Langton Capital – 2018-10-22 – Gfinity, Ten Entertainment, CAKE, business rates etc.:
Gfinity, Ten Entertainment, CAKE, business rates etc.:
A DAY IN THE LIFE:
Many big firms have slack built into them.
I mean they must have. Where else would they find the time to send their staff to conferences, wellness awareness seminars, gender fluidity bonding sessions etc while the rest of us have our wheels dropping off if the laptop is two minutes longer than usual booting up or the mobile phone ‘installs new updates’ and won’t turn on again.
And heaven help us if the internet goes down, the computer falls on the floor or the dog chews through one of the more important cables that rats’ nest around the front door.
Anyway, I have been trying for some time to use rats’ nest as a verb so let’s leave it at that. On to the news:
• Telegraph reports ‘doubts persist about whether the emergency funding, comprising of £20m of loans from Mr Johnson and a further £15.6m cash call from shareholders, is sufficient.’
• Subscribers to the placing initially believed that the group’s shares would be re-listed on Thursday last week
• Company directors will face shareholders at a General Meeting on 1 November
• Sunday Times reports group could face legal action from shareholders as lawyers attempt to rally support
• FT suggests Patisserie Holdings debacle (along with the administration of Conviviality) does nothing ‘to lessen Aim’s reputation as a loosely regulated wild west of a market choc-a-bloc with ventures with short trading histories and shaky governance.’
• FT latches on to fact that ‘two directors of troubled café chain Patisserie Valerie, including its suspended finance director Chris Marsh, made multimillion-pound profits from share options pegged to profit figures that may now have to be revised.’
• If profit figures are revised, as they will be, then action may be taken to recover the monies from the above directors.
• It is not known at this stage whether the ‘accounting irregularities’ go back to the time of the group’s IPO in 2014. If they do, then the documents accompanying the IPO may be wrong and the price at which the share were placed by previous shareholders and by the company itself may be reviewed.
• Langton work on Pat Val & other Risk Capital shareholdings goes on.
PUBS & RESTAURANTS:
• 3Sixty restaurants is set to convert another Mitchells & Butlers pub into its Ego in a Pub format.
• Exports of Scotch whiskey have risen by almost £2bn in the first half of the year, representing a greater than 10% increase, according to the Scotch Whisky Association.
• Talking to a number of companies about Deliveroo. Boosts sales but is damaging to margins. Some operators going cold turkey. Probably better than handing the names, locations and email addresses of all your customers over to a potential longer-term competitor.
• The former director of Bill’s, Roberto Moretti, has been named chief executive of Vapiano UK replacing the outgoing Phil Sermon, the MCA has reported.
• The healthy grab-and-go chain Abokado has seen profits rise 24% for the year ended 31 March 2018, to £726k.
• The shopping centre landlord, Intu, has stated that it is considering an improved proposal of 215p per share from the consortium led by John Whittaker. The consortium had previously offered 205p on October 11th.
• The Sunday Times reports Gaucho will come out of its CVA rebranded to encourage vegans to eat at its restaurants. That could be a challenge. The company owed £50m to its banks and had to be acquired out of administration by Investec and SC Lowy.
• Retailers are facing the worst period for the high street since the financial crisis, with EY reporting eight profit warnings in the industry in Q3. Over the last year 206 listed companies have warned on profits, up from 191 a year ago.
• French Connection announced on Friday it has begun discussions with four interested parties regarding a sale of the business. The company expects a formal sale to conclude during the first half of 2019.
• Food Service Equipment Journal quotes work done by UCL School of Management as saying that crowd funding has a role to play and ‘can make the difference between success and failure’. On the other hand, like the lottery, it may be offering odds that, whilst the prize looks appealing, make deals less attractive than they first appear.
• Cider boss Martin Thatcher calls for cider tax cut.
HOLIDAYS & LEISURE TRAVEL:
• The Cypriot government had declared that it would refund the cost of alternative flights for stranded Cobalt Air passengers yesterday. The Cyprus government commented: ‘The remaining passengers that were due to fly with Cobalt Air in the next seven days, will be informed with subsequent announcements for arrangements for their repatriation’.
• Heathrow Airport will start to use new biometric services from summer 2019, including facial recognition at check-in, bag drops, security lanes and boarding gates. The £50m project is part of a wider programme of investment to streamline passenger journeys.
• Belgian unions CNE and LBC-NVK are planning further strikes against Ryanair before the end of the year. The unions said they had ‘decided to put Ryanair on probation, as they do with their own workers’.
• US hotel occupancy fell 2.1% to 68% yoy in September 2018, with ADR up 1.9% to $131 and RevPAR down 0.3% to $89.10.
• According to Sky News, Gatwick Airport may sell a stake in itself to the Canada Pension Plan Investment Board, valuing the airport at more than £3bn.
• Ten Entertainment Group has announced that Dr Duncan Garrood is to join as Chief Executive Officer, succeeding Alan Hand.
