Langton Capital – 2018-10-09 – Gregg’s, rates, restaurant trading, London hotels & other:
Gregg’s, rates, restaurant trading, London hotels & other:
A DAY IN THE LIFE:
Don’t you just love salesmen?
I mean, we have a rather big car. It’s coming up 6yrs old and we had the five kids at home on and off when we bought it, so it was (somewhat) justifiable but, at stupid money for its tax disc, mileage measured in footage rather than any larger distance and all the rest, it will have to go at some point.
But not, apparently, before the dealer has had another bite out of us as we know we should have it serviced professionally to keep up its resale value and, no matter how many times we plead with them that it’s a private vehicle and please don’t gouge us, they simply can’t help themselves.
Hence another 10k service came in at £600 plus a strongly recommended £350 tyre change with another three tyres, £1,050, apparently on their last legs.
This meant that the dealer wanted more for an afternoon’s work and a few scraps of rubber than my parents paid for their house so we had to politely say no, vaguely accuse them of sticking a nail in the tyre where they had discovered a slow puncture (so slow, apparently, that we wouldn’t notice it) and take the car to the grease monkeys down the road who did the whole job including one tyre for less than £500.
The hell with the resale value. Live for the now is what my wallet would have us say. On to the news:
GREGG’S Q3 TRADING UPDATE:
• Gregg’s does well against the hot weather.
• Gregg’s has updated on Q3 trading saying that it has seen ‘improved sales in challenging conditions.’ Full year expectations are unchanged.
• Gregg’s says managed LfL sales are +3.2% in the 13wks to 29 Sept with total sales +7.3%. The group has opened 93 new shops this year to date with 35 units having closed. The company expects around 100 net openings in 2018. Full year LfL sales to date are +2.1%.
• Gregg’s says it ‘traded well against strong comparatives in the third quarter, which was characterised by particularly hot weather.’
• As regards the outlook, GRG says it is putting addition ‘investment into the supply chain.
• The company says ‘we were pleased with our trading performance during a period that included a long spell of hot weather, which made sales patterns more difficult to predict. This, and the resulting mix of sales led to a lower-than-normal trading margin in the first part of the quarter, offset by improved trading as we came into September. Overall our expectations for the full year outturn remain unchanged.’
• Langton comment: Gregg’s trading has picked up against what was a tough trading background given the hot weather and difficult comps from last year.
• Shareholders will be reassured that the company remains on track to deliver on expectations for the full year.
• The company has done well but, though the shares are down on the £14 or so that they hit late last year, valuation remains an issue.
• See earlier Langton comments ‘It’s Just a Pie Shop’. A PER of 16-something falling to 15-something is perhaps not low enough. The group has 1,900 units and elephants can’t jump.
• That said, the yield, at 3.1% or so, is useful and the company is performing well. It has the south of England to aim at alongside transport hubs and the like. A good company but, though the shares could go better today, it is perhaps fully-priced.
PUBS & RESTAURANTS:
• Some 150 hospitality business from across the UK – including JD Wetherspoons, Café Nero, InterContinental Hotels Group – will today assemble at Westminster to meet with over 60 MPs to champion their sector’s contribution to the high street.
• UKHospitality is to launch an AIM HIGH campaign calling for ‘a digital sales tax to freeze business rates increases, doubling the National Insurance Contribution for employers, a level-playing field for property and online businesses regulation and delivering a Brexit that allows the industry to meet its workforce needs without extra costs.’ Doubling the NI contribution for employers would add 12% or so to wage bills. This may be a typo in the press release.
• UKHospitality says ‘with more news of high street closures across the country coupled with the new findings that that the industry could see a fall in the number of people employed, our industry is feeling the strain of the unprecedented pressures it currently faces.’ UKHospitality says ‘it is time to stop talking and start taking action. Today we want to hear meaningful change from parliamentarians and the Government to ensure that we can all play out part to adopt and prosper from Britain’s changing high street.’
• Keith Knowles of Beds and Bars says ‘this government needs to decide if it wants to create the environment for recession or an environment for stability and growth.’ Ian Payne, chairman of Stonegate, says ‘look at the inequity of business rates alone: in the case of Stonegate, our rates bill alone of £33m is almost 20 times greater than the amount of tax which Amazon paid. And yet our turnover was around a third of Amazon’s, at £700m versus £2bn. It’s clear that we need government to provide a fairer and more progressive means of taxing business, and one more closely aligned to revenue generation.’
