising will be effected by way of a 1 for 1 placing and open offer at 19p a share and is expected to complete on 27 July, subject to an EGM vote. The CVA plan is largely proceeding, however, As for the outlook, the mixed news is that “Current trading continues to follow the patterns seen in the second half of the last financial year, with challenging conditions in the UK and some stability visible in our International operations”
• Retail Sales Watch: For Retail Sales purposes, June was the 5 weeks to June 30th and, although it was nice to have a month with no calendar distortions for once, the World Cup usually brings some sales (eg TV’s) forward, whilst the recent heatwave will have driven picnic/barbecue/booze sales (notwithstanding a similar hot spell a year ago). The BRC-KPMG Retail Sales figures for June are out tomorrow and we expect another positive month for LFL sales (after a surprisingly good +2.8% LFL in May), although the Food Retailers, as usual, are likely to have seen the best of it…
• News Flow This Week: As the second half of Wimbledon gets under way and the World Cup builds to a climax, this week is busy in terms of Retail news, kicking off first thing tomorrow with the BRC-KPMG Retail Sales figures for June (see above), closely followed by the Ocado interims and the Marks & Spencer AGM. Wednesday brings the Burberry Q1, the Sainsbury AGM and the Hotel Chocolat pre-close. And then on Thursday we get the Dunelm Q4, the ASOS Q3, the Burberry AGM and the Pets at Home AGM.