Langton Capital – 2016-02-22 – Soho House, beer sales, tips, betting & other:
A Day in the Life:
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Find previous emails at http://www.langtoncapital.co.uk/daily-notes/
So the Mighty Hull City’s second team destroyed Arsenal 0-0 at the Emirates on Saturday.
At least our goalie did and now both teams have a problem with fixture congestion when it comes to organising the rematch at the KC.
I mean Hull is pushing for promotion this season. We could actually head the division, would be the first silverware in a couple of generations and even Arsenal, which is not fighting a relegation battle this year, probably has more matches than it knows what to do with.
But anyway. I suppose it’s an embarrassment of riches and, for the moment, with the Half Term now definitively behind us and the run-in to Easter to look forward to, let’s move on to the news:
Pub, Restaurant & Drinks Producer News:
• Soho House shareholders have been told that they must stump up £20m in equity if banks are to increase overdraft from £25m to £35m
• Soho House is currently 60% owned by US tycoon Ron Burkle, 30% by Richard Caring and 10% by founder Nick Jones
• Moody’s puts Soho House bonds on review. Accepts strong cash-flow but suggests that rapid expansion is eating cash. Moody’s says ‘the review reflects the company’s narrowed liquidity profile ahead of its April 2016 interest payment on its senior secured notes due 2018 and uncertainty about the impact of its recent bondholder consent solicitation.’ It accepts ‘Soho House’s business is strongly cash flowing on the operating level; however, the firm is also in a growth mode, thus consuming more cash than its operations generate.’ It says ‘as a result, Soho House’s liquidity is the weakest feature of its credit profile, currently, with only GBP2.5 million available on the revolver and GBP8.5 million of cash on balance sheet. The proposed consent solicitation would provide Soho House with much needed liquidity via an increase in the revolving
• Moody’s says ‘during its review Moody’s will continue to closely monitor Soho House’s liquidity, in particular, the receipt of equity funds as detailed in the consent solicitation balanced against planned capital expenditures. For the outlook to revert to stable, the company would have to find a way to finance itself through 12-18 months without frequently recurring liquidity-oriented transactions, such as the bond tap in December following closely on the heels of a PIK not issuance, as well as the current consent solicitation. Stable and profitable operating performance would also be needed for a stable outlook.’
• Scientists at Washington State University have found that drinking wine just before bed helps people lose weight thanks to the presence of Resveratrol. The substance is credited with turning stubborn white fat into fast-burning beige fat.
• CGA and the ALMR are joining together for a new ‘Future Shock’ series of intelligence reports on the eating out and drinking sectors. The reports will make use of the considerable banks of data held by each body and provide insights for operators and suppliers across the sectors on key issues like property costs, pay, and tax.
• ‘Future Shock’. ALMR chief executive Kate Nicholls said: ‘Our aim is simple—to provide anyone with an interest in our sector with a one stop shop of information; a genuine state of the nation report. This is the first time that anyone has provided a comprehensive health check on the sector—with operational, consumer, supply chain and macro-economic insight. It means operators, politicians and the media have the key facts and fingertips in an easy to digest, bite-sized format.’
• Burger King has lost its bid to sell beer at its London Paddington and Victoria stations sites, following strong opposition from police.
• A union has blasted restaurant chain Bill’s after claims tips meant for staff did not reach them. Unite spokesman Rhys McCarthy commented: ‘It’s ¬outrageous restaurants like Bill’s appear to be pocketing this money which hardworking staff rely on to top up their meagre wages.’ A Bill’s spokesman said they are shared by a -restaurant’s whole team but cash tips go to the waiters.
• A new study of 1,000 graduates by the NUS and YouthSight shows students are increasingly more likely to go to visit a coffee shop or a study group than the local student bar. In a sign of changing times, the survey found that the most useful services for students were clubs and societies (60%), advice and support (50%) and café facilities (43%). Only 37% described bars as the most useful service.
• The Scotch Whisky Association continues to campaign for a further 2% cut in duty for Scotch whisky, which brings some £4bn in exports to the UK. The group argues that another cut in duty to the current rate of 76% will stimulate further growth in the industry.
• Craft cider and pizza chain The Stable, which is 51% owned by Fuller’s, is to open its first London site (and 14th in total) in Whitechapel this April. Its existing sites are located in Bath, Bristol, Birmingham, Cheltenham, Cardiff, Falmouth, Fistral, Winchester, Weymouth, Winchester, Plymouth, Southampton, and Poole.
• The BBPA has responded to a group of multiple operators calling its beer duty campaign ‘fundamentally misguided’.
• The Wine and Spirit Trade Association (WSTA) has described reports that attribute the UK’s rising cost of living to higher alcohol prices as ‘overinflated’.
• Lidl UK has announced it will give at least £500,000 from the proceeds of its single-use carrier bags to environmental charity Keep Britain Tidy.
• Home Retail Group has received a rival £1.4bn bid from South African retailer Steinhoff, worth more than Sainsbury’s £1.3bn offer.
• Online travel search engine Skyscanner has announced its seventh year of double-digit growth in a row, with revenue up 28% to £120m. The group was recently valued at over £1bn.
• Ladbrokes & Wm Hill will report FY numbers this week. Both will be adversely impacted by new taxes, levies.
• The football pools is set to become a stand-alone public company, with the former COO of Owner Sportech in talks to create a new London-listed company to buy the institution.
• Playtech has decided against returning cash to shareholders and will use its £800m war chest to kick off a new round of deals in the betting industry.
Finance & Markets:
• Jan surplus in public finances may still leave HMG short on its FY (5 April) targets. The ONS reports a Jan surplus +£1bn at £11.2bn. This was the largest January surplus since 2008 but was still a little below the c£12.6bn that the City had been looking for. Borrowing for the current tax year (the 10mths to end-Jan) came in at £66.5bn, some £10.6bn lower than at the same time last year. The current forecast for the 2015/16 deficit stands at £73.5bn.
