Langton Capital – 2019-03-15 – JD Wetherspoon, Restaurant Group, EIG, tariffs, costs etc.:
JD Wetherspoon, Restaurant Group, EIG, tariffs, costs etc.:
A DAY IN THE LIFE:
I’ve been reading a bit of Dostoyevsky recently, which has provided proof to me, if proof be needed, that this Hull comprehensive schoolboy is not really a member of the Liberal Elite.
Because I struggle with the prose.
I hesitate to say they’re turgid; they’re almost certainly wonderful but I’m finding them a bit difficult as I’ve been struck with a case of something-lexia in that I’m understanding all the individual words but not really absorbing the meaning.
Anyway, it was Votaire last week. Much easier. It was in English, mind, but I’m told that Goethe in the original German is a must. I might make a page a day – but that’s only if there’s plenty of dialogue involving cats sitting on mats. A busy day for a Friday so let’s move on to the news.
JD WETHERSPOON – H1 NUMBERS:
JD Wetherspoon has this morning reported first half year numbers for the 26wk period to 27 January and our comments thereon are set out below:
JDW has reported H1 revenues up by 7.1% at £889.6m with LfL sales +6.3%. PBT is £50.3m (last year £62.0m) and EPS is down 18.2% at 37.4p (2018: 45.7p). The H1 dividend is held at 4.0p. Chairman Tim Martin says the group opened two new pubs & closed six in the period.
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RESTAURANT GROUP – FULL YEAR NUMBERS:
The Restaurant Group has this morning reported FY numbers to 30 Dec and our comments are set out below:
The Restaurant Group reports FY sales down 2.0% LfL with growth since the World Cup. The company says Wagamama ‘has continued to outperform the sector’ and says ‘concessions…opened 21 new units and entered four new airports’ with pubs also doing well.
There has been a sequential improvement in leisure business and the ‘enlarged group [is] now strongly orientated towards growth’. Total sales are +1.0%. Adjusted PBT is £53.2m, EPS is 14.7p (2017: 16.7p) and a final dividend of 1.47p is to be paid.
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GENERAL NEWS – PUBS & RESTAURANTS:
• EI Group has completed on the disposal of its commercial pubs. CEO Simon Townsend says ‘today’s announcement is a significant milestone for the business and evidence of our ability to unlock value across our estate and realise attractive cash proceeds for shareholders.’
• Mr Townsend continues ‘this disposal will allow us to focus on driving growth across our core Publican Partnerships, Managed Operations and Managed Investments businesses, while also reducing our debt and delivering further shareholder value. With that in mind, we are pleased to announce a further £35 million share buyback programme, in addition to the £20 million programme we completed in January.”
• Fallons plans to develop a £250m food and leisure attraction near Harrogate called Future Park. The scheme will create 1,000 jobs and attract an estimated 3.5m customers a year.
• Craft Union Pub Co celebrates the contribution of its operators at its annual operator awards show in Blackpool, bringing over 600 people together.
• Tariff information may have come too late to be much use to the food & drink industry. FDF CEO Ian Wright has said that the government ‘announcement on tariffs underlines why the UK is not ready to exit the EU on 29 March. Business cannot adapt to this new regime in just two weeks. It is disgraceful; that we are, only now, getting to see these. There must be proper consultation with business before a change of this magnitude is introduced.’
• The FDF says ‘in a world where it is costly and complex to export finished goods to the EU, and costly and complex to import key ingredients, many food and drink manufacturers who trade with the EU will surely question whether the UK is the right place for them to be.’
• GBK has seen LfL sales increase 4% in the 16 weeks to 24 February 2019, after it entered into a CVA last year. The CVA is believed to have cost the company £18.3m due to redundancy payments, professional fees, compensation fund costs and store strip-out charges.
• Gary Usher, the owner of Elite Bistros restaurant group has set a new record on Kickstarter after raising £100k in just 11 hours. The money will be used to fund a new restaurant opening on King Street in Manchester.
• Heineken has opened its first brewery in Mozambique. Heineken has invested $100m into the site which will oversee the production of 0.8m hectolitres of beer a year.
