Confidence, food prices, labour, Thwaites, YUM Brands, Young & Co etc.:

A DAY IN THE LIFE:

In common with many others, it seems as though every second letter we get these days is telling us either that our mortgage is going up or that our electricity bill is doing likewise.

But the bank (or the electricity company) is ‘there for us’ so that’s alright then.

But then again, hang on, it isn’t really as we’ll still have to pay and as the cost increases look likely to go on for some time, they brought to mind, as we were being dragged around on the end of a lead by the dog yesterday, what is now the appropriate comment by Jeff Winger in the comedy series Community, namely:

‘Let’s do what people do. Let’s get a house we can’t afford and a dog that makes us angry…’

Anyway, it really is nearing the weekend but Hull City is reverting to form. On to the news:

LANGTON EMAIL:

The Free Email is now written in short form. Extended versions of many stories are in the Premium Email. Reply to this email if you would like to upgrade.

Prices for the Premium at time of writing are £345 for one subscription, £595 for multiple, both plus VAT. Or sign up for easy in, easy out monthly option HERE

PUBS & RESTAURANTS:

Business confidence:

CGA & Fourth’s October Business Confidence Survey shows that ‘just 8% of leaders of multi-site businesses feel confident about the next 12 months for the eating and drinking out market.’ The report highlights that ‘this is a sharp drop from the figure of 23% in the last survey in June – which in turn was a steep fall from 65% in March.’

• See premium. Reply for sample or to upgrade. Single £345, multiple £595. Limited time offer: PayPal monthly £25 + VAT. Easy in, easy out.

Consumer behaviour.

Spotty trading. Despite sometimes horrible weather, Halloween may have traded well in residential areas over the last week.

Elsewhere, interesting to note that Next reported Q3 trends yesterday and ‘beat’ estimates. We are indebted to Nick Bubb for pointing out that recent sales were lifted by 1.4% in the last five weeks, this was ‘boosted by one particularly strong week at the end of September, when temperatures dropped and sales of heavier weight products improved’…

• See premium. Reply for sample or to upgrade. Single £345, multiple £595. Limited time offer: PayPal monthly £25 + VAT. Easy in, easy out.

The MCA reports property consultancy Distrkt as expecting a rise in liquidations in the first half of next year. Whilst this could be a disaster for those companies concerned, it could present opportunities to those businesses looking to grow their estate…

Novuna Business Finance reports that the proportion of small businesses in the UK hospitality and leisure sector predicting that they will grow fell by 5% to 26% for the last quarter of 2022…

Prospects for food prices:

Russia has agreed with Turkey to restart its participation in the grain corridor from Ukraine. According to the UN, 9.8m tonnes of grain, oil and soya beans have been transported in more than 400 shipments from Ukraine around the world since the operation began on 3 August.

Labour market:

Sainsbury’s has announced it is looking to recruit 18,000 temporary workers to support the supermarket through the festive season. New recruits would be paid £10.25 an hour, with London-based staff getting £11.30.

WFH:

The Telegraph reports that the work from home boom has passed its peak. It suggests that evidence on LinkedIn shows that remote adverts declined for a fifth straight month in September. It says less than 12pc of adverts were for fully remote working in September…

Trading:

S4 Labour has reported that hospitality sales are down for a second month. It says ‘October marks the second month in a row of a significant drop in Hospitality sales. Compared to the same period in 2021 sales were down 7.1% (September -6.9%), this is despite a better trading week over half term of minus 1.5%…

• See premium. Reply for sample or to upgrade. Single £345, multiple £595. Limited time offer: PayPal monthly £25 + VAT. Easy in, easy out.

Other news:

SIBA Scotland has responded to the publication of the Scottish Government’s Emergency Budget Review and the announcement on the Scottish Deposit Return Scheme saying that this is encouraging news…

COMPANY NEWS:

Young’s has announced its acquisition of  The Griffin Inn in Fletching and The Carpenter’s Arms in Tonbridge…

Yum! Brands reports Q3 worldwide system sales excluding foreign currency translation up 7%, with 5% same-store sales growth and 4% unit growth.

