Langton Capital – 2018-06-05 – Vianet, sector confidence, Leon, petrol, World Cup etc.:
Vianet, sector confidence, Leon, petrol, World Cup etc.:A DAY IN THE LIFE: Just in case you’ve been living in a cave for a year or two, a reminder that the World Cup begins in Russia on 14 June, a week on Thursday. This will impact Langton’s ability (and desire) to produce research etc. (particularly in the afternoons) but, more importantly, it means that we’ll have to get a move on if we’re going to collect all the cards for our Panini sticker book. We’ve got duplicates coming out of our ears and are keen to play swapsies. Details towards the foot of the email. On to the news: SECTOR CONFIDENCE: • CGA Fourth Hospitality says business confidence rose in May ‘despite a host of pressures on the market.’ It says ‘there remains a gap between the optimism that leaders of Britain’s restaurant, pub and bar groups have about their own businesses and their confidence in the market as a whole.’ • Sum of all confidences in the market clearly adds up to more than 100% and both suggestions, that one’s own business will perform well but that the market could stumble, cannot be correct. • CGA Fourth says ‘75% of company leaders are now optimistic about the prospects for their own business over the next 12 months—11 percentage points more than at the time of the last confidence survey in February.’ It says, however, only 47% ‘are upbeat about prospects for the wider eating and drinking out sector over the next 12 months.’ This is also up 11pts on February. • CGA Fourth suggests ‘three quarters of leaders said their businesses had been adversely affected by the consequences of the [Brexit] referendum.’ Phil Tate says ‘the more upbeat tone of the survey appears at odds with the recent news of some high profile restaurant closures in the first half of this year, driven by business challenges including rising food, people and property costs and the uncertainty surrounding Brexit.’ • Langton research (that is ringing people up and asking them) suggests that trading worsened for some operators in Spring last year and has since steadied. For others, the lurch came in June and July. The World Cup will upset comps this year but there are indications that trading is getting no worse. This could at least partly account for the apparent optimism. • CGA Fourth says reduced supply (via CVAs etc. and there has indeed been no reduction when already-committed new build is taken into account) may have cheered up some surviving operators. Those that have undergone CVAs will have a somewhat reduced cost base and less of a tail. Food prices have also stabilised (but labour etc. continues to rise). • CGA Fourth quotes a contributor as saying ‘the [restaurant] market is sorting itself out like the pub industry did a few years ago. We are over saturated with some struggling brands. Once they leave, which is happening, there will be opportunities for better brands.’ Another suggested ‘an unsettled market presents opportunities for established operators with a clear offer.’ • Fourth concludes ‘in the face of challenging external headwinds in rising costs of both labour and inventory, there remains a cohort of outstanding operators who are constantly looking inwardly at their businesses and investing in the marketing and technology they need to increase efficiencies and improve their offer and the customer experience. There will always be an appetite for spending on food and drink among UK consumers, it’s ingrained in our culture, and these slick, streamlined businesses are in pole position to thrive over the coming years.’ PUB, RESTAURANT & DRINK PRODUCERS: • Vianet reports FY numbers to end-March saying sales rose to £14.6m from £14.3m last year. • Vianet reports an adjusted operating profit from Smart Machines of £1.07 million, including Vendman contribution of £0.12 million. This is up 20.1%. • Vianet reports PBT up 41.5% to £2.05 million post exceptional items. The group has net cash of £1.2 million. • Vianet EPS 7.4p vs 5.3p last year with a FY dividend unchanged at 5.7p. Chairman James Dickson reports ‘Vianet has made significant steps towards the delivery of its earnings transformation plan and continues to benefit from its focus on exploiting growth opportunities in the Smart Machines division whilst optimising performance in the Smart Zones division.’ • Vianet says its ‘Board is confident that the Group’s long term strategy is the right one and that it is positioned to deliver earnings growth and expand future strategic options.’ • Location, location, location. Local Data Company reports that smaller shopping centres bore the brunt of store closures last year. • LDC says centres ranked 300 or lower in the UK saw vacancies rise from 19.7% to 19.9%. Vacancies fell in the UK’s top 50 shopping centres. LDC suggests ‘this increase in vacancy is perhaps more marginal than might have been expected given some of the current rhetoric.’ • Pragma has pointed out a couple of the impacts of younger people’s inability to get on the housing ladder saying that the gardening market and indeed the demand for allotments has begun to rise. • Petrol prices rose 6p a litre in May, the biggest monthly rise since the RAC began tracking prices 18 years ago. Although real wage growth is now once again positive, rising petrol prices will take money out of consumers’ pockets. • Natural fast food chain LEON has opened its first restaurant in Norway, operated by UMOE, in Oslo Central Station. Helene Skjenneberg, MD of LEON for UMOE, says, ‘Launching LEON means that we get to bring the future of fast food to Norway. We have exciting times in front of us and look forward to offer Norwegians a whole new concept of fast food based on natural ingredients.’ • Coca-Cola has made its first move into the alcohol drinks market by launching a fruit-flavoured alcopop in Japan, which is being aimed at younger drinkers and women in particular. The Coca-Cola alcopop is lemon-flavoured and comes in three alcoholic strengths, from 3% to 8% abv, and is modelled on the country’s Chu-Hi drinks category – a category of RTD beverages containing a local spirit, typically shōchū, with sparkling water and a range of fruit flavours. • Black Sheep Brewery has secured new listings with Morrisons for several newly-developed beers, including its first-ever lager, 54° North. Other Black Sheep drinks to hit the shelves include My Generation and Flying Circus, a 4.5% ABV amber ale created in collaboration with legendary comedy troupe, Monty Python. • Star Pubs & Bars is expanding its cask beer range to over 300, meaning licensees at its 2,900 pubs can now access beers from 900 brewers across the UK. Star Pubs & Bars managing director Lawson Mountstevens said: ‘Great beer is at the heart of great pubs. And cask beer is completely unique to the on-trade, giving it a huge point of difference for drinkers. Every pub in our estate is different which means our entrepreneurial licensees can tailor their beer offering to their customer, while adding value to their business.’ • Hunky Dory Pubs, a joint venture between Oakman Inns and Ei Managed Investments under Ei’s Managed Expert scheme, has added a second site called ‘The Four Alls’ in Welford-on-Avon, Warwickshire. • Nomad Foods, owner of Birds Eye, will acquire frozen food brand Aunt Bessie’s from William Jackson in a deal worth £210m. The deal is expected to be completed in Q3 2018 and will include the brand’s factory in Hull. • Legal action has been taken against three delivery firms used by Amazon in another challenge to what has been called ‘bogus’ self-employment. • BrewDog has launched the second round of its Equity for Punks USA campaign and aims to initially raise $10m to open more bars across the country, as well as a sour beer facility. • Starbucks chairman Howard Schultz will leave at the end of June after almost four decades at the helm amid rumours of a possible 2020 presidential bid. • Shoppers, pub-goers and gardeners were happy to spend in May, with Barclaycard data showing a 5.1% increase in spending on the year, representing the strongest annual growth since April 2017 and an improvement on the average of 3.3% over the previous six months. • Mothercare could be forced to ditch 300 staff after creditors blocked part of its restructuring plan following a recount of the votes. HOLIDAYS & LEISURE TRAVEL: • Two 24-hour Tube strikes have been planned on the Jubilee and District Lines by the Rail Maritime and Transport union. The strikes have been arranged for 6th and 14th of June due to a row over timetables. • Northern rail has axed 165 trains from its schedules causing massive delays for many commuters. • Marriott International is showcasing its ‘transformation vision’ for Sheraton Hotels and Resorts at this week’s NYU International Hospitality Investment Conference. FOOTBALL STICKERS: • And now to the important business. With the pain of four years ago neatly tucked away and ignored the Langton Team’s latest investment is developing very well, but is in need of a little help. The world cup is just around the corner and we have begun the four yearly ritual of completely a panini world cup sticker book and have exactly 52 duplicates up for grabs. So get in touch if you think there could be business to be done (but no more Pogbas we already have 3!). OTHER LEISURE: • Apple has unveiled new features to help users control how often they use their phones and improve digital well-being. The plans, which aim to improve digital well-being, include a new feature called Screen Time. It will send users weekly reports on how they use their iPhones or iPads. Parents can also set up a feature which will sent them reports from their children’s phones and set time limits on app usage. • MGM Resorts and the Culinary Workers Union have tentatively agreed on a new 5-year contract covering approximately 24,000 workers at 10 casino resorts on the Las Vegas strip. FINANCE & MARKETS:
• Note of caution on construction PMI. UK construction PMI held steady at 52.5 in May, the same level as April. April had seen a bounce back from the Beast from the East. Any number over 50.0 implies expansion. HIS Markit says ‘the two millstones of uncertainty and weak economic growth gave the sector plenty to worry about this month, and whilst activity still grew, the lowest business confidence in seven months suggests the subdued pipeline of new work is having an effect.’ It continues ‘with a decline in new orders for a fourth time in five months, it was client hesitation and consumer diffidence towards spending that had construction activity stuttering. Higher prices for fuel, raw material shortages, higher labor costs combined with slow delivery times were further obstacles to growth as firms nervously assessed their workforce for much-needed talent and sub-contractors could name • Sterling down at $1.3303 and €1.1384 • Oil down a dollar at $75.42 • UK 10yr gilt yield up 2bps at 1.30% • World markets: UK, Europe & US up yesterday but Asia mixed in Tuesday trade. • Brexit, politics etc.: o FT reports Mrs May has abandoned plans to present European leaders with a detailed blueprint for the UK’s post Brexit / EU relationship after failures to agree in Cabinet. A 150-page white paper will now be published after the European Council meeting on June 28-29. o David Davis said to be “disappointed” that the detailed plan has been put on hold as uncertainty continues. o UK Brexit solution to be kicked down the road to October. It had been June but then, unfortunately, June began to happen. o FT quotes business leader as saying executives were “starting to disengage” with government after having ‘repeatedly raised the same issues, such as the need for frictionless trade after Brexit, but it is now a Gordian knot that we can’t help untie.’ o PM tells President Trump his tariffs are ‘unjustified and deeply disappointing’. Liam Fox says Brexit could see them removed o Brexit legislation to return to the House of Commons from the Lords a week today, 12 June o Bloomberg suggests Mrs May could U-turn on the Customs’ Union in a move that would see Ireland solved but her Brexit ministers either resign or undermine the PM’s own position. o Chatter re an autumn election ongoing as Labour’s left tells Jeremy Corbyn to commit to remaining in the EU in order to gain power o Whilst they have to prepare for any outcome, civil servants working for David Davis have drawn up a ‘Doomsday Brexit’ scenario that would see the UK short of medicine, fuel and food within a fortnight of leaving the EU without a trade deal. A senior official said ‘we are entirely dependent on Europe reciprocating our posture that we will do nothing to impede the flow of goods into the UK. If, for whatever reason, Europe decides to slow that supply down, then we’re screwed.’ o Downing Street has said there will be no Armageddon. Brexiters say it is Project Fear II. o Wells Fargo is said to be considering using both Paris and Dublin as centres for its European business after Brexit per FY. START THE DAY WITH A SONG: Yesterday’s song was Insomnia by Faithless. Today, who sang: Unless, unless, I know, I feel it in my bones, I’m sick I’m tired of staying in control Oh yes, I feel, a rat upon a wheel I got to know what’s not and what is real RETAIL NEWS WITH NICK BUBB:
• BRC-KPMG Retail Sales figures for May (the 4 weeks to May 26th): After a notably poor April outcome and increasing doubts about how representative the BRC sample of Large Retailers is, our expectations were pretty subdued for the May survey (which was released overnight). But the boost to Food and Fashion retailers from the warmer weather was enough to drive as much as +2.8% LFL overall. How much the Royal Wedding drove more spending is debatable (the BRC notes that “the day itself was a distraction for shoppers as they stayed at home to watch the festivities on TV”), but the extra Bank Holiday gave a useful calendar boost and the weather was certainly good for picnics and barbecues and outdoor living. The exact Food/Non-Food LFL sales split in May is, as usual, buried in the 3-month moving averages (of +3.4% and -1.4% respectively), but it looks to us as if Food and Non-Food were • AO World: After a strong rally on the back of the reassuring pre-close update in early April, the share price of the Online electricals business AO World (aka AO.com) has been on the slide since the Dixons Carphone warning last week, as if today’s finals could also contain some bad news, but there is nothing untoward in the statement. The typically bullish headline is “AO on track as it delivers continued revenue growth and further strategic progress” and CEO Steve Caunce says “The new financial year has started well in both the UK and Europe, with UK revenue growth returning to double-digit levels against prior year. Whilst we remain cautious, given economic and competitive pressures on the UK electricals market, we are confident of achieving our stated goals of future growth in the years ahead”. Analyst’s meeting 9am. • QUIZ: The finals today from the fast fashion business QUIZ (which floated last July) show 30% revenue growth and 20% underlying PBT growth in y/e March and the headline is “Strong omni-channel growth driven by international and outstanding online momentum”. The current trading statement is mixed “As has been reported in the media, UK retail sector footfall softened in April and this impacted the performance of our UK stores and concessions sales channel during the month, while our Online and International business continued to perform well. Since then we have been encouraged by a strong recovery in UK store and concession sales”, but the overall message is that “QUIZ is well positioned to deliver strong growth in the year ahead in line with the Board’s expectations”. Analyst’s meeting 9.30am. • News Flow This Week: There is still no sign of the Games Workshop pre-close update, but tomorrow brings an Inchcape Capital Markets Day and a WH Smith update. On Thursday we get the Wesfarmers Strategy Day down in Australia (hopefully with more detail on the sale of Homebase/Bunnings UK) and a Joules pre-close update. |
|