Langton Capital – 2017-04-19 – G Election, Vianet, experiential offers, Heineken & other:
G Election, Vianet, experiential offers, Heineken & other:
A DAY IN THE LIFE:
Short week, this week. Wednesday already. Key issues below? Experiential is where it’s at. Hard to replicate but nobody said life would be easy. Also, the General Election. Everyone has a view but we would pick out comments from the holiday industry; this will not be good news for them, there may be some reluctance to book holidays whilst would-be travellers remain glued to their TVs.
That’s assuming they can summon up the interest to follow the debates a.k.a. shouting matches. On to the news:
THE TREND TOWARDS EXPERIENTIAL LEISURE – FOOD COURTS:
• Recent listing Time Out Group says a central part of its growth strategy is its new Time Out Markets, with its existing Lisbon market showing strong growth and new sites planned in London and Miami.
• The UK’s capital is abuzz with similar ventures, from trendsetters Box Park (Shoreditch, Croydon) and Dinerama (Shoreditch) to newer entrants such as Flat Iron Square (Borough).
• But what new experiences do these food markets offer, and are they a fad or indicative of a more significant shift in leisure habits?
• Buying the experience…
• The trend towards consumers paying for a memorable experience is well-documented. Food courts certainly play to this.
• Other operators talk of ‘bringing the outside in’ and becoming ‘department stores of dining’ – consumers appear to like a choice of food and drink in a communal space.
• Destinations such as Dinerama can bring in a range of ages, but appear to particularly appeal to younger professionals who, perhaps understandably, prefer a beer with a burger rather than jaeger bombs at the local nightclub.
• But what about Beyond London?
• Luke Johnson has been busy with Brighton Pier Group, while other piers have been identified as targets for redevelopment.
• York has established a new food court area on its historic Shambles street.
• While there is plenty of room for more food markets across the UK, there are also barriers to entry (for example, finding and operating appropriate sites).
• Bulls might say this allows such businesses to command a higher premium, although bears might see it as a drag on growth.
• More to follow on night-out activities, escape rooms and e-sports, among others…
PUB, RESTAURANT & DRINK PRODUCERS:
• Vianet updates on trading for its year ended 31 March 2017 saying ‘trading for the second half of the year has continued to improve as anticipated and, as a result, the Group’s full year profits will be broadly in line with market expectations and ahead of last year’s outturn of £3.02 million from continuing operations.’ Vianet chairman James Dickson comments ‘the Group expects to again deliver year-on-year profit growth. Importantly, there has been overall progress across the core businesses where focus on our exciting medium to long term prospects, particularly for telemetry and payment solutions for the coffee vending market is gaining momentum.’
• Heineken reports Q1 numbers, says consolidated beer volume +0.6% organically, ‘with growth in Asia Pacific and Europe offsetting slightly lower volume in Americas and Africa, Middle East & Eastern Europe.’
• Heineken says Q1 ‘is seasonally less significant in terms of both volume and profit to full year HEINEKEN results.’
• Heineken CEO Jean-François van Boxmeer comments ‘performance in the first quarter was in line with expectations, delivering volume growth against strong comparatives last year. Asia Pacific continued to outperform and volume in Europe was solid. In Africa, Middle East & Eastern Europe market conditions remain challenging, adversely impacting volume. In Americas, whilst Mexican volume was good this was more than offset by weaker volume in Brazil. Our full year expectations remain unchanged.’
• Recent import MOD pizza has reported numbers to 25 December showing that it lost £5.02m in this, its start-up, phase
• MOD, which is part-owned by Carphone Warehouse founder Sir Charles Dunstone, reported no revenues (pre-opening) with capex of £4.93m and pre-opening costs of £5.02m.
• MOD Pizza reports 2016 was a year in which it ‘opened five trial restaurants in a variety of locations in order to understand how the operating model would translate to the UK market and to understand how different types of location would perform’.
• MOD reports it ‘will seek to optimise the performance of its five existing restaurants in the coming year as well as attempting to identify sites for additional openings’.
• Fleurets reports Q1 has been associated with the triggering or Article 50 with record amounts spent on staycations last year (£45.3bn) and an increasing number of day-trips.
• Fleurets reports ‘owing to weak sterling, transactionally the hotel market has shown a trend of international investors purchasing UK Regional hotels.’
• Fleurets says ‘the restaurant market has shown a degree of increased turnover on previous years at casual dining chains.’ It says ‘brands which are seeing minimal or no improvement are looking into loss making units with restructuring and slowing expansion such as The Restaurant Group identifying £10m of costs to be saved. The only company stating ‘Brexit’ as the reason for suppressed sales and the closure of certain sites is Jamie Oliver’s brand.’
