Langton Capital – 2018-10-02 – Revolution Bars Group, Hawksmoor, Deliveroo, tips etc.:
Revolution Bars Group, Hawksmoor, Deliveroo, tips etc.:
A DAY IN THE LIFE:
Plenty to say today but no time in which to say it. On to the news:
REVOLUTION BAR GROUP – FY NUMBERS:
• RBG highlights poor H2, losses for the year just reported and current LfL sales running down 5%. Have we missed something?
• Revolution Bars Group has today reported results for the 52 weeks ended 30 June 2018 saying sales rose 8.7% to £141.9m with FY LfL sales down 0.6%.
• As H1 sales were up 1.9%, a decline in the region of 3% LfL must have been registered in H2. The hot weather, which will have done little for bars without much outside space, began in the year under review but will have impacted Revolution’s new financial year as well.
• RBG reports adjusted EBITDA of £15.0m (2017: £15.1m) with an operating loss of £3.0m (last year profit £5.5m) and a loss per share of 5.7p versus a profit last year of 7.7p positive.
• The group is maintaining its final dividend at 3.3p.
• RBG says ‘H2 [was] impacted by the uncertainty following corporate activity, management change, extremes of weather and the FIFA World Cup.’ It says ‘estate expansion continued throughout the period, with six new sites contributing to 8.7% total sales growth. New sites are achieving good overall returns.’
• RBG says it still has a ‘strong balance sheet’ and remains ‘highly cash generative.’
• Re the future, RBG says it has taken steps to stabilise the business but ‘most recent’ LfL sales are trailing 5% below those last year.
• Xmas bookings are up and two new sites have opened since the year end. New CEO Rob Pitcher says ‘this is a fundamentally good business which has seen significant disruption over the past year and factors outside of its control.’
• RBG says ‘the performance of our new sites is encouraging, in line with our expectations and set to deliver good returns underpinning our strategic view of the business.’ Mr Pitcher continues ‘our confidence in the potential of the Group is undiminished.’
• Langton Comment: Revolution is reported back in talks with Deltic. There is no update on the talks in today’s announcement.
• Trading has clearly not been easy. FY19 will have been impacted in July by the hot weather and, as the group says, it is trailing at minus 5% in terms of LfL sales.
• JD Wetherspoon has said that 4% positive is needed in order to stand still in terms of profits. Other groups say nearer to 2% but, anything below that level, is likely to see margins come under downward pressure.
• Consensus estimates look to have RBG increasing profits in the current year and minus 5% LfL may set that ambition back a little.
• The tone of the statement is cautionary (poor trading but ambition for the longer term) and it is likely that estimates will have to come down.
• Corporate activity may feature over the coming months meaning that the share price reaction to poor trading news is not as easy to predict as it would otherwise be.
PUBS & RESTAURANTS:
• Underdog, the group that owns the Hawksmoor restaurant brand, has reported results to end-Dec 2017 to Companies House saying that turnover rose to £43.7m from £39.0m but operating profit slipped to £2.3m from £3.0m. The loss before taxation was £7.5m versus a loss last year of £9.0m.
• Hawksmoor now has accumulated losses since incorporation of £33.9m and negative shareholders’ funds of £33.0m. The group says ‘the Foxlow restaurants underwent significant brand and operational changes in 2017 and, although they have yet to contribute positively to the group, their LfL sales grew strongly in H2’.
• Deliveroo has reported widened losses of £184.7m for 2017, up from £129.1m a year earlier. CEO Will Shu says ‘our growth is matched only by our ambition.’ Mr Shu says ‘we want to become the world’s definitive food company and we have invested heavily in innovation, technology, people and restaurants. We are changing the way people eat and helping restaurants to expand to new areas and in new ways.’
• Deliveroo has been reported both to be considering an IPO and to be in sale talks with Uber.
• Casual Dining Group has said ‘we are very disappointed by inaccurate and ill-informed comments by government. Our staff keep 100% of cash tips, and 97.5% of credit card tips, after a 2.5% administration charge to cover credit card and banking administration charges. Our staff are at the heart of our business, and are well paid.’ CDG says ‘our policy on tips is in line with government sponsored guidance issued in 2009 and which was approved by Unite and HMRC.’
• The Food & Drink Federation has said ‘it’s all very well for Dominic Raab to decry scaremongering on a ‘no-deal’ Brexit, but just two months ago he was the one raising the possibility of stockpiling food and calling in the squaddies to help.’
