Langton Capital – 2019-02-14 – Restaurant Group, Whitbread, Stock Spirits, Heavitree, DPP etc.:
Restaurant Group, Whitbread, Stock Spirits, Heavitree, DPP etc.:
A DAY IN THE LIFE:
Bit busy with announcements etc this morning so let’s move straight on to the news:
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RESTAURANT GROUP CEO TO LEAVE THE COMPANY:
• The Restaurant Group has announced that CEO Andy McCue is to leave the Company ‘due to extenuating personal circumstances.’
• The company says ‘a search will commence immediately and we anticipate that Andy will remain in position while his successor is being recruited.’
• RTN adds ‘the Board would like to thank Andy for his significant contribution to the business and in particular for leading its transition into higher growth areas, including the recent acquisition of Wagamama. We are grateful that he will continue to drive the business forward while the recruitment process is underway.’
• Chairman Debbie Hewitt comments ‘Andy has brought a strong vision, developed a first-class team and laid the foundation of the Company’s transformation. Whilst we are clearly disappointed that he will not be able to provide the long-term leadership for the business, we understand and respect the decision he has made purely on personal grounds.’
• Mr McCue says ‘in recent years, we have achieved much in a challenging market.’
• He says ‘while I recognise that this decision is untimely, it is the right one for me and my family. We have a strong team in the business and a clear plan which we are focused on delivering.’
• RTN announced the acquisition of Wagamama last year in a move designed to reinvigorate the group. It would provide the company with a multipronged growth strategy said the CEO at the time.
• Restaurant Group’s shares peaked at an adjusted 540p or so in 2015. They were around 285p when Andy McCue became CEO in September 2016 and were 215p or so last year before the group announced its purchase of Wagamama. The shares currently trade at 146p.
• Personal circumstances change & the outgoing CEO is to be wished all the best but Mr McCue’s departure will cause some consternation.
PUBS & RESTAURANTS:
• Stock Spirits has updated on trading ahead of its AGM saying: ‘performance so far this year has been solid and the Company is on track with its plans for the year as a whole.’
• Coca-Cola HBC has reported FY numbers to end-December saying net sales were up 6.0%. CEO Zoran Bogdanovic says ‘in 2018 we delivered another very good performance with revenue growth above our target range and another step up in margins. Strong volume growth in all our segments was helped by a record number of new product launches, whilst price/mix improved for the eighth consecutive year. This growth supported margin progress, which we delivered while increasing our investment in marketing.’
• The company continues ‘our sharp focus on cost efficiencies continues while we invest in the business for growth. The shape of the business, capabilities and commitment of our people and our overall commercial proposition give us confidence in our ability to continue to grow revenues and margins.’
• DP Poland has updated on its ‘broker option’ saying that an additional 8.3m shares were issued at 6p. The group has thus raised £5.8m.
• Heavitree Brewery has annoiunce results for the year to October 2018 saying that ‘turnover for the Group has increased by £315,000 to £7,614,000 returning a Group operating profit of £1,632,000 for the year under review.’
• This is down by £146,000 against the previous year due to a number of one-off costs. The group chairman says ‘having considered these one-off transactions to the previous year before making comparisons, I am pleased with the results in this report.’ As regards the outlook, Heavitree says ‘it is hard to avoid making mention of the political uncertainty the Country is facing. Despite this, the quality of our houses and of our tenants and leaseholders who operate them and the dedicated support they receive from all of our staff at Head Office, have combined to help deliver this year’s strong set of results.’
• Local Data Company reports the high street vacancy rate increased 0.3% to 11.5% in 2018, driven by CVAs and administration from brands such as Carpetright, Homebase, House of Fraser and others. From 2012 to 2017 the vacancy rate fell yoy from 14% but it has been marginally rising since then.
• LDC also reports the number of independents has increased from 65.9% in 2012 to 67.5% in 2018. Independent coffee shops account for 3.8% of all stores on the high street.
• The Hospitality Works 2019 campaign has launched, promoting the industry as one where jobseekers can find gainful employment. Brigid Simmonds, CEO of BBPA, said ‘Our industry needs to do more to recruit UK citizens to our workforce whether it behind the bar or in our kitchens, as pub chefs, or wider roles within the team.’
