Langton Capital – 2019-12-05 – PREMIUM – Late night market, Time Out, discounts, holiday capacity etc.:
Late night market, Time Out, discounts, holiday capacity etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Our daughter seems to have decent insight as, when she caught me loitering around the ales in the supermarket the other day, she said that beer is Toys R Us for dads and couldn’t I look at something more important.
Well, firstly, she’s only thirteen and I didn’t know she could remember Toys R Us and secondly, whilst she was spot on with the toyshop reference, she was way wrong when it came to saying there were things – in a supermarket of all places – that were more important than beer.
Fortunately for the rest of the family I only had a basket and 500ml bottles of ale are quite heavy. They’ll regret it if I ever get the hang of this online ordering malarkey. Anyway, enough of that. On to the news:
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PRIVATE COMPANY RESULTS – NIGHTCLUB OPERATOR DELTIC. Deltic reports full year numbers to 23 Feb to Companies’ House. It’s tough out there. 5 Dec 2019:
• Deltic reports headline revenues down by 4.4% at £101.8m. Admission numbers fell from 7.5m to 6.9m. The group disposed of a number of venues during the year
• Gross profit is down to £80.1m from £83.6m implying that the gross margin rose from 78.5% to 78.7%.
• The loss before tax (after write-offs, see below) was £16.5m compared with a profit before tax of £3.2m last year.
• Deltic has written off £6.56m of tangible assets and £0.12m of intangibles. It has also made a provision against onerous leases of £10.5m and says that £0.5m of launch costs are not ongoing
• Deltic operates 53 late-night clubs and bars throughout the UK, trading under a number of brands and concepts including PRYZM, ATK, eden, Vinyl and Bar&Beyond.
• It says its ‘product is clearly differentiated, in most cases town dominant and remains relevant to the young adult consumer.’
• The group comments on the last year saying ‘2018 was a tough year for the company, and the sector as a whole, with what became a ‘perfect storm’ of headwinds.’
• Deltic reports ‘March saw heavy snowfall across the country and effectively wiped out a weekend’s trading.’
• It adds ‘summer football tournaments are detrimental to most town centre late night businesses but England’s long run in the competition made the impact greater than usual.’
• The major impact was caused by the hot weather through summer 2018. Deltic says this was unhelpful for the late-night industry.
• The company says that ‘some sites…were underperforming but this was masked by the summer weather, and only on the return to normal trading in the autumn were these localised issues apparent.’
• Nonetheless, Deltic says ‘the Directors remain confident in the sector and its business, that the trading headwinds of this year were either one-off in nature, such as the weather, or largely fixable in their local markets. The majority of its clubs and bars remain stable and profitable.’
Certain trading features:
• Deltic says ‘we remain an attractive prospect to our customers and the Directors consider that well-funded and well-run operators who invest in their premises and people will be the ultimate winners.’
• It says it ‘continues to see pre-booked revenue as important and this underpins how the business has kept pace with market changes and demands.’
• Social media is playing a greater role in driving visits and spend. Deltic says ‘we have continued to develop our Al chatbot that runs in Facebook Messenger.’
• Deltic reports ‘we disposed of four venues in the year.’ It does not give LfL sales but some of the shortfall will be due to sold units.
• The group says it had £6.6m of undrawn bank facilities at the end of the financial year ‘although £3.3m of this is part of an RCF earmarked to fund the refurbishment of our acquired Tiger Tiger sites into the ‘eden’ concept.’
The market and the future:
• Deltic says ‘the late-night entertainment industry is fundamentally experiential and is constantly evolving and as such we need to be able to adapt to the changes in the market and what people want from their night out.’
• It says ‘leisure sector spend can be one of the first areas to experience the pinch of any economic downturn.’
• The company is ensuring that it is ‘competitively placed in our local marketplaces.’
• It says ‘most of the capacity oversupply was removed from the nightclub sector in the years post 2005, so now we increasingly see other experiential leisure operators, streaming services and delivery services as our competition.’
• It says that, as ‘our customers undoubtedly demand the best experiences’, there are ‘solid returns are there for the best invested, smartest operators. ‘
• Overall, the company says ’the Directors will maintain their focus on strategic acquisitions, targeted investments and proactive management through the year and believe that this will allow the business to continue to grow from strength to strength.’
