Langton Capital – 2019-09-03 – Restaurant Group H1, overcapacity, discounting etc.:
Restaurant Group H1, overcapacity, discounting etc.:
A DAY IN THE LIFE:
Langton is in London this week, it really is.
But some weeks it is up north and, with the dog barking occasionally in the background, that sometimes makes itself obvious.
Not that that’s much of a problem but, at this time of year, there are also massive cooking apples dropping onto the home-office roof at the slightest sign of a breeze.
Indeed they can fall with no sign of any wind at all and, as they must weigh the best part of half a kilo each, they make quite a racket. They certainly make me jump and presumably leave whomever I’m on the phone with the impression that the bailiffs are thumping on the door of London’s central London megaplex HQ.
And then, if we can get past the initial shock without a ‘what on earth was that?’, the magpies and squirrels descend on said apples and set about fighting over them noisily for hours and hours and hours.
So long, in fact, that even the most slothful amongst us is obliged to go up onto the balcony and thrown a bunch of mangled fruit onto the grass where the aforementioned wildlife has to at least contend with the local foxes and our dog if it wants to continue its feast.
Anyway, big demo in SW1A today. On to the news:
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RESTAURANT GROUP FULL YEAR NUMBERS: More write-downs. Leisure still struggling. Wagamama good & integration on track. Numbers ‘broadly’ in line. No details on IFRS16. 3 Sept 2019:
The Restaurant Group has this morning released H1 numbers for the 6mth period to 30 June and our comments thereon are set out below:
• Restaurant Group reports total sales, including Wagamama, up 58.2% at £515.9m
• LfL sales, helped by Wagamama, were up 4.0%
• Adjusted PBT is £28.1m vs £20.7m last year.
• Exceptional charges total some £115.7m ‘predominantly relating to a £100.2m impairment charge and a £10.7m onerous lease provision in our Leisure business.’
• This comes on top of provisions in earlier years.
• The group therefore reports a statutory loss before tax of £87.7m (2018 Statutory profit: £12.2m)
• Adjusted EBITDA is £61.4m (20183: £38.4m) with EPS, not accounting for the write-downs, of 4.5p vs 5.9p last year
• The statutory loss per share is 16.1p and the H1 dividend is 2.1p per share ‘in line with policy’. See Premium Email.
GENERAL NEWS – PUBS & RESTAURANTS:
• Top ten shareholder Eminence Capital, which owns 4% of Just Eat, has said that it will vote against the group’s planned merger with Takeaway.com. The merger, which is meant to be one ‘of equals’, is intended to create a European competitor to Uber and Deliveroo.
• Discounts ongoing with 30% off food at Bella Italia, Café Rouge and Pizza Express. Kids eat for a quid at Toby Carvery.
• The BRC reports that retail sales were disappointing in August, coming in at the same level as those a year ago. KPMG says ‘August proved to be yet another incredibly disappointing month for retail. It’s clear that for much of the retail market, efforts are being focused on preservation, not growth, in this adverse and uncertain climate.’
• Barclaycard reports that consumer spending rose by 1.3% in August ‘as economic uncertainty continues.’
• Barclaycard reports ‘spending remained subdued across the board, with the exception of pubs and restaurants as Brits made the most of the long summer days.’ The nation’s pubs & restaurants are benefiting from the move to plastic from cash. The total spend is less clear.
• Barclaycard reports ‘discount stores rose 8.0 per cent as shoppers looked to make their money go further, with over half worrying about the impact of rising prices.’ It says that ‘almost one in five Brits are stockpiling everyday items in case of future shortages – rising to a quarter of 18-34 year olds.’
• Barclaycard points out that the 1.3% rise is a ‘decline in real terms when accounting for inflation.’ It says ‘travel increased by a modest 0.6 per cent, with travel agents up 1.0 per cent, whereas airlines and hotels contracted by 0.4 per cent and 0.2 per cent respectively.’
• Barclaycard says ‘August’s figures signal the end of a fairly subdued summer for consumer spending – showing a marked contrast to the previous August. A weak pound and worries about rising prices are causing concern for many, with Brits looking to better balance their household budgets. That said, spending at pubs and restaurants remains robust, suggesting Brits have been making the most of the longer days by relaxing and dining out.’
• Former PM Gordon Brown has warned that a no-deal Brexit could be a catastrophe for the food industry as it would lead to rising prices, a weak pound and disrupted supplies. Brown said ‘uncertainty, restricted supplies and a weakened pound could raise prices. This would be a catastrophe for the food industry but also for family budgets, hospitals and those driven to food banks due to the decimation of our social security system over the last decade.’
