Langton Capital – 2018-07-23 – Stonegate & Be At One, CVAs, Escape Hunt & other:
Stonegate & Be At One, CVAs, Escape Hunt & other:
A DAY IN THE LIFE:
Many of the local pigeons, which beg from tourists in York city centre during the day and then make horrible cooing noises all of the night, have taken to coming to our garden in the evening to go to the loo, sleep, go to the loo again and tear up any of our interesting looking plants either looking for grubs in the roots or simply for the hell of it.
And that has not endeared these flying rats to us as it seems to me that a pigeon can poo its body-weight every hour and, if you leave them for any length of time, they can bury most things, garden furniture included, under a pile of guano in no time at all.
Furthermore, as they’re also roosting on the garden gate, various fence posts and the like, you’re hard-pressed not to get pigeon poo under your fingernails when opening the gate and, if you’re rushing for the train at crazy o’clock in the morning, that’s not the best look to be wearing for the rest of the day. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Sky news over the weekend broke the story that Stonegate will this morning announce this morning that it has bought cocktail chain Be at One in a deal valuing the operator at around £50m. The group has confirmed the acquisition this morning.
• Stonegate Pub Company confirms purchase of Be At One Limited, specialist cocktail bar operator with 33 units.
• Stonegate says it ‘plans to operate Be At One as a standalone, eighth format with its wider portfolio of c.700 predominantly high street pubs and bars.’
• Stonegate has also announced the acquisition of 15 sites from Novus Leisure for an undisclosed sum. Group CEO Simon Longbottom says ‘these are both excellent acquisitions for Stonegate which are right in our sweet-spot.’
• Stonegate, which has more than 700, largely wet-led outlets across the country, also owns the Yates, Walkabout and Slug & Lettuce chains. It last year attempted to buy Revolution Group in a deal that was ultimately blocked by shareholders.
• A Stonegate IPO may be on the cards in the not-too-distant future.
• The government has been asked to conduct an urgent view into CVAs after claims from the British Property Federation (BPF) that they are being misused. The BPF said issues include a lack of transparency, unfair discrimination between different creditors and a lack of regulation to ensure CVAs are used appropriately and to drive good practice. Melanie Leech, CEO of the BPF said ‘Property owners, looking after savers and pensioners’ money, will support businesses who demonstrate this commitment but must protect those pensioners against unfair action that penalises their interests.’
• Per Mail on Sunday, TGI Fridays CEO Karen Forrester received a 40% pay rise despite strikes by employees over ‘exploitative’ practices on pay and tips. Many staff are unhappy with a new policy of redistributing 40% of tips paid by customers using cards to back-of-house staff including kitchen workers instead of giving them an increase in basic pay. The company recorded a turnover of £216 million in the year to December 31, 2017, up from £211 million, while pre-tax profits dipped from £21 million to £20 million.
• Krispy Kreme Doughnuts may be nearing an acquisition of the Insomnia Cookie delivery company, valuing the business at around $500m according to CNBC sources. Insomnia Cookies delivers cookies late at night until 3 a.m. from its nearly 140 locations, most of which are near college campuses.
• David Moore accuses the UK government of ‘sitting on its hands’ as dozens of businesses in the restaurant sector have collapsed or face administration. Moore blamed Brexit for bringing down consumer spending. London steakhouse Gaucho will bring in Deloitte as its administrator, while sister chain Cau has appointed KPMG to sell of close its 22 restaurants.
• A Welsh branch of KFC was fined £35,000 after serving undercooked chicken to a customer. Newport Magistrates Court found issues such as a lack of documented checks on oil levels in its pressure fryer.
• Per MCA, Upham Group has appointed advisors to consider its future funding options, with the company having a rumoured valuation of more than £40m. Trade buyers and private equity seem the most likely buyers.