• Ten reports ‘Duncan will join the Group as CEO designate with effect from 19 November 2018 and will take up the role as CEO and join the Board with effect from 15 December 2018.’ Dr Garrood last week stepped down as CEO of Bill’s. Chairman Nick Basing reports ‘we ran a deep and wide-ranging search process and we are delighted to appoint Duncan as the new Chief Executive. Duncan was the stand out candidate.’
• Gfinity has updated on trading for its year to end-June saying it achieved turnover of around £4.3m, up 82%. The EBITDA loss will be in the region of £5.2m. Gfinity had cash at end-June of £3.7m and it currently has ‘over £2m.’
• Gfinity continues to move towards break even but the above numbers suggest that it will need to raise more money in order to achieve its targets.
• Addendum. Gfinity didn’t wait long. It has this morning announced that it is to raise £6m via the placing of shares at 8p. The shares were 30p or so last year.
• HMRC opened ‘inquiries’ into 171 football players, 44 clubs and 31 agents over the last year, raising over £330m in doing so. The crackdown comes after an agreement between HMRC and the English Premier League expired last year, under which clubs accepted limits as to how much they could pay players for their image rights.
• Facebook hires Sir Nick Clegg as head of global affairs and communications amid increased scrutiny of the company and the threat of government regulation.
• C.banner International, the Chinese owner Hamleys, launches a strategic review of the toy retailer days after revealing multi million-pound losses.
FINANCE & ECONOMICS:
• UK Government borrowing fell by more than expected last month, to £4.1bn, from £4.9bn a year earlier. The ONS has reported that we are at the lowest year-to-date total borrowing since 2002.
• Sterling up vs dollar at $1.3067 but down vs Euro at €1.1351
• Oil up at $80.03
• UK 10yr gilt yield up 5bps at 1.59%
• World markets mixed. Far East up in Monday trade
• Brexit etc.:
o 700k march for right to vote on deal. Sunday Times survey running 71:29 in favour of a People’s Vote
o Sunday Times says PM could face challenge as soon as Wednesday. New leader could go to the country (as Mrs May did but Gordon Brown did not)
o Various ministers insist Chequers proposal is not dead. EU says current UK position is unacceptable & further concessions needed. Hence potential leadership challenge above.
o Bloomberg has reported that the PM is willing to drop ‘key demands’
o Stena Line has said there is ‘very little readiness’ at UK ports for a no-deal Brexit. Sky reports Japanese carmakers saying a ‘no-deal’ Brexit should be ‘avoided at all costs’. A deal, currently, will only be forthcoming if the government rubs out some of its red lines re either Europe or staying in the Customs Union.
o IAG has dismissed as ‘nonesense’ suggestions that it would not be able to fly to Europe in the case of a no-deal Brexit
o Bank of England preparing for what it says is an unlikely ‘disorderly, cliff-edge’ Brexit
o CBI says most British businesses surveyed are to begin Brexit preparations before Xmas
PRIOR DAY LATER TWEETS:
• Later tweets: MCA re Bread: possibly ‘the latest delay is not due to Brexit, but more to do with the current problems faced by Patisserie Holdings’
• Pendragon warns on profits as big-ticket items suffer spending drop. Mix of economic & motor-industry-specific issues
• BDO suggests w/e Sun 14 Oct LfL store sales down 3.9%, online only up 5.4%. Total sales down 2.2%.
• CAKE, Bread. Looking at sales, store numbers, valuation, roll-up loans, bank debt & the rest. Latter now no longer for sale
START THE DAY WITH A SONG:
Friday’s song was I Wanna Be Your Dog by The Stooges. Today, who sang:
My hands are tied,
My body bruised, she’s got me with
Nothing to win and
Nothing left to lose
RETAIL NEWS WITH NICK BUBB:
• B&M: A week ago the Sunday Times ran a story that B&M was looking for an acquisition to break into the French discount market and, lo and behold, the company announced at 4.35pm on Friday that it was doing just that, by buying Babou Stores for Eur 91m. Babou’s 95 stores are mainly on out-of-town parks and have average selling space of c27,000 sq ft (ie a bit bigger than the average B&M), with c30,000 general merchandise, homewares seasonal and textile SKU’s. Total revenues were Eur 391m in y/e Jan, with EBITDA of Eur 24.7m, so the purchase price looks quite reasonable and the acquisition will be immediately earnings enhancing, although B&M has warned that it will spend 12 months realigning the Babou product range closer to that of B&M. Simon Arora, the CEO of B&M, said: “B&M has made no secret of its European growth plans since its IPO in 2014. We are
• French Connection: Another after-hours announcement on Friday (at 4.45pm) came from French Connection, after a suspicious spike in its share price, to reveal that, following the news on Oct 8th about a Strategic Review of the business, it has started preliminary discussions with 4 “interested parties” and has also had several other conversations. How many of these discussions involve full-scale bids is unclear, but the impression is that there is more interest in the loss-making fashion chain than one might have thought…
• Saturday Press and News (1): Apart from the extraordinary news that the former Lib Dem leader Nick Clegg, of all people, is to be the Global Communications Director of Facebook…the main focus in the Saturday papers was on the indicative c210p cash offer for the embattled shopping centre giant Intu from the John Whittaker consortium. The veteran City Editor of the Daily Mail said the offer “looks a little short of what may be required”, whilst the Business editorial in the Times flagged that the up-to-date property valuation promised by Intu “won’t mean much”. The Business editorial in the Times also looked at the profit warning from Pendragon on the back of the new EU emissions tests for new cars, noting that although “it does seen extraordinary that this crackdown could have wrong-footed the industry so badly” there was also a profit warning for similar reasons from Mercedes Benz on
• Saturday Press and News (2): The news that Sports Direct is to close the House of Fraser flagship store in Manchester, after failing to reach agreement with the private landlord, was picked up by the Guardian and the Times. The Guardian also had an interesting feature on the news that the private equity owned Nicholson’s shopping centre in Maidenhead has fallen into administration (“Shopping centres’ downturn comes to Prime Minister’s doorstep”), highlighting that the former Argos store is now a “Ping Pong Parlour”, of all things…In terms of other interesting photos, the Telegraph had a picture of the Queen touring the Fenwick’s store in the new Bracknell shopping centre and the Times flagged that Xavier Rougeaux is the new CEO of Bond Street retailer Smythson.
