Langton Capital – 2022-05-31 – PREMIUM – XP Factory, Sportech, trading, footfall, holiday delays & other:
XP Factory, Sportech, trading, footfall, holiday delays & other:
A DAY IN THE LIFE:
The number of out-of-office replies to our email tripled yesterday.
That, added to the unknown but large number of recipients (including Langton) who either don’t bother or don’t know how to put an OOO auto-reply on would suggest that a great many people have taken off three days in order to stitch together a nine-day holiday.
Certainly the queues at Gatwick and the Channel would suggest that a lot of people are getting away. On to the news:
QUESTION OF THE WEEK?
Question of this week:
What will happen to the delivery market now that restaurants are open again, times are getting hard and there may be some discounting?
PUBS & RESTAURANTS:
Current trading, footfall etc.
The CGA Drinks Recovery Tracker shows that on premise drink sales were 0.2% behind 2019 levels in the week to 21 May. Warmer weather in the earlier part of the week pushed sales above pre-pandemic levels, by +8% on Tuesday and +11% on Wednesday before the cooler wetter weather saw sales flatten.
• The Tracker suggests ‘drinks sales have hovered close to pre-COVID-19 levels throughout April and May, but meaningful growth is frustratingly elusive.’ Jonathan Jones, CGA’s managing director, UK and Ireland continues ‘mixed weather isn’t helping, and the On Premise desperately needs sunshine if it is to take full advantage of the Jubilee weekend. The celebrations could help to kickstart the summer, though the cost-of-living crisis continues to cast a shadow over consumer spending.’
Springboard has updated on weekly footfall saying that it rose by 2.2% week on week in the seven days to 28 May. This will come as something of a relief as the prior week registered a decline. Footfall is up 22.7% vs 2021 but is still down 18.3% on 2019. Springboard points out that last week led up to payday for many people.
• Springboard says ‘the return of employees to the workplace appeared to accelerate last week, with noticeable increases in footfall in Central London and in Springboard’s Central London “Back to the Office” benchmark which tracks footfall in those Central London locations closest to offices, as well as in city centres outside of the capital.’
• It says ‘in contrast, in market towns – where a rise in footfall has become synonymous with home working – footfall remained flat from the week before, and likewise in Outer London the increase in footfall was just a third of that in Central London.’
• Springboard says ‘the ongoing shift back to office working by employees for at least part of the week, meant that in city centres the gap from the 2019 footfall level had narrowed by more than in market towns for the seventh consecutive week.’ It might be a little early to make too broad a conclusion.
• The analyst says ‘we are anticipating a boost this week generated by the Platinum Bank Holiday combined with the school half term break.’ It adds ‘this is likely to be supported by weather that is forecast to be sunny on Thursday and Friday but not hugely hot, followed by cooler weather with occasional rain over the weekend, making visits to coastal towns and leisure venues on these days less appealing for many and increasing the appeal of retail destinations.’ Mixed, perhaps.
UKHospitality CEO Kate Nicholls has said the announcement regarding the new visa scheme for the world’s top graduates ‘would be greatly enhanced, however, if there was also an increased use of youth mobility schemes with other nations, and bilateral arrangements built into forthcoming trade deals.’
The upcoming Jubilee long weekend:
The Barclays SME Barometer shows that independent pubs, bars and restaurants are expecting a £76m boost over the Platinum Jubilee weekend, with 49% of those open predicting a sales rise. On average, SMEs are hoping for a 10.4% rise between the months of April and June 2022 against the same period in 2021.
Inflation & the cost of living crisis:
The ONS reports that some budget foods have increased in price by more than 15% of the past year. The lowest cost version of pasta rose by 50% in the year to April, with minced beef, bread and rice also recording large increases.
Sainsbury has said that its ‘investment in price to help customers with the cost of living is set to top more than half a billion pounds.’
• It says this total has been achieved in the period since March 2021. CEO Simon Roberts says ‘the cost of living is having a huge impact on our customers’ and colleagues’ lives and we understand that, right now, every penny counts. We are determined to stand side by side with our customers and we are relentlessly focused on driving savings that can be reinvested into keeping food prices low.’ Roberts continues ‘Sainsbury’s is keeping inflation lower than its major peers while winning market share.’
The FT reports ONS data as showing that the cheapest food prices have not risen faster than average. This is presumably correct but, as poorer demographics spend a larger proportion of their income on food (and save less), the same inflation rate will hit different demographics to a differing degree,
• This is important as operators may cater for different demographics across their estates. To the extent that an operator’s customers may be less well off, more price sensitive and, perhaps older, this could have negative implications for sales and / or margins over the medium term.