• See premium. Reply for sample or to upgrade. Single £345, multiple £595. Limited time offer: PayPal monthly £25 + VAT. Easy in, easy out.

Daniel Thwaites PLC yesterday reported H1 numbers saying that ‘the Company has turned in a respectable performance over the last six months, a period in which we have operated under the shadow of war in Europe and have also looked to stabilise the business as support from the pandemic has been withdrawn.’

Chairman Richard Bailey says ‘turnover for the half year was £57.9m, which is a 21% increase compared to turnover last year of £47.8m, which had disruption from closure and a benefit from government support on VAT and Business Rates. Our turnover is 8% ahead of the same period in 2019, the last clean set of trading results.’

He adds that ‘an operating profit of £9.9m for the half year compares to £9.3m last year and £9.5m in 2019. The business has emerged successfully from a couple of difficult years and whilst there are some very significant challenges ahead it is financially stable…’

• See premium. Reply for sample or to upgrade. Single £345, multiple £595. Limited time offer: PayPal monthly £25 + VAT. Easy in, easy out.

Dishoom is set to open its Canary Wharf site in November this year, located at 13 Water Street, Wood Wharf. It will include a ‘Permit Room cocktail bar in the atrium, several spaces for all-day dining, and an outdoor verandah suited to year-round enjoyment.’

SSP Norway has secured a contract to roll out 19 retail units in airports across the country, including Bergen, Trondheim, Stavanger and Oslo, starting from January 2023. Seventeen of the units will be ‘Point’ outlets – a concept specifically developed by SSP to respond to the travelling consumer’s needs.

Las Iguanas will open in Peterborough just in time for Christmas, following a transformation of their new Church Street location.

A Tortilla site will open in the Lexicon in Spring 2023.

eBay has reported Q3 numbers saying it generated revenue of $2.4 billion in the quarter, down 5% on an as-reported basis and down 2% on an FX-Neutral basis. The company made a loss per share under GAAP of 13c. CEO Jamie Iannone says ‘our third quarter results demonstrate significant progress against our long-term objectives and exceeded expectations for all key business metrics.’

HOLIDAYS & LEISURE TRAVEL:

Airbnb reports Q3 revenue up 29% YoY to $2.9bn despite geopolitical and macro-economic headwinds. Net profit for Q3 was up $380m to $1.2bn. The home-sharing giant saw bookings rise by a 25% YoY…

FRONTIER DEVELOPMENTS – ACQUISITION OF COMPLEX GAMES:

Video game developer and publisher Frontier Developments has acquired Foundry developer Complex Games & has held a conference call with analysts. Our comments are set out below…

The acquisition:

• Today, FDEV announced its first acquisition in 28 years, acquiring Complex Games, a developer that has just recently launched a game through FDEV’s Foundry publishing programme.

• Complex Games is a developer studio based in Winnipeg, Manitoba, Canada and was founded in 2001. It has 20 employees.

• The total consideration for the acquisition is £11.6m, with £8.3m cash up front and deferred consideration of £3.3m subject to operational milestones.

• The four shareholder-employees of Complex Games will participate in a 5 year profit-share cash earn-out scheme of up to £7.5m.

• The game Complex Games released through Foundry is called Warhammer 40,000: Chaos Gate – Daemonhunters and achieved revenue of around £5m in its launch month (the whole of Foundry generated £10m in FY22)

The rationale for the acquisition:

• The company said that the process of working as the publisher for Chaos Gate gave it good insight into the culture of Complex Games and served as an extended due diligence process.

• FDEV claimed that there is a desirable range of experience and knowledge between the four shareholder employees.

• The company said that building companies in different geographies will help it going forwards, Manitoba appears to have a good talent pool for developers, with local government encouraging focused on growing this area.

