Langton Capital – 2018-09-06 – Marston’s, PPHE, Gaucho, menu prices, DART & other:
Marston’s, PPHE, Gaucho, menu prices, DART & other:
A DAY IN THE LIFE:
Hopefully the wasp season is coming to a close but is it just me or are bees more of a danger to health than their slightly more orange-coloured cousins?
Because, whilst neither I nor any member of the family that I’m aware of has been stung by a wasp, we’ve all been got at by bees.
And the suggestion that they’re a one-shot only type of stinger seems to be misplaced as one flew down one of the kids’ polo shirts once, stung him three times and then crawled out and flew away with an indignant but somewhat self-satisfied look on its face.
True, this may be due to the proximity of various bee-hives, where not-quite-local people keep the insects (at a safe distance from themselves) and then don’t share the honey around. These must be home to tens of thousands of stinging insects and, from time to time, they seem willing to give their stingers a bit of an airing, just to check that they still work.
Anyway, it’s a fresh seven degrees out there and, with a drab-looking weekend to come, let’s move on to the news:
PUBS & RESTAURANTS:
• Marston’s has announced the appointment of William Rucker as Chairman with effect from 1 October 2018. The group comments ‘William Rucker is Chief Executive of Lazard in the UK, the NYSE-listed investment bank that is one of the world’s pre-eminent financial advisory and asset management firms.’
• Commenting on the announcement, Marston’s CEO Ralph Findlay says ‘we are delighted to welcome William Rucker to the Board of Marston’s as our Chairman and look forward to working with him. William brings with him extensive expertise, having advised a broad range of companies and chaired two publicly quoted companies. His skillset will further strengthen our existing Board and add significant value in helping Marston’s to deliver its future growth ambitions.’
• Mr Rucker comments ‘Marston’s is a well-respected business and a leader in its field which is well placed to capitalise on current sector trends with a leading beer business, a balanced, well invested pub portfolio and growing lodge accommodation business.’
• Gaucho’s administrator has confirmed the sale of the steak restaurant chain to a new vehicle called Lomo Bidco created and owned by the company’s lenders, Investec and SC Lowy, which will see Gaucho’s CEO leave the brand. Instead, Gaucho’s former managing director and founder of M Restaurants, Martin Williams will be ‘working with the key stakeholders to drive the next stage of Gaucho’s development’. Lomo Bidco will acquire Gaucho’s 16 UK restaurants, conditional on the successful implementation of a Company Voluntary Arrangement (CVA) of Gioma (UK) Limited, the legal entity operating the Gaucho business.
• A look at pricing. It’s possible to leave various pizza restaurants having spend £40 per head and be neither sated nor drunk.
• Prezzo has been 30% off (food only) for most of the last few months. That’s when it hasn’t been 40% off and it will be tough for the group to move back to full prices. However, a glance at the list prices does suggest that they could be a tad high.
• In London, Prezzo is charging (or rather attempting to charge when customers don’t have a fistful of vouchers with them) £10.45 for a ‘prestigio’ Margherita with a large base. Cost? We’re guessing here but perhaps less than two quid? Olives are £3.50 a bowl and a 33cl bottle of Peroni will set you back £4.50. Add in a coffee, a bottle of water and a ‘discretionary’ 12.5% tip that you don’t have much chance to knock off and you’re looking at nearly £30 per head for a plain pizza lunch.
• That’s not cheap. Prezzo prices are only about lower in Hull than they are in London. Even at these prices, Prezzo and other chains have been struggling to make money and CVAs in the sector are ongoing.
• Some other operators, such as Fulham Shore (Franco Manca), work on a lower margin & offer value. It’s worked pretty well for JD Wetherspoon over the years. See FUL interview here – https://www.youtube.com/watch?v=7VpE1aXyTLM
• Greene King updates on Q1 trading (since end-April) at its AGM tomorrow. The summer weather will have helped wet sales, food will have been tougher, August was mixed but the last week or so should have been better.
• UK August services PMI stronger than anticipated at 54.3 compared with 53.5 in July. Markit says ‘business activity and new work rose faster although anecdotal evidence suggested that Brexit uncertainty continued to hold back business-to-business spending, especially in relation to large scale projects.’
• Speaking to MCA, Richard O’Sullivan, CEO of Boost Juice Bars and The Shake Lab, says that the current trading environment is the toughest he has known in his 40 years in the sector. O’Sullivan added: ‘For a lot of guys it really is just about staying in the game. Everyone is trying to work out where retail is going.’
