Langton Capital – 2018-10-01 – Tips, rates, Itsu, Caravan, discounts, JW Lees & other:
Tips, rates, Itsu, Caravan, discounts, JW Lees & other:
A DAY IN THE LIFE:
It’s not often that I feel empathy for inanimate objects.
But, as the clock on the wall of our flat, one of those cheap, 1xAA battery jobs, now doesn’t have the energy to turn the hands anymore, I can say with some certainty that, on a dark Monday morning, I know how it feels.
Because the poor thing can make it to about 20 seconds to 20 minutes to eight but, as the second hand moves a fraction higher, it falls back to the six-o’clock mark and has to start again and, as September moves into October, that’s a familiar feeling.
However, let’s hope that when the sun gets up we get a boost of energy. The clock, myself, the markets, the economy and all. On to the news:
PUBS & RESTAURANTS:
• Business minister Greg Clark has said that business rates may be ‘adjusted’ in order to help struggling businesses. Horse, bolted etc. Mr Clark says ‘obviously the high street is undergoing a tough time. We know that, and we know some of the reasons for it.’
• Itsu has reported numbers for the year to 28 Dec 2017 to Companies’ House saying that turnover grew by 10% to £105.6m and the loss before tax was reduced to £9.0m from £9.4m last year. EBITDA increased by 28% to £2.6m.
• Itsu reports that LfL sales are up in 2018 (to 20 Sept). It says this is ‘driving UK EBITDA expectations back to more healthier levels’. Itsu has accumulated losses of £14m but its balance sheet totals rose to £40.5m on more shares in issue.
• Five-strong restaurant & coffee chain Caravan Coffee Roasters has reported numbers to Dec-17 to Companies House saying that retained profits rose by around £1,500 and shareholders’ funds increased by £325k on the back of an equity issue.
• Benugo, the operator of ‘high quality café delis and restaurants in High Streets’, has reported numbers to 29 Dec 2017 to Companies’ House saying turnover rose to £112.7m from £100.1m but operating profit fell from £5.5m to £4.7m.
• With no interest payable, Benugo reports a PBT of £4,7m down from £5.5m. The company says ‘the directors are satisfied with the results for 2017’.
• Prezzo still offering 40% discounts on food over the weekend. Pizza Express up to 25% off.
• JW Lees has reported numbers with Companies’ House saying that turnover for the year to end-March rose to £70.8m from £67.7m and PBT fell to £4.5m from £5.2m. The group says ‘the directors anticipate the group will continue to operate profitably in the future’.
• The German owner of Pret a Manger, JAB, has stated that it intends to stick by its embattled chief executive Clive Schlee despite growing anger over the death of a teenager allergy-sufferer, the Sunday Times has reported.
• The fried chicken and biscuits fast food chain, Bojangles Inc, has announced that it is exploring strategic alternatives, including a potential sale.
• After the brand’s success in the UK, Skinny Brands has begun exports of its flagship Skinny Lager to Australia.
• Theresa May has announced intentions of preventing restaurant chains from deducting money from tips given by customers to waiters and bar staff.
• Keurig Dr Pepper Inc has acquired the bottled water producer Core Nutrition LLC for $525m. This is the latest investment of big beverage companies expanding their offerings beyond their namesake sodas.
• Yum! Brands Inc. has raised Tony Lowings to KFC Division CEO. Lowings has worked at the company for 24 years.
• AB InBev will launch its Italian craft beer Lisa in the UK next month, which will enter into direct competition with Asahi-owned Peroni.
• Jamie Oliver Group has reported a £29.2m loss in the year to 31 December 2017. The group also saw revenue fall 10.8% to £100.6m.
• Venice is considering banning alcohol consumption in the streets in a bid to tackle anti social behaviour.
• KAM Media has announced that it is to develop the annual Licensee Index, working alongside a number of leading pub companies and family brewers to evolve the industry’s annual survey of its licensees. MD Katy Moses says ‘we are delighted to be working with the country’s biggest pub companies and family brewers to provide robust and independent data on their performance. Our survey findings will enable our clients to evaluate their performance and ensure their offer to their tenants remains competitive.’
HOLIDAYS & LEISURE TRAVEL:
• Moody’s has reported that ‘TUI’s summer trading update underpins resilience of its business.’ It says ‘even with the unusually prolonged period of hot weather in Northern Europe this year, the group’s increased capacity in hotels and cruises should allow it to book double-digit growth in underlying EBITA for the fourth consecutive year.’
