Langton Capital – 2017-07-24 – Gregg’s, prices, Cranswick, Everyman and other:
Gregg’s, prices, Cranswick, Everyman and other:
A DAY IN THE LIFE:
So, despite the fact that the kids in York have two more days at school, the holiday season is upon us and we’re expecting the number of out-of-office replies to surge.
In addition, phones will go unanswered and meetings will be pushed back into September, October or, let’s be sure to get it the other side of the next General Election, November as much of the business around is put on hold and we work on our tans, trudge around ancient churches and/or perhaps drink too much for the remainder of July and all of August.
But, if you’re a little tired of the Med and fancy a change, how about Russia?
It’s a big place, you know. It’s a country where the trees outnumber the people by about 5,000 to one (there are around 650bn of them) and there’s a lot of culture etc.
More churches than you can shake a stick at and, once you’ve done St Petersburg, Moscow and Ekaterinburg, there’s always Siberia where most of the 650bn trees reside and where you can visit the Monument to Condensed Milk in Surgut.
Surgut also hosts the Monument to Gas Fires and, as they always say, when you’re tired of looking at monuments to condensed milk and gas fires, you’re tired of life. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Gregg’s boss Roger Whiteside has said that the company is expanding its digital presence & has plans for mobile ordering.
• Gregg’s says it will introduce click-and-collect & may deliver. CEO Roger Whiteside told Marketing Week ‘the question is still how to make money out of it [delivery] and that’s what we’re trying to work out. If you work with Deliveroo, they charge a commission. There’s also the question of how it impacts customer behaviour. Will delivery cannibalise your shopper’s time and stop them going to a Greggs shop? If someone can deliver and it isn’t too expensive we can use it. But there’s still a long way to go.’
• Gregg’s CEO says the chain could get to 2,500 shops from its current c1,800.
• Pig & chicken co Cranswick says it has ‘made a positive start to the current financial year.’ It certainly has. It goes on to say ‘revenue in the three months to 30 June 2017 was 27% ahead of the same period last year.’ It adds ‘like-for-like revenue grew by 21% compared to the same period last year, underpinned by strong domestic volume growth, with all product categories making a positive contribution.’
• The average cost of a supermarket shop increased 47% over the last 20 years. The biggest percentage mover has been potatoes, which are up 207%, on the other hand bananas have reduced 27% in price.
• Asda is exploring a £4.4bn takeover of fast-growing discount retailer B&M, following Tesco’s tie up with Booker and Sainsbury’s talks with Nisa, writes The Sunday Times.
• Burger & Lobster has opened its second site in New York (Midtown Manhattan) and has secured its first in Thailand, in Bangkok.
• Gloucester Council has voted to reject a Late Night Levy and to establish a Business Improvement District instead. Meanwhile a recent House of Lords Committee report on licensing acknowledged in its findings that the Late Night Levy has ‘failed to reach its objectives and should be abolished’.
• Italian food court operator Eataly Distribuzione has posted an €11m loss for 2016, compared to its previous year’s profit of €713,000. The Eataly franchise owner attributed the drop to a fall in sales, with revenue down by some €32m to €178.8m, and increasing competition, although it believes that the ‘organic growth and the opening of new stores, coupled with greater efficiency’ should allow the company to return to profitability, writes Propel.
• Ei Group has hired Greg Parkes as its new Commercial Property Director. Mr. Parkes will be overseeing Ei Group’s growth strategy of its commercial property division, which currently stands at 300.
• US restaurant data shows a continued weakness, as customer traffic turned negative in the last quarter. An analyst for NPD, Bonnie Riggs said ‘The industry is just not addressing the needs of the marketplace. The drivers, the incentives … they’re just no longer there’.
• Youth market. Labour leader Jeremy Corbyn has denied that he ever said Labour would write off student loans
Surveys, tougher but not too bad. Hope over experience?
• Christie & Co reports in its H2 2017 Sector Insights that ‘there has been reasonable activity during the first half of 2017.’ The property agent says ‘Private Equity investors, both at home and abroad, remain incredibly interested in the sector, particularly restaurants.’
• Christie points to something of an evolution saying ‘this interest has shifted in the past year to be less focused on Casual Dining and more about targeting those innovative businesses that represent major growth, and thus value, potential.’
• Christie concludes ‘despite a difficult political and economic climate, the sector remains as determined and resilient as it has been in the past, with good fundamentals.’ It concludes ‘those businesses that are able to adapt and prove themselves in the face of these changes will attract the necessary investment to fund their continued growth.’
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Moody’s has reported that Wyndham’s planned purchase of AmericInn is credit positive. It says Wyndham, which will buy the AmericInn brand and its management company, Three Rivers Hospitality, from Northcott Hospitality for $170m ‘will be adding another brand to its midscale hotel portfolio, diversifying its presence in this segment beyond its Ramada, Baymont, Wingate and Hawthorn brands.’ Moody’s says ‘although Wyndham has not yet said how it will fund the acquisition, we believe the deal would not meaningfully change the company’s leverage, even if it borrowed the full transaction cost.’
• Expedia has dropped certain animal attractions due to welfare concerns. The group will conduct a ‘thorough review’ over the next few months with guidance from industry-leading wildlife and animal protection groups.
• Passengers at Gatwick are being urged to use only approved car parking operators after non-approved companies have failed to return 100’s of cars to customers. Gatwick senior commercial operations manager, Chris Banford, said ‘By using official on-airport parking or companies in our Approved Operators Scheme instead, passengers will eliminate the risk of experiencing a distressing incident like this in the future’.
• Flight and hotel prices are expected to climb 3.6%, according to a new 2018 global travel forecast by a leading travel management company. Kurt Ekert, president and chief executive of Carlson Wagonlit Travel, said: ‘The higher pricing is a reflection of the stronger economy and growing demand. The global numbers from this forecast should be considered strong leading indicators of what 2018 will mean for global businesses, as we anticipate higher spending.’
• Air France is to create a new budget airline in order to attract millennials, the new brand will be named Joon.
• The laptop ban on some flights to the US from the Middle East and North Africa has officially ended.
• Mandatory resort fees tacked onto a hotel bill after an initial price quote are on the rise again. A total of 1,026 domestic hotels charged a resort fee for the first half of 2017, a 14% increase from just six months ago, according to new research from Resortfeechecker.com, a site that allows travelers to look up resort fees at hotels worldwide.
• J.D. Power’s 2017 North America Hotel Guest Satisfaction Index Study showed slight improvements in guest satisfaction ratings.
• Southeast Asian ride-hailing co Grab has raised $2.5bn in new funds. Chinese Uber rival Didi & Japan’s Softbank will invest
• Everyman Media Group has updated on h1 trading saying ‘the Group ended the six months to 29th June 2017 operating 21 cinemas, with Stratford-upon-Avon having opened during the period.’ It says ‘the Group remains on track to open a permanent three screen cinema in Kings Cross in November this year. In addition, contracts have been exchanged on the acquisition of a 28-year lease for the existing five screen Reel cinema in York, which is expected to be fully refurbished and open as an Everyman in early 2018.’
• Everyman reports ‘demand for the Everyman offer continues to strengthen and the Group is excited to announce that new contracts have been exchanged for venues in Borough Market (2020), Liverpool (2018) and Newcastle (2018) which, along with those previously announced, commits the Group to a total of nine more venues.’ The group concludes ‘in summary, the Group has performed in line with expectations in the first six months of 2017, the Board is confident of a successful outcome for the full year and the pipeline is continuing to be developed in line with investors’ expectations.’
• San Diego’s Comic-Con International, which was on over the weekend, continues to grow in both popularity and revenues. The event made more than $17m in revenue in 2015, according to the most recent tax filing available online. Eventbrite, a ticketing website, estimated that fandom conventions in North America grossed $600m in 2013, while their wider economic impact could be as high as $5bn.
• DuCanon, the new advisory boutique set up by two former HSBC bankers to capitalise on a boom in private equity deals, is helping to seal the £600m buyout of an exhibitions organiser by Blackstone. Blackstone pre-empted the second round of an auction for Clarion by submitting a knockout bid to its owners Providence Equity Partners, highlighting the fierce competition between private equity groups for attractive assets by. Rival bidders included Cinven, the UK buyout firm, and Xio, the Chinese investment company.
FINANCE & MARKETS:
• More than a 50% chance of recession next year Sunday Times quotes Fathom Consulting as saying. It says the consumer is ‘under assault’.
• Fathom Consulting says inflation ‘has only paused for breath’.
• Sunday Times quotes Credit Suisse as saying there is a one in three chance UK will enter recession ‘in the next few months’.
• IMF reports UK & US economies will grow more slowly in 2017 than previously predicted. It says it has already seen ‘weaker-than-expected activity’ in Q1 this year in the UK, where it is looking for 1.7% growth compared with earlier 2% estimates. It is cutting its estimate for US growth from 2.3% to 2.1%.
• Michael Heseltine has said that Brexit is an issue for the Tories. He says the country faces another election in the next 2yrs and says the Conservatives must prove that they can run the country.
• Oil down a dollar or so to $48.12
• Sterling up vs US$ at $1.3014
• Pound unchanged vs Euro at €1.1151
• UK 10yr gilt yield down 2bps at 1.18%.
• World market: UK, Europe & US down on Friday. Asia lower in Monday trade
• Government borrowing rose last month in part due to higher interest payments. Public sector net borrowing amounted to £6.9bn in June, up £2bn from a year earlier. The Office for Budget Responsibility forecasts borrowing will be £58.3bn during the current financial year, up from £46.2bn in the year to March 2017.
• HMRC reports the number of homes sold fell for the 3rd month in a row in June.
o Liam Fox has said that any transitional arrangements with the EU should terminate before 2022
o Liam Fox is to spend 2dys with trade opposite number Robert Lightizer in the US this week holding the first talks re a UK/US trade deal. A working group will be established, which ‘is the means to ensure we get to know each other’s issues and identify areas where we can work together to strengthen trade and investment ties.’
o No evidence yet that the UK has told the EU what it actually wants to achieve
o Jeremy Corbyn has said that Labour would take the UK out of the single market reports The Guardian. Damaging but definite.
o With Labour ahead in polls, ongoing Brexit debacle may shoe in a Hard Left, unfettered Corbyn administration
YESTERDAY’S LATER TWEETS:
• Later tweets: Wendy’s try a popup in London. Could they be coming back? Just what we need, another burger bar.
• Travel sector to take a £150m hit over credit card surcharge ban. Will have to try to allocate the charges elsewhere. Won’t be easy.
• Liam Fox looking forward to ‘easiest trade deal in human history’ with EU. Canada deal took 8yrs.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The AO.com trading update didn’t get that much coverage in the Saturday papers, although the Times picked up on the news, with the somewhat misleading headline “Big tickets are paying off for AO World”. The Telegraph seized on the fashion model photo opportunity provided by the not particularly interesting news that Koovs, the struggling Indian Online fashion website, is having to raise yet more money from shareholders. Several of the stockmarket reports flagged that the Sports Direct share price improved further on Friday and the Daily Mail’s “Hero of the Week” was Mike Ashley (for keeping his results presentation down to 17 words and for hiring a new FD). The main story in the “Director’s Dealing” column in the FT Money supplement was the recent share sales by Dixons Carphone’s Andrew Harrison. Finally, the FT had an interesting article about the pressures on
• Sunday Press: The big story in the Sunday papers was the Sunday Times scoop that Asda is weighing up a £4.4bn bid for the discount chain B&M and the City Editor opined in his column that, if the deal comes to pass, a new round of “Supermarket Sweep” could kick off, with Morrisons likely to be encouraged to join in by bidding for The Range discount chain (!). The Prufrock column in the Sunday Times (which is also penned by the Retail correspondent Oliver Shah) flagged that the Directors of Dixons Carphone led by CEO Seb James have ended up losing money from a new-fangled share incentive scheme because of the fall in the share price…The Observer’s Review of the Week mocked Mike Ashley’s use of the word “smashed” in last week’s Sports Direct presentation to the City. The Observer also had a big feature on the decline of the US shopping mall, focused on a visit to the famous Mall of
• B&M: The follow-up in today’s papers on the Sunday Times’s Asda/B&M story is rather muted: the Guardian runs with it (“Asda weighing up bid for discount chain B&M”), but the FT doesn’t touch the story and nor does the Times, whilst the Telegraph says “Asda sources dismiss B&M takeover talk as discount chain investors mull rationale”, implying that Asda has only been researching B&M as a competitor…Given that Wal-Mart had been thought to be weighing up selling Asda at one point, it would certainly represent quite a change in attitude to M&A in the UK on their part. The £4.4bn valuation seems quite specific, but that is simply a c30% increase on the current £3.4bn market cap, which is probably the sort of premium a bidder would have to pay to tempt the Arora family and their backers to sell out…Needless to say, there has been no official comment by B&M or
• News Flow This Week: As we head into the last week of July we get the latest monthly Kantar/Nielsen grocery market share data tomorrow. Then the Joules finals, the Halfords AGM and the Hammerson interims are on Wednesday. The Intu Properties interims, the Inchcape interims and the Bonmarche AGM are on Thursday. Friday brings the start of dealings in the Quiz IPO, as well as the latest GFK Consumer Confidence survey.