• Ei Managed Investments has announced the launch of Urban Pubs and Bars Two, a partnership with Nick Pring and Malc Heap, the Founders of Urban Pubs & Bars. The Paradise by Way of Kensal Green, the Royal Oak in Harlesden, and the Rose Pub & Kitchen in New Cross, will be Urban Two’s first three pubs.
• UKHospitality has warned that the introduction of inflexible mandatory calorie labelling could present a serious burden for hospitality businesses. CEO Kate Nicholls said: ‘Mandatory calorie labelling could have a significant impact on the hospitality sector, particularly smaller businesses that would struggle to cope with the huge burden of a one-size-fits-all approach. The knock-on effect would almost certainly mean prices go up and investment in businesses goes down. There is also a serious potential that mandatory calorie labelling would undermine businesses’ efforts to tackle food waste which is a growing concern for consumers and an area of innovation for businesses.’
• Pret A Manger revenue rose 13.2% to £878.5m for the 52 weeks to 28 December 2017 thanks to a 3.2% increase in like-for-like sales and the opening of 58 net new shops in the period, taking its total estate to 502.
• The Scottish Beer & Pub Association has welcomed ‘the Scottish Government’s Program for Government, particularly the news of further action on non-domestic rates, expanding our food and drink sector, and growing our exports.’ CEO Brigid Simmonds commented: ‘Most significantly of all, the current system of rates simply doesn’t work for our sector and this has been recognised by the Scottish Government with the 12.5% annual cap on increases. The legislation announced yesterday will put into law the remaining Barclay recommendations, which includes a break between the completion of capital investment and a rise in business rates.’
• According to The Verge, Instagram plans to launch a standalone shopping app to allow users to buy goods from people they follow on Instagram.
• Pernod Ricard managing director, Laurent Pillet, claims the company has ‘dramatically’ increased the money it spends on Amazon ads in the UK. The company now says it is the second-biggest spirits provider on Amazon with 10% market share. Pernod Ricard declined to reveal the exact amount invested in the campaign.
• Leon will open its first US site in Washington DC’s L Street next week with a media preview on 12 September. Co-founder John Vincent said ‘We have found the people, community and culture of D.C. very inspiring.’
• Wyevale, a garden centre chain, offloads four sites as part of its plan to sell its entire 145-store portfolio. The company is backed by Terra Firma who appointed Christie & Co in May to oversee the sale process.
• The UK government is working on a new scheme that will allow up to 2,500 non-EU workers to be recruited by British farmers for up to six months post Brexit. This will help the farmers harvest their fruit and vegetable farms with home secretary, Sajid Javid, saying the government was keen to support British farmers ‘in any way we can’.
• RBS will close an additional 54 branches, affecting 258 jobs, on top of the 62 closures announced in May. The bank said the latest closures were linked to its decision not to sell its Williams & Glyn business. This takes total RBS closures since March 2017 to 603 branches.
• The National Audit Office accuses the government of having a ‘limited understanding’ of problem personal debt which costs the taxpayer £900m a year. Problem debt – defined as the inability to pay debts or household bills – affects an estimated 8.3 million across the UK.
HOLIDAYS & LEISURE TRAVEL
• DART Group, owner of Jet2, has updated on trading for its Q1 saying ‘the positive start to the financial year as reported in our Preliminary Results Statement of 12 July 2018 has continued.’
• DART says Leisure Travel bookings are ‘growing slightly ahead of our 25% summer 2018 seat capacity increase and winter bookings satisfactory at this stage.’ The group says ‘demand for both our flight-only offering and our higher margin package holiday product remains strong and package holiday customer numbers as a proportion of total departing customers have increased slightly for summer 2018.’
• Re its distribution business, DART Group says ‘progress continues to be made at Fowler Welch…which is currently trading in line with management’s expectations.’
• Overall, DART says ‘the Board expects the Group to meet the recently upgraded market expectations of profit before foreign exchange revaluations and taxation for the year ending 31 March 2019 and will provide a further trading update on publication of its interim results on 15 November 2018.’
• Hotel company PPHE has reported H1 numbers for the six months ended 30 June 2018 saying it has seen a ‘solid first half performance delivering year-on-year revenue growth, with trading maturing across recently opened hotels in 2016 and 2017 and improved trading across several operating regions.’
• PPHE reports total revenue increased by 5.0%, to £148.8 million with sales up 4.4% on a LfL basis. EBITDA increased by 1.7% to £40.6 million.
• PPHE reports H1 REVPAR up 2.5% with normalised profit before tax up 62.4% to £5.1 million. Reported profit before tax increased by 384.6% to £16.4 million (H1 2017: £3.4 million). CEO Boris Ivesha comments ‘we are pleased to report a solid first half performance, with further revenue growth and a 45% increase in the interim dividend.’
