Turtle Bay, Just Eat, Chilango, discounts etc.:

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A DAY IN THE LIFE:

Langton went out for a couple of beers last night on a fact-finding mission (and to watch the West Ham, Arsenal match).

The main declared objective, football aside, was to see whether it ‘felt like a Monday’ or did it ‘feel like December’ and, a couple of silly-hat tables notwithstanding, it pretty much felt like a Monday.

Now there are a full two weeks to go until the big day and it’s all to play for but, at £4.65 then £5.60 and finally £6.45 per pint, it did feel as though the response of some in the industry has been to jack prices in response to a decline in footfall.

Of course, the buyer (in this case me) has only him or herself to blame if they’re snared by an attractive beer tap into paying crazy money for a product that costs pennies to manufacture but, in the final analysis, they may not see it that way.

After all, one person’s premiumisation is another person’s gouging and, if like me, they don’t often get receipts when they pay contactless, customers could be in for a bit of a bill-shock further down the line. See northerner in London. On to the news:

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PRIVATE COMPANY RESULTS – TURTLE BAY RESTAURANTS: The company has reported 2 March full year numbers to Companies House. 10 Dec 2019:

Headline numbers:

• Sales for the year fell by 1.8% to £68.1m.

• EBITDA was down from £12.om to £7.6m. Trading profit fell by 55% to £2.96m and the PBT fell by 62% to £2.24m.

Company comment:

• Turtle Bay says ‘this has been a challenging year, with the group impacted by the significant headwinds facing the restaurant sector.’

• It says ‘despite this we have continued to invest in building the people and systems capabilities required to improve the business and further differentiate it.’

• Sales in the UK fell by 2.5% (they must have held up reasonably well overseas) with a number of one-off events such as the World Cup having a depressing effect.

• Turtle Bay says ‘in light of the environment we slowed site growth and only opened one new site during the year.’

• The company adds ‘margins were also under pressure from external factors including the continuing increases in the National Minimum Wage, as well as food and drink cost inflation.’ The company believes ‘in the face of these pressures we have managed to maintain strong Gross Profit margins, reflecting the value delivered to consumers.’

• Sales were up by 31.5% in Germany with the EBITDA margin up by 11.5% on the prior year

• The company says ‘we continue to focus our efforts on giving guests high quality food and drink at good value, and an enjoyable experience. We strongly believe that focusing on these areas rather than discounts or promotions is the way to build a sustainable business.’

Company comments on the future:

• Turtle Bay says ‘the main external challenges to the business remain the uncertainty around the economy pending a decision on Brexiti the competitive nature of our sector and a general inflationary increase in costs.’

• It says ‘the main internal challenges are the finding and retaining of the right people to work in our restaurants and deliver great guest experience.’

• As regards the property market, Turtle Bay says ‘our belief is that there are still a large number of good potential sites around the UK. However, their costs are likely to fall over the next couple of years.’

A bit more on the numbers:

• Turtle Bay has accumulated profits since incorporation of £10.4m.

• It has positive shareholders’ funds of £10.0m.

• The company has net debt of £16.6m (2018: £17.3m) with some £13.1m of this owed to banks and only £3.5m owed to directors and shareholders

Other considerations:

• PwC is the auditor. The audit report is clean (though there are all the usual caveats).

• The going concern principle has been adopted. The auditors have signed off on this. There would appear to be no alarm bells ringing.

• The group’s comment on the potential future availability of sites in the UK at lower prices is interesting. It is in line with comments made by certain other operators such as Franco Manca.

• The group says it does not wish to enter the discounting fray. That seems reasonable as the way back from a discount-heavy offer is often unclear. Or not easily possible or not possible at all.

PUBS & RESTAURANTS:

• Just Eat has formally rejected the revised and increased 740p per share offer from Prosus. It says the board ‘continues to believe that it significantly undervalues Just Eat and its attractive assets and prospects both on a standalone basis and as part of the proposed recommended all-share combination with Takeaway.com N.V.’ It says ‘accordingly, the Board of Just Eat unanimously recommends that shareholders reject the Prosus Offer.’

• Just Eat says it is ‘a leading, strategic asset in the food delivery sector and the Board of Just Eat continues to believe that the Prosus Offer fails to reflect appropriately the quality of Just Eat and its attractive assets and prospects, the benefits of first mover advantage in a consolidating sector, and, on the basis of its own analysis, the future upside available to Just Eat shareholders through remaining invested in Just Eat and the Takeaway.com Combination.’