• The grab go chain, Eat has been put up for sale as the private equity house behind it, Horizon, shifts to focus on technology and business services investments.
• Official figures from HMRC have revealed export values of Scotch Whisky have increased 7.8% in 2018 to a record value of £4.7bn, with the US becoming the first overseas market to hit the billion-pound mark.
• Costa has moved up to the world’s second strongest brand in the restaurant sector, overtaking rival Starbucks, according to research from Brand Finance.
• The Saudi Arabian based Jolt Coffee is reported to be making its UK debut in London next month, Beverage Business World has stated.
• Yo! Sushi is to launch a genetic-based nutrition service in partnership with DNAFit. The service will offer personalised food advice based on individual’s genetic code.
WHITBREAD CAPITAL MARKETS DAY:
• Whitbread, now flush with cash following its sale of Costa to Coca Cola, yesterday held a capital markets day at which it outlined its plans for the future.
• Whitbread maintains that it has ‘attractive structural growth opportunities in the UK & German hotel markets’
• It says it plans to couble its room network to ‘more than 170,000 rooms in the UK & internationally’
• The group’s efficiency programme will continue & ‘at least £2.5 billion [is] to be returned to shareholders’
• Whitbread says Premier is the largest budget hotel brand in the world with at ‘track record of strong financial performance over the long-term.’
• The group says that it has 1) long term growth opportunities (it can double in size over an unspecified time period), 2) it owns many freeholds & sees itself as ‘vertically integrated’ and 3) it believes that its systems are ‘best in class’.
• Whitbread will ‘optimise its capital structure’ via a share buyback of ‘at least’ £2.5bn.
• After this, the group says it ‘will continue to operate with a strong balance sheet to provide access to low cost incremental funding, underpinned by its balanced freehold and leasehold approach to property.’
• The buyback will be achieved via 1) the current £500m repurchase in the market and then 2) via a tender offer to repurchase up to a further £2 billion of shares. Whitbread says it will seek a mandate from shareholders to conduct the above at its Annual General Meeting on 19 June 2019.
• Some have suggested that, shorn of its Costa subsidiary, Whitbread would be approached by the major hotel companies who may covet Premier Inn.
• This may or may not have happened.
• In fact, it would be strange if overtures had not been made but, for the medium term, it appears that Whitbread wishes to plough its own furrow.
• Germany is a big bet for the company. The market is large & tempting but, with Accor and other players by no means amateurish in their own approaches to the largest market in Europe, everything will depend upon execution.
HOLIDAYS & LEISURE TRAVEL:
• Tanzer claims an ongoing lack of clarity on key issues affecting travel, petty ‘political skirmishing’ and mainstream media scare stories had hit consumer confidence as Brexit looms.
• GfK reports Brexit uncertainty is hurting demand for summer 2019 bookings, with bookings down 8% yoy in the week ending 9 February. However, the analyst said the sector’s strong start to the year has so far mitigated this recent downturn.
• GfK says the last three weeks have seen holiday demand down 8%, down 10% and down 9% respectively. The group says that media stories about potentially cancelled flights, invalid passports and border delays have taken a toll.
• Stuart Pinnell, chairman and co-founder of Consensio Chalets, claims moving seasonal workers onto European employment contracts would add around 30% to payroll costs, and could push holiday prices up 10%.
• Wyndham Hotels & Resorts reports full year net income of $162m for 2018, down from $230m the year before. President and CEO Geoff Ballotti said ‘delivered strong adjusted earnings growth fueled by solid (revenue per available room) and rooms growth while acquiring and integrating La Quinta… 2017 results include impairment expenses and an $85 million tax benefit recorded as a result of the Tax Cuts and Jobs Act’.
• STR reports US hotel growth is slowing with occupancy set to be flat in 2019 followed by a 0.2% decrease in 2020.
• STR reports preliminary January US hotel occupancy between -1% and 1% with RevPAR and ADR set to be between 0% and 2%.