• Mr Ivesha continues ‘as an owner and operator of hospitality real estate, we are committed to and have a track record of creating long-term value for our shareholders. The recent independent valuations represent an EPRA NAV per share of £24.21.’ The PPHE CEO concludes ‘we remain focused in the second half of the year on the excellent service delivery for which our properties and people are known and on significantly progressing our renovation projects. We continue to expect the full year results to be in line with the Board’s expectations.’
• Club Med prepares for a $700m listing on the Hong Kong stock exchange, with the funds expected to be used to repay debt and expand the company. Fosun acquired the Club Med three years ago in a lengthy takeover battle.
• Marriott announces its target to grow its branded residential portfolio by more than 70% in the next four years. Marriott already has nearly 90 branded residential projects open with a pipeline of more than 60 additional signed and approved projects.
• Uber will block customers with low ratings from using its app in Australia and New Zealand. Riders who are rated four-out-of-five stars or lower will be banned for 6 months.
• Uber Technologies CEO Dara Khosrowshahi said the company has no plans to sell its self-driving car research arm as it prepares to go public next year. The Advanced Technologies division will partner with other companies that are building self-driving technology with Khosrowshahi saying ‘We want to get the technology ready for prime time as soon as possible’.
FINANCE & ECONOMICS:
• Services PMI stronger. See above.
• HIS Markit says ‘business confidence fell to a 5-month low due to Brexit concerns, especially the near-term impact on clients’ business investment plans.’
• Sterling up at $1.2909 and €1.1096
• Oil down at $77.23
• UK 10yr gilt yield up 4bps at 1.47%
• World markets: Down yesterday with Far East down Thursday.
o Brexit supporter Lord King has joined the ranks of the dissatisfied referendum winners saying that the government is incompetent in its handling of the process. He says, ‘both camps feel that they haven’t got what they wanted.’
o Lord King expresses regret that the EU27 are more united in their approach to Brexit than is the UK itself.
o Ex Labour front bencher Andy Burnham has said that the UK should extend its EU membership until an exit agreement is reached.
o FT reports Jeremy Corbyn under pressure to push for a second referendum. Union the GMB is calling for a vote on the final Brexit deal. Ironically, this could make a no-deal Brexit more achievable than one with a deal.
o Reuters has reported that the UK would now vote to remain in the EU if a second referendum were to be held.
o Sterling up a little yesterday on the suggestion that Germany was softening its stance re the UK post Brexit
PRIOR DAYS LATER TWEETS:
Later tweets: Barclaycard says pub spend +11.9%. They wish! Maybe reflects switch from cash to card??
Discounts still heavy with little sign that there is the ability or the desire to row back to full prices.
Telegraph suggests UK economy is c2% smaller than would’ve been if Brexit vote gone other way (c£45bn p.a.). c£650 per person & counting
Strong services PMI (up to 54.3 in Aug) provides some relief after weak manufacturing & construction numbers
Coffee & sugar prices trending lower globally. Sterling weaker vs dollar though so no dirt cheap sweet coffees on the horizon
WPP note of caution. Lead indicator or a blip? PMIs mixed with services, largest by far, signalling better growth
Autumnal weather good for John Lewis but not for Waitrose. Less charcoal, suntan lotion & BBQ gear being sold. Normal for this time of year
START THE DAY WITH A SONG:
Yesterday’s song was Higher Ground by Stevie Wonder. Today, who sang:
Some of those that work forces, are the same that burn crosses,
Some of those that work forces, are the same that burn crosses
RETAIL NEWS WITH NICK BUBB:
Dixons Carphone: We flagged yesterday that the consensus for today’s Q1 trading update (for the 13 weeks to July 28th) was that overall Group LFL sales would be flat and that is indeed the case. In the core UK business, the Electricals business was also flat, despite the World Cup boost to TV demand, but there is some relief that Mobile was only down 1%. Overseas, the Nordics were also flat, but good old Greece was up an impressive 9%. The main interest was in what the new CEO Alex Baldock said about the key negotiations with the mobile network operators (which are rumoured to have gone badly…), but he ducks the issue, ahead of the interims in mid-December and simply says “First quarter performance was in line with expectations. We’ve maintained or grown our leading market positions, and our full year PBT guidance of around £300m remains unchanged”
FTSE Index Watch: The latest FTSE quarterly index review was announced after the market close last night, and, as expected, there were no big surprises. There were no changes in the FTSE 100 index (ie Marks & Spencer clung on for another quarter), but it was good to see that JD Sports has got onto the Reserve list (with a market cap of £4.8bn, just below that of M&S…). And in the FTSE 350 index, AO World has, somehow, got onto the Reserve List (with a market cap of £670m).