Langton Capital – 2017-10-09 – Millennium & Copthorne, Prezzo, Pret, Papa John’s & other:
Millennium & Copthorne, Prezzo, Pret, Papa John’s & other:
A DAY IN THE LIFE:
Have you tried to use cash in a pub recently?
Because I have and you increasingly find yourself waving a twenty pound note at a barman who’s in turn waving a card machine at you and looking at the paper money as though it’s fallen to the earth from another planet.
And increasingly, perhaps, it has because the use of cash is declining and card usage, particularly now that the contactless limit has been raised to £30, is on the up.
And don’t get me wrong, I quite like the cash-back that I get from my credit card provider and, though I used to feel guilty using a card for purchases of less than twenty quid or so, I don’t mind carrying less cash and making do with a well-thumbed fiver, six pence in copper and a couple of cards.
But there is a bit of leakage here, isn’t there?
I mean the card company’s happy and the punter getting his cash-back should be happy but the remaining customers, who either pay by cash or debit card, are likely to be paying a higher bill in order to compensate the operator for taking so much plastic. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
Topical to say the least. See comments below from Prezzo parent Papa Topco.
Headings in our note include Why the Increase in Supply, evidence of oversupply, consequences of oversupply with a case study comprising a City of London walk.
It’s an easy (if at times queasy) read & if you’d like a copy at £200 + VAT (in money, beer or pizza subject to negotiation), then please drop us a line.
PREZZO TELLS IT LIKE IT IS:
• Prezzo’s ultimate parent company, Papa Topco, has filed accounts for the year to 1 Jan 2017 at Companies’ House. The group says: ‘the casual dining market is currently facing a turbulent time as…headwinds intensify’.
• Prezzo parent says the group is engaging in ‘the active marketing of a number of uneconomic restaurants and [has] reduced the number of planned new openings to 8 in 2017’.
• Prezzo parent says ‘during 2017 the sector has witnessed declining consumer visit frequencies, rising cost pressures and in some locations, over-expansion’. It says ‘these factors are creating a downward pressure on profit margins due to intensified competition, discounting and increased operating costs’.
• Papa Topco increased revenue by 12.7% to £219.7m. The group lost £71.1m after financing, up from a loss of £12.7m last year. The group had financing costs of £27.9m (some of which has gone to capital providers) and says that it has been impacted by £72.1m of non-trading items (compared with £13.5m last year).
• Prezzo parent provides £54.2m against ‘amortisation and impairment of intangibles’. Concedes worth of brand much declined. Also provides £12.8m for impairment of fixed assets.
• Papa Topco, ultimate parent of Prezzo, has negative net worth of £84.0m, up from a negative worth of £11.1m last year. The group has made accumulated losses of almost £84m since incorporation.
PUB, RESTAURANT & DRINK PRODUCERS:
• Papa John’s (GB) Ltd has lodged accounts for the year to 25 Dec 2016 with Companies’ House showing that the group’s turnover rose by 11.9% to £56.5m with operating profit coming in at £5.1m vs £3.8m last year. The group had 353 outlets in the UK at its balance sheet date.
• Papa John’s (GB) says of last year ‘for the 11th consecutive year, underlying comparable sales of our UK delco outlets grew’. The co says ‘the pizza market does however remain intensely competitive with significant promotional discounting continuing to take place in 2016 as in prior years’.
• Pret a Manger Europe has reported results to 29 Dec 2016 at Companies’ House saying that it ‘celebrated its 20th anniversary in 2016 with sales and EBITDA both growing strongly’.
• Pret says ‘we continued our measured expansion of the business [in calendar 2016] building and opening more shops and expanding and refurbishin in all markets’.
• Pret Europe 2016 revenues grew by 10.4% to £575m with operating profit of £57.7m against £54.3m last year. Pret says ‘we continue to adapt our product range to meet the tastes, needs and aspirations of our customers’. It opened its first vegetarian only shop last year.
• Deltic back in the game? Despite its need to clarify its approach to the stock market, Deltic’s chances of buying Revolution Bar Group may have increased as a major shareholder has indicated that it may be willing to switch allegiances. Stonegate reported on Friday that Revolution shareholder Artemis has informed it that it was withdrawing its non-binding letter of support for the former’s bid.
• Sky News has reported that Luke Johnson owned chain of bakeries Gail’s had appointed KPMG to advise it on a potential sale. Parent company Bread Holdings is reported to be worth as much as £200m though Sky comments that Bread made profits of £4.8m in the year to February 2016.
• Guardian reports Deliveroo is facing local authority opposition in its moves to open ‘dark kitchens’ on industrial parks etc.
• NRN reports that so many restaurants closed during hurricanes Harvey and Irma that it influenced US jobs growth as a whole. Numbers employed (non-farm) in the US fell by 33k in September
• Propel reports that Soho House has secured more than £400m from private equity firm Permira Debt Managers
• The MCA has found that the UK Eating Out Market has fallen 1% in value in Q2 2017 compared to the same period last year. Eating out visits were found to have fallen 6% to an average of 15.6 visits.
• A report conducted by IHS Markit/REC has found that record UK employment figures and a reduction in EU workers moving to the UK is leaving employers struggling to fill vacancies. Kevin Green, chief executive of REC chief executive said: ‘We urge the government to ensure any new immigration system includes provisions for low-skilled and temporary workers so that warehouses, supermarkets and restaurants can access the people they desperately need.’
• McDonald’s British division paid £132m in ‘franchise rights’ last year. The payments are believed to have been paid to the fast food giant’s Luxembourg operation, which means the UK branch has significantly reduced its bill to the Exchequer.
• The US-based family dining chain, Denny’s Corp has announced its intentions to open its first UK restaurant in Swansea.
• EasyCoffee is raising funding to open 200 stores across the UK in the next three years.
• The MCA has reported that Dylan Murray will step down as operations director of the Drake & Morgan bar group, in order to ‘pursue other interests.
• The British Retail Consortium has warned that home deliveries could be slower unless the sector retains access to EU workers. The body found that EU workers only make up 6% of the retail industry’s workforce, but these workers are concentrated in warehouse and distribution jobs.
• The old pound coins will no longer be legal tender in a week’s time. Around 1.2bn have been returned, but a further 500 million are believed to still be in circulation. So check between your sofas cushions and crack open those piggy banks.
• Caffe Nero Group has altered its name to ‘Italian Coffee Holdings’ but the new name will not be reflected in its 600 stores. Laura Vallis-Wain, a spokesperson for the group said: ‘The name of the company has been changed so that it better reflects its position in the corporate structure. This has no implications for the stores or the operations of the business’.
• Domino’s Pizza Group has agreed to form a partnership with its largest franchise in London. As part of the transaction DPG agreed to pay £24m to acquire a 75% stake in a newly formed company that will own the franchisee’s 25 existing London stores.
• The average price per litre for sparkling wine has fallen by 23p (3.3%) to £6.76 this year, bucking the wider trend of rising prices, as a result of increased competition within Prosecco.
• Micky Pant, who helped turn Yum! Brands Inc.’s restaurants in China into an independent franchisee, is stepping down as CEO of the company effective 1 March. Yum China’s COO, Joey Wat, will replace Pant as chief executive.
• TGI Fridays is to test alcohol delivery in Texas this November, making it the first restaurant chain to ever send spirits to a patron’s door. The chain has linked with third-party delivery service Lash, which will drive to a local liquor store partner once an order is received, pick up the bottles of alcohol, and then head to TGI Fridays for the food before traveling to the guest.
Sainsbury’s is increasing the number of stores stocking Patisserie Valerie products from 18 to 28.
BID FOR MILLENNIUM & COPTHORNE:
• Millennium & Copthorne to be bid for by Agapier Investments, a wholly-owned subsidiary of majority owner CDL.
• CDL to pay 552.5p per share for the shares in MLC that it does not already own.
• Millennium announces ‘following a period of negotiation between the parties, CDL and the independent non-executive directors of M&C are pleased to announce that they have reached agreement on the price at which the M&C Independent Directors would recommend a possible cash offer to be made by Agapier Investments Limited, a wholly-owned subsidiary of CDL, to acquire all of the outstanding ordinary shares in M&C that CDL and its subsidiaries do not already own’.
• Deal would represeng ‘a premium of approximately 23.7 per cent. to the closing price per M&C Share of 446.7 pence on 18 August 2017 (being the last business day prior to the date on which an initial proposal was received by M&C from CDL)’
• Deal comprises ‘a cash amount of 545 pence per M&C Share payable by Agapier Investments Limited, together with a special dividend of 7.5 pence per M&C Share’
• CDL ‘confirms that it intends to maintain M&C’s current business model, in particular to run the business as an owner and operator of its hotel portfolio. CDL also confirms it has no intention to sell or repurpose any of M&C’s hotels in London or in New York.’ The company cautions ‘there can be no certainty that a formal offer will be made’ and says ‘a further statement will be made as appropriate.’
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Jet2.com has added 550,000 summer seats at former Monarch bases after announcing more than 100,000 extra winter seats last week. The new additions include 250,000 more summer seats from Birmingham on its routes to Alicante, Antalya, Crete, Dalaman, Faro, Gran Canaria, Lanzarote, Malaga, Majorca, Paphos, Rome, and Tenerife.
• Upscale to luxury restaurant chains struggled in the US in September, according to preliminary lodging data received by STR, although economy to upper midscale hotels performed better. While occupancy fell by 2%-4% for the upscale segment, midscale hotels saw a 3%-5% increase and economy chains grew by 1%-3%.
• The Sunday Times reports that Airbnb paid less than £200k in Corporation Tax in the UK despite having generated more than £600m in rental income for landlords in Britain
• The Civil Aviation Authority has said that around 60% of holidaymakers left stranded by the collapse of monarch airlines, have now returned to the UK. The CAA has leased and chartered aircraft from 16 different countries, as it undertook the ‘the biggest peacetime repatriation effort’.
• UK games designer Sumo is said to be lining up a £150m IPO.
• The sequel to the iconic 80s film, Blade Runner, has reported disappointing viewing figures for its opening weekend at the US box office. Blade Runner 2049, recorded takings of $31.5m, far from Warner Bros predicted $45-50m.
• Donald Trump’s Scottish golf courses have recorded a loss of £19m for 2016. President Trump handed over control of the courses to his sons Donald Junior and Eric shortly before taking office.
FINANCE & MARKETS:
• ONS reports productivity of UK workers has fallen for the second quarter in a row in Q2 this year. Productivity per hour fell by 0.1% in Q2 after a fall of 0.5% in Q1.
• Halifax reports that house prices in the UK rose by 4.0% in the year to Sept, up from 2.6% in the year to August
• Fixed rate mortgage costs are beginning to rise. Barclays & NatWest have become the latest lenders to raise rates.
• Bank of England’s Jon Cunliffe says new capital requirements could dampen signs of ‘exuberance’ across lenders
• ONS reports it may have miscalculated inflation. Could be higher than previously reported.
• Oil down over a dollar to $55.73
• Sterling broadly unchanged vs dollar at $1.3094
• Pound down vs Euro at €1.1157
• UK 10yr gilt yield down 3bps at 1.36%
• World markets: UK up on Friday but Europe & US lower. Far East down in Monday trade
o Tory civil war rumbles on as Mrs May remains in job. Talks of demoting Boris. Party keen for her to stay in order to avoid pressure for General election
o Foremost Tories attempt to avoid references to Nasty Party
o Times quotes senior Tory as saying government is in a ‘monumental mess’
o No deal scenario still thought unlikely. Contingency plans for such an outcome said by Dominic Raab to be “well under way”. Says UK had to “strive for the very best outcome” but must “prepare for all eventualities”.
o PM will update today on progress or lack of it in Brexit talks. Times says she will say ball is in EU’s court
o Tory party membership (Preston on Sunday poll) said to favour no deal, hard Brexit & non-membership of trade body
YESTERDAY’S LATER TWEETS:
• Later tweets: Stonegate reminds shareholders its bid for Revolution is cash. Deltic clarifies position, says would need a prospectus & a bit more time
• NRN: overcapacity in US casual dining market one of main reasons footfall down. US industry ‘has exploded since the end of the recession’
• Monarch collapse impacts public. And, Langton. There are now virtually no flights available to anywhere for half term in 3wks
• Short haul airlines probably making out like bandits post Monarch. Sooner the planes get back in the sky the better (for consumers at least)
• Merlin’s shares up almost 2% on reports that the entertainment giant has held talks to take over parts of US-based SeaWorld
START THE DAY WITH A SONG:
Last Friday’s song was Stormzy with ‘Shut Up’. Today’s song:
If I was a sculptor but then again, no,
Or a man who makes potions in a traveling show,
Oh, I know it’s not much but it’s the best I can do
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: On top of all the stories in the Saturday papers about the embattled and beleaguered Prime Minister, the front page headline of the FT was ominous: “Germany and France crush hopes for swift Brexit transition deal”. In terms of Retailing news, the Times went to town on Tesco, with two separate stories: one about the revelation in the Tesco accounting trial that UK MD Chris Bush had been told in detail about the hole in profits and the other the news that rival grocery wholesalers have written to the CMA to complain about the planned Booker takeover (which prompted a Business editorial comment about why they’ve taken so long). And Tempus column in the Times looked in detail at Tesco and concluded “Buy now, but be prepared to be ruthless in taking profits”. The Telegraph noted the rise in first half sales reported by the struggling NISA convenience store business and the
• Sunday Press: The Sunday papers found fashion model photo opportunities in the upcoming Ted Baker interims (the Sunday Telegraph and the Mail on Sunday) and the news that the sale of the Oasis fashion chain by Kaupthing has been called off (the Sunday Times). The Sunday Times also flagged that the struggling New Look fashion chain is about to talk to its banks about restructuring its debt mountain. The Sunday Telegraph highlighted that Marks & Spencer is to revive UK hosiery production and also had an interview with the boss of Cath Kidston, Kenny Wilson (“We are 25 years old now. So, well past the point of being a fad”). The Business Comment column in the Sunday Telegraph noted the view of one major retailer that UK consumers are “behaving strangely” and that the High Street is “incredibly mixed”, whilst the Economics correspondent of the Sunday Times highlighted that although the
• Today’s Press and News: The most startling front page headline is in the Guardian; “Tory Brexiters turn their fire on Treasury”, but there is also an eye-catching headline in the Times: “Traditional store’s days are numbered, Aviva warns” (the big property investor Aviva has written in gloomy mood to clients about the impact of ever-increasing Online shopping). The Times, together with City AM, also flags up the subdued Visa spending survey for September (“Britons cut back on cars and clothes”). There are previews of this week’s results from Dunelm and Booker in the Telegraph and separately the Telegraph also has a useful “SWOT” analysis of Ted Baker ahead of their interims tomorrow. The Daily Mail highlights the Sunday press story that Marks & Spencer is to help to revive UK hosiery production.
• News Flow This Week: A busy week kicks off tomorrow with the BRC-KPMG Retail Sales for September (with another modest LFL sales rise expected). Tomorrow also brings the Ted Baker interims. On Wednesday we get the Dunelm Q1 and Capital Markets Day, the Vertu Motors interims and the Quiz pre-close update. Then Thursday brings the Booker interims, the WH Smith finals and the N Brown interims.