• JDW chairman Tim Martin has consistently said that food prices would fall. On Sunday, Michael Gove said that some prices would rise, some fall. He said there would be no shortages. The BRC says that is not true.
• CGA’s Global Origins Wine Insight reports that the value of wine sales in the UK has remained stable year over year with the value of champagne sales down by 2.4% and volumes down by 7.4%.
• Old world markets supplied 63.4% of the wine consumed in the UK last year reports CGA. France and Italy are the two largest supplier markets. CGA says ‘for the majority of wine drinkers, the Old World still very much rules the New, and the continued popularity of Prosecco makes Italy the global leader in overall sales terms.’
• CGA adds ‘the value end of the wine market is still hugely important, with one in four drinkers typically opting for the cheapest or second cheapest option on the list. But as consumers extend their knowledge of wine we see that more and more of them are willing to pay extra for it—so long as the quality is right.’
• Fuller’s has reported that a number of its managed pubs will offer a talking menu for visually impaired, blind or dyslexic diners. The system, Good Food Talks, ‘provides accessible menus, both online and in its app, using text-to-speech software.’
• The first bottles of rosé Prosecco are to go on sale in UK supermarkets on 1 January next year. Drinks Business reports Paolo Lasagni, managing director of Bosco Viticultori, as saying ‘we will be making pink Prosecco from the 2019 harvest, which will be bottled in December and on UK shelves on 1 January 2020. There is a temptation to try and get the wines ready in time for Christmas, but it’s better to take your time and make a quality product than rush it to market.’
• EI Group’s Bermondsey Pubs is working with Stint, an ‘innovative platform providing on-demand access to student labour’, across a number of its London-centric pubs.
• Rhubarb site Vivi, which has been the flagship restaurant in London’s Centre Point development, has closed after only six months of trading. Rhubarb says ‘we are incredibly proud of the beautiful restaurant we created at Centre Point and have had great feedback from our guests.’ It goes on to say that ‘due to factors beyond our control such as the on-going building works, incomplete public plaza, lack of footfall and the Crossrail delay, the business has not been able to get to the desired position in our agreed timescales.’
• Rhubarb says ‘to continue operating is not sustainable and we have had to take, after much consideration, the difficult, but commercial decision to close.’
• Snacking could prove to be a sustainable source of revenue for the on-trade. NPD reports that out-of-home snacking has risen by 11% in the past year, of which, pubs saw the strongest growth with snacking spend up by 28%. That seems like rather a high number.
• Star Pubs & Bars is to launch a series of free chef training courses at regional cookery schools around the country to help its licensees to recruit and retain kitchen staff.
• Drinks brand Distil Plc has announced a collaboration with London-based soft drinks specialist Franklin & Sons. The latter was founded by the Franklin Brothers in London in 1886.
• TPG is reported to be in talks to buy Coffee Day Global Ltd, owner of chain Cafe Coffee Day. The latter has a chain of around 1,750 coffee stores across India along with 600 Express kiosks and 60,000 vending machines in workplaces and hotels across the country.
HOLIDAYS & LEISURE TRAVEL:
• Barclaycard reports that spending across hotels fell in August vs the same month last year. See Barclaycard comments above.
• The Bahamas has been battered by Hurricane Dorian with winds of up to 180mph reported.
• HVS reports that hotels in Paris have seen a recovery in Q2 2019 ‘following a rocky start to the year’.
• HVS says that REVPAR rose 10.6% last year but ‘visitor numbers took a knock at the end of the year and the start of 2019 with the unrest caused by the ‘gilets jaunes’ movement.’
• Whilst there are no numbers given, HVS says ‘Paris has an exceptionally well-balanced mix of business and leisure demand which, alongside London, had made it one of the most desirable destinations for hotel investment for over a decade.’ It adds ‘the general resilience and strong fundamentals of the Paris market indicate that a continued improvement in performance can be expected for the rest of 2019, September and October being generally stronger months for the city.’
• Deliveroo is to become an official partner of the England football teams and the Emirates FA Cup. The FA says ‘our partnership will see Deliveroo become England’s first sleeve sponsor. The food delivery company’s logo will be worn on the training kit of all senior men’s and women’s sides, starting with Gareth Southgate’s squad for the forthcoming UEFA EURO 2020 qualifiers against Bulgaria and Kosovo.’
• Will Shu says ‘we couldn’t be more excited to support the England teams. Both the men’s and women’s teams are doing incredible things and we’re proud to be playing a part in their success.’
• Disney has sold 80% of its regional sports company Yes Network to a Blackstone-backed investor group In a deal valued at $3.47bn.
