Langton Capital – 2019-06-28 – More on GNK, collapsed companies, Merlin, holidays etc
More on GNK, collapsed companies, Merlin, holidays etc.:
A DAY IN THE LIFE:
Having braved a couple of Gregg’s veggie sausage rolls I feel I should go full snowflake and try an alcohol-free beer at some point over the weekend.
Now I have tried the odd one before. But that was back in the Calibre days and that was, how shall we put it, just plain bad.
However, I’m told that the modern offerings are better and have a bit of taste to them – and are not just a liquid that’s the right colour – but perhaps I’ll reserve judgement on that and report back next week.
Anyway, we’ll need the sunscreen over the weekend. It’s set to be 31 in London, 26 in York and 23 on the Yorkshire Coast where the North Sea will be a balmy 12 degrees. At that temperature, a normal, healthy adult will have 3-6hrs before they die of hypothermia and, with that comforting thought, let’s move on to the news:
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GREENE KING FULL YEAR ANALYSTS MEETING: Following the release of its FY numbers, Greene King hosted a meeting for analysts and our comments are set out below. 28 June 2019: See Premium Email.
THE STORY IN HEADLINES: Frustratingly, success stories and concepts destined to fail look eerily similar in their early years. However, whilst the downward stage of the J-curve ends for some companies, for others, it doesn’t. See also High Street High Rollers. 28 June 2019: See Premium Email.
GENERAL NEWS – PUBS & RESTAURANTS:
• Leon co-founder Henry Dimbleby is to lead a year-long review of the UK food system for the Government. It will be the first review of its kind in 75 years and will require Dimbleby to investigate the entire UK food system from field to fork. Dimbleby commented: ‘No part of our economy matters more than food. It is vital to life and shapes our sense of identity. But there are urgent challenges we must grapple with. Populations are growing, diet-related conditions are harming the lives of millions, and climate change is altering what our land will yield’.
• UKHospitality has welcomed the Government’s plan to launch a review of the UK’s food industry. Chief Executive of UKHospitality, Kate Nicholls said: ‘The UK’s food industry is one our greatest assets. Across the sector we see huge amounts of variety as well as ingenuity. With the country’s food and hospitality sectors so intimately linked, it is absolutely vital to the ongoing success of hospitality that the food industry is supported’.
• The restaurant sector has come under pressure as only three out of ten commercial kitchens are served by some sort of FOG mitigation system. According to ACO Building Drainage, one of the fundamental issues is that foodservice operators simply don’t have the infrastructure in place to cope grease and oil being discharged into the sewer network,
• See Finance & Markets for latest GfK consumer confidence stats.
• Vegtoberfest the UK’s first vegan Oktoberfest is returning to Camden Town following its inaugural celebration last year.
• ConAgra is looking to develop meat-free alternatives to its products following a quarter of sluggish sales.
• One in three closed shops are expected to never reopen as retail outlets given the tough conditions on the high street, according to research from Colliers International.
• CGA has reported that the UK pub market is set to be worth £23bn in 2019, growing 1.9% in the last year. CGA says ‘there is a huge opportunity for pub operators to grow, however with consumer trends continuing to evolve at a rate of knots the challenge is on pubs to keep up.’
• UKHospitality has responded to Boris Johnson’s latest immigration system proposal, with Chief Executive Kate Nicholls commenting: ‘Moving towards a point-based system has inherent risks, not least the potential for too much Government intervention in the labour market – something Conservatives have fought against for many years. Existing proposals need to be adapted to back business and those who want to work in the UK, rather than shutting the door on economic growth’.
• Starbucks’ UK-based European business paid £18.3m in tax last year while paying Starbucks HQ in Seattle £348m in licensing fees.
• Brewhouse & Kitchen reports an operating loss of more than £500,000 in its 2018 results, but has been listed in the LSE’s annual ‘1000 Companies that Inspire Britain’ report.
• Gordon Ramsey partners with Lion Capital to invest $100m in five different concepts across the US over the next five years. Lion Capital, the former owner of Wagamama and Weetabix, is acquiring a 50 per cent stake in Gordon Ramsay North America for $25 million and will provide a mixture of equity and debt funding to finance the opening of 75 to 100 restaurants.
• In the US, the 13 chicken chains in the Top 200 saw total segment sales up 8.9% to nearly $26.5bn, making it the fastest growing segment in the Top 200.
• Alibaba launches an English-language website for its Tmall marketplace, aiming to double the number of international brands on the platform to 40,000 in the next three years.
HOLIDAYS & LEISURE TRAVEL:
• Merlin Entertainments, the owner of Legoland and Madame Tussauds wax museum, has agreed to a bid from the Danish billionaire family that owns Lego at 455p per share. The bid ‘values the entire issued and to be issued share capital of Merlin at approximately £4,766 million on a fully diluted basis and implies an enterprise value of £5,905 million and a multiple of approximately 12.0x Merlin’s underlying EBITDA of £494 million for the year ended 29 December 2018.’