• Pernod Ricard is mulling over a potential $500m sale of its wine divisions, which include Campo Viejo and Jacob’s Creek.
• Good Things Brewing Co has been awarded SIBA’s Brewery Business of the Year 2019. Neil Walker, SIBA Business Awards Judges Chair said: ‘Good Things Brewing Co impressed judges with their unique approach to all aspects of their business and how their core beliefs as brewers shone through not only in their branding but in their actions as an independent craft brewer’.
• Papa John’s International has partnered with DoorDash in the US, as the pizza delivery group explores third-party delivery to 1,400 restaurants across America. Anne Fischer, senior vice president of customer experience at Papa John’s said: ‘This partnership extends our continued commitment to meet customers wherever they are and provide simple, easy ordering for guests in addition to our own world-class Papa John’s mobile app’.
HOLIDAYS & LEISURE TRAVEL:
• Visitors to the UK from the US, Canada, New Zealand, Australia, Japan, Singapore and South Korea will be permitted to use e-gates at UK airports and Eurostar terminals starting in June. The change will benefit an estimated 6.5m travellers.
• MMGY Global research shows nearly 60% of millennials used a traditional travel agency to book a domestic break in the last year.
• The Greek tourism sector, which represents c20% of the countries GDP, grew by 6.9% in 2018 while the economy as a whole grew by just 2%. One quarter of all employment in Greece is based in tourism – equivalent to nearly one million jobs.
• The CAA’s Atol crisis management team is dealing with the fallout from Val-Ski, which ceased trading yesterday.
• Best Western will launch four brands in the UK on 11 April – Sadie, Aiden, Executive Residency and Gle. Gle, Sadie and Aiden will focus on the boutique hotel market while Executive Residency is Best Western’s extended stay brand.
• Boeing has grounded its 737 Max aircraft – totalling 371 airplanes – citing an ‘abundance of caution’ after the Ethiopian Airlines crash on Sunday.
• Uber’s autonomous vehicl0065s division seeks $1bn of investment from investors such as the SoftBank Vision Fund. The investment would value the business at between $5-10bn.
• For the week ending 9 March, STR reports US hotel occupancy down 2.4% to 66.8%, ADR up 0.8% to $132.01 and RevPAR down 1.7% to $88.15.
• Reuters reports Uber will IPO in April, the company will seek a valuation as high as $120bn.
• Facebook has restored service to Instagram after it suffered major outage for around 24 hours.
• SJM and MGM China’s gaming concessions have been extended for two years to mid-2022, in line with Galaxy Entertainment, Sands China, Wynn Macau and Melco.
FINANCE & ECONOMICS:
• Sterling little changed on the votes yesterday at $1.3238 and €1.1695. Oil down at $67.27 and UK 10yr gilt yield up 3bps at 1.23%. World markets higher with Far East up in Friday trade.
• Brexit, politics etc.:
o Business has given a cautious welcome to the House of Commons decision to ask the EU to allow the UK to delay Brexit. The time period is currently unknown. The BCC said ‘while most businesses will support an extension to Article 50 to avert the prospect of a messy and disorderly exit on 29 March, with just two weeks to go this vote leaves firms with no real clarity on the future.’
o PM’s deal to come back to the Commons a third time. Strong & stable Mrs May watching too much South Park, telling MPs to respect her authoritaaay.
o Still all to play for. ERG may be bounced into agreeing the PM’s deal for fear of a lengthy extension to Article 50. However, the facts re the backstop are unlikely to have changed.
o FT says it is ‘difficult to exaggerate the sheer irritation in Brussels, and in some national capitals, at the incompetence, arrogance and ignorance with which Mrs May’s government has handled the Brexit negotiations.’
PRIOR DAY LATER TWEETS:
• Management actions should be ‘problem appropriate’. Little point in making a strategic move to ‘solve’ an operational problem. See Premium e/m
• Crowdfunding – who is the idiot in the room? See premium email. Valuations are high, regulation is low. How will that end??
• The latest CGA Prestige Purchasing study into food costs has concluded that fish, dairy & soft drink prices are still rising.
