Langton Capital – 2019-07-18 – EI Group, Stonegate, recycling, Saga, GVC & other:
EI Group, Stonegate, recycling, Saga, GVC & other:
A DAY IN THE LIFE:
When the various house plants that we own feel the full force of our ‘focused neglect’, they have a tendency to wither and die.
Because, whilst the label may say ‘drizzle occasionally with sun-drenched mountain spring water and move from an east-facing to a west-facing terrace at 3pm daily’, we tend rather to plonk them in a dark corner, knock them over from time to time and then ignore them.
True, they occasionally get half a cup of finest tapwater and even the odd teabag and slop of coffee, but that doesn’t seem to be enough except, of course, for rubber plants, which you simply cannot kill.
Anyway, time’s getting on so here’s the news:
LANGTON PREMIUM EMAIL:
Corporate Offer: Premium email just £295 (plus VAT) for a single subscriber or £495 (plus VAT) for multiple subscribers. Drop us a line to get involved.
Retail Offer: Easy in, easy out. £30 per month (inc. VAT) via PayPal. Email us for details or check here:
STONEGATE TO BUY E.I. GROUP: Stonegate is to buy EI Group for 285p in cash. 18 July 2019: See Premium Email.
GENERAL NEWS – PUBS & RESTAURANTS:
• EI Group has this morning confirmed Bloomberg reports that TDR Capital, which owns the Stonegate Pub Co amongst other investments is to make an agreed bid for the company.
• The deal is at 285p in cash. See Premium Email.
• Bloomberg had reported that ‘a deal could be announced as soon as this week.’ It says ‘no final decisions have been made and the discussions may not lead to a transaction… EI Group, which owns more than 4,400 British pubs, has a market value of about 902 million pounds.’
• EI Group shares are up around 32% this year to date. The company has been successfully transitioning from a purely tenanted and leased operation to one that has managed houses, speciality operations and free-of-tie leases in addition to its more traditional pubs.
• Bloomberg says ‘a representative for TDR declined to comment. EI didn’t immediately respond to requests outside of regular business hours.’ The deal is now on the screens.
• FT reports that AB InBev may have to fall back on promoting organic growth as its failure to list its Asian business may have blocked off a source of capital that could have been used to fund acquisitions, at least for the time being.
• ASDA, Sainsbury, BurgerKing, Starbucks, Gregg’s & others are to hold talks with environment secretary Michael Gove this week in order to discuss recycling initiatives and Mr Gove’s proposals for a wide-ranging deposit return scheme.
• Young & Co has appointed Simon Dodd as a Director in the newly created role of Chief Operating Officer. CEO Patrick Dardis says ‘I am delighted that we have been able to attract someone of Simon’s calibre and experience to take on this new role. I am confident that the extensive experience, knowledge and relevant skills that Simon has built up over his career will make a significant and positive difference to Young’s.’
• Fleurets’ Q2 review of the UK Leisure Sector reports that a number of UK pub companies have reported an increase in like-for-like sales in the quarter. Wadworth increased managed like-for-like sales by 2.3% and Thwaites achieved 4%.
• Fleurets highlights Loungers, which has reported ‘a 6.9% like-for-like sales increase with total revenue of £150m, and finally Ei Group reported a tenanted like-for-like 1.9% increase in income.’
• Capital transactions have been ticking along whilst a number of operators, including Jamie’s Italian, have either undergone CVAs or called in administrators as a prelude to winding up the company in question.
• Fleuets suggests that uncertainty is likely to continue as ‘in the next quarter, the Prime Minster will have stepped down’ and the deal to be done with the EU is unclear.
• CGA reports that ‘gin sales have rocketed 56% by value in a year’ and ‘the number of people drinking pink gin has more than doubled.’ It says on-trade gin sales reached £1.4bn in the year to mid-May 2019, and that 8.9 million people now drink gin out-of-home—up by 2.3 million in just 12 months.
• CGA says its research suggests ‘there is no end in sight to the remarkable revival of gin sales. From value brands to artisan distilleries the category is booming, to the point where consumers now drink gin out-of-home more often than vodka.’
• CGA adds ‘pink gin has been an extraordinary success story for the on-trade. It is clearly tempting a lot of drinkers away from other spirits and cocktails, and with new pink gin producers now piling into the market.’
• Oversupply could ultimately become a feature, particularly if the growth curve begins to flatten.
