Langton Capital – 2019-01-14 – Revolution Bars, Goals, CAKE, holiday discounts etc.:
Revolution Bars, Goals, CAKE, holiday discounts etc.:
A DAY IN THE LIFE:
Bit busier than we expected to be with announcements this morning so, without further ado, we’ll move on to the news:
PUBS & RESTAURANTS:
• Revolution Bars Group updates on H1 trading to 29 Dc saying total revenue grew 6.4% with five new venues opened during financial H1. Group says ‘overall, these venues have traded ahead of expectations.’
• RBG says LfL sales in the 4wks to NY Eve were +2.6% over last year and +8.7% over two years.
• RBG says H1 lfL sales were down 4.0% with an improvement in Q2 over Q1. The 26wk period does not include NY Eve. Revolucion de Cuba is up in LfL terms but the Revolution brand is lower.
• RBG comments that it expects ‘adjusted EBITDA for H1 FY19 to be approximately £2.0m lower than last year due to the like-for-like sales decline and increased operating costs.’ It says ‘whilst the business has seen a much improved trend over the Christmas period, there is still further work to be done on the Revolution brand and therefore the Board is taking a cautious approach to trading in the second half given the economic and political uncertainties at this time.’ It expects ‘adjusted EBITDA for the full year to be approximately £12.0m (FY18: £15.0m).’ Whilst pleased with Christmas, CEO Rob Pitcher comments ‘given the uncertain economic and political outlook we are adopting a more cautious outlook on trading in the coming months.’
• Patisserie Holdings interim CFO Nick Perrin has said in an update ‘it was identified that there are many creditors with a large backlog of unpaid invoices.’ In a letter to Rachel Reeves, chair of the Business, Energy and Industrial Strategy select committee, the company says its interim CFO is unaware as to why the previous management team did not publish payment reports.
• The Times reports that the Financial Reporting Council approved CAKE’s audit 6mths before its virtual collapse. The FRC is now conducting an investigation into Grant Thornton’s audits of Patisserie Valerie going back three years. It is unclear at this stage as to whether any inappropriate accounting went back to the time of the group’s IPO.
• Thai restaurant operator Rosa’s London has reported full year results to end-March to Companies’ House saying revenue rose from £8.2m to £11.8m with EBITDA margins down from 16.8% to 14.0%.
• Rosa’s reports EBITDA of £1.6m (2017: £1.4m) with PBT slipping from £723k to £706k. Rosa’s says it ‘expects to continue its expansion plans by opening five to eight sites each year.’ It says ‘many of these are expected to be outside London and the recent opening in Bluewater Kent has shown that the concept is well-received outside London’.
• At the time of its March 2018 accounts, Rosa’s was controlled by directors Alex and Saipan Moore. In June, a majority stake in the company was sold to PE house TriSpan.
• Bar company Wright & Bell has reported numbers to end-April to Companies House saying that the owner of the Kitty Hawk on South Place reported full year turnover of £2.8m with an EBITDA loss of £456k (2017: loss £351k). The group reported a loss before tax of £1.2m (2017: loss £1.8m).
• Wright & Bell reports that post year end, two more sites have opened. The group has accumulated net losses of £3.4m since incorporation with positive shareholders’ funds of £6m.
• Heineken’s David Forde has told the Daily Mail that Heineken can take on Coke with alcohol free beer served on tap and in branded glassware. A study from University College London suggests 29% of 16-24yr olds may be teetotal.
• Data from Barclaycard has indicated that spending in pubs rose 12.9% in December 2018 compared to the same period last year.
• Wine wholesalers have been stockpiling wine ahead of Brexit. Alongside potential non-deal tariffs, wine trade also faces an increase in duty on 1 February, adding 20p to the price of a bottle.