John Bason, CFO at ABF, has told the BBC his company “regrets” raising prices at Primark, as the fashion firm gives way to rising costs. Primark has said it will implement “selective price increases” across some of its autumn and winter stock.
Pub closures. CAMRA has called for the government to intervene after its research showed an average of just over 5 pubs a week (290 in total) were demolished or converted to another use in 2021. However, the statistics did show an increase in new pubs being built, or existing buildings being converted into pubs, averaging at just over seven pubs opening per week in the second half of the year.
The NTIA has announced that Sacha Lord, Night Time Economy Advisor for Greater Manchester, is to become Chair of its Board of Directors. It says ‘Sacha has worked hand in hand with the NTIA and stakeholders across the UK over the last two years, and has established himself as one of the stand out voices within the sector. This appointment will add considerable weight to the Board, in the drive to raise awareness of the importance of the night time industry to the UK economy.’
Drinks insights agency PROOF Insight claims that 10 million consumers plan to drink English wine and 16 million intend to drink a British-distilled gin over the Platinum Jubilee weekend.
Franco Manca is to offer a free glass of prosecco to customers ordering its ‘Jubliee Special’ pizzas over the Bank Holiday weekend. The company is producing a Jubilee Meat Special as well as a vegetarian option.
XP Factory (was Escape Hunt), which operates an estate of escape rooms alongside the Boom Battle Bar chain of bars, has reported full year numbers to end-December saying that revenue rose by 163% to £7.0m with adjusted EBITDA of £2.7m (2030: loss £1.4m). The group reports a loss before tax of £885k vs a loss in FY20 of £6.6m.
• Commenting on events post year-end, XP Factory says ‘in the year to date, 6 new Boom sites opened, including owner operated site in Exeter, co-located with Escape Hunt, and franchise sites in Watford, Ipswich, Glasgow, Aldgate East and Bath.’ It says there are a ‘further 6 Boom sites in build and 10 contracts exchanged or in final legals underpinning site roll-out targets for the year.’ XPF says that the ‘site level economics for Boom [are] being proven by performance at owner-operated sites.’
• CEO Richard Harpham says ‘2021 was an important year in our journey. It marked the inflexion point at which we delivered sufficient critical mass to become profitable and was the year where we best set ourselves up to become a key player in the leisure space with the acquisition of Boom. The customer demand we have seen since Covid restrictions were lifted has been overwhelmingly positive and has reinforced our belief that businesses like ours serve an important role in bringing people together.’
• The CEO continues ‘with the Escape Room category becoming much more a part of the mainstream consumer psyche, and with competitive socialising being such a fast growing sub-sector within the leisure market, we feel that XP Factory is perfectly positioned through its operating brands Escape Hunt and Boom respectively.’ Mr Harpham concludes ‘with such a well-developed pipeline of sites, such encouraging demonstrable unit economics in both brands, and such a well-positioned business in terms of customer demand, we have reason to be highly optimistic about the future for XP Factory.’
• Chairman Richard Rose says ‘there will no doubt be challenges to be faced with increasing uncertainty from the current macro-economic environment, inflation and cost pressures and, as a young business, opening so many sites in a short period of time. However, by the end of 2022, we will have built a substantial network across our two brands and with Escape Hunt continuing to grow whilst delivering outstanding customer experiences, the two brands together form a wonderful foundation for exciting times to come.’
MCA reports that Greggs is still considering its options for expansion internationally. Former CEO Roger Whiteside said ‘Greggs has some history of it in the past in that we tried and failed in Belgium – but we were bakers then and now we are food on the go and better set up to compete with whatever the local competition might be in the country that we might choose’
Greene King is offering a pint for just 6p in 408 locations over the Platinum Jubilee weekend if you say the secret codeword, which isn’t much of a secret at all, to bar staff. It is ‘1952’.
Drinks company Diageo is to sell off 32 low-margin, locally produced brands in India to Inbrew Beverages for just over US$100 million. India is reported to be one of the fastest-growing alcoholic beverages markets, at an estimated market size of US$52.5 billion in 2020.
Shaftesbury yesterday reported that it and Capital & Counties remain in ‘advanced discussions regarding a possible all-share merger of the two companies’. The ‘put up or shut up’ deadline has been extended from 4 June to 17 June. Shaftesbury says ‘there can be no certainty that any offer will be made. A further announcement will be made in due course.’
HOLIDAYS & LEISURE TRAVEL:
Delays still in the news:
Last weekend saw travellers stuck in hour-long queues at several airports, and strings of flights cancelled by airlines including easyJet and Tui. Manchester airport warned on its official Twitter page that there were delays at check-in and baggage reclaim.
• Given all of the TV advertising that’s going on, it’s clear that the tour operators can talk a good holiday.