• The FDF says ‘the “lurid predictions” he mentions are from his own colleagues in DExEU. Their technical notices lay bare just how severe blockages at the ports would be for food coming in and out of our country. Indeed, the Government takes this so seriously that just last week it appointed a food supplies Minister. The last person to occupy such a position oversaw the end of rationing in 1954.’ It says ‘we face grisly consequences if we do not secure a deal with the EU – it is not scaremongering, it is scary.’
• BBC reports that Britons spend less on food as a proportion of income than most other countries in the developed world. Some 8% of total household spending is on food compared with around 12% in Sweden, 13% in Japan and between 30% and 40% in some developing nations. The debate as to whether the price of food would rise (FDF, Treasury etc.) or fall (JD Wetherspoon etc.) continues.
• Dark Star Brewery has teamed-up with comedians and Radio X DJs Elis James and John Robins to create a beer to celebrate the launch of their new book, The Holy Vible: The Book The Bible Could Have Been.
• UKHospitality has stated that new tipping legislation is an unnecessary burden, with Chief Executive Kate Nicholls commenting: ‘The hospitality sector took immediate voluntary action to improve transparency and address concerns around the treatment of tips when the issue was first raised. UKHospitality and Unite have developed an industry Code of Practice which deals with the fair distribution of tips among all staff, not just waiters. As a result, best practice has been widely promoted across the sector’.
• The British Beer & Pub Association has reacted to the same tip legislation with Chief Executive Brigid Simmonds stating: ‘The BBPA has always supported the hospitality industry Code of Practice, which promotes the fair distribution of tipping among all staff. We would be happy to work with the Government to ensure that this policy is fair and works in practice’.
• Five Guys has secured a new £100m banking facility with Goldman Sachs, in order to push its UK expansion.
• Aldi has announced plans to open 130 new stores as the group reports revenue up 16.4% to £10.2bn.
• Nearly 40% of hospitality professionals spend three to five hours dealing with equipment issues on a monthly basis. A report conducted by BRITA Professional also found that 70% of hospitality workers feel stressed in the kitchen, with 61% stating that reliable equipment would make their kitchen more efficient.
• Australian entrepreneur Tony Quinn acquires York-based King’s Elite Snacks for a figure reportedly in excess of £20m.
• Polling by Survation for campaign organisation 38 Degrees found that more than 90% of Conservative voters agreed with the statement ‘the Chancellor should change tax rules so that large international firms like Amazon pay a similar amount of tax on their profits to [that of] UK domiciled businesses’.
• McDonald’s will reformulate its burgers to have no artificial ingredients in all 14,000 US restaurants. The chain has also committed to cage-free eggs by 2025.
• Chief Executive of the British Beer & Pub Association, Brigid Simmonds has stated: ‘We welcome the Chancellor’s speech today at the Conservative Conference where, in addition to offering flexibility for the apprenticeship scheme, he acknowledged the need to tax more fairly the digital economy, even if that entailed the ‘UK going it alone’.
• UKHospitality welcomed the Chancellor’s business support at the Conservative Party Conference, where he stated aid would be offered for apprenticeships, management skills and retaining.
• Italian coffee maker Lavazza has acquired the coffee business of Mars Inc in a deal valued at $650m.
• The swiss-listed baker Aryzta, which supplies McDonald’s with bread buns, has seen its share price increase dramatically after the group announced sweeping restructuring plans, including a €8oom capital hike.
HOLIDAYS & LEISURE TRAVEL:
• Welcome Break has reported 52wk numbers to 30 Jan to Co House saying ‘the business had a successful year with turnover of £695.7m which was 7.1% up year on year’. The group says EBITDAR was £92m. The group has reported a PBT of £17.4m (2017: £43.5m). It has negative shareholders’ funds of £74m.
• Jean Claude Juncker says ‘if talks [on air transport] go wrong, then no more British airplanes can land on the continent. People didn’t know that, and they should probably have been told.’
• Marriott has announced rapid expansion plans across Africa, targeting Ghana, Kenya, Morocco and South Africa.
• Ryanair issues a profit warning, blaming two days of coordinated strikes across Europe last month and a decline in consumer confidence due to the industrial action. Ryanair said annual profits were now projected at between €1.10 billion- €1.20 billion against €1.25 billion-€1.35 billion previously projected.
• The UNWTO warns poor management and uncontrolled development is leading to the ‘over-tourism’ of popular cities.
• Iata CEO Alexandre de Juniac warns every contingency needs to be prepared for to ensure continuity in UK-EU air links post Brexit. De Juniac said ‘It is not just about permission for flights to take off and land. Everything from pilots’ licenses to security arrangements, and much more besides, needs to be agreed upon.’
