Langton Capital – 2019-07-17 – More on FUL, Nichols, Hotel Choc, TCG & other:
More on FUL, Nichols, Hotel Choc, TCG & other:
A DAY IN THE LIFE:
Using nouns as a verb doesn’t often upset me but I’m not sure that saying you’re going to ‘sunset’ something (or somebody) adds much to the English language.
Because, if you mean you’re going to close a branch or a concept and sack half a dozen people, then why not just say it?
You can downsize, I suppose. But at least that’s still a verb and it does give some indication that things are headed in a suboptimal (for some) direction whilst ‘sunsetting’ carries with it an image of exotic drinks on the deck of a ship, a pint by the green in an idyllic English village or jostling to get a west-facing table at 8pm in a Key West restaurant.
It doesn’t so much imply embarrassing conversations with your spouse, the bank manager and the kids but perhaps that’s the point and, in a tricky situation, every little helps?
Anyway, I’ve just decided that throwing the patio doors open to let some air in pre-6am in the north of England is a bit ambitious as it’s about ten degrees out there. Time for the news:
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FULHAM SHORE FULL YEAR NUMBERS: The Fulham Shore yesterday hosted a meeting for analysts. The group insists that, in an industry suffering from oversupply, it is well-positioned to succeed. 17 July 2019: See premium email.
THE STORY IN HEADLINES: It’s fair to say that successes and failures look similar for a while. They have big ambitions but little proof of product. Until, of course they do. Some never do. Here we look at various headlines relating to Purple Bricks. 17 July 2019: See premium email.
GENERAL NEWS – PUBS & RESTAURANTS:
• Soft drinks company Nichols has reported H1 numbers to end-June saying that revenues rose 10.2% to £71.6m with PBT up 2% at £13.3m. EPS is +2.8% at 29.63p and the dividend is up 9.7% at 12.4p.
• The numbers will come as a relief after AG Barr’s comments yesterday.
• Chairman John Nichols says ‘Nichols plc has delivered another good trading performance in the first half of 2019, with growth across both the UK and international markets.’
• Nichols says ‘the Group has delivered a good trading performance for the first six months of 2019.’ Re the outlook, the chairman says ‘the Board is pleased with the Group’s performance in the first six months of 2019 in both our UK and international markets.’ He adds ‘while UK trading conditions are expected to remain challenging, as a result of the Group’s diversified business model and sales momentum, the Board is confident that full year earnings will be delivered in line with its expectations.’
• Hotel Chocolat has updated on full year trading to end-June saying ‘revenue for FY19 was £132 million, an increase of 14 per cent compared to the 52 weeks ended 1 July 2018.’ It adds ‘management expects that profit before tax for FY19 will be in line with market expectations.’
• Hotel Chocolat CEO Angus Thirlwell says ‘I’m really pleased with our performance this year, delivering strong growth across all parts of the Hotel Chocolat multi-channel, direct-to-consumer model.’ He says ‘our pace of innovation is relentless.’
• Just Eat has announced it will release the food hygiene rating of every restaurant listed on its delivery platform. Graham Corfield, UK managing director of Just Eat, said: ‘We spoke to customers about the information they want before choosing their takeaway and their feedback was clear. They want easy access to independent information about the hygiene standards of their local restaurants and we’ve worked hard to make that a reality’.
• Fried-chicken chain Bird has suggestetd that bank lending for restaurants is becoming harder to source and it is considering restructuring plans as a result. The Evening Standard reports that the group has ‘filed a notice of intention to appoint administrators.’ Founder Paul Hemings says that options included securing new investment, a company voluntary arrangement with creditor approval, or a pre-pack sale with one of the above being ‘imminent’.
• AG Barr shares finished yesterday down 28% on the back of a warning from the company that profits would be lower this year. Last year’s hot weather set the bar rather high but that should not have come as a shock to analysts. The company expects H1 revenue numbers to be down by 10% with profits down about 20%. It points to the ‘disappointing spring and early summer weather, most notably in Scotland and the north of England’. The weather has arguably been more average than bad.
• The FT looks at meat substitutes and vegan foods saying that ‘plant-based meat sales grew 10 per cent in the 12 months to April 2019’ in the US to $801m. The Good Food Institute says that sales of plant-based dairy foods were helping increase demand. Restaurateurs in the UK have long believed that they needed to offer vegetarian alternatives but recently, after years during which the offers were arguably somewhat cosmetic, demand seems to be on the up.
