Langton Capital – 2022-01-26 – PREMIUM – DP Eurasia, XP Factory, calls for more aid, trading, holidays etc.:
DP Eurasia, XP Factory, calls for more aid, trading, holidays etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Bit pushed for time this morning.
This largely because a standard check-up at the dentist, you remember those, they used to come every six months, had been arranged for yesterday late afternoon and it pushed the whole day out of shape.
And, as dental check-ups are like hen’s teeth – that is not pleasant but rare – we had to stick to the appointment dictated as the last time we had our gnashers checked was late 2019.
Anyway, all good, blasted by X-rays and poked around a bit but no work to be done. Pain and discomfort avoided for the short term, the trains down were ghostly quiet and we’ve got our day broadly back on track. On to the news:
PUBS & RESTAURANTS:
Trading, state aid etc.:
The BBPA has called on the government to provide further support for its pubs and brewers ‘following another devastating winter.’ It says the ‘end of Plan B boost to consumer confidence must be matched with Government support.’ The BBPA quotes data from CGA saying that trading was down 30% on average across England during the second half of December. It is therefore ‘urging further Government support to combat the increasing financial pressures to ensure our pubs remain open for consumers, having recently relaunched its Long Live The Local campaign.’
• The campaign ‘urges the Government to provide long-term support by extending the current lower rate of VAT, lowering beer duty, and reforming the business rates system to reduce the disproportionate tax-burden on pubs.’ Whilst money will need to be raised from somewhere to balance the government’s books, the BBPA is calling for the burden to fall elsewhere.
• It says ‘the return to office working for many and a move back to Plan A measures will increase footfall in towns and cities and boost already rising consumer confidence.’ This has been the case towards the end of multiple prior lockdowns but, with utility and energy prices going up and with taxes and mortgage rates rising, the consumer may be in a less good place this time around.
• CGA’s Consumer Pulse survey reports that 70% of respondents now feel confident about visiting pubs, bars and restaurants. That figure is virtually double the number (34%) who felt confident at the start of 2021. The number is also up on the 52% reported by CGA in July. The BBPA says ‘these levels of confidence are a huge boost for pubs and brewers who are experiencing record levels of debt and are facing increased costs across the board from energy through to raw materials, as well as supply chain difficulties.’
• BBPA CEO Emma McClarkin says ‘Plan B decimated consumer confidence and in-turn our trade which is why we are delighted to see the back of these measures from today. It is hugely positive to see how comfortable the public now feel about returning to their local and office workers can do their bit by visiting their old pre-pandemic haunts.’ She adds ‘we are grateful for the support the sector has received, however, there is much more to be done to secure the long-term survival of our much-loved pubs and breweries. We are calling on the Government to extend the current lower level of VAT, lower beer duty, and introduce business rates reform that reduces the disproportionate burden paid by pubs. With the right support we stand ready to re-ignite the UK Economy.’
Meanwhile SIBA has welcomed some of the moves north of the border. It reports that the Scottish Government has announced new funding to help small brewers impacted by the restrictions introduced to control the omicron variant.
• CEO James Calder comments ‘small brewers have been amongst the hardest hit by the Covid pandemic as they rely on community pubs for their sales. In these challenges times it is hugely welcome that the Scottish Government has again worked with SIBA and the sector to develop another round of the pivotal Brewers Support Fund specifically for small brewers in Scotland. Scottish brewers will be raising a cheer to the Cabinet Secretary for continuing to stand up for and support our sector.’
More on Trading.
S4Labour has reported that last week’s hospitality sales remained soft. It says they were down 8% on 2020 levels but add ‘with the ending of Plan B restrictions potentially in sight, sales were up 4.5% on the previous week — albeit from a low-base mark.’
• S4L says ‘week-on-week sales in London were up 1%, whereas week-on-weeks in sites outside of the capital were up 5%.’ It adds ‘the majority of the like-for-like decline remains in London sites, where sales suffered a 23% fall on 2020 levels last week. Non-London, on the other hand, saw a smaller 3% drop in sales when compared to the same week in 2020.’
