Fulham Shore, DP Poland, Restaurant Group & other:

A DAY IN THE LIFE:

It must be Christmas as the pavements are filling with slow-moving, loud and wildly-gesticulating people after about 6pm.

It must be something in the air.

Either that or the gallons of alcohol that are being glugged left and right an action that, in the age of camera phones, is somewhat risky as mischievous, ambitious or simply venomous colleagues could be getting blackmail-worthy photos at any time after drink number three.

Anyway, it is what it is and, as we’re somewhat remarkably still busy, let’s move on to the news:

FULHAM SHORE H1 NUMBERS:

The Fulham Shore has this morning reported H1 numbers for the six months to 23 Sept 2018 and our comments are set out below:

• The Fulham Shore reports revenues up 20% at £33.0m with headline EBITDA of £4.6m versus £4.5m last year.

• Profit before tax is up 35% at £1.5m versus £1.1m last year. EPS is less meaningful at this stage but is broadly unchanged at 0.2p.

• Operating cash inflow was £4.9m (2017: £3.3m) leaving net debt of £8.9m (24 September 2017: £9.7m).

• Debt is down from £12.0m at the last year end

• The group has opened 2 new Franco Manca pizzerias in H1 with a further unit opening since the H1 end

• The group says that it has ‘increased [its] restaurant opening programme planned for FY2020

• Chairman David Page comments ‘our two restaurant businesses performed well in the first half of the year, driven by a number of factors including: new menu initiatives, including vegan and gluten free options, within both businesses and investment in our digital channels.’

• Mr Page adds ‘at the same time, we have remained resolutely focussed on both Franco Manca’s and The Real Greek’s stand out characteristics: exceptional food provenance and outstanding value for money menu pricing.’

• Re current trading, Fulham Shore says ‘during the current financial year to date we have seen sales and profit growth, improved operating cash flow, and reduced debt exposure for the Group.’ It adds ‘these factors, together with our successful new opening so far this year, have led us to consider increasing our opening programme beyond the current financial year.’

• Overall, FUL says ‘the Board remains confident that The Fulham Shore, underpinned by its unique brands and clear growth strategy, remains well positioned for continued growth and a great future.’ The group concludes ‘as a profitable, growing restaurant company with a great future, we look forward to the second half of our financial year with confidence.’

• Langton Comment: Casual dining remains a growth industry and, despite the oversupply problems to which we have referred for some time, FUL is a winner.

• It has reduced debt whilst continuing to expand, saying today that it now feels sufficiently confident to increase its rate of new openings going forward. We believe that this can be funded from cash flow & do not expect to see debt rise materially.

• FUL says it has ‘a number of further locations in advanced legal negotiations with landlords’ and adds ‘we continue to look for well-located new sites at reasonable rents throughout the UK, for both Franco Manca and The Real Greek. The increasing availability of restaurant space, lease incentives and capital contributions, in the current climate, should enable us to achieve higher site returns on capital than we have previously recorded.’

• FUL is now acquiring sites in a buyers’ market. It says ‘we are conscious that the longer we wait on a new site or location, the greater the choice of sites, and potentially the better the incentives from landlords. We believe that our two brands are now firmly established; we can afford to grow at a measured pace.’

• FUL has ended this half year with more restaurants, higher sales and profits and less debt. If this can be maintained (we believe that it can and the company’s own comments are positive), then shareholders will have reason to celebrate over the medium and longer term.

PUBS & RESTAURANTS:

• Restaurant Group’s Rights Issue result to be announced Friday morning. Nil paid share volume drying up & will cease trading tomorrow. Shares up 11p yesterday after falling 11p the day before. Will be value at some point. Unclear until Friday how much stock underwriters will be left with.

• DP Poland has updated on trading saying that sales have softened in recent months. It says ‘a combination of warm and dry weather continuing into November and sustained advertising spend by competing delivery aggregators, in particular, impacted share of voice and sales performance. In addition to these external factors our investment in top-line sales support in Q4 2017 was not replicated in Q4 2018, as we focused more on balancing sales growth with enhanced store profitability.’

• DPP says ‘despite the sales pressure, Company EBITDA for 2018 is expected to be broadly in line with expectations, but we approach the year ahead with caution and believe that sales and EBITDA performance for 2019 will continue to be impacted by competition for share of voice.’ The Company will update on full year trading on 29 January 2019.

• Steve Robinson has resigned as CFO of Young’s to pursue other interests. Young’s has stated that they intend to appoint an interim CFO in the New Year while the Board searches for a permanent replacement.

