Langton Capital – 2019-08-28 – PREMIUM – Loungers, Fulham Shore, Thomas Cook etc.:
Loungers, Fulham Shore, Thomas Cook etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Bolton & Bury have anchored football on the front pages and, with that in mind (and on the back of Hull City coming second again over the weekend), it struck me that our dog is like the worst – or at least the most blinkered – sort of football fan.
Because, whilst he’s prepared to bark at and be rude to virtually everyone else for no reason, his home team can do no wrong.
We could withhold his food, make him sleep in the rain and oblige him to wear a pint tutu night and day and he would still ‘love’ us, whatever love in this case means.
And he wouldn’t listen to reason.
His beloved team could be gamely losing to Liverpool and he would still be affronted, indignant and downright unapologetic, graceless in defeat etc. and the same attitude, in these polarised times, seems to accrue to the way we view our politicians.
Some can do no right, but others can do no wrong. The words traitor and betrayal attach to some who are fighting for what they think is right whilst others, no less intransigent but with an opposing view, are heroes. Just which is which depends very much on whom you ask. On to the news:
LOUNGERS REPORTS FULL YEAR NUMBERS: Loungers, which listed at 200p per share in May this year, has reported FY numbers. 28 Aug 2019:
• Loungers floated at 200p in May. The IPO price was cut in the days running up to the float. The shares rose to 225p but have subsequently slipped to around 206p.
• Loungers reports that it has turned in ‘another strong trading performance in a transformational year.’
• It reports revenue up 26.4% to £153.0m (2018: £121.1m) with LfL sales growth of 6.9% (2018: 6.0%)
• Loungers has sdjusted EBITDA up 23.7% to £20.6m (2018: £16.6m). The adjusted EBITDA margin is ‘broadly maintained’ at 13.5% (2018: 13.7%)
• Adjusted operating profit is up 23.3% to £12.4m (2018: £10.1m)
• Loungers says there were ‘25 new sites opened in the year (2018: 22 new sites), taking the total to 146 sites at FY19 year end’
• There is ‘continued investment in and evolution of both brands in respect of menu, design and people’
• Re the outlook ‘the new financial year has started well and we are trading in line with our expectations as we continue to outperform the wider hospitality market.’
• Loungers says ‘we look forward to updating the market further when we next report on trading at our AGM in October’
• It adds ‘eight new sites have opened in the current financial year and the Group remains on track to deliver its target of 25 new openings in the full year.’
• CEO Nick Collins says ‘these results represent a strong performance for the financial year ending 21 April 2019 and are in line with both our, and the market’s, expectations.’
• Mr Collins adds ‘our revenue and profit growth not only reflect the continued success of the roll-out, but also our unwavering focus on our customers, the evolution of our proposition and how we support and invest in our teams.’
• Impressive LfL growth, rollout and headline numbers. Overall, as the group says, the figures are in-line with guidance.
• These numbers are for the period prior to the group’s AIM listing.
• Adjusted EBITDA is £20.6m but the reported loss before tax for the period is £5.0m. This is after material financing costs and prior to the reorganisation in the wake of the company’s stock market listing.
• Balance sheet totals for the pre-listed company were negative £15.4m.
• Accumulated losses for the company were £19.7m.
• Excluding intangibles, the company, pre its IPO, had negative net worth of £128.6m. The market cap of the company is £191m. This is comparing apples with oranges.
• The pro-forma, post IPO balance sheet suggests that net assets are £124m or £11m if brand values and intangible assets are excluded.
FULHAM SHORE AGM TRADING UPDATE:
• Fulham Shore has released the trading update that will accompany its AGM later today. The group says ‘in the first 21 weeks of the current financial year, total Group revenues have increased compared to the same period last year.’
• FUL adds ‘at Franco Manca, increased revenue is being driven by restaurant openings and increased customer numbers. At The Real Greek, due to the long spring and summer 2018 heatwave, which has not been repeated in 2019, like for like revenues have until recently been slightly behind last year.’
• FUL says ‘overall, trading for the Group in the financial year to date continues to be in line with management expectations.’ Re new openings, the group has opened five Franco Manca pizzeria (in Greenwich, Birmingham, Exeter, Leeds and Edinburgh, all of which have started brightly) to date. It says ‘the opening of these last four restaurants continues our successful expansion outside London.’
Property & the property market:
• FUL is building its 50th Franco Manca pizzeria in Manchester and the 17th The Real Greek on the Strand in London. It says ‘these two will take Fulham Shore’s restaurant portfolio to 67 restaurants in the UK, as well as one summer Franco Manca franchise in Italy.’
• FUL concludes ‘we are in negotiations to secure a number of sites for the current and next financial year. As previously announced, we will continue our policy of funding new restaurant openings largely through internally generated cash flow.’
• Re the property market, Fulham Shore says ‘we continue to see more properties coming to the market at ever lower rents as a result of the current conditions in the wider property, retail and dining out sectors, and will continue to take advantage of these as and when is appropriate.’
The statement in context:
• The group had said at the time of its full year numbers last month that ‘the current financial year to March 2020 has started well in both Franco Manca and The Real Greek.’ It said that it had opened three new sites to 15 July with ‘the opening of our Greenwich Franco Manca in April 2019…one of our busiest yet.’
• Fulham shore said ‘both our businesses are building customer numbers and they both continue to have significant growth potential. We are confident that the Group will perform well this year and we look forward to further financial and operational progress.’
• Rival operators continue to struggle. Franco Manca’s price points are hard to beat. Everyday low prices have led to high sales per unit. Queues are common. There was minor cannibalisation around 18mths ago but, given the blistering performance of the group’s Greenwich store, that would appear to have worked through.
• FUL does not discount. It offers what the customer wants to buy at a price they are prepared to pay.
GENERAL NEWS – PUBS & RESTAURANTS:
• Discounts still available. Prezzo 40% off mains. Toby, kids eat for a quid. Frankie & Benny’s 25% off mains. Pizza Express 25% off food. Customers confused as to what is the right price & angry when they pay the wrong one.
• The UK Spirits Alliance has campaigned to the new Chancellor Sajid Javid calling on him to impose a freeze on spirits duty in the next budget. A letter written to Javid read: ‘we ask you to support the UKSA campaign to fix excise duty – first by freezing it for the length of this parliament then reforming it. Government should join us in celebrating the global thirst for British drinks, backing jobs, growth and UK success by fixing spirits duty’.
• Former Yo! Sushi CEO Robin Rowland is stepping down from his role as non-executive director of the company, bringing to an end a 20-year association with the brand. Rowland says ‘the acquisition of SnowFox last month marks a further milestone in YO!’s pivot to a diversified global multi-brand and multi-format Japanese food group. As such, now’s the right time for me to step down from the board to make room for others who can guide YO! through to the next stage of development.’
• Masham-based Black Sheep Brewery has announced that revenues rose to £19.3m last year, up from £18.5m in 2018. The group has now raised profits in two consecutive years, hitting £260k last year.
• Black Sheep reports on the purchase of Leeds-based bar and restaurant chain Kith & Kin last year as well as its intention to build a packaging plant on its site at Fearby Road in its North Yorkshire home town. Chairman Andy Slee says ‘our diversification into pub ownership and to develop packaging capabilities to supplement our core brewing activity is proving to be a positive strategy.’ Mr Slee continues ‘brewing continues to be a challenging industry in which to operate, which is exemplified by the suffocating levels of beer duty we pay, accounting for 40 per cent of our turnover. However, we remain agile and proactive through the development of new products and programmes of investment that will enable the brewery to continue to move forward.’
• Black Sheep concludes ‘working with our loyal shareholders and pursuing new routes to fundraising for the business, we are committed to the fast pace of change we are delivering at Black Sheep Brewery that will ensure we bolster our position as an iconic Yorkshire brand and innovative and creative brewer.’
• Papa John’s has announced that Arby’s president Rob Lynch is to be its new CEO. The shares rose more that 7% on the news.
• Farmed insects could be used as a basis for pet-foods reports the BBC.
• Arcadia is to go ahead with its proposed CVA after objections from US landlords was withdrawn. CEO Ian Grabiner says that ‘all the components’ are now there and adds ‘we can now look forward to implementing our strategy and delivering our growth plan for the group.’
