I would like to say how much I enjoy the e-mails from Langton Capital on a daily basis. I use the newsletter as an ideal way of keeping me up to date with what is going on financially in the drinks industry.
Tenanted pub company
City Pub Co, Carnival, betting in football, EU staff & other:
A DAY IN THE LIFE:
Bit busy today but just a few words on interest rates.
Perhaps arcane but, with the MPC split 5:3 and deputy governor Andy Haldane mulling switching sides in the autumn, a rise could be on the cards.
In fact a rate rise will happen at some point but the betting is still slightly against anything happening this calendar year.
However, and here’s something worth pondering, we’re less than a fortnight or so away from the ten year (yes, ten year) anniversary of when rates last went up.
They rose from 5.50% to 5.75% on 5 July 2007.
They have been cut ten times since then but that kind of time gap means that a whole generation of kids must have left school, done Uni, got a job, got married, bought a house & had kids since rates last went up. It will be something of a defining moment. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• City Pub Co East reports FY numbers to end-2016. Chairman Clive Watson says ‘I am delighted to be able to update you on our progress for the 2016 financial period. It has once again been another excellent year for the Company, which has seen a large expansion in the trading estate and significant financial progress. We have built up a fantastic business over the last few years that is performing really well.’
• City Pub Co East says it started 2016 with ten pubs but currently has 17 sites. The group says ‘we have also identified further sites for acquisition and we will update shareholders when these are completed.’
• City Pub Co reports FY16 revenues of £14.9m with EBITDA of £.1m and operating profit of £0.6m. The group reports ‘trading has been healthy in the first three months and total sales are up some 46% on this time last year. All sites are trading in line with or better than expectations.’
• The ALMR has welcomed Theresa May’s statement, in which she set out plans for migration upon Brexit saying that she didn’t want anyone working in Britain to leave. Chief Executive Kate Nicholls said ‘the Prime Minister’s statement is a welcome indication that the Government recognises the value of EU workers to the UK economy, and that a sensible solution will prevail.’
• ‘Millennials’ (those born in the 1980’s or 1990’s) are leading a change in the way we holiday or spend our leisure time, which now prioritises the sharing of experiences on social media platforms such as Instagram. Instagram has over 500 million active monthly users who have shared over 40 billion photos to date, equal to c95 million photos and videos per day, and is driving a boom for holidays where travellers can ‘access the inaccessible’.
• Fleet Street Communications writes: ‘It’s said with no new destinations to discover by 2030, travellers will seek out spots that enable them to impress their followers in other ways. Destinations that challenge expectations, were previously perceived as ‘risky’ and/or are very hard to access will be in demand. Extreme activities will also be more popular for the same reason, with travellers spending more on specialist guides and excursions to help them find hidden gems.’
• The ALMR has welcomed the government’s guidance to local authorities that they should ‘expedite payments of business rates reliefs to licensed hospitality operators, and to communicate to recipients when and how they will be paid.’ CEO comments ‘despite this money having been available since April, too many local authorities faltered when companies were suffering and needed assistance and information. At long last, direction and a sense of urgency has been provided.’
• JD Wetherspoon is to drop the email version of its monthly customer newsletter. It says ‘many companies use e-mail to promote themselves, but we don’t want to take this approach – which many consider intrusive. Our database of customers’ e-mail addresses, including yours, will be securely deleted. In future, rather than e-mailing our newsletters, we will continue to release news stories on our website:’
• Managing Director of Chiquito, Jason Green, is stepping down after a five year stint with the Restaurant Group-owned brand, reports the MCA.
• The UK pub market has been forecast to grow 1.5% in 2017 reaching a value of £22.15bn, this is despite an expected 2.1% decline in the number of pubs.
• The BBPA has welcomed the Department of Communities and Local Government’s push for councils to deliver business rate discounts to pubs that qualify. The Chief Executive of the BBPA, Brigid Simmonds has said ‘I am grateful to DCLG for issuing clear guidance that stresses how important it is for councils to ensure that local business receive all the rates relief for which they qualify. Local authorities now need to get on and deliver these lower bills to businesses. For pubs, this is much needed’.
• The MCA has reported that the eight-strong Craft Beer Co is in advanced negotiations with regards to opening a site in Shoreditch. Martin Hayes, the managing director of the group said ‘It’s true we are in negotiations over a site in Shoreditch and all being well we’ll sign in the coming weeks’.
• Crussh juice bars have become Sainsbury's latest concession partner, with the first Crussh concession opening in Sainsbury’s Pimlico store.
