Langton Capital – 2017-09-04 – Admiral, McDonald’s, Revolution, pub sport & other:
Admiral, McDonald’s, Revolution, pub sport & other:
A DAY IN THE LIFE:
I decided to dig my walking boots out of the cupboard over the weekend in a move that I thought might incentivise me to put them on and go for a walk.
And, though they were covered in dust and inhabited by spiders, they seemed to be in pretty good nick but I couldn’t help but notice that one of the laces was missing.
Now this could have been hungry mice or the walking boot fairies but I tend to think that one of the kids, on snapping one of their own shoe laces, had pinched mine and, even now, might be walking around with one short black lace and one enormous brown on, last seen on a walking boot.
Hey, ho. At least I felt justified in settling down in front of the telly with a good book. On to the news:
ADMIRAL TAVERNS, C&C AND PROPRIUM:
• After tilting at Spirit, C&C gets a toehold in the UK pub market via part purchase of Admiral Taverns. C&C will own 47% of the resulting JV.
• Admiral announces Proprium Capital & C&C Group plc are to buy the company. Admiral says that its management team led by Chief Executive Kevin Georgel ‘will remain invested and continue to lead the business, building on its proven growth strategy which has seen Admiral cement its reputation as a leading operator of community pubs across the UK.’
• Admiral says ‘over the last 5 years Admiral has developed a high-quality estate of 845 predominantly wet-led pubs which sit at the heart of their local communities. Through its highly supportive approach and operational centric culture, the Group has worked hard to develop positive and progressive relationships with its licensees, built on mutual trust and respect.’
• Admiral CEO Kevin Georgel comments ‘recent years have seen Admiral Taverns go from strength to strength and I am delighted that with the support of our new investors we will have the platform in place to continue our development and execute our growth plans.’ He says ‘today, our nationwide estate of community pubs showcases the supported-tied model at its best. Through our distinct and award winning operational approach, our dedicated and passionate team have worked hard to build strong and enduring relationships with our licensees.’
• Admiral concludes ‘our strategy remains unapologetically consistent and I look forward to working with the support of our new investors to continue to build on the significant progress the business has made over the last five years and take advantage of the opportunities within our markets, as and when they arise.’
• C&C comments ‘the equity investment by C&C is £37m representing 47% of the issued capital of Admiral. The investment will be funded from existing C&C facilities and Admiral will be accounted for as an associate of C&C.’
• It says it ‘believes that the investment will deliver significant economic and route-to-market benefit to its GB businesses through: collaboration with a highly experienced and skilled management team; participation in a resilient and growing earnings stream from a quality, tenanted pub estate; direct access to 845 pubs1 mainly across England and Wales, through a procurement and supply agreement; mid-single digit earnings accretion and attractive returns on equity in the first full financial year following completion; and a long term commitment from our partners to develop the business.’
• Commenting on the investment, Stephen Glancey, C&C CEO, said ‘the local pub remains at the heart of many suburban and city communities – often the hub of local activity and their economic and social contribution is immeasurable. C&C has a long and successful track-record of supplying and providing financial support to local pubs within the independent free-trade in Scotland and Ireland.’ Mr Glancey says ‘for C&C, this is an attractive opportunity to create a new long term investment in the important on-trade channel, without taking significant financial and operational risk. The investment will provide our brands with improved distribution in some of the best community pubs across the UK, with an opportunity to enhance on-trade penetration further over time.”
PUB, RESTAURANT & DRINK PRODUCERS:
• Club operator Deltic has been reported to be working on a cash bid for Revolution bars following a bid by Stonegate for the bar chain.
• CAMRA is asking pub goers to go to their local pubs more often in order to save them from going out of business. The trade body adds that, of every £4 pint in a pub, 15p goes to business rates, 49p goes to beer tax, 67p goes to VAT, and another 15p is spent on additional taxes.
• McDonald’s is facing its first strike in the UK after workers at two sites in Cambridge and Crayford walked out in a dispute over zero-hours contracts and working conditions. Ian Hodson, national president of the Bakers, Food and Allied Workers Union (BFAWU), said: ‘We fully support the historic decision by these brave workers to stand up and fight back against McDonald’s – a company that has let them down one too many times. For far too long, workers in fast food restaurants such as McDonald’s have had to deal with poor working conditions, drastic cuts to employee hours, and even bullying in the workplace – viewed by many as a punishment for joining a union.’
• The MCA has reported that London Union is expected to have revenue climb 40% in 2017. Jonathan Downey, co-founder of the group said that opening costs were likely to slow EBITDA growth, however, it is expected to remain a positive figure. The group made revenue of £9m in the year ended 1 January 2017, with EBITDA of £2.7m.
• CGA research has found that 22% of consumers watch live sporting events in a pub or bar. The most common age group to watch sports in a pub or bar was 18-34, with 33% doing so. Chief executive of CGA, Phil Tate said ‘The research reveals how crucial sporting events are to the on-trade, with fixtures appealing across the age groups. Consumers who go out to enjoy sport are also very loyal to particular venues’.
• A Greene King pub has been awarded a zero food-hygiene rating and must now make major improvements to its food safety management, per PMA. The Tredegar Arms on Caerphilly Road in Newport, south Wales, was inspected by food safety officers from Newport City Council on 17 July days after a new manager took on the site.
• Spain’s first half wine exports reached a record high of €1.3bn, up by 6% year-on-year, boosted in part by strong demand from China and a hike in the average price of exported wine from (€1.11 to €1.18 per litre) . Export volumes actually fell to 7.8 million litres.
• The price of unleaded petrol could exceed that of diesel in the next few days as a result of the disruption caused by Hurricane Harvey in the US.
• NRN points out that the restaurant industry in the US added only 9,200 jobs in August, the lowest number in over 3yrs. NRN says ‘restaurants have been growing for a variety of reasons. Investors have poured money into the industry, fueling the growth of fast-casual chains and large, destination concepts that have replaced retailers as shopping mall anchors.’
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Hotels along the path of the total eclipse in the US last week saw a boost in business as people travelled to see the event. ‘The total revenue-per-available-room increase for all hotels in the path of totality on Sunday, 20 August, was an impressive 244%, with hotels in Hopkinsville, Kentucky, blowing away all other cities, achieving a staggering 1,644% RevPAR gain,’ wrote Carter Wilson, VP of consulting and analytics at STR. ‘These are Super-Bowl-and-beyond numbers. However, keep in mind many of these cities have very limited hotel supply, making it easier to collectively push performance.’
• Ryanair has written to the Civil Aviation Authority calling for a ban on UK airports serving passengers more than two alcoholic drinks per person. Writing on the ‘growing problem of drunken passengers on aircraft’ — which has resulted in increasingly frequent passenger-disruption events — Ryanair CEO Michael O’Leary commented: ‘It’s a reasonable and modest proposal. There is a growing problem of drunken and loutish behaviour.’
• With London expecting a 30% increase in tourists to 40m a year in 2025 Sadiq Khan has launched a new plan to ensure sustainable growth across the industry. The report predicts spending by tourists to grow by nearly 50% to £22bn a year compared to £14.9bn in 2016. The key recommendations of the report were to promote travel during off-peak periods and to invest in tourist information.
• Changes to Britain’s gambling habits have led to a drop in lottery spend and Camelot, the company that runs the lottery, must now convince regulators that it should retain that control. Camelot’s UK arm revealed in June that its lottery ticket sales had fallen 8.8% to £6.9bn in the year to March 31, with developments including higher competition and the rise of online gambling as factors in its decline.
• According to the Sunday Times, Google will be levied with a record multibillion EU fine relating to phone software abuse.
• The Sunday Telegraph reports that Gala bingo is looking to offload sites as it mulls over a rebrand.
• Facebook’s Watch video service is rolling out to US users offering access to hundreds of shows in a move to rival YouTube.
• Evolution continues & the only constant is change. Yellow Pages to cease printing directories.
FINANCE & MARKETS:
• UK manufacturing PMI came in ahead of forecast for August at 56.9, up from 55.3 in July. A number above 50.0 implies expansion. Markit said that the numbers showed ‘solid progress’. It says ‘the survey data suggest that the manufacturing economy remains in good health despite Brexit uncertainty, and should help support on-going growth in the economy in the third quarter, which will add fuel to hawkish policymakers’ calls for higher interest rates.’ Manufacturing makes up around 10% of UK GDP. The much larger Services PMI is released tomorrow.