• PE house Lion Capital is reported to be lining up a sale of sports nutrition company Grenade, in order to take advantage of an upsurge of interest in healthy brands. The company markets the Carb Killa range of high protein cereal bars, which it terms a ‘guilt-free snack’.
• Puttshack has opened its latest site at intu Lakeside. The group says ‘the opening forms part of an equity raise of £27m in June this year with lead investor Promethean Investment. Puttshack Lakeside is the company’s second UK site and the latest edition to intu Lakeside which has recently undergone a £72m leisure extension.’
• Puttshack will open a site at 1 Poultry in Bank later in the year, with a further site planned at intu Watford. It says ‘the new sites will implement Puttshack’s world leading technology which combines automatic tracking with game scoring through the golf ball.’
• Pragma Consulting has commented on the ‘farm-to-fork’ trend that provides customers with a feeling of provenance and authenticity saying ‘F&B operators, particularly casual dining and café outlets in more advanced markets, are looking to capitalise on this movement as food production shifts to become better for people, profit and the planet.’
• Pragma says that physical proximity is a factor because ‘as well as reducing the environmental impact of transportation, the restaurant gains control over its ingredients.’
• Deep Blue Restaurants Limited has agreed with Boparan Restaurants Group to acquire the Harry Ramsden brand.
• Members of the trade union GMB Scotland working for Diageo have voted in favour of strike action over a long-running pay dispute.
• Later this month, it is expected that the WTO will hand the EU a penalty of billions of dollars, due to unfair subsidised Airbus production and sales at the expense of its US competitor, Boeing.
• Big Hospitality has reported that the German chopped salad, Salaid is set to launch in the UK later this year under new a name Choppaluna.
• Blueberri Ltd purchases Pi Pizza out of pre-pack administration, saving its two sites. In 2017-18 Pi raised over £500,000 on investor platform Growthdeck ahead of a planned London expansion, but it appears to have stalled.
• Breakfast Club acquires the former Polpetto site in Berwick Street, London, bringing the group up to two sites in Soho when the new venue opens next month.
• Panera Bread now delivers through DoorDash, GrubHub and Uber Eats.
• UNFORESEEN CONSEQUENCES. The right that tenants lobbied for to demand a free-of-tie rental option could lead to more leased and tenanted pubs being taken back and operated directly by property-owners.
• EI Group has developed a managed business via its JVs with managed experts as well as its Craft Union and Bermondsey businesses. It is possible, indeed likely, that many currently leased and tenanted pubs will be taken back by the group when leases expire.
• This, whilst eminently predictable, is not what campaigners had been fighting for. It is likely that there will be fewer pubs available to tenants going forward with more positions being offered as either bar managers or bar staff.
• THE SHRINKING POOL OF LISTED COMPANIES: In the last couple of years, three of the six largest UK pub companies will have been delisted.
• Punch was broken up and sold, EI Group is going to Stonegate and Greene King is to be purchased by Chinese property company CKA. It is likely that the behaviour of all three (pub numbers, the search for ‘alternative-use’ etc.) will be changed going forward.
• Of the three remaining large pub companies (MARS, MAB and JDW), only Marston’s has what might be deemed a ‘normal’ share register. M&B is controlled by Joe Lewis and by Irish investors Elpida whilst JDW is controlled by founder Tim Martin, who recently said that he would cut beer prices to ‘unbelievably low’ levels once Brexit was achieved.
• The above is neither necessarily good nor necessarily bad. But it is noteworthy. Quasi-private companies, whilst they have advantages such as being able to take a longer-term view etc., are more likely to make non-economic decisions – or at least decisions with which the Stock Market does not agree, in the short and medium term.
• Such actions (though not all apparent here) could include asset stripping, non-payment of dividend, strange pricing decisions or the decision to devote 90% or more of some RNS statements to a personal view on Brexit, the Euro, taxation levels or whatever.
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook has updated on its proposed refinancing saying it can announce ‘substantial agreement’ regarding key commercial terms between the Company, Fosun Tourism Group and its affiliates, the Company’s core lending banks and a majority of the Company’s 2022 and 2023 senior noteholders.
