Langton Capital – 2016-09-19 – DP Poland, late-night economy, Brexit & other:
DP Poland H1 numbers, late-night spending, Brexit etc.
A DAY IN THE LIFE:
So should you do unto your dog as you would have him do unto you?
Well, perhaps but, whilst loyalty, devotion and all that good stuff could be seen as a two-way street, I’m just as happy if he doesn’t share his food with me as what he eats holds relatively little appeal, particularly when he chooses to dine al fresco, usually on dead squirrels and horse poo.
However, if we end up in penury post our EU exit, then I might have to review my options.
I’d certainly be sharing out the scraps differently because, after stripping a chicken or a duck or whatever for the family table of a Sunday, I’d swear that the dog ends up with a plate that’s fuller than the one meant to feed the six or seven of us and, though much of it comprises grisly muck that I don’t feel immediately attracted towards, some of it might have to do in post Brexit Britain. Anyway, on to the news:
RECENT WEBSITE ARTICLES:
• August Tracker could/should have been better – here
• The weather in August – here
• Over-expansion issues – here
• Email, tweets etc. – here
DP POLAND H1 NUMBERS:
• DP Poland has this morning reported H1 numbers saying ‘store opening momentum continues to build’ and 69% is online
• DPP says ‘two new sub-franchisees open stores in two new cities’ in H1. Adds ‘corporate store performance and commissary performance continue to improve.’
• DPP reports it now has 29 Domino’s Pizza stores in 7 Polish cities, 16 corporately managed and 13 sub-franchised.
• DPP reports it has ‘pipeline of further store openings for H2 2016, 1 is ready to open and 3 are under construction’.
• DPP now seen ‘15 consecutive quarters of double digit like-for-like System Sales growth, Q4 2012 – Q2 2016’.
• DPP H1 LfL system sales +28%. Current trading (July & Aug) +24%. Total H1 sales +57% on H1 last year
• DPP store EBITDA +104% in H1, commissary performing well with gross profit +143% in H1.
• DPP still in loss but EBITDA loss down by 5% despite new openings. CEO Peter Shaw reports ‘out of our 6 store openings so far this year I am delighted that 3 stores have been opened by 2 new sub-franchisees, in 2 new cities, taking the number of our sub-franchise partners to 4. Domino’s Pizza is now available in 7 Polish cities, with 29 stores to date, 16 corporately managed and 13 sub-franchised.’
• DPP CEO Shaw adds ‘we saw more than a doubling of both corporate store EBITDA and commissary gross profit in the first half of the year driven by rapid sales growth and improvements in food costs. The continuing improvement in Group EBITDA losses will accelerate as the growth in overheads necessary for rapid expansion become proportionately less significant to accelerating sales.’
• DPP says ‘we have expanded our real estate team to deliver our accelerated store opening programme. This team, including third party specialists, is responsible for finding and negotiating sites, project managing store fit-outs and commissioning store openings, for both corporately managed and sub-franchised stores.’
• DPP now has 4 sub-franchise partners operating 13 stores between them.
• DPP re outlook and current trading: Says ‘growth over the last two months has continued in the same vein as the first half, with strong like-for-likes July to August.’
• DPP reports ‘we anticipate 2016 finishing strongly both in terms of like-for-like sales growth and absolute growth in System Sales.’
• DPP reports opening costs and investment in management continue but says ‘as the business grows, the necessary investments for growth in the Polish team (commissary, real estate, area management and sub-franchisee support) will become proportionately less significant and will be reflected in further improvement in Group EBITDA.’
• DPP on Brexit: Says ‘at this stage it is difficult to predict on a macro-economic basis, however it is clear that Poland is firmly set as a key member of the European Community, benefiting from very significant investment in infrastructure and innovation projects. In turn Poland contributes a robust growth economy with a highly qualified and motivated workforce and growing consumer demand for great value products. As distribution improves with more store openings and as our customer loyalty grows we believe that the growth of Domino’s Pizza in Poland over the coming years will remain robust and uninterrupted.’
PUB, RESTAURANT & DRINKS PRODUCERS:
• Telegraph reports bars & restaurants ‘came to the rescue of Britain’s beleaguered high streets last month by helping to draw consumers into town centres.’ This is a point that has been made by operators on a number of occasions, not least, JD Wetherspoon.