• Deltic now has accumulated losses since incorporation of £5.953m and negative shareholders funds of the same figure.
• KPMG has signed the company off (as of last February) as a going concern. The company itself says ‘the Directors acknowledge the net liabilities position’ but says that, in ‘considering going concern, the Directors have prepared cash flow forecasts for a period of 15 months from the date of approval of these financial statements.’
• The directors say that, provided the parent company, The Deltic Group Holdings Limited, does not demand repayment of intercompany loans, and provided that it is there to provide support if needed, then the going concern principle is appropriate.
• Deltic says ‘the Directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.’
• Things are indeed very tough out there.
• Summer 2018 was extremely hot and the football will not have helped.
• That said, comps should now be soft – but we have no data on current trading. Deltic, as it says itself, competes against other experiences including Netflix, the settee and delivery food operators. Things, in the short and medium term, could remain challenging.
PUBS & RESTAURANTS:
• Time Out says its numbers are being pushed slightly to the right. It says ‘in light of the delayed opening of Time Out Market Chicago and Time Out Market Montréal, combined with additional Market investment, there will be a modest impact to full year EBITDA. The Group however remains on track to reach the key milestone of profitability in 2020.’
• Time Out Group has updated on trading saying that it ‘is encouraged by the early trading of the five sites opened in 2019. New Markets in Miami, New York, Boston, Montréal and Chicago, have replicated – with a strong local focus – the concept first launched in Lisbon, which is now Portugal’s most popular attraction with c. 4 million visitors a year.’
• It says ‘in combination, the six Time Out Markets offer food from 120 of the world’s best chefs, occupy 185,000 square feet and accommodate almost 4,000 seats. The global roll-out is set to continue with planned launches in Dubai (2020), London (2021) and Prague (2023).’
• Discounts still available. Harvester 25% off mains, ASK 40% off food, Ed’s Diner 30% off certain meals, Prezzo 30% off food or 2-4-1 on mains. Toby 25% off mains. Ad says that runs till February.
• The Cotswolds Distillery company is launching a new crowdfunding campaign. In 2018, the company raised £3m. CEO Dan Szor says ‘we pride ourselves on creating award-wining English whiskies that are enjoyed across the world, and, are always looking for new investors to join us on this journey.’ He says ‘in this funding round, we’re hoping to secure investment which will carry us through the next chapter in the distillery’s evolution and help support us in creating even more delicious whisky.’
• Drinks giant Diageo has acquired pre-mixed cocktail company Tipplesworth. Diageo will push the brand’s draft drinks into the UK on-trade. Diageo reports that nine million consumers now drink cocktails. The transaction value has not been disclosed.
• SIBA has reported that 24% of UK adults will be more inclined to shop in a supermarket if it has a wide selection of craft beers on offer. See our Day in the Life. SIBA says ‘the quality of craft beer available in supermarkets has gone through the roof this year and what is particularly important is we are seeing more independent, small-scale breweries appearing on supermarket shelves. It is great to see shoppers starting to become more beer-savvy and choose where they do their Christmas shop based on the beer selection.’
• Cider manufacturer Thatcher’s is to launch a non-alcoholic cider.
• Fleurets is marketing Shepherds restaurant, in Westminster. The unit was formerly owned by actor, Sir Michael Caine.
• Constellation Brands is to sell san Diego brewer Ballast Point to Illinois-based brewer Kings & Convicts for an undisclosed sum. The original purchase, which cost Constellation some $1bn in 2015, is not thought to have been a success.
• Constellation says the craft beer market has ‘shifted dramatically’ since it invested $1bn of its shareholders’ money in Ballast Point some four years ago. The decision to get shot ‘allows Constellation to focus more fully on maximising growth for our high-performing import portfolio and upcoming new product introductions.’
• Constellation is to launch Corona Hard Seltzer next spring.
• Punch is to reopen The Birch Tree near Stourbridge after a £284k refurbishment. Punch is also to reopen the ‘revitalised Coach & Horses pub in Freckleton’ after a £360k spend.
• The Otley Pub Club, which features Greg Mullholland amongst its members, says that Star Pubs (Heineken) has too many pubs in Otley. Mr Mullholland says that the brewing giant should sell one or more units to local operators.
• Bottled water company Belu is to become the first UK water company to make all plastic bottles from 100% recycled plastic bottles. The company says ‘the answer to our anti-plastics challenge, is in fact, plastic. Our message is to first use less, but when you buy bottles, buy better.’
• TripAdvisor has bought Bookatable by Michelin for an undisclosed amount.
HOLIDAYS & LEISURE TRAVEL:
• Travel Weekly quotes Alan Bowen, a ‘leading ATOL expert’, as saying that the price of protecting all-inclusive holidays could rise from £2.50 to £10.00 in order to replenish the CAA’s Air Travel Trust Fund post the extremely expensive Thomas Cook repatriation operation.
• Uber CEO Dara Khosrowshahi has said that his company could move into courier services for retail businesses. He says ‘we can extend that [their food delivery model] model to essentially every single local retailer, so that anything you want in New York City can be delivered to you, hopefully in under 30 minutes.’
• EasyJet’s fledgling holidays business has agreed a five year supply deal for accommodation with global bed-bank, Hotelbeds.
• Abercrombie & Kent has bought luxury operator Cox & Kings for an undisclosed sum. All 66 staff employed by Cox & Kings Travel will retain their jobs and transfer to the new owner.
• Daniel Craig has confirmed that his fifth outing as James Bond, in ‘No Time to Die, which is released next spring, will be his last.
• Sports booking platform Playfinder has raised £650k on Crowdcube.
FINANCE & ECONOMICS:
• The IHS Markit/CIPS UK Services Purchasing Managers’ Index for November fell to 49.3 from October’s 50.0. Markit says ‘service providers have attributed the recent soft patch to delayed decision-making on new projects until greater clarity emerges in relation to the domestic political landscape.’
• Markit’s composite index suggests that the UK economy contracted by around 0.1% between the third and fourth quarters of this year. Markit says ‘November’s PMI surveys collectively suggest that the UK economy is staggering through the final quarter of 2019, with service sector output falling back into decline after a brief period of stabilisation.’
• Sterling higher at $1.3113 and €1.1878. Oil up at $62.81. UK 10yr gilt yield up 6bps at 0.73%. World markets up yesterday with Far East higher in Thursday trade.
• Politics etc.:
o The NIESR says that both Labour and the Tories will have to raise taxes as an ageing population will put significant pressure on the public finances.
o The NIESR also says that whichever party wins next Thursday’s General Election, they must kickstart UK labour productivity if real wages are to be allowed to rise.
o PM Boris Johnson says that, if he were to win the General Election next week, he would pass the Brexit Withdrawal Act before the end of January and hold a Budget in February. Ex speaker John Bercow says that the idea that Mr Johnson will be able to get Brexit ‘done’ by the end of January is ‘utter nonsense.’
START THE DAY WITH A SONG:
• Taking a break due to exam commitments. Back middle of next week.
RETAIL WITH NICK BUBB:
• Boohoo: We flagged on Tuesday that the unscheduled trading update from Boohoo was meant to be reassuring to investors about how Black Friday had gone, but it now appears that it was also designed to underpin the share price, after a strong run, ahead of a big Director share placing…It was announced after hours last night that Mahmud Kamani and Carol Kane intend to sell up to 35m and 15m shares respectively, via an accelerated book-build placing to institutional investors. Mahmud Kamani is the Group co-Founder and Group Executive Chairman and Carol Kane is the Group co-Founder and Executive Director. The placing shares represent c4.3% of the issued share capital and Mahmud and Carol will retain a combined 15.8% of the company’s issued share capital (with an 18 month lock-in). And it has been announced first thing this morning that the placing has been done at 285p, a surprisingly small
• Joules: As Joules have a 24 Nov half-year end and Black Friday on Nov 29th was a week later than last year there was some doubt about how Joules would adjust for that in their pre-close update today, but the answer is that they have ignored it completely and given figures for the period from 27 May to 3 December, so they can trumpet about “robust” growth of 1.3% in revenues, despite “challenging” market conditions.
• FTSE Index Watch: The embattled Kingfisher clung on in the FTSE 100 index in last night’s quarterly FTSE Index review, but Card Factory, as expected, was ejected from the FTSE 250 index.
• News Flow This Week: The jeweller Signet’s Q3 results are out in the US this afternoon. Tomorrow then brings us the ABF (Primark) AGM trading update and possibly the Games Workshop interims.