Langton Capital – 2019-08-14 – PREMIUM – Adnams, Gfinity, travel hubs, tour operators etc.:
Adnams, Gfinity, travel hubs, tour operators etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Given that you have to find the hire-car return, get to the right desk, queue to check in, queue again for security and then live with the fact that your airline will want you to stand in line at the gate for another 20 minutes just so they can push back on time and, with their wheels still firmly on the ground, hit their ‘take-off’ time, why do burger operators in airports think that it’s a good idea to work at a slower pace than they would on the High Street?
Because time really is of the essence yet the same grab-n-go outlets that would fling your food at you the moment they’ve relieved you of your cash on the High Street, seem to operate at half speed in airports and even tell you, when you order a burger in a burger restaurant, that’ll be ten minutes, sir.
Yes, they’re not likely to lose your custom in the short term and your sweaty palms don’t worry them in the least but, note to self, take sandwiches and croissants to airport next time, borrow the food outlet’s chairs. On to the news:
PRIVATE COMPANY RESULTS: Byron Hamburgers Limited reported FY numbers to 24 June 2018 to Companies House last month. They were 3mths late. 14 Aug 2018:
Other results to be covered include Bourne Leisure, St Austell Brewery, Daniel Thwaites, JW Lees and Dishoom.
• Whether Byron is the poster boy for ambitious overexpansion or simply one of several is a moot point. What is not in doubt is that the company has not delivered profits in terms of its financial results.
• Many companies are both a part of the problem and subsequently victims thereof. Sorting out the he-said, she-said may ultimately not be possible. Most companies have expanded in recent years and virtually all companies have felt the impact of overcapacity.
• Given back to back multi-million-pound losses and a 2018 CVA, Byron might have been stretching credibility somewhat had it put too rosy a gloss on these overdue numbers.
• Those expecting a litany of woe will not have been disappointed. The question, perhaps, was whether the sandwich would have anything in it other than the filling.
• Byron says ‘the period ended 24 June 2018 was a pivotal year for the Company.’
• It says it undertook a review of its operations to consider ‘its options for underperforming restaurants and sourcing new investment for the business.’
• Offers were received for the business, but they were conditional upon a CVA. A CVA was organised & approved and the group shut 19 restaurants and cut the rent on some others. Byron was left with 53 stores.
Oversupply. It’s always somebody else…
• Growth is (reportedly) still on the menu as Byron says it ‘continues to focus on the development and expansion of the Byron brand.’ Just how jilted landlords will feel towards the company remains to be seen.
• Byron says it ‘has continued to face significant external cost pressures during 2018 which have impacted profitability’ and adds ‘the casual dining market is challenging for all operators, with a 27% increase in the number of branded restaurants over the past five years.’
• The company says overcapacity ‘has inevitably resulted in lower like-for-like sales across the market.’
• Healthy trends do not favour hamburgers. The market is evolving & Byron says this creates ‘challenges for long established multi-site operators.’ Signing 15yr or 25yr upward only leases without breaks in this kind of environment may not have been desirable.
Refinancing, management & outlook:
• The group undertook a debt for equity swap. In addition, it sourced new funds. Existing shareholders were diluted.
• The group changed its CEO after the end of the period under review.
• Back to the mission as Byron says without irony that it is ‘turning its attention to achieving operational excellence, evolving the Byron brand and continuing its journey to turn the UK into a nation of “proper hamburger” lovers by innovating in its current restaurants as well as opening further restaurants across the UK .’
The numbers & formal statement:
• LfL sales for this rather dated set of numbers fell by 4.7% and revenue fell by 5.9% on the back of closed units.
• In its comments on Going Concern, Byron says ‘the current economic conditions continue to create uncertainty over (a) the level of demand for the Company’s products; and (b) the availability of bank finance for the foreseeable future.’
• It says it ‘has a reasonable expectation that the Company has adequate resources to continue in operational existence’. It adds that its shareholders may be prepared to support it further.
• Auditor PwC hedges its bets saying ‘because not all future events or conditions can be predicted [its assumption] is not a guarantee as to the company’s ability to continue as a going concern.’
• Byron lost £47.2m during the year. It lost £54.7m in the prior 12mths. Another year has passed since the £47.2m loss was generated.
• Byron has generated losses of £88.7m since incorporation. It has negative shareholders’ funds of £39.0m after a capital injection (debt for equity) of £49.7m during the year.
GENERAL NEWS – PUBS & RESTAURANTS:
• Suffolk brewer & pub company Adnam’s has reported H1 numbers to end-June saying that revenue slipped by 2.3% to £34.7m leading to a loss on ordinary activities before tax of £1.2m (2018: loss £0.8m).
• Adnams says ‘the last few years have seen substantial change and considerable investment in the Adnams business as we have positioned ourselves in crowded and rapidly changing markets.’ It says ‘we needed to increase costs to deal with the business change.’
