Langton Capital – 2019-01-22 – Time Out, CAKE, buy-backs, singletons, holiday bookings & other:
Time Out, CAKE, buy-backs, singletons, holiday bookings & other:
A DAY IN THE LIFE:
Fed the dog this morning. He said: ‘give me more.’ I said: ‘you’ve had enough’. He said: ‘let me be the judge of that.’
Anyway, it looks like being a relatively short email today. We’re on light duties whilst we throw off this cold and, Pat Val aside, there’s a bit of a hiatus in news flow.
PATISSERIE HOLDINGS – FURTHER UPDATE:
• Various press reports that the company ‘remains locked in talks with its bankers’.
• Wages, VAT & other bills will need paying, many by the end of this week.
• Options remain banking extension, harsher terms (e.g. personal guarantees from Mr Johnson), a direct loan from Mr Johnson or another party or parties or a more drastic solution such as administration.
• The fraud, and the argument as to whether the IPO four and a half years ago was itself undertaken on information that is now under review, remain to be fully disclosed.
• Meanwhile, on the ground, staff, beleaguered shareholders & suppliers (and to a lesser extent customers) will be wondering just what on earth is going on. I mean, you buy cakes, you sell cakes. How do you end up in this position?
• Daily Telegraph reports lenders HSBC & Barclays have no security over Patisserie Valerie’s assets. Hence the loans would ‘rank no higher than suppliers and other creditors’ should the company go into administration.
Competence / incompetence:
• We’ll leave legality to the lawyers but competency will be questioned in several areas. Banks, directors, auditors etc. will all come under the spotlight.
• Banks lending without security? I mean, really…
• Auditors: Well, Grant Thornton will be in its own personal hell. There’ll be plenty to say but maybe later.
• Directors: You could write a book. Non-existent cash, unrecognised loans, potentially fictitious sales, long-term rotten CFOs, questionable sites etc. etc. etc. We’ll leave it there save to say that, in situations like this, poo perhaps should roll uphill rather than down.
PUBS & RESTAURANTS:
• The BBPA has announced its pleasure at the PM’s decision to scrap the £65 settled status fee, with Chief Executive of the organisation, Brigid Simmons commenting: ‘The Prime Minister’s decision to scrap the settled status fee for EU nationals is a big boost for Britain’s pubs and their workforce. As many as 71,000 EU nationals will benefit from the decision, saving around £4.6 million in total’.
• UKHospitality remarked on the same decision taken by the PM to remove the settle status fee, with Chief Executive, Kate Nicholls saying: ‘Scrapping the fee for settled status is a welcome and positive Government decision, providing peace of mind for many EU citizens working in the UK’s hospitality sector planning for their futures. It will save the hospitality sector, workers and their families an estimated £20 million and is a gesture that rightly highlights the hugely valuable contribution EU workers make to the UK economy, particularly in hospitality. It is encouraging that the Government has heard our concerns’.
• The FDF has also welcomed the decision to remove the settle status fee, with Chief Executive, Ian Wright stating: ‘FDF was one of the first trade organisations to call for certainty for EU nationals and this is an encouraging development. Further work is now needed to make sure the right to stay and the Settlement Scheme is swiftly and effectively communicated to eligible EU citizens wishing to stay in the UK and that employers are provided with the tools needed to support their workforce’.
• Time Out Group has announced the sale of its stake in payment mechanism company Flyt Limited to Just Eat for £9.6m. Time Out says ‘this represents a £4.5m profit on disposal or 88% increase over the previously reported investment holding.’
• Time Out says it ‘made a strategic technology investment in Flyt in July 2015.’ Time out will ‘use the proceeds to invest in one of its top strategic priorities which remains the global rollout of Time Out Market following the success of the first site in Lisbon which attracted 3.6 million visitors in 2017.’
• Whitbread yesterday bought back another £5.25m of its own shares at £48.57. EI Group bought back 380,746 shares at 204p.
• Pragma has reported that a third of Brits eat out alone once a month, with an increase of 38% of single-table bookings between 2014 and 2017. Pragma stated the rise in single diners can be attributed to people seeking alone time, insufficient time to cook for themselves and the fact that there fewer marriages.
