Langton Capital – 2021-01-21 – PREMIUM – Asset buyers, NewRiver, Ten Entertainment, Entain, Saga & other:
Asset buyers, NewRiver, Ten Entertainment, Entain, Saga & other:
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A DAY IN THE LIFE:
Looks like we’ve got a bit of a flood here in York. The porch is swimming and the dog won’t go out. Too dark to see the damage yet but there’s water where it’s not meant to be.
Anyway, for anyone looking to lose weight after Christmas, here’s an interesting fact I picked up recently. Food isn’t measured by the volume that you can cram into your mouth at any one time but rather by ‘the calorie’ as that was deemed, by some pointy head in times of yore, to be a more accurate way of calculating what’s going to
So, here’s a list of fruits. It’s an alphabetic list – but can you put them in calorific value by weight? We’ve not picked any that are similar. In fact, the relationship is doubled by fruit in the ratio 1 to 2 to 4 to 8 to 16 to 32.
The answer is at the bottom of the email, below Nick Bubb. The calorific value of human fat, by way of comparison, is nearly three times the combined value of all of the above added together. On to the news:
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OPERATORS RAISING MONEY TO BUY ASSETS:
• Raising money to buy good assets at distressed prices seems like an excellent idea.
• But it takes two to tango and, though there may be 10,000 leases on the high street and elsewhere available to the lucky ‘buyer’, decent freeholds are another story.
• JD Wetherspoon yesterday confirmed that it had raised £93m via a share placing. Part of the reason was to push further into the future the point at which its cash-burn would have become a problem and part is to provide funds for expansion.
• The Valiant Pub Company has been launched by Gerry Carroll and Mark McGinty, co-founders of Hawthorn Leisure and by James Croft, director at EI Group. There is no mention of scale yet but the group will target the suburban and community pub sector.
• Investment vehicle Redcat Pub Company has been established by former Greene King CEO Rooney Anand to ‘invest in Britain’s ailing pubs industry’ says Sky. The vehicle is said to be funded by an unnamed US investor (who so far has not contacted Langton to throw money in our direction) to the tune of £200m.
• We are aware of at least two other existing pub companies that would like to raise additional funds in order to buy assets. There have been reports that Hawthorn Leisure, owned by NewRiver, is also looking to make acquisitions.
• Marston’s recently established the Carlsberg Marston’s Brewing Company and realised up to some £273m in cash (£34m deferred) in the process. Expansion is possible though the group’s innovative deal with SA Brain illustrates that this could be done on a ‘capital light’ basis.
• We have heard but have been unable to substantiate that a large investment bank is considering launching a pub fund in order to invest in freeholds.
There’s light at the end of the tunnel. But we can all see it…
• This space could become crowded,
• Or rather, as freehold pubs cannot be magicked from thin air, the money being waved around could drive up prices.
• More likely perhaps, it will simply prevent them from falling – but the vehicles mentioned above may not be able to buy the assets that they want.
A bit more detail on the companies:
• JDW says: ‘additional capital will facilitate the acquisition of new properties, which are likely to be available at favourable prices, as a result of the pandemic.’
• It adds that it ‘is considering the acquisition of a number of properties in central London, the freehold reversions of pubs of which it is currently the tenant, and properties adjacent to successful pubs. It may be possible to achieve a higher-than-average return on capital on properties acquired in the next few years, based on the company’s past experience.’
• JDW is perhaps better-positioned (as an existing tenant) to buy freeholds than are some of the other operators mentioned
• Valiant, where no sums have been mentioned, is ‘poised and ready to go’. Valiant wants to get its timing right, easier said than done, but adds ‘we obviously want an unrestricted market place, we don’t want to be opening up when you can’t have vertical drinking, and you’re stuck with table service and closing at 10pm.’
• Redcat, says Sky, is ‘backed by an unnamed US-based private equity firm, and had raised around £200m to help finance a takeover spree.’ Sky quotes ‘people close’ to Redcat as saying ‘that Mr Anand was unlikely to pursue large corporate takeovers in the near term, but would focus on smaller acquisitions with scope for improving operational performance.’
• Other operators would like to make small, bolt-on acquisitions.
Freeholds versus leases:
• The value of freeholds will not be as volatile as that attached to leases.
• Certainly, premiums may for sites and there may be a lotting premium (which can then disappear) for groups of freehold pubs, but the value of leases can ping around much more violently.
• A big leasehold unit (probably with a big leasehold rent) could cost £2m to fit out and be ‘worth’ £5m if it trades well and generates £500k plus in EBITDA.
• But if unit income falls (via fashion or footfall changes or competition), the unit could be worth literally nothing. If it is deemed to be ‘overrented’ it might be worth a negative amount.
• There may be 10,000 leases available at historically low prices in the UK at present and very few freeholds on the same basis.