• San Carlo restuarants has reported numbers saying that turnover has risen to £53.9m but that trading conditions are tougher and the group as a whole has made a loss after tax. The first San Carlo restaurant was opened by Carlo Distefano in Birmingham in 1992. Parent company Templeton Holdings Ltd revealed the company made a profit for the year to end-Sept 2018 of just under £4,000 before tax (2017: £1.3m profit) but paid tax and retained a loss of £134k (2017: profit £941k).
• Templeton says ‘the group has recorded a loss in the year which can be contributed to [sic] investments in new sites, as well as difficult trading conditions due to Brexit and large rent and rates increases’.
• The five fastest-growing global beer brands are all based in Asia, the Morning Advertiser has reported.
• In the US, Domino’s reports same-store sales up 3% yoy in the June quarter, below analysts’ expectations of 4.6% growth. CEO Richard Allison said delivery aggregators such as UberEats and GrubHub applied a ‘significant amount of pressure’ with ‘a substantial amount of discounting out there as they drive to gain market share’.
• In the US, McDonald’s partners with DoorDash to expand the chain’s delivery reach. McDonald’s is also partnered with Uber Eats, serving about 9,100 restaurants.
• UKHospitality and local businesses in Southwark have gathered signatures to oppose the introduction of a new late-night levy on pubs, bars and venues open after midnight. UKHospitality CEO Kate Nicholls said ‘they are being squeezed by a Council only interested in another tax, even if it undermines businesses, loses jobs and harms investment in the community.’
• The EU is set to launch a formal investigation into how the retail giant uses data from other merchants that sell goods on its websites.
• The meal-kit group, Gousto has raised £30m in new funding, Sky News has reported.
• Red’s Smoque Ltd, which traded as Red’s True BBQ, has officially notified Companies’ House that an administrator has been appointed.
• Shadow Chancellor John McDonnell has said that a Labour government would curtail outsourcing from government departments. In a move that could disadvantage Compass, Sodexho and other contract caterers going forward, McDonnell says ‘we’re introducing legislation which has an insourcing preference, so services would be provided in house. Only on extremely tight grounds would there ever be any outsourcing under a Labour government. We’ve drafted that legislation and we’re publishing it this week.’
• Seedlip, the low alcohol spirits group, has released no-alcohol lightly carbonated pale lemon ‘wasted wine’, as the group looks to expand its offering.
• Holland & Barret will stock ISH Spirits, Danish alcohol-free gin and rum, according to Drinks Business. Fiona Davies, Holland & Barrett’s food buyer, said the alcohol-free spirits are ‘an important part of our new product range.’
• Big Drop is rolling out its 0.5% ABV Citra IPA in Brewhouse & Kitchen’s 22 craft beer sites. Rob Fink, founder and CEO of Big Drop, said ‘Lower strength beer finally is moving from back-bar fridges to sit front-and-centre of bartops with proud tap badges.’
• Pernod Ricard acquires a 34% stake in Seagram MM Holdings, a joint venture whiskey producer and distributor in Myanmar, for an undisclosed sum.
HOLIDAYS & LEISURE TRAVEL:
• Club Med owner Fosun, the travel arm of which was only created in 2016, is fast ‘becoming a global empire in its own right’ reports the FT. bondholders permitting, the group is about to add the non-airline parts of Thomas Cook to its portfolio of assets.
• The Telegraph has reported analysts speculating that the £750m rescue being proposed by Thomas Cook’s directors could be blocked by bondholders. Thomas Cook’s shares rose 10% (just half a penny) yesterday to close at around 5.7p.
• Virgin Holidays stops selling tickets to SeaWorld as part of a decision to cease the company’s relationship with attractions that keep whales and dolphins in captivity. Last summer Thomas Cook also stopped selling tickets to animal attractions that include killer whales.
• Premier Inn opens its 800th hotel – the Premier Inn Skegness.
• Uber’s Russian joint venture with Yandex, MLU, acquires Vezet for $204m, with the joint venture planning to invest a further $127m in Russian regions over the next three years.
• Jan Freitag, SVP of lodging insights, and Brian Riley, researcher on the Market Insights Team, of STR, claim fluctuations of up to 10% in daily RevPAR make volatility new normal in the US and several global markets.
