Langton Capital – 2019-07-01 – PREMIUM – Carluccio, Betty’s, current trading, tourism, Goals etc.:
Carluccio, Betty’s, current trading, tourism, Goals etc.PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: More than 20yrs after first having done so as an adult and a parent, I spent a chunk of the weekend constructing a guinea pig cage. And, I can report, it’s no more enjoyable and no less frustrating than it was in the 90s but, as they say, the smile on a child’s face is priceless and what else was I going to do, sit in the sun with a beer? Thanks to those who suggested various non-alcoholic beers to try over the weekend. The selection was wide with many beers getting one mention only and Nanny State (BrewDog) and Ghost Ship (Adnam’s) getting more than one. But, I have to report, I didn’t get around to trying any deciding to neck a couple of bottles of white beer, Wainwright (MARS) and Golden Hen (GNK) instead. Average strength about 4.3%. I swerved the various flashy tins (strength 6% to 7.5%) that I’d acquired for Fathers’ Day but have still got plenty to aim for. On to the news: PRIVATE COMPANY RESULTS: Italian themed restaurant company Carluccio has reported numbers for the year to 23 September 2018 to Companies House. 1 July 2018: Introduction: • Carluccio, begun by the late Antonio Carluccio in 1999, underwent a CVA under new-CEO Mark Jones last year. The company is refurbishing and refreshing its estate via its Fresca programme. Company comment: • See also comments in general news below. • Carluccio says ‘the company saw sales fall 4.3% to £137.1m, with the closure of the initial 14 sites in the last four months of the year offsetting the impact of new openings in 2017 and 2018.’ • It says ‘against a backdrop of the well-documented trading challenges confronting the UK casual dining market, like-for-like sales were down -3.1%, with comparable sales softening in the wake of the CVA.’ • Carluccio adds ‘this trend continued into the current financial year, albeit with visible improvements in the past three months across a number of metrics, including like-for-like sales and advance bookings.’ The CVA: • Carluccio closed 14 UK restaurants during the year under review and it has closed a further 15 since. The core UK business now operates from 74 locations with an additional 16 in operation overseas, two in Ireland and 14 managed by a franchise partner in the UAE. The refurbishment programme: • Carluccio says its ‘recovery is expected to continue with the acceleration of the refurbishment programme, alongside menu innovations and on-going operational improvements, which pleasingly are also reflected in improving levels of customer sentiment scores.’ • Carluccio reports ‘the 2018 results fully account for the impact of the sites that were closed as a result of the CVA, before and after the financial year-end [but its] growth plans are underpinned by the rollout of the “Fresca” programme, that combines a more premium dining experience with innovative menus and enhanced service.’ • The pilot investment site in Richmond ‘has received excellent customer feedback with sales uplifts well ahead of expectations.’ More refurbishments will follow • Carluccio says ‘the Fresca programme is far-reaching and aimed at making the restaurants more appealing across all day parts.’ The company adds ‘ultimately, this work is intended to drive Carluccio’s relevancy and appeal to more consumers more of the time, and is aimed at encouraging lapsed customers to re-appraise the brand.’ The numbers: • Sales (largely on the back of restaurant closures) declined by 4.3% to £137.1m. • LfL sales were down by 3.1%. The CVA (and rumours of it before it was confirmed) may have unsettled trading. • The group reports ‘EBITDA before exceptional costs, for the period was £4.0m (excluding sites earmarked for closure from the CVA) as against £4.4m in the prior year.’ • The company adds ‘the business incurred material exceptional costs and impairments against the book value of restaurants, largely as a result of the CVA, totalling £20.4m at group level. The majority of these items were non cash and pushed operating losses to £21.2m.’ • The group has debt of £29.5m (the majority of which is loan notes which accrue not interest until September 2021) and the loss before tax is £23.8m compared with a loss in the prior year of £91.9m • Carluccio is indeed fortunate to have owners with apparently deep pockets and debt that does not accrue interest until September 2021. This because accumulated losses are now £175m and shareholders’ funds are a negative £31.8m. • The group’s £36m of loan notes will accrue interest at 6% p.a. from Sept 2021 Outlook: • Carluccio says ‘this has been a challenging and transitional year, and while we have stabilised the business, it is still relatively early in the turnaround journey.’ • It adds ‘the completion of the CVA and the new investment programme has given us the opportunity to return this business to what the senior management believes is its rightful place in the UK eating-out industry; as a great place to work and to dine, a brand that champions fresh and delicious food, full of flavour and passion.’ • CEO Mark Jones says ‘by any stretch, this has been a challenging period for the company.’ • He adds that the CVA ‘has stabilised the business and given us the opportunity to restore and re-invigorate this great brand.’ Interpretation: • Since Jamie Oliver’s restaurants underwent a CVA and went bust thereafter, there has been speculation that this may become a trend. • Carluccio has to press on with its refurbishments, turn LfLs around, grow sales in total, hold costs and turn in a profit • This could and perhaps should be doable but the market is tough and the competitors are not standing still. • Better competitors are taking share organically and less well-positioned players are discounting – and sometimes undergoing CVAs in order to allow them to cut costs and to discount further. PRIVATE COMPANY RESULTS: Cake shop, coffee and tea producer Betty’s & Taylor’s, has reported numbers to end-Oct 2018 to Companies House: 1 July 2018: Introduction: • Betty’s & Taylor’s was incorporated in 1951. The group has six Betty’s Café Tea Rooms, an online business and tea and coffee merchants, Taylor’s of Harrogate. Company comment: • Betty’s says ‘in an increasingly competitive market, we have seen good sales performance with turnover growing by 10%.’ • The company says ‘during the year, we started a major investment programme to ensure that we remain able to satisfy the growing demand for our products’. • Betty’s says that return on capital fell during the year from 11% to 7% The numbers: • Revenue was £208.1m with operating profit down 26% at £11.2m. • PBT was £10.6m, down from £16.0m last year. • The near 70yr old company has retained profits of £124.3m (2017: £119.4m) and positive shareholders’ funds of £126.2m BOOK REVIEWS: We’d meant to cover Eric Ries’ The Lean Start Up today but it looks as though we’re running out of time. It’ll be in tomorrow. GENERAL NEWS – PUBS & RESTAURANTS: • The BBPA has welcomed the Government’s introduction of the Sector Deal for Tourism, as the association believes it will boost recruitment by promoting important tourism careers like those in pubs and hospitality through enhanced apprenticeship schemes. Chief Executive of the BBPA, Brigid Simmonds commented: ‘Brewing and pubs are vital attractions for our tourism industry, which is why the BBPA has been at the heart of the development of the Sector Deal for Tourism’. • UKHospitality has also stated that it is pleased by the Government’s initiative, the Sector Deal for Tourism, with Chief Executive of the organisation, Kate Nicholls commenting: ‘This Sector Deal marks a tremendous moment for all of us in the hospitality, tourism and leisure industries. The move will be absolutely critical in changing the perception of the sector within Government and the wider public opinion, and acknowledges that hospitality is key to the country’s economic growth’. • Carluccio has lodged accounts to 23 September 2018 with Companies’ House saying that it was a ‘transitional year for the business that saw the completion of a Company Voluntary Arrangement and the start of a far-reaching programme of restaurant investments, on the back of a cash injection by its principal shareholder Landmark Group.’ • Carluccio closed 14 UK restaurants during the year under review and it has closed a further 15 since. The core UK business now operates from 74 locations with an additional 16 in operation overseas, two in Ireland and 14 managed by a franchise partner in the UAE. • Carluccio reports that 52-week sales fell by 4.3% to £137.1m largely as a result of the closures which took place towards the end of the financial year. LfL sales were down 3.1%. EBITDA was £4.0m. See Premium Email for further detail. CEO Mark Jones comments ‘by any stretch, this has been a challenging period for the company.’ The CVA ‘has stabilised the business and given us the opportunity to restore and re-invigorate this great brand and we are very encouraged by the work we have undertaken to improve every facet of the business – including food quality and restaurant environments, and are pleased by the very strong and positive reaction to our initial investments.’ • Per The Times, Richard Caring is reportedly preparing to sell a 25% stake in his restaurant empire, including Annabel’s and The Ivy, to former Qatar prime minister Hamad bin Jassam bin Jaber Al Thani for £200m. It is understood that HBJ would have an option to buy a further 25% of the group, depending on its performance. • AB InBev is gauging interest in a public offering of its Budweiser APAC business in Hong Kong. CEO Carlos Brito believes such a listing would help the company grow through acquisitions in the region. • Constellation Brands Friday announced earnings of $17.57 per share for fiscal 2019 and increased guidance for the current year. The group’s shares rose by around 14% in US trading on the day. • Constellation Brands reports that net sales of beer rose 7.4% over the year with sales of wine and spirits some 7.8% lower. CEO Bill Newlands comments ‘our wine and spirits transformation strategy is working . . . In addition, our iconic beer portfolio continues to be a cornerstone of growth in the US beer industry driven by double-digit growth for Modelo Especial and Corona Premier.’ • Brand Finance has named BrewDog as one of the world’s 25 most valuable beer brands for the first time. • The Italian restaurant group San Carlo has announced it will open its first airport location in Manchester’s new ‘super terminal’ next year. • Charles Wells has announced it will change its name to Wells & Co and will build a new flagship brewery in Bedford. • Isle of Skye Brewing Company has acquired the craft brewer Black Wolf for an undisclosed sum. • Boots has stated that it will close c.200 stores in the UK over the next 18 months, with most staff being transferred to other branches. CURRENT TRADING: • Anti-cheerfulness spoiler alert. Recent company results, contacts etc. June is over and the suggestion is that it was awful. It was awful on a standalone basis but, as it will be compared with June last year (which was hot and during which the World Cup kicked off) it will be particularly bad. • Despite the fact that the sun shone over the weekend (though not across the whole of the country), LfL numbers in June could be down by a material amount. • That is not enough to write off the summer but it does get the season off on a difficult footing. • GNK did not put numbers on its ‘current trading’ and we are not surprised. There is no prize for presenting bad news. The Coffer Peach Tracker should be out in a little over 2wks. • Perhaps the rest of the summer will be great but, with costs rising, the image is of running on a conveyor belt that is moving steadily in a ‘not-helpful’ direction. • Results ex-capex, which are difficult to disaggregate at the best of times, will be particularly interesting. GNK is adding capital and Carluccio (less impacted by poor weather) has commenced on its Fresca refurbishment programme. • In many cases, un-refurbished LfL sales will be down. Because, even for the best of operators, given what’s going on out there, how could they not be? HOLIDAYS & LEISURE TRAVEL: • The Tourism Alliance, an umbrella group which unites the UK outbound, inbound and domestic sectors, is drafting proposals for local authorities to tax visitors in return for a reduction in the 20% VAT rate on accommodation. • Per HVS, Brussels hotel Q1 saw an increase in occupancy and average rates, with RevPAR up 10% yoy. • STR reports US hotel occupancy up 0.9% in May, with ADR up 1.6%. Year-to-date ADR is up 1.6% with RevPAR growth of 1.2%. • Abta CEO Mark Tanzer calls for a review of APD, arguing for a tax policy ‘that does not unfairly penalise the industry or place UK airlines at a disadvantage’. • Travel Weekly reports that German flag carrier Lufthansa ‘has cooled’ on acquiring Thomas Cook’s German airline Condor. It says this is ‘a blow to the travel group’s plans to restructure.’ Lufthansa CFO Ulrik Svensson says ‘it’s unlikely we will get the deal’ and adds it would be ‘complex’ to integrate Condor into Lufthansa’s Eurowings subsidiary. • The ONS reports that the number of overseas visits by Britons rose 4% year-on-year in the month of March but says that spending fell 7% to just under £3 billion. Holidays were down 2%, business trips were also down 2% but (less high-spending) visiting friends & family trips rose by 9%. • The owner of P&O, DP World, is set to buy Topaz Energy and Marine reports Sky News. • Air Canada will acquire Canadian tour operating and airline group Transat for C$520m, with the transaction expected to be completed in early 2020. • Air traffic control operator Nats Holdings reports pre-tax profits down £35m to £98.2m in the year to 31 March. The company handled 2.54m flights during the financial year. • Invesco Ltd invests $300m in ride-hailing firm Grab. In April Grab said that it was looking to raise another $2 billion this year to ramp up expansion. OTHER LEISURE: • Goals Soccer updated on trading on Friday saying that ‘as stated previously the Company is performing well and is cash generative.’ It says ‘across the 45 sites in the UK gross like for like sales were up +10.8% and the game count had increased +12.8% year on year. The Company’s US sites are trading strongly.’ • Goals says ‘Net Debt levels remain around £29m. As reported on 8 March 2019, whilst Goals has exceeded one of its covenant thresholds, the company continues to work positively with the bank within its existing facilities.’ • The company says ‘we can confirm that standstill agreements have been issued to the Company’s previous auditors KPMG and the Company’s previous CFO William Gow.’ It adds ‘for the avoidance of doubt, nothing in these agreements constitutes any admission by the parties of any facts, liabilities, wrongdoing and/or responsibility.’ • All resolutions were passed at the group’s AGM despite the objections raised by major shareholder Mike Ashley. • Gfinity has updated on full year trading saying it has seen ‘strong revenue growth with new account wins driving improved EBITDA.’ The group, which is in its start up phase and is generating losses, says there has been a ‘growth in strategic partnerships highlighting Gfinity’s position as one of the world leaders in the esports and competitive gaming sector.’ • Gfinity says ‘the Company has continued to deliver improved gross margins, particularly through Advisory Services assignments for sports rights holders and commercial brands in collaboration with publishers and distribution partners. The Company continues to move towards a shared revenue model with increased commercial rights.’ It concludes ‘overall, this strong progress has contributed to better than expected revenue and Adjusted EBITDA performance, which are now expected to be slightly ahead of market expectations for the year to 30 June 2019. The Company continues to reiterate its target of breakeven by 2021.’ FINANCE & ECONOMICS: • US and China trade talks back on. • Sterling up at $1.2698 and €1.1187. Oil little changed at $66.29. UK 10yr gilt yield up 1bp at 0.83%. world markets up Friday but Far East lower in Monday trade. • Brexits & Politics: o Team Tory still hammer & tongs with the odd olive branch being thrown out there. Jeremy Hunt says he would offer a cabinet job to Boris Johnson saying ‘Boris is someone of enormous talent.’ Right. o Hunt says he would be happy to serve as Foreign Secretary if Boris Johnson were to become PM. o Boris Johnson says he would aggressively cut taxes in the event of a no-deal Brexit, reports The Times. If the economy were to stumble, the tax base would contract suggesting that the government would have to borrow if it did not put taxes up or cut benefits & spending. Mr Johnson is suggesting a September budget. Sajid Javid would reportedly like Philip Hammond’s job in the event of a Johnson premiership. o The BBC has quoted sources as suggesting that the UK could quickly find itself short of gas post Brexit. o Jeremy Hunt has said he will raid Philip Hammond’s reserves in the event of a no-deal Brexit. Says he is prepared to pull the trigger on no deal even if it leads to business failures. Both contenders promising that they will splash the cash. o Daily Express poll has 94% saying next PM should be a Brexiter. It concludes a ‘remainer must not be allowed near future Brexit negotiations’. o Now hyperactive outgoing PM Mrs May tries death stare on Vlad then launches tourism initiatives etc etc START THE DAY WITH A SONG: • Last Friday’s song was Cash Machine by Hard Fi. Today, who sang: o She’s been in disguise forever, o She’s tried to disguise her stellar views o Much brighter than all this static o Now she’s coming through RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): After Friday’s exclusive interview in the FT with the devious Russian leader Vladimir Putin in Moscow, the front page headline of Saturday’s FT was “May rebuffs Putin at G20 summit and criticises “despicable” actions”. The other eye-catching front page headline in Saturday’s papers was in the Times: “Corbyn too frail to be PM, fears civil service”. In terms of Retail news, the main focus was on the heated exchanges at the Goals Soccer Centres AGM on Friday, with both the Times and the Daily Mail flagging that Sports Direct’s representative Liam Rowley was told to “f*** off” after asking the Board to submit to lie detector tests… • Saturday’s Press and News (2): The Times also noted that Walgreen has confirmed the story that 200 small Boots stores are to be closed. The Daily Mail highlighted that the French Connection formal sale process has been extended until the autumn, whilst its “Punt of the Week” column looked at Boohoo (after it overtook ASOS in market cap terms last week) and its “Popular Shares” section looked at Sainsbury, ahead of the Q1 update next week. The Telegraph flagged that the entrepreneur Philip Day has picked up another 11% of the embattled Bonmarche, via the stake held by the fund manager Cavendish. The Guardian noted the success of the IPO of an Online second-hand clothing company The RealReal in the US on Friday. The Guardian also had a feature article about how Mulberry is trying to attract a younger customer base by sponsoring London pub gigs. • Sunday’s Press and News (1): The front pages of Sunday’s papers again had some interesting headlines, ranging from “Tory rivals in hard Brexit bidding war” in the Sunday Times to “MPs to Corbyn: get a grip or lose Election” in the Observer. In Retail news terms, most papers had pretty thin pickings, although the Sunday Telegraph flagged that the shopping centre company New River Retail is being targeted as a short by hedge funds.
• Sunday’s Press and News (2): The Sunday Times had plenty of Retail stories, however, leading with the news that trading at the Jack Wills fashion chain has “fallen off a cliff” in the last two months and that it is quickly burning through the cash injected recently by its private equity owner BlueGem. The Sunday Times also flagged that Sainsbury boss Mike Coupe has told suppliers that industry consolidation is inevitable (despite the failure of the Asda merger plan) and that Santander has joined the race to buy Tesco Bank’s mortgage book. Talking of Tesco, there was also a big feature interview in the Sunday Times with the former Tesco boss Ian MacLaurin, headlined “I should never have put Leahy in charge”, in which he said that Terry Leahy’s arrogant desire to conquer the US with the ill-conceived Fresh & Easy chain was almost the company’s undoing and that he wished he’d • News Flow This Week: This week starts off quietly, as we move into July/Q3, but it bursts into life on Wednesday, via the Sainsbury Q1 update, the Topps Tiles Q3, The Works’ final results, the JD Sports AGM update and the Monsoon Accessorize CVA vote. Thursday then brings the ABF (Primark) trading update and the Sainsbury AGM. |
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