UK Eating Out Report, CGA research, Easy Hotel:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

I must say, whist they may be famous for their whirls, cakes, coffees and schnitzels, the Viennese make a mean iced cream and, at a couple of Euros a pop, they’re not too bad value.

Some other stuff, on the other hand, is pretty pricey, particularly with the pound at parity once you’ve factored in transaction costs. I mean a fridge magnet (albeit from Hard Rock) at €11.00 and a medium sized coffee at €4.25, just what’s going on?

I suppose the flipside is that staycations are on the up. We might be loading a van with cheap groceries and sleeping in laybys in Cornwall ourselves next year but, for the moment, it doesn’t do to spoil the ship for a ha’p’orth of tar. So, with a somewhat fixed grin, we’ve been stumping up for the bus tour, the meals and the rest whilst explaining that we would forego the horse & carriage treatment and didn’t want a Danube cruise because we were doing our bit to minimise our carbon footprint.

Seemed to do the trick and, with the Lidl and Aldi (a.k.a. Hofer in Austria) outlets helping to keep our costs down, we’re hoping to push on through till the end.

Anyway, as mentioned, elements of Langton are on holiday this week. We’ve done Lake Garda, Innsbruck, Munich, Salzburg & Vienna on a shoestring and will be setting foot in Slovakia shortly. The email could be a little bit shorter than usual. On to the news:

I have done a story on Goals below:

GENERAL NEWS – PUBS & RESTAURANTS:

The MCA’s UK Eating Out Market Report 2019 has found that 44% of customers are thinking more about the environmental impact of their food and drink, compared to five years ago.

A survey conducted by CGA and Fourth has found that 41% of businesses are fairly to very optimistic about the future prospects for the eating and drinking out market over the next 12 months.

CGA has reported that beer accounts for 48% of alcoholic drinks sold in the on-trade in the UK and 44% in the US, making it the most popular in its catagory in both countries. The same report finds that cask ale sales dropped 9.8% in the UK.

The FT reports that Diageo, the world’s largest spirits maker, is investing £180m in green energy and water recovery projects at 11 of its breweries across Africa. This is said to be its largest environmental investment in a decade. Andrew Cowan, chief executive of the company’s Kenya-based East African Breweries business said ‘becoming 100 per cent green is the ultimate goal.’

The Long Live the Local campaign that aims to promote pubs and cut beer duty has released a short video on a now-closed pub to highlight the impact of rising taxes on the on-trade.

Takeaway.com and Just Eat have reached agreement on the terms of a recommended all-share combination. Chairman of Just Eat, Mike Evans commented: ‘The Board believes that this is a compelling offer for Just Eat shareholders which will create a global leader in a dynamic and rapidly growing sector’

JD wetherspoon has been named that best place for children’s food from a list of 28 of the most popular restaurants and supermarket cafes, the charity group The Soil Association.

Henry Dimbleby has stepped down as a director of London Union. Dimbleby was recently hired by the Government to conduct a review of the UK’s food supply systems.

The more than 1,000 strong restaurant chain Wingstop in the US has seen systemwide LfL sales increase 12.8% for the quarter.

Majestic Wine has confirmed its sale to the US investment firm, BidCo, which is owned by the Japanese bank, SoftBank. The sale has valued Majestic Wine at £100m.

Intu properties has seen another two fifths of its share value wiped off, following its announcement that it may need to raise new equity.

The US based food delivery group, DoorDash is buying the high-end delivery company Caviar for $410m.

Spudulike is set to close all 37 of its stores as a buyer withdraws from the pre-package administration deal at the last turn.

HOLIDAYS & LEISURE TRAVEL:

EASYHOTEL – RECOMMENDED CASH OFFER:

EasyHotel has announced that it’s independent directors are to recommend a bid for the company from the newly-incorporated Citrus UK Bidco at 95p per share in cash. This represents a discount to EZH’s last two fund-raisings, which were to raise £38m at 100p in September 2016 and to raise a further £50m at 110p in February 2018.

Supporters of the shares at the time of those fund raisings will suffer a 5% or a 14% loss of value as a result of the proposed takeover.

Nonetheless, the proposed takeover price represents a 35% premium to Friday’s closing price and a 27% premium to the average price over the last 6mths.

Citrus Bidco is owned by a consortium of companies including ICAMAP Investments, which is already a major shareholder in the company.

The offer values EasyHotel’s equity at £138.7 million on a fully diluted basis and implies a multiple of 36.7x the growing company’s EBITDA of £3.4 million for the twelve months ended 31 March 2019.

EZH says ‘the Independent…Directors, who have been so advised by Investec as to the financial terms of the Offer, each consider the terms of the Offer to be fair and reasonable.’ It sys ‘the Independent easyHotel Directors intend to recommend unanimously that easyHotel Shareholders accept or procure acceptance of the Offer.’

Bidco has ‘received irrevocable undertakings to accept (or procure acceptance of) the Offer from each of the Independent easyHotel Directors…representing approximately 0.7 per cent. of the issued ordinary share capital of easyHotel.’

ICAMAP says ‘we have been a shareholder in easyHotel since October 2016 and have been the principal supporter of two capital raises…However, we also believe that the Company needs a change in its shareholder base in order for easyHotel to become a true leading pan-European budget hotel player.’