• S4L’s Sam Wignell comments ‘operators have started to see a slight turning of the tide and sales are, for the first time this year, starting to grow week-on-week. However, these rises are from a low point and there is a long way to go before the industry is in full recovery.’
Employment & the consumer.
Employment levels, which can be a lead-indicator for consumer confidence, remain buoyant. Nonetheless, yesterday we saw announcements from The Royal Mail and Unilever that they were cutting 700 management jobs and 1,500 positions respectively.
The International Monetary Fund has urged the UK to provide “targeted support” for those households facing a cost of living crisis, partly caused by rising energy prices. Deputy MD Gita Gopinath says it is ‘important that there should be well targeted support to highly vulnerable households who are having to face very high living cost increases.’ She adds that the crisis in Ukraine could mean “further increase in prices of oil and natural gas, and therefore of energy costs more broadly, for many countries in the world”.
Working from Home.
There appears to be a widespread desire to (at least attempt) to get back to normal. This will involve many more office workers returning to their desks than has hitherto been the case. Getting back to 100% may not be possible in the short term. Some employers are calling staff back, whilst others are going ‘remote first’ (i.e. there is an understanding that staff will be more likely than not to work form home).
• The Guardian reports that there is a move back but it says the ‘great awakening is happening slowly.’ TfL is reporting Tube journeys only 6% higher this week than last – but there is a widespread feeling that next week will be busier than this week. Manchester has recorded 9% more journeys on its trams. Network Rail says that footfall was actually down by 0.3% this Monday on Monday last week.
Clear Sight comments on consumer confidence saying that the mood has brightened since the beginning of the year. The data was collected before it had been announced that Plan B was being dropped. Clear Sight says ‘compared with our previous wave of research in early December, a smaller proportion of the population rated their mood at the lower end of the spectrum.’ Vaccinations have helped.
• Clear Sight says that the timing of Plan B’s imposition makes some comparisons difficult. It says ‘partly because the measures came into force mid-month, the incidence of those dining in restaurants, visiting pubs and cinemas, going to shopping malls, getting on buses and trains, grew in December relative to November. Accommodation, flight and holiday booking activity (UK & overseas) all dipped – but remained at significantly higher levels than in December 2020 – ahead of an anticipated seasonal upturn in January.’
The BBC reports that ‘food and drink firms have raised fears over shortages as a deal that secured vital carbon dioxide supplies is about to end without an extension.’ CO2 is used for keeping packaged food fresh and is used in fizzy drinks. A supply chain crisis was averted last year when the government stepped in to broker a three-month price-fixing deal between CO2 producers and industry. A new deal will have to be struck before the end of this month.
• The FDF says ‘we are concerned with just days now remaining before that agreement comes to an end, and energy prices still very high, there will be further CO2 shortages once again.’ It adds ‘this could lead to shortages in the products we find on our supermarket shelves – adding further pressures to families already coping with high food-price inflation.’
City Pub Group chairman Clive Watson warns that the price of a pint could rise by as much as 50p, with inflation running at about 10% in pubs. One supplier reportedly told Mr Watson at the start of the year that beer prices were going to go by 7%.
• Regarding sales levels, Mr Watson tells the BBC that ‘the first week [of January] was pretty brutal to be honest, and it was very, very quiet even for a normal January. Sales just almost non-existent.’ He then says ‘suddenly about ten days ago it was almost like someone flicked a switch and suddenly sales started building up and the momentum started building up which is great, and over the last three or four days we are now getting to levels of a normal January which is absolutely fantastic.’
COMPANY & OTHER NEWS:
DP Eurasia has updated on trading for the year to 31 December 2021 saying its ‘strong sales performance’ has been sustained. The group reports group revenues for the year up 40.6% on last year with Turkey up 50.4% and Russia up 9.6%. The group says ‘system sales increased 51.5%, on the back of sustained strong demand in Turkey and improving performance in Russia.’ Turkish systems sales were up by 59.4% with Russian system sales up 33.5%. The co says it opened a net 38 new stores in 2021. Omicron impact in January and some cost headwinds. See below.