• Moody’s says ‘the deleveraging based on ongoing earnings growth was a key pillar of our decision to change the rating outlook on TUI’s B2 rating to positive on 20 February 2018…the resilience of the group’s business profile to market disruptions such as natural catastrophes, geopolitical tensions, terrorist attacks and the like, which the company has demonstrated over the past few years, is another important consideration of our positive stance on TUI’s rating.’
• On The Beach has found that Spain is the most popular winter sun destination for British holidaymakers.
• HotStats reports UK hotel profit per room increased by 9.2% yoy in August. Occupancy was up 2.7% to 84.8%, ADR increased by 4.6% to £118.94 and RevPAR was up 8.0% to £100.72. Payroll as a percentage of revenue fell to 27.7%.
• Jennifer Cox steps down as CEO of Millennium & Copthorne after just three months in the job.
• According to the Telegraph, the boss of Millennium & Copthorne will leave with a payout of more than £1m despite being in the role for just three months. M&C did not announce the reasons for Ms Fox’s departure but The Daily Telegraph reports it was due to a personality clash with the chairman, Kwek Leng Beng.
• The UN World Tourism Organisation warns of ‘over-tourism’ in popular cities with the body saying there has been ‘A rise in negative attitudes among local populations towards visitors due to issues of perceived overcrowding, noise and other nuisances, the emergence of protests in some cities and the spread of terms such as ‘over-tourism’ and ‘tourism-phobia’.’
• Key figures in the US hotel industry say labour challengers will be the key issue going forwards, prompting read-across for the UK industry. CEO of Aimbridge Hospitality, Dave Johnson, said labour costs were ‘up almost 2.9% in August—that’s the highest in a long, long time.’
• Powerleague, a five-a-side football operator, proposes a CVA that will result in the closure of 13 sites and the loss of 109 jobs. The operator currently has 50 sites, employing over 580 people but has suffered three years of falling revenues.
• Facebook Inc stated that hackers stole digital login codes for 50m user accounts.
• Elon Musk will step down as chairman of electric car-maker Tesla after settling a fraud lawsuit with US regulators. Musk was fined $20m as the US securities and exchange commission accused him of making ‘false and misleading’ tweets about potentially taking Tesla private.
FINANCE & ECONOMICS:
• The ONS has cut its estimate for the growth of the UK economy to 0.5% for H1 this year. Hitting 1.7% or so for the full year could now be something of a challenge.
• Sterling down at $1.3024 but little changed vs Euro at €1.123.
• Oil up sharply at $83.17.
• UK 10yr gilt yield down 1bp at 1.58%
• World markets: UK & Europe down on Friday. US up and Far East higher in Monday trade.
• Brexit, politics etc.:
o Dominic Raab has said that the UK’s willingness to compromise is “not without limits”. He says that a no-deal Brexit may be forced on the UK by its negotiating partners.
o Liam Fox has said that the ‘taunting’ of the PM at Saltzburg was ‘beyond the pale’.
o Business Minister Greg Clark has said that a Canada-style deal would make things more difficult for business. Mr Clark says that there is no point in extending Article 50.
o Boris Johnson has said that Chequers is ‘deranged’. Cabinet is still, reportedly, behind the deal. He says the UK should physically construct a bridge between Scotland and Northern Ireland. David Davis has said that this represents a good headline but bad business.
o Jeremy Hunt has said that the EU is ‘punishing’ Britain. He says that if the Tory Party negotiates a bad deal Brexit, it may stir the Dunkirk spirit in the UK. What’s that old adage? Isn’t it that if you invoke the war, you’ve lost the argument?
PRIOR DAY LATER TWEETS:
• Later tweets: See e/m for QUESTIONS comment. Where does value accrue? Is it in the brand or is it in the physical contact with the customer?
• See e/m for QUESTIONS. Is signing a 25yr lease in this environment either a) naively foolish or b) foolishly naïve?
• Tough trading for some smaller operators. Richoux losing money in its H1, Attendant coffee shops losing £350k etc.
• Shaftesbury, on the other hand, updates saying that it has seen ‘robust trading and footfall across our portfolio over the summer.’
• GfK. Optimism bias still in play as consumers see themselves as OK but the economy as a whole as negative. Confi at minus 9 vs -7
• GfK says ‘danger is that consumers might capitulate on how they feel about their personal finances.’ Could see ‘very sharp drops indeed’
START THE DAY WITH A SONG:
Last Friday’s song was Naive by the Kooks, today who sang:
All we need is music, sweet music.
