Langton Capital – 2017-05-23 – EasyHotel H1 numbers, hotels, input costs & other:
EasyHotel H1 numbers, hotels, input costs & other:
A DAY IN THE LIFE:
Bit of a rush today, on to the news:
EASYHOTEL H1 NUMBERS:
• The numbers:
o EZH H1 LfLs across managed hotels +17.4%.
o EZH H1 numbers. Revenue +21.2% on H1 last year with 13.2% growth in Adjusted EBITDA ‘and strong development pipeline in place’
o EZH H1: Total system sales +24.7% to £12.05m with EBITDA of £0.65m. PBT down to £0.06m from £0.14m on pipeline spend
o EZH reports H1 dividend of 0.11p (unchanged).
o EZH reports ‘trading in the first half of the financial year ending 30 September 2017 was slightly ahead of Board expectations, driven primarily by the Group’s strong hotel like-for-like revenue performance.’
o It gives no H2 trading information but says ‘we are well positioned to capitalise on consumer desire to seek out the best value.’
• New openings, balance sheet etc.
o EZH opened 3 hotels in H1 ‘with occupancy of 85%’. It adds ‘two new hotels opened in the last four weeks’. Group sees ‘further expansion of the development pipeline in line with the Group’s strategy. The company reports that ‘investment in new hotel management system on track and due to complete by the end of current financial year.’
o EZH expects a ‘strategic decision regarding easyHotel Old Street due by the end of the financial year’
o Group reports ‘the successful equity placing in October 2016, which raised £38m (gross) additional equity capital, and the £12m refinancing of an existing bank facility in the period, provide funds to finance further growth of the Group’s identified owned hotel development pipeline, in line with the Board’s strategy.’
o Group reports ‘easyHotel’s growth strategy remains focused on the rollout of owned hotels, in the United Kingdom and key cities in Europe.’
o It reports ‘the Group continues to leverage the strength of the brand to attract partners and extend the franchise network, without direct capital investment by the Group.’
o EZH CEO Guy Parsons reports ‘these results reflect the continued good progress the Group is making against our long-term growth strategy to develop the easyHotel brand as a market leader in “super budget” hotels.’ He continues ‘the strong like-for-like performance from our owned and franchised hotels over the period is very encouraging. Our new hotels opened during the period, under our ‘new-look’ format, have traded strongly.’
o EZH CEO Guy Parsons reports ‘we have a number of exciting opportunities in our development pipeline and the Board believes that the strength of the brand and our leading position in the branded super budget market means we are well positioned to capitalise on consumer desire to seek out the best value.’
o EZH concludes ‘whilst we are mindful of the broader political and economic uncertainty and the impact this is having on consumer confidence, full year trading is on track to meet the Board’s expectations.’
• Langton Comment:
o EZH is well-funded and has an identifiable pipeline of sites. It is currently focusing on key UK & European locations and its easily-recognisable brand should help it drive trade. LfL growth is impressive and the group is slightly exceeding its own expectations.
o Current forecast numbers do not, arguably, correctly reflect the potential of the group but, for the record, the company is expected to generate earnings of around 1.2p for the year to September 2018 and to pay a dividend of around 0.3p.
PUB, RESTAURANT & DRINK PRODUCERS:
• Fleurets reports ‘it would appear that the leisure sector is continuing to defy pessimistic forecasts.’ MD Graeme Bunn continues ‘we have seen better than expected GDP growth…therefore it is perhaps of little surprise that the UK population continues to enjoy staying, drinking and dining out.’
• Fleurets reports ‘headwinds remain’ saying ‘not least with the Business Rates Revaluation which will see many businesses suffering up to a 42% increase in business rates payable as of this month. The imminent introduction of the Apprenticeship Levy will also add to the tax burden of most multiple operators.’
• Fleurets reports M&A activity is ‘alive & well’ but concedes that ‘2016 fell short of the previous year in terms of transaction volume, albeit this is perhaps a reflection of the exceptional levels of activity witnessed in 2015, rather than a sign of market deterioration in 2016.’