• Oakman Inns is making a concerted attempt to reduce the number of straws it uses in its business. It makes available some 100k per month. Oakman reports, by way of comparison, that 500m are used in the USA every single day.
• Christie reports ‘convenience retail is growing at a steady rate of c.5% per annum, the fastest growing arm of grocery retail behind discounters and online retail.’
• Christie reports food-to-grow market expanding. It says ‘there is a current trend among progressive retailers to increase the amount of food to-go and coffee offers – arguably still a missed opportunity for many. Food-to-go reflects the changing behaviour and habits of consumers who are more inclined, more now than ever, to purchase food out of the home.’ It says there has been some blurring of dividing lines with petrol stations moving into coffee and McColl’s, for example, opening 12 Subway units.
• Derby Brewing is seeking to raise £500k on Crowdcube, valuing the company at £12.5m (pre-new money). Derby, which was established in 2004, currently has revenues of £3m but it says that average growth y-o-y has been 78%.
• Next boss Simon Wolfson has seen his pay halved on disappointing numbers.
• General election:
o Sterling up but FTSE-100 down.
o ALMR says ‘whatever the outcome, we need a Government that takes decisive action to tackle rising costs for eating and drinking out businesses and provides clarity on Brexit. Employers need confidence and financial room to manoeuvre if they are to invest and grow.’
o BBPA comments ‘the debate around Brexit will be centre-stage, and we will be highlighting the key issues facing the sector.’ It continues ‘in the hospitality industry, we need to continue to attract those with the right skills, and keep trade with our neighbours as free as possible. “Brexit also presents an opportunity to encourage the new Government towards a more favourable tax regime, especially for beer duty.’
o Food & Drink Federation says ‘alongside national security, any Government’s primary duty is to ensure that the nation has access to safe, affordable and nutritious food and drink so our country can continue to prosper.’
• Begbies Traynor has reported that rising food and fuel prices are putting pressure on firms across the UK. It says that 22k firms are facing “significant financial distress”. This number is up by a quarter over the last 12mths.
• The formation of new distilleries increased by almost a fifth (17%) in the UK last year, according to data published by the Wine & Spirit Trade Association (WSTA). The total number of distilleries in the UK stands at 273, with the chief executive of WSTA, Miles Beale, calling the ‘rapid growth’ a ‘positive sign’ for the spirits industry.
• Business rates are to increase significantly for pub companies despite a substantial reduction for supermarket operators like Tesco. Business rates specialist, CVS, has calculated that Tesco will have a £105m cut in its annual business rate bill. Tesco said these numbers are ‘inaccurate’ but declined to specify how much it is saving due to the rate revaluation.
• Hotcha, the fastest growing Chinese takeaway and delivery chain in the UK, has opened its 13th store in Bournemouth last month. Co-founder James Liang commented ‘We are delighted to be opening this store in Bournemouth, enabling us to cook for customers in this thriving, seaside town.’
• A record of one million vines will be planted in the UK this year, making wine production ‘one the fastest growing agricultural sectors in the UK.’ The extra 625 acres of new vines will yield an extra two million bottles, adding another £50m to the industry. The last ten years has seen 135% growth in the area under vine in the UK.
• Peter Harris, artist and entrepreneur, has taken artisanal coffee to the next level, showing off a steampunked cold drip coffee machine displayed at the London Coffee Festival 2017. Coffee shot sales from the machine raised £436.97 for charity.
• Shanghai-based Bright Food Group will sell cereal brand Weetabix to US cereal company Post Holdings for $1.76bn (£1.4bn). The former will continue to work with Post to market the brand in China. Weetabix’s revenues of £346m in 2015 were 2% lower than in 2012, while its pre-tax profits were down 1% to £94.3m over the same period, according to its accounts.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• General election a ‘disaster’ for the travel industry as it could delay holiday bookings, push operators to offer discounts. Alan Bowen, legal advisor to the Association of Atol Companies, told TTG ‘it’s a disaster for the travel industry as we know historically that people stop spending money on holidays and other big purchases during an election campaign.’ Mr Bowen continues ‘it’s not good news because it creates uncertainty and people will wait until June 9 when it calms down – it’s not going to be helpful for the next eight weeks. The only good thing is that the election hasn’t been called for July 8.’
• A study by Tourism Economics has forecast that president Trump’s travel ban could deter as many as 10.6 million travellers from visiting the USA this year. Tourism Economics predicts the drop, which it expects to be nearly 7% of expected travellers, could cost the US economy $18bn and 107,000 jobs. Adam Sacks, president of Tourism Economics, said: ‘The whole rhetoric around [the travel ban] has damaged the US brand as a destination. It’s a very discretionary market. It takes very little for them to shift their travel plan and preferences.’