There’ll be music everywhere.
There’ll be swinging and swaying and records playing.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): There were plenty of Retail stories in the Saturday papers, although there was no one theme. The main Business story in the Times was the strong Harrods results for y/e January, which saw its Qatari owners get an increased dividend of £125m, on the back of a 7% increase in sales to £2.1bn and a 16% increase in operating profit to £218m. The FT had a big article about ASOS and its apparently controversial decision to scrap its popular “A-list” loyalty programme (“Asos axes rewards scheme in test of customer loyalty”). The FT also flagged that the founder of the now bankrupt Poundworld discount chain, Chris Edwards, is planning to set up a new “pound shop” chain called Onebelow, with a target of up to 100 stores by the end of next year.
• Saturday Press and News (2): The Telegraph had a photo of Amazon’s new “bricks-and-mortar” store in New York, Amazon 4-Star. The Guardian had a feature in its News pages on the growth of Personal Shopper services, eg John Lewis in Westfield. The Times highlighted that Chanel has bought the accessories brand Orlebar Brown and also noted that the forecourt retailer Applegreen has placed £150m of shares to part-fund its planned acquisition of the Welcome Break motorway service stations. Most of the market reports featured the news that the founder of Games Workshop, Tom Kirkby, sold £20m of shares on Friday. The FT Money section flagged that Boohoo was tipped as a Buy in its sister publication, the Investors Chronicle magazine, on Friday. Finally, the veteran City commentator Neil Collins highlighted in his FT column how Simon Wolfson laid everything out in “exhaustive and exhausting
• Sunday Press and News (1): The main focus in the Sunday papers was on Tesco, ahead of its interims on Wednesday. The Sunday Times flagged that Tesco would report slightly slower sales growth in Q2, despite the boost from the summer heatwave, but the Sunday Telegraph highlighted that the consolidation of Booker would boost headline operating profits towards £1bn, whilst the Observer had a positive feature on Tesco, noting that it would be on the front foot this week. The Mail on Sunday contrasted the success of Tesco with the way Sainsbury may be stumbling over its planned acquisition of Asda, quoting our view that the CMA seems to be taking a “hard-line” stance on the merger
• Sunday Press and News (2): The Mail on Sunday launched a new campaign “Fair play on Tax” by contrasting the corporation tax that High Street stalwart WH Smith pays with the paltry amount that 3 tech giants (Amazon, Facebook and Airbnb) pay in the UK. The Observer had a double-page spread on the 5-point plan of the Salford MP and Shadow Business Secretary, Rebecca Long-Bailey, to revive the High Street. And the Sunday Telegraph looked at the growing interest in John Lewis-like employee share ownership, after last week’s Labour Party plan: “What fits well at John Lewis will not suit all”.
• Sunday Press and News (3): In other news, the Sunday Times flagged that a leading credit insurer, Atradius, has completely cut cover to Debenhams suppliers and also noted that “Mad Mike” Ashley is having trouble negotiating new rent deals on 30 prime House of Fraser sites with the landlords. The “Inside the City” column in the Sunday Times looked at the background to the interest of the activist investor Teleios Capital in Card Factory, noting that it is hard to see who would back a buy-out of the chain, and Questor column in the Sunday Telegraph said that it is time to sell the property company that owns Covent Garden, Capital & Counties. And the Mail on Sunday highlighted that HMV has managed to increase its share of the UK music market to one-third and that the Lewis family behind the fashion chain River Island saw its dividend income slashed to almost nothing after a poor time
oday’s Press and News: There are lots more previews of the Tesco interims in today’s papers, including a useful “SWOT” analysis in the Telegraph, and the Times points out the extraordinary amount of coverage that the Jack’s discount chain has received recently, but it also finds room to flag up the Topps Tiles and DFS updates this week. Hot on the heels of the Harrods results, the Times also highlights the strength of the Selfridges results for y/e Jan, with total sales up c12% to over £1.75bn and solid operating profits of £181m, despite revamp costs.
News Flow This Week: There is again plenty going on this week, kicking off tomorrow with the ScS finals and an AO.com Capital Markets Day. Wednesday brings the Tesco interims and the Topps Tiles finals and then on Thursday we get the DFS finals and the Ted Baker interims.