• McDonald’s has announced plans to reduce the number of hard plastic toys found in Happy Meals in the United Kingdom. Its latest promotion is tied to Disney’s much-anticipated remake of ‘The Lion King.’ The plastic toys, which will be available elsewhere in the world, won’t be found in the United Kingdom.
• Novus has sold Balls Brothers sites and the brand rights to use the name to Mosaic Pub and Dining reports Propel. It says ‘the deal takes Mosaic Pub and Dining’s portfolio to 28 sites.’
• Premier Foods yesterday reported on trading for calendar Q2 suggesting that the cooler weather (vs the beginning of the heatwave last year) helped Bisto, Oxo and food sauce sales. Mr Kipling also had a good year.
• SDM Legal will be representing around 70 former Jamie Oliver restaurant staff in an employment tribunal over the nature of their redundancies. SDM Legal will argue that the employees are each entitled to a protective award of up to 90 days gross pay because a 30-day consultation period was not carried out prior to their redundancy.
• Per Big Hospitality, The Halal Guys’ first UK site has been delisted from UberEats because it has yet to receive a food hygiene rating from Westminster Council, hitting sales by 20%.
• Millennials could face an ‘inevitable catastrophe’ of homelessness when they retire, according to the first government inquiry into the effects of failing to get on the housing ladder. This could lead to the savings ratio rising.
• The Telegraph reports the immigration system will need to be overhauled after Brexit to avoid a serious shortage of workers, especially in the F&B industry. A coalition of businesses said ‘The proposed future immigration system risks exacerbating the UK’s already chronic skills and labour shortages and could cripple a number of businesses across sectors’.
• A Lastminute.com survey ranks Italy as the best country in the world for wine lovers, beating out France and Spain.
• According to The Roasters Report UK 2019, 65% of coffee roasters regard current trading conditions as positive with 50% planning operational expansion.
• Carrefour partners with Glovo in four countries to allow urban consumers to benefit from a 30-minute delivery service, seven days a week. Spanish start-up Glovo was founded in 2015 and is one of the world’s fastest growing on-demand delivery services.
HOLIDAYS & LEISURE TRAVEL:
• Activist fund manager Elliott has taken a 5 per cent stake in Saga, the travel and financial services company that has seen its shares fall from a peak of around 225p to less than 50p. Saga says ‘we have good and open relations with all of our shareholders and expect to be in contact with Elliott shortly.’ Observers speculate that Elliott could propose a split of the company’s tour operating and financial services businesses.
• Per BBC, tourists can expect to receive around €0.98/£ when buying currency at airports this summer due to the uncertainty of a no deal Brexit. However, better rates can be found by buying in advance, with the Post Office offering €1.0819.
• EasyJet expects to fly more than 312,000 passengers, travelling on 1,970 flights across its network, this Friday as the school holidays start.
• Ryanair’s British pilot union is to ballot members on a possible strike in a dispute over working conditions.
• Booking.com has produced research into the travelling habits and plans of Generation Z saying that the group (now between 16 and 24) were not beginning to consider independent travel. It says 39% planned to ‘have visited at least three different continents over the next 10 years’ with 30% planning to study abroad. Overall, Booking.com says its ‘assessment is that Gen Z isn’t that much different from other generations; it is simply a life phase.’
• Per Travel Weekly, travel trade leaders claim Fosun’s proposed takeover of Thomas Cook is ‘good for the industry’. Julia Lo Bue-Said, Advantage Travel Partnership chief executive, said ‘I’m pleased. Thomas Cook is a key partner and key industry player. It’s good for the industry and consumers.’
• SeaWorld said it was ‘disappointing to see Virgin Holidays succumb to pressure from animal activists’ following the company’s announcement that it had stopped selling tickets to the US theme park chain’s captive whale and dolphin experiences.
• Indian firm Oyo’s expansion continues with hotels now in more than 80 countries, entering the co-living spaces segment and is now targeting co-working spaces. Rohit Kapoor, CEO of New Real Estate Businesses, said Oyo plans to have 50 Oyo Workspaces centres by the end of the year and aims to make it the largest co-working business in Asia by the end of next year.
• GVC has announced that it is to sell its 50% interest in Sportium Apuestas Deportivas S.A. to joint venture partner Cirsa S.A. ‘for a consideration of €70m payable in cash plus repayment of loans and distribution of excess cash. The deal is conditional on regulatory approval.’ CEO Kenneth Alexander says ‘GVC is one of the leading online gaming operators in Spain with bwin and the disposal of our interest in Sportium enables us to simplify our business in this market. We have enjoyed a good working relationship with Cirsa and are pleased to be able to support them through a new B2B partnership.’
