Langton Capital – 2017-01-30 – Mobile ordering, Compoir, Conviviality & other:
Mobile ordering, Compoir, Conviviality & other:A DAY IN THE LIFE: Why is it that the most haunted buildings in Britain tend to be pubs? It’s not the drink, do you think? Because surely there are more spirits, if spirits exist, knocking about in graveyards and, on route to the boneyard, many if not most people’s mortal remains will have passed through a church and what about hospitals, battlefields and the like? Well one characteristic that graveyards, churches, hospitals and battlefields have in common, other than being the cause, recipient or stopping off point for dead bodies and their associated spirits, is that they’re not very long on alcohol whilst pubs, even taking into account their move into the food market, still vend quite a lot of booze. So there’s ‘definite’ correlation between drink & apparitions and, if the statisticians can conclude from such things that there is causality (big feet ‘lead’ to intelligence but only largely because adults are more intelligent than toddlers), then that might be quite easy to ‘prove’ too. On to the news: PUB, RESTAURANT & DRINKS PRODUCERS: • Comptoir Group updates on FY trading, says ‘was in line with market expectations.’ Says ‘the Company had a strong trading performance during the second half of 2016, culminating in a busy December.’ • Comptoir confirms it hit its target of opening 6 new sites in H2. The Company ended the year with 24 restaurants. • Conviviality reports H1 numbers, says revenue +211% (on acquisitions) at £782.5m with PBT +285% at £7.4m • Conviviality H1. EPS +142% at 9.2p, debt down a little & H1 dividend doubled to 4.2p per share. • Conviviality current trading. Sales +6.1% in Nov & Dec with LfL sales +2.1% over the 6wk Xmas period to 1 Jan. CEO Diana Hunter reports ‘these strong results demonstrate our competitive advantage, the broad customer base we have developed and the robust nature of Conviviality as the UK’s leading drinks wholesaler, distributor and solution provider to our Customers.’ She says ‘we have successfully restructured to create three business units Conviviality Direct, Conviviality Retail and Conviviality Trading, each providing our customers and Franchisees with unrivalled range, expert service and advice to meet their customer needs whilst providing our suppliers with unmatched access to routes to market across both the on and off trade.’ • Conviviality CEO Diane Hunter reports ‘the recent acquisitions have resulted in Conviviality being well positioned in its market with a resilient business model that provides unique positioning for its suppliers and customers. We are also pleased to report that the Group continues to trade in line with expectations for the full year.’ • Five Guys is rolling out its delivery service with Deliveroo across its 60 UK sites after trialling it at sites in London, Bristol, and Cambridge earlier this month, per MCA. The fast-growing better burger brand is in talks to open in Clapham, Croydon, and Leicester Square and is also preparing to launch in Germany. • Roll outs can be fun, particularly if there is demand for the product. But roll ups can be more difficult, often lead to failure. Five Guys is a roll out. But the issue with the former is that it adds capacity whilst the latter does not. Adding capacity can cause problems if demand is stagnant (or even rising slowly) and it can jack up rents, cause shortages of chefs and the like. Sound familiar? • Company set up to help foreign workers leave Britain. Expatexit will help EU workers in UK find jobs elsewhere in EU post Brexit vote. This may or may not amount to something. The hospitality industry relies heavily on EU workers. If companies set up to busily find Polish and Baltic workers jobs in Germany, they will not be doing the industry any favours. • Resolution foundation says ‘mini-boom’ in living standards is now over. Says things improved in 2014 but worsening now. Inflation is thought likely to hit 4% later in the year & interest rates may rise. Income growth is also reported to have slowed. Resolution says ‘after a tight squeeze during the crisis, working-age households have enjoyed a living standards mini-boom in recent years. But fast-rising inflation this year has brought this all too short mini-boom to a sharp halt as pay rises have not kept up.’ • Resolution Foundation: ‘There’s little that the government can do to stop rising inflation eating into people’s living standards this year.’ • Starbucks has pledged to employ over 10,000 refugees globally in the next five years, in reaction to President Trump’s immigration ban. The hiring will begin in the US and will focus on people who have served or supported the military. Airbnb has also offered free accommodation to individuals stranded by the implementation of the ban. • Emerald Investment Partners, the fund led by former Punch finance director Alan McIntosh, is trying to put together the financing it needs to make a bid for the pub company of 200p or more. The Sunday Times writes that Emerald has yet to secure backing for its counter bid and is thought to have approached a few potential partners, including Magners maker C&C. A last ditch bid is still possible before Punch puts the Heineken bid to a shareholder vote on 10 February. • Moody’s has reported that Tesco’s proposed merger with Booker is credit positive. It says the shares & cash deal offers ‘the opportunity for efficiencies in the supply chain, and, in due course, innovation and improved asset utilisation that will drive significant potential synergies.’ It says ‘we think the merger’s strategic logic is sound, although, as with any major merger deal, it carries execution risks and the possibility that planned synergies will not be realised in full.’ • Moody’s reports Morrison’s recent tender offer for c£209m of its debt is also credit positive. • John Kennedy, president of Europe for Diageo, says that the drinks giant won’t be raising the retail prices of its brands in the wake of Brexit. ‘If we based our prices on changes in currency we’d be changing them all the time.’ Said Kennedy. ‘We manage our prices on a global basis, and while there will inevitably be some inflation pressure in the UK, there will not be significant price hikes to our brands.’ • Chop’d has opened two new sites since the beginning of the month, one in London, the other in Leeds. MCA quotes CEO Eddie Holmes as saying future openings to be a mixture of regional launches and openings in London. Holmes says ‘it’s obviously very early days with Manchester but initial response has been great. We think there’s huge potential across the UK for healthy food that also – and very importantly – tastes great. I’d see us opening a mixture of sites in and out of London going forward.’ • MCA reports Truman’s Brewery is planning to launch out an all-day café concept, Brick Land Brews • Fuller’s has appointed Georgina Young as its head brewer, having originally been hired as a production brewer back in 1999. John Keeling said of the lady succeeding him: ‘I’m delighted to see George promoted to this role. She is very well-respected at Fuller’s and throughout the wider industry and is the first female Head Brewer at Fuller’s. She’s a great person to lead the Brewery going forwards and inspire the next generation of brewers.’ • Thwaites is freezing its prices to its tenants for the rest of 2017. Director of Pubs and Brewing at Thwaites, Andrew Buchanan, said: ‘We hope this news is a welcome boost to our licensees. • ‘We know currently there are tough trading conditions and they are facing cost increases in a whole host of areas. That is why we are committed to supporting our customers wherever we can and why we are going to hold our prices this year. • ‘We too have seen our costs rise but we have found a way to absorb that this year so that we don’t have to pass it on to our publicans.’ • MCA’s latest menu analysis suggests Christmas 2016 was the most expensive yet, with operators bumping prices up by 3%-4%. • Australia’s wines priced at or above AUS$10 per litre free-on-board achieved their highest export value to date in 2016, rising 19% to AUS$574m (£344m). The figures, from Wine Australia’s December 2016 export report, show demand was up in all of Australia’s top five markets except Hong Kong ¬– mainland China by 47%, the US by 23%, the UK by 25% and Canada by 9%. Hong Kong was down by 12%. • Coca-Cola will invest $200m in plants in Pakistan and is opening two new bottling plants in the country. The move follows S$500m invested this year in upgrading existing plants, along with the inauguration of a US$60m plant in Bangladesh through its subsidiary International Beverage. • RMT union says staff working on the London underground will stage a 16-hour walkout from 6pm on Sunday 5 February and another 15-hour walkout on Tuesday 7 from 10am. • London commuters face more travel chaos in February and March as underground train staff press their case over staffing levels with another round of strikes. More strikes are planned for March MOBILE PAYMENTS: • Journal NRN in US says ‘mobile payment is a huge trend in the restaurant business.’ This after Starbucks said mobile ordering is now 7% of sales, up from 3% last year. NRN says ‘consumers like their phones after all, so enabling them to use those phones to pay for their food seems a no brainer.’ • Mobile payments. Is tech leading demand – or reacting to it. NRN quotes observer as saying it’s ‘a solution in search of a problem.’ This does not sit well with raw data, which suggests that the demand is substantial. • NRN says ‘most customers will only use a couple of restaurant company apps, and those apps are for companies they frequent. As such, chains like Starbucks and Domino’s are easy beneficiaries of mobile apps and mobile payment.’ It may be that smaller (though still substantial) operators will go through an aggregator in order to allow consumers not to overload their phones with random clutter. Store cards of the 90s and 00s come to mind. You’ve got one and then you’ve got a dozen. This opened up the way for Nectar etc. • Mobile payments can speed up trade. NRN quotes service providers as saying customers ‘can pay their bill and avoid the line that can develop at the cashier at the end of the meal.’ • One danger to watch out for is that mobile ordering can slow service at the counter, per Starbucks. Commentator NRN says ‘so many people used mobile order and pay in many locations that it had the opposite effect that the chain intended. Rather than speed orders and improve service, mobile ordering actually drove some customers away by crowding the counter where people get their drinks.’ • Starbucks CEO Howard Schultz says ‘a growing number of stores are challenged to keep up with volume demands. We are now laser focused on fixing the problem. The nature of it is too much demand. Operational challenge is a problem we have solved before. I assure you we can solve it again.’ • Mobile ordering is super-hot in a number of locations. Starbucks notes that 1,200 particularly tech savvy locations now receive 20% of their orders via mobile order and payment. Starbucks admits ‘when those orders come in at that volume, it’s creating congestion at handoff.’ Long lines are blamed for causing some would-be customers to walk away. LEISURE TRAVEL & HOTELS: • PPHE updates on full year trading, says has ‘reshaped business’ to ‘pave the way for future growth’. • PPHE reports hotel revenues +27% y-o-y. LfL REVPAr +7.2%. This largely due to the weakness of the pound. CEO Boris Ivesha reports ‘2016 has truly been a year of transition for our Group, with several new hotel openings and soft openings, debt restructuring, the acquisition of a controlling interest in our Croatian operation and the transfer of our Germany & Hungary assets under our Croatian operation which will enable us to create further shareholder value.’ • PPHE says ‘trading in the early part of the year was softer than expected in some of our markets’. It says this was ‘in the build up to the Brexit referendum and in the wake of various terrorist attacks’. • PPHE says ‘the second half of the year was more encouraging. Improved market conditions have continued into 2017 and we expect to make further progress, particularly as we benefit from our new room inventory in Nuremberg and London where our market position will be strengthened significantly.’ • ONS numbers show a record number of inbound tourists in November. Numbers rose to 3.1m, up 17% on last year. Tourism Minister Tracey Crouch comments ‘our tourism industry is booming as Britain cements its reputation as one of the world’s must-visit destinations. I am particularly pleased that there are an increasing number of visits from important markets like the US, with tourism making a significant contribution to our economy. We are committed to helping the sector grow even further, so the benefits are spread far and wide across the country.’ • VisitBritain’s Sally Balcombe says growing inbound numbers ‘demonstrate our tourism industry’s crucial role in showing that our nation is welcoming and open for business, and its increasing importance as a driver of economic growth.’ • A study by STR and Tourism Economics suggests that the UK’s tourism and hospitality sectors have benefitted from an increase in arrivals from North America. According to the International Passenger Survey (IPS) conducted by the Office for National Statistics, U.K. arrivals from North America were up 6.8% between July and October 2016 year-on-year. • Flight booking data shows that bookings from China to the UK are up 81% this month against January last year, and 43% ahead for January to March 2017, according to VisitBritain. • The US hotel industry reported positive results in the three key performance metrics during the week of 15-21 January 2017, per STR. Occupancy increased 0.3% to 56.3%, and average daily rate (ADR) rose 4.6% to US$122.34. Consequently, revenue per available room (RevPAR) grew 4.9% to US$68.87. OTHER LEISURE: • Alphabet Q4 revenues were up 22% to $26bn and profits rose 17% to $7.8bn. • Snap Inc, topco of Snapchat, is getting set to IPO soon (March deadline) by revealing its financials this week. This event could become the largest U.S. technology IPO since Facebook, with some valuing it between $20bn and $25bn. The firm is expected to offer new investors ‘no-vote’ shares; thereby denying them voting power over corporate decisions. FINANCE & MARKETS: • US economy grew at an annualised rate of 1.9% in Q4 per Fed numbers. President Trump is aiming to raise the rate to c4% • Eurozone bailout fund has reported that Greece’s public debt is manageable. • World markets: UK up Friday, Europe down. US markets down & Asia mostly lower in Monday trade • Brent a shade lower at c$55.30 per barrel • Sterling $1.258 per dollar. Little changed at 117.2 per Euro • UK 10yr gilt yield unchanged at 1.47%. US 30yr treasury yield down 2bps at 3.06% TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS: • Comptoir Group updates on FY trading, says ‘was in line with market expectations.’ • Conviviality reports H1 numbers, says revenue +211% (on acquisitions) at £782.5m with PBT +285% at £7.4m • Conviviality H1. EPS +142% at 9.2p, debt down a little & H1 dividend doubled to 4.2p per share. • Conviviality current trading. Sales +6.1% in Nov & Dec with LfL sales +2.1% over the 6wk Xmas period to 1 Jan • Five Guys is rolling out its delivery service with Deliveroo across its 60 UK sites after trialling it at sites in London, Bristol & Cambridge • Company set up to help foreign workers leave Britain. Expatexit will help EU workers in UK find jobs elsewhere in EU post Brexit vote • Resolution foundation says ‘mini-boom’ in living standards is now over. Says things improved in 2014 but worsening now • Resolution Foundation: ‘There’s little that the government can do to stop rising inflation eating into people’s living standards this year.’ • Sunday Times has Emerald Investment Partners trying to put together financing for rival Punch Taverns bid • MCA’s latest menu analysis suggests Christmas 2016 was the most expensive yet, with operators bumping prices up by 3%-4%. • Journal NRN in US says ‘mobile payment is a huge trend in the restaurant business.’ Is 7% of sales at Starbucks, up from 3% last year • PPHE updates on full year trading, says has ‘reshaped business’ to ‘pave the way for future growth’. • ONS numbers show a record number of inbound tourists in November. Numbers rose to 3.1m, up 17% on last year • US economy grew at an annualised rate of 1.9% in Q4 per Fed numbers. President Trump is aiming to raise the rate to c4% • Friday late tweets: Starbucks leads the way in mobile apps. Pre-ordering, it’s a growing thing. Now 7% of US sales pre-ordered • Booker. Tesco says merger will bring benefits for everybody. Now that’s not quite true, is it?! Indie retailers may object RETAIL NEWS WITH NICK BUBB:
