Langton Capital – 2015-05-03 – More on RTN, sugar sales, restaurant trends & other:
A Day in the Life:
So is it just me or are online advertisers getting ever more inventive in the ways that they present you with adverts despite your wish to avoid them?
South Park recently picked up the theme and ran with it in their inimitable way & it’s hard not to agree that, what with popups, pop-unders and those annoying sites that won’t let you get off them by hitting the ‘x’ button, it’s getting more and more difficult to get away from often intrusive ads by payday lenders, Russian dating sites and sundry other get-rich-quick merchants peddling their various wares.
Of course you won’t get such trash if you stick to The BBC, The Times, The Hull Daily Mail etc. There they might try to sell you life insurance or a chintzy sofa and I couldn’t possibly comment on whether or not Langton has a firewall to prevent accessing Hooky sites in order to watch back episodes of various sitcoms etc. far less anything worse.
And, there may be some truth in the WC Fields comment that you can’t cheat an honest man but surely enough is enough? We only need to be told once or twice that we can make $50k per day effortlessly from home once, don’t we?
Anyway, it’s Tuesday. Feels like Monday, but it isn’t. On to the news:
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• Warren Buffett has labelled public health campaigns blaming obesity and diabetes on fizzy drinks, such as long-term holding Coca-Cola, as ‘quite spurious’. Buffett insisted consumption levels were a matter of personal preference, before saying of his long-standing affection for Cherry Coke: ‘I’ve not seen evidence that convinces me I’ll be more likely to make it to 100 if I suddenly switched to water and broccoli.’
• Horizons reports American-style restaurants poised for further expansion in the UK. Says could replace Mexican outlets as fastest-growers. It says ‘the biannual Ones To Watch report, which tracks the growth of new and emerging brands with between five and 25 outlets and which have shown over 20% growth over the past three years, lists a number of US-themed outlets in its list of the top10 fastest growing brands, either by number of new outlets or percentage growth, and an even larger number of US-themed fledgling ‘Bubbling Under’ brands.’
• Horizons says Dunkin’ Donuts was fastest growing brand by percentage growth rate (2013-2016) with Red’s True Barbecue at no6. Horizons analyst Nicola Knight reports ‘we have seen a significant rise in the numbers of Ones To Watch and Bubbling Under brands (those that have yet to reach five outlets) offering US-style dining including barbecue pits, smokehouses, burgers bars and classic American diners.’
• Major chains growing in the UK between 2013 and 2016 headed by Red Kiosk Co (0 to 20) & Dunkin Donuts (1 to 20). Franco Manca is in there at no3 having grown from 6 to 20 units over the same period
• Texas Roadhouse reports Q1 numbers, revenues +12% to $516m, diluted EPS +10% at 50c. Sees LfL growth of 4.6%. CEO Kent Taylor reports ‘we are pleased that our top-line momentum continued in the first quarter, driven by solid traffic growth. Strong comp sales, along with commodity deflation driven by lower beef costs helped us deliver near double digit earnings growth this quarter. As of today, we have opened ten company restaurants, as well as two international franchise openings, including our first in the Philippines. Beyond restaurant development, our balance sheet and cash flow remain healthy and we believe we are well-positioned for long-term growth.’ Re FY numbers, group sees 5.1% LfL growth in first 4wks of Q2 and reiterates that it should see overall positive growth for the year as a whole.
• Sadly Tim Bacon, co-founder and chairman of the Living Ventures group, has passed away after a long illness
• Bank of Mum & Dad will lend £5bn to its children in 2016 in order to help them get on the property ladder reports L&G
• Pub co Star Pubs & Bars will invest £2.4m in outside areas at 100 of its pubs this year as a part of a £20m overall spend
• Enterprise Inns on Thursday bought back 101k of its own shares for cancellation. On Friday it bought another 98k at c88p
• AB InBev has updated details on the package of commitments it has made to the EC in order to gain approval for SAB deal. It says ‘AB InBev…has submitted an updated package of commitments to the European Commission (EC) in which it has offered to divest the entirety of SABMiller’s businesses in Central and Eastern Europe. This is in addition to the agreed sale of Peroni, Grolsch and Meantime and their related businesses to Asahi.’ SAB reports AB as saying ‘AB InBev’s submission and updated package of commitments is part of its approach to proactively address potential regulatory considerations’. CEO Alan Clark reports ‘SABMiller’s Central and Eastern European businesses have been a core part of our growth story since we first embarked on our international expansion strategy over 20 years ago. We are very proud of these businesses, their brands and the
• Restaurant Group. The ‘un-darling-isation’ of the company reached a new level Friday when shares dropped around 26%.
• RTN: Shares now lost around £930m of shareholders’ money since peak.
