Langton Capital – 2017-05-19 – Revolution profit warning, MARS, TCG & other:

May 19 2017

Revolution profit warning, MARS, TCG & other:


On the basis that there’s a chance the Lib Dems will not win the current election, I’ve decide not to push ahead with plans to open a humungous cannabis farm.

I mean that thought of passing the next couple of decades is a confusing fug might appeal but the authorities may remain unenlightened over the medium term.

And you could argue that I’m doing a passable ‘confused’ as it is what with the Anglo-Saxon world turned on its head and us well and truly down the rabbit hole. Up is down, south is north, we have an aggressive, belligerent Mr Whippy-head in the White House and in the UK forty years of carefully planned social & business integration with Europe is now being screwed up and thrown out of the pram and the Tories, bless ‘em, after 7yrs in power, have decided that it’s time for a fresh start.

I mean what’s not to be confused about, maybe the skunk is unnecessary. On to the news:


Get the macro right and the micro will follow. Operate in a growing market & many sins will be forgiven. A bad company will defeat a good manager etc. etc.

Overall, and while we accept that you can rent-a-quote to support any opinion, the above would suggest to us that ‘getting the themes right’ is critically important.

I mean if you’d focused on vertical, male-led drinking over the last four decades, you may have succeeded but you would have certainly seen your market shrink.

Indeed, if you look around the room and can’t see the competitor most likely to go bust, then you may be that competitor.

With bigger themes in mind, Langton produces periodic pieces some of which are linked below:

• Apps; can you ignore them? Here
• Bricks or clicks? Here
• Focus on revenue or margins? Here 
• Inflation, friend or foe? Here


Marston’s yesterday morning reported H1 numbers for the 26wk period to 1 April 2017 and our comments are set out below:

• Headline Numbers:

• Marston’s reports group reports revenue +3% at £440.8m. This despite the impact of Easter moving from H1 to H2

• Profit before tax is +3% at £33.7m. The group estimates that the negative impact of the Easter shift to H2 is around £1.5m

• EPS is 4.8p (+4%) & MARS proposes a 2.7p interim dividend, up 3.8% on H1 last year

• Trading – Destination & Premium:

• Marston’s Premium & Destination pubs have increased LfL sales by +1.1% in H1 over H1 last year. H1 FY16/17 does not include Easter

• In the first 30wks of the year (which includes Easter in both years), LfL sales are +1.6%

• Marston’s reports that operating margins are in line with last year.

• Costs are an issue but, with the slight exception of energy, cost guidance remains in line with earlier comments.

• Prices have been put up ‘by around 2% on a selective basis’

• Trading – Taverns:

• LfL sales in H1 are +1.1% at Taverns

• Sales at week 30 are reported to be +1.7%

• Trading – Leased Pubs:

• Leased profits per pub were +3%

• LfL profits at week 30 were +2%

• Trading – Beer Company:

• Own brewed beer volumes were up 1% in H1 (which excludes Easter)

• Volumes were also running +2% at week 30

• Balance Sheet, Cash Flow & Debt:

• The group is on track to open c23 new units this year (including 3 premium sites) and 8 lodges.

• The group will open a 100-room lodge next year, a noticeably larger unit than the more traditional, 40-60 room site

• The future new-openings pipeline is said to be secure

• MARS H1: Leverage is maintained at 5.0x, fixed charge cover improved to 2.6x

• Both measures will improve as a result of the modest over-funding of the Charles Wells’ acquisition implied by the placing of 57.6m shares

• More on Charles Wells:

• MARS says that the purchase ‘extends our number 1 position in the premium bottled ale and cask ale markets, and enhances our share of the premium canned market.’

• It also ‘strengthens our presence in London and the South East and presents a platform to expand into Scotland.’

• The group will acquire a lager-brewing capacity as well as a canning business that it was in the process of commissioning itself at its existing sites

• The purchase is based on an enterprise value of £55 million equates to 9x current EBITDA before synergies. MARS comments that the transaction to be funded through equity placing as announced today. Some 9.9% of new shares (57.6m shares) are to be issued.

• CEO Ralph Findlay comments ‘we are delighted to have agreed to acquire Charles Wells Brewing and Beer Business.’