• US restaurants have seen same-store sales increase 2% in December 2018, research from TDn2K has found. Victor Fernandez, vice president of insights and knowledge for TDn2K commented: ‘The industry’s recovery from a longer-term perspective also continued to show some upward momentum. Same-store sales during the fourth quarter increased by slightly over 1.4 percent compared with the same period in 2016. Two-year sales growth had been negative for the past eight consecutive quarters’.
• Chief Executive of drinks distributor Bibendum, Michael Saunders has revealed his concerns regarding rising drink costs in London’s restaurant sector: ‘Having a drink has got very expensive; it is now £9 after service for a glass of wine – that is a lot of money’.
• Vacancies in the hospitality sector have increased 19%, while salaries have risen 7.1% to an average of £28,850 per year. Managing director of CV Library, Lee Biggins commented: ‘Throughout 2018 there was a great deal of competition for businesses to attract and secure the most talented hospitality professionals, hence why the sector has seen such a jump in pay’.
• Interested parties have until 15 January to lodge bids for HMV, according to administrators KPMG. It is thought that KPMG have already received expressions of interest from credible parties.
• Debenhams is considering closing as many as 90 of its 165 stores as part of a radical turnaround plan, according to the Daily Telegraph.
HOLIDAYS & LEISURE TRAVEL:
• Worth pointing out that Vouchercodes.co.uk is running an unusually high number of offers for travel & hotel brands.
• Hoseasons has reported a 27% year-on-year increase in sales through third parties. Sales director Sally Henry stated: ‘Strong sales figures are obviously great news for us, but they should resonate with the wider sector too. No-one knows what’s going to happen post-Brexit, but the encouraging thing for all of us is that uncertainty doesn’t seem to be translating into bookings’.
• Holiday Extras reports advance bookings for airport parking, airport hotels and airport lounges together are up 13.5% for the period after April, claiming holidaymakers are undaunted by the Brexit deadline. The company says it has experienced a turn of the year surge in booking growth in the first week of January.
• Post Office Holiday Money reports Bulgaria, Turkey and the Portuguese Algarve are rated as offering the best value destinations for holidays.
• Stansted saw passenger numbers up 8% yoy in 2018 to 28m. December saw more than 2m passengers alone, up 10% yoy.
• UKHospitality claims UK hotels are being outperformed in every key metric by hotels in the EU. The group demands that government ‘foster an operating environment that enables the hotel market to thrive and remain competitive’.
• STR reports US hotel occupancy down 0.4% yoy to 48.8%, ADR up 5.6% to $130.69 and RevPAR up 5.2% to $63.79 in the week ending 5 January.
• Heathrow reports a record 80m passengers travelled through the airport last year, an increase of 2.7% yoy.
• Goals Soccer warns on profits as it updates on FY trading saying underlying sales rose 0.5% ‘reflecting the success of the further arena investment.’ It says ‘this follows a weak first half, impacted by adverse weather conditions.’
• Goals comments ‘growth in trading at the new clubs in Pomona and Rancho is slower than initially anticipated, although we are now materially growing game count through changes in management and our marketing strategy. These clubs will however take additional time to reach their full potential. This has resulted in non-recurring start-up losses of £0.8m, of which Goals’ share is £0.4m.’
• Goals comments that some costs have risen ‘resulting in a decline in Group profitability in H2 of £0.3m and an overall reduction in Gross Profit of 3%. In addition, labour costs increased by £0.3m (8%) and other costs increased by £0.2m partly driven by the increased staffing requirements in these areas.’
• Goals concludes ‘whilst we have seen positive growth in football and other revenues in H2, the outturn for 2018 is disappointing and has been impacted by both the lower margin in ancillary activities and the slower-than-anticipated growth rates in the US. Goals therefore expects full year Group Adjusted Profit for 2018 of between £4.3m to £4.5m.’
• SpaceX will reduce its 6,000-strong workforce by around 10% as it faces ‘extraordinary difficult challenges ahead’.