• Jet2holidays has included 30% more capacity into Turkey in its programmes for summer 2018 and has also pushed prices up. Chief executive Steve Heapy explained, in contrast to negative comments from Hays Travel, that ‘Turkey sold really well this year. It’s great value and was in much demand, so we’re putting more on for next year. With Turkey, it very much depends if it’s in the news, but then it always returns.’
• Data from eDreams Odigeo shows a ‘significant increase’ in visitors travelling from Europe to the UK over Easter. With the cost of flying to the UK falling by 16% the number of international visitors increased by 49%, with Edinburgh and London up 66% and 61% respectively against figures from last Easter.
• Aspen Skiing Co and KSL Capital Partners have entered into a joint venture to acquire Intrawest Resort Holdings for $945m and Mammoth Resorts for an undisclosed sum.
• Accorhotels has acquired Availpro, a European hotel booking software firm. The hotel group will merge Availpro with its 2015 acquisition of Fastbooking to create a large European hotel digital booking platform.
• A court ruling in Italy that banned Uber services from running in the country has been suspended. The ‘unfair competition’ ban would have seen the app face fines of $10,600 a day for remaining active.
• Shares in the Australian gambling company, Tatts Group, have gone up after it received a $5.4bn cash takeover offer from a consortium backed by private equity house KKR.
FINANCE & MARKETS:
• IMF reports world economic growth is gaining momentum. It expects global growth of 3.5% this year, up from the 3.1% predicted earlier.
• The IMF has upgraded its estimate for the UK’s economic growth this year to 2%. It had been looking for 1.5% as recently as January.
• Chancellor Philip Hammond has told MPs that the taxpayers’ stake in RBS may have to be sold at a loss
• Oil down a little at $54.73
• Sterling at 3mth highs of $1.2827 and €1.1962
• UK 10yr gilt yield down 4bps at 1.01%
• World markets: UK’s FTSE has its worst day in 3mths as Sterling strength impacted overseas earners
• World markets: UK down yesterday with Europe also lower. US down and Asia down in Wednesday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Geopolitical concerns put skids under market. Miners down despite strong China data. Q1 reporting season about to ramp up
• China growth fastest in 6 Qs. Market still drops on Loony Leader revelation: Trump, Brexit, Erdogan, N Korea etc. What could go wrong?
• Loony Leaders; remember the good old days? All we had to worry about were Gadhafi, Hussein, non-nuclear N Korea etc.
• Tesco coins ‘customercentricity’. Gagging observers advise co to sack those responsible immediately.
• Starbucks in UK slips to 1% LfL growth. Equates to volume loss with inflation at more than twice that level
• Bank of England to choke off consumer credit before we do ourselves an injury. Will impact spending with real income growth non-existent
• MOD Pizza reports 2016 numbers. No revenue, £5m of costs on ‘support team & pre-opening costs of opening 5 restaurants’
• Snap election news has market lower. Labour disarray. Spectre of unopposed Tory gov. now a looming prospect. Erdogan lesson well learnt…
RETAIL NEWS WITH NICK BUBB:
• Bonmarche: The embattled Bonmarche fashion chain has reported some better news for once: today’s update reports a return to modest overall LFL sales growth (0.7%) in Q4 and “the Board expects that the pre-exceptional PBT for the 53 week period ended 1 April 2017 will be slightly above the mid-point of the £5.0m to £7.0m range previously forecast on 21 September 2016”. CEO Helen Connolly says that “Store like-for like sales were negative in January but stronger during February and March, and we also saw the resumption of growth in Online sales following improvements made to our online offering…We remain confident that Bonmarché remains unique in its ability to serve the needs of its target market and that the successful implementation of our plan will allow us to deliver growth in FY18, despite the challenging market”.
• General Election Tips: “Honest Nick” thinks that the value bet in #GE2017 must be to go long of Lib Dem seats: last night Ladbrokes were offering as much as 12-1 against them getting more than 40 seats…
• Today’s Press and News: Today’s papers are obviously full of coverage of the shock news about a snap Election on June 8th…the front page headline of the Times is “May heads for election landslide”, whilst the Guardian runs with “May: give me my mandate” and the FT goes with “May calls snap election in bid to strengthen hand in Brexit”, although the Daily Mail plumps, bizarrely, for “Crush the Saboteurs”. In Retailing terms, the main stories are the big decline in CEO Simon Wolfson’s pay package last year (as reported in the Next Report & Accounts) and the so-called “strong” final results released by House of Fraser (more on this tomorrow), although the Daily Mail focuses on the 200 job losses at Burberry (in the cosmetics division) and at Jaeger. The Burberry and ABF (Primark) updates today contain few surprises.
• News Flow This Week: Tomorrow we get the much-awaited Debenhams interims/strategic update and then the ONS Retail Sales figures for March are out on Friday morning.