Langton Capital – 2019-02-27 – Nichols, coffee shops, SA Brain, airport queues, Playtech etc.:
Nichols, coffee shops, SA Brain, airport queues, Playtech etc.:
A DAY IN THE LIFE:
So, here’s a bit of advice to any of you out there prepared to admit that you’re lazy or mean or both; don’t spend over four hundred quid on a flat-pack vivarium and then spend 20-30 man-hours skinning your knuckles and swearing bitterly to yourself whilst building it.
Because, though the smile on a child’s face may be priceless, your money is your money and turning the air blue in front of a juvenile is not a good look.
But it’s a lot of geld to blow on a few bits of chipboard, a bag of screws and a striplamp and, if I know animals like I think I know them, whatever ungrateful little beast we get to put in the glorified hot-box will spend its life strutting around, making a mess and generally regarding us coldly as a potential future food source.
But no, wait. I’m sure the creature, a Bearded Monster or Fearful Dragon or some such, will prove to be a rewarding and loyal member of our extended family. It will certaintly be friendlier, more warm-blooded & more of a team player that the members of Mrs May’s cabinet are proving to be. On to the news:
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PUBS & RESTAURANTS:
• Nichols PLC has reported full year numbers to end-Dec saying that revenues rose by 7% to £142m, EBITDA was up 6.6% at £33.8m and PBT (pre-exceptional costs) was up by 4% at £31.8m.
• Nichols says it ‘delivered a strong performance in 2018, achieving growth in revenue, profit and earnings per share, resulting in a 14.5% increase in the final dividend.’ The group continues ‘the UK sales performance was driven by the strength of the Vimto brand, now in its 110th year and continuing to outperform the wider soft drinks market, in addition to the increasing growth opportunities in the Out of Home sector following successful investment in this area.’
• Nichols concludes ‘as a result of the Group’s diversified business model, strong portfolio of brands and successful track record, the Board remains confident of delivering continued profitable growth.’ It says ‘we are well positioned with a diversified business model, a strong balance sheet and remain highly profitable. We continue to monitor the ongoing Brexit process, taking all possible actions to reduce the risk and we are confident that the Group can maintain its forward momentum in 2019 and beyond.’
• Allegra has announced that Costa Coffee, now owned by Coca Cola, has been voted the ‘Nation’s Favourite Coffee Shop’ for the ninth year running.
• Allegra says the UK coffee shop market had its 20th consecutive year of growth in 2018. Costa comments ‘we’re delighted to be awarded as the UK’s favourite coffee shop for the ninth consecutive year. It’s also incredibly rewarding to have been recognised for our sustainability work.’
• S.A. Brain has reported turnover for the year ending 29th September 2018 increased 1.3% to £117m, with underlying profit climbing 55% to £4.1m. Commenting on the results John Rhys, Brains’ Chairman, said: ‘We had a busy year, during which I am pleased to report that turnover from our continuing operations grew to £117m thanks to a strong summer of trading in our pubs. Operating profit was much improved as a result of us managing margins well and securing savings in our cost base’.
• AB InBev has acquired the San Diego-based spirits company Cutwater Spirits. Marina Hahn, new business co-founder at AB InBev added: ‘We’re excited to welcome the Cutwater Spirits team to the Anheuser-Busch family. We have tremendous respect for the brand that Cutwater Spirits has created and cultivated in just a few years and look forward to working with them to expand their premium canned cocktails to consumers across the U.S.’.
• The UK’s leading event catering marketplace, Feast It has raised £1.7m. Feast It grew by more than 1000% in 2018, reaching £2.5m worth of enquiries per month last year.
• As many as 10,500 borrowers are still being affected by Wonga, even after the group fell into administration last August. Many of these individuals are awaiting outcomes of Ombudsman rulings that they were mis-sold loans.
• Shake Shack has reported revenues up 30% in Q4 but says that the opening costs for 20 new restaurants negatively impacted earnings. The company says ‘labour inflations haven’t stopped yet.’