• Saturday Press on Tesco/Booker: There was, inevitably, saturation coverage of the surprise Tesco/Booker deal in the Saturday papers, much of its focused on competition concerns: as per the detailed FT article (which also had some interesting vox pop from a Mr Patel, owner of a Londis store in Southwark). Notwithstanding the failure of the Iceland/Booker deal in 2000, Lex column in the FT noted that Tesco’s move into an adjacent food market is a logical response to UK maturity and concluded that “attack may turn out to be the best form of defence”. The other editorial comment tended to focus on the intriguing revelation that Richard Cousins of Compass resigned recently as a non-exec of Tesco because of his concerns over the deal: the Evening Standard on Friday said that he was wrong and the Business editorial in the Times was headlined “Somebody is off their trolley”, noting that the • Other Saturday Press: The Daily Mail had a feature profile of its “Big Shot of the Week”, the estimable Seb James, CEO of Dixons Carphone, noting that after Silverscreen, the DVD retailer that he used to run, went bust in 2006 he feared he might never get another job again. And the Guardian had a big article about the growing importance of Chinese shoppers (“UK retailers crowing as Year of the Rooster brings big Chinese spenders”), including some vox pop from the Burberry outlet store in Hackney.
• Sunday Press on Tesco/Booker: The Sunday papers were also all over the Tesco/Booker deal and the main Sunday Times story (“Watchdog to bury teeth into Tesco’s cornershop raid”) noted Stuart Rose’s view that “the CMA will be all over it like a rash”. The Sunday Times also had a full-page feature article focused on the way in which independent shopkeepers will end up working for Tesco, noting Malcolm Walker of Iceland’s view that Charles Wilson of Booker is “a genius” and revealing that the City code names for the deal were “Teal” and “Blue”. The Sunday Telegraph went with “Tesco to escalate Marmite wars with takeover” as its main Business story, with a separate Editorial comment that the deal could ignite “a seismic shift” in the relationship between grocery suppliers and the supermarket giants. The Mail on Sunday also highlighted the pressure on food suppliers from the deal and • Other Sunday Press: The other company in focus in the Sunday papers was the beleaguered French Connection, with the Sunday Telegraph revealing that the business is close to selling its Oxford Circus flagship freehold to the US brand Under Armour and also running a big article about the way in which French Connection has fallen out of fashion, whilst the Mail on Sunday flagged that activist investors are thinking of using FCA rules to force an AGM vote on the future of the veteran Stephen Marks as both Chairman and CEO. The Sunday Telegraph also noted that the fast-recovering Dreams furnishings business is up for sale by its private equity owners. The Observer noted that it was “a good week” for WH Smith and also highlighted, ahead of Tuesday’s Ocado final results, that the Ocado share price peaked just after founder Jason Gissing retired.
• Conviviality: Today’s interims from Conviviality, “the UK’s leading independent wholesaler and distributor of alcohol” are not exactly timely in the sense that they cover the 26 weeks to Oct 30th…but they are timely in the sense that, post Tesco/Booker, they show how an acquisitive business can successfully grow in this market. Sales have climbed dramatically, but adjusted EBITDA is up 252% to £22.9m and adjusted fully diluted EPS is up 142% to 9.2p. And current trading is good, with a 6.1% increase in Group sales in November and December showing that the acquisitions have bedded in well. Diana Hunter, the CEO, “The recent acquisitions have resulted in Conviviality being well positioned in its market with a resilient business model that provides unique positioning for its suppliers and customers. We are also pleased to report that the Group continues to trade in line with • News Flow This Week: The flow of Christmas trading updates is nearly over, thankfully, but we haven’t heard much from the Furniture and Furnishings retailers, so we get the ScS trading update tomorrow, along with the Carpetright Q3 update, just after the monthly GFK Consumer Confidence survey is published. Tomorrow also brings the Ocado finals (with management likely to face more questions about the failure to deliver the long-awaited Overseas licensing deal…), as well as the Joules interims. Over in the US, the Apple Q1 is out tomorrow evening, with the Amazon Q4 out on Thursday. Thursday is also “Groundhog Day” and sees the latest MPC interest rate announcement and the Bank of England Inflation Report. |
|