• Property agent remains optimistic. Reporting on recent events in the leisure sector, property agents Fleurets comments ‘Q3 2018 witnessed buoyant M&A activity within the public house market with the purchase of 15 central London bars and clubs from Novus by Stonegate, Aprirose acquiring Wear Inns for £22.4m and The Restaurant Group acquiring Food & Fuel for £14.91m, adding to the Brunning & Price division of the company.’
• Fleurets points to more capacity saying ‘investment in the sector has seen an increase, with Downing providing equity (£4.7m) to Apprise Pubs to expand into the Home Counties with a gastropub offering. Deltic have also invested in refurbishing parts of the estate this year spending £5.7m with a further £5.5m planned for next year. The National Trust, due to increased admissions and staycations, has also announced that they will be spending a further £20m over the next 5 years to improve facilities across their operations.’
• Fleurets says there has been a ‘perceived improvement’ in trading. This contrasts with what a number of operators have said recently.
• Starbucks appoints Patrick Grismer as its new CFO with its current CFO Scott Maw set to retire on November 30.
• Marston’s will open a new premium Revere site called The Lost & Found in Sheffield on 16 November.
• The Independent Brewers if Europe (IBE) is set to be formed by nine craft brewing associations from France, Italy, Denmark, the UK, Ireland, Sweden, Spain, Netherlands and the Czech Republic. The new international body will have nearly 2,000 member breweries.
• Burger & Lobster Restaurant Group has reported full year dec 2017 numbers to Companies’ House saying that, whilst revenue in the year fell to £42.2m from £44.1m, EBITDA rose to £6.1m from £2.7m and the group managed a PBT of £3.1m against a loss in the prior year of £10.8m. Margins at the restaurant level were higher, admin costs are down and depreciation was reduced. The group has accumulated losses of £12.8n and a negative net worth as recorded by its shareholders’ funds of £1.3m.
• Hall & Woodhouse has reported numbers for the year to 27 Jan 2018 to Companies House saying that revenues rose to £110m from £107.7m and underlying profit before taxation slipped by 15.9% top £6.0m. H&W says ‘the year has delivered a strong performance from both our managed houses and our business partnerships despite the challenging market conditions’.
• Red Oak Taverns, a 161-strong pub chain, targets growth after securing a £42m loan from OakNorth. It is expected to use the cash injection to refinance existing debt and to help fund future takeovers.
• The BBPA is ‘encouraged’ by findings that the night time economy may play an important role in preventing the decline of the high street. CEO Brigid Simmonds said ‘Pubs are a huge part of the night time economy, creating jobs and driving growth on the high street. As an industry though they face many threats from beer duty to business rates. They need support from the very councils who say they value the role of the night time economy’.
• Simpsons Wine Estate expects to harvest 200 tonnes of grapes this year compared to 30 tonnes the year prior.
• The WSTA English wine members have written a letter to the Chancellor, arguing for a freeze on ‘excessively high’ wine duty that is restricting the industry’s growth. Chris White, CEO of Denbies Wine Estate in Surrey, said ‘This action is necessary in order to support the current demand for English wine and the growth of the industry’.
• Walkers will launch an initiative in December allowing customers to drop off used crisp packets at collection points or post them free to be recycled.
• Tesco remove ‘best before’ dates on an additional 116 fruit and veg lines in a move to reduce food waste.
HOLIDAYS & LEISURE TRAVEL:
• The commercial property specialist Savoy Stewart has stated that London accounts for 40% of the development pipeline for hotels in the UK.
• Travel consumers are ‘shifting to mobile’ according to online analytics group Hitwise, although most still prefer to make their bookings on a desktop. Nigel Wilson, Hitwise chief operating officer, told the Travolution European Summit in London that 64% of UK visits to tour operator websites in August were via mobile, 60% of hotel site visits, 57% of metasearch site visits, 53% of online travel agency (OTA) visits and 42% of airline site visits.
• Hays Travel is to close all of its trial branches within WHSmith shops by Christmas and saysthe move was a ‘mistake’.
• Uber drivers from London, Birmingham and Nottingham are set to strike for 24-hours starting regarding the company’s appeal of a court ruling that gives them employee rights.
• Hyatt Hotels Corporation acquires Two Roads Hospitality, an international lifestyle hotel management company. The move will expand Hyatt into 23 new markets.