• Following a £300,000 refurbishment Craft Beer Co has acquired the freehold of its Brixton site. Founder Martin Hayes said ‘Our mission remains to be Europe’s leading craft beer led pub group, the best beer selection paired with unmatched hospitality’.
• Magioni, a plant based pizza brand, has launched in the UK. The company produces cauliflower and courgette pizza bases, selling 13,000 a day in its native Netherlands.
• Popchips Ltd, the European subsidiary of Popchips, has been acquired by KP Snacks. Popchips Inc, the parent co, will retain ownership of the brand in all other international markets.
• Yorkshire food and drink exports to the US totalled £81 million in 2017, accounting for roughly 7% of Yorkshire’s global food and drink exports, which total more than £1bn.
• According to EY, the number of profit warnings by FTSE-listed retailers has doubled yoy, with 20 profit warnings in H1 from retailers such as Debenhams, Moss Bros, Carpetright and Card Factory. Non-listed retailers such as New Look and House of Fraser have also used CVAs, leading to thousands of job losses and met with anger from landlords.
• Quorn sales are reported to have risen by 12% this year versus last on the back of an upsurge in vegan and vegetarianism.
• FT reports that shopping centre chain Hammerson, which it labels ‘troubled’, will announce asset sales with its H1 numbers later this week.
HOLIDAYS & LEISURE TRAVEL:
• Exchange rates for holidaymakers are the lowest for nine months, with the Moneycorp bureau at Stansted offering €0.89/£ and $1/£.
• Airbnb has breached the EU’s Unfair Commercial Practices Directive, the Unfair Contract Terms Directive, and the regulation on legal jurisdiction, according to the European Commission. The EC said ‘The presentation of Airbnb’s pricing, as well as the distinction between private and professional hosts does not comply with the requirements of EU law, in particular [with] the Unfair Commercial Practices Directive.’
• Holidaymakers will be warned about the impacts of a potential no-deal Brexit with information being distributed in weekly ‘bundles’ by the government. The government has set aside £3 billion for no-deal contingencies but only half of that has been allocated, according to The Times.
• STR reports EU Q2 hotel occupancy up 1.1% to 75.5%, ADR up 3.8% to €115.54 and RevPAR up 4.9% to €87.20.
• STR reports US Q2 hotel occupancy up 1.1% to 70.2%, ADR up 2.9% to $131.02 and RevPAR up 4% to $91.94. Demand grew 3.1% yoy with supply increasing by 2%. Bobby Bowers, STR’s senior VP of operations, said ‘The industry continues to benefit from demand across the travel segments as well as favorable macroeconomic conditions.’
• Travel + Leisure reports more than half of Americans, 129m people, go a year without taking time off with 96m not taking a trip in more than 2 years, up 3m yoy..
ESCAPE HUNT – SHORT TERM PROFIT CAUTION BUT BAGS DR WHO…
• Escape-game operator Escape Hunt has cautions that slippage in opening plans mean that current year trading will be below earlier estimates.
• Escape Hunt says that ‘while the Company remains strategically on track, the revised opening schedule coupled with holding back spare rooms will impact on current year performance.’
• ESC says it is nonetheless ‘delighted that the resulting rebranding and enhanced game design has delivered the desired results.’ It says the ‘three sites opened earlier this year are translating into good financial performance thus far with revenue and EBITDA contribution, relative to the number of games rooms opened, having met our expectations.’
• ESC says it ‘has deliberately held back on building games in all available rooms to leave capacity for rooms for our new strategic partner which will launch from the end of 2018.’ ESC says ‘with weekend and peak occupancy often nearing 100%, Escape Hunt is starting to market weekday capacity to corporates.’
• ESC will open 5 sites ‘in the coming months.’ It says ‘the Company is now able to proceed at pace.’ It is shutting its Bangkok office as its games studio is now established in London.