• Mr Findlay continues ‘it is a high quality brewing business offering us opportunities to extend our trading area in the South of England and Scotland, and brings a range of well-known and popular brands into our portfolio. We also aim to develop further our range of international licensed brands, and look forward to working with our new overseas partners, including Estrella Damm, Erdinger and Kirin.’

• Marston’s is to purchase Charles Wells’ 16 acre brewing site in Bedford.

• The brewery is only c50% utilised at present. Additional volumes could be put through the Bedford sitet

• Marston’s expects to secure £4m of synergy benefits by FY19

• More on Trading, Conclusion:

• MARS H1: Current trading (for 30 weeks incorporating Easter) ‘remains encouraging’

• Expansion plans remain in line with earlier expectations. Interestingly, Marston’s supports M&B’s view (expressed yesterday) that new capacity growth has slowed

• Marston’s has historically avoided new-build ‘hot spots’

• Group has also acquired three Pointing Dog Premium pubs in May and it has announced the agreement to purchase seven Destination and Premium pubs

• MARS CEO Ralph Findlay comments ‘Marston’s has been transformed over the last 10 years by the consistent implementation of our established strategy. In that time, we have built around 200 pubs on new sites representing 60% of the Destination estate today, and we have developed a leading premium pubs and bars business.’

• MARS comments ‘the Taverns estate has been repositioned, having sold around 1,000 pubs and introduced pioneering franchise-style agreements designed for community pubs. In Brewing, we lead the premium ale market and benefit from a growing contribution from craft beers and international licensed brands, including premium European lager brands.’

• Overall, CEO Ralph Findlay comments ‘our market position will be enhanced by the acquisition of Charles Wells Brewing and Beer Business and we remain confident our strategy will continue to create value for shareholders.’

• Langton Comment: Marston’s has reported robust results and has demonstrated that it is possible to grow LfL sales without sacrificing margin. The group’s shares trade on around 10x this year’s earnings and yield some 5.2%.

• The group has an attractive, well-managed estate of largely freehold properties and its shares are not trading on a demanding rating. Marston’s, along with all of its peers, is exposed to the UK consumer but it is selling product that the consumer would like to buy at a price they are prepared to pay.


• Revolution warns on profits, says ‘adjusted EBITDA (pre-opening costs) out-turn for the year is expected to be broadly at the same level as last year.’

• Revolution nonetheless says ‘underlying sales performance of the business has remained positive in H2’

• Revolution reports +1.7% LfL sales in year to date but says ‘the Company is experiencing the well-publicised sector cost headwinds’

• Revolution says ‘costs will be more than anticipated in the current year.’ Group has opened 5 bars in last year.

• Revolution says new sites ‘are taking longer to mature to full profitability than originally anticipated.’

• Revolution: ‘the Directors remain confident in the underlying strength of the business, its brands, the strong customer proposition and the business’s capability to deliver high returns on invested capital. Consequently, it remains the plan to open six new bars in the next financial year.’

• Following its share issue announcement yesterday, Marston’s has reported that it has placed 57.6m new shares at 137p. The placing is thus at a 4.9% discount to the closing price on 17 May 2017. The new shares will trade from Monday

• Marston’s in the Press. Group’s numbers generally welcomed, supply deal with Punch seen as a positive, Charles Wells deal should add value. Shares slip on pricing of 9.9% placing, see above

• Conservative party manifest. BBPA CEO Brigid Simmonds says ‘we will be studying all the proposals in detail, but I welcome the strong emphasis on supporting business and the important role that small businesses play in our economy.’ The ALMR welcomes steps to reform rates but warned that any immigration system that includes a tax on jobs will undermine businesses’ ability to invest. ALMR CEO Kate Nicholls comments ‘we need a migration system that works, that allows employers’ access to workers and is more than just the taxation of employment. Control of future immigration could be a problem for employers if the target is set prohibitively low, particularly as we are in a position of almost full employment in the UK. Additional costs for businesses will undermine their ability to invest, grow and provide jobs.’

• Gregg’s results taken well, shares manage small rise against falling market.

• The MCA Eating Out Panel has found that pub restaurants were the most commonly visited area in the eating out sector during Q1. Average spend in pub restaurants was £6.30 for breakfast (up 6%), £11.99 for lunch (up 3%) and £17.42 for dinner (up 1%).

• The ONS says warmer weather in April helped retail sales rise by 2.3% month on month, and 4% yoy. Due to increases in inflation, Q1 consumer spending figures in shops and online was 6.2% higher than last year. It remains to be seen if inflationary pressure continues to impact sales with the ONS saying ‘we need a longer series to properly determine a pattern’.

• A survey by Eagle Eye claims that retailers are not taking advantage of extensive mobile phone use. The survey found that 60% of 16-24 year-olds use their phones in stores but only 17% used phones to find products, 17% redeemed promotions and only 15% paid via mobile. However, the customers are ready to engage with 68% saying they would be amenable to digital vouchers and 55% saying they would consider downloading an app for the store.

• Lidl will open its first store in the US in June, with the intention of reaching around 100 stores over the next year.

• Asda has posted an 11th consecutive quarter of falling sales (down 2.8% like-for-like) as it continues to lose ground to its rivals. By contrast, Asda’s parent company, Walmart, revealed a 1.4% rise in like-for-like sales in its native US market. Although the figure marks an improvement on the 7.5% fall recorded in August last year, CEO Sean Clarke admitted that more needs to be done to recover.


• Thomas Cook numbers greeted positively. Group said to be recovering. Tone of statement positive, shares rise vs weak overall stock market.

• Thomas Cook showed an increase in illness related claims in its interim results, believing many of them to be ‘questionable’. The company echoed Abta’s concern about ‘unscrupulous’ claims management firms, saying ‘We are working closely with our hotel partners and the authorities … and will continue actively to lobby government for changes to legislation in this area.’

• On the Beach book build results in Inflexion selling 11.5m shares at 365p each.Following completion of the Placing, Inflexion will hold 3,833,194 ordinary shares in the Company, representing approximately 2.9% of the Company’s issued share capital.

• The laptop ban will not be extended to flights from Europe to the US after a meeting in Brussels between US Department of Homeland Security and the European Commission on Wednesday.

• The US hotel industry saw occupancy fall back slightly by 0.1% to 67.9% for the week ending 13 May, although average daily rate was bumped up by 2.1% to $125.64 and revenue per available room grew by 2% to $85.34, per STR data.


• Hollywood Bowl Group will open its 57th site at the O2 in London in June. CEO of Hollywood Bowl Group, Steve Burns, said ‘The O2 is one of the UK’s premier entertainment venues, with over 200 events a year, so we’re very excited to be bringing a Hollywood Bowl to its eight million annual visitors.’

• Time Out’s bid to open a street food market in Spitalfields has been quashed by councillors. Time Out has not yet stated if it will appeal the decision.

• Alibaba’s revenue for Q1 was up 60% to £4.3bn, thanks to growing its Chinese customer base to more than 450 million shoppers. However, the share price fell 3% yesterday showing investors were unsatisfied with the growth.

• Gear4music directors to sell up to 839k shares at 690p. The group’s shares were 100p less than a year ago.

• G4M also announces that it is to place 610k new shares at 690p to raise £4.2m.


• Japan’s economy grew by 0.5% in Q1 with an annualised rate of 2.2%.

• Greece’s parliament has approved a new package of austerity measures in a bid to gain access to more bailout cash

• Oil up nearly a dollar at $52.92

• Sterling virtually unchanged vs US$ at 1.2955

• Sterling up a fraction vs Euro at €1.1656

• UK 10yr gilt rate unchanged at 1.06%

• World markets: UK & Europe down yesterday but US finished higher. Far East up in Friday trade


• Later tweets: Marston’s H1 PBT +3% at £33.7m. The group estimates that the negative impact of the Easter shift to H2 is around £1.5m

• Marston’s H1 EPS is 4.8p (+4%) & group proposes a 2.7p interim dividend, up 3.8% on H1 last year

• MARS’ Destination & Premium pubs +1.6% LfL at wk30. Margins in line with last year. Taverns +1.7%, leased +2%, beer +2%

• MARS buys Charles Wells’ beer & brewing for £55m. Will generate £4m in synergies. Paying 5.5x post-synergy EBITDA

• MARS says steady as she goes. Issuing c£80m of new equity. Over-funding the Wells deal, will bring gearing down a little

• Discounting on the up (per M&B and others). Frankie & Benny’s offering 2-4-1 on mains, Pizza Hut 25% off mains after 3pm etc

• Thomas Cook H1. Reports ‘robust demand for holidays driving growth’.

