Langton Capital – 2017-06-06 – DPP raises cash, Compoir warns, Vianet, spending & other:
DPP raises cash, Compoir warns, Vianet, spending & other:
A DAY IN THE LIFE:
A somewhat busy day and, having just got back from Malta, where the traditional clocks have no minute hands, it’s a little tough to get going. Nonetheless, let’s move on to the news:
DP POLAND TAPS MARKET, EXPANSION TO CONTINUE:
• DP Poland has announced that it is to place £5.246m worth of new shares in the company at 43p via an accelerated book-building process. The funds will be used to ‘maintain the roll-out of new stores, with the planned opening in 2018 of 15 new corporate stores and in 2019 providing loans by the Company for 5 sub-franchised store openings in 2019 providing loans by the Company for 5 sub-franchised store openings. In addition, the Company intends to increase its investment in marketing.’
• DPP CEO Peter Shaw reports ‘we continue to make strong progress, with 9 store openings to date this year and our 18th consecutive quarter of double digit like-for-like sales growth.’
• DPP comments ‘we wish to underpin our store opening momentum through 2018 and 2019, while encouraging sub-franchisee funded store openings. To this end an additional investment in the business of £5m would enable us to open additional corporate stores, provide loan capital for further sub-franchised store openings and support additional marketing in support of sales growth, all contributing to the establishment of Domino’s Pizza as a key player in the Polish pizza delivery market.’
• DPP reminds investors that it ‘achieved its 18th consecutive quarter of double digit like-for-like System Sales growth in Q1 2017’.
• DPP updates on trading for the 4mths to April saying that LfL sales were +19%. This is down from the +21% seen in the 3mths to March but the movement of Easter dampened sales in April whilst having boosted them in March.
• DPP sees shift in store openings, over the short-term, from franchisee openings to corporate stores. It reports ‘at present, there are not sufficient grounds for confidence that enough of the targeted 2018 store openings will be stores opened by sub-franchisees; for this reason the Company is seeking to raise £5m net of costs to fund a combination of additional corporate store openings and loans to sub-franchisees, plus additional marketing activity to support sales growth in the expanding estate of owned and sub-franchised stores, deploying strict return on investment criteria.’
• DPP reports that ‘the market in Poland is evolving with the growing influence of food service aggregators; Uber Eats entered the Warsaw market in Q1 2017 and the restaurant group Amrest announced in April that it was acquiring a 51% stake in the Polish Delivery Hero portal Pizza Portal.’
• DPP says it ‘expects more competitive activity as the Polish delivery market develops and becomes yet more attractive. The Company welcomes this competition, in the strong belief that a growing market will disproportionately benefit the Domino’s Pizza brand as the Group’s sales growth continues to outstrip growth in the Polish pizza market.’
COMPTOIR PROFIT WARNING – SHARES NOW 75% OFF HIGH:
• Comptoir stuns market, points to tough market, sliding LfLs, poor retail footfall, higher costs and disappointing new openings.
• Stark warning from Comptoir. Disappointing on most measures, no resignations observed to date. The group reported on 30 Jan that trading had been in line with expectations. On 12 April, it conceded that Jan & Feb had been poor but said March had been better and reassured that ‘the Group expects further positive trading in April (which includes Easter) and into the summer months.’
• This has been overtaken by events as Comptoir Group updated the market yesterday saying that ‘the past 2mths have seen a continuation of the difficult trading it reported at the time of its prelims in April 2017.’
• Comptoir reports ‘while the business saw improved sales figures over the Easter weekend and half term holidays, unfortunately much of this benefit was subsequently lost in the final two weeks of the month’
• Comptoir adds ‘in May 2017 the Company also experienced an unexpected decline in like for like sales and profit at certain mature restaurants, particularly in retail-led locations and at its higher-spend restaurants, Levant and Kenza.’ The group adds ‘like many of its peers in the sector, the Company is experiencing upward pressure on costs.’
• Compoir somehow concludes ‘the Comptoir brand continues to have a strong appeal to consumers and landlords and there remains considerable potential for expansion in the UK.’ Shares fell 9p (29%) yesterday.
• Comptoir shares now lost c75% of their value in last 9mths. Group sees rising costs, poor sales and disappointing new openings as continuing to drag on current trading. Group expects to open 3 restaurants by calendar year end. It is to raise £2.7m gross from the sale and leaseback of the freehold of its central processing unit (CPU) in North London. It says ‘the net proceeds will be used to fund the remaining new openings for 2017 and strengthen the Group’s working capital position. A further announcement on the sale and leaseback will be made in due course.’
