Jamie’s, C&C, Britvic, EasyHotel, Sportech etc.:

A DAY IN THE LIFE:

So it’s official, we’re going to have to ban biscuits from the office because, having inadvertently eaten a full packet whilst gazing out of the window yesterday at the builders who are operating not more than 30cm from the glass, I’m not sure they’re all that good for our health.

The biscuits, that is, not the builders. Though they could no doubt do some damage if they put their minds to it given the power tools that they swing around all day.

Anyway, we’re creeping towards another three-day weekend so, without further ado, let’s move on to the news:

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JAMIE’S & THE CRISIS IN CASUAL DINING: Capacity is coming out of the market but it is coming too late to save some operators. 21 May 2019: Premium Email.

GENERAL NEWS – PUBS & RESTAURANTS: 

• Jamie’s Italian, which first opened its doors in 2008, has called in administrators KPMG after having narrowly avoided collapse just two years ago. Some 1,000 jobs could be lost. Some 22 of the 25 restaurants impacted are reported to have closed already.

• Jamie Oliver, who took money out of the business, some £6m or so from the restaurant operations, in 2016, was reported at the time to have put £13m back in in 2018 in an earlier attempt to save the chain of restaurants. The celebrity chef is reported to have put another £4m in this year but drew the line at providing any further support. KPMG reports ‘the group had recently undertaken a process to secure additional investment into the business and, since the beginning of this year, Jamie Oliver has made available additional funds of £4m to support the fundraising.’ KPMG continues ‘however, with no suitable investment forthcoming and in light of the very difficult current trading environment, the directors resolved to appoint administrators.’

• Jamie Oliver wrote yesterday in a tweet ‘I’m devastated that our much-loved UK restaurants have gone into administration’. Union Unite said this was a ‘devastating blow for the chain’s hardworking and loyal workforce’. HSBC is the principal lender to the company.

• KPMG partner Will Wright says the market is currently ‘as tough as I’ve ever seen’. He says ‘the directors at Jamie Oliver Restaurant Group have worked tirelessly to stabilise the business against a backdrop of rising costs and brittle consumer confidence.’ See also Premium Email.

• The Telegraph reports that HSBC and ‘one of Britain’s biggest food suppliers are poised to pursue Jamie Oliver over debts after the chef’s empire of restaurants collapsed.’ Mr Oliver is said to have provided personal guarantees of some description to HSBC. This would allow the bank to claim against him personally for any unpaid bills.

• C&C has reported FY numbers saying that total revenues including the purchases of Matthew Clark & Bibendum rose to €1.01bn with basic EPS down 9.3% at 23.4c.

• C&C says that its core organic net revenues rose by 3.2%. FY20 has started ‘solidly’ and is in-line with expectations. CEO Stephen Glancey comments ‘FY2019 was a transformational year for the Company. Despite strong multi beverage brand led positions in Ireland and Scotland, access to the wider UK on-trade had always been a challenge, the acquisition of Matthew Clark and Bibendum changes this dynamic.’

• Mr Glancey says ‘we are now the largest final mile distributor to the on-trade of alcohol and other drinks in the British Isles with unparalleled access to this profitable market channel. In the longer term this will provide the platform for developing our high premium speciality beers and ciders.’

• The company continues saying ‘2019 was of course an exceptional year for trading and the weather impact is not something we can necessarily hope to repeat. There remains uncertainty ranging from the impact of geo-political events to the, as yet, unclear Brexit process. Any such event could, of course, impact upon the economic environment within our key markets and consumer confidence. This includes currency risk and the ability to trade freely across borders. Naturally, we have taken all necessary steps to plan for the worst while hoping for the most rationale outcome.’

• The group concludes ‘C&C is highly cash generative and has inherent balance sheet strength to support our targeted growth range.’

• Britvic H1 numbers reflect ‘a strong performance with revenue, organic margin and EPS all growing.’ Revenues are up 1.9% with PBT up 4.8% at £34.9m.

• Britvic CEO Simon Litherland says ‘I am pleased to report that we have delivered another strong performance in the first half of the year. We have grown organic brand contribution in all our markets and increased group revenue, organic margin and adjusted earnings per share.’

• Re the drinks levy, Britvic says ‘as we anticipated, the soft drinks levy has benefited our portfolio, accelerating the consumer trend towards our heartland of low and no sugar brands.’ Britvic concludes ‘our transformational business capability programme is nearing completion and forms an important part of our broader commitment to building a more flexible and sustainable business model. In the second half of the year we have a range of exciting marketing and innovation plans, and I remain confident that we will achieve full-year market expectations.’