• Marston’s announces result of placing to fund C Wells, will issue 57.6m shares at 137p. Represents 4.9% discount.


• Burberry: Today’s finals are the last to be presided over by Christopher Bailey, Chief Creative and Chief Executive Officer, and he says that “2017 was a year of transition for Burberry in a fast changing luxury market. The actions we have taken to lay the foundations for future growth are yielding early benefits and I remain confident that these will build over time”. Importantly, Burberry go on to say, ahead of the 9.30am analysts meeting, that “There is no change to our expectations for FY 2018 adjusted PBT at constant exchange rates”.

• Booker: Notwithstanding the lack of news from the CMA on its proposed merger with Tesco (see below), Booker say today on the back of its finals that “We are continuing to assist the UK competition authorities in their ongoing consideration of the merger and it is expected that the merger will complete in late 2017/early 2018, subject to, amongst other things, the necessary shareholder approvals”. In terms of the outlook, Booker helpfully say that the group’s revenue in the first seven weeks of the current financial year is ahead of last year, but otherwise they make clear that “As a result of the proposed merger, we are in an offer period as defined in the Takeover Code. We will not be making forward-looking statements for the duration of the offer period”. There is an analysts meeting at 8.30am, which might generate a bit more colour, but this is being held in the offices of
Bookers’ City lawyers, so CEO Charles Wilson will be on his best behaviour…

• Moss Bros: Ahead of today’s AGM, Moss Bros has come out with a trading update and the recent run in the share price looks justified, at first sight, as the overall message is that “the Group’s overall trading performance has shown improvement on the prior year, in line with market expectations”, with Retail LFL sales up by 5.5% over the last 15 weeks. But Hire sales have been weak and gross margins are 50bps down, as “a result of re-introducing a mid-season Sale during April as a response to a much tougher trading environment than the previous year”. Brian Brick, the CEO, sums it up by saying: “We are pleased with our progress and Moss Bros continues to trade well and in line with the Board’s expectations, despite the continuing tough trading environment and a highly competitive marketplace which has seen significantly more markdown activity than the same period last year”…

• Planet ONS Watch: We flagged yesterday that, in the real world, April (the 4 weeks to April 29th) was a bit better, given the boost from the late Easter this year, but we then discovered that life was good last month on that bizarre parallel world, the Planet ONS, as the Office of National Statistics Retail Sales figures for April were better than expected. City economists, who had pencilled in a rise of 1%-2% in “seasonally adjusted sales volume” month-on-month (including petrol), were impressed by the fact that the ONS reported an overall rise of 2.3% (giving year-on-year volume growth of 4.0%), but only a fool (or a credulous City economist) would trust the wretched ONS to properly adjust for the effect of the late Easter…The real story, of course, comes in the year-on-year movement in “sales value” in April and it is telling that the non-seasonally adjusted increase was 8.1% and
that the seasonally adjusted increase was as much as 7.1% (we would have expected the gap to be not 1%, but more like 2%-3%…). At least the ONS split of the sales trends between Small Retailers and Large Retailers was very similar and therefore much more plausible this time (after a big divergence in February). The split of Predominantly Food/Non-Food in April was +6.5% and +7.3%, respectively, whilst Non-Store Retailers’ sales growth (ie Online sales growth etc) was 20.5%. Amazingly, the ONS didn’t even mention the Easter timing issue about April in the press release…and just said, lamely, that “Anecdotal evidence from retailers suggests that good weather contributed to growth”.

• BDO High Street Sales Tracker: We flagged on Wednesday that trading at John Lewis last week was a bit subdued, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e May 14th saw Fashion Store LFL sales slump by as much as 8.1% against last year, albeit the comp was reasonably tough as the weather was much warmer a year ago. Including Homewares and Lifestyle chains, total Store LFL sales were down by 3.2% last week. Overall Online sales were up by a relatively modest 13.7% (on top of 16% growth a year ago).