• ESC has also announced that it has signed a 5yr licence agreement with BBC Studios to create a series of Dr Who-themed escape rooms in the UK. It says it ‘will open the first of the rooms in December 2018 to follow the autumn launch of the new television series.’ It will ‘roll out Dr Who-themed rooms across the UK over the next three years.’ ESC says it ‘believes that using branded content in its escape rooms broadens their appeal both to the public and to corporate clients and will help to drive footfall and brand awareness.’
• ESC CEO Richard Harpham comments ‘Doctor Who represents the very best in British action adventure and has a loyal and dedicated fanbase that spans all generations. We look forward to bringing the show to life for all fans in its first ever live escape game experience at Escape Hunt venues across the UK.’
• Langton: Missing early targets is rarely a good look & ESC may have to go further to prove its concept before the market gives it credit for its ideas going forward.
• That said, escape games could have legs. They tick a number of interactive boxes and Dr Who does indeed have a loyal fan-base with the first-ever female Doctor due to hit screens in the Autumn.
• But stories are one thing and numbers are another. It could be some time before the latter start to come through but early TripAdvisor and other reviews are, to say the least, encouraging.
FINANCE & MARKETS:
• Mortgage mis-selling? The BBC is running a story suggesting that excessive lending in the years before the financial crisis has left a number of borrowers in homes that they cannot afford to buy – or even keep if and when interest rates rise further. It suggests that interest only mortgage holders could struggle to repay them.
• BBC reports there has been a “significant” rise in homes being valued at less than what buyers have agreed to pay. Such ‘down valuations’ are leading in some cases to chains collapsing.
• Government borrowing in Q2 was at its lowest level since 2007 per the ONS. Borrowing in the quarter was £16.8bn, down by £5.4bn on the same period last year. HM Treasury reported ‘borrowing is at the lowest level for over a decade, which shows our balanced approach is working.’
• Sterling up a little at $1.3143 and €1.1198
• Oil up at $72.98
• UK 10yr gilt yield up 4bps at 1.23%
• World markets: UK, Europe & US up on Friday but Asia mixed in Monday trade.
o YouGov poll in Sunday Times says majority of voters do not approve of Mrs May’s Chequers’ proposals
o More than a third of voters want a new Brexit poll.
o Boris Johnson remains voters’ favourite to lead the Tory party.
o Only 16% of respondents think Brexit is being handled ‘well’.
o Dominic Raab tells BBC government needs to prepare for a no-deal Brexit. Declines to deny that it is stockpiling food and medicines.
o Nigel Farage & US advisor Steve Bannon said to be in talks to create a new, right of right of centre party as UK politics polarise
o Mrs May & Mr Raab call on Brussels to ‘evolve’ its position. Post his meeting with Mr Raab last Thursday, Michel Barnier says many questions remain.
o Reality check. The Brexit referendum was 21mths ago. We leave the EU in 9mths. A deal is needed by October. The now worried-looking Mr Raab has been in his job for just a couple of weeks and, almost ¾ of the way through the exit process, has been to Brussels only once. He is calling for the EU to evolve its position.
PRIOR DAY TWEETS:
• Later tweets: Gaucho (cut our rents otherwise we’ll shoot ourselves in the head) shoots self in head. Staff sacked. Lose, lose, lose?
• EZH confirms Dublin site & strengthening Euro team ‘to support increased focus on Continental European expansion’. Will cost c£750k pa
• Busiest holiday w/e of year but tour op shares still weak on Brexit fears. ABTA says record 2.5m holidaymakers will go o/seas in next 72hrs
• Leaver & Brexit Sec. Dominic Raab in Brussels holding 1st talks w. Michel Barnier. Calls for ‘vigour & vim’. Meaningless.
• Politicians saying risk of Hard Brexit not rising. Translation: The risk of a Hard Brexit is rising. Sterling at 10mth lows
• Sterling crazy weak just in time for us all to go on holiday. Thanks for that. Stock up in Yorkshire & camper van in Cornwall anyone?