• CEO Aslan Saranga comments that he is ‘pleased to report a continued strong trading performance. Group system sales have increased across all regions [and] our Turkish like-for-like growth rate compared to the pre-COVID-19 (2019) period reached 88.8%, significantly outpacing inflation of 55.9% over the same period. Our Russian like-for-like growth rate compared to 2019 was down 4.4%; however, we saw an improvement in the last four months of the year, where we achieved a positive like-for-like growth rate compared to the same period in 2019.’
• Mr Saranga says ‘the strong trading has resulted in our best year in terms of store openings in Turkey since our IPO, where we increased our Turkish store count by 39. In Russia, our store numbers decreased by two as we focused on optimizing store coverage areas.’ He adds ‘we are continuing to drive our product innovation strategy, during the fourth quarter’ and says ‘we continued improving the share of digital in our delivery system sales in both Turkey and Russia, as well as at the Group level.’
• The company says re current trading that ‘since December, there has been an increase in daily new COVID-19 cases, with Omicron becoming the dominant variant; however, we are not subject to any material operational constraints at this point in any of our trading regions. Vaccination rates are continuing to increase, especially with a marked improvement in Russia.’ It adds ‘we saw increasing inflation in Turkey at the end of 2021, and while this will remain a headwind during 2022, other macro factors, such as GDP growth and foreign trade, remain strong.’
• The company concludes ‘whilst the Board is conscious of the potential continued risks posed by the pandemic, these trading results give us confidence in the prospects of our business and the Board expects the full year adjusted EBITDA for 2021 to be in line with expectations.’
Belgium-based delivery company Deliverect has raised $150m to value the company at $1.4bn. The company says it will use the funds to hire more people, and to build out more functionality on its platform, including an app store to make it easier to integrate more companies as and when th. The co says ‘we are preparing to scale to meet all of the digital opportunities in the food hospitality industry.’
The Cinnamon Club, which is owned by Boparan Restuarants, has extensively renovated its bar area ‘with a new scheme conceptualised by London-based interior designer, Juliet Walmsley.
Corbin & King has been pushed into administration. Minor International is its largest shareholder and has pushed for the appointed of FRP as an administrator amid growing concerns. Minor says ‘contrary to the picture that Mr King [Jeremy King, CEO] is trying to paint, the business is insolvent and is in strong need of further financial support.’
• Sky News reports that Mr King had been speaking to potential funder Knighthead for months over a cash injection worth tens of millions of pounds. Mr King says ‘there is absolutely no need to go into administration – we are trading extremely well and all suppliers, staff et cetera continue to be paid.’ He says it is a ‘power play for the holding company – and we plan to buy it out of administration.’
Carluccio’s is to sell product through 300 Sainsbury’s stores nationwide from today.
McDonald’s Corp is to sell its plant-based McPlant burger from around 600 restaurants in the San Francisco Bay Area and Dallas Fort Worth on a test basis from 14 Feb.
XP Factory (used to be Escape Hunt) updates on trading for the six months to 31 December 2021 saying that it generated £5.1m of revenue from owner-operated Escape Hunt sites in H2 (13% ahead of H2 2019) with ‘Escape Hunt site level EBITDA expected to exceed £2m in H2 (340% ahead of H2 2019).’
The company says a ‘positive Group EBITDA (excluding R&D credits) [is] expected to be delivered in H2 with underlying Group EBITDA expected to be ahead of City expectations.’ The co says it received a £1.5m R&D grant in January 2022. The group completed the acquisition of Boom Battle Bar on 23 November 2021 and says it has a ‘number of new openings on track for both Escape Hunt and Boom Battle Bar.’
• XP says ‘trading within the Escape Hunt network bounced back strongly after H1 2021, which was severely affected by lockdown restrictions. Owner operated revenue in the six months to 31 December was £5.1 million, an increase of 133% compared to the same period in 2019. Site EBITDA for H2 2021 is expected to exceed £2m. This represents an increase of over 340% compared to the same period in 2019, driven by the enlarged estate, underlying like-for-like growth and improved margins. The outcome significantly exceeds the Board’s original expectations for the Escape Hunt business.’
