Cinemas, Chilango, discounts, YUM, Xmas trade etc.:

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A DAY IN THE LIFE:

Most of the Langton family got to see Hull City lose 2-0 to Notts Forest on Boxing Day.

And, whilst the team is overall doing pretty well this season, that was what it was but, when our daughter said that she’d never seen Hull City win, I was a bit surprised.

Or even score a goal, she said. And that hurt but, on reflection, she doesn’t get to all the matches that we see, and she may just have been unlucky.

Still, her impression of football, cold terraces, no goals, numerous defeats and the occasional nil-nil victory, is likely to have coloured her opinion going forward.

You have to stick at it, we’ve told her, football isn’t meant to be enjoyed. On to the news:

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CINEMAS – THE THREAT FROM NETFLIX: Other retailers (of books, records, DVDs etc.) have been hit by downloading. Why should film be any different: 6 Jan 2020:

Cineworld comments on Netflix

• Recently, the Cineworld CEO, Mooky Greidinger, has been vocal on the threats to his company’s industry

• On 1 Dec the company updated on trading saying that its box office revenues were weaker but this was being partially offset by strong execution of synergies and revenue initiatives

• Mr Greidinger said ‘trading for the full year is expected to be slightly below management’s expectations.’

• The CEO said the performance was nonetheless resilient across the portfolio

• On Christmas Eve, the FT ran an interview with the Cineworld CEO in which Mr Greidinger accused Netflix ‘of leaving Martin Scorsese’s The Irishman with “meaningless” box office income after releasing the film in cinemas for only a short period before streaming it.’

Industry at a crossroads?

• Everyone knows that the way in which media is delivered to the customer is undergoing serious change in the entertainment industry.

• Films, TV Shows, music and video games are now being streamed by customers.

• So, with Americans (and Canadians) selling chains such as Regal and Cineplex to Cineworld, what does this mean for the future of the cinema industry?

Our interpretation of industry trends:

• Change brings either risks or opportunities or, more often, both

• Streaming platforms such as Netflix and Amazon Prime are becoming both the producer and the delivery mechanism of films and TV shows.

• Vertical integration is natural but, whilst it is profitable for the company doing the integration, it can upset existing players

• As Mr Greidinger indicated above, vertical integration allows Netflix to dictate how long the cinemas get exclusivity before it is available on a streaming platform.

• The FT reports Netflix has released 10 films in cinemas but few for more than a week before they are uploaded to its platform.

A major and growing presence:

• The streaming giants are also becoming a larger presence at awards shows.

• At last night’s Golden Globes, HBO Max won 4 awards with Netflix, Amazon Prime and Hulu each winning two Golden Globes.

• As the streaming giants invest more in their production every year, one can guess their awards hauls will increase too.

• Given the wall to wall coverage of events such as yesterday’s Globes, these victories are bound to have an impact on the consumer.

A tricky outlook?

• The above could potentially lead to a position where most of the highly awarded films are made by streaming companies, which can then dictate the way in which they are consumed by their ultimate customers

• Such films could have either a short cinema release or none at all.

• Such a scenario could see future box office revenues being ‘crushed’ in a much bigger way than in Mr Greidinger’s example above.

• This is not an environment (ask the general retailers) in which you would like to have nearly 10,000 screens across 800 bricks and mortar properties worldwide

• Certainly the above, given the risks to the industry as a whole, might not be consistent with a high PE ratio

• Cineworld partially reflects the above as it is currently on a forward PER of only 9.3x 2020 earnings

PUBS & RESTAURANTS:

• Chilango’s proposed CVA has been approved by creditors. Co-founders Eric Partaker and Dan Houghton said ‘we are humbled to have received such strong support from our creditors and shareholders, and appreciate how pragmatic and understanding our stakeholders have been.’

• Rents will be cut by 40 per cent at three of its 12 restaurants. The group will exit four leases on dormant sites. Around 1500 small investors who put £5.8m into Chilango’s two mini-bond offerings are to have their investments converted into preferential shares in the company.

• A spokesperson for the company has denied reports that that chief executives Partaker and Houghton, who founded the business in 2007, had agreed to step down due to pressure from investors. Instead, the decision was taken ‘separate from and before the CVA’.

• Discounting. Some large reductions. Prezzo 50% off mains till 2 Feb. M&B’s Harvester & Toby 40% off mains till 11 or 12 Jan. Café Rouge & Bella Italia 40% off mains till 12 Feb. ASK 30% off mains and Pizza Express 30% off the whole bill, including drinks, until 30 Jan.