• Stock volatility rising? Mid & small cap horrors continue but indices sail on regardless. Chance of rate rise slipping on slowdown fears
START THE DAY WITH A SONG:
Friday’s song was Pumped Up Kicks by Foster the People. Today, who sang:
Thirteen month old baby, broke the lookin’ glass,
Seven years of bad luck, good things in your past
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News: The late news on Friday about a legal challenge from some landlords to the controversial House of Fraser CVA plan was the main talking point in the Saturday papers, with the FT noting that the challenge is in the Scottish courts because the House of Fraser operating subsidiaries are registered in Scotland. The slightly odd lead Business story in the Daily Mail was headlined “£1.5bn High Street pension time bomb”, alleging that the struggling High Street giants have a combined pension deficit of £1.5bn…The Guardian had a feature on how Ashford city centre in Kent has been revived since the local council took over the struggling Park Mall. And the Times had a snippet about the bizarre announcement on Friday by Sports Direct whining that they had no influence over the many retail companies that they have “strategic stakes” in…
• Sunday Press and News (1): The main focus in the Sunday papers was the investor pressure on the CEO of shopping centre giant Hammerson, David Atkins, to come up with a credible plan with the interim results on Tuesday to get the share price up, as highlighted by front page Business stories in the Sunday Times and the Sunday Telegraph. And the estimable Oliver Shah of the Sunday Times devoted his column to the subject of the beleaguered Hammerson, in the light of Land Secs’ recent write-down of its stake in Bluewater, opining that the CEO is unlikely to last long and noting that the French predator Klepierre can bid again in October. The Sunday Times also kept up the pressure on Debenhams, after its supplier credit story last week, by flagging that the beauty company Blow seems to want to abandon its relationship with Debenhams (and has put itself up for sale instead) and that the
• Sunday Press and News (2): The main Retail scoop, however, was the Mail on Sunday story that Tesco has secretly identified up to 60 sites to convert to a new discount food chain (possibly called Jack’s) this autumn, in an effort to take on Aldi and Lidl. The Sunday Telegraph had a big feature on the pressures on Food suppliers (“Grocery price crunch hands urgent food for thought to suppliers”) and there was an Editorial thundering that “Suppliers are the real victims of Sainsbury’s move for Asda”. The Sunday Times flagged that a new eco-friendly baby and maternity wear business in Cornwall called Frugi has sold a majority stake to private equity firm True Capital. Finally, Prufrock column in the Sunday Times noted the sad death of shoe industry veteran Don McCarthy, who is best known for leading the Icelandic-backed takeover of House of Fraser in 2006.
• McColl’s: Ahead of today’s interims (for the 26 weeks to May 27th), the share price of the convenience store operator McColl’s has failed to rise on the Food Retail tide, as if something was amiss, even though we had assumed that the temporary supply disruption it had suffered from the collapse of the Palmer & Harvey wholesale supplier last November was well behind it…Unfortunately, this turns out not to be the case, with overall LFL sales down 2.7% in H1, gross margin 40 bps down and adjusted EBITDA slightly down at £16.0m. And although McColl’s say that things are past the worst, with total LFL sales for the seven weeks to 15 July only down 0.8%, they have warned that full year EBITDA will be only flat, which is clearly disappointing given the benefit of last year’s big Co-op acquisition. At least the dividend has been maintained, but the City’s mood will not be lifted by the
• News Flow This Week: This week is busy again, in terms of Retail news, and tomorrow brings the latest monthly Kantar/Nielsen grocery sales data. Tomorrow also brings the Halfords AGM (albeit with no update scheduled), whilst the Joules finals are on Wednesday. Thursday then brings the Howdeninterims, the Inchcape interims and the Bonmarche AGM update. And there are also back-to-back interim results from the big shopping centre landlords, with Hammerson tomorrow, CapCo on Wednesday and Intu Properties on Thursday. And over in the US, mighty Amazon announces its Q2 results on Thursday.