FINANCE & ECONOMICS:
• Growth in the UK economy slowed in the 3mths to end-Nov to 0.3% per the ONS. The ONS says ‘growth in the UK economy continued to slow in the three months to November after performing more strongly through the middle of the year. Accountancy and house building again grew but a number of other areas were sluggish.
• Manufacturing saw a steep decline, with car production and the often-erratic pharmaceutical industry both performing poorly.’ Industrial production fell 0.8% in November per ONS.
• Sterlign up at $1.2849 & €1.1193. Oil down at $59.81. UK 10yr gilt yield up 1bp at 1.29%. World markets down Friday with Far East mixed this morning.
o Jeremy Corby says exiting the EU without a deal would be ‘catastrophic’. Mrs May has said no Brexit is now more likely than no-deal. This may remove any bargaining power that she had left with Brussels. Bloomberg says 65% chance of Brexit not happening, at least by its first due date of 29 March.
o Brexit vote due tomorrow. Vote of confidence possible Tuesday or Wednesday. Government may 1) fall (unlikely) or 2) come back with Plan B within 3dys, which should make interesting reading.
o CBI warns no-deal could cut GDP by 8%. Some still insisting that this is untrue. Mrs May says failing to deliver Brexit would be ‘catastrophic’ for democracy. The word ‘catastrophic’ getting a good airing these days.
o Economic concerns dubbed Project Fear but apparently warnings that right-wing thugs will take to the streets (per Chris Grayling, who should really have enough on his plate keeping the trains running on time) if there is a democratic vote to stop the current process is not. This latter labelled ‘gutter politics’ by Labour.
o Unfortunate tribalism to the fore. Mrs May & Chris Grayling ‘reaching out’ in the Express & the Mail. Boris in the Telegraph with the other side speaking to Guardian, FT & the I.
PRIOR DAY LATER TWEETS:
• Later tweets: EI Group sale of 370 pubs for £348m cash (c. book value) sends shares up 6% in early trade. Group executing on stated strategy
• Bread Holdings. Was it ever worth £150m? Or £200m? Was a potential purchaser, CAKE, being used as a valuation yardstick? See e/m
• Patisserie Holding’s shares still suspended 3mths after near-death experience. Were meant’ to relist within a week? What’s going on?
• Discounts available yesterday were, arguably, an insult to those often asked to pay ‘full price’. Many, many 40% off offers.
• GfK confirms pre-Christmas holiday bookings fell in a report in S Times w. Summer 2019 bookings down 17% yoy in week. Others say bookings OK
• UK economic growth +0.3% in 3mths to Nov, slowest rate in 6mths. Mid year was better. Ind Pdn down 0.8% in 3mths to Nov
START THE DAY WITH A SONG:
Last Friday’s song was Tighten Up by The Black Keys. Today, who sang:
Cleaned a lot of plates in Memphis,
Pumped a lot of tane down in New Orleans
But I never saw the good side of the city
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): The main focus, inevitably, in the Saturday’s papers was on Mike Ashley’s revolt against the management of the embattled Debenhams at Thursday’s AGM. The Times flagged that Mike Ashley hired the little known IR group Morrow Sodali to canvas the disgruntled Middle Eastern investor Landmark about supporting him in his fight with the Chairman Ian Cheshire and that their vote was key to swinging things his way at the AGM, in a low turnout of shareholders. The Guardian highlighted that Sports Direct has claimed that Debenhams was wrong to reject its pre-Christmas offer of a £40m loan with strings attached. The FT had a detailed article about the Boardroom coup, quoting our view that Mike Ashley can now dictate the terms of any equity refinancing and that the Board’s advisers were remiss in allowing themselves to be ambushed at the AGM. The FT article also noted
• Saturday Press and News (2): In terms of other Retail news, the latest profit warning from the struggling fashion chain QUIZ also got plenty of coverage: the lead story in the Daily Mail stockmarket report was the further plunge in the QUIZ share price on Friday, whist the Times flagged that “Questions rack up in tough test for Quiz” and the Business editorial in the Times mocked the way in which the family management of QUIZ took so much money out of the company in the IPO 18 months ago. The Times and the Telegraph both noted that the extended Black Friday Sale had worked out well for AO.com, whilst the Times (“Moss Bros is not suited to discounting”) and the Telegraph both highlighted that the beleaguered Moss Bros will report a small loss for last year. The Times also flagged, in an uncritical way, the press release from Lidl UK on Friday, boasting of good Christmas sales. In other