• Warehouse companies are said to be doing well out of stock-piling. Morrison’s said that it is running low on toilet paper. Really, it did.
• GfK reports Summer 2019 bookings up 1% yoy in the week to March 9, driven by an 8% rise in all-inclusive bookings.
• Nasty Party vs Incompetent Party Brexit drama continues as they battle to destroy least value. More coming soon
START THE DAY WITH A SONG:
Yesterday’s song was The Sun Always Shines On Tv by A-Ha. Today, who sang:
I’ve waited hours for this,
I’ve made myself so sick
I wish I’d stayed asleep today
TOPICS FOR CONSIDERATION IN PREMIUM EMAIL:
• Thematic pieces including Pubs vs Restaurants, Delivery, Experiential Leisure, Crowd Funding, CVAs, Employemnt levels (& costs) etc.
• Occasional ‘deep dives’ into stocks (Pat Val, RTN etc.), trends etc.
• Book reviews. Black Swans, The Honest Truth about Dishonesty, Dark Pools, Lean Start Up, Smartest Guys in the Room, Client Nine, Black Edge, The Billionaire’s Apprentice, Thinking Fast & Slow, Wizard of Lies & many others.
• Accountancy, Audit & other, thrill-a-minute topics
• Behavioural economics. Over-confidence, Hofstadter’s Law, confirmatory bias etc.
• Other. Guest contributions, From the Archive etc.
RETAIL NEWS WITH NICK BUBB:
• Boohoo: John Lyttle takes over as CEO of Boohoo today, with Mahmud Kamani taking over as Chairman from Peter Williams and co-founder and Joint CEO Carol Kane stepping back to be an Executive Director: all as announced back on Sept 17th. Six months on it is a bit surprising that Boohoo has not been able to announce the 2 promised new non-execs, but the search is said to be “progressing well” and no doubt there should be some news by April 24th, when the final results are announced. After 8 years as COO at Primark, John Lyttle is an expert on distribution/logistics, so it will be interesting to hear what he says on April 24th about Boohoo’s plans on this front.
• News Flow Next Week: Next week will bring yet another key Brexit vote in the House of Commons, but there is plenty going on in retailing to keep us busy, beginning on Tuesday with the Ocado Q1, the Applegreen finals, the ScS interims and the ASOS update. Wednesday then brings the Kingfisher finals (and a decision about the future of the CEO, Veronique Laury). Then Thursday brings the much-awaited Next finals, as well as the Ted Baker finals, the Game Digital interims and the ONS Retail Sales figures for February.
• Trade Press: Retail Week magazine today went to print back on Tuesday, but it goes big, inevitably, on last night’s annual Retail Week Awards (see below). In Drapers magazine the Editor looks at the demise of LK Bennett in her column and thunders that “Lack of long-term leader left LK Bennett lost”. In terms of News stories, Drapers highlight that LK Bennett creditors have been left ‘in the dark’ after the chain fell into administration, the power struggle between the Board of Debenhams and Mike Ashley has reached boiling point and Primark is moving its product teams from Reading to Dublin. In terms of features, Drapers look, inter alia, at the new Berlin HQ of the fashion website Zalando.
• BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis slumped last week, thanks to the calendar shift of Mother’s Day, and the BDO High Street Sales Tracker for medium-sized Non-Food chains for last week, w/e Sunday March 10th, is mixed. BDO Fashion Store sales were actually up by 2.4% LFL (including Online), but Total BDO LFL sales (including Homewares and Lifestyle sales) were down by 4.0% last week (down by 9.6% in Store sales and up by 8.3% Online), versus +10.2% a year ago.
• “Retail Week Awards” Watch: Last night’s annual Retail Week Awards at the Grosvenor House Hotel in the West End were hosted by the comedienne Sue Perkins, after a speech by the former politician Ed Balls. Julian Richer won the award for “Outstanding Contribution to Retail” and, as we expected, the hotly contested award for “Best New Store of the Year” went to John Lewis Westfield. The prestigious award for “Retail Leader of the Year” went to Paul Marchant of Primark (which was also the “Best Retailer over £250m”) and the fast-growing The Entertainer toy chain won the “Best Retailer under £250m” award.