• Shake Shack reported a Christmas Q4 loss of just under $1 or 3c per share.
• Heineken has announced that it has signed an agreement with Cadena Comercial Oxxo (a subsidiary of FEMSA) in Mexico to extend their commercial relationship for 5 years, up to and including March 2024. Heineken says ‘the current successful commercial relationship began in 2010 under a ten-year agreement, whereby the only beer brands sold by OXXO have been those of the HEINEKEN Mexico portfolio.’
• Event catering marketplace Feast It has raised £1.7m in new funding. The organiser curates from within a range of over 650 of the UK’s caterers and mobile bars to book for all kinds of events.
• The range of income inequality between the richest and poorest in the UK widened last year per the ONS. The stats obdy says that the richest 20% of the UK population saw incomes rise by 4.7% whilst the richest saw them shrink by 1.6%.
• This has an impact on spending trends. Lower income families tend to spend a higher proportion of their incomes (and save less). When Mrs May stood on the steps of no10 Downing St for the first time, she said that she would address the issues of JAMs a top priority.
• Ocado’s and Marks and Spencer’s shares have both risen on the back of news confirming talks of a joint venture. Commenting on the speculation Ocado said: ‘Following media speculation, Ocado Group plc confirms that it is in discussions with Marks and Spencer Group Plc regarding a joint venture in UK retail’.
HOLIDAYS & LEISURE TRAVEL:
• Analysis by Which? reveals British tourists to Spain could face airport queues of five hours or more in the event of a no-deal Brexit. It calculated that if airports spent only 90 seconds making extra checks on each UK passport, it would take a single passport lane in an EU airport five hours longer to process a Ryanair flight with 189 UK passengers on board.
• Lastminute.com announces a major advertising campaign to tackle post-Brexit ‘travel stigma’.
• Data from STR shows January European hotel occupancy -0.1% to 58.1%, ADR up 2.5% to €99.56 and RevPAR up 2.4% to €57.8.
• CBRE says US hotels will endure a short-lived slowdown in 2021, but will get back on track in 2022.
• Dalata Hotel Group reports pre-tax profits up 13% yoy to €87.3m for 2018, with revenues up 11.8% to €393.7m. RevPAR rose by 4.7% to €94.13, while the hotel group’s average room rate rose by 4% to €112.51. The group said it has seen no impact from Brexit so far.
• Hotel Football, Gary Neville and Ryan Giggs’ Manchester hotel, has joined Marriott International’s soft brand for independent hotels, Tribute Portfolio.
• The Hard Rock Hotel London is set to open on the 30th April in Marble Arch.
• The High Court has dismissed a case brought by black cab drivers to strike down Uber’s license to operate in London. Lord Chief Justice, Lord Burnett, said the judge who granted the licence – Lord Arbuthnot – was not biased.
• Playtech has announced that it is signing a new long-term agreement with GVC until 2025. CEO Mor Weizer says ‘we are pleased to have reached a new agreement with GVC, which expands on the successful partnership we have established with Ladbrokes Coral over the last six years. This is testament to the strength of the Playtech proposition and we look forward to supporting GVC over the coming years.’
FINANCE & ECONOMICS:
• Former Fed bank chair Janet Yellen has said that President Trump does not understand economic policy. She added that he was not focusing on ‘appropriate objectives’ when determining policy.
• Sterling up sharply yesterday at $1.3244 and €1.1639. Oil up at $65.66. UK 10yr gilt yield up 2bps at 1.21%. World markets mixed. UK down but Europe higher yesterday. US down but Far East higher in Wednesday trade.
