Langton Capital – 2017-12-05 – Vianet, Brighton Pier, business optimism, Cineworld etc.:
Vianet, Brighton Pier, business optimism, Cineworld etc.:
A DAY IN THE LIFE:
Bit rushed this morning following emergency visit to the pub yesterday evening. It was Monday, December. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Vianet has reported H1 numbers saying revenue fell to £6.7m from £7.1m with adjusted PBT up 4% at £1.7m
• Vianet H1 EPS 3.66p (vs 3.42p) and H1 dividend unchanged at 1.7p. Cash at half year £2.7m against £2.0m last year.
• Vianet H1. Group chairman James Dickson says ‘I am pleased to report that the Group’s continued focus on growth areas has resulted in a moderate increase in adjusted operating profits for the six months to 30 September 2017, with our recurring revenue streams being strengthened by growth in the Smart Machines division further enhancing the quality of the Group’s earnings.’
• Vianet continues ‘as we expand the iDraughtTM footprint, develop new revenues from further Pubco data analytics and deliver efficiencies from increased automation in our Smart Zone division, the Group believes that the division’s contribution can be sustained notwithstanding the challenges of the end customers’ market.’ Chairman James Dickson concludes ‘underpinned by high levels of recurring revenue, Group cash flow is strong and there is a solid financial platform to facilitate further expansion and development. The Board remains confident that Vianet’s long term strategy is appropriate and that the Group is capable of delivering consistent and sustained growth.”
• Brighton Pier Group has announced that it has entered into a conditional agreement to acquire Lethington Leisure Ltd. The target ‘owns and operates Paradise Island Adventure Golf, the operator of six indoor mini golf sites at high footfall retail and leisure centres’. The purchase price represents a total consideration of £10.5 million on a cash-free, debt-free basis.
• Brighton Pier to issue £3m of shares to part-pay for its acquisition. Brighton says ‘the Target has a strong track record as a profitable and growing leisure operator. In the financial year ended March 2017, Paradise Island Adventure Golf had revenues of £3.49 million, with a three year CAGR from 2014-17 of 14.7%, and adjusted EBITDA of £1.21 million.’ Brighton Chairman Luke Johnson says ‘it is part of The Brighton Pier Group’s strategy to acquire growing experiential leisure and entertainment destinations.’ He says ‘we are excited by the opportunity to bring Paradise Island Adventure Golf into the group and will now turn our attention to expanding its footprint across the UK, having already identified a number of potential additional locations.’
• Fever Tree has updated on its expansion plans saying it ‘is pleased to announce the establishment of a North American office and the appointment of Charles Gibb as the Group’s North American CEO.’ Fever Tree CEO Tim Warrillow says ‘the North American premium mixer market is still at a relatively early stage but the trend towards spirits premiumisation and the increasing focus on simple long drink mixability is accelerating and represents a significant opportunity for Fever-Tree, as the pioneer of the premium mixers segment.’
• Optimism falls per CGA survey. Announces ‘perfect storm’ of challenges facing the industry including rising food and property costs and Brexit.
• CGA reports ‘optimism among leaders in the eating and drinking out sectors has been substantially dented since the start of the year.’ It says only ‘30% of leaders of restaurant, pub, bar and coffee shop groups are optimistic about general market prospects for the next 12 months—down from 47% in the first quarter of 2017.’
• CGA finds optimism bias alive & well in that operators’ optimism about prospects for their own businesses remains far higher than that for the industry as a whole. It finds 52% are optimistic, down from 68% in Q1.
• CGA says ‘a third (32%) of leaders admit their business’ performance has been below expectations in the last six months—down by five percentage points from May’s survey.’
• CGA says 57% of business leaders are concerned about consumer confidence over the next six months. Bias shows through in that ‘only one in eight (12.2%) is pessimistic about their own business’ prospects for the next year.’ So where do all these failures come from, then. Finger pointing & the optimism bias mean that it’s always ‘someone else’ or ‘the market’ that is in trouble. It’s a wonder that any failures happen at all.
• CGA says 71% of leaders say the decision to leave the EU has had a negative impact on their business. Only 3% say it was positive.
• CGA says costs are an issue. Passing on price rises to customers is a problem. Property costs are too high. Staffing is an issue. Discounting (always ‘somebody else’) is also problematic. Oh dear.
• CGA’s Peter Martin reports ‘our Business Confidence Survey is the clearest indication yet of the trials facing the leaders of out-of-home eating and drinking. With food, property and people costs all rising, consumer confidence softening, competition intensifying and Brexit casting a long shadow over the future, operators are enduring something of a perfect storm of challenges.’ On a more optimistic note, Mr Martin says ‘but this is a creative and resilient sector, and while leaders’ optimism has been dented this year, they will be rolling up their sleeves and fighting hard for growth in 2018.’