• Nestle USA has launched a new startup accelerator programme, partnering with Rabobank and RocketSpace. The operation will see 20 startups being supported over a six-months course.
• EU staff: BBC quotes one UK fruit farm as saying only ‘one Brit applied [for a job] in five years’
• McDonald’s is set to trial delivery in the UK by teaming up with UberEats, the soft launch will take place in London, Leeds and Nottingham.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Carnival reports Q2 numbers saying adjusted US GAAP net income was $378m, or $0.52 diluted EPS vs $370m, or $0.49 last year
• Carnival Q2. Group says cruise costs per berth rose 1.5% from prior year, in line with March guidance. Fuel price rises cut earnings by 12c per share.
• Carnival Q2 re outlook. Group says ‘at this time, cumulative bookings for the next three quarters are higher at prices that are well ahead of the prior year.’ It says ‘FY 2017 net revenue yields in constant currency are expected to be up approximately 3.5% compared to the prior year, better than March guidance of up approximately 3%.’ President and Chief Executive Officer Arnold Donald commenting on these results says ‘strong execution drove significant operational improvements, which more than offset the substantial drag from fuel and currency, leading to another second quarter adjusted earnings record. It was reinforcing to see over five percent improvement in cruise ticket prices, affirming our efforts to increase demand by building positive word of mouth through the delivery of exceptional guest experiences as well as our innovative marketing and public relations programs.’
• Carnival CEO Arnold Donald comments ‘we are realizing sustained strength in booking trends across all core products. We are delivering on our strategy to grow demand in excess of measured capacity growth while leveraging our industry-leading scale resulting in increased return on invested capital. We are working hard to sustain the momentum. We have accelerated returns to shareholders through our recent dividend increase, with annual dividend distributions now approaching $1.2 billion, and the reauthorization of up to $1 billion in share repurchases.’
• Inbound tourism. Forward bookings for travel in the UK in the summer peak remain healthy despite flight bookings by overseas travellers to the capital falling 12% in the first week after the London Bridge and Borough Market attack, according to travel data firm ForwardKeys. Olivier Jager, chief executive of ForwardKeys, told the Financial Times: ‘One needs to bear in mind that even though we have seen something of a slowdown in bookings for the UK in recent weeks, the forward booking situation for July and August remains extremely healthy and there has been a sustained positive trend in bookings for the UK throughout the year, so [we] remain bullish on the UK’s tourism performance in summer 2017.’
• Airbnb is to launch a premium service that will match guests with inspected homes and apartments.
• The AAA expects 44.2m people will travel at least 50 miles from home over the Fourth of July weekend, up 2.9% year-on-year.
• The US hotel industry has released mostly positive y-o-y results in its three major performance metrics for the week of 11-17 June 2017. Occupancy declined 0.3% to 74.3%, Average daily rate increased 1.7% and RevPAR climbed 1.4% to $96.10.
• Holidaymakers travelling to Turkey and Bulgaria have been warned by the Foreign Office about companies that encourage them to make holiday sickness claims. The department said travellers could face prosecution if the claim is found to be fraudulent.
• Travel firms have been warned at the ITT Conference last week that they need to review their pricing ahead of the EU Payment Services Directive 2, which bans credit card charges from next year.
• Marriott International’s Ritz-Carlton is set to become the first hotelier to enter the cruise market. The first 292-passenger yacht set to launch in Q4 2019 with itineraries going on sale in May 2018.
• The Scottish Parliament has voted 108 to 11 to replace Air Passenger Duty with a 50% less ‘Air Passenger Tax’ with plans to eventually scrap it completely. Supporters of the bill claim it will improve connectivity and create economic benefits, with opponents claiming it will cost the country £189 million a year in lost revenue.
• The FA has pulled out of a sponsorship deal with Ladbrokes Coral worth up to £4m a year, following concerns over gambling industry influence on the game. Martin Glenn, the FA’s CEO said ‘we would like to thank Ladbrokes for both being a valued partner over the last year and for their professionalism and understanding about our change of policy around gambling.’ In response, Ladbrokes CEO Jim Mullen said ‘we understand the FA’s decision regarding their commercial partnerships on gambling. Football is a passion of ours, and our customers, and we remain committed to working with the FA to ensure the integrity and trust of the sport is maintained for the fans of the game and the millions of customers who enjoy betting on it week in and week out.’