• However, they also have to deliver the same and, if cancellations and delays continue at the current rate, then it will soon begin to look as though they are unable to do so and would-be holidaymakers may hold back on their spend.
BA check-in staff are being balloted by the Unite and GMB unions ahead of potential strike action for later in the summer. Unite says ‘British Airways used the cover of Covid to brutally cut members’ pay.’
• Unite adds ‘BA has now reversed the pay cuts imposed on management but refuses to do this for our members. This is disgraceful. Unite will not allow our members to be treated as a second-class workforce.’ It says ‘our members are rightly furious and ready to take action. A strike will make an immediate impact on the service to customers so I urge BA to get a grip and restore these workers’ pay immediately.’
STR reports that European hotel ADRs are now, on average, six per cent higher than pre-Covid rates. Ireland leads the recovery, with rates 21% higher than comparable 2019 levels in May, and is closely followed by Portugal (18% higher) and Spain (14% higher).
Statistics from Amadeus show that global flight searches had recovered to just 3% behind pre-pandemic 2019 levels in the last week of April. Double-digit increases were recorded in many key markets during the whole month of April, with searches from Mexico up 69% and Canada 29% while the US saw single digit growth of 7%.
Expedia Group has put Traveldoo up for sale, admitting that the business could close if a buyer cannot be found.
Sportech has released the trading update that will be read at its AGM later today, saying that ‘for the first five months of the year trading has been in line with the Board’s expectations.’
• The company says ‘sports betting continues to experience a high rate of growth’ but adds that the ‘record online growth in pari-mutuel betting seen during the pandemic has receded slightly.’ Sportech says ‘the introduction of sports betting has been very positive, and the Board are confident that the Company will achieve the projected overall improvement in the Venues business to support a positive Group EBITDA this year.’
• Sportech separately announces that ‘Andrew Lindley will step down from his role as Chief Executive Officer and therefore will not stand for re-election as a Director at the AGM today.’ It says ‘Richard McGuire, current Non-Executive Chairman, has been appointed Executive Chairman, effective immediately. Mr McGuire shall receive no fixed compensation for the role, however it is anticipated he will participate in a performance only incentive, directly linked to significant Group value creation.’
Sky News reports that ‘Roman Abramovich has completed the sale of Chelsea Football Club to a group led by American businessman Todd Boehly and investment firm Clearlake Capital.
• The club itself says sanctions on Mr Abramovich had presented “unique and unforeseen challenges to the sale process” but it says the deal has been concluded “on an accelerated timeline”. Culture minister Nadine Dorries tweets ‘a sale was the only way the club could continue after this season. Sale proceeds will be frozen and can only be used with government approval.’
FINANCE & MARKETS:
Zoopla has reported that the average price of a house in the UK was £250,200 in April. It suggests that the annual rate of house price inflation fell from 9.0% in March to 8.4% in April meaning that house prices declined in real terms.
Zoopla says fewer houses are coming onto the market and they are taking longer to sell. It says price reductions are more common with around one in 20 properties cutting their price by 5% or more.
Sterling down at $1.2609 and €1.1729. Oil price up at $123.32. UK 10yr gilt yield up 7bps at 1.99%. World markets better yesterday with London set to open around 5pts lower as at 6.30am.
Short week nearly halfway through. Sportech’s AGM is today and that, at the moment, is about it.
The following week (beginning 6 June) is only a little more active with City Pub Group holding its AGM on the Wednesday and Fuller’s full year numbers on the Thursday.
RETAIL WITH NICK BUBB:
• Today’s News: The B&M finals for y/e March show group adjusted EBITDA of £619m only marginally down on the previous year’s bumper £626m outcome, slightly above consensus expectations, despite a chunky 9% fall in LFL sales in the core UK business. Given the boost from the pandemic, B&M prefer to look at 3-year comps, but it reports that over the last 8 weeks B&M UK LFL sales have been down by 13.0% on last year. In terms of the overall outlook, the summary is that “Notwithstanding the many and varied uncertainties and headwinds which are likely to impact on our trading performance during FY23, at this early stage in the year Group adjusted EBITDA is expected to be in the range of £550m to £600m”. In other news, the Lookers AGM is being held today at 10am and the latest monthly Nielsen grocery market share figures (for the 4 weeks to May 21st) come out at 8am today.
• This Week’s News: Given the Bank Holidays on Thursday and Friday, to celebrate the Platinum Jubilee, there are only two working days left this week, but, as we move into June, the Dr Martens finals are out tomorrow morning and, in the evening, the quarterly FTSE index review is announced (with ASOS expected to get into the FTSE 350 index, following its move up from AIM).