• Foodservice consultant Peter Backman has suggested that preparing for 2019 involves ‘planning for the unplannable’. Mr Backman suggests that industry operators should build in flexibility to their models (where possible) and to expect the current level of uncertainty to persist for some time.

• Areas of material uncertainty (in addition to the weather) include Brexit, its impact on investment, employment levels, costs, currencies and consumer confidence.

• Peter Backman’s recently released book, Restaurants Also Serve Food, is based on his experience working with executives in fast-moving consumer goods companies who succeed in selling to retailers but struggle to replicate that success when they sell to restaurants and other operators in the foodservice sector.

• Businesses have told the Business, Energy and Industrial Strategy committee that leaving the EU without a deal could be catastrophic for the F&B sector. Chair of the committee, Rachel Reeves commented: ‘Businesses were clear that the deal on offer is inferior to what they currently enjoy as part of the single market and customs union, with supply chains built for maximum efficiency using frictionless trade across Europe’.

• A new report published by the Scottish Beer & Pub Association has demonstrated that the beer and pub sectors sustain 66,830 jobs and contribute £1.66bn to the scottish economy. Brigid Simmonds, Chief Executive of the Scottish Beer and Pub Association, said: ‘As this report shows, the beer and pub industry in Scotland pays close to £1billion in tax every single year, but recent cost increases have significantly reduced the profitability of many pubs. This was recognised by the UK Government for pubs in England with Philip Hammond providing a relief for all pubs rated under £51,000 in his budget in October’.

• The West Yorkshire-based brewer ad pub operator, Ossett Brewery has sold 50% of its business to Mark Hunter, co-founder of Leeds based IT business BJSS.

• Research from Barclaycard has found that 225 of diners look up restaurants’ menus and social media channels before visiting. Kirsty Morris, director at Barclaycard Payment Solutions commented: ‘Simply being active on social media is no longer enough for restaurateurs, they also need to consider the quality of their content to avoid missing out on potential customers’.

• Kantar Worldpanel reports UK shoppers could spend a ‘record’ £10b in the run-up to Christmas.  Fraser McKevitt, head of retail and consumer insight said ‘Because of the way Christmas falls, grocers have an extra trading day this year’. 

• The US large-venue food and entertainment brand, Dave & Buster’s Entertainment Inc. has reported LfL sales was down 1.3% in Q3 ended Nov 4.

• UK grocery sales increased 0.4% above inflation in the 12 weeks to December 2, Kantar Worldpanel data has shown. Only three chains were found to grow faster than inflation, Aldi, Lidl and Co-op.

HOLIDAYS & LEISURE TRAVEL:

• A survey for the Business Travel Show reports Brexit as the biggest challenge facing business travel buyers next year, continuing to cause them problems as far ahead as 2022.

• Siris Capital Group and Evergreen Coast Capital will acquire Travelport for $4.4bn, with the deal set to complete by next spring. 

• Heathrow reports passenger numbers up 3.3% in November to 6.11m. North America saw growth of 5.8 per cent from a significant base, driven by more competitive pricing in the region. 

• Hotel Indigo opens at Manchester Victoria Station, located at the gateway to the Northern Quarter.

OTHER LEISURE:

• Tencent Music Entertainment has opted to price its IPO at the lower end of expectations.

FINANCE & ECONOMICS:

• Slowing growth in London could narrow the North – South gap. Rebalancing but for an unattractive reason? E.g. you can lose weight quickly by cutting your leg off.

• Annual wages now growing at highest rate in a decade at +3.3%. Unemployment up slightly. Sterling weak. 1970s, here we come?

• UK unemployment rate unchanged at 4.1%. More letters of no-confidence apparently gone in against PM Mrs May.

• Brexit:

o Child locks left on in PM’s Berlin car. Doesn’t help PM on her (perhaps humiliating) trawl around Europe hoping to catch some sort of supportive comments.

o The word so far. Ed -good luck with that, chuck. Juncker – there is no room whatsoever for renegotiation. Angela Merkel – discussions cannot be reopened. Robert Peston – why is she bothering with any of this?

o Accountancy firm EY warns of a weaker outlook for almost every region of the UK through to 2021. The North East will see the lowest growth in the country.

o Tory civil war re Europe goes back to at least the 80s. Former leader William Hague warns ‘there is a danger of this party falling apart’.

o Bully billionaire Brexiters retreating behind their barricades of money. Gone a bit quiet, adding ‘it wasn’t us Guv’nor’. Liam Fox (an EU trade deal will be ‘the easiest in human history’) & Michael Gove (we don’t like, need or respect experts) faded into the shadows while their boss takes the heat.

o Tories may be unfit to govern but Labour may be worse. Perhaps this is a dream. Or it really is the ‘Isle of Madness’.

o As others see us: Washington Post says ‘any Brexit will leave the country poorer.’ It adds a People’s Vote may ‘be the least bad way out of the disaster that Britain has inflicted on itself.’ Thank you very much Tory Eurosceptics, David Cameron and any other leader who puts job before party, party before country etc. etc.