• Adnams has new systems in place and the introduction ‘has unarguably been a major distraction during the past half year.’ An unchanged interim dividend of 78p per “B” share and 19.5p per “A” share is being proposed.
• Adnams beer volumes rose 2% against a market decline of 1%. Gin volumes were down – oversupply may become a problem here. Adnams says ‘demand has continued to grow, but it has been spread over an ever greater range of products and producers and supermarkets are stocking fewer traditional gins.’
• Regarding the outlook, Adnams says it is ‘focussing on being flexible and agile to cope with the changes that will come.’ The company adds ‘looking ahead, we have properties and products that are truly premium and award winning, a talented, loyal and determined workforce and a strong reputation for innovation and sustainability.’
• In common with many other companies, the picture here is arguably of a solid company buffeted by changes beyond its control. The ownership of good properties and the manufacture of products for which there is a genuine demand remains key. As for everything else that is going on out there, well, we may have to wait and see.
• NPD has reported that the value of the travel hub foodservice market rose by 11% in the last year to £2.75bn. Visits rose by 7% to 619m suggesting that spend per head rose by around 3.5% or so.
• NPD says that airports have registered the fastest growth over the last 3yrs (up 31%), followed by motorway service stations (up 16%).
• NPD predicts that the travel hub market could grow by as much as 25% to £3.44bn by 2022. Rail passenger journeys continue to grow and airport departures continue to hit new highs. There are around 11,000 travel hubs in the UK.
• NPD says ‘these travel hubs are doing well not just because more people are travelling but also because the quality of food and beverages, as well as the experience, has improved.’ It adds ‘travelling consumers are these days getting much more than they have ever done before in terms of service, variety and quality.’
• The compulsory strike-off process, which had been initiated by Companies House against Casual Dining Group, has been suspended. The group should have submitted results for the year to 31 May 2018 to Companies House by 28 February, but it has not yet done so.
• Companies House had advertised that it was proposing to strike off CDG on 30 April 2019. The group last reported numbers (for the year to 28 May 2017) on 9 April last year. In its May 2017 accounts, CDG announced that it had lost £78.6m after exceptional costs and before a tax credit in the year under review. At the time, the group had lost an accumulated £96.8m since incorporation and had negative net worth of £96.2m.
• Subsequent to its 2017 year end, CDG’s parent made loans to the company and Casual Dining Bidco refinanced its £160m of senior debt and £25m revolving credit facility with its existing lenders.
• The Stonegate Pub Company has decreased its chef turnover by 32% following the introduction of its back-of-house apprenticeship programme, the MCA has reported. Stonegate apprenticeship manager Jemelle Bish commented: ‘In 2017, when the government levy went live, our apprenticeship provisions were already bedded into the company. However, we used the levy as an opportunity to fine-tune our strategy and used the government changes to create corporate standards’.
• Bacardi is to launch an ‘all-natural’ Martini 0.0% Dolce, as the group looks to profit from the growing number of teetotalers.
• HelloFresh has reported Q2 revenue up 37% to EUR 437m with an AEBITDA margin of 4.2%. The group commented: ‘HelloFresh SE, the leading global meal kit company, is making great progress on its mission to change the way people eat around the world. On track to deliver more than 250 million meals in 2019’.
• The bar and restaurant group The Alchemist has seen its revenue increase 19% to £41m in the 12 months ended 31 March. The group reported its pre-tax losses declining by 31% to £205,372.
• UKHospitality has welcomed the decision from the Financial Conduct Authority to introduce a phased roll-out of Strong Customer Authentication. Chief Executive of the organisation, Kate Nicholls said: ‘The decision to implement a phased roll-out of strong customer authentication is extremely helpful for the sector. UKHospitality, along with its members, has been pushing for more time before the enforcement of the new measures and it is good to see the FCA recognise and support the collaborative industry response’.
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook shares fell by around 14% to 6.75p on confirmation that the group would like to raise £900m in new capital rather than the £750m earlier suggested. Any debt for equity swap will see equity-holders significantly diluted. Thomas Cook has said that shareholders ‘may be given the opportunity to participate in the recapitalisation on terms to be agreed between, among others, the company, Fosun, and the converting financial creditors’.
• Shares in TUI Travel closed little-changed yesterday after the group put a number on the hit caused by the grounding of its Boeing 737 MAX planes alongside shifts in demand and later booking patterns, partly as a result of Brexit uncertainty.
• STR has reported a 52.4% increase in the number of rooms in the final phase of development in the European hotel industry, with 192,352 rooms in construction as of July 2019.
• STR has found that 205,992 rooms were in the final construction phase of development in the US as of July 2019, representing an 8.3% increase year-on-year.
• US TV co CBS and Viacom are reported to have reached a deal to merge, some 13yrs after the two companies parted company when they were both a part of mogul Sumner Redstone’s media empire. The new company will be called ViacomCBS Inc with CBS shareholders taking 61% and CBS shareholders 39% of the merged entity. Shari Redstone, daughter of the group’s founder said ‘my father once said ‘content is king,’ and never has that been more true than today.’