• TCG says ‘implementation of the proposed recapitalisation will involve a significant new capital investment and reorganisation of the Group.’
• Fosun will put in £450 million of new money and take ‘at least 75% of the equity of the Group Tour Operator (subject to the receipt of anti-trust approvals) and 25% of the Group Airline.’
• TCG adds that its ‘core lending banks and noteholders targeting in aggregate £450 million of new money to the Group and converting their existing debt into approximately 75% of the equity of the Group Airline and up to 25% of new equity in the Group Tour Operator.’
• There doesn’t seem to be a lot left over for existing shareholders.
• Club Med is to open its first Canadian resort, a ski-in, ski-out facility, Québec Charlevoix, on December 5, 2020.
• Tui CEO Fritz Joussen has said ‘There is a lot of competitive pressure with airlines. Consolidation will happen sooner rather than later.’
• The CAA is pressing BA for answers after it wrongly told passengers their flights were cancelled due to a pilots strike. Pilots at the airline are due to walk out on September 9, 10 and 27 but customers with tickets booked for other days were told on Saturday that flights were cancelled.
• Wildfires on the Greek island of Samos and other parts of the country have led to at least two hotels being evacuated.
• Bury has been expelled from the Football League. Rival Bolton Wanderers could go the same way within days. The League says ‘today is undoubtedly one of the darkest days in the league’s recent history. The EFL has worked determinedly and tirelessly to avoid this outcome and it is with a heavy heart that this situation has been forced upon us.’
FINANCE & ECONOMICS:
• Mortgage approvals in the UK hit their highest level in more than a decade last month. Some 95.1k loans were approved. Whilst it sounds a little counter-intuitive, the EY Item Club suggests that buyers wish to finalise their purchases ahead of an uncertain future.
• Germany’s economy thought to be on the brink of recession as business confidence levels hit their lowest level in 7yrs.
• Sterling up at $1.2276 and €1.1073. Oil up at $59.93. UK 10yr gilt yield down to 0.51%. Markets mixed yesterday. Far East higher in Wednesday trade.
• Politics & Brexit:
o Labour politician Baron Adonis tweets ‘Johnson is a straightforward narcissist. The needless man of the pointless hour. His own Churchill tribute act. There was no darkest hour, so he switched off the lights himself.’
o Labour leader Jeremy Corbyn has met his fellow opposition party leaders to discuss ways of averting a no-deal Brexit. Parliament is back next week.
o New Chancellor Sajid Javid has cancelled his first major speech leading Sky to suggest that a General Election could be on the cards. Mr Javid will instead concentrate on negotiating the forthcoming spending round in early September.
START THE DAY WITH A SONG:
Yesterday’s song was The Hunter by Slaves. Today, who sang:
“To the basement people, to the basement, many surprises await you,
In the basement, people, in the basement”
RETAIL WITH NICK BUBB:
• WH Smith: Today’s pre-close update (for y/e Aug) from WH Smith is light on detail, but it is very similar to the one a year ago, in fact it is almost the same word for word…The “Travel business continues to perform strongly with good sales across all of our channels” and the InMotion acquisition in the US going well, whilst “Our High Street business continues to perform in line with expectations”, with the result that the outcome for the year to 31 August will be in line with expectations. In terms of colour, about the only interesting tit-bits are that the lucrative Hospital shops are now the second biggest Travel Division channel in the UK and that stationery continues to be the main driver of the High Street Division. However, although the WH Smith share price has not had one its best years, the business can always be relied upon to deliver the goods, year in year out…
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda win for the seventh week in a row and it was another convincing victory. The overall Asda basket cost just £57.98, as much as £9.20 cheaper than second placed Sainsbury. Tesco was 37p behind on £67.55, Morrisons was on £68.74 and Waitrose was way off the pace, as usual, on £73.77. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Sainsbury, breaking Tesco’s four week winning run, as its 75,000 sq ft superstore in Newport came top, with an excellent 91 points out of 100.
• News Flow This Week: There is not much more company news scheduled for this week, after the Bank Holiday weekend, but tomorrow brings the McColl’s Q3 update whilst, with the end of the month looming large now, the GfK Consumer Confidence survey for August is out first thing on Friday.