PUBS & RESTAURANTS:
• The Global intelligence platform Streetbees has found that the majority of Brits have lost confidence in the Government to support the pub sector. The survey found that 61% of those consulted lacked belief that the Government would protect pubs.
• Big Hospitality has reported that the chairman to Loungers, Alex Reilley expects the end of the lease forfeiture and debt enforcement moratoria in March will cause a ‘phenomenal glut’ of CVAs across the hospitality sector.
• Chief executive of Admiral Taverns, Chris Jowsey has stated that there is no reason for UK pubs to remain closed until May. Jowsey told the Morning Advertiser: ‘I just don’t believe we need to stay closed until May to be honest. If you look at the speed – so far, fingers’ crossed – of the vaccination rollout, it’s really important we get those most vulnerable protected, and then we can go back to more open trading’.
• Prestige Purchasing has launched ‘The Club’, a ‘member’s only purchasing consortium with a difference.’ Prestige says ‘this new service will provide access to pricing usually only achieved by larger operators through Prestige’s 20+ years of experience and food and beverage supply-chain know-how.’
Company & other news:
• NewRiver REIT, which owns the Hawthorn Leisure chain of pubs, has updated on Q3 trading (to end-Dec) saying that ‘our rent collection for the first three quarters of the financial year continues to improve following key agreements made with retailers.’ The co says ‘retail rent collection in respect of the fourth quarter, due on 25 December 2020, is currently tracking ahead of the levels seen at the same point in Q3. As in previous quarters, we expect the Q4 figure will continue to improve in the coming weeks.’
• Regarding Hawthorn, the company says ‘all of our community pubs in the UK are temporarily closed due to lockdown restrictions.’ It says ‘our focus has been on protecting Hawthorn’s financial position and supporting our pub partners throughout the closure period so we can bounce back quickly on reopening, as we demonstrated in July 2020.’
• It says ‘over the past nine months, our pub partners have demonstrated their resilience in challenging circumstances, and we are confident that the vast majority of our pubs will emerge from the current restrictions in a strong position. The completion of £2.7 million of non-core pub disposals since 30 September 2020 further demonstrates liquidity and confidence in the long-term prospects of community pubs as an asset class.’
• Hawthorn says ‘we have also continued to improve the quality of the portfolio with selected capex projects resumed and 86% of the portfolio invested in during the last lockdown. Aligned to this we are seeing a resurgence in demand for new convenience stores around the UK. With lots of surplus land in our pub portfolio and good road visibility locations in neighbourhoods around the country we are well placed to benefit from this.’
• Hawthorn concludes ‘the community and suburban location of our portfolio is well placed to benefit from consumers working from home and using their local services and facilities. This was clearly evident in the summer of 2020 when Hawthorn outperformed the UK pub sector and we believe this can be achieved again when restrictions are relaxed later this year. Our teams are currently preparing to bounce back and reopen our pubs in April 2021 and, should Government guidance align with this, or allow an earlier reopening, we are optimistic about the trading prospects of Hawthorn in the new financial year.’
• DP Poland has said it will update on full year 2020 in March with results ‘as early as possible’ in Q2. Re the merger with Dominium, Nick Donaldson, Non-Executive Chairman, commented “We are delighted to have completed the acquisition, whilst it is still early days, significant work is already underway to integrate the two businesses.”
• The MCA has reported that the takeaway pizza concept Fireaway has opened its 50th site, with a further 50 sites in the pipeline for next year.
• The Caterer has reported that founder of Coffee #1, James Shapland is looking to open sites in ‘neighbourhood centres’ and high street market towns across Wales and the West for the new cafe concept, Coffi Lab.
• Devil’s Botany absinthe distillery has opened in the east London district of Leyton.
• Google is participating in a $40m investment round of India-based delivery startup Dunzo. The move comes as part of Google’s plan to invest in India’s internet market with a new $10bn fund.
HOTELS & LEISURE TRAVEL:
• The FT reports that Saga Holidays is to require customers to be fully vaccinated before boarding cruises. It will push back the restart date for its travel business from April to May. It says that holidaymakers will have to be vaccinated at least 14 days before travelling.
• TravelSupermarket data shows package holiday prices in the January peak booking period for summer 2021 have fallen, with average rates down by a minimum of 10% YoY.
• Hurtigruten cancels cruises that were due to depart with MS Maud in March from Dover. The company is offering UK customers affected by the cancellations either a Future Cruise Voucher, worth 125% of money paid and a 10% future cruise discount; or a full refund.
• UKinbound has criticised the UK government over its failure to provide financial support and urged it to ‘engage directly’ with the sector. On the other hand, the Scottish government has announced today it will be releasing a £104m package for the tourism and hospitality industry in Scotland.
• STR reports that the U.S. hotel industry reported all-time lows in occupancy and revenue per available room for the year to end 2020. Occupancy was down 33% on the year with room rates off by 21%. These numbers include relatively ‘normal’ data from Q1. REVPAR was down by 48%. STR says ‘for the first time in history, the industry surpassed 1 billion unsold room nights, which eclipsed the 786 million unsold room nights during the great recession in 2009. Based on November year-to-date results, the industry is expected to show nearly zero profit for the year when STR releases P&L data next week.’