• The US economy added 156,000 jobs in August, below expectations. The jobless rate ticked up to 4.4% from 4.3% in July. The data may dampen calls for a December rate rise.
• BBC reports most economists do not expect a rate rise in the UK till 2019. This despite the fact that last week MPC member Michael Saunders, said a modest rate rise may be needed to curb inflation.
• Oil down over the weekend at $52.51
• Sterling up a shade vs dollar at $1.2953
• Pound up a little versus Euro at €1.0899
• UK 10yr gilt +3bps at 1.06%
• World markets: UK mixed on Friday with FTSE100 higher. Europe and US up. Asia mostly down in Monday trade
o David Davis says Europe looks silly and frightened.
o EU negotiator Michel Barnier has said that he intends to “teach the British people and others what leaving the EU means”.
o Theresa May has threatened a reshuffle to keep her MPs in line & to prevent them from voting against the Repeal Bill on Thursday. Labour will vote against.
o PM Theresa May has said that Brexit wobbles could let in Labour.
o Brexit debacle & botched election could usher in first hard left government in, well, ever. Money Week says Labour, which is ahead in the polls, will return country to the 1970s and ruin the economy.
FRIDAY’S LATER TWEETS:
• Later Tweets: RTN confirms that full year margins will be some 150 to 180bps below last year. Prices down & costs up.
• RTN aided by warm weather in June (its pubs) & release of Beauty & the Beast. Nonetheless, sees some progress with strategic goals.
• Overbuilding. NRN reports that restaurant sales and traffic softened in July in the US. Companies are still intending to expand
• Messrs Barnier & Davis disagree on meaning of word ‘progress’. One suggests that it means, well, progress. And the other doesn’t.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The news that the struggling New Look chain has dumped its CEO Anders Kristiansen “with immediate effect” was picked up by the Times (“Fashion chain gets new look after chief resigns”), as well as the FT and the Telegraph, but the main focus in Saturday’s papers was 0n the news that another rebellion is brewing against the beleaguered Chairman of Sports Direct, Keith Hellawell, ahead of next week’s AGM. That was the lead Business story in the Telegraph (“Chairman of Sports Direct faces calls to quit”), although the Business editorial in the Times mocked the fact that the leading institutional shareholders involved in the revolt only have very small shareholdings in Sports Direct. The Guardian’s main focus was on the news that the founders of Matches.com have banked £400m from selling a big chunk of their stake to Apax, but it also had a big feature on the potential for
• Sunday Press: Sports Direct remained in focus ahead of its AGM in Sunday’s papers, with the Observer highlighting that Mike Ashley will not be appearing to help defend his embattled Chairman and the Business editorial in the Sunday Telegraph flagged that “there is no room for feelings” and that “a new Chairman is desperately needed to speed up reform”. The Sunday Times noted that leading investors are also protesting against the Sports Direct share buyback scheme (as it has tightened Mike Ashley’s grip on the business by pushing his stake over 60%), whilst the Mail on Sunday highlighted that Mike Ashley has tightened his grip on the Flannels clothing chain, by increasing his stake from 51% to over 75%. The Midas investment column in the Mail on Sunday reviewed the recent focus on the fact that ASOS is nearly capitalised at as much as Marks & Spencer and advised its readers to Hold
• Today’s Press and News: The Telegraph highlights that the trial of the 3 ex-Tesco UK directors involved in the accounting scandal begins today (with large photos of the 3 men adorning the front page of its Business section). The Telegraph also has a helpful “SWOT” analysis of Sports Direct ahead of the AGM, whilst City AM flags that some institutions are trying to block the share buyback plan. The Daily Mail notes that Amazon will start a big advertising programme this week for its new own-label clothing range “Find”, the FT highlights that Boden has reported some decent annual sales and profits growth and the Times picks up that the former Dunelm boss, John Browett, had been set a specific target of improving his relationship with the Board, implying that personality differences lay behind his sudden departure last week.
• News Flow This Week: As we move on into September, the pace of news picks up this week, kicking off tomorrow with the BRC-KPMG Retail Sales figures for August (which are again likely to show some modest LFL sales growth overall, perhaps +1.0%) and the Halfords IMS update, followed by the Sports Direct AGM on Wednesday. Thursday then brings the Dixons Carphone AGM, the Carpetright AGM and the Conviviality AGM.