Langton Capital – 2021-01-19 – Outlook, balance sheets, closures, Dark Kitchens, Premier Foods etc.:
Outlook, balance sheets, closures, Dark Kitchens, Premier Foods etc.:
A DAY IN THE LIFE:
We’ve got our mind slightly on other things this morning but here’s a question for you, how many times have you burnt your fingers after being told, by a waiter or some other sensible adult, ‘it’s hot, don’t touch.’
Yes, we’d expect the answer to be ‘several’ although, as with all things, it could just be that we’re being coloured by our own response.
Anyway, we’ll leave you with that question as we move onto the news:
ADVERTISE WITH US:
Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.
LANGTON PREMIUM EMAIL:
Langton produces a premium email alongside the free version that you receive. It’s c100 lines longer than the free version (depending on what’s going on) and inc. analysis and opinion.
If you would like an example, please let us know.
Corporate Offer: Annual subscription just £295 (plus VAT) for a single subscriber or £495 (plus VAT) for multiple subscribers. Drop us a line to get involved.
Retail Offer: Easy in, easy out. £30 per month (inclusive of VAT, £25 net) via PayPal. Email us for details or check:
IN TODAY’S PREMIUM EMAIL:
Here we consider the hot topics & hope to analyse as well as report. We look at feedback from readers concerning future relationships with landlords and analyse the Coffer Peach data in a little more detail.
FEEDBACK REPORT: SUNDRY COMMENTS:
Earlier in the month, we asked for reader comment as to how the year might turn out. Some comments fell neatly into categories & we’ve covered these over recent days. See Premium Email.
A note to potential investors:
• High level of investment risk, opportunity, or both? Bank rates are low and Sophisticated Investor and High Net Worth interest in the stock market may be robust.
• If any individual investors are interested in discussing with us the possibility of participating in IPOs, Secondary Placements and other fund raises across our and other sectors, perhaps they could let us know by replying to this email.
• To proceed, we would need to register interested parties as a Qualified Investor. But the first step is to drop us a line. We look forward to hearing from you. Here’s a bit of context.
Light at the end of the tunnel?
• 2020 was an easy year for the private investor to lose money but, as 2021 opens, with vaccines now being delivered, there are grounds for guarded optimism regarding recovery.
Surveying the battlefield:
• There have been corporate casualties. But there will be winners, and this could be an active year in the capital markets.
• Last year, with its c20 fund raisings in leisure alone and perhaps 100+ across other industries, was about survival.
• But 2021, though it will see its fair share of balance sheet repair activity, could also be about growth and expansion. Let us know if you are interested in getting involved.
PUBS & RESTAURANTS:
• Research from the Evening Standard has shown that 800 branded restaurants, bars and coffee shops have closed since the start of the Coronavirus pandemic. It is likely that many more will close in the coming months.
• The Caterer has reported that hospitality businesses whose insurance companies have refused to pay for businesses losses due to Covid, should seek damages for late payment after last week’s court ruling. Sonia Campbell, a partner at law firm Mishcon de Reya told the Caterer: ‘We would be advocating that [businesses] should be claiming damages for late payments because these claims should have been paid many months ago. [Insurers] should be paying damages and compensating for the fact they didn’t pay back at the beginning of the pandemic when these claims were put in’.
• The Advisor for Greater Manchester’s Night Time Economy has stated that hospitality in England has to reopen at the same time as non-essential retail, if the country is to return to a tiered system.
• The WSTA has called on the Treasury to reduce wine and spirit duty and extend the hospitality VAT cut to help businesses recover from the impact of Covid.
• UKHospitality chief executive, Kate Nicholls responded to the vaccine minister’s comments that lockdown measures will not be eased until the impact of vaccinating top priority groups is seen, stating that many pubs ‘will simply fail to survive that long’.