• Chilango has confirmed plans that it is to launch a company voluntary arrangement (CVA) as it attempts to secure its future. The company says it has ‘begun a process of engagement with its stakeholders with a plan to secure the future of the business.’

• Proposals may be put forward later today or tomorrow. The company wishes to exit its ‘non-trading leases’ and wants to ‘restructure the company’s debt.’ The holders of its ‘Burrito Bonds’ may be looking at a capital loss.

• City AM speculates that the group wishes to exit three leases. RSM, the accountancy firm that co-sponsors the Coffer Peach Tracker, is advising the company. Any CVA would need the backing of a majority of its creditors. These include the c1,500 small investors who are thought to have bought its mini-bonds.

• Chilango had been advertising these to individual investors outside its London Wall site during previous capital issues. City regulators are threatening to ban the marketing of mini bonds to individual investors from next year.

• A spokesperson said ‘together with a reduction in central costs, a successful CVA will materially improve the balance sheet.’ That’s what walking away from your commitments will get you. CVAs have been undertaken by a number of other firms including Prezzo, Carluccio and Jamie’s Italian. Chilango says ‘this proposal allows us to make important changes so we can support our stakeholders and continue serving our loyal guests. We are proud of the strong brand and passionate following our teams have created and look forward to the future.’

• Domino’s Pizza has announced that chairman Stephen Hemsley ‘has decided to step down from the Board with effect from 29 December 2019.’ The group says ‘Ian Bull, Senior Independent Director will step into the role of Interim Chairman until a permanent replacement is appointed.’ The company adds ‘the search for a new Chairman is progressing, and will be followed by the appointment of a new CEO. Further announcements will be made in due course.’

• Prezzo offering 30% off food or 2-4-1 on mains. Pizza Express 25% off food. Toby 25% off mains, Giraffe 30% off mains, Ed’s 30% off mains. Some offers run out next week, a couple run through to February.

• The number of Polish people living and working outside their own country has begun to fall for the first time in a decade.

• Lux Rewards, which offers points in certain restaurants redeemable against a range of products and services, is looking to raise £100k on Crowdcube in exchange for 6.25% of its equity.

• UK Hospitality has welcomed Conservative proposals for the UK to adopt a points-based immigration system though it has ‘urged the party to deliver more detail on how the system would work.’ UKH CEO Kate Nicholls says ‘confirmation that the aspiration remains a migration regime open to talent to meet the needs of the economy is welcome.’

• NIESR warns that it will be very difficult for the next parliament to design an immigration system that ‘addresses people’s concerns and meets the economy’s requirements.’

• Ms Nicholls says ‘a fair and managed system at all salary and skilled levels, hand-in-hand with investment in skills and training, is a must. This will avoid exacerbating skills shortages, keep the economy at full strength and allow hospitality to continue its work boosting the domestic workforce.’

• CGA and Prestige have released details on annual price increases in the food and drink markets saying that ‘whilst food and drink inflation for restaurants and caterers finished 2018 at 3.7%, 2019’s rate almost doubled to 6.1% (year to date).’

• The report suggests that ‘many of these cost challenges were sustainability related.’ It says that fish prices soared during the year with fruit & veg prices already ‘well ahead of expectations with storms, flooding and drought all impacting production in the UK and Europe.’

• David Read, Chairman of Prestige Purchasing said ‘our food system was built with the aim of feeding the world at an affordable cost. Now it’s contributing to the destruction of the planet. Urgent reforms are required to create transparent supply chains that protect the environment, and the people that create the food that we eat.’

• Imbiba-funded restaurant operator Casper & Cole has reported numbers to 3 March to Companies’ House saying that revenues rose by 34% in the year (to £6.48m) whilst the loss before (and after) tax rose by 69% to £1.40m.

• Three-restaurant-strong Casper & Cole reports that margins fell during the year ‘primarily due to adjustments in concept at the City and Covent Garden sites.’ It says that issues here ‘have subsequently been addressed’. The company says that ‘along with many other operators in the industry [it] is facing inflationary food and beverage cost pressures.’ C&C has accumulated losses since incorporation of £2.86m with positive shareholders’ funds of £4.59m. The group had cash balances back in early March of £0.83m with no debt.

• US burger company Shake Shack says it is ‘delighted to announce that it will open the doors to its 12th Shack in the UK, at Brent Cross, North West London’s premier shopping destination, on Tuesday 10th December 2019, and everyone’s invited.’

• Bar company Drake & Morgan has announced headline March 2019 numbers ahead of lodging full accounts will Companies’ House later this month. The company says turnover is up by 12% at £56.0m with LfL sales up 2.8%. The company says EBITDA was up by 24.9% at £6.3m with adjusted pre-tax profit of £1.9m.