PRIOR DAY LATER TWEETS:

• Later tweets: Discounts still around in the middle of December. Prezzo 40% off mains, Frankie & Benny’s 30% off etc. etc.

• STR London hotel data for Nov shows REVPAR +5.6%. Should help London-based F&B operators etc.

• ONS reports growth in the UK slowed to 0.4% in the 3mths to October, down from 0.6% in the 3mths to September

• Sterling at low since April 2017. Wage growth at 3.3% is highest in a decade, unemployment edging up. 1970s here we come??

• Vote delayed, uncertainty reigns. Ministers (from ignorance) misleading Commons, promising vote would happen etc. Look like incompetents?

• Young & Co reports CFO ‘has left the business’. Bit terse. There is a vacancy at Fullers, of course…

• Carpetright reports LfLs in H1 down 12.7% but some ‘improvement’ as Q2 only down 8.9%. Big ticket still under pressure, though

• Restaurant Group Rights Issue result to be announced 8am Friday. Shares weak yesterday on fears JP Morgan will be stuck with rump

START THE DAY WITH A SONG:

Yesterday’s song was This Monkey’s Gone To Heaven by the Pixies, but today who sang:

Oh, can’t anybody see,

We’ve got a war to fight

Never found our way

Regardless of what they say

RETAIL NEWS WITH NICK BUBB:

Dixons Carphone: Today’s interims (for the 26 weeks to Oct 27th) show a sharp drop in headline PBT form £73m to £50m, but that is no worse than expected (the City consensus is said by the company to have been £45m)and the Q2 LFL sales growth of 4% is pleasing. Full-year profit guidance of £300m is unchanged, so the big cut in the interim dividend is eye-catching, but most focus will be on the Strategy Review which has been unveiled and will be explained at length in the 8.30am results meeting and presentation to analysts. The latter was expected to involve more store closures, but the bullish focus instead is on the growth opportunities in Online and Credit and the City should be pleased to hear that negotiations with the mobile networks appear t have been successful

Superdry: With today’s weak interims, management has had to announce further downgrades to full year profit expectations because of the mild weather through November and December and the reliance of the business on heavy outerwear, so the 9.30am meeting with analysts should be interesting.

John Lewis Trading Watch: In a continuing hangover after Black Friday, trading at John Lewis was poor again last week, with mild weather and reduced promotional activity getting the blame, according to yesterday’s weekly sales overview from JLP. As we have been noting, the graph of overall JLP sales now includes Waitrose as well, so it is no longer possible to see the “pure” John Lewis sales graph, but we estimate that John Lewis fell back from a massive £230m (inc VAT) of gross sales in w/e Nov 24th, to £167m in w/e Dec 1st and £141m in w/e Dec 8th. Last week was down 5.1% gross (nearly 7.5% down on a LFL basis, excluding new stores) and we estimate that the last 5 weeks overall have been nearly 4% down LFL, despite the success of Black Friday. In terms of sales mix, Electricals were only down by 0.9% in gross terms last week, but Fashion/Beauty sales were down by 6.8% gross and Home
sales were down by 7.3% gross. The last 19 weeks are now running cumulatively down by 0.9% gross (c3.5% down LFL), pulled back by a 5.3% drop in Home sales.

Waitrose Watch: Over at Waitrose, weak sales last week were also blamed on reduced promotional activity, with gross sales down by 2.5%, ex-petrol, in w/e Dec 8th (c2.5% down LFL, as there is hardly any net new space). The last 19 weeks are cumulatively running down by c0.6% gross (despite the strong start to August for Waitrose), with the “Home and General Merchandise” category running 4.4% down. For Waitrose, however, it is again worth noting that the big Christmas sales peak is still to come, whereas at John Lewis the Christmas week now, alas, pales into insignificance compared to Black Friday week…

News Flow This Week: Tomorrow morning brings the much-awaited Sports Direct interims and the Ocado Q4 update and in the evening the management of Asda is holding a Christmas Drinks reception for press and analysts (at the London office in Carnaby Street).