• Macau casino has reported lower than expected gaming revenue, down 2.8% in September compared to a year earlier.
• The failed Dragon Den contestant, Lee McAteer, has reported turnover of £5m this year with his mix of summer camp, gap year and tour companies aimed at UK Millennials.
FINANCE & ECONOMICS:
• CBI boss Carolyn Fairbairn has suggested that the relationship between the Tory Party and business needs to be ‘reset’.
• Manufacturing posted a ‘mild’ improvement in September per the latest HIS Markit PPI report. The measure came in at 53.8 versus 53.0 in August. Any number over 50.0 implies growth.
• Sterling up slightly at $1.3031 and €1.1262
• Oil up sharply again to $85.01
• UK 10yr gilt yield unchanged at 1.58%
• World markets: UK down but most markets up yesterday. Far East mixed in Tuesday trade.
• Brexit, politics etc.:
o Jeremy Hunt (going for PM position) says UK is being ‘held prisoner’ by the EU.
o Boris (going for PM position) says Chequers is deranged.
o The bullied-looking Dominic Raab (probably going for PM position) says Britain cannot be bullied.
o Jeremy Corbyn (going for PM position) says nothing.
o Sir Keir Starmer (adult in the room) says staying in the EU is not off the table.
o FT suggests PM May is preparing to make more concessions to Brussels.
o City minister John Glenn says he will do ‘whatever it takes’ to defend London’s position as a global financial centre. No detail.
o Toyota says no-deal Brexit would lead to it cutting investment
PRIOR DAY LATER TWEETS:
• Later tweets: Tories to stop deductions from tips, poss change business rates. Talk about anything, but anything other than Brexit. Too little, too late?
• HotStats has UK hotels having a bit of a purple patch. Revpar +8% in August. Good for WTB & operators such as MERL?
• Tory infighting continues as Conference begins. Raab, Hunt (Dunkirk spirit) sabre rattling. Mrs May soldiering on etc.
• Coffee, sugar prices down. Wider margins for coffee shops or cheaper coffees for the rest of us. Easy answer to that one…
• Tories will tax overseas property buyers. But, with trade deficit at £20.3bn per quarter, we need to sell grillions in assets to pay for it
START THE DAY WITH A SONG:
Yesterday’s song was Dancing in the Street, originally sung by Martha Reeves and the Vandellas, but perhaps most expertly covered by David Bowie and Mick Jagger silently here https://www.youtube.com/watch?v=BHkhIjG0DKc . Today who sang:
Since you’ve gone I been lost without a trace,
I dream at night I can only see your face
I look around but it’s you I can’t replace
I feel so cold and I long for your embrace
RETAIL NEWS WITH NICK BUBB:
Stockmarket Trends: Having listed the main “Retailing Winners and Losers” in the first 9 months of 2018 on the stockmarket yesterday, we have been asked about the companies in the middle, including the fate of our “Tip for the Year”, mighty B&M. Well, B&M is performing bang in line with the rest of the General Retail sector, but that is little comfort, disappointingly, as it is running down by 9%, even though it looks relatively cheap (fingers crossed that next month’s interims trigger a re-rating!). If truth be told, most of the major stocks have been under pressure, apart from Next and Burberry (which is up 12% cumulatively). Marks & Spencer is down by 8%, Sports Direct is also down by 9%, WH Smith is down by 12%, Ted Baker is down by 15%, ASOS is down by 17% and Kingfisher is down by 24%…
ScS: The Sunderland-based sofa retailer ScS was last heard from in early August, reporting a surprisingly resilient trading performance in the summer (given the impact of the heatwave and the demise of House of Fraser) and today’s finals for y/e July maintain that line, with decent growth seen in profits, dividends and cash flow. And order intake is up 2.1% LFL for the 9 weeks to 29 September, despite challenging trading in the House of Fraser concessions (which accounted for only c7% of the business last year). ScS say bravely that “we are working with the new owners to address this as a priority (good luck with that). Overall, however, “Group trading since the start of the year has been pleasing and in line with the Board’s expectations”.
AO.com: The Capital Markets Day today is only a visit to the AO.com recycling facility in Telford, which sounds like a perfect definition of “worthy but dull”, so it will be interesting to hear how many investors and analysts turn up, particularly as “no new material information or update on trading will be provided”…
News Flow This Week: Tomorrow brings the Tesco interims and the Topps Tiles finals and then on Thursday we get the DFS finals and the Ted Baker interims.