• Brexit, politics:
o Exhausted school ma’am Mrs May tells Commons to say what it wants; her deal, no deal or a Brexit extension. Labour adds a second referendum and the country still doesn’t know what it’s doing.
o HMG publishes its assessment of the impact of a no-deal Brexit on business saying food prices would rise and customs checks would cost the UK around £13bn per year.
o The idea of a ‘no-tariffs, consumer-windfall’ dismissed by the Government itself as a dream.
o HMG says there is ‘little evidence that businesses are preparing in earnest’. Mrs May herself now seems to be backing away from a no-deal Brexit.
o HMG says ‘as of February 2019, many businesses in the food supply industry are unprepared for a no-deal scenario.’
o Michael Gove says food tariffs will be necessary to redistribute income from consumers to farmers.
o Chuka Umunna says the report illustrates ‘a disastrous picture of the catastrophe which would befall our country if there is a no-deal Brexit.’
o Former Greek finance minister George Papaconstantinou says ‘just like Greece, the UK lacked an understanding of the EU’s political and institutional dynamics. This led to a flawed negotiating strategy.’
PRIOR DAY LATER TWEETS:
• Later tweets: It’s half term in bits of the North of England this week but the heavy food-discounts continue. See email for details.
• Lincat says it has seen ‘unprecedented’ pre-sale demand for the money-saving Synergy Grills that it is including in its kitchen suites
• Powerleague says worsened trading was due to ‘the inability to invest in the estate…compounded by the loss of commercial income’.
• Mrs May speaks to MPs today. Vote 12 March. Labour swings behind a 2nd referendum. HMG to publish analysis of impact of no-deal
START THE DAY WITH A SONG:
Yesterday’s song was Animal Nitrate by Suede. Today, who sang:
She told me she worked,
In the morning and started to laugh
I told her I didn’t
And crawled off to sleep in the bath
RETAIL NEWS WITH NICK BUBB:
Ocado/Marks & Spencer: There is plenty of press coverage today of the jv deal…because the Evening Standard broke the story in detail in its first edition yesterday morning soon after 10.30am and M&S/Ocado confirmed to the market just before 11.30am the fact that were talking…The news is very puzzling, particularly as the Andover fire had seemed to put the whole talks on the back-burner (as it were!). It may be understandable that Ocado wanted to ditch Waitrose and give 18 month’s notice on their supply contract, but it is hard to understand why M&S want to buy into the existing Ocado distribution infrastructure (which services Morrisons etc), at a cost of at least £750m, rather than just become a new partner. Steve Rowe, M&S CEO, has the nerve to say that “I have always believed that M&S Food could and should be Online”, but M&S still haven’t proved that they can
Waitrose Watch: Losing the Ocado contract will cost Waitrose quite a big chunk of its buying power, as well as over £15m in annual sourcing fees, but the P&L impact will doubtless be revealed by JLP in the final results on March 7th. In the meantime, trading at Waitrose has been going quite well so far this year, but yesterday morning’s JLP weekly overview reported a 4.3% fall in gross ex-petrol sales (c4% down LFL) last week, w/e Feb 23rd, with the outcome hit by a tough comp (“shoppers were stocking up last year for the anticipated ‘Beast from the East’”) and by the later fall of the half-term holidays this year for many areas of the country. With no new store openings to speak of, LFL sales were only flat in H2, to the end of January, and the first 4 weeks of H1 are now running up by only c0.5% LFL.
John Lewis Trading Watch: In contrast, trading at John Lewis has been weak so far this year and last week, w/e Feb 23rd, was again disappointing, down 4.8% gross (over 7% down on a “LFL” basis, excluding new stores like Westfield). In terms of sales mix, Fashion/Beauty sales were up by 1.1% gross last week, but Home sales were down 9.5% gross (blamed on “discounting and half term offers at competitors”) and Electricals were 6.9% down gross. John Lewis LFL sales were c2% down in H2 (with gross margins under a lot of pressure), but have been over 6% down over the first 4 weeks of H1 (down 3.9% gross).
News Flow This Week: Tonight brings the quarterly FTSE index review. Tomorrow brings the monthly GFK Consumer Confidence survey, the Howden finals, the Grafton finals, the Inchcape finals and the Zalando finals/Capital Markets Day in sunny Germany.