• US ‘core’ (price rises excluding food & energy) CPI rose 2.2% in the year to end-January per Labor Dept.
• Greek paper Agora has said that EU lenders are working on a debt relief programme for the country if it can institute reforms by 2022. The debt relief would initially take the form of lower interest rates and longer maturities on the nation’s debts.
• World markets: UK down on Friday, Europe also weaker. US down in later trading but Asia up in Monday trade
• Oil price little changed. Down for choice over the weekend. Trading at around $33.50 per barrel.
• Early reports suggest Euro consumer confidence took a dip in February. Certainly feels as though a slowdown is underway
Retail Roundup from Nick Bubb:
Sainsbury/Home Retail: With a market cap of about €18bn we must assume Steinhoff have the cash resources to fund their 175p bid and with the Conforama chain in Europe and Harveys and Bensons in the UK there are plenty of synergies in furnishings and electricals for them from owning Argos, so it looks like Sainsbury has a real fight on its hands…
Today’s Press and News:
Planet ONS Watch:
Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s magazine saw guest retailer Aldi win easily, but with less of a gap than its advertising claims: the Aldi basket of just £41.17 was 14% cheaper than 2nd placed Morrisons and 32% (or nearly £20) cheaper than Waitrose…Amazingly, the separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was also won by Aldi, as its newly refurbished 12,000 sq ft superstore in Lewisham topped the rankings, with a solid score of 77 out of 100 (including 10 out 10 for car parking). The Grocer also had a feature article on the debate about whether Aldi’s new ad campaign shows that it has been rattled by its rivals’ recent price-cutting or it is merely setting the record straight.
News Flow Next Week: Things are busy in the world of Retail Property this week, with Wednesday bringing the CapCo finals and Friday the Intu Properties finals. The Howden Joinery finals are on Thursday. And, as the end of the month is approaching amazingly quickly now, we get the silly CBI Distributive Trades survey for “February” on Wednesday and the well-respected monthly GFK Consumer Confidence Index on Friday. Nick Bubb – email@example.com
This was produced for distribution Friday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:
The London Market (hotels, restaurants, pubs, bars etc.):
• See earlier comments for more detail on our view that London is perhaps past its best (for this cycle at least) and that it may be about to embark on a period of slower (or negative) growth
• M&C has reported figures this morning. It says ‘trading was weaker than last year in London and New York especially in the second half of the year.’
• It repeats ‘during Q4 2015, RevPAR in key cities such as New York, London and Singapore all fell as compared to the previous quarter.’
• M&C says specifically ‘London RevPAR for 2015 fell by 3.4%. Excluding The Chelsea Harbour Hotel which was acquired in March 2014, London RevPAR fell 3.5%.’
• It says that a part of this decline was ‘due to the refurbishment of guestrooms which started at the end of 2014 and was completed in the fourth quarter of 2015.’ But it does say ‘in Q4 2015, London’s RevPAR fell by 5.0%.’
• But does slow trading result from refurbishment closures or are the latter prompted by the former?
• M&C says ‘the Group will commence refurbishment of two of its key London hotels in 2016…it is anticipated that both projects will require removal of rooms from inventory in stages but the hotels will not need to be fully closed during the refurbishment period. ‘
• Overall, we believe that the London hotel cycle has passed its peak. It would not be surprising in the near future to see rates cut in order to bolster already-falling occupancy levels
• New capacity being put on by Travelodge, Premier Inn & Hub (both Whitbread), Tune, the Accor brands and EasyHotel will all do nothing to support rates.
• So is Uber really losing $1bn a year in China?
• And if it is, how long can that go on?
• Perhaps, with hindsight, in China Uber may have bitten off more than it can chew.
• But the path to riches for these Unicorn stocks – start-up, $1bn valuation, IPO, mega-billion capitalisation (but still losses or de-Minimis profits) – is well trod.
• And while there are billions to be made by getting these gambles right, there will doubtless be people willing to spin the wheel.
• It’s OPM, perhaps (other people’s money) but it is what it is.
• All of which suggests that it may not be just the existing market that gets disrupted, it could be the wealth of those backing the new entrant
• TUI and Thomas Cook have commented that bookings to Turkey are down by as much as 40%
• The operators are able (at some modest cost but at great effort) to move capacity to the Western Med and the Canaries.
• Terrorist incidents such as the explosion in Ankara yesterday will do little to prompt a new wave of bookings to Turkey’s resorts.
Random information, hopefully not all of it useless:
• Press comment that Morrison’s may be bid for. Could happen. The idea of allowing 4 to go to 3 is more appealing (or at least less unappealing) to the competition authorities when there are new entrants and ‘smaller’ operators such as Aldi, Lidl, M&S Food and Waitrose all taking share.
• Shaping up to be a rather soggy end to an otherwise buoyant week. UK markets down yesterday when some others were up. Could go either way today but overall the week has been one of substantial recovery.
• Risk off kinda day yesterday with OIGs, MINs and FINs (oil & gas, miners & financials) on the way down & boring stocks on the way up. House builders relatively strong on broker comment.
• Sterling stable. Brexit fears not impacting just at the moment.
• Oil off a shade. Down a buck and a half from its recent bounce to $35.50.
• Again it pays to look at a slightly longer chart. This suggests that oil price is just bumping around the bottom. Could go either way. That’s stating the blooming obvious but it gives plenty of ammunition to both the bulls and the bears.
• Gold price off the top but still threatening to break through the (what-we-are-told-is) important $1260 level.
• Soft commodities. Most weak. Feature of the day, sugar weak, pig prices strong.