• Abta has said holidaymakers should receive refunds for booked package holidays prevented by Brexit but has confirmed they won’t be liable to compensation. The trade association was responding to what the Mail on Sunday claimed was a “top secret” travel industry report it had seen in which Abta advises members to add Brexit clauses to their terms and conditions.
• Royal Caribbean has ordered three new ships for Silversea Cruises, ‘the ultra-luxury and expedition cruise brand that recently joined the RCL family.’
• Something that we hopefully don’t have to worry about in the UK. Or in Europe in general as STR is bemoaning the fact that ‘gun policies [are] inconsistent across U.S. hotels.’ In some you shouldn’t brandish deadly weapons whilst others allow ‘open carry’.
• Facebook paid triple the amount of tax in the UK in 2017 than it did in 2016, up from £5.1m to £15.7m, while profits rose £4m year-on-year to £62.7m.
• The British Film Institute (BFI) reports the industry generated £7.9bn in 2016, with £632m in tax relief spurring additional spending of more than £3bn leading to HMRC gaining £2bn in tax. The industry generated 137,000 jobs in 2016.
FINANCE & ECONOMICS:
• Jaguar Land Rover is to shut down its Solihull plant at the end of October for two weeks. JLR blames slack demand. Union Unite blames government policies.
• Sterling down at $1.3103 and €1.1392
• Oil up a dollar at $84.32
• UK 10yr gilt yield off 3yr highs & down 5bps at 1.68%
• World markets: UK & Europe down, US up, Far East mixed in Tuesday trade.
• Brexit etc.:
o Juncker etc. playing up chance of a deal. Mrs May trying to dial it down. DUP says red lines are still red. Chance of a deal & rhetoric to suggest UK isn’t really selling out Ulster most likely outcome.
o UK / EU meeting next week on 17 & 18 Oct.
PRIOR DAY LATER TWEETS:
• Later tweets: Easyhotel hails ‘transformational year’ but accepts Old St refurb will cost £7m. Group to focus more on Europe going forward
• CGA Market Monitor says pubs closing at 3 per day. Drink led a little less bad than recently but numbers still down 2.7% in year to June
• UK landlords put £2.5bn of assets for sale. Takes time but, if online takes share, property prices will come under downward pressure
• BCC says UK economy is ‘stuck in a rut’ because of Brexit uncertainty & weak confidence. Others say will bounce back next year
START THE DAY WITH A SONG:
Yesterday’s song was Tender by Blur. Today, who sang:
Save me, save me, save me from this squeeze,
I gotta big fat mama trying to break me
And I love to live so pleasantly
Live this life of luxury
RETAIL NEWS WITH NICK BUBB:
BRC-KPMG Retail Sales for September (5 weeks to Sept 29th): We flagged yesterday that another flattish LFL sales outcome was likely, despite the problems of Fashion retailers and we weren’t far out as the outcome was -0.2% (after +1.1% LFL in June, +0.5% LFL in July and +0.2% in August). The exact Food/Non-Food LFL sales split is, as usual, buried in the 3-month moving averages (of +2.3% and -1.6% respectively), but the Food Retailers look to have slowed to little more than +1% LFL last month and that would imply that Non-Food was less than 1.5% down LFL overall in September, which is not bad, given how bad Clothing and Footwear sales were, helped by a pick-up in sales of Computing/Mobile Phones and Furniture…Online Non-Food sales were said to be up by only 5.4% (versus +7.5% in August), and although this must be under-stating the overall Online market (given the absence of pure play
Greggs: When we last heard from Greggs on July 31st, on the back of the interims, management were in cautious mood, warning that High Street footfall was under pressure and full-year profits would be only flat. But today’s Q3 strikes a more cheerful note, flagging improved trading, with LFL sales up by 3.2% in the period, despite the adverse impact of the heatwave and tough comps and there is no change in full-year profit expectations. And the autumn range includes a limited edition Pumpkin Spice Latte!
MySale: Along with today’s finals for y/e June from the Online retailer MySale, the company has announced that the CFO Andrew Dingle is leaving with immediate effect, to take up another job, but there is nothing untoward in the trading news, which will provide some relief to two of the company’s biggest shareholders, the embattled Mike Ashley and the beleaguered Philip Green.
News Flow This Week: Tomorrow brings the Vertu Motors interims. Then on Thursday we get the WH Smith finals, the Dunelm Q1 update and the N Brown interims.