• Hilton’s DoubleTree brand turns 50 this year, with Shawn McAteer, SVP and global brand head, saying growth has been possible because almost all locations are conversions and because there is a strong case to be made for both owners and consumers.
FINANCE & ECONOMICS:
• Wage growth in the UK edged up to 3.6% in the year to May 2019, the highest level since 2008. This is well ahead of the rate of GDP growth plus inflation suggesting that, if productivity has not increased, labour must be taking a larger share of the national cake.
• The ONS says a record number of 32.75 million people were in employment up to the end of May. Some 1.29 million were out of work, the lowest since at least 1992.
• The NIESR says ‘strong earnings growth in the first half of 2019 helped real pay recover most of the losses incurred since the financial crisis a decade ago. However, economic and political uncertainty pose a considerable risk to hiring activity and, according to our new estimates, prevent a further acceleration of earnings growth in the months ahead.’
• IMF boss Christine Lagarde has resigned her position as she takes a tilt at the role of ECB boss.
• Sterling briefly fell below $1.24 yesterday. It closed down around a cent at $1.2413 and €1.1068 just in time for people to go on holiday. Oil was lower at $64.50 and the UK 10yr gilt yield rose 1bp to 0.81%. Workd markets: UK & Europe higher yesterday but US down and Far East lower in Wednesday trade.
• Brexit & politics:
o FT reports ‘a no-deal Brexit on October 31 is looking more likely than ever.’
o Messrs Johnson and Hunt have both said that they would prefer a no-deal Brexit to the currently proposed Northern Ireland backstop
o Guardian quotes EU sources as saying that both Boris Johnson’s and Jeremy Hunt’s proposals on the Irish border will be rejected outright.
o Michael Gove is reported to have ‘made a pitch to be in Boris Johnson’s cabinet’. Better keeping enemies in the tent?
START THE DAY WITH A SONG:
Yesterday’s song was Someone Like You by Adele. Today, who sang:
I’m goin’ my way, your lover,
If you get cold, I will be your cover
Don’t have to worry ’cause I’m here
No need to suffer baby, ’cause I’m here
RETAIL WITH NICK BUBB:
• Watches of Switzerland: Today’s final results for y/e April are not new, as they came out during the recent IPO process, but as CEO Brian Duffy says “FY 19 was a fantastic year for the Watches of Switzerland group”, with UK LFL sales up by 10% and adjusted EBITDA up by 18%, on the back of the continuing demand for luxury watches. And trading over the first 11 weeks of the new-year is said to have been “encouraging”.
• Hotel Chocolat: The year-end trading update flags that revenue was up by 14% in the 52 weeks to July 1st and that management expect that PBT will be in line with market expectations. The group opened 16 Hotel Chocolat locations in the year contributing 5% to group sales year-on-year. Trading since the year end continues to be in line with management’s expectations. CEO Angus Thirlwell says that “In our drinks and ices range we are seeing the most prolific new product Instagramming in our history, with Billionaire’s Sundaes, Choc Shakes and Vegan Chocolate-Dipped Lollies generating lots of excitement”.
• Koovs: The struggling Indian Online fashion retailer Koovs boasts today with its finals for y/e March that sales in Q1 increased by 104%, but the most startling thing is still how small they are (at £4.8m gross), given that they’ve been going for 9 years and burnt through plenty of investor money in the process. Nevertheless, the business seems to be on the recovery trail and management say that they are on track to meet FY 20 market expecations.
• Sports Direct: The share price of the embattled Sports Direct continued to come under pressure yesterday, despite the news that the activist US investor Coltrane has built up a c3% stake and more modest support from the continuing “close season” share buyback programme (Sports Direct was able to pick up c80,000 yesterday, rather than their usual c50,000 shares, at c236p).
• Weather Watch: If you’re confident that the current warm/dry spell will last, having escaped St Swithin’s Day on Monday without any rain, then you shouldn’t get too carried away, as the next few days will be a bit more unsettled across the country, even if London will still see the best of the weather. According to the Met Office weekly weather forecast supplied by Retail Economics, the warmest day this week across the country will be yesterday (with an average UK forecast temperature of 22.4C, versus 21.4C a year ago) and the coolest day (and the wettest) will be Friday (with an average UK forecast temperature of 19.1C, versus 21.8C a year ago).
• News Flow This Week: Tomorrow brings the AO.com Q1 (after today’s AGM) and the ONS Retail Sales figures for June. The British Land AGM is then on Friday.