• Heineken. The group’s purchase of most of Punch’s estate is set to leave the global brewer in the image of the ‘brewerage’ companies of the 1980’s. In addition to its production, it will also have sizable managed & tenanted estates. Only difference? It will not be UK-owned.
• Re Manifestos: CEO of BBPA Brigid Simmonds comments ‘I welcome this clear commitment from Labour, to review the business rates system, a commitment we have from both major parties. I look forward to working with whoever wins the election on making the case for a system that is fair for pubs.’
• Morrison’s offering 5p per litre off fuel when spending more than £40 in store. Wrong grocer but every little helps when real wage growth has once again moved negative.
• PE house Endless is reported to be considering an IPO for retail chain The Works.
• Derby Brewing cuts price again, says the £500k it is looking to raise will now secure 9% of the equity.
• Derby Brewing cuts value to £5.1m. Last month the group was seeking a valuation of £12.5m. Group fails to secure EIS status. Derby says ‘we hope this [the lower valuation] reflects our passion to offer investors great value, on the back of our previous increase in equity, additional rewards, commitment to create a secondary market allowing investors to buy and sell shares in the future and the reduction in threshold for full voting A shares from a £20,000 investment to £5,000 and above.’
• Despite failing to secure EIS status and cutting its offer price twice in a month, Derby Brewing says ‘we are excited about our future plans and believe strongly in the outlined strategy, based on forecast we hope to double investors value of shares within three years, with all investors eligible for dividends every 6 months and of course a range of rewards along the way, depending of their level of investment.’
• Craft Union Pub Company has added 31 sites in the last three months, taking it to 122 pubs in total and marking the start of its ‘nationwide expansion’. The company, part of Ei Managed Operations, has a goal of 170 pubs by September 2017, increasing to 500 by 2020.
• Vianet has partnered with FullClear to create an ‘Internet of Things’ based beer line cleaning product.
• Runaway Brewery is collaborating with Joseph Holt to create a beer for Manchester Beer Week (June 23 – 2 July).
• MatchPint is launching SportsFest – a festival of sport across the Spring Bank Holiday weekend – in 1,800 of its pubs in partnership with Budweiser, Carlsberg and Fosters. Stonegate Pub Company, Amber Taverns and Rileys are among the companies that will run a drinks offer during the holiday weekend.
• Sekforde Drinks is launching a gin mixer that it hopes will challenge the dominance of the G&T. Sekforde for Gin is an all-natural blend of English garden botanicals designed to bring out the flavour of craft gins.
• Shepherd Neame is planning to release Orchard View, its first cider, which is described by the brewer as ‘British craftsmanship and produce.’
• Olive oil prices are expected to rise as months of droughts have hit the Mediterranean take their toll. The price of olive oil has increased by 15% in the last year to $4,434.15 per tonne.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Manchester outrage likely to impact inbound tourism in the short term.
• Abta has revealed that millennial holidaymakers are the most likely to travel abroad without insurance, with 25% of people aged 18-24 and 38% of people aged 25-34 travelling abroad uninsured in the last year. Last year, 31% of both age groups travelled abroad uninsured.
• The threat posed by Airbnb to established hotel operating models continues to be discussed during panels, most recently at the Hotel Operating Agreements conference last week. Moderator Richard Bursby, partner and head of the international hotels group at law firm Taylor Wessing LLP, said that in London more than 25% of Airbnb listings are rented out for more than the 90 legally allowed days per year, despite Airbnb assurances that it would ban this practice in any case where it breached regulations.
• Online car hire business CarTrawler has reportedly been put up for sale by its private equity backers for £600m, per the Sunday Times.
• A US Federal Reserve survey of household economics and decision-making has found that the highest number of people said they are either ‘living comfortably’ or ‘doing okay’ since the inception of the survey in 2013. A total of 70% of respondents met those thresholds, however the report goes on to warn that ‘day-to-day finances are still precarious for many Americans,’ with the survey finding that 44% ‘wouldn’t be able to cover an unexpected $400 expense like a car repair or medical bill, or would have to borrow money or sell something to meet it.’