• Barclaycard has reported that consumer spending growth fell to 2.8% in November, a drop in real terms. Spending on ‘non-essential items’ was also 2.8%, up from 2.2% in October. Barclaycard comments ‘consumer sentiment has deteriorated over the last couple of months after a prolonged period of falling purchasing power.’ It continues ‘against this backdrop, it’s not surprising that consumers continue to spend conservatively, leading to a second successive month of contraction in real terms.’
• Government figures show that pub and bar insolvencies are up 9% in the past year, from 444 in 2015-16 to 482 in 2016-17. This is the first time in four years that the number of pub and bar insolvencies has risen, according to London-based commercial lender Ortus Secured Finance, which explained that weak consumer spending (down to just 0.1% in Q2 of 2017) is ‘likely to be a major driver behind insolvencies’, and warned the figure ‘may fall further still’, following the recent interest rate rise.
• The Society of Independent Brewers (SIBA) has purchased a majority stake in Flying Firkin Distribution Ltd as the trade body looks to develop routes to market for its members. Mike Benner, SIBA Chief Executive,commented: ‘This purchase creates an exciting opportunity for SIBA to progress its commercial objectives to fulfil local to national demand for craft beer and firmly establish SIBA as the category leader in British craft-brewed beer.’
• Laine Pub Company has acquired four-strong Distinct Group, taking its portfolio up to 60 sites. Laine’s chief executive Gavin George said ‘The Distinct Group team have created an estate of high quality pubs which they have traded to an equally high standard. We are very excited to be welcoming the pubs’ staff into Laine’s family and are looking forward to applying our resources and experience to support them in meeting their trading aspirations.’
• TGI Fridays has become the first restaurant to offer Amazon Pay with Alexa, which allows customers to speak food orders into their devices and pay via Amazon Pay. Digital ordering is fast becoming a new battleground for the casual dining sector as operators look to cut down customer waiting times (and boost sales in the process). ‘As we continue to innovate, we’re focused on creating digital programs with industry leaders like Amazon that make the Fridays experience more convenient for guests to recreate at home,’ Stephanie Perdue, chief marketing officer at TGI Fridays, said in a statement.
• Starbuck’s attempt to close all 379 Teavana sites by January 2018 is in doubt after an Indiana judge prevented the coffee-chain from shuttering 77 locations in Indiana. Simon Property Group brought the case citing a breach of lease with the judge proclaiming they would suffer greater harm if the Teavana locations closed than Starbucks would if they remained open.
• Australia has overtaken France for the first time as China’s biggest source for bottled wine imports by value in October, although France still leads for overall imports in the first 10 months of the year. China has already become Australia’s highest value export wine market, and Australia overtaking over France in October is expected to further boost Australian wine exports to China, aided by the upcoming tariff reduction starting from 1 January next year.
• Mahou San Miguel has acquired a 30% stake in US craft brewer Avery Brewing. Avery produces White Rascal, El Gose and Avery IPA.
• In-N-Out burger is set to buy 22.4 acres in Victory Ridge, Colorado, widening its presence to seven states.
• Sainsbury’s will trial ‘1896 Coffee’ in six of its supermarkets, giving its shoppers a coffee-to-go offering that hopes to rival the likes of Caffé Nero and Starbucks.
• Data from the British Retail Consortium and KPMG show that Black Friday was unable to dispel the gloom over the British high street, with retail sales in store and online rising by just 0.6% for November yoy. The research highlighted that food spend was the main drive of growth.
• Around 26 of Toys R Us’s 84 warehouse style stores are to be closed, putting about 800 jobs at risk.
HOLIDAYS & LEISURE TRAVEL:
• One-fifth of business travel buyers have increased their use of serviced apartment suppliers, according to research by the Business Travel Show and ASAP. Out of the 243 respondents to the survey, 57% cited value for money as the reason for using serviced apartments. However, 42% said they don’t use serviced apartments.
• The number of Chinese tourists traveling abroad is set to increase by 10% to 86m next year, according to data from the China Outbound Tourism Research Institute. A spokesperson for the institute said: ‘Given 2016 was the first year in which more Chinese outbound trips were made beyond Greater China than within it, Cotri’s forecast shows that this pattern is becoming firmly entrenched and ‘rest of the world’ destinations are still benefiting from double-digit growth in Chinese outbound arrival numbers’.