• E-sports company Gfinity has announced that it is to close its JV in Australia. Gfinity Esports Australia, which was launched in 2017, will close in November this year. Revenue performance is reported as ‘solid’ but Gfinity says ‘the business has not reached the required level of profitability and further significant additional capital investment is required to make Gfinity Esports Australia commercially viable.’
• Gfinity says it has ‘taken the decision to prioritise resources and allocate capital to other key business areas and markets where there are clear and significant growth opportunities.’ The Company will continue to expand into the US market.
FINANCE & ECONOMICS:
• The ONS has reported that wages grew by 3.9% in the year to June, an 11yr high. In real terms, wages have yet to exceed their 2008 peak.
• Unemployment rose slightly in June though employment levels remained stable at 76.1%, still the highest rate since records began in 1971.
• New chancellor Sajid Javid said ‘today’s figures are another sign that despite the challenges across the global economy, the fundamentals of the British economy are strong as we prepare to leave the EU.’
• The NIESR reports real wages are now growing at their fastest rate since May 2016. It says ‘this is likely to put upward pressure on consumer prices in the months ahead.’ The NIESR adds ‘while real earnings growth has now returned to pre-referendum rates, the labour market appears to be reaching a turning point, with unemployment no longer falling, the number of job vacancies no longer increasing and companies and workers deterred from bigger employment decisions by Brexit and global uncertainties.’
• Sterling little changed at $1.2056 and €1.079. Oil up a couple of dollars at $60.66. UK 10yr gilt yield up 1bp at 0.49%. World markets all higher yesterday with Far East up in Wednesday trade.
o A senior Trump official is reported by Reuters as saying that the Trump administration is working on a US-UK trade deal that could take effect as soon as 1 November.
o Reuters highlights differing agricultural standards in the UK (and the whole of the EU) and the US and reports ‘many diplomats expect London to become increasingly reliant on the United States.
o Former Chancellor Philip Hammond has said that new PM Boris Johnson is making demands re the Irish backstop that the EU could never accept in order to to wreck the chance of a new Brexit deal. PM Johnson has moved from demanding changes to the backstop to demanding its removal altogether.
o Hammond warns against the break up of the UK leaving a ‘diminished and inward-looking little England’.
o Commons speaker John Bercow has said he will fight ‘with every bone in my body’ any move by Boris Johnson to shut parliament to force through a no-deal Brexit.
START THE DAY WITH A SONG:
Yesterday’s song was Lovely Day by Bill Withers. today who sang:
He’s made of bones, he’s made of blood,
He’s made of flesh, he’s made of love
He’s made of you, he’s made of me
RETAIL WITH NICK BUBB:
Lookers: The interims today (for the 6 months to end June) from the struggling Motor dealer, the Manchester-based Lookers, are weak, as expected, with underlying PBT of £29m down by 28%, despite a 2.7% increase in revenue. But the dividend is maintained and the company highlights its strong 80p a share asset backing. And although the outlook remains uncertain, not least as the FCA investigation into its selling processes hasn’t even got under way yet, the management strike a defiant note, flagging that their full year profit expectations are unchanged, which should reassure the market ahead of the 9.30am analysts meeting.
Waitrose Watch: The heatwave broke last week a year ago, so the comps on picnic and barbecue sales a year ago were a bit tougher and yesterday morning’s JLP weekly overview, for w/e Aug 10th revealed that Waitrose saw yet another dip in gross ex-petrol sales last week, of 1.7%, to continue the weak start to Q3/H2…A year ago LFL sales were c2% up last week. That left the last 28 weeks down by 0.7% gross cumulatively, albeit store space must be fractionally down (after the sale of five Waitrose stores in June).
John Lewis Trading Watch: The comps were still soft for John Lewis last week (c4% down LFL a year ago, despite the end of the heatwave), but gross sales were only 0.4% up. In terms of sales mix, Fashion/Beauty sales were down by 1.2% in w/e Aug 10th and Home sales were down by 2.7% gross but Electricals were up by 4.7% gross. There are no new stores in the figures, but overall John Lewis LFL sales, however, are still down over the last 28 weeks (down 1.3% gross).
Watches of Switzerland: The recently floated Watches of Switzerland group brought forward its Q1 trading statement (for the three months to 28 July) and yesterday’s announcement was headlined “Continued strong momentum with standout luxury watch sales growth”. Trading has been skewed towards luxury watches (as opposed to luxury jewellery), but that is the core business and the strong LFL sales growth of 10.8% is well spread, with the UK (excluding Online) +11.5% , the US +8.7% and Online (UK) +14.5%. And despite the wider macro-economic uncertainty in the UK and US, the Board is “confident that the group remains well-positioned to deliver on its strategic aims and meet the Board’s expectations for FY20”.