• Trade Press (1): The front page headline story in Retail Week magazine today is about “Pennycook’s Co-op legacy”, flagging up a feature on Richard Pennycook, as he moves on from the Co-op to chair Fenwick’s, looking back at his “rollercoaster ride”. RW also have features on how Monsoon is seeking “to leave its rainy days behind” and “What a former Goodwood boss” (Alex Wilkinson) could bring to House of Fraser, plus a column by Majestic’s Rowan Gormley on “why he’s turning staff into partners”. In terms of News stories, RW focus on the news that Dreams has piqued the interest of rival Chinese mattress-makers and the UK giant Silentnight in the first round of £400m bids for the business and that a fire broke out at the Asos European warehouse in Berlin in the early hours of Tuesday morning, causing an estimated £6.25m of damage to stock.

• Trade Press (2): The main feature in Drapers magazine today is on their recent Footwear Awards (which saw Schuh and Clarks win big), but in her column the Editor looks at the recent recruitment of Alex Williamson and Jill Macdonald and thundered that fashion retailers are casting the net surprisingly wide. In terms of News stories, Drapers focus on the news that the retail workforce is facing “revolutionary” change and employers must adopt innovative strategies to reflect this (as the BRC warned this week at its “Retail 2020 Journey to Better Jobs” conference in London) and that the House of Fraser Chairman has defended the choice of the unknown Alex Williamson as the new CEO. And there is a feature on the first of the High Street autumn range previews.

• News Flow Next Week: A very busy week kicks off on Monday with a McColl’s presentation on the outlook for the Convenience Store market (helped by the IGD). The Topps Tiles interims are on Tuesday. Then Wednesday brings the Kingfisher Q1, the Dixons Carphone Q1, the Marks & Spencer finals and the French Connection AGM. And on Thursday we get the Halfords finals, the Pets at Home finals, the Inchcape Q1, a Card Factory update and the B&M finals.



Trading Statements, etc.


Upcoming results are set out below:

• 19 May 17  Revolution trading update

• 23 May 17  Cranswick FY numbers

• 23 May 17  Stock Spirits AGM

• 23 May 17  Time Out AGM

• 23 May 17  EasyHotel H1 numbers

• 24 May 17  Hollywood Bowl H1 numbers

• 24 May 17  Sportech AGM

• 24 May 17  M&S FY numbers

• 24 May 17  Britvic H1 numbers

• 25 May 17  Young & Co FY numbers

• 26 May 17  Restaurant Group AGM & Q1 update

• 31 May 17  AG Barr AGM

• 6 Jun 17  Vianet FY numbers

• 6 Jun 17  Gym Group AGM

• 7 Jun 17  Jackpot Joy AGM

• 7 Jun 17  Comptoir Group AGM

• 9 Jun 17  Fuller’s FY numbers

• 9 Jun 17  Richoux AGM

• 13-14 Jun 17  Fed interest rates’ meeting

• 14 Jun 17  Elegant Hotels H1 numbers

• 15 Jun 17  Bank of England MPC interest rates decision

• 20 Jun 17  Coca Cola HBC AGM

• 22 Jun 17  Saga AGM

• 29 Jun 17  Greene King FY numbers

• 5 Jul 17   Ocado H1 numbers

• 13 Jul 17  DART Group FY numbers

• 13 Jul 17  SSP Group Q3 update

• 13 Jul 17  Bank of England MPC interest rates decision

• 24 Jul 17  Cranswick Q1 update & AGM

• 25-26 Jul 17  Fed interest rates’ meeting

• 26 Jul 17  Marston’s Q3 update

• 3 Aug 17  Bank of England MPC interest rates decision

• 4 Aug 17  William Hill H1

• 10 Aug 17  TUI Q3 update

• 10 Aug 17  Cineworld H1 numbers

• 8 Sep 17  Greene King AGM

• 14 Sep 17  Bank of England MPC interest rates decision

• 19 Sep 17  Ocado Q3

• 19-20 Sep 17  Fed interest rates’ meeting

• 28 Sep 17  TUI Q4 & FY update

• 10 Oct 17  Marston’s FY trading update

• 12 Oct 17  Bank of England MPC interest rates decision

• 31 Oct 17  Fed interest rates’ meeting

LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line.

Find us online

style=”text-align:left !important”>

 Our website