Langton Capital – 2021-02-02 – Confidence, more on Marston’s, rents, Just Eat, summer hols etc.:
Confidence, more on Marston’s, rents, Just Eat, summer hols etc.:A DAY IN THE LIFE: A big chunk of yesterday was spent trying to pay our Q1 VAT. Calculating the liability wasn’t an issue. That’s a life-numbing and time-consuming but not unduly difficult task. No, it was paying it was the issue. We’ve had to go digital you see, which was a bit of an odyssey in itself. But we bought a package, paid for it and got it working last quarter only to be told that, from April, we would need to upgrade (or side-grade or downgrade) to something else. Still, even that wasn’t the issue. And nor was sticking the data into the cloud somewhere. It was only when we tried to sync it with the HMRC, something we’d successfully done 3mths ago, that we got some random error message which, after the fifth or sixth time we’d repeated the whole process, was burned onto my retinas such that it will take some intensive counselling to remove. Thereafter, have you ever tried to ring an HMRC help desk? Our advice is, don’t. And the online help is useless, particularly if the Revenue’s servers are down because they won’t have a useful red box anywhere saying: ‘our servers are down’ (like the leccy does when you have a power cut), it’s something you need to find out for yourself by Googling something imaginative like ‘HMRC are your servers down?’ Don’t get us started on the national deficit, we’re trying to do our bit. On to 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 Deloitte’s work on consumer confidence & consider what it might mean. INTERPRETATION OF DELOITTE’S CONSUMER CONFIDENCE COMMENTS: Introduction: • As mentioned below, consumer spending is driven by both the ability to spend and the desire to do so. • The first is impacted by income and the second, arguably, by potential changes thereof (via fears of unemployment, hopes for promotion, bonuses etc.) See Premium Email MARSTON’S UNSOLICITED BID APPROACH UPDATE: • Marston’s yesterday updated on the bid approach(es) that it has received from Platinum Equity Advisors saying that it had had three approaches, each at a higher price, and it had rejected all of them as even the highest of them ‘very significantly undervalues Marston’s’. • Marston’s says its board ‘has considered the Proposal of 105 pence per Marston’s share with its advisers, and unanimously rejected the Proposal on the basis that it very significantly undervalues Marston’s. The Proposal followed two earlier proposals at 88 pence and 95 pence per share in December 2020, both of which were received prior to the Brains transaction, and were unanimously rejected by the Board.’ • The company adds ‘the Proposal represents a 19% discount to the Company’s share price at the start of 2020, pre-COVID 19; and since that time the Company has completed the transformative joint venture with Carlsberg to create the Carlsberg Marston’s Brewing Company, which realised significant value on completion and is anticipated to continue to do so as the benefits of the joint venture are realised. In December 2020 the Company also announced an agreement to operate 156 high quality pubs within the SA Brain estate in South and West Wales, in a transaction which is expected to be accretive to earnings in the first full year of trading.’ • Platinum has until 5pm on Friday 26 Feb to either make a firm offer for Marston’s or make clear that a bid will not be forthcoming. • Langton Comment: See Premium Email PUBS & RESTAURANTS: Rents, evictions etc.: • With the leasehold eviction moratorium due to end in 8wks or so, observers are beginning to comment on the potential implications. • The Times suggests that landlords should consider granting rent free periods. This will no doubt have occurred to them. Landlords could be faced with business rates (after end-March) and maintenance costs if tenants are forced out. • The Times points to L&G as one landlord that is offering rent frees. There are plenty of landlords who are not. Other Covid news: • The Isle of Man is to lift restrictions on hospitality venues. Health minister David Ashford says ‘I’m delighted we are able to turn suspended and reduced services back on without delay.’ The island closed its borders on 23 March last year. • Labour has warned that around further 650k jobs are at risk in the hospitality industry. This in addition to the hundreds of thousands that have already been lost. Re the wider economy, Labour says ‘a million firms are struggling with a cash crisis threatening jobs and livelihoods just as the vaccine offers hope. The cost of business insolvencies and unemployment on this scale would take a wrecking-ball to our economy.’ • Italy is to allow restaurants & museums to reopen in certain regions. The consumer: • See comments above on the Deloitte survey. • The Telegraph says that the tax burden is hitting ‘its highest level for 70 years.’ It is against this background that ‘chancellor Rishi Sunak is considering raising taxes even further in the next budget.’ • Langton Comment: See Premium Email • The chancellor is less likely to impose taxes on spending or earning as they are too visible and could indeed discourage spending and earning, which would be inconvenient. • The Taxpayers’ Alliance says: ‘in these difficult times, the Chancellor should give hard pressed families and businesses a respite from taxes, offer a rescue to struggling sectors and try to revive the economy.’ Company & other news: • See Marston’s above. • Paid to issue debt (but investor cash more secure & convertibility is the kicker). • Just Eat Takeaway yesterday announced that it was placing €1.1bn of convertible bonds. Today it reports that the bonds will be issued at 101.5% (Tranche A) and at 100% (Tranche B) of their nominal value and redeemed at 100% of their nominal value. Interest on Tranche A will be yield no interest and Tranche B will be 0.625%. • Just Eat Takeaway also updated on its Grubhub acquisition, announced in June last year, saying the deal ‘is expected to close after completion of the offering of the Convertible Bonds during the first half of 2021.’ • The company says it is issuing the convertible debt ‘to capitalise on the strong momentum from our investment programme, the Company will continue to invest heavily and prioritise market share over adjusted EBITDA, as also set out in the Q4 2020 Trading Update. The Company believes that a stronger balance sheet provides additional financial flexibility to act on strategic opportunities that may arise.’ • There is a degree of IPO froth about. Dr Marten’s is now listed and Moonpig commences trading today. Deliveroo will be coming shortly. The business models need scrutiny and some of these valuations look rather stretched. • ASOS is not taking any physical Topshop, Topman or Miss Selfridge stores. • Suffolk brewer St Peter’s has been bought by a group of private investors for an undisclosed sum. • Chop’d has been acquired by Inc Retail, for an undisclosed sum. • French company Chefclub has raided $17m in funding. • Online retailers are reported to be facing a cardboard shortage. • Up to £500m of Scotch whisky export sales may have been lost because of the trade dispute with the US reports the Scotch Whisky Association. • Heineken has taken full control of Brixton Brewery. The latter says ‘to realise our original vision of helping thirsty people everywhere get a taste of Brixton, we’re today announcing that, following a successful three years’ working with the global brewers, Heineken, we are expanding this partnership in a deal that will see Heineken fully acquire Brixton Brewery.’ HOTELS & LEISURE TRAVEL: • Ryanair is forecasting “a strong return” for European beach holidays this summer. That is a shade optimistic. CEO Michael O’Leary talks of “pent up demand”. He says ‘we think once all those high risk groups – the elderly, the NHS, nursing homes – have been vaccinated then the travel restrictions should be removed, particularly on short haul intra-European travel.’ • Boris Johnson says he is “optimistic” for the summer holiday season. He cautions ‘I understand the reasons for being optimistic – but some things have got to go right for us. The vaccine programme has got to continue to be successful.’ • ABTA says consumers seem prepared to accept vouchers rather than cash for cancelled holidays. Perhaps not happy, though. • Business travel body, the GBTA’s, latest poll says 69 per cent of European business travel professionals see domestic travel as still suspended (up 7 per cent on the previous poll). OTHER LEISURE: • Gfinity has updated on trading. CEO John Clarke says ‘the positive results in the last quarter of the 2020 calendar year demonstrates that the strategy we have implemented is starting to deliver. We recorded the first quarter of adjusted EBITDA profitability in the Company’s history, a significant milestone.’ He adds ‘whilst we are confident as to the prospects for the Company, we will continue to ensure Gfinity can navigate any potential challenges created by the current situation. We are well positioned to reap the rewards of being a leading player in one of the most exciting industry sectors in the world. The team is working hard and smartly to build value for shareholders. The fundamentals are strong and the foundations are now in place to enter a period of solid growth.’ • Sales of Nintendo’s Switch gaming consoles have now beaten those for the earlier 3DS. • Sky reports CVC Capital is to strike a $300m deal with volleyball’s governing body to expand the appeal of the sport. FINANCE & MARKETS: • IHS Markit’s January PMI for the UK manufacturing sector reports that there was a fall to 54.1 from 57.5 in December. It says ‘output growth eased and new orders fell slightly as producers faced weaker inflows of new export work and temporary supply-chain disruptions caused by COVID-19 restrictions and transport delays (especially at ports) following the end of the Brexit transition period.’ • Markit says ‘whereas many countries are seeing manufacturers provide a much-needed support to economic growth as the service sector is hit by COVID-19, the UK’s manufacturing sector has come close to stalling.’ It blames ‘a mixture of harsher COVID-19 restrictions and Brexit led…supply-chain disruptions.’ • The much larger services PMI is today. • The Bank of England has suggested that cutting official interest rates below zero would not boost the economy. • Sterling mixed in light of dollar strength. Down vs dollar at $1.3682 but up vs Euro at €1.1332. Oil higher at $56.89. UK 10yr gilt yield up 3bps at 0.32%. World markets better yesterday & London set to open around 28pts higher. RETAIL WITH NICK BUBB:
• Today’s News: There is still no more news on the mooted JD Sports share placing, even though the shares rallied strongly yesterday on the back of the latest US acquisition, but the food delivery giant Just Eat has announced that it has easily raised Eur 1.1bn overnight on convertible bonds, “for general corporate purposes, as well as to provide the company with financial flexibility to act on strategic opportunities which may arise”. And the Online retailer Moonpig has confirmed that it has priced its shares at the top end of the previously indicated range of 310p to 350p, capitalising the business at c£1.2bn, with first dealings starting at 8am (via the ticker MOON): Nickyl Raithatha, the CEO of Moonpig, says: “As the leaders of a market undergoing an accelerating shift to online, now is the perfect time for us to bring the company to the public market, and we are excited about • This Week’s News: As we move on into February, there is not much Retail company news scheduled this week, but the Amazon Q4 results in the US are out after hours tonight and Watches of Switzerland issue a Q3 update on Thursday. First dealings in the Moonpig IPO start today (see above) and unconditional dealings in Dr Martens start tomorrow. In terms of the Economic outlook, the MPC meeting interest rate/QE news at mid-day on Thursday will be worth keeping an eye on. TRADING STATEMENTS & EVENTS: Upcoming results are set out below: • 29 Jan 21 Hollywood Bowl AGM • 4 Feb 21 Compass Group AGM • 4 Feb 21 Stock Spirits AGM • 4 Feb 21 Bank of England MPC rate decision • 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 • 18 Feb 21 Texas Roadhouse Q4 numbers • 18 Feb 21 Marriott FY numbers • 24 Feb 21 William Hill FY numbers • Est 28 Feb 21 – Various Eateries FY numbers • 2 Mar 21 PPHE FY results • 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 • 18 Mar 21 Fever Tree FY numbers • 24 Mar 21 M&B AGM • 30 Mar 21 AG Barr FY numbers • 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. |
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