FINANCE & MARKETS:
• Bank of England outgoing MPC member Kristin Forbes has commented on the perhaps surprising fact that there have been no interest rate rises since the recession bottomed nearly 8yrs ago asking ‘why has there been no consensus to tighten monetary policy – or at least slightly reduce the substantial amount of stimulus provided in August – since then?’ Ms Forbes says that a setback had been expected post the Brexit vote, but that has not happened.
• Kristin Forbes says inflation ‘is expected to continue increasing over the next few months and remain above target for over three years.’ Ms Forbes asks ‘why has there been no reduction in the substantial amount of emergency stimulus still being provided given that the sharp slowdown that motivated the emergency response has not materialized and inflation is well above target?’
• UK factories benefiting from lower Sterling exchange rate with the CBI saying that order books in June climbed to their highest level since August 1988 with export demand hitting a 22-year high.
• CBI says ‘Britain’s manufacturers are continuing to see demand for ‘Made in Britain’ goods rise with the temperature. Total and export order books are at highs not seen for decades, and output growth remains robust.’
• Oil bounced a little to $45.45 per barrel
• Sterling up a shade at $1.2698 and €1.1375
• UK 10yr gilt yields down 2bps at 1.02%
• World markets: UK down yesterday but Europe higher. US down but Asia mostly up in Friday trading
o European workers offered chance to stay in UK.
o Insurance companies setting up offices abroad. AIG, RSA & Hiscox choose Luxemburg, Lloyds & QBE will beef up their Brussels offices whilst Chaucer is to open in Dublin and Beazley & Aviva will expand their offices there. Worldpay is to expand operations at its Dutch operation.
o Mrs May met Euro leaders in Brussels yesterday. Council president Donald Tusk, commenting on whether Brexit could be reversed, said ‘who knows? You may say I'm a dreamer, but I am not the only one.’
YESTERDAY’S LATER TWEETS:
• Later tweets: Current PM (as at 10.30am) Mrs May heads to Brussels as Brexit debacle-deniers have a plan; we should all cheer up. No, really, that’s it
• Colliers says UK retailers are becoming concentrated in fewer, ‘prime’ locations. Many rents now reported falling.
• Colliers says 12% of rents across UK’s top-420 retail locations now falling. Is a feature of shifting demand, changing tastes etc.
• Launch of Amazon Prime Wardrobe spooks some retailers. Free shipping etc. threatens some business models
• Andy Haldane says may vote for rate increase. Would be 1st since July 2007. Ten year anniversary coming up soon…
RETAIL NEWS WITH NICK BUBB:
• Boohoo.com: A year ago, ahead of the AGM, the Boohoo.com share price was (with hindsight) on the rise, post-Brexit, but it was still only just under the 60p level, so, with the shares now trading at c240p, even after the launch of the Amazon Prime Wardrobe, shareholders have much to be grateful for (!). The hard working management are very unlikely therefore to get a hard time at today’s AGM, which is being held at 2pm in the offices of the lawyers TLT in sunny Manchester. No trading update is expected, after the bumper Q1 update back on June 8th.
• BDO High Street Sales Tracker: We flagged on Wednesday that it was getting “too hot to shop” at John Lewis at the end of last week and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e June 18th saw Fashion Store LFL sales dip by 1.5%, despite a very weak comp. Including Homewares and Lifestyle chains, total Store LFL sales were still down by 1.7% last week, but overall Online sales were up by 14.5% (on top of 16.2% growth a year ago).
• Trade Press: The front cover photo of Retail Week magazine today is of a Whole Foods store in the UK, with the headline “Amazon’s Whole new world” (“Etail titan shocks retail with swoop for specialist grocer”) and the Editor thunders in his column that the agreement to buy Whole Foods must be Amazon’s “most disruptive move yet”. The Editor also notes that the IPO of the fashion chain Quiz will be a good test of investor sentiment towards retailing. In terms of News stories, RW focuses on the news that Bunnings UK has poached B&Q’s Retail director Damian McGloughlin to take on the role of Chief Operating Officer and that Sainsbury’s is on course to buy NISA after agreeing an exclusivity pact. The Retail Week website flags that at last night’s prestigious BRC Annual Lecture, the former Co-op boss Richard Pennycook urged retail leaders to do more to shed the “toxic” reputation that the industry has developed among consumers: “We really should be concerned that our customers rank us below bankers in terms of trust-worthiness, and only a shade above estate agents and politicians. We can either pretend that it’s an issue about Philip Green and Mike Ashley, or we can recognise that