• Stan, Kroenke, the majority shareholder of Arsenal football club, has said his shares are not for sale following minority shareholder Alisher Usmanov’s $1.3bn bid for the football club. This weekend, Arsenal missed out on qualifying the Champions league for the first time in 20 years, a failure that is likely to cost it about £50m in lost revenues. KSE UK, the holding company for Mr Kroenke’s shares in Arsenal, said in a statement: ‘KSE UK notes the recent media speculation concerning its shareholding in Arsenal Holdings PLC and confirms that its shares are not, and never have been, for sale. KSE is a committed, long term investor in Arsenal and will remain so.’
FINANCE & MARKETS:
• Greece has failed to secure a deal to release the next instalment of its bailout after talks with EU officials broke down.
• Oil price down 60c or so to $53.96
• Sterling down vs US$ at $1.2988
• Sterling down vs Euro at €1.1545
• UK 10yr gilt yield down 2bps at 1.08%
• World markets: UK up yesterday but Europe lower. US markets up and Asian markets mostly up in Tuesday trade
• Election, Brexit etc.
o Strong & stable morphs into weak & wobbly per commentators.
o Biggest election U-turn in last 20 general elections reports Sir David Butler
o Labour, facing an open goal, hoofs ball over bar.
o Brexit. David Davis says walking away is a real option.
o EU’s Michel Barnier says he doesn’t want to consider that at this point in time.
TRENDS AND WHATNOT:
• Get the macro right and the micro will follow. Operate in a growing market & many sins will be forgiven. A bad company will defeat a good manager etc. etc.
• Overall, and while we accept that you can rent-a-quote to support any opinion, the above would suggest to us that ‘getting the themes right’ is critically important.
• I mean if you’d focused on vertical, male-led drinking over the last four decades, you may have succeeded but you would have certainly seen your market shrink.
• Indeed, if you look around the room and can’t see the competitor most likely to go bust, then you may be that competitor.
• With bigger themes in mind, Langton produces periodic pieces some of which are linked below:
o Apps; can you ignore them? Here
o Bricks or clicks? Here
o Focus on revenue or margins? Here
o Inflation, friend or foe? Here
o Spectre of overcapacity – Here
YESTERDAY’S LATER TWEETS:
• Later tweets: Trump overseas, markets rally. Oil price bounces, US$ at 6mth lows. Brexit pre-talk talks getting a bit fractious etc. etc.
• Revolution share price drop reawakens spectre of oversupply. See our Nov 2016 note, which now looks rather timely – here
• RBG in takeover spec. Really? Suggestion that new units are a shade disappointing leads to big question mark over strategy
RETAIL NEWS WITH NICK BUBB:
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Tesco beat Asda for the second week in a row, as the Asda basket of £61.69 was £1.51 more than Tesco’s, meaning that Asda also had to dole out a hefty £4.73 Price Guarantee voucher, for failing to be at least 10% cheaper than its main rivals. The others were well behind: Morrisons was beaten by Sainsbury’s for 3rd place, but Sainsbury was still £4.05 more expensive than Tesco, whilst Morrisons was £4.62 more expensive than Tesco. Poor old Waitrose was again well off the pace, with a £71.65 basket. The separate regular Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by the new 63,000 sq ft Sainsbury’s superstore at Nine Elms in Vauxhall, scoring an impressive 92 out of 100. Elsewhere in the magazine, The Grocer has a big feature on
• News Flow This Week: A very busy week kicked off with McColl’s presentation to the City yesterday morning on the outlook for the Convenience Store market (helped by the IGD) and continues today with the Topps Tiles interims. 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.
• Quote of the Day: Here’s another insight from the 17th century French writer Francois de la Rochefoucauld: “People always complain about their memories, never about their minds”.