• Saturday Press and News (3): In other news, the Times noted the after-hours news from French Connection on Friday that it has at least 4 interested buyers, whilst the Daily Mail had a snippet about the news that the privately owned discount chain Home Bargains has announced that sales surged to £2.1bn in y/e June and profits reached £201m. Finally, the veteran City commentator Neil Collins maintained his one-man campaign against the planned Sainsbury/Asda merger, thundering in his FT column that if the CMA makes a tie-up unviable, the two companies will have to find a more imaginative route to survival, “rather than behaving like a pair of drunks propping each other up”.
• Sunday Press and News (1): The main focus in the Sunday papers was on the embattled Debenhams, ahead of its final results on Thursday, with a variety of front-page Business stories: the Sunday Telegraph led with “Debenhams to ramp up closures and axe dividend”, flagging that the new FD Rachel Osborne wants to save £100m by axing the dividend and cutting cap ex, whilst the Mail on Sunday screamed “A THIRD of Debenhams stores at risk of closure”. The Sunday Times went with the slightly more obscure news that hedge funds are buying up Debenhams’ debt to position themselves for an asset break-up, but it also noted that Debenhams will have disappointingly little to say about the much-vaunted sale of the Magasin business in Denmark.
• Sunday Press and News (2): The more prominent Retail story in the Sunday Times was the revelation that Julian Dunkerton, the co-founder of Superdry, thinks that “Superdry needs my help” and that it is on a “completely wrong” strategic path. The Sunday Times also flagged that the embattled Intu Properties will unveil a slight drop in NAV this week, but Oliver Shah said in his column that the John Whittaker consortium will clinch a deal to buy Intu at around 225p and that this will represent “a corporate mercy killing”. The Sunday Times also flagged that the fashion chain Reiss has bucked the trend by reporting strong sales growth and that Ocado is looking for two new distribution warehouse sites to cater for Online grocery demand in the North. The Sunday Times also had a big feature on the problems of Tesco.com (“Tesco can’t see Online delivering”), illustrated with a graphic of a
• Sunday Press and News (3): The Sky News scoop that the shadowy Chinese firm C.banner has put Hamleys up for sale was picked up by the Sunday Telegraph and the Sunday Times, whilst the Mail on Sunday had a scoop that the Chancellor will unveil £300m of Business Rate relief for deprived town centres in the Budget. The Mail on Sunday also noted that Pets at Home is one of the most shorted stocks, with a 14.3% position (Debenhams is 11.8%), also flagged that Liberum feel the recent alarming slide in the Joules share price is “unwarranted” and also highlighted that losses have increased at the shirt retailer Thomas Pink. And the Sunday Telegraph picked up on the strong results reported by the privately owned discount chain Home Bargains, noting that the founder Tom Morris paid himself over £1m.
• Today’s Press and News: The Daily Mail follows up its sister paper’s claim that Debenhams is considering axing up to a third of its stores, but the Times focuses on the safer ground of Debenhams’ axing the dividend, as does the Telegraph in its preview of Thursday’s finals. The Times follows up its sister paper’s claim that the Superdry founder Julian Dunkerton thinks the business is on the wrong path and the Telegraph aids the debate with a helpful “SWOT” analysis on Superdry. And CityAM flags up the news that the Chinese firm C.banner has put Hamleys up for sale.
• News Flow This Week: Things are quieter this week, given skool half-term, with the much-awaited Debenhams finals on Thursday the highlight, but there is also a Travis Perkins (Wickes) Q3 trading update on Tuesday and the Pendragon Q3 update on Friday.