• Catton Hospitality reports LfL sales across pubs and restaurants were flat in December, with wet weather deterring many from going out. LfL food sales were up 1.1% but drink sales fell by 1%.

• The three main trading days of Christmas (24th-26th) and New Year’s Eve saw pub sales up 3.9% on last year. Wet-led businesses outside London saw sales up 6.8% over key festive dates, compared to 4.5% for wet-led businesses in London.    

• Yum! Brands Inc. will acquire The Habit Restaurants for around $375m, acquiring all of the issued and outstanding common shares of The Habit Burger Grill for $14 per share in cash. 

• The acquisition will see YUM add burgers to its existing chicken, pizza and burrito stable of products. This had, arguably, been something of an obvious gap in its portfolio.

• Coaching Inn Group has reported record festive trading with like-for-like sales up 4.5% for the five weeks to 31 December with total sales up 7.1% on the same period in the prior year. CEO Kevin Charity comments ‘against a tough backdrop of some excellent sales figures last year, we were particularly pleased with the strong trading we delivered this year.’

• Non-profit organisation Veganuary, which is promoting the idea of a meat-free month, has suggested that Burger King’s decision to fry up its vegan burgers on grills used to cook meat, excludes the product from its definitions of meat-free. BK also adds mayonnaise unless the customer asks for it to be excluded.

• Foodservice Equipment Journal suggested that BK might need to use dedicated grills for vegetarian products. This is unlikely to happen though some grill manufacturers, such as Cambridge-based Synergy Grill, can cook meat and plant-based products on the same grill without cross-contamination.

• Synergy Grill says its product ‘is a favourite of the vegetarian community as it is the only grill approved by the Vegetarian Society.’ It says ‘the Synergy Grill has a wide range of benefits, including allowing meat, fish and vegetables to be cooked at the same time and allowing no cross-flavouring or contamination between foods due to the fat molecules being atomised.’

• The company adds ‘as the fat is atomised and turned to dust, the grills do not require the need for a fat tray and the disposal of fatty waste, meaning cleaning the grill is made quick and simple.’ Unlike with other grills, there is little opportunity for the chef’s grilled carrots to end up basted in pig fat.

• Retailer Crussh has said that it will introduce ‘celery juice to the high street this January, alongside new plant-based protein shakes, low-sugar juices and more vegan options.’

• The Times reports that Crêpeaffaire, which has sixteen branches in Britain and five stores overseas, is ‘preparing to press the button on ambitious expansion plans that could lead to hundreds of new openings across the United States, the Gulf states and the Netherlands.’ The company has had a single franchised store in the Netherlands since 2016.

• Pragma Consulting has pointed out that there are good reasons why bloated consumers turn to gyms as well as holidays in the period immediately following Christmas. It says airports promoting ‘wellness’ could be onto a winner.

• PubAid has appointed founder of Titanic Brewery, Keith Bott MBE, as its first ever President.

• Christmas sales at Aldi exceeded £1bn in the UK for the first time. Sales were up by 7.9% in the four weeks to Christmas Eve.

• Amazon has partnered with Future Retail, India’s second-largest retail chain.

• Arc Inspirations reports 6% LfL sales growth over the festive season, with total sales up 10.5%. Arc Inspirations CEO Martin Wolstencroft, said ‘Christmas 2019 has smashed all records for Arc Inspirations and gives us great momentum heading into the new year.’ 

• The Inn Collection Group has purchased the 15-bedroom The Pheasant Inn at Bassenthwaite Lake, Cumbria, with the pub set to continue trading before full-scale redevelopments get underway. 

• Crussh Fit Food & Juice Bars will launch a selection of products into over 300 Sainsbury’s stores across the UK from 6th January 2020.  

• Conagra Brands has sold Lender’s Bagels to Bimbo Bakeries USA for an undisclosed amount.

• A group of London restaurant board members have written to the Government calling for a cut to wine taxes. The letter says duty on wine has risen 12% since 2014, compared with 2% for spirits and a 0.2% fall for beer. Signatories include Jeremy King and Mark Derry. 

• Hooters of America launches the plant-based Hooters Unreal Wings in partnership with Quorn. Kevin Brennan, CEO of Quorn Foods, said ‘we’re excited to partner with Hooters to roll out the first meatless poultry item on a national scale in the US’.

• Morrison’s CEO Dave Potts has said re Xmas ‘it was encouraging that during an unusually challenging period for sales, our execution was strong and our profitability robust, demonstrating the broad-based progress we have made during the turnaround.’

