Langton Capital – 2016-08-10 – William Hill, drinking guidelines, hotel trading & other:
A Day in the Life:Langton is probably over the Atlantic as you read this. We battled our way across the Mohave – or whatever the desert is called at this point – and made it to Vegas and now we’ve just the flight and the jet lag to look forward to. All being well, the email should be back to normal by the end of the week. On to the news: Briefly repeating yesterday’s Question for our Readers:The explosion in craft beer, and the ‘local’ focus of many of these breweries has left Langton wondering whether there has been any impact on the hotel industry. As such we’d just like to ask if any readers in the Hotel segment would mind taking a minute to answer these questions for us. • What type of craft brewers fit best into your hotels? Does their ‘localness’ play a part? • How is the offer of these breweries different/better than their competition? • What are other small breweries not doing that they should be doing in order to get your business? The News:PUB, RESTAURANT & DRINKS PRODUCERS: • CAMRA has said that the government’s recommendations on alcohol consumption do not make sense. • NHS guidance for men was dropped to 14 units per week, the same as for women, in January. A YouGov poll suggests that 61% of respondents agreed that moderate alcohol consumption could be part of a healthy lifestyle. Some 51% disagreed with the Chief Medical Officers’ decision that alcohol guidelines should be the same for men and women. • CAMRA says ‘the figures we’re releasing today, at the start of the Great British Beer Festival, show that government advice on drinking is at odds with common sense.’ It continues ‘if the government wants people to take the guidance seriously then it needs to present people with realistic and believable advice, which they can use to judge their own risk when it comes to responsible drinking. If the public feels, as our figures suggest, that the guidelines are not credible and lack evidence, the danger is they will increasingly just ignore them.’ • Whiting & Hammond has slipped into loss after head office expansion reports Propel. • MCA reports that David Page, the former PizzaExpress chief executive and chairman of Franco Manca-owner Fulham Shore, has begun a new funding round for his private investment vehicle Putney Beach. The MCA suggests that Page, who has already raised £1m through the vehicle, is looking for a further £750k. • ETM is said to be set to open three further sites before the end of the year. • Morrison’s has updated on its agreement with Ocado – See Nick Bubb below. LEISURE TRAVEL & HOTELS: • HVS, AlixPartners survey suggests that the UK hotel industry had a varied Q2. It says ‘while trading in London’s hotels was subdued for the sixth consecutive quarter, cities such as Bath and Birmingham enjoyed stronger RevPAR growth in Q2.’ Weaker Sterling following the 23 June Brexit vote may suck in some visitors & dissuade some Brits on financial grounds from travelling overseas. OTHER LEISURE: • 888 and Rank have made an ‘unsolicited non-binding highly conditional proposal…regarding a potential combination of the three companies’ reports William Hill. • Hill says approach ‘envisages an inter-conditional all-share merger of 888 and Rank, with 888 acting as the acquiring entity, to create BidCo, which would contemporaneously offer to acquire William Hill for cash and newly issued shares in BidCo.’ • Mixed proposal of cash and shares to value William Hill at around 364p per share. William Hill says ‘having reviewed the Proposal with its financial advisers, Citi and Barclays, the Board of William Hill has unanimously rejected the Proposal as it substantially undervalues William Hill.’ It says ‘in addition, the Board of William Hill does not believe that a combination of William Hill with 888 and Rank will enhance William Hill’s strategic positioning or deliver superior value for shareholders compared against William Hill’s strategy, which is focused on increasing the Group’s diversification by growing its digital and international businesses.’ • Hill says bid is risky and ‘involves a highly complicated three-way combination at a low premium with BidCo assuming approximately £2.2 billion of leverage in order to fund the cash element of the consideration and refinance existing debt within the three companies.’ Chairman Gareth Davis reports ‘this conditional proposal substantially undervalues William Hill, is highly opportunistic and does not reflect the inherent value of the business. It is a very complex three-way combination at a low premium involving substantial risk for William Hill shareholders: execution risk, integration risk and risks of materially increased leverage. The Group has a strong team to deliver against our strategy to grow our digital and international businesses so we strongly advise that shareholders take no action.’ FINANCE & MARKETS: • UK indices continue to hit new highs despite Brexit fears for the real economy. • Estate agent Savills has said profits at its British commercial property business more than halved in the first six months of the year. These were hit by uncertainty before the 23 June EU referendum. • UK industrial output grew at the fastest rate for 17yrs in Q2. The figures were struck largely before 23 june Brexit vote. RETAIL NEWS WITH NICK BUBB: • Morrisons/Ocado: Out of the blue yesterday, both companies have issued announcements about a new deal (Ocado call it “an extended agreement”). As the Times website noted yesterday, when Ocado struck a deal with Morrisons in 2013 to provide the technology and distribution network to sell groceries Online for the first time, its shares soared 32% in just one day, as Ocado was seen to have got a great deal from Dalton Philips, the then CEO of Morrisons. With former Tesco executives now in charge at Morrisons (and a supply deal with Amazon to help rebalance the power), Morrisons has “renegotiated” the deal with Ocado and they appear, at first glance, to have struck a much better deal…
• Boohoo: With the share price touching its all-time high of c75p, after a strong run since “Brexit”, the fast-growing Online fashion retailer Boohoo has confirmed yesterday that the company has performed well during the first five months of the year and the start to August has been encouraging: “Demand has been robust and sales momentum in the first quarter has continued into the second quarter. Sell through of seasonal stock has been strong through the Spring and Summer season. Consequently, the board now anticipates that the results for the current year will be above expectations with increased sales growth of between 28% and 33% (against previous guidance of 25% to 30%). As a result of operating leverage in the business, the board currently anticipates improved EBITDA margins for the financial year”. That looks like translating into an 11%/12% upgrade
• ScS Group: The furniture retailers were hit hard on the stockmarket after “Brexit”, but with its great rival, DFS, due to announce a trading update on Thursday, ScS has got in there first by announcing today that good sales momentum has continued since the last trading update on 9 June, with total LFL sales order intake edging up cumulatively from 14.6% to 14.8% for the 53 weeks ended 30 July. As a result, “the group expects to report profits in line with current market expectations” and CEO David Knight says “We are delighted that trading was strong throughout the EU referendum campaign and has continued since the vote with progress on a like for like basis in all retail categories”. How long the momentum will last is another matter and we will know more about the outlook when ScS report their full-year results on Oct 4th, but in the meantime ScS • Yesterday’s Press and News: The strike on Southern Railways hits many of the front pages (“Southern Discomfort” screams the headline in CityAM), but the main Retail focus is on the improved BRC-KPMG Retail sales figures for July (see above). A few papers pick up the comment on the BBC Today programme from MP Iain Wright (the chairman of the Business, Innovations and Skills Committee), that Philip Green should “do the right thing” and sort out the pension liabilities of BHS. The Times notes that Crispin Odey’s hedge fund has increased its stake in Sports Direct to c5%, via CFD’s, and the Daily Mail flags that reports that Ocado is about to announce a deal with Morrisons today over its new warehouse in Erith saw shares in the Online grocer jump yesterday… |
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