• Cineworld has confirmed that it is to buy Regal Entertainment of the US for $5.8bn. It proposes a rights issue of £1.7bn. This is fully underwritten.
• Rupert Murdoch’s 21st Century Fox is believed to have resumed talks with Walt Disney regarding a possible sale of ‘most’ of its business. The sale under discussion would see Fox’s movie and cable networks and international divisions (including Sky) being acquired by Walt Disney. Fox News Channel, Fox broadcast network and its sports rights would not be up for sale.
• Facebook has announced that it will open new London offices, creating 800 jobs, next year. This will take Facebook’s total workforce in the UK to 2300.
• Spotify and Tencent Music are reportedly in talks regarding a 10% equity swap in each company, in a bid to bolster both of their positions in content licensing.
• The Supreme Court could overturn a ban on sports betting in most US states as New Jersey challenges the 1992 federal law at the highest level.
FINANCE & MARKETS:
• UK construction PMI rose to 53.1 in November from 50.8 in October. Any number over 50.0 implies growth. Most of the improvement was in residential building.
• CBI reports economic growth this year has been “timid” and will stay “steady but sluggish” in 2018. The CBI continues, saying ‘the lacklustre rates of growth that we’re expecting come against the backdrop of several years of persistently weak productivity, which is pushing down on the UK’s supply potential.’
• Oil down 90c or so at $62.37
• Sterling little changed vs dollar at $1.347
• Pound up a shade vs Euro at €1.1348
• UK 10yr gilt yield up 5bps at 1.28%
• World markets: UK up yesterday with Europe up and US down. Far East mostly down in Tuesday trade
• HM Government said to be considering regulation Bitcoin under money-laundering legislation. Good luck with that.
• Brexit, lame duck government etc.:
o UK & EU yesterday failed to agree Brexit talks can move on to trade.
o Still a week to go till the really, really real deadline.
o Irish border said to be sticking point. After caving in on the €50bn, HM Government tried to cave in on Irish border but DUP wouldn’t let them.
o ‘No’ and ‘never’ (often allied with the word ‘surrender’) are much-used in N Irish politics
o BBC reports DUP has ‘sunk’ attempted surrender of N Irish sovereignty to Europe. The words ‘surrender sovereignty’ would never have been in the agreement, of course. The scribes may have preferred ‘regulatory alignment’.
o Mrs May still confident of EU agreement, confident her government will not collapse, confident in the support of the DUP and absolutely convinced that things are going well
o Jean Claude Juncker says significant progress has been made but ‘it was not possible to reach a complete agreement.’
o Scotland, wales & London said to want special Brexit deals if the £1bn richer Northern Ireland gets one
o No talk re Damien Green at the moment
START THE DAY WITH A SONG:
Yesterday’s song was Novocaine for the Soul by the Eels. We hope you liked it because we used it twice by accident. Today, who sang:
Just what they’re told to,
To go to jail!
RETAIL NEWS WITH NICK BUBB:
• BRC-KPMG Retail Sales for November (4 weeks to Nov 25th): We flagged yesterday that a reasonably good Black Friday week was likely to make up for weak sales in the rest of November, to leave overall LFL sales fairly flat in the overnight BRC-KPMG Retail Sales survey for November and we weren’t far out, as the outcome was +0.6% LFL. But progress was skewed to Food and Online…As usual, the exact Food/Non-Food sales split for last month is buried in a 3-month moving average, but it looks to us as if Food was again over 2.5% up LFL, thanks to food price inflation, which would mean that Non-Food was about 1% down LFL overall, despite the Black Friday discounting boost. And Online Non-Food sales were “only” up by 6.5% in November, which would imply that Store Non-Food sales were about 4% down LFL, alas…Within Non-Food, only three sub-sectors saw combined LFL sales growth last month: House
• John Lewis Watch: But the focus now in the industry is on how December will turn out and we said last week that if it transpires that all Black Friday week did was to pull sales forward from December, then there will be some furrowed brows around the Boardroom table at John Lewis…Well, we will get the first clue this morning (at about 11am), in the form of the weekly sales figures from that great bellwether, John Lewis. A year ago, the week after Black Friday was still pretty busy, because of the Sunday and Cyber Monday promotions and the same was true this year: in fact John Lewis was still price-matching discount Sales on Friday…But we still think that sales will fall back quite sharply: we would pencil in a fall of 4%/5% in gross sales, to c£164m, for w/e Dec 2nd (versus £172m in the same week last year and the bumper £214m in Black Friday week this year).
• News Flow This Week: We get the SMMT New Car sales for November later this morning. The Mulberry interims are tomorrow and the ABF (Primark) AGM update is on Friday.