• MOD Pizza raises $160m in equity financing from Clayton, Dubilier & Rice private investment firm. The pizza chain has set a target to open more than 500 locations over the next five years, bringing its number of sites to 1,000. MOD had U.S. systemwide sales of $390.7 million in 2018, up 44.7%, from $270 million a year earlier, according to 2019 NRN Top 200 data.

• Mod Pizza opened a net 98 restaurants in 2018, 77 company-owned and 21 franchised, closing out the year with 395 locations. 

• Shake Shack opened 20 units in the last quarter of 2018, bringing the chain up to 200 sites. The fast-casual company opened 36 locations in 2018 and generated estimated U.S. system sales of $467.6 million in 2018, up 27.3% yoy.

• NPD has suggested that families and young people are driving visits to coffee shops in the UK. It says coffee visits are up by 2% year-on-year with breakfast and dinner driving the market. NPD says ‘families and young adults are driving growth at 14% and 15% respectively. Breakfast is strong, but we are seeing dinner growing about seven times faster than the whole of the market.’

• NPD says that the global market for hot drinks outside the home is worth £105bn per annum with some 45bn consumer visits every year.

• Landlord Shaftesbury yesterday reported H1 results saying that it had seen LfL rents increase by 6.4% across its properties in the West End of London. CEO Brian Bickell reports that the longer term outlook for London properties is ‘strongly positive’. Mr Bickell goes on to say ‘the resilient performance over the period demonstrates both the exceptional qualities of our portfolio, located in the heart of London’s West End, and our proven long-term strategy. We continue to deliver increases in current and potential rental income, which have underpinned growth in our earnings and dividends, and the stability of our net asset value.’

• Shaftesbury says ‘whilst macro uncertainties are likely to dominate the national mood for some time to come, we believe the medium to long-term outlook for London and the West End remains strongly positive, driven by their international appeal, broad economic base and dynamism.’ It says ‘with our unique portfolio, and a team which brings expertise, enterprise and innovation to managing our holdings, we are well-placed both to respond to short-term challenges and to benefit from London’s long-established status as a truly global city destination for businesses and visitors.’

• The Government’s food surplus and waste champion, Ben Elliot has stated that the UK hospitality sector ‘needs to stick their hands up and say what they’re doing [to tackle food waste]’.

• Kate Nicholls, Chief Executive of UKHospitality has commented on the findings of RSPH’s study on mental health in hospitality: ‘Hospitality is a dynamic industry where careers can be fun and rewarding but these findings are obviously of concern. Many of our members already have practises and programmes in place to support those dealing with mental health issues, but it is clear that more needs to be done – especially if we are to encourage more British workers to consider a career in a sector with an increasingly acute labour shortage’.

• Restauranteurs have been warned by the accountancy firm BDO that HMRC is continuing to focus on the industry in an effort to catch tax avoiders. Over a quarter of businesses ‘named and shamed’ by the HMRC as ‘deliberate tax defaulters’ have been restaurants and takeaways since December 2017.

• Majestic Wine’s retail estate is believed to be valued at £100m with the private equity firm OpCapita supposedly interested in making a bid. 

• LVMH acquires wine producer Chateau du Galoupet for an undisclosed sum. 

• Morrisons will roll out plastic-free fruit & veg areas in sixty stores, using recyclable paper bags to pack the loose food.

HOLIDAYS & LEISURE TRAVEL:

• easyHotel updates on its opening program saying that it is ‘pleased to confirm that it has now completed the acquisition of its new site in Blackpool.’ It says ‘planning permission for the 104 – room purpose-built hotel has recently been granted and works are due to commence over the summer…the hotel is expected to open in the second half of 2020.’

• The FT reports that ‘Thomas Cook intends to push ahead with expansion plans despite growing doubt over the 178-year old UK travel group’s ability to continue trading.’ The group is opening its 13th new hotel this year in Crete.

• The UK Premier League should earn some 30% more from international broadcasting rights next year reports the FT. The League will earn £4.2bn for the sale of rights over the next three seasons.

• New research shows enthusiasm for package holidays, with eight out of ten people have either taken a package holiday or are open to taking one in the future. 55% of millennials aged 25-34 have taken a package trip in the past year.  

• Commenting on the attack on a tourist bus near the Giza pyramids, Aito chairman Derek Moore said ‘There is no doubt that it’s a setback for Egypt, just as things seemed to be settling down somewhat’.

• Brexit uncertainty and the US-China trade war send the pound to its lowest levels in five months, just as many UK holidaymakers head abroad for the May half-term break.

• Trainline, the rail booking app, plans to list on the stock market with a valuation well over £1bn. However, City sources have cautioned that a final decision about the timing had not yet been taken. 