• Sunday Press and News (1): Mike Ashley and Debenhams remained in the spotlight in the Sunday papers, with the main Business story in the Sunday Telegraph headlined “Ashley’s “hand grenade” puts Debenhams on the brink”: the main revelation was that “Mad” Mike had offered to stand down as boss of Sports Direct so that he could take over as the boss of Debenhams instead! The Mail on Sunday also flagged up this news, in an article headlined “Mike Ashley told Debenhams: Put me in charge now!” The Sunday Times had a detailed background piece about the fight between Mike and Debenhams (“First blood to Ashley in battle for Debenhams”), noting that Ian Cheshire knew that he was “a dead man walking” before he stood up to run Thursday’s AGM. The Business Leader column in the Observer thundered, however, without much evidence, that “Debenhams is in trouble. But the Board could yet fend off
• Sunday Press and News (2): In other news, the Mail on Sunday highlighted that Ted Baker founder Ray Kelvin is £15m better off after the huge rally in the share price last week, on the back of the reassuring trading update. The Mail on Sunday also noted that the value of New Look’s bonds has collapsed and that some City analysts are concerned about Boohoo’s margins, ahead of Tuesday’s update, although the Sunday Times flagged that Boohoo is still booming, thanks to teenager’s interest in cheap fast fashion, whilst its “Databank” column argued that Asos will be “back in fashion before long”. The Sunday Times also noted that Hilco, the restructuring firm behind the collapse of HMV, has also lost out from the collapse of the cookware chain Steamer Trading, but that, on a brighter note, Games Workshop will report record interim results on Tuesday. Finally, the Sunday Times had a front page
• JD Sports: Despite the increased discounting in a challenging fashion market that its small UK rival, Footasylum, has suffered from, today’s post-Christmas update from mighty JD Sports is fine and the company has said that full year underlying PBT performance will be at the upper end of the range of market expectations. The company hasn’t split out the Christmas trading period, but has said that cumulative LFL sales growth for the 48 weeks to Jan 6th is now more than 5% (it was 3% in H1), “including a consistently positive like for like performance across Black Friday and the Christmas period”. JD has also said that it is encouraged by the performance of the big US acquisition, Finish Line. Peter Cowgill, the lugubrious but highly respected Executive Chairman, says: “We are confident that domestically and internationally, in stores and online, our unique and often exclusive sports
• Hotel Chocolat: If you would like to know how Hotel Chocolat did in Christmas trading then you will have to wait until next week, but in the meantime the company featured in a “fly on the wall” documentary last night on Channel 5, which may help City sentiment a bit. We only caught the second half of the programme (which was one big advert for the business basically), but we enjoyed the visit of CEO Angus Thirlwell to the cocoa plantations in St Lucia and the customer vox pop around the opening of the store in Sunderland, in The Bridges shopping centre, back in early March.
• News Flow This Week: This week will be dominated by the key Brexit vote in the House of Commons tomorrow evening and its aftermath, as the political drama and chaos/uncertainty continues…but there is still plenty of Retail company news scheduled for this week, even after the recent rush. We get the Boohoo update and the Games Workshop interims tomorrow, whilst the interims from the stationery chain The Works are on Wednesday. Thursday brings the ABF (Primark) update, the N Brown Q3 update, the Game Digital AGM update and the Signet update in the US. Then Friday brings the ONS Retail Sales figures for December. In the meantime, a lot of industry commentators have flown out to sunny New York, for the big NRF Retail trade show/conference.