Langton Capital – 2019-01-25 – Discounts, Pat Val, Fuller’s, AG Barr, Jet2, Brexit & other:
Discounts, Pat Val, Fuller’s, AG Barr, Jet2, Brexit & other:
A DAY IN THE LIFE:
We’re still recovering from some bug that hit us last week. On to the news:
FULLER’S TO SELL BEER BUSINESS TO ASAHI:
• Fuller, Smith & Turner is to sell its beer business to Asahi.
• The company says it has ‘entered into an agreement for the sale of its entire beer business to Asahi Europe Ltd…for an enterprise value of £250 million on a debt free, cash free basis.’
• The business to be sold ‘comprises the entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as the distribution thereof, and also includes the Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports.’
• Asahi will acquire Fuller’s beer brands including London Pride.
• Fuller’s says ‘following Completion of the Proposed Disposal, Fuller’s will be a focused, premium pub and hotel operator pursuing its previously stated strategy of running a stylish, high quality estate, with well-located, well-invested, predominantly freehold sites that are maintained to the high standards that customers have come to expect. Fuller’s will form a strategic alliance with Asahi that will ensure continued access to the high-quality premium beer brands Fuller’s has always brewed.’
• The disposal multiple (including brewery freeholds etc.) is 23.6x historic EBITDA.
• Fuller’s says ‘the price reflects the strategic value of the brands of the Beer Business being acquired, the long-term growth potential of the Beer Business under AEL’s ownership, the value of the Griffin Brewery as well as the expertise and respected industry knowledge of the people employed within the Beer Business.’
• Net cash proceeds will be around £205m. Between £55m and £69m will be returned to shareholders.
• The transaction should complete in H1 this year. CEO Simon Emeny reports ‘this deal secures the future of both parts of our business including protecting the heritage of the Griffin Brewery in Chiswick, which was particularly important to the Fuller’s Board.’
• Mr Emeny says ‘I am delighted that this transaction maintains Fuller’s long association with the Beer Business and that we will continue to enjoy a strong relationship with Asahi as a key supplier.’
• As regards trading, Fuller’s says it updates to week 42 and says it ‘has delivered a very strong performance since it last reported, especially in its Managed Pubs and Hotels where like for like sales have risen 5.6 per cent in the last 10 weeks. For the 42 week period, like for like sales in Managed Pubs and Hotels have risen 4.7 per cent, like for like profits in Tenanted Inns have risen 2 per cent and total beer and cider volumes in The Fuller’s Beer Company have remained level.’
• Xmas trading was strong with LfL sales for December up 8.7 per cent ‘and our pre-booked covers rose by 16 per cent.’
PUBS & RESTAURANTS:
• Light news day at the end of a pretty busy week.
• FT reports Patisserie Holdings is pushing for the repayment of VAT on overstated sales.
• AG BARR has updated on full year trading to 26 Jan saying ‘we are pleased to report a continued positive trading performance across the period with revenue expected to be c.£277m, up c.5% on the prior year (2017/18: £264.1m).’
• AG Barr says it has seen ‘strong trading execution across our core brands and the continued success of our key innovation have led to further market share volume gains in a UK soft drinks market which saw volume up 3.0% while value increased by 8.0%.’
• The company says the Soft Drinks Industry Levy had an impact during the year with ‘value growth significantly outstripping volume in the period.’ It expects a ‘return to a more value-led trading strategy in 2019.’ Regarding the outlook, the company says ‘looking ahead, the current political and economic uncertainty in the UK looks set to continue.’ However, it concludes ‘our strong and flexible business model, our portfolio of differentiated and growing brands and our well-invested and efficient asset base give us confidence for continued profitable growth as we enter a new financial year.’
• RTN shares yesterday fell 6p (4%) on the back of its full year trading update. H2 better (less negative) than H1 but group pointed to slower Cinema attendances as one of the reasons for a failure to effectively turn the corner on LfL sales. Group still hoping for great things from Wagamama.
• Discounts: Bella Italia & Pizza Express 2-4-1-. Frankie & Benny’s & Prezzo 40% off, Jamie’s 30% off. Test wll be next week, after we’re sure everyone has received their January pay-cheques; what happens then?
• The Prime Minister of Poland, Mateusz Morawiecki has told the BBC that he wants to see more workers return from the UK to help grow the domestic economy. Mr. Morawiecki sais: ‘more and more are coming back and I’m pleased about that because there is a low level of unemployment [in Poland]. Give us our people back’.
• The private equity group, TriSpan has announced that its dedicated restaurant fund, Rising Stars has invested in Thunderbird Fried Chicken.
• The HMRC has found that England has more distilleries than Scotland for the first time, with one new distillery opening a week in the last year. There are as many as 166 distilleries in England and 160 in Scotland.
• US restaurants have been offering deals and new twists to French fries offerings for the last two years, but may need to rethink their strategies after Europe reports a poor crop of potatoes. Akshay Jagdale, packaged food analyst with Jefferies Inc commented: ‘Europe is having one of the worst potato crops in 40 years. The harvest is now complete. And the shortage in Europe is likely to start playing through in the export markets pretty soon’.
