Langton Capital – 2018-07-10 – Nichols, Everyman, Goals warning, DPP, EU staff & other:
Nichols, Everyman, Goals warning, DPP, EU staff & other:
A DAY IN THE LIFE:
Busy with RNSs. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Nichols plc has reported H1 numbers to 30 June saying sales rose by 2.3% to £65.0m with PBT up 2.7% to £13.1m. EPS was 28.8p (2017: 27.7p) and the H1 dividend is 11.3p versus 10.1p.
• Nichols says it ‘has delivered a solid performance in the first half of 2018.’ UK sales were +13.2% but international sales were down. It says ‘the majority of the reduction is a result of lower sales to the Middle East as anticipated in our 2017 Preliminary Results statement (1 March 2018). This is due to the ongoing conflict in Yemen and the timing of shipments to Saudi Arabia.’
• Nichols reports ‘whilst we maintain our original guidance that full year sales to the Middle East will be lower when compared to the prior year, the Board anticipate a stronger second half year in our international business.’ It says ‘as a result, the Board are confident that full year earnings will be in line with expectations.’
• Nichols’ chairman John Nichols reports ‘we have been managing the widely reported market challenges in the Middle East and as a result, the Board is confident of delivering full year results in line with expectations.’ The group does not mention the recently imposed UK sugar tax.
• Around 1,500 jobs are at risk after Gaucho restaurant group announced its intentions to appoint an administrator.
• Data from Fourth has indicated that the UK hospitality sector relies on EU workers for 40% of its staff. The numbers increase drastically for the restaurant subsector with as many as 62.7% of workers being non-UK EU nationals. Mike Shipley, Analytics & Insight Solutions Director at Fourth, said: ‘These figures clearly demonstrate how heavily reliant hospitality is on foreign nationals, especially in the quick service restaurant sector and back of house positions, such as chefs’.
• Commenting on Fourth’s research Kate Nicholls, CEO of UKHospitality said: ‘This research underscores the message that UKHospitality has highlighted to the Government about the vital importance of EU workers to the hospitality sector, and the sector’s overall importance to the UK economy’.
• DP Poland has updated on H1 trading saying that, despite a hit from hot weather mitigated by a benefit from the World Cup, system sales were up by 38% with LfLs some 13% higher. The group now has 59 stores in Poland in some 26 towns and cities.
• DPP reports it has opened 5 new stores in H1. It should open 10+ in the year as a whole. The proportion of new to existing stores should fall as the group grows and the drag on EBITDA should be diminished. Drop us a line for details.
• Beer and cider sales have increased 6.3% in the off-trade in the year up to 25th Feb 2018, according to Kantar Worldpanel. The research found that 37% of Brits drink lager, with 22% drinking bitter, ale, mild or stout.
• The BBPA has appointed a new panel of experts to diagnose the issues currently affecting the health of the UK’s high street.
• Subway has announced plans to roll out food delivery from more than 500 stores nationwide before the end of the year, partnering with Just Eat.
• Hawksmoor will open its New York restaurant next year, in the former United Charities Building in Manhattan.
• Japan and the EU have signed what is being dubbed ‘the largest bilateral trade deal ever’. The deal will see nearly all tariffs on products traded between the two completely removed.
• Arla Foods warns consumers that costs for dairy products could soar during a hard or soft Brexit due to custom-related delays.
• Britain’s Beer Alliance has launched a ‘long live the local’ campaign that aims to highlight the cultural importance of pubs and the threat they face from tax pressures. David Cunningham, Programme Director for ‘Long Live The Local’, said: ‘The punitive beer tax, in conjunction with the other tax pressures from VAT and increasing business rates, are without doubt the biggest challenges facing the pub and beer industry right now’.
• This Monday saw Amazon.com launch its fourth annual Prime Day special, with many products heavily discounted. Moody’s has reported that Amazon’s willingness to sacrifice margin for the sake of building its membership coffers over the longer term, is credit negative for Brick-and-Mortar retailers.
• Consumer watchdog, Which?, has warned that supermarkets are not doing enough to reduce the amount of plastic in their packaging that is hard or impossible to recycle.
• Nation’s Restaurant News has reported that hotel room service is disappearing as US customer preferences change. Travelers in the US are prefering to eat locally than to order room service.
• McDonald’s and Starbucks are teaming up in order to build fully recyclable, compostable cup within the next three years.
• Premier Foods’ CEO Gavin Darby yesterday survived by 59% to 41% an attempt to unseat him at the company’s AGM.