• Pubs rescue High Street, BRC says ‘people are being drawn to the high streets for reasons other than to shop’. It adds ‘driving the overall rise on the high street is an increase in footfall post 5pm, which highlights the growing evening economy based on leisure activities – hospitality, food and beverage trips’.
• City Pub Co reports that bars have not yet been impacted by Brexit vote – but it cautions that prices are set to rise. Clive Watson tells Telegraph vote ‘changed sentiment very briefly but that didn’t impact on trade in the pubs at all.’ He adds ‘we have these shocks over the years, we had Black Wednesday, we had the credit crunch, now we’ve got Brexit and as a businessman you’ve just got to get on with it and do the best for your company.’
• Small brewer tells Langton ‘our costs [grain etc., not labour] have risen by 35% and prices will have to rise’.
• Coca Cola HBC has announced that, following the completion of the acquisition of Neptûno Vandenys, a leading bottled water company in Lithuania, the co ‘has entered into a binding agreement for the sale of 50% of Neptunas’ share capital to The Coca-Cola Company’. Coca Cola HBC says the consideration for the Transaction is approximately €10 million and adds it ‘is subject to customary closing conditions and regulatory approvals and is expected to complete in the fourth quarter of 2016.’
• City Pub Company has announced plans to float on AIM late next year after posting a 36% increase in first half sales to £12.1m and a 30% rise in EBITDA to £1.6m. The group currently has 28 sites, split between its City Pub Company East and City Pub Company West companies, and is aiming to grow to 35 units in the next 12 months with a longer term target of 50.
• In a statement, the group said: ‘It has been another exciting, enjoyable and successful period for our two companies. We look forward to the challenges of continuing to build and expand the companies. The recent acquisitions, our increased focus on better systems and purchasing and our improved bank facilities give us a real opportunity to continue our growth and to seek a successful listing onto AIM when we get to the end of the EIS qualifying period.’
• Investors must adopt a long-term view when backing tech start-ups in the UK as smaller companies struggle to receive funding to grow, according to Neil Woodford. Speaking as part of the BBC’s Tech Talent coverage, Woodford commented: ‘We have been appallingly bad at giving those minnows the long-term capital they need.’
• McDonald’s might have to pay nearly $500m in back taxes to Luxembourg as a result of the ongoing European Commission’s tax probe. Currently, the fast-food chain is permitted to pay no corporation tax — either in the US or Luxembourg — on royalty income from restaurant franchises across Europe. Apple has recently been ordered to pay a €13bn tax penalty in Ireland.
• Scotch Whisky’s recovery in export volumes after three years of declines was driven in part by strong demand from India and France. Export volumes rose by about 3% to 149m litres in the first six months of the year, although export values have slid by 1%.
• Scotch exports volumes rose by 3.1% in the first half of 2016 following several years of decline, according to analysis from the Scotch Whisky Association. ‘The first half of 2016 was marked by an improving Scotch Whisky export performance, suggesting a strengthening in global consumer demand compared to the last couple of years’, said David Frost, Scotch Whisky Association chief executive. ‘The industry-wide emphasis on craftsmanship and provenance, backed by investment, means that Scotch exports are well-placed to grow in the future, appealing to consumers in both mature and emerging markets.’
• The BBPA has partnered with Drinkaware and National Pubwatch in relaunching a campaign to help raise awareness of the law around serving drunks.
• Diageo is preparing to cut jobs at its London head office in an attempt to boost profitability.
• Ranjit Boparan, of Harry Ramsden’s and Godfella’s pizzas, is to buy the Bernard Matthews turkey producer, writes the Telegraph.
• The Intergenerational Foundation says young families are being ‘ghettoised’ in inner city areas by the housing crisis.
• Krispy Kreme UK set to IPO this week.
• Moody’s reports ‘Wm Morrison’s First Half Results and Deleveraging Are Credit Positive’. It says the group ‘announced credit-positive results for its fiscal first half’ adding the company ‘reported stronger profits and cash flows than prior comparables and lower net debt.’
• Moody’s says MRW’s stats ‘all demonstrate the company’s successful execution of its operational and financial strategy.’ It adds ‘the LFL sales growth (excluding fuel) of +2.0% in the second quarter is the strongest of three consecutive quarters of positive LFLs following 14 quarters of negative LFL sales.’