• Drake & Morgan reports that The Anthologist at One St Peter’s Square, Manchester opened in July 2018 and says that there have been two further conversions from the former C&B bars estate with the Little Fable in November 2018 and The Moniker in April 2019.

• Re current trading, D&M says a ‘strong Christmas period [is] anticipated with bookings well ahead of last year, after the challenging market conditions affected the first half of the current financial year.’ It says it will open a central London site in 2020. CFO James Sherrington comments ‘2018/19 was a good year of progress – like-for-like sales were positive whilst a strong focus on productivity and efficiency savings delivered margin improvement and profit growth.’

• Beer Hawk Fresh has signed a distribution partnership with Swinkels Family Brewers ‘making a range of iconic European craft beers available to UK bars and retailers.’

• Carluccio is reported to be looking for strategic franchise partners to support growth in certain travel and airport markets as well as in the Republic of Ireland.

• Organic whisky company Nc’nean has launched a £1m crowdfunding campaign on Seedrs to help fund further growth.

• Bodega Bay Hard Seltzer has announced that it will be available on trial in 72 Sainsburys stores from the 19th of January. The company says ‘seltzers appeal to our target audience of “woke” millennials because of their low calorie and sugar content, but also due to the fact they’re gluten free and vegan.’

HOLIDAYS & LEISURE TRAVEL:

• Saga has updated travel professionals on its move into the river cruise market saying that its first ship, Spirit of the Rhine, will operate 15 itineraries, including five speciality cruises on the Rhine, Moselle, Main, Danube, and the Dutch waterways.

• Private wealth legal adviser Boodle Hatfield has said that the market for investing in luxury hotels in the UK remains buoyant. It says that 50 new luxury and premium hotels opened in 2018/19, up 1.5% on the previous year.

• France-based global hotelier Accor has announced that it has entered an agreement to sell a c5% stake in Huazhu Group Limited for USD451m. Accor will keep a stake of approximately the same size and its chairman and CEO Sebastien Bazin will remain on the Board.

• A number of tourists have been confirmed killed after the eruptions on the White Island volcano in New Zealand.

• Marriott has reported that its purchase of Elegant Hotels has completed. Shares in Elegant Hotels have now been suspended.

• Eurostar has cancelled dozens of trains this week in response to industrial action in France.

• The FT reports that US financier Todd Boehly, who owns the LA Dodgers baseball team, has made an offer to Roman Abramovich to buy Chelsea Football Club for an unnamed sum.

OTHER LEISURE:

• Netflix is reportedly investing some $420m in content as it seeks to compete with online rivals in the Indian market.

• Gambling addiction bodies have warned that moves to deal with problem gambling do no go far enough. They say that current regulation is ‘not fit for purpose.’

FINANCE & ECONOMICS:

• Sterling up vs dollar at $1.3153 and stable vs Euro at €1.1884. Oil little changed at $64.24. UK 10yr gilt yield unchanged at 0.77%. World markets lower yesterday with Far East down in Tuesday trade.

• Brexit & politics:

o Tories still on course for a working majority despite slip up re the NHS and potential abolition of the BBC license fee. FT speculates that a small majority (rather than a large one or none at all) would give the maximum amount of influence to the ERG.

START THE DAY WITH A SONG:

• Taking a break due to exam commitments. Back middle of next week.

RETAIL WITH NICK BUBB:

• Ted Baker: The much-awaited Ted Baker trading update has been brought forward from tomorrow, because…it is dreadful, with another big profit warning, prompting the inevitable resignation of both the CEO, Lindsay Page, and the Chairman, David Bernstein. Shareholders may take some comfort from the fact that the newly installed CFO, Rachel Osborne, has been installed as CEO, but the news that “Trading over November and the Black Friday period was below expectations, with lower than anticipated margins and sell through” will go down like a lead balloon and the difficult trading conditions are expected to continue over the key Christmas period. If the founder Ray Kelvin has been waiting for more bad news like this before launching his much-expected rescue bid then he has been wise, but the stockmarket is unlikely to put too much weight on that happening this side of Christmas when dealings
start at 8am…

• News Flow This Week:  The Watches of Switzerland interims today are good, but the Mothercare interims are messy and the McColl’s pre-close update is a bit disappointing.  The latest monthly Kantar/Nielsen grocery sales figures are out at c8am today. The Superdry interims, the Dixons Carphone interims and the Ocado Q4 update (and the General Election) are all on Thursday.