EZH chairman Jonathan Lane says ‘the Independent easyHotel Directors consider that the Offer is fair and reasonable and in the best interests of shareholders, the Company, its employees and wider stakeholders. Liquidity in easyHotel stock has been limited since the Company was admitted to AIM five years ago.’

The British Airways-owner IAG has stated that its pay deal being offered to its pilots is ‘fair’, and still hopes to avoid strikes this summer.

Heathrow Airport workers have called off today’s strike action, as talks continue to stop a further walkout tomorrow.

Millennium & Copthorne reported H1 2019 RevPAR up 3.4% to £77.82, however, total revenues were down 1% at £477m.

European hotels have seen rising costs reduce their overall profitabilty even though RevPAR continued to increase. Eurpean hotel RevPAR reached €158.82 in 2019 up from €157.09 in June 2018, however, profit per room fell by 2.8% to €101.00 over the same time period.

The number of tourists visiting the UK from China has increased by nearly a fifth this summer, mainly accredited to the current weakness in the pound.

The number of tourists visiting the UK from China has risen by almost a fifth this summer, the latest figures show. Sarah Hewin, chief economist for Europe and the Americas at Standard Chartered commented: ‘he fall in the value of the pound against China’s currency [the renminbi] means that Chinese tourists coming to the UK have seen their spending power increase by around 5% in the past three months’.

Peel Hotel has reported full year results for the year ended 27 January 2019, showing that revenue decreased 3.2% to £15.6m, with operating profit down 35.1% to £598k. Chairman Robert Peel commented: ‘There has been a slow but sustained improvement in sales and hotel profitability since August 2018 up and until todays date. In view of the high operational gearing of the business, small improvements in turnover translate to much higher percentages of hotel profitability and therefore if we can maintain this trend, we can expect our EBITDA and Profits to move forward in the current year’.

OTHER LEISURE:

Goals’s Soccer Centres’ former CFO has been accused of fraud by accountants BDO. Goals announced last week that it expects to delist its shares. Current LfL sales are positive but the company will not have its calendar 2018 accounts prepared in time to satisfy AIM rules.

The FT claims that Goals’ CFO Bill Gow is alleged to have created fictitious documents including invoices in order to disguise the company’s performance over a number of accounting periods. There have been further claims, denied by Mr Rogers, that co-founder Keith Rogers was aware of the behaviour.

Goals has already conceded that its accounts dating back to at least 2010 may have given a misleading impression as to its financial results. The FT quotes sources close to the BDO report as saying that the scale of the financial hole is not yet known. Former CEO Keith Rogers said ‘I categorically deny that I was engaged in (or had knowledge of) any “alleged fraud” in the preparation of the Goals Soccer Centre Financial Statements.’

FINANCE:

The Share Centre reports that UK corporate profitability in Q2 this year was at its lowest in three years.

START THE DAY WITH A SONG:

Last Friday’s song was Good Vibrations by The Beach Boys, today who sang:

Wild thing, I think you move me

But I wanna know for sure

Come on and hold me tight

RETAIL WITH NICK BUBB:

Saturday’s Press and News (1): The big sell-off in equity markets on Friday was the key topic in the Business pages of the Saturday papers and the FT led its front page with the headline “Trump’s escalation of trade war drives investors to seek safety”, although the Guardian led with the Lib Dem win in the Brecon by-election (“Tory rebels threaten PM after majority cut to one”). In terms of Retail news, there was reasonable coverage of the strong Pets at Home update on Friday and the announcement that Majestic Wine is to sell its Retail arm to the US investment fund Fortress, as well as the latest accounting scandal to befall Goals Soccer Centres (another Sports Direct investment…), whilst the Times and the Telegraph both flagged the Sky Business News story that the last 2 bidders left in the running for the struggling Jack Wills fashion chain are Philip Day and…#MadMike.

Saturday’s Press and News (2): In other news, the Guardian and the Daily Mail both flagged up a visit to the new-look Marks & Spencer Food store in Hempstead Valley in Kent (it has been doubled in size to nearly 17,000 sq ft and carries a full range of 6,000 lines, including more loose produce and more  family-sized packs). The Daily Mail’s “Hero of the Week” was Simon Wolfson of Next, after the upbeat Q2 update. And the veteran City Editor of the Daily Mail noted in his column that the one shop in his local High Street, in East Sheen, that has survived for 30 years without any fascia change is Ron’s Fishing Tackle.

Sunday’s Press and News: There wasn’t much Retail stuff in the Sunday papers, although the Sunday Times flagged that Majestic Wine is thinking of getting a US quote on NASDAQ once it becomes a pure Online business, ie Naked Wines. And the Mail on Sunday highlighted that the Flying Tiger gifts and homewares chain has halted UK store expansion after reporting a slump in sales and profits for last year. The Business Leader column in the Observer looked at the lessons that can be learnt from the re-invention of Greggs and its success with the vegan sausage roll: “Vegan success shows that Greggs can roll with a changing market”. And the Sunday Times had a feature article about the problems of Sports Direct and the background to the so far unsuccessful “elevation” strategy seen in its flagship Lakeside retail park store: “Why Adidas and Nike are squeezing Ashley”. The Sunday Times also noted
in passing that one person unlikely to shed a tear for the embattled Mike Ashley is the beleaguered Philip Green: “Rotund rivals fall out of love”.