• RTN. See Langton 2015 and earlier comments comparing and contrasting group with JDW. High margins can get you only so far
• Restaurant Group. Press suggesting private equity bid for the company now relatively likely, further downside limited.
• The government has revealed its proposals to change the way tips are distributed in restaurants, which include restricting the levying of table sales charges on staff. The consultation into ‘ending unfair tipping practices and increasing transparency for consumers and employees,’ which runs until 27 June. Business Secretary Sajid Javid added: ‘We will look closely at all the options, including legislation if necessary.’
• Kate Nicholls of industry trade body ALMR has spoken up concerning the government’s consultation, with which it has provided research indicating current practices are satisfactory. The ALMR carried out a survey of its 7,000 restaurant members last year and found no evidence of abuse of the current system. Team members were actively involved in and supported the pooling and distribution of tips and no company was retaining the service charge in full or using it to subsidise low pay.
• Conviviality Retail has bought wine wholesaler Bibendum for £60m and has announced an accompanying £32m rights issue which will see 15.6m new shares listed. Conviviality has been on the acquisition trail as recently as last year, when it purchased drinks wholesaler Matthew Clarke for £200m. Bibendum was founded in 1982, merging with PLB in 2014 to form the Bibendum PLB Group, and owns five individual businesses (Bibendum Wine, PLB, Instil Drinks Co., Walker & Wodehouse and The Wondering Wine Company). The group generates most of its business in London and the South East, and is expected to report revenues of around £270.5m and earnings of c£7m in the current year.
• Coffee chain Le Pain Quotidien has stopped paid breaks for staff, offsetting the National Living Wage.
• Brown-Forman has agreed to acquire the BenRiach Distillery Company for c£285m, which will add three single malt scotch whisky brands to its portfolio. Brown-Forman CEO Paul Varga said: ‘The acquisition of these super premium brands will allow Brown-Forman to re-enter one of our industry’s most exciting and consistent growth segments, Single Malt Scotch Whisky. The Glendronach, BenRiach, and Glenglassaugh single malt brands are rich in history and we believe they will continue to prosper and grow in our hands.’
• Heartstone Inns recorded sales of £8.2m in 2015, up 27% year-on-year, while pub EBITDA rose 33% to £1.36m. The group intends to add another two leasehold or freehold sites this year.
• Deliveroo has launched RooBox – an off-site delivery kitchen that aims to bring operators to areas with low restaurant supply. Speaking to MCA, Dan Warne, UK managing director at Deliveroo, commented: ‘We are not inhibited at all by space, which is one of the really exciting things about the project and a major reason why we can make this economical for the restaurant industry versus perhaps setting up a site on a high street. It certainly is a game changer, certainly for us as the volumes we now do with some our restaurant partners are very significant.’
• SA Brain has secured five sites for its Coffee#1 brand, with openings lined up in Dorchester, Honiton, Lichfield, Southampton, and Stourbridge over the next three months.
• Mophagy, a European wholesaler of edible cricket and mealworm, is encouraging chefs in the UK to embrace insect cuisine. Ex-Lego employees Josh Bentham and Harry Harrison, who went on to found Mophagy, posit that their cricket and mealworm products not only taste good, but are rich in nutritional benefits.
• Wholesale onion prices have doubled as concerns grow over tightening supplies in Europe.
• RCL reports Q1 numbers, says earnings at 57c were nearly triple those of a year ago. Increases FY guidance by 25c to c625c.
• RCL says net yields rose by 7% in constant currency terms in Q1. Says it has seen ‘strong close-in demand on Caribbean sailings’ in addition to ‘better on-board revenue’. RCL says ‘overall, the company’s booked position remains strong, similar to last year’s record high levels.’ CEO Richard Fain reports ‘what an exciting quarter in an exciting year. Our brands continue to excel and produce gratifying results. This year’s performance further solidifies our base for the Double-Double.’
• First Rate Holiday Confidence Index suggests that holiday demand remains high despite 23 June Brexit vote. Says 56% of respondents intend to take an overseas holiday this year. It adds ‘the uncertainty around the referendum is having an undeniable impact on confidence in the economy. You can understand that if you consider the uncertainty about the outcome and impact of the referendum among economic experts.’
• Lone Star, which also owns Jury’s Inn, is to sell its Atlas Hotels’ business to London & Regional for £575m
• Silver Point Capital reported to have taken out a £10m short in shares of Thomas Cook Group
• PPHE reports completion of placing of Arenaturist shares. Chairman Boris Ivesha rports ‘we welcome AZ and PBZ, two of Croatia’s largest institutional investors, as shareholders in Arenaturist. Their investments confirm our belief in the significant opportunities for Arenaturist and they share our plans to make it one of the most exciting Croatian leisure companies traded on the Zagreb Stock Exchange.’’