• Chaos Gate, a strategic turn-based game, represents diversification for FDEV and allows it to have developers who are specialised in these types of games.

• There are favourable tax incentives in Canada for video games. UK Video Games Tax Relief (VGTR) nets out to about 20% cash tax credit on qualifying development spend. Broadly, in Canada the benefit can be as much as double that, 40% for certain spending.

Operational impact:

• FDEV will look to double the current Complex Games headcount of 20 in the next 12-18 months.

• Opex will also grow from the current annualised rate of c£1.5m as the studio grows. Much of this is development cost and will be capitalised and amortised as projects are released in the future.

• Complex Games will be kept as a separate, internal team. FDEV organises its teams per game, implying that Complex Games will work on its own projects.

• Note on F1 Manager 2022:

• Following a successful launch, the game has faced some community backlash over the announcement that FDEV would stop updates in preparation for next year’s release F1 Manager 2023. FDEV blamed this on miscommunication and said that the game will now receive regular updates.

• The company stated that it had to strike the balance between nurturing the game and saving new features for the new annual version in 2023.

Going forwards:

• FDEV said it will continue to be very selective about further acquisitions. It only wants teams that fit its culture and leadership expectations.

• The company said that it had looked at lots of M&A opportunities over the years but pointed out that this is the first time in 28 years they have gone ahead. It stated that this was not the start of a ‘spending spree’.

• It will stick to its core model of developing games, launching them and then nurturing them with Paid Downloadable Contents (PDLCs)

Langton comment:

• The acquisition of Complex Games has come after a lengthy due diligence process – making a game together and then releasing it to market through the Foundry publishing process.

• It seems that FDEV liked what it saw in terms of the skills and culture of Complex Games and has acted to secure these employees.

• This acquisition serves to diversify the range of games that FDEV can deliver, broadening its internal skillset.

• The earn-out for the four employee shareholders has been presented as a win-win, incentivising the newly acquired Complex Games to deliver successful projects now at a much bigger scale. The acquisition looks carefully thought out and seems encouraging to investors.

OTHER LEISURE:

Aston Martin warned on profits, stating that higher costs from global supply chain and logistical disruptions look set to hit its profit margin this year. Q3 revenue increased by 33% YoY to £315.5m, driven by an average 28% increase in selling price to £189k. Executive chairman, Lawrence Stroll said ‘Although these headwinds, which are already improving in Q4, have disrupted our near-term financial performance and modestly impacted our full year guidance, the medium and long-term outlook is robust.’

FINANCE & MARKETS:

The US Fed yesterday, as expected, raised its key interest rate by 0.75 percentage points to between 3.75% and 4.00% taking the rate to its highest since early 2008. Federal Reserve chairman Jerome Powell warned that it would be ‘premature’ to pause further rate rises and he suggested that there were more to come. The Bank of England’s MPC reports at lunchtime today.

Sterling weaker at $1.1413 and €1.1609. Oil down at $95.78. UK 10yr gilt yield down 7bps at 3.39%. World markets weaker yesterday and London set to open down around 46pts as at 6.30am.

THE AQUIS MARKET:

Broker VSA Capital is hosting an Aquis Day on Tues 29 November at the Royal College of Surgeons (38-43 Lincoln’s Inn Fields, London, WC1A 3PE). The event will feature around 20 companies, who will present to attendants and take part in a competition to win the ‘Britain’s Got Aquis’ title. Judges on the day will include Andy Brough (Schroders) and Judith Mackenzie of Downing LLP. Tickets and details are available HERE

Attendance costs £20 – but Langton has a number of complimentary tickets and we’re open to suggestions as to who we should give them to…. Drop us a line.

RETAIL WITH NICK BUBB:

• See premium. Reply for sample or to upgrade. Single £345, multiple £595. Limited time offer: PayPal monthly £25 + VAT. Easy in, easy out.