• Moody’s says Morrison’s ‘turnaround is noteworthy given the highly competitive grocery market, with discounters Aldi and Lidl actively opening stores and taking market share from the established Big Four.’ It says ‘the ongoing improvement in Morrison’s underlying sales coupled with improved operating margins is therefore credit positive.’ Moody’s says ‘based on our expectations of further moderate profit growth over the next 12-18 months and some additional reduction in gross debt, we expect leverage to reduce’.
• FT reports Crawshaw blamed a large number of factors for its sales slide in its trading update on Friday. The Yorkshire butcher singled out ‘Brexit, soggy barbecue weather and even the football championships.’ It also pointed out that supermarkets have been more aggressive. MRW, for example, rears, slaughters & prepares its own animals for table – and can therefore move profits up and down the supply chain to suit its own purposes. CRAW says its customer base is ‘more price-focused than ever.’
LEISURE TRAVEL & HOTELS:
• A panel at this year’s BDRC Hotel Insights Forum has suggested that hotels are almost certainly losing business to sharing economy platforms such as Airbnb. Some figures indicate that as many as one in seven British people have used such sites to book accommodation, including one in three business travellers. Robert Nadler, CEO of Nadler Hotels, said: ‘Airbnb will have a visible impact. Something that opened over 40,000 rooms in London must have an impact. Chief executives of hotel groups won’t tell you that, but it must do. I think Airbnb is a threat across the board, and if it’s taking business from [hotels], then we’re obviously not doing the right things.’
• Many customers caught up in the collapse of Lowcost Travel Group have been able to claim refunds from credit or debit card issuers. However, a statement from joint administrators Smith & Williamson and CMB Partners said that the total estimated shortfall from the group runs into ‘tens of millions of pounds’.
• New York international arrivals are predicted to reach an all-time high of 12.7 million this year, while the UK is set to remain its number one market.
• Inghams has laughed off Brexit currency concerns and is introducing more short breaks and new flight and property options.
• Hollywood Bowl has priced its initial public offering at 160p per share, giving it a market capitalisation of £240m. Dealings will begin this Wednesday. The offer is expected to raise £181.3m for Electra and other selling shareholders, including some directors and members of its senior management team. Revenues at Hollywood Bowl grew by 9% last year to £86m, with like-for-like sales up 11%.
• Stephen Burns, CEO of Hollywood Bowl said: ‘I am delighted with the response we have received from investors toward Hollywood Bowl Group. We have achieved a huge amount over the past few years, transforming the business through investment and acquisition, and providing outstanding family entertainment to millions of customers every year. Keeping the customer experience at the heart of everything we do, we have exciting plans in place to grow the business further in the years ahead.’
• Nickelodeon will build an indoor theme park at American Dream Meadowlands mall in New Jersey.
FINANCE & MARKETS:
• Bank of England governor Mark Carney says dealing with Brexit presented him with his “toughest day” in his job. The bank had plans in place but ‘in order to make sure those plans worked we had to have a huge number of people co-ordinate with people both here in the UK, and with people who do my type of job around the world, and ensure that everyone did the right thing at the right time, so that nobody noticed any ripples as a result of it.’
• ICAEW reports ‘the post-vote period of complete confusion shows little sign of abating. David Davis, Brexit secretary, has said that we may need to leave the EU without a trade deal. Says there will not be £350m per week extra to spend on the NHS.
• Sunday Times reports EU may take legal action to prevent UK negotiating trade deals with other countries until it has left the EU.
• Conditions less onerous in property sector, M&G will reopen its suspended commercial property fund in October.
• Confidence across Chinese industry has picked up for the 2nd quarter running per the People’s Bank of China.
• Investor Odey reports inflation ‘could hit 4%’ next year. Would be helpful for high-debt companies that can raise prices.
• World markets: UK down Friday & Europe also lower. US down later in the day but Asia mostly higher in Monday trade
• Oil: Brent trading around $46.55 per barrel
• Rightmove suggests prices up by 4% y-o-y in September. Prices +0.7% in Sept having fallen 1.2% in Aug
• France’s finance and economy minister Michel Sapin has confirmed expectation of 1.5% growth for 2016
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Tracker doesn’t tell full story. Weather was better this August, pubs could have hoped for more
• Tracker has LfLs in line with inflation – i.e. no real growth – and could have been better given weather etc.