• The ONS has studied 17,000 items between September 2015 and June 2017, finding that 206 products have reduced in size, as poorer exchange rates has led to shrinkflation. The ONS specifically highlighted Bread and Breakfast cereals as having shrunk.
HOLIDAYS & LEISURE TRAVEL:
• The Civil Aviation Authority says Monday was forecast to be one of the busiest days for holiday bookings, with 5.2m people expected to book a holiday this month. The CAA says cost is the top factor determining booking holidays.
• Abta rejects claims that many smaller agents and operators face going bust within the next three years.
• Google has received a fine for 50m euros (£44m) from the French data regulator CNIL, for breaching EU data protection laws.
FINANCE & ECONOMICS:
• The Chairman of PwC has told Sky News that the world is at risk of an economic slowdown. The world is now ‘too integrated’ for a slowdown in one part of it (e.g. specific issues caused by the Sino-US trade spat) not to affect the rest. Chairman Bob Moritz said ‘there is a lot of populism and nationalism in the world at the moment but we don’t operate in silos. Big changes will have ramifications for the whole world.’
• The International Monetary Fund has also warned that rising trade tensions could slow global economic growth.
• IMF forecasts world economic growth of 3.5% in 2019. It is predicting 1.5% in the UK.
• Sterling up a little at $1.2873 and €1.1330. Oil down at $62.06 and UK 10yr gilt yield down 4bps at 1.32%. World markets mixed.
• Politics etc.:
o Plan A seems to be the same as Plan B. Mrs May seems to be determined to run the clock down whilst discounting all solutions other than her own.
o Border Force believes that cross channel freight could fall by 75% to 87% in the first 6mths of a no-deal Brexit reports Sky.
o Mrs May says she is prepared to listen to views but there are no signs of her changing hers. We are 93% (around 930dys of c1.000dys) through the Brexit process.
o Mrs May is to reopen talks with Brussels ‘in the next few days’ as the House of Commons continues to manoeuvre to take control of the Brexit process.
PRIOR DAY LATER TWEETS:
• Later tweets: CAKE in ongoing discussions w. banks. Facilities expired last Friday. VAT, wages etc could need paying this week
• CAKE will make ‘materially’ less than £12m EBITDA in next full year. Yet it reportedly made £12m pre-IPO in 2013, from a smaller estate…
• Either trading has worsened materially since 2014 (& it hasn’t been mentioned) or the CAKE fraud could have pre-dated the IPO
• Long drag to payday. Discounts still very heavy. Prezzo 40% off, Frankie & Benny’s 2-4-1, Harvester one third off.
• Banks may not want ‘deadlines’ to be treated as soft. Doesn’t set a good precedent. CAKE conclusion likely due very soon
START THE DAY WITH A SONG:
Yesterday’s song was Sticks ’n’ Stones by Jamie T, today who sang:
Let’s fade into the sun,
Let your spirit fly
Where we are one
Just for a little fun
RETAIL NEWS WITH NICK BUBB:
• Dixons Carphone: Today’s Christmas trading update (for the 10 weeks to Jan 5th) for Dixons Carphone is slightly ahead of the City consensus for LFL sales, with UK Electricals +2%, UK Mobile -7%, Nordics +3%, Greece +19% and the group +1%, with the full year group headline PBT guidance holding at c£300m (versus £382m for y/e April 2018). Alex Baldock, the CEO, says: “Overall, our Peak trading was disciplined and well-executed, with stable gross margins” and calls out the success in Gaming within UK Electricals (which suffered otherwise from “a challenging backdrop and a declining market”) and the fact that International accounted for almost 40% of sales. There is a conference call at 7.45am.
• Pets at Home: Today’s Q3 covers the 12 weeks to Jan 3rd, with Pets at Home trumpeting that it was “a strong quarter”, with Retail LFL sales up 4.7% and Vet revenue up 9.1% LFL. There is no specific mention of gross margins, but the message is that full-year profits are on track.
• News Flow This Week: Tomorrow brings the Joules interims, the Burberry Q3, the Hotel Chocolat update and the WH Smith AGM/update, together with the Marks & Spencer Spring Fashion preview. Thursday is a quiet day, but on Friday we get the Bonmarche update and the CBI Distributive Trades survey for “January”.