• Premier says it has ‘had discussions with a substantial proportion of the major shareholders, which has included listening to the concerns expressed by those whose support we have still to earn.’
• Premier hints at possible disposals saying ‘the Board is committed to continuing its strategy of improving performance and reducing net debt, while working in parallel to identify other strategic opportunities to accelerate the Company’s turnaround to create value for shareholders.’
HOLIDAYS & LEISURE TRAVEL:
• FT reports domestic stocks in the Far East are struggling to benefit from the rise in leisure travel in the region. It reports Thailand and Australia are among the top destinations for Chinese outbound travellers.’ It says, however, that only 4% of Chinese citizens own a passport and that Chinese airlines will need to hire 110,000 pilots between now and 2035.
• Click Travel is now being backed by BGF in a multi-million pound investment. Click Travel manages millions of travel bookings a year for a wide variety of businesses from the FTSE 100 to the public and third sector. Click Travel’s next-generation approach to business travel management has seen the company averaging annual growth of 30% since 2012.
• Per Travel Weekly, Spanish hotel safety standards are not uniform, but instead a ‘lottery’ putting holidaymakers at risk. Christopher Deacon, senior associate at Stewarts, said ‘This puts holidaymakers at risk, with the hotel’s compliance with the most recent safety standards being a lottery for guests depending on when the hotel was built or last renovated.’ The comments come in the wake of a third British holidaymaker having a fatal fall from a balcony in Magaluf this year.
• UKHospitality calls on the government to create a level regulatory playing field between the UK’s sharing economy and hospitality businesses and increase customer safety.
• Booking Holdings has invested $500m into Didi, China’s largest ride-hailing app, adding to the company’s strategic capital. Didi has multiple billions of US dollars on its balance sheet, thanks to a $4bn funding round that closed at the end of 2017. Instead Booking wishes to work closely with Didi to offer its on-demand car services through its Booking.com apps via an integration.
• Zoox, a self-driving car startup, has closed a $500m funding round valuing the company at $3.2bn. The company has now raised $800m in total and plans to deploy its vehicles on the roads by 2020 for use in its own ride-hailing service.
• Goals warns on H1 trading and amends banking covenants.
• Goals says H1 numbers will be ‘materially below market expectations, due to the impacts of the extreme weather in H1.’ Andy Anson, CEO, says ‘the investment strategy that is being executed is improving the underlying performance of the clubs. However, frustratingly, the first half was impacted by the snow and its significant aftereffects, which masks the performance of the business where positive trends are clear. With the improving underlying performance, we expect a better second half.’
• The group has amended its 3.00x debt to EBITDA covenant to 3.25x. It says this will ‘provide additional headroom in the quarterly tests in June and September 2018, after which the covenant will reduce back to 3.0x.’ The group does not outline what, if anything, this has cost.
• Goals Soccer says ‘Q1 2018 was impacted by the extreme weather conditions during March and April.’ The group says that this has skewed behaviour with less demand for five-a-side in Q2.
• Goals says ‘260 of our 460 arenas [are] now fully modernised’.
• Goals has also announced that CFO Bill Gow has resigned and will step down from the Board with immediate effect. He will remain in the role of CFO ‘up until his successor is identified and has started. A search for his successor has begun.’
• Everyman Media Group has updated on h1 trading saying ‘the Group ended the period operating 22 cinemas having opened a four screen venue in York during the period.’
• Everyman says ‘demand for the Everyman offer continues to strengthen and the Board is pleased to announce that new contracts have been exchanged for venues in Cardiff (four screens) and London Broadgate (three screens), both of which are expected to open in 2019. These sites, together with those previously announced, commit the Group to a total of 15 more venues.’
• Everyman comments on profits saying ‘the Group has performed in line with expectations in the first 27 weeks of 2018, the Board is confident of a successful outcome for the full year and the pipeline is continuing to be developed in line with the Board’s expectations.’
• The World Cup and a recent warm spell in the UK have been highlighted as the main reasons behind gambling group, GVC’s, strong revenue figures in H1 2018. The group is still implementing its $4bn merger with Ladbrokes. Chief executive Kenny Alexander said: ‘I am pleased to report this positive trading update whilst at the same time undertaking the integration of the Ladbrokes Coral business. The strong momentum across the online business has continued and means we are well placed to deliver against our full year expectations’.
• Gilde Buy Out Partners have acquired Caseking, a PC gaming business, from Equistone Partners Europe for an undisclosed sum. During Equistone’s hold turnover has increased from €96m in the 2013/14 financial year to €239m in the 2017/2018 financial year with strategic acquisitions boosting revenues.
• The EU has fined Google €4.34bn for abusing its control of the Android operating system by forcing vendors to pre-install its apps. The EU said ‘Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet’. Google plans to appeal against the decision.
FINANCE & MARKETS:
• UK CPI held steady at 2.4% in June for the 3rd month in a row per the ONS.
• Sterling has hit a 10mth low against the dollar trading at $1.3075 and €1.1225.
• ONs reports that the price of flats across the UK has not risen at all over the last 12mths. Prices in London actually fell by 0.4%.
• Oil up to $72.76
• UK 10yr gilt yield down 4bps at 1.22%.
• World markets: UK, Europe & US up yesterday but Far East down in Thursday trade.
• Brexit etc.:
o FT reports ‘Jacob Rees-Mogg and the Brexit Ultras’ are calling the shots in the Brexit process. Pro-EU Tories were unable to secure amendments to keep the UK nearer to the EU on trade. The FT writes ‘even at this critical moment, with their credibility on the line, the pro-EU Tories lacked the numbers they needed.’
o Boris Johnson has said that the Brexit dream is not dead. Mrs May has said that the Chequers’ deal is similarly alive. Mrs May says she does not believe that the UK is now nearer to a no-deal Brexit, despite the manoeuvring of some of her Ultra backbenchers.
o The Publishers’ Association has said that trade barriers could be a problem and that they would threaten the industry’s currently-record-breaking export position.
PRIOR DAY TWEETS:
• Later tweets: Seedrs accumulated losses to Dec 17 now £11.2m. Group says performance nonetheless ‘very encouraging.’
• Red’s True Barbecue says is in best position it has ever been operationally after 2yrs of consolidation featuring losses & site closure
• PFD sales Q1 (to June) +1.7%. N/change to forecasts, says growth H2 weighted. International up 20% in calendar H1
• Sojern says holiday demand picked up immediately following England’s exit from World Cup. Prices & volumes should be much firmer
• OBR says tax will rise or spending be cut to fund HMG’s promise to NHS. Brexit ‘more likely to weaken public finances than strengthen them’
• CPI holds at 2.4% for 3rd straight month in June per ONS. Wages rising at 2.7%. Sterling hits 10mth low vs dollar
• John Lewis hit by heat, World Cup. W/e 14 July sales down c8% LfL. Home sales down 11.0% gross, Fashion down 3.5% etc.
• Looking for a low-energy hobby in this hot weather? Tried collecting dead flies on your window-ledge? Effortless, self-replenishing etc.
START THE DAY WITH A SONG:
Yesterday’s song was Buddy Holly with Everyday, but today who sang the following:
Ah sacré papa,
Dis-moi où es-tu caché ?
Ca doit faire au moins mille fois que j’ai compté mes doigts
RETAIL NEWS WITH NICK BUBB:
• Sports Direct: Ahead of today’s final results, the Sports Direct share price has been pretty firm, with the City anticipating a bullish current trading update World Cup football shirts…but we can’t see any mention of the World Cup in the self-congratulatory results statement, although they do mention losing a net £85m on the ill-fated strategic stake in Debenhams! Mike Ashley begins his short summary by trumpeting that “I am particularly pleased that Sports Direct has not only been named among the ten companies with the most improved reputation in the UK, but also that we were ranked among the top five in an index of international retailers* and also says “I’m pleased that our underlying EBITDA has come in at the top end of our expected range at £306.1m” (up 12%) and Michael Murray, the so-called Head of Elevation, gets to say “As the property pipeline and brand relationships
• The Works: Even though the private equity owners Endless and the management have sold a big chunk of their shares in the discount High Street book and gift chain The Works, last week’s £65m pre-IPO placing by Investec at 160p (capitalising the group at £100m or just over 8x EBITDA) is said to have gone surprisingly well and so it will be interesting to see how strong the after-market is when dealings start at 8am today…
• Planet ONS Watch: The hot weather and the World Cup helped to boost the BRC-KPMG Retail Sales figures for June, but we will find out at 9.30am what “seasonally adjusted” life was like last month on the High Street on that strange parallel world, the Planet ONS (aka the Office of National Statistics), via their official Retail Sales figures…City economists generally expect a 0.5% rise in month-on-month seasonally adjusted sales volume, although Capital Economics have pencilled in a 1.0% fall (to pull year-on-year volume growth back to 2.4%), for what it’s worth. We will be looking, as usual, at the non-seasonally adjusted sales value figures and the split in Non-Food between Large and Small Businesses.