• Airlines for America forecasts 257.4m people will fly on U.S. air carriers between 1 June and 31 August, up 3.4% yoy. 

• Anbang Insurance’s portfolio of U.S. luxury hotels business is being bid for by Blackstone, Brookfield Asset Management, Mirae Asset Management, and SoftBank-owned Fortress, with bids reaching $5.8bn.

OTHER LEISURE:

• Sportech is to comment on trading at its AGM saying ‘the Group has made progress during 2019 implementing the strategy to drive longer term profitability (as set out on 21 March 2019 in our full year results for the year ending 31 December 2018) and we continue to trade in line with Board expectations.’

• The FT reports that ‘Thomas Cook intends to push ahead with expansion plans despite growing doubt over the 178-year old UK travel group’s ability to continue trading.’ The group is opening its 13th new hotel this year in Crete.

• The UK Premier League should earn some 30% more from international broadcasting rights next year reports the FT. The League will earn £4.2bn for the sale of rights over the next three seasons.

FINANCE & ECONOMICS:

• British Steel is reported to be on the brink of administration. A collapse would cost 4,500 jobs in Scunthorpe & Teesside. The government has said it will leave ‘no stone unturned’ in its aim to support the steel company. It’s unclear what that means. Up to 25,000 jobs may be at risk including BS’s supply chain.

• Sterling down at $1.2713 and €1.1393. Oil down at $71.73. UK 10yr gilt yield up 3bps at 1.09%. World markets all up yesterday with Far East up in Wednesday trade.

• Brexit, politics etc.:

o Mrs May says she aims to ‘seek common ground in parliament.’ Perhaps it’s a little late in the day. Mrs May was accused of running the clock down for most of 2018. She has suggested that MPs may be given a vote on whether to offer the public a chance to vote on any deal.

o Mrs May added that the UK will not leave the European Union unless her Brexit deal can win the support of political parties across parliament. Mrs May has waited until well beyond the last minute to seek cross party support.

o Andrea Leadsom has suggested that there could be a no-deal Brexit on 31 October.

START THE DAY WITH A SONG:

Yesterday’s song was Folsom Prison Blues by Johnny Cash. Today, who sang:

Daddy’s always on the move, mama’s always on the news,

I try to keep you sheltered from it but somehow it seems

The harder that I try to do that, the more it backfires on me

RETAIL NEWS WITH NICK BUBB:

Marks & Spencer: Ahead of the much-awaited Marks & Spencer finals today, we flagged yesterday that M&S would have to say how they intend to pursue the planned rights issue to finance the hefty purchase price of the Ocado jv, with £563m cash to be paid upfront (c13% of M&S’s market cap), And M&S has got on with it, by announcing a fully underwritten £600m rights issue, on surprisingly cautious terms: a 1 for 5 at 185p. M&S remains enthused about the potential for the Ocado business, although Waitrose will not make it easy for them…In the meantime, the profit slump continues and although the 10% fall to £523m in adjusted PBT was expected, that is before chunky exceptional costs of £439m and the final dividend has been slashed (as flagged at the time of the Ocado deal announcement back in Feb). Long-suffering shareholders may find a crumb of comfort in the fact that
the Q4 LFL sales are a tad better than feared, on an Easter adjusted basis, with Food up 0.4% and Clothing and Home down by 0.9%, although the embattled CEO Steve Rowe says “at this stage we are judging ourselves as much by the pace of change as by the trading outcomes”.

Waitrose Watch: The cooler weather year-on-year again dampened down supermarket sales last week, aggravated by the comp with last year’s Royal Wedding, and yesterday morning’s JLP weekly overview, for w/e May 18th, revealed that Waitrose saw a 2.1% fall in gross ex-petrol sales, to continue the weak start to Q2/May so far.  That left the last 16 weeks up by 0.5% gross cumulatively (also up by c0.5% LFL, as there are no new stores).

John Lewis Trading Watch: The comp with the good weather/Royal Wedding last year again worked in favour of John Lewis last week, with gross sales up by 1.7%. In terms of sales mix, Fashion/Beauty sales were up by 5.3% gross in w/e May 18th, helped by price-matching promotions, but Electricals were 2.2% down gross and Home sales were down by 0.3% gross. John Lewis LFL sales are, however, running nearly 4% down over the last 16 weeks (down 2.6% gross).

News Flow This Week:  The French Connection AGM is being held today, but no statement is expected. Today should also see the publication of the Watches of Switzerland IPO prospectus. Tomorrow brings the B&M finals, the Mothercare finals, the Inchcape Q1/AGM, the Hotel Chocolat Capital Markets Day and…the EU Elections. The ONS Retail Sales figures for April are out on Friday (the same day as the CBI Distributive Trades survey for “May”).