• Horizons’ Menu Trends says operators keeping cost of main courses low but boosting spend by upping price of starters/desserts
• London hotels see two-way pull. Inbound tourism numbers up on the back of a weaker pound but demand < supply per STR.
• London tourist volume unlikely to fully compensate for what would otherwise have been a more notable supply > demand problem.
• Monarch’s Andrew Swaffield says British aviation should plan for ‘worst case scenario’ of life outside European Common Aviation Area.
• Other tweets: Pub trading not as good as it could/should have been over the summer. Weather was markedly better
• Hollywood Bowl shares to be listed from Monday. Group c£240m, around £5m per site
• Hog prices low and falling. Down 23% over last 12mths, most of that in last quarter. Will be good for Cranswick, holds onto cheaper prices
• IPOs popping up more frequently. Gym Group to be followed by Pure Gym, Hollywood Bowl lists on Monday, VCs keen to get out?
• Distribution curves less smooth, not linear. Bar-bells re performance seem more common. Either good or bad. Not much in the middle?
RETAIL NEWS WITH NICK BUBB:
• Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s Grocer magazine saw Tesco notch up first win since the beginning of July, as the latest Asda price cuts failed to make an impact. The Tesco basket of £50.58 was £1.24 cheaper than Asda and Asda’s failure to be 10% cheaper than its rivals forced it to dole out a hefty £4.74 price guarantee voucher. Sainsbury edged into 3rd place with a basket of £53.54 and Morrison’s was 4th, with a basket of £54.13. Poor old Waitrose was again well off the pace, with a basket costing £59.53. There was more bad news for Waitrose in the separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability, as their store at Mountsorrel in Leicestershire came 2nd bottom, scoring a resounding 0 out of 20 for stock availability…The 42,000 sq ft Morrisons store at
• Saturday Press: There were loads of glossy Fashion magazine supplements with the Saturday papers, to note the launch of London Fashion Week (LFW), as well as lots of photos of the in-store launch of the new iPhone 7, which the FT noted had received surprisingly big pre-orders. The Times had a feature on its News pages about the problems of John Lewis, in the light of its weak interim results last week, headlined “Trouble in store for middle England’s favourite”. The Telegraph had a snippet about the prediction from Wyevale Garden Centres that this weekend will be the peak for sales of spring bulbs. The FT market report led with the news that Burberry was pushed by UBS on Friday on hopes of increased tourist spending. The Daily Mail flagged that the South African investment vehicle of Christo Wiese, Brait (which owns New Look), is planning on getting a London
• Sunday Press: There was more focus on the John Lewis Partnership in the Sunday papers, with the Mail on Sunday flagging that it will find it impossible to fill its £1.5bn pension deficit hole because of the partnership structure, whilst the Sunday Times had an article headlined “First the Chubby Grocer, now the Zany Salesman…is it the end of a golden era for John Lewis?”, noting that, with top bosses Mark Price and Andy Street off or on their way and costs soaring, the group may have lost its sparkle. The Sunday Times also noted the “Lidl local difficulty”, following the sacking of UK boss Ronny Gottschlich for straying too far from Lidl HQ guidelines. Following the success of JD Sports, there was also a lot of coverage of the boom in “athleisure”: the Observer looked at how JD Sports has used the athleisure trend to forge ahead of its rival Sports
• Today’s Press and News: Several papers report that Philip Green missed the start of London Fashion Week yesterday and the Times claims that he missed Top Shop’s catwalk show in order to avoid answering questions about the BHS pension shortfall in front of his celebrity friends…Otherwise the main story is the improved BRC-Springboard footfall figures for August (footfall in High Street locations rose 1.1%, while retail parks reported a 0.4% increase, albeit footfall in shopping centres dipped by 1.9% in August). Ahead of tomorrow’s interims, the Telegraph reports that Kingfisher is looking for a new London HQ and has appointed Cushman & Wakefield to find a 300,000 sq ft base (although it may stay in Paddington), whilst the Guardian flags that French Connection boss Stephen Marks is resisting a meeting with the activist investor Gatemore Capital. Finally, the
• News Flow This Week: As we move into the second half of September, this week is relatively quiet. The McColl’s EGM on the Co-op deal is being held today, then tomorrow brings the Kingfisher interims, the French Connection interims and the latest monthly Kantar/Nielsen grocery market share data.