• Re the outlook, Mr Potts says he expects Jan 2020 full year numbers to be in line with expectations. See Nick Bubb.

HOLIDAYS & LEISURE TRAVEL:    

• Staycity Group reports turnover for the year to December up 14% to €78m, with EBITDA rising around 11%. CFO Wayne Arthur said ‘we delivered a record like-for-like occupancy of 87.3% and are delighted to have signed a new €22.5m loan facility with Dunport Capital’. 

• Figures from UHY Hacker Young show the number of UK hotel insolvencies hit a five-year high in 2019, driven by a drop in business travel and tougher competition from Airbnb. Hoteliers suffered a 60% jump in insolvencies over the year to September 2019 affecting 144 individual sites.  

• Sykes Holiday Cottages is to buy Pure Cottages Group from private equity investor LDC for an undisclosed sum.

• Sales at Britannia Hotels increased 19% to £115m for the year to March, despite being rated ‘Britain’s worst hotel chain’. The company said ‘To sustain and enhance our position in the market we have endeavoured to improve the standard of our product both in terms of facilities and levels of service.’

OTHER LEISURE:

• 888 has updated on trading saying that ‘as a result of 888’s continued progress during the second half of the financial year culminating in December’s revenue at an all-time monthly record, the Board remains confident of achieving an adjusted EBITDA outcome for the Period in-line with its expectations.’

• Poker has been ‘challenging’ but in the UK ‘the Group has continued to increase revenue reflecting its sustained focus on engaging with and entertaining recreational customers.’ CEO Itai Pazner says ‘the Group has delivered solid progress in the second half of the financial year underpinned by continued momentum in Casino and Sport.’ Mr Pazner says ‘888 has entered 2020 with good momentum across several regulated European markets and, underpinned by further investment in our team, marketing and product development, we remain focused on achieving further progress in the US. With 888’s core strengths as a responsible operator with outstanding technology and diversification across a number of regulated markets, the Board remains confident of further progress in the year ahead.’

FINANCE & ECONOMICS:

• The IHS Markit December Services PMI for the UK registered 50.0 in December, up from 49.3 in November. Optimism was at its highest level in over a year. The Construction PMI las week fell to 44.4 in December from 45.3 a month earlier whilst the Manufacturing PMI was 47.5 in December versus 48.9 in November.

• The Composite PMI registered 49.3 in December, unchanged from that seen in November. Any number below 50.0 suggests contraction.

• Car sales in the UK fell to a 6yr low in 2019.

• The Budget will be on 11 March.

• Sterling up at $1.3154 and €1.176. Oil lower at $68.18. UK 10yr gilt yield up 3bps at 0.77%. UK & Europe stock markets lower yesterday but US up. Far East higher in Tuesday trade.

START THE DAY WITH A SONG:

Yesterday’s song was Just the Two of Us by Grover Washington Jr.. Today, who sang:

“Feel the rain like an English summer,

Hear the notes from a distant song

Stepping out from a back shop poster”

RETAIL WITH NICK BUBB:

• Morrisons: After a quiet start to the week, the Christmas trading updates will soon come thick and fast, with the main focus on the struggling Food Retailers, kicking off today with the Morrisons update. Now, Morrisons was widely expected to be over 2% down LFL at Christmas, so at first sight the news that Retail LFL was only 1.7% down over the 22 weeks to Jan 5th may seem reassuring, but that’s only because, slyly, Morrisons have not broken out the last 9 weeks…As Q3 Retail LFL was down by 1.1%, however, it’s easy to work out that performance deteriorated badly over the last 9 weeks, in what CEO Dave Potts calls “an unusually challenging period for sales”. But the bottom-line is that Morrisons managed costs down to offset some of the impact of the weak LFL sales and has said that it still expects full-year pre-exceptional profits to be “within the current range of analysts’
forecasts”. The aforementioned analysts assemble at 8.15am for a conference call with management and the share price may hold its ground, after the nervous 3% drop yesterday.

• News Flow This Week: The latest monthly Kantar/Nielsen grocery sales figures are expected to be released at c8am this morning. Tomorrow brings the Sainsbury Q3 update, as well as the Shoe Zone finals, the Greggs Q4 and the Topps Tiles Q1. The BRC-KPMG Retail Sales figures for December will be out first thing on “Super Thursday”, shortly before the Tesco Q3 update, the Marks & Spencer Q3, the Card Factory update, the John Lewis/Waitrose update and the Dunelm Q2. Friday then brings the B&M Q3 and the JD Sports update (and possibly the AO.com update).