• The US hotel industry has seen occupancy down 0.6% for the week 16-22 June to 75.5%, according to data from STR. The industry also saw average daily rates increase 0.8% o $134.83 and RevPAR up 0.2% to $101.80.
• Lord Daniel Finkelstein has told travel industry leaders that Boris Johnson will be the next prime minister but it is likely Britain will not leave the EU on 31 October. Finkelstein warned of ‘a period of great turbulence in British politics’ as ‘[Polls show] Conservative voters are willing to end the union [of the UK] to get Brexit.’
• India-based Hero Enterprise partners with Catalyst Capital to invest £500m in hotel development in the UK.
FINANCE & ECONOMICS:
• GfK has reported that consumer confidence slipped to minus 13 in June, down from minus 10 in May. The number, below market expectations, added to fears of a slowdown in economic growth across the country. GfK says its stats ‘could point to a turbulent time for the economy over the summer months.’
• The EY Item Club has suggested that there could be a ‘levelling off’ in employment and earnings growth in Q2.
• UK car production fell by 15.5% in May, the 12th straight month of decline due to model changes and slack demand. The SMMT says ’12 consecutive months of decline for UK car manufacturing is a serious concern and underlines yet again the importance of securing a Brexit deal quickly.’
• Sterling up vs dollar at $1.2667 but down vs Euro at €1.1144. Oil little changed at $66.20. UK 10yr gilt yield down 1bp at 0.82%. World markets mixed with Far East down in Friday trade.
• Brexit, politics etc.:
o Bank of England Governor Mark Carney has suggested that the Bank would cut interest rates if the UK left the EU without a deal. Mr Carney told MPs ‘it’s more likely we would provide some stimulus in the event of no-deal Brexit, he told the MPs. “We have said we would do what we could in the event of a no-deal scenario but there is no guarantee on that.’
o Japan’s foreign minister has told the BBC that he has told both Boris Johnson and Jeremy Hunt to avoid a no-deal Brexit.
o FT suggests the maintenance of the Union is not being addressed in the Tory Party leadership campaign.
o Independent reports Boris Johnson has ‘downgraded his promise of support for an independent inquiry into Islamophobia in the Conservative Party.’
o Jeremy Hunt says both ‘sides’ in Northern Ireland must be treated ‘the same’.
o PSA, the owner of Vauxhall, has said it will make the next generation of Astra at Ellesmere Port only conditional upon a Brexit deal that suits its business model.
o Theresa May has somewhat interestingly declined to promise unconditional support for her successor’s Brexit plan. Mrs May says ‘it is important that we deliver a Brexit that is good for the British people.’
START THE DAY WITH A SONG:
Yesterday’s song was Obstacle 1 by Interpol, today who sang:
Message on the screen,
Says don’t make plans, you’re broke
No, no this can’t be right
RETAIL WITH NICK BUBB:
• Consumer Confidence Watch: The widely-followed monthly GFK Consumer Confidence survey came out overnight and the overall index (which has been negative since shortly before the June 2016 Brexit referendum) fell back to -13 in June, from May’s seven-month high of -10. The outcome was below the median forecast in a Reuters poll of economists of -11. Joe Staton, the Client Strategy Director at GfK, noted that all measures fell across the board this month and said “While UK consumers continue to remain concerned about the wider economy, over which the woman or man in the street has no control, of greater worry are the falls in the measures for personal finance. These better reflect our hopes and fears for our everyday financial futures and this, coupled with a decline in the Major Purchase Index, could point to a turbulent time for the economy over the summer months”.
• French Connection: In case you’re wondering what happened to the strategic review/formal sale process at the struggling French Connection, which was announced last October and was meant to be completed during the first half of 2019, the company has announced that the deadline has been pushed back until the time of the interims on Sept 17th. Discussions are said to have progressed “and are ongoing with a number of interested parties”, but we are not told why things have taken so long or what the options are or whether Sports Direct is still interested or what recent trading has been like…
• BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis were held back last week by the warmer weather at the weekend, despite the start of “Clearance”, but today’s BDO High Street Sales Tracker for medium-sized Non-Food chains looks OK for last week, w/e Sunday June 23rd. BDO Fashion sales were up by 2.1% LFL (including Online), helped by weak comps and total BDO LFL sales (including Homewares and Lifestyle sales) were up by 1.9% last week (down by 0.6% in Store sales, but up by 10.6% in Online sales).
• News Flow Next Week: Next week starts off quietly, as we move into July/Q3 on Tuesday, but bursts into life on Wednesday, via the Sainsbury Q1 update, the Topps Tiles Q3, The Works’final results and the JD Sports AGM update. Thursday then brings the ABF (Primark) trading update and the Sainsbury AGM.