• The CEO of Monarch Group has denied that the company is up for sale and says that the airline is itself looking at potential acquisitions.
FINANCE & MARKETS:
• Dallas Federal Reserve President Robert Kaplan said last week that he could back a rise in US interest rates as soon as June or July is economic data picks up. ‘We’ll see how the second quarter unfolds but I think the market may well be underestimating how soon we might move next,’ Kaplan said at an event in London hosted by think-tank OMFIF. ‘If the second-quarter data is firming you will see me advocating in the not too distant future that we try to take the next step.’
• US inflation barely rose last month as consumer spending underwhelmed, making the possibility of two interest rate hikes this year less likely.
• The eurozone’s economy exceeded expectations in the first quarter of 2016, compared to analyst forecasts of 0.4%. Separate data from Eurostat showed that deflation returned in April, however, with inflation falling to -0.2% from 0% in March.
• World markets: UK down on Friday, Europe mostly higher yesterday, same in US. Far East mixed in Tuesday trade
• Oil price down on Friday spike, trading at around $46.20 per barrel
• Eurozone final manufacturing PMI up to 51.7 in April, ahead of expectations
Retail Roundup from Nick Bubb:
Conviviality: Only six months or so after buying the Matthew Clark drinks wholesaling business, the fast-expanding Conviviality Retail group is to buy the wine wholesaler Bibendum for £60m (EV), as flagged by the Telegraph yesterday, financed by a £32m placing at 205p. Bibendum is not overly profitable, with y/e March seeing EBITDA of £6.7m on sales of £271m, but the synergies should be strong and the business moves the group into more upmarket territory (from its base in Bargain Booze), so the move should be well received by shareholders. CEO Diana Hunter says “The acquisition of Bibendum accelerates our aim to satisfy all of our customers who want to consume alcoholic beverages at home or out of home, whatever the occasion, serving customers directly via retail outlets and indirectly through hospitality and foodservice channels”.
Joules IPO: It is nearly 2 months now since Hotel Chocolat announced that they were to float and that IPO hasn’t happened yet, but another lifestyle retailer has stepped into the breech today, in the form of the fashion chain Joules. It remains to be seen why the business wants to float, but the business is decently profitable, with full-year EBITDA likely to top £16m and the track record is good, so it should get a good reception.
News Flow This Week: As we move into May, after the Bank Holiday yesterday, the big day for company news is tomorrow, which brings us the Next Q1 update, the Sainsbury finals, the Intu Properties AGM trading update and the Ocado AGM. The latest Kantar and Nielsen grocery market share figures are also out tomorrow, with the Morrisons Q1 on Thursday. Nick Bubb – firstname.lastname@example.org
Yester-tweet – Yesterday in a Nutshell:
• Restaurant Group has announced trading got worse, seen ‘further deterioration in trading conditions’.
• RTN. Says sees deterioration with ‘our Leisure business, in particular, continuing to be impacted by the structural and business challenges’
• RTN. Says LfL sales for 17wks to 24 April down, yes down, 2.7%. Group says ‘we do not anticipate any improvement to underlying like for like trends’
• RTN announces CFO to leave the group immediately. Says a comprehensive review is ongoing.
• RTN. Won’t update till August. Has 7.15am conference call. Wrong-foots analysts, major downgrades coming.
• Adnams updates at AGM saying ‘underlying trends remain good with strong growth in key products’.
• Adnams says ‘our operating profit was slightly ahead of expectations at the end of the first quarter.’
• Pizza Pilgrims has secured a fifth site, in London’s Docklands, which is set to open later this year.
• Chinese co HNA is to purchase Carlson Hotels, owner of the Radisson hotel chain. Carlson also owns 51% of Rezidor chain.
RESTAURANT GROUP CONFERENCE CALL:
• The call is ongoing so fuller email later.
• The timing, scheduled at 7.15am, is unprecedented.
• It is poor – to say the very least.
• The management is being skewered, particularly re the dividend.
• Will it, won’t it, hold the payment? Group is unclear.
• Management is hesitant, Mr Breithaupt is on his own, very, very upset.
• He has our sympathy – but there is a money bonfire going on here, lit on his watch
• CFO gone in order to ‘refresh the board’. What does that mean?
• This was as bad a conference call as we have heard in many, many years.
• RTN profit warning, director departure. Timing of call (7.15am) unprecedented. Bad news imparted badly. Will you cut dividend or not?
• RTN shocker: Management hesitant, little financial depth to comments as financial guy walked plank. Dividend now the main issue.
• RTN shocker. Operation guys incl. Mr Breithaupt have our sympathy but this was as bad a conference call as we have heard in many, many years
• RTN shocker: Friday before a Bank Holiday? Really? CFO departs to ‘refresh the board’. Gimme a break, what does that mean? Where’s new one?