HOLIDAYS & LEISURE TRAVEL:
• Over 40% of parents have admitted to taking their children on holiday during term time, with discount prices cited as the main reason for doing so. Research from Kayak found that 69% of parents who took their children on holiday in term time informed the school and did not receive a fine.
• Research from Holiday Extras has found that the number of passengers choosing to drink alcohol at airports has increased to 42% in 2018 from 31% three years ago.
• Travelzoo reports Brits are choosing longer holiday packages, cheaper and less convenient flights and going all-inclusive. The survey showed 86% try to make their holiday budgets go further.
• Jet2 completes its fleet expansion, adding 34 Boeing 737-800 aircraft to bring the operator up to 100 aeroplanes. Each 737-800 can seat 189 people and costs in the region of $80m.
• Staycity announces joint occupation of a £203m Paddington complex with 620 rooms. Premier Inn will take 60% of the rooms with Staycity taking the remainder. The complex is expected to open by 2021.
• Meliá Hotels is revamping its Innside brand to attract more millennial business by having a stronger leisure and wellness offer.
• Gatwick will test valet parking robots this summer, with each booking of the service linked to flight numbers to ensure smooth collection upon return.
• The European Hotel industry reported occupancy p 1.2% to 72.4% during 2018, with average daily rates climbing 3.9% to EUR112.49 and RevPAR increasing 5.2% to EUR81.43.
• The US hotel industry recorded occupancy up 5% to 58.4% for the week of 13-19 January 2019, according to data from STR. The average daily rate rose 3.4% to $124.32 with RevPAR increasing 8.5% to $72.54.
FINANCE & ECONOMICS:
• The ONS has reported that family spending in the UK rose to £572.60 last year. Transport spend rose 14% to £80.80. People aged 30 and under spent up to 60% of their cash on rent.
• The German government is now forecasting only 1% growth in 2019 (was 1.8%).
• ECB data suggests slowing Euro economy. First interest rate rise now a long way in the future.
• Sterling up strongly at $1.3131 and €1.1594. Oil up a dollar at $61.83. UK 10yr gilt yield down 7bps at 1.26%. World markets mixed.
• Politics, Brexit etc.:
o Airbus has said that the current handling of Brexit is a ‘disgrace’. It has said that it could leave the UK in the event of a no-deal.
o Tony Blair has told a Davos audience that Brexit is a ‘complete mess’. He is calling for a People’s Vote.
o P& Ferries is to re-flag its ships to Cyprus ahead of Brexit.
o Jaguar Land Rover is to halt production for a week in April.
o The Dutch government is reported to be in talks with more than 250 British-based companies to persuade them to move to the Netherlands
o Ford has said that a hard Brexit would cost it around $800m this year alone.
PRIOR DAY LATER TWEETS:
• Later tweets: CAKE. 71 stores closures, 920 job losses & counting. Inquest. Who should have known what and when? Does the fraud extend to before 2014?
• Restaurant Group in 2018 caps off 3rd straight year of LfL sales falls. Down c10% over period while costs have risen by perhaps the same
• Whole host of 50% off & other offers in the run up to the first payday of this year. RTN, CDG, M&B and others getting stuck in
• Over 25% of consumers will spend more on holidays this year per ABTA. At a time of rising prices, that isn’t actually saying a great deal
• CBI Industrial Trends disturbing. It’s getting real. Alert No10. Cap & Reg in talks with Debs re rent. Arden (Luke J 11%) loses 9.6p / share
START THE DAY WITH A SONG:
Yesterday’s song was Take Me Home, Country Roads by John Denver. Today who sang:
They’d put us on a railroad
They’d dearly make us pay
For laughing in their faces and making it our way
RETAIL NEWS WITH NICK BUBB:
• Bonmarche: The struggling fashion chain Bonmarche has come out with its scheduled Q3 trading update (for the 13 weeks to Dec 29th) today and, having gone early with a profit warning back on Dec 13th, it is able to report that recent trading has been “in line with revised expectations”. The last 3 weeks of the period were less bad, however, as “a slight improvement in footfall towards the end of the month” resulted in the overall Q3 Store LFL sales figure being marginally better than the -12% reported earlier, at -11.1%, to give overall LFL sales down by 7.8%. And Bonmarche report that “the Winter Sale has begun well”.
• BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis remained reasonably decent last week and today’s BDO High Street Sales Tracker for medium-sized Non-Food chains for last week, w/e Sunday Jan 20th, is also quite good again, with BDO Fashion sales up by 1.1% LFL last week (including Online), despite firm comps. Total BDO LFL sales (including Homewares and Lifestyle sales) were up by 2.5% last week (down 2.5% in Store sales and up by 13.6% Online).
• News Flow Next Week: The Christmas trading updates are all but over, but next week brings an update from ScS on Thursday and Carpetright is expected to announce an update shortly after that. Otherwise, with the end of the month coming up quickly now, after this morning’s CBI Distributive Trades survey for “January”, we get the GFK Consumer Confidence survey for January first thing on Thursday. And out in the US, the Apple Q1 update comes after hours on Tuesday.