PUB, RESTAURANT & DRINK PRODUCERS:
• The Times suggests London business could see 30% hit post terrorist outrages. That seems a little severe. Merlin’s Nick Varney suggests ‘we’ve seen this before and what happened at London Bridge is terrible, but more than any other city London has shown its resilience and ability to bounce back.’ He adds ‘it remains a long-term sucessful growth story for tourism because it’s a unique world-class destination, but there’s no getting away from the fact that this is going to affect businesses in the tourism and hospitality trade in the short term.’
• Draught monitoring and data insight specialist Vianet has reported broadly flat revenues of £14.26m and a 21% fall in pre-tax profit for the year ended 31 March 2017. Basic EPS also declined by 21% to 5.3p, and the group’s proposed total dividend of 5.7p is in line with the previous year. Commenting on the final results, James Dickson, Chairman of Vianet Group plc, said: ‘Encouraging progress has been made across our business, which has benefitted from the focus on exploiting growth opportunities in both the Smart Machines and Smart Zones Divisions… As the Internet of Things evolves and businesses increasingly seek more data and insight on everything from asset performance to process automation, we believe Vianet is well placed to grow its position in this rapidly developing area.’
• Figures from HMRC show that spirit sales generated more money for the Treasury than beer for the first time, following a 12% surge in gin sales. Gin exports are set to reach £500m this summer and the spirit is now the fastest-growing of any drink. However, there are fears the growth in sales of spirits could experience a slump after a 3.9% rise in alcohol duty was announced in the spring Budget, which added 30p to the price of a bottle.
• Papa Murphy’s Holdings Inc. is planning to close up to 16 company-owned restaurants by the end of the year. The company, which is struggling to recover from steep sales declines and financial losses, also announced a deal with the online ordering company Olo to improve mobile and online ordering capabilities.
• Buying specialist Lynx Purchasing says the hospitality sector ‘urgently needs’ a period of market stability to allow operators to deal with food and drink inflation. The Summer 2017 edition of the Lynx Purchasing Market Forecast shows a slight decline in the rate at which prices are rising, with the ‘Lynxometer’ (a basket of food and drink bought regularly by Lynx Purchasing customers) increasing by 6% over the 12 months to June 2017, down from 9% in March. Dairy was the highest-rising subcategory, up 9% year-on-year, while Fruit & Veg was up 6% year-on-year and Meat increased 5% year-on-year.
• Barclaycard has reported that household spending growth slowed in May. Spending, at up 2.8pc on the year in May, recorded the slowest rate of growth since last July, Barclaycard figures show. Barclaycard suggests that households are still spending on entertainment but they are cutting back elsewhere.
• Barclaycard reports ‘consumer spending growth was subdued last month as shoppers paused for breath after an Easter bounce in April. With inflation running at its highest rate since 2013, it’s no surprise that more of us are starting to ‘feel the squeeze’ of inflation and slower wage growth, perhaps prompting small changes to our spending patterns.’
• UK nightclub operator Deltic Group has pushed back plans to explore an IPO and other types of exit until at least next year, as it concentrates on upgrading its estate. Speaking to The Times, CEO Peter Mark said: ‘Our view on advisers is that until we are happy we have got the right story and have caught up on the investment backlog, we should hold off. But hopefully that will happen within a year, macro factors permitting.’ Deltic has reported a fall in underlying earnings from £13.4m to £11.5m in the year to 25 February in a challenging trading environment while it also decided to implement ‘a more aggressive depreciation policy in line with best practice’.
• Heineken has acquired Brasil Kirin Holding, giving the brewing giant brands including Schin, Baden Baden, Devassa, and Kirin Ichiban. The move marks a further expansion into the Brazil market following the 2010 purchase of Fomento Económico Mexicano.
• Kantar Worldpanel’s quarterly FMCG E-commerce Index indicates that UK shoppers are becoming more comfortable buying their groceries online. The index found that 7.3% of UK grocery sales took place online during the year, up from 6.7% a year earlier and making the UK second only to South Koreans in the proportion of groceries they buy online. UK shoppers spent an average of $83.40 when they shopped online: four times as much as offline shops, and the largest spend in the world.
• Amazon Fresh is expanding its reach in online food delivery by adding another 42 postcodes across Hertfordshire and Bedfordshire to its service. Amazon Fresh has now also been launched in Germany and Japan, and has been busy adding more than 50,000 products over the past year.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Coach and escorted tours operator Shearings has reported a fourth consecutive year of record sales, profits and passenger numbers. In the 12 months to last December the group, which includes the Shearings Holidays, National Holidays and the Coast & Country and Bay hotel brands, grew revenue by 3%. This took annual revenue to £207.2m while passenger numbers were up 4% to 1.12 million.
• Underlying profit (adjusted EBITDA) increased 13% to £10.3m thanks to improved gross margins and continued cost discipline.
• US president Donald Trump has reiterated his call for a travel ban on some mainly-Muslim countries in the fight against terror following last weekend’s attack in London. Taking to his preferred medium of Twitter, Trump tweeted: ‘We need to be smart, vigilant and tough. We need the courts to give us back our rights. We need the Travel Ban as an extra level of safety!’
• Wyndham Hotel group has announced the launch of its 19th hotel brand, Trademark Hotel Collection. Lisa Checchio, VP of Brand Marketing and Insights, indicated that the brand will target the upper-midscale-and-above segments.
• Wilbur Ross, US secretary of commerce, has been reassuring the US travel and tourism industry amid the administration’s proposals to ditch its overseas marketing body and Trump’s ‘travel ban’. The secretary insisted that the “dual mission” of national security and tourism promotion was achievable.
FINANCE & MARKETS:
• Data from IHS Markit shows that eurozone growth remained at its fastest pace for 6 years last month. IHS Markit said the ‘big two’, Germany and France, were the main drivers of the growth. The eurozone showed strong levels of business activity with an index level of 56.8.
• The SMMT reports that new car sales decreased by 8.5% yoy in May, suggesting that buyers are being cautious in the build up to the general election. Sales of alternatively fueled vehicles increased 46.7% yoy, representing 8,258 of the 186,265 new cars registered in May.
• BBC reports ‘wealth’ starts at £134,170 a year. It points out the figure is nearly five times the national average wage of £28,000.
• US services sector activity slowed in May.
• The EY Scottish Item Club has warned that the Scottish economy may be slowing more rapidly than that of the UK as a whole
• Oil down again. Now below 50 bucks at $49.24 per barrel
• Sterling up a shade vs US$ at $1.2926 and Euro at €1.1469
• UK 10yr gilt yield up 1bp at 1.05%
• World markets: UK down yesterday with Europe & the US also lower. Far East markets mixed in Tuesday trading
YESTERDAY’S LATER TWEETS:
• Later tweets: Some concerns that London terrorism may curb the desire of would-be overseas visitors to come to the Capital
• Market Rent Only option looking like a damp squib. But, beneath the surface, it may have changed behaviour, rental terms etc.
• World apparently in step with UK as volume of alcohol consumed looks to be on the slide.
• Election interesting. Some pollsters have Ms May failing to defeat the ‘unelectable’ Jeremy Corbyn.
• Election latest. What’s happened to the 100-seat majority, Tee? Pollsters may be wrong but Thursday now looking rather tight
RETAIL NEWS WITH NICK BUBB:
• BRC-KPMG Retail Sales figures for May (the 4 weeks to May 27th): We flagged yesterday that a modest LFL sales decline was likely in the overnight survey from the BRC-KPMG, so the 0.4% dip overall in LFL sales is not a big surprise, but the BRC highlights the growing divergence between Food and Non-Food. The exact split for May is buried in the 3-month moving average (which now stands at +3.2% LFL and -0.3% LFL respectively), but Food was certainly well up LFL, thanks to the warm weather in the final week of the period, whilst Non-Food was clearly well down LFL, with Electricals hurt by tough Euro 2016 comps for TV sales. Interestingly, Online Non-Food sales growth was notably sluggish last month, at only +4.3%, but it still outperformed Store sales, with Non-Food Store LFL sales down by 2.3% over the last 3 months.
• AO World (aka AO.com): Today’s finals are, slightly bizarrely, headlined “Building for Growth: 40+% Increase in UK Adjusted EBITDA Y-O-Y from £17.2m to £24.4m; Gaining Market Share in All Categories and Countries”. But, needless to say, overall losses in Europe increased and the City, given the big £50m AO share placing recently, will be more interested in the warning that, because of the challenging UK trading environment and tough comps, “we expect our UK Q1 growth rate to slow significantly year on year”, albeit AO “continue to expect to fall within the range of market expectations”. Analysts meeting at 9am.
• Joules: The recently floated Joules lifestyle brand has a growing fan club, given the excellent share price performance, and today’s bullish pre-close update will not let them down, despite the absence of a Retail LFL sales figure: “As a result of the Group’s c20% revenue growth and improved gross margin, combined with continued cost discipline, the Board anticipates reporting FY17 Group profit before tax comfortably ahead of its previous expectations”.
• News Flow This Week: Tomorrow brings the Shoe Zone interims