Longer term industry trends:
• Dark Kitchens. Too much money looking for a home?
o Foodservice analyst Peter Backman has commented on the continued expansion of Dark Kitchens. He says that planning permission has recently been lodged for one proposing 22 kitchens ‘in a bustling area of north London.’
o He says the area is ‘already served by two Deliveroo Editions and is not far from a Foodstars dark kitchen site – and it now looks as though it will gain another 22 kitchens. And my area is only one slice of an investment boom in dark kitchens – a boom in which Karma Kitchens, a small, two site, London-based dark kitchen operator has been able to raise a quarter of a billion in investment money for creating dark kitchens across Europe.’
o Money is clearly looking for a home. Not much of it is knocking on Langton’s door but it would appear that capacity is going on. As we have commented on many occasions, the market doesn’t have a braking mechanism, it has a crashing mechanism!
o Backman says dark kitchens ‘are driven by the growing role of restaurant delivery – and the fact that it’s very difficult for anybody to make money out of delivery.’ The risk to operators is that, by working with Deliveroo etc., they are letting the fox into the henhouse. They may find that it is their sites that are bypassed as delivery companies deal directly with customers.
Company & other news:
• JD Wetherspoon updates on trading in the first half of its year to July (period to January) tomorrow.
• Bella Italia has been named the best hospitality company to work for in this year’s Glassdoor Employees’ Choice Awards. Commenting on the result, Lisa Gibbons, Bella Italia Brand Director, said: ‘It is a wonderful feeling to have been voted the UK’s top hospitality company to work for and knowing that the recognition has come directly from members of our team makes it all the better’.
• SAWIS reports South African wine exports to the UK were up 23% by value and 7% in volume in 2020. The UK is the fastest growing of the top 10 key export markets for South Africa.
• Per The Pragmatist, the IMRG Capgemini Online Retail Index reports that the UK saw online sales up 37% YoY in December, compared to footfall across the UK being down by 46%. Retailers with strong multichannel offerings, online and offline, have been able to adapt to the pandemic.
Flip side of the pandemic:
• The pandemic has been dreadful for hospitality but it has boosted the sales of supermarkets and other companies that benefit when consumers stay at home rather than go out.
• Today, Premier Foods (Mr Kipling, Batchelors, Sharwoods etc) updates on trading for the 3mths to end-December saying ‘quarter 3 proved to be another period of exceptional growth, with Group sales up 9.0% and branded sales up 12.1%, as people turned to our product ranges in the face of heightened restrictions on out of home eating.’
• PFD says ‘we continue to deploy our branded growth model strategy, launching a series of new products in the quarter such as Sharwood’s low sugar stir fry sauces and supporting five of our major brands with TV advertising. Together with excellent execution both instore and online, we continue to take market share in volume and value terms. Online sales were up 90% in the quarter, ahead of the broader channel and we saw higher household penetration for brands such as Bisto, Oxo and Paxo, as more meals were eaten at home this Christmas.’
• Premier says ‘looking to the remainder of the year, out of home eating is likely to remain heavily restricted and we therefore expect to see continued high levels of consumer demand for our products. With more brand investment to come, we now expect trading profit to be in the range of £145-£150m this year and Net debt to EBITDA to fall below 2.0x by the year end.’
• The specifics re the numbers may not be of interest to those following hospitality stocks, but the direction of travel certainly will by.
• Premier and the hospitality industry face the annualization of restrictions on 23 March and the annualization of panic buying and the reluctance to go out, some time in early to mid-March.
• Premier says that it has increased ‘brand penetration’ across its product ranges. This is excellent news for the company but less so for hospitality. The $64,000 question is, how much of this will stick?
HOTELS & LEISURE TRAVEL:
• Hostelworld borrowing at rate ‘in the mid-teens’.
• Hostelworld yesterday updated on trading saying that ‘further to the announcement on 13 January 2021, the Company is pleased to announce that it is continuing to negotiate with a short-list of selected lenders in relation to a new €30 million debt facility.’ The five-year money has a cost ‘in the low to mid-teens, with other conditions, including a minimum liquidity covenant, security and warrants provisions, in line with current market practice for facilities of this nature.’
• The company says ‘whilst there is no guarantee that the Company will agree the terms of a debt facility, in order to draw down a facility of this size, the Company will be required to obtain shareholder approval to amend the borrowing limit contained within the Company’s Articles of Association.’ It says ‘if implemented, the current intention to borrow €30 million would exceed the borrowing limit.’
• Hostelworld says its ‘Board believes the proposed change to the borrowing limit is in the best interests of the Company and the Shareholders as a whole and is recommending unanimously that Shareholders vote in favour of the resolution at the General Meeting.’
• EasyJet says holiday bookings for this summer are up 250% on last year. The BBC reports CEO Johan Lundgren as saying ‘we know that people want to go on holiday as soon as they can.’
• Disneyland Paris has postponed its reopening to 2 April, if ‘conditions permit’, quoting the “prevailing conditions in Europe” as responsible for its delay. It had been set to reopen on 13 February.
• Airbnb is refusing to pay refunds for holidays that have had to be cancelled due to travel restrictions brought on by the pandemic.
• Port of Sunderland is ‘looking seriously’ at welcoming cruise ships on a regular basis with director Matthew Hunt saying ‘the port is looking at small to medium size ships and the expedition-cruise market’.
• The Gambling Commission’s CEO, Neil McArthur, has said a recent report stating that 200,000 people in the UK spend £1.4bn on black market sites every year was ‘not consistent with the intelligence picture’.
• Per the Telegraph, streaming giants are acquiring British studio space with CBRE reporting that some companies are on the hunt for at least 2 million square feet of studio space in the UK. For example, Netflix has exclusive access to most of Shepperton’s west London studios.
FINANCE & MARKETS:
• Industry observers have suggested that property asking prices have slipped as sellers rush to market homes before the end of the stamp duty holiday. Rightmove says prices advertised between 6 December and 9 January were down 0.9% on the previous month.
• Fishing businesses have been protesting outside Westminster about what they consider to be a bad Brexit deal.
• Sterling stronger at $1.3608 and €1.1247. Oil slightly up at $54.98. UK 10yr gilt yield unchanged at 0.29%. World markets mixed yesterday but Far East better in Tuesday trade & London set to open up around 31pts.
RETAIL WITH NICK BUBB:
Today’s News: On top of the Superdry interims and trading update, we have also had unscheduled updates today from AO.com and Hotel Chocolat and the latter two statements are much more cheerful than poor old Superdry’s…AO.com saw impressive sales growth of 67% in the UK and 77% in Germany in the 3 months to end Dec and although this surge in business brought extra costs, the company says “we look forward to the last quarter and the next financial year with confidence”, given the structural shift to Online, with AO boss John Roberts trumpeting that “Now that customers have experienced a better, digital-first way to shop for electricals, I believe the majority will never look back”. Over at Hotel Chocolat, Online trading made up for the loss of Store sales during the lockdowns and total revenue was up a useful 19% in the 3 months to Dec 27th, helped by successful expansion in the US and
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 19 Jan 21 Premier Foods Q3 update
• 20 Jan 21 JD Wetherspoon H1 update
• 20 Jan 21 WH Smith AGM update
• 22 Jan 21 GfK Consumer Confidence numbers
• 26 Jan 21 DP Eurasia FY trading update
• 26 Jan 21 Starbucks Q1 update
• 27 Jan 21 Marston’s AGM (no update)
• 28 Jan 21 Britvic AGM
• 29 Jan 21 Hollywood Bowl AGM
• 4 Feb 21 Compass Group AGM
• 4 Feb 21 YUM Q4 & FY numbers
• 5 Feb 21 On the Beach AGM & trading update
• 11 Feb 21 Coca Cola HBC FY numbers
• 11 Feb 21 Pepsi FY numbers
• 24 Feb 21 William Hill FY numbers
• 3 Mar 21 Nichols FY numbers
• 3 Mar 21 Government Budget Statement
• 11 Mar 21 Playtech FY numbers
• 16 Mar 21 Gregg’s FY numbers
• 24 Mar 21 M&B AGM
• 18 May 21 Britvic H1 numbers
LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line.