• Paddy Power updates on legacy tax assessments, with £36m payable to German authorities and £13m payable to Greece. Paddy Power says ‘The Group strongly disputes the basis of these assessments, and in line with the legal and tax advice we have received, is confident in our grounds to appeal. We therefore intend to do so. Pending the outcome of these appeals, we paid the total Greek liability in January 2019 while we await clarity with respect to the timing of any cash payment in Germany.’
FINANCE & ECONOMICS:
• UK CPI fell ot 1.8% in January, a two-year low. Underlying inflation was 1.9%. The ONS comments ‘the fall in inflation is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time last year.’
• The NIESR says ‘we found that disinflationary pressure is widespread. The drop in the rate of inflation cannot be explained by one-off factors such as the January sales, as only 6.5 per cent of goods and services were listed at sales prices last month compared to 7.2 per cent last year.’ The NIESR continues ‘not only is price growth weak across goods and services but also across the country as the dispersion of trimmed mean inflation at the regional level is the lowest on record.’
• The ONS has said that the price of flats fell in the UK over 2018.
• Sterling down vs dollar at $1.2867 but up vs Euro at €1.1406. Oil up at $64.20 with UK 10yr gilt yield up 1bp at 1.19%. World markets better yesterday but Far East down in Thursday trade. UK market forecast to open slightly lower.
• Brexit etc.:
o Brexit adviser Olly Robbins tells a Brussels pub that Mrs May’s plan is to run down the clock & offer simply her deal or an Article 50 extension.
o Brexit Secretary Stephen Barclay says that an extension is not government policy. It’s not clear just what government policy is. Mrs May says ‘it is very clear the government’s position is the same’ as it was two years ago when Article 50 was triggered.
o The Sun says only 6 (of 70+) trade deals will be ready by 29 March.
o German trade bodies asking for concessions to be made to the UK in order to protect exports. UK currently running a £12bn per month trade deficit. The country needs to transfer £12bn of treasure (mitigated by any invisibles surplus) overseas in order to pay for this. Every month.
o Ford reported to be stepping up plans to cope with a no-deal Brexit. Signalling that it may move production out of the UK Ford says ‘such a situation [a Hard Brexit] would be catastrophic for the UK auto industry and Ford’s manufacturing operations in the country.’
o We all have a tendency towards inertia. Only exam crises stir us to action but, with 43 days left and more than 950 days gone in the Brexit process, this isn’t perhaps the best way to provide certainty for business.
PRIOR DAY LATER TWEETS:
• Later tweets: Langton is set to introduce a paid-for Premium version of its popular free Daily email. Check Daily for details or drop us a line.
• Deadline for collapsed CAKE bids, all or just a slice, is lunchtime today. Buying whole co would mean inheriting any (unknown) problems
• Jeremy Hunt says is a ‘real hunger’ for a deal. What deal? Business ‘hung out to dry’ says BCC. Mad Hatter’s tea party rolls on
• GfK says holiday sales down 8% last week due to Brexit uncertainty. Got more to them than just UK but TUI down yesterday & TCG now 27p.
• Discounts continuing. Surely they must be pulled for Half Term (next week & week after)? Signs are they may continue.
START THE DAY WITH A SONG:
Yesterday’s song was Forever Young by Bob Dylan. Today, who sang:
Sometimes I wake up by the door,
That heart you caught must be waiting for you
Even now when we’re already over
RETAIL NEWS WITH NICK BUBB:
• New Look: The fashion chain New Look is one of the walking wounded on the High Street, as its embattled bondholders and landlords know only too well, but at least the company continues to produce quarterly results (because of the aforementioned bondholders) and the Q3 results yesterday contained some unexpected good news…Q3 total UK LFL sales were actually positive, at +0.9%, notwithstanding the very weak comps, whilst cumulative profits after 9 months have recovered strongly. Alistair McGeorge, Executive Chairman, said: “Today’s results show that we continue to make good progress in delivering improved operational and financial stability despite the challenging retail environment. Our return to broad appeal product continues to enhance profitability, our supply chain lead-times have improved, and we have exceeded our planned cost savings. However, we have more work to do and our
• News Flow This Week: The provisional verdict of the CMA on the planned merger of Sainsbury and Asda still looks likely to be next week rather than this week. The ONS Retail Sales figures for January are out tomorrow morning.