Langton Capital – 2021-12-02 – PREMIUM – Loungers’ meeting, Xmas bookings, Seedrs, DPP, RedCat etc.
Loungers’ meeting, Xmas bookings, Seedrs, DPP, RedCat etc.A DAY IN THE LIFE: Whenever I start to lose my faith in human nature, I’ve been clipped by a Deliveroo cyclist on the pavement or someone’s let a door slam in my face etc., I remember our trip, pre-Covid, to Canada when we found most of the people in most of the towns very, very agreeable. There’s the francophone lorry driver between Montreal and Kingston who told me when I was queueing for poutine at a truck stop that I sounded like Gordon Ramsay (I most certainly do not) and the lady in the hotel in Quebec City who said my French was beautiful (clearly a major, major redefinition of that word) but mostly there’s the old geezer in Cobourg, a small town on Lake Ontario. He’d overheard us talking and waddled over to say he loved England. Mind, he’d only been there once, albeit for two years between 1943 and 1945, but he really liked the county. Quickly working out that he needed to be somewhere between 90 and 150 years old, we chatted to him for a while until he wandered off to find his daughter, a delightful 70yr old, who was going to drive him home. Ten minutes later, we were eating ice-creams when a car slowed down to honk at us & it was the old chap again. We thought he was in the drivers’ seat, but he wasn’t, the steering wheel was on the wrong side and he’d asked his daughter to drive him around to see if he could find us to wave at us one more time. I hope it made him as happy as it made us. Ahh. On to the news: LOUNGERS H1 ANALYSTS’ MEETING: Following the release of its H1 numbers, Loungers hosted a meeting for analysts and our notes are set out below: Trading: • All things to all people at all times of day. The company laid out how its 61% female clientele stretched across all age-groups and income groups and that they visited the operator’s sites at all times of day. • The product offer is similarly varied (60% food, 40% wet) across a variety of products alcoholic vs non-alcoholic, hot food vs cold, lunch vs dinner & breakfast etc. • Some 46% of sales Come Monday to Thursday and, though cocktail (typically a younger person’s product) sales have doubled, the company believes older customers are returning. • The group is still 10% down on covers (vs 2019). • Margins have risen. The VAT cut has helped but, even stripping this out, they are up. Menus have been simplified & a new Kitchen Management System rolled out. The group is working to simplify its distribution system. • Labour. This is more challenging – but mostly in certain areas, e.g. Cornwall in the summer. Market towns can be difficult and some trading periods have been lost. The impact on sales has been ‘negligible’ and things may be ‘a little better’. • VAT has helped LfL sales. With the VAT benefit, LfLs are +23.4% and without they are 12.2%. VAT helped margins by 780bps. Lower rates helped by 230bps. • Older sites are still growing at the same pace as newer sites. The rent to sales percentage is below 5%. Capital spending, cash flow, debt & balance sheet: • Loungers may increase its number of build teams from four to five. This would allow the group to move from c25 units a year to c30-35. The group has been ‘delighted’ with the strength of recent openings • Net debt (including deferred Covid liabilities not yet paid) is £17.5m, down from £25.2m last year. Current & near term trading: • Loungers will ‘take a bit of price’ in response to the inflation it is facing. Food costs are under more pressure than drink. Utilities are hedged until Sept 2024. There is little upward pressure on rents. • Christmas is not as big in Lounge as it is at Cosy Club. Bookings have been coming late. It’s ‘too early to judge the impact of Omicron’. There has been ‘no change to sales yet’. • The group has no plans to introduce a third brand and it has no current M&A ambitions. PUBS & RESTAURANTS: Christmas bookings: Sky News reports that rule changes in restrictions are having a ‘chilling’ effect on Christmas bookings. Data from reservations website OpenTable said that diners became more cautious over the weekend after news of the Omicron variant came to light. • Sacha Lord, the night-time economy adviser for Greater Manchester, said ‘Every restaurant I’ve spoken to today, is now experiencing Xmas party cancellations’ • OpenTable reports that on Saturday 20 November the number of seated diners was up 31% on the level seen two years ago – but by Saturday 27 November this had fallen to 20%. • The Guardian reports that bosses of pubs, bars and restaurants across the UK are warning they are already receiving cancellations of bookings for Christmas parties amid fears about the Omicron variant. • Guidance over socialising during the festive season so far has been mixed with the prime minister saying on Tuesday that people should not cancel upcoming parties and gatherings, only hours after one of the UK’s most senior health officials urged people to reduce their social contact. • Kate Nicholls, CEO of UKHospitality, said its members were starting to see bookings cancelled, which would have a serious financial impact on their businesses. • Hugh Osmond, the founder of Punch Taverns, said ‘We are seeing that some of the people in large organisations who organise bigger events are taking the cautious view because I guess they feel some overriding responsibility. We are not seeing that in young people.’ • The Morning Advertiser described the situation as a ‘potential cliff edge’ in its editorial, saying the industry is ‘waiting for the casual and careless shove of our political leaders to send us into the abyss.’ The editorial recalcitrantly continued ‘So once again, we find our industry being casually scapegoated by advisors to a government that struggles to get to grips with a crisis.’ • The BBC says that Christmas parties may be smaller this year. It says ‘uncertainty over the Omicron Covid variant has added to safety concerns over large gatherings.’ The BBC has spoken to financial companies NatWest, Aviva and Deloitte. It says ‘about 52% of UK workplaces have decided not to hold a Christmas office party.’ • Research by Prenetics found that consultancy firms Deloitte, PwC, EY and KPMG confirmed that firm-wide events were not planned, but smaller teams could make plans among themselves. The consumer: Customers moved to new suppliers will face spot prices rather than the prices that were so low their suppliers went bust. This could impact their consumption of leisure goods & services. Ofgem reports that Zog Energy, which has about 11,700 domestic energy customers, ceased trading on Wednesday amid an ongoing surge in gas prices. COMPANY & OTHER NEWS: Crowdfunding: Regarding crowdfunding, Seedrs is set to be acquired by American investing platform Republic for $100m, pending approval by Seedrs shareholders and the Financial Conduct Authority (FCA). The acquisition will enable Seedrs to access US investors and deal flow as well as accelerate growth in the UK and Europe.’ • Having cancelled their attempt to merge earlier this year, both the UK’s large crowd-funders have now been bought by American buyers. Whether this will limit small businesses’ access to capital remains to be seen. Misha Zelman and ex Harrods and Heston Blumenthal Marketing Lead, Ben Hedley, have opened Neyba, with its first site located on Westbourne Grove in Notting Hill. Neyba is a new multi-cuisine concept which will feature a menu designed by celebrity chefs. The Times quotes RedCat (and former Greene King) boss Rooney Anand as saying his company is preparing to take a ‘half billion bet on the pub industry’. He says ‘some people have called it a brave move, some have called it a vanity project. But I’m a huge believer in the sector.’ DP Poland has announced that Mr Jeremy Dibb is to join the Board as Non-executive Director with effect from 1 January 2022. It says ‘Jeremy has a background working as an equity research analyst at Macquarie Capital Partners and Canaccord Genuity, where he was a director in the Metals and Mining Research team.’ The company says ‘Robert Morrish, Non-Executive Director, has informed the Board he plans to step down after 11 years of service. Following a period of handover to Mr Dibb, Mr Morrish will leave the Board on 1 March 2022.’ • Nick Donaldson, Non-executive Chairman of DP Poland, said: “On behalf of the Board, I would like to thank Rob for his service and dedication during the years of his Directorship and wish him all the best for the future. We are delighted to welcome Jeremy to the Board, bringing a wealth of public market experience through his previous roles”. The Drinks List shows that Gordon’s pink gin was the top UK gin brand, followed by Gordon’s standard gin. Overall gin value and volume rates decreased across the board at an average of 22.8% and 25% retrospectively. Morrisons has partnered with StarStock to help operators across the UK fulfil their food and drink order requirements. StarStock’s partnership with Morrisons gives pub, bar and restaurant operators across the UK direct, 24/7 access to products from Morrisons Market Street counters and its own brand range. Serial investor & Hill Capital founder Paul Campbell has told the MCA that he believes there is scope to improve the coffee offer across the UK. Fullers reports that The Queen’s Head in Dorking has been named the winner of this year’s Griffin Trophy – the annual Pub of the Year competition from Fuller, Smith and Turner. The Griffin Trophy is open to all Fuller’s 210 Managed Pubs and Hotels and 174 Tenanted Inns. In the US, Shake Shack will open its first-ever drive-thru location on Dec. 6 in Minnesota. Cracker Barrel is to operate its first ghost kitchen. It also offers two ‘virtual brands’ across a number of its units. LEISURE TRAVEL & HOTELS: The WHO has issued a correction to a travel advisory which initially stated those unwell or aged over 60 should avoid travel to areas with community transmission of Covid. The WHO has now confirmed this advice applied to those who were vulnerable or not fully-vaccinated. Travel Weekly reports that Jet2holidays’ proportion of sales made by its independent travel agent partners increased during the pandemic to 31% this year. CEO Steve Heapy said ‘We have no upper limit on travel agent business or any lower limit on direct [sales]. We don’t want to penalise agent business; we want to get as much business as we can.’ UK travellers to France will have to show a negative Covid-19 test from Saturday. The rule will apply to all arrivals from outside the EU. A PCR or antigen test will be acceptable if taken within 48 hours of travel. OTHER LEISURE: Deloitte predicts the games console market will generate over £60bn globally in 2022, up 10% from 2021. Paul Lee, global head of technology, media and telecommunications research at Deloitte, said ‘We saw usage of consoles spike during lockdown, with many using their devices as a way to socialise when restrictions prevented people from meeting in person.’ Gear4music announces that it has completed the acquisition of AV Distribution Ltd. It says ‘AV Online is an online retailer of audio-visual equipment, including HiFi speakers and home cinema systems’ and adds ‘we are also pleased to report our systems and supply chain operations have performed well over the busy Black Friday and Cyber Monday period, and we continue to be confident that our full year financial results will be in line with the recently revised consensus market expectations.’ FINANCE & MARKETS: The Markit PMI for the UK manufacturing sector in November reports that ‘UK manufacturers continued to face a challenging operating environment in November, as severely stretched supply chains disrupted production schedules and drove up input prices to the greatest extent in the 30-year survey history. The PMI nonetheless rose to a three-month high of 58.1 in November, up from 57.8 in October. • Markit comments ‘although November saw rates of expansion in output and new orders gain some traction, growth remains lacklustre compared to the first half of the year. Manufacturers are facing a challenging backdrop, with rising supply chain disruptions, staff shortages and inflationary pressures stifling growth while ongoing difficulties caused by Brexit and logistical headaches restrict opportunities to expand into overseas markets. New export sales fell for the third straight month.’ • On costs, it says they ‘continue to surge relentlessly higher, rising at the steepest pace in the three decades of survey history. Stretched supply chains, component shortages and a vast mismatch between demand and supply are all exerting massive upwards pressure on input costs. This is also filtering through to prices charged at the factory gate, which rose at a rate close to October’s record high.’ UK house prices grew by 10% in November, according to the Nationwide Building Society, up from growth of 9.9% in October. The average price of a UK house was £252,687 in November – nearly 15% higher than March 2020, the start of the pandemic. Speaking of the word ‘transitory’, Jay Powell, chairman of the Fed, told US Congress: “It’s probably a good time to retire that word.” • Powell went on: “It now appears that factors pushing inflation upward will linger into next year.” Powell added ‘the economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases… perhaps a few months sooner.’ He added that the Omicron variant could pose a threat to US recovery. The OECD has said that the new Omicron strain of coronavirus threatens to boost inflation as outbreaks restrict production capacity whilst demand remains buoyant. The OECD says ‘even in more benign scenarios, ongoing coronavirus outbreaks may continue to restrict mobility in some regions and across borders, with potential long-lasting consequences for labour markets and production capacity, as well as prices.’ Sterling weaker at $1.3287 and €1.1737. Oil price lower at $69.78. UK 10yr gilt yield up 2bps at 0.84%. world markets better in Europe yesterday but US down and Far East mixed. London set to open down around 65pts as at 7am. RETAIL WITH NICK BUBB: • Today’s Market: Despite a good start, Wall Street was down by 1.3% at the close last night (as measured by the Dow Jones index) and the stockmarket in London is tipped to slide this morning, as the omicron rollercoaster turns down again, after a first case in the US was reported overnight (according to the Proactive investor website). The spread betting firms expect the FTSE 100 index to fall c78 points, to open at c7090 at 8am. • Today’s News: After the market closed last night, Halfords announced that it had agreed to acquire the privately-owned National Tyres group for £62m in cash. It also said, surprisingly, that it wanted to fund the acquisition with a share placing and investors must have liked the deal because the company has announced that it has raised c£64m gross overnight, by placing 19.8m shares (9.9% of the existing share capital) at 320p, a nil discount to the closing price. The deal delivers on Halfords’ objective of evolving into a business more heavily weighted towards Motoring Services and will bring useful synergies. • Today’s Press: According to the invaluable Guardian press summary email, the Guardian itself leads with the front-page headline “GPs may stop monitoring millions of patients due to Covid jab drive”, while the Times says “Fourth jab to fight variants”. The Telegraph has a similar line with “Two more rounds of booster jabs ordered” and the i reports “Booster jabs until 2023: Britain buys 114m vaccine doses. The Daily Mail warns “Stop being Christmas killjoys, ministers”, but the Daily Express is feeling upbeat and claims: “Not all gloom and doom! Omicron cases are ‘mild’”. The Daily Mirror has more revelations on the Christmas party row in Downing Street (“Booze, nibbles & party games until early hours”) and the FT leads with “US delays deal to lift Trump era steel tariffs over N Ireland fears”. |
|