• Re Boom Battle, XP says ‘since the acquisition, significant progress has been made in the development of the network with The O2 opening as an owner-operated site in December, and Wandsworth and Coventry opening as franchises. Eight additional sites (including two owner-operated) are currently in build.
• CEO Richard Harpham says ‘we are delighted with the performance our Escape Hunt business in the second half of 2021, with activity bouncing back strongly after the lockdown in H1. Our acquisition of Boom Battle Bar which completed in late November 2021 is settling in well and we have made excellent progress on the site pipeline. With COVID restrictions now being substantially lifted in the coming days, we have much reason to be optimistic about the future.’
Coca Cola HBC has announced that it has completed the previously-announced purchase of a further 42% of the shares in Coca Cola Bottling Co of Egypt. It says the purchase was for a ‘cash consideration of approximately US$123 million, bringing CCH Holdings’ total ownership in CCBCE to 94.7%.’
Molson Coors Beverage Company (in the US) has announced that it has ‘expanded its exclusive agreement with The Coca-Cola Company to develop and commercialize a brand of full-flavour alcohol beverages.’ It says this ‘marks another milestone in the relationship between Molson Coors and The Coca-Cola Company, following a successful first year for Topo Chico Hard Seltzer.’
• The move clearly blurs the line between soft drinks marketing and alcohol sales. Whether this attracts the attention of regulators remains to be seen. Molson Coors says ‘over the past two years, we’ve seen success by shaking up existing categories with new brands that have clear, compelling points of difference, like Coca-Cola’s Topo Chico Hard Seltzer, Vizzy Hard Seltzer and ZOA Energy Drink.’
• It says this summer, the company ‘will start by launching the Simply Spiked Lemonade variety pack’ in flavours including Strawberry Lemonade, Watermelon Lemonade, Blueberry Lemonade and ‘Signature Lemonade’. Molson Coors says it will, distribute and market Simply Spiked Lemonade as part of an agreement with The Coca-Cola Company.
Remy Cointreau beat Q3 sales forecasts with group sales up 21% to €440.5m for the three months ending 31 December. The company is confident that demand for its premium cognac in China, the United States and Europe will underpin profit growth this year.
The latest CGA On Premise Measurement Service shows that the drinks expected to be the most popular in 2022 are run, tequila and vodka. On the other hand, wine, gin and whisky are among those suspected to take a dip in popularity.
Sky News reports that US-based Knighthead Capital Management is in talks with Corbin & King about providing tens of millions of pounds of funding amid a dispute with Minor Hotels, the hospitality group’s biggest shareholder.
Wells & Co has announced a 10% rent concession for all its 130 leased and tenanted pubs across the UK. The announcement comes after a disappointing trading period in December 2021 due to the Plan B restrictions.
Britvic has pledged its support to homelessness charity Only A Pavement Away as it prepares to open training cafés on high streets across the UK.
London-based bar operator Inception Group is set to open a Mr Fogg’s site in Mayfair at the former Balls Brothers site.
LEISURE TRAVEL & HOTELS:
Jet2 has said holiday bookings had increased by 30% on last week after the announcements on Monday that rules would be relaxed for people arriving in Britain. The rule changes mean fully-vaccinated people arriving in those countries from abroad do not need to take Covid tests.
• Mr Heapy says ‘we have seen a notable increase in demand for holidays and flights across all seasons, particularly February half term, the Easter holidays and Summer 22.’ He says he is seeing ‘enormous growth’ for bookings for Greece, Turkey and Cyprus.
Travelodge has launched its 2022 recruitment drive, looking to fill 600 positions including roles such as Hotel Manager, Assistant Hotel Manager, Bar Café Team Member, Housekeeping Team Member and Receptionist.
The billionaire Livingstone brothers are reported to have teamed up with a Dutch pension fund manager to invest €1 billion in buying hotels from financially distressed sellers.