• The French government is pushing ahead with the IPO of the national lottery provider Française des Jeux. The sale will take place in November.
FINANCE & ECONOMICS:
• Markit reports that UK manufacturing is shrinking at its fastest pace in 7yrs. The index fell to 47.4 in August from 48.0 in July. Any number below 50.0 implies contraction. New orders also fell at their fastest rate in 7yrs. The construction PMI is due out at 9.30 today with the much larger services PMI due out tomorrow.
• Markit says ‘high levels of economic and political uncertainty alongside ongoing global trade tensions stifled the performance of UK manufacturers in August.’ It says ‘the global economic slowdown was the main factor weighing on new work received from Europe, the USA and Asia. There was also a further impact from some EU-based clients routing supply chains away from the UK due to Brexit.’
• Sterling lower on general election talk at $1.2034 and €1.1001. Oil lower at $58.63. UK 10yr gilt yield down 5bps at 0.43%. World markets mixed.
• Brexit, politics etc.:
o Parliament back today at 2.30pm. Rebels are set to attempt to force debate on banning a no-deal Brexit tomorrow and Thursday. Boris Johnson said to be considering deselecting any Tory MPs rebelling despite widespread rebellions under Theresa May going unpunished.
o Suggested that the PM could simply ignore legislation passed this week. Mr Johnson has threatened a General Election on 14 October if he does not get his way.
o Dominic Cummings’ influence? Sajid Javid said to be ‘livid’ but staying in his job for the time being. Mr Javid, who has been trumped when it has come to the announcement of spending decisions and has seen one of his aids sacked by Mr Cummings, took a 90% plus pay cut to enter politics.
o UK house prices could fall by 6.2% next year in the event of a no-deal Brexit says KPMG.
o Michael Gove is reported to have pulled plans to publish a ‘watered down’ version of the government’s Operation Yellowhammer no-deal Brexit contingency plans, after it was decided that the findings would still alarm the public. The FT quotes an insider as saying ‘the meeting didn’t go well. The whole thing was seen as far too pessimistic about no deal.’
START THE DAY WITH A SONG:
• The song is taking a short break due to exam commitments.
RETAIL WITH NICK BUBB:
• BRC Retail Sales for August (the 4 weeks to Aug 24Th): We flagged yesterday that the latest BRC Retail Sales survey (which is still the most reliable guide to monthly High Street trends) was likely to see another flattish LFL sales outcome and the August outcome was indeed a slightly disappointing -0.5% LFL, despite a sluggish comp. The exact Food/Non-Food LFL sales split for August is, as usual, buried in the 3-month moving averages of -0.3% and -1.2% respectively, but it looks like Food recovered to be about 0.5% up LFL and that means that Non-Food must have been down about 1.5% LFL last month (the late heatwave released some pent up demand in Clothing and Footwear, but trading in Furniture and Homewares wasn’t easy). The separate Online Non-Food sales survey doesn’t, alas, include the likes of Amazon and so it must surely understate overall industry Online sales growth, but,
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda win for the eighth week in a row, although the margin of victory was much narrower. The overall Asda basket cost just £56.84, only £1.05 cheaper than second placed Sainsbury. Morrisons was on £59.61, Tesco was on £60.60 and Waitrose was way off the pace, as usual, on £70.29. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Sainsbury again, as its c42,000 sq ft superstore in Dulwich came top, with an excellent 94 points out of 100.
• Today’s Press and News: The front page headlines are dominated by the drama in Westminster ahead of today’s key no-deal Brexit vote, with talk of an Election on Oct 14th rife, eg the FT runs with “Johnson threatens snap election if Tory rebels refuse to back him”. In terms of Retail news, the main focus is on the Debenhams High Court legal challenge to the CVA, with the FT highlighting that Debenhams are arguing that Sports Direct (which is funding the CVA challenge) wants to put Debs “out of business” to help HoF. And today Tesco Bank has announced the sale of its mortgage portfolio to Lloyds Bank/Halifax for the princely sum of £3.8bn.
• News Flow This Week: The House of Commons returns today and events will be dominated by the efforts of the Opposition to stop or delay the Government’s no-deal Brexit plans, which may force the embattled PM to try to call an Election on the back of the Chancellor’s Spending Review tomorrow…Fortunately, there is plenty going on in Retailing to divert us from this drama, with tomorrow bringing us the Halfords trading update, the Dunelm finals, the QUIZ AGM and, in the evening, the FTSE index quarterly review. On Thursday we get the Dixons Carphone Q1/AGM and the Carpetright AGM, whilst the Naked Wines EGM to approve the sale of Majestic Wine Retail is on Friday.