• GVC Holdings reported a fall in H1 LFL retail net gaming revenue of 10% on Tuesday, blaming a recently-introduced £2 limit on fixed-odds betting terminals (FOBT). However, online net gaming revenue increased by 17% despite tough World Cup comps from last year.
• FOBTs generated £1.7bn for the gambling industry in 2018 and the cut in stakes will sharply reduce revenue.
• Netflix has reported that it added fewer paid subscribers than expected in Q2 and its shares fell by 10% on the news. The company added 2.7 million new customers worldwide in the April-June period, well below expectations. The company said ‘our missed forecast was across all regions, but slightly more so in regions with price increases.’
• Instagram is to remove the number of likes on posts in some countries in order to ‘remove pressure’ on users.
FINANCE & ECONOMICS:
• The ONS reports that CPI in the UK held steady at 2% in June. Average wages are rising at 3.6% suggesting that real wages are continuing to grow.
• The NIESR reports that underlying inflation edged higher (from 0.8% to 1.0%). The NIESR says ‘our analysis of more than 130,000 goods and services included in the basket, suggests that scheduled sales in the month of June offset some of the price increases seen during the month. Our measure of underlying inflation, which excludes extreme price movements, picked up by 0.2 percentage points at the national level. Underlying inflation also increased in every region of the United Kingdom, rising most in the London, the North and North West.’
• The ONS has reported that house prices in London are falling at their fastest rate in a decade to stand some 4.4% lower than they were a year earlier.
• The IMF has suggested that the US dollar is overvalued by 6% to 12%, while the euro, the Japanese yen and China’s yuan are roughly in line with fundamentals.
• Sterling up vs dollar at $1.2437 but down vs Euro at €1.1065. Oil down at $63.76. UK 10yr gilt yield down 6bps at 0.75%. World markets lower yesterday with Far East down in Thursday trade.
• Brexit & politics:
o Theresa May has warned that anger, entrenched views, a lack of compromise and strong views are an impediment to progress in politics.
o Boris Johnson has broken records in the UK for the amount of money he has raised to press his campaign to become UK Prime Minister next week.
o Jeremy Hunt has warned that Boris Johnson could botch Brexit and cause a General Election before the end of October.
o BBC (Boris, Brexit then Corbyn) looking entirely possible.
o Cross-channel ferry operators have warned that British ports could grind to a halt as they confirmed they would not allow trucks to board ferries bound for France after a no-deal Brexit, unless they have the right paperwork.
o The FT points out that current chancellor Philip Hammond may have to take a leading role in attempting to prevent a no-deal Brexit.
START THE DAY WITH A SONG:
Yesterday’s song was Hold On I’m Comin’ by Sam & Dave. Today, who sang:
Dream, dream again in your way,
Always knew that you would
Loose yourself to the scene
Am I only a dream.
RETAIL WITH NICK BUBB:
• ASOS: The ASOS Q1 update wasn’t due until next Tuesday, but bad news comes early….because the company has brought the announcement forward as it contains a profit warning! Sales growth in the four months to 30th June was only 11% (at constant FX)…Sales in the UK and Rest of the World remained “robust” at 16%, but in Europe (+3%) and the US (+6%) sales were held back by “operational issues associated with our transformational warehouse programmes”. With warehouse problems continuing, management now expect full year PBT to be only £30m-35m after exceptional costs of c£50m and they will be under pressure on the analysts conference call at 9.30am…
• Planet ONS Watch: In the real world, as per the overall BRC figures for June (the 5 weeks to June 29th), Retail Sales were disappointing again last month, given the cooler weather compared to last year’s heatwave and World Cup, but we will find out at 9.30am what “seasonally adjusted” life was like on the High Street on that bizarre parallel world, the Planet ONS(aka the Office of National Statistics), via their official Retail Sales figures…Now, City economists (who still seem, unaccountably, treat the dubious-looking ONS figures as the gospel truth) generally expect a fall of 0.3% in month-on-month seasonally adjusted sales volumes, although Capital Economics have pencilled in a 1.0% fall in June (to give year-on-year volume growth of just 1.8%), for what it’s worth. We will be focusing, as usual, on the year-on-year, non-seasonally adjusted sales value figures and the key split
• News Flow This Week: Tomorrow brings the British Land AGM trading update (on the impact of CVA’s on its Retail portfolio).