Sky reports that Playtech is ‘drawing up contingency plans to dismantle and sell its operations if a £2.7bn takeover by an Australian rival is blocked by a collection of Asian-based shareholders.’ It says it believes ‘Playtech’s directors and its investment banking advisers are discussing a full break-up of the London-listed gaming software company, which has a market value of just under £1.9bn.’ The company says ‘whilst Playtech has made significant strategic and operational progress and is in a strong position for the future, Aristocrat’s proposal provides an attractive opportunity for shareholders to accelerate the delivery of Playtech’s longer-term value.’
The company has this morning commented saying it ‘notes recent media speculation on the Company’s future strategy. The Board of Directors reiterates its recommendation that shareholders vote in favour of the offer from Aristocrat Leisure Limited. Whilst Playtech has made significant strategic and operational progress and is in a strong position for the future, Aristocrat’s proposal provides an attractive opportunity for shareholders to accelerate the delivery of Playtech’s longer-term value.’
Market research group NPD reports that toy sales dropped by 3% in the UK last year, as the supply of materials and transportation of finished toys, particularly on shipping containers, provided obstacles for the industry.
The Avengers Campus in Disneyland Paris is set to open this summer, with Disneyland Paris president, Natacha Rafalski, calling it a ‘significant milestone’ in the park’s ongoing expansion.
Guitarguitar is moving to an employee ownership corporate structure, with 60% of shares being placed into an employee ownership trust (EOT).
Bob Dylan has become the latest recording star to sell his record collection to a music major. Mr Dylan is reported to have sold his catalogue to Sony in a deal worth up to $200m.
Sterling stronger at $1.3508 and €1.1949. Oil price higher at $88.21. UK 10yr gilt yield up 3bps at 1.16%. World markets mixed yesterday but London set to open some 58pts higher as at 7am.
FINANCE & MARKETS:
The ONS yesterday reported that government net borrowing in December was a little below estimates but it confirmed that interest charges had hit new record highs. The government borrowed £16.8bn last month. Economists had forecast a figure of £18.5bn.
Some have suggested that the shortfall could provide the flexibility needed to perform a U-turn on proposed National Insurance rises. Taxes rose and government spending fell as support to industry was withdrawn. Borrowing cumulatively this financial year is running below forecasts. Interest charges tripled on December last year to hit £8.1bn on the month or a horrendous £100bn annualised.
• Chancellor Rishi Sunak says ‘risks to the public finances, including from inflation, make it even more important that we avoid burdening future generations with high debt repayments.’ He is reportedly calling the upcoming NI increase ‘The Prime Minister’s Tax’. Sunak says ‘our fiscal rules mean we will reduce our debt burden while continuing to invest in the future of the UK.’
The IMF has cut its forecast for growth for the UK economy in 2021 from 5.0% to 4.7%. The IMF has also cut estimates for the US and China. For global growth in total, the IMF has cut its forecasts from 4.9% to 4.4%.
• The IMF says ‘the global economy enters 2022 in a weaker position than previously expected.’ It says ‘rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the US and many emerging market and developing economies.’ It says ‘the the ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption have limited growth prospects.’
RETAIL WITH NICK BUBB:
• Today’s News: If you thought the craze for getting pets was just a lockdown thing, then you should note that Pets At Home say that “The UK pet care market remains robust, with strong continued growth in new pet owner customers, and the prevailing customer themes of long-term pet ownership, humanisation and premiumisation, creating a sustainable tailwind for growth across our business” and today’s Q3 update (for the 12 weeks to Dec 30th) is strong, with group LFL revenue up by 8.7% (up 28.1% on a 2-year basis). And Pets at Home flag that “with this strong continued momentum into our final quarter, we now anticipate that FY22 Group underlying pre-tax profit will be at least £140m” (versus consensus of £135m). And after the sharp fall in the stockmarket on Monday, it’s worth highlighting that “Mr Share Buyback Man” made a dramatic reappearance at Next, with the company ploughing into the
• This Week’s News: Tomorrow morning brings the Dr Martens Q3 update, whilst over in the US, Apple report their Q1 results after-hours tomorrow evening.