• STR also looks at the month of December, saying that occupancy was down by 32%, rates were down by 28% and REVPAR was off by some 51%.
• Ten Entertainment Group has updated on full year trading saying it has ‘strong growth potential, [and it is] well positioned to take advantage of tailwinds on reopening’. The company says it moved quickly to secure funding. It says ‘Nick Basing will return to his Non-Executive Chairman role from 1st April 2021 continuing to provide his expert leadership in guiding the Board.’
• Re the outlook, Ten says ‘our underlying business model remains highly attractive and strongly cash generative with fully modernised sites, and a long-standing track record of organic growth and successful acquisition investment.’ Nick Basing says ‘our leadership team have ensured that the business has been maintained in first-class shape for when we are able to reopen fully. We have used this extraordinarily challenging year to strengthen our underlying business model.’
• Basing says ‘we expect there to be significant pent-up demand when our business reopens. Our highly popular competitive socialising model, operating in safe, spacious and well-invested centres, will be extremely attractive to people in a post vaccine environment. We have secured strong liquidity headroom well into 2022 and anticipate a rapid return to profitability and previous sales levels once the Government eases trading restrictions.’
• Entain has confirmed that ‘Jette Nygaard-Andersen, currently an independent non-executive director of Entain, has been appointed Chief Executive Officer with immediate effect.’
• Entain has also updated on current trading saying that it has seen ‘strong delivery across the year with continued momentum into 2021.’ It says ‘Q4 marks the Group’s 20th consecutive quarter of double-digit online NGR growth.’
• Shay Segev, Entain’s outgoing CEO, commented ‘in an exceptionally challenging year, our strong performance has been driven by a business model that is highly diversified across a wide range of products, brands, territories and channels. Q4 has been another successful period for us, and we are particularly pleased with the momentum that we are seeing in the US.’
• Entain says ‘while the short-term outlook remains uncertain as a result of the ongoing impacts of COVID-19, we have entered 2021 with good momentum and remain as confident as ever in Entain’s longer term prospects.’
• Per Sky, Lloyd’s Bank is set to auction its Virgin Active debt, with City sources saying that another of Virgin Active’s seven-strong lending syndicate was also planning to offload its position.
FINANCE & MARKETS:
• The ONS says the PI rose 0.6% in the year to December up from 0.3% in the year to November. Estimates were for 0.5%.
• The NIESR says ‘underlying inflation remained unchanged at 0.3 per cent in the year to December 2020, as measured by the trimmed mean, which excludes 5 per cent of the highest and lowest price changes.’
• The NIESR says ‘we expect the downward pressure on inflation to continue in the short-term.’ It says CPI should then pick up in H2 but stay below 2.0%. The NIESR adds ‘our analysis at regional level indicates that regions that entered higher tiers of restrictions in December experienced marked decreases in consumer prices during the month.’
• The Bank of France says Paris has picked up around 2,500 jobs from London and “at least €170bn in assets” since Brexit. London remains the foremost financial centre in our time zone but Amsterdam, Dublin, Frankfurt and Paris have all taken some share.
• Sterling up at $1.3699 and €1.1289. Oil down at $56.01. UK 10yr gilt yield up 1bp at 0.30%. World markets broadly better yesterday and London set to open up over 30 points.
RETAIL WITH NICK BUBB:
Today’s News: The high-flying Pets at Home had been due to make a Q3 trading statement today, but having brought forward its update to Jan 8th to upgrade full-year profit guidance because of stronger than Christmas trading, we had assumed that it would not need to say anything more, but it has, although it just fills in a bit of the detail and repeats that after “high-teens” Group LFL sales growth during December, the company now expects full-year underlying pre-tax profit to be at least £77m. Interestingly, however, the company says that it launched two smaller “next generation” Pets at Home stores in the period, in Camden and Putney, to test growth potential inside the M25: the one in Putney opened in the former Allied Carpets store on the Upper Richmond Road in early December. There is no other Retail news out today, although yesterday afternoon WH Smith announced that at its AGM that
This Week’s News: Tomorrow brings the monthly GFK Consumer Confidence survey, the ONS Retail Sales figures for December and The Works’ interims.
CALORIFIC VALUE OF FRUIT:
Rising in terms of calorific value and doubling at each stage, the fruit is ranked as to:
• Rhubarb 7 calories per 100g
• Cranberries 15 calories per 100g
• Gooseberries 25 calories per 100g
• Apple 50 calories per 100g
• Banana (peeled) 95 calories per 100g
• Avocado (peeled) 190 calories per 100g
• Human fat 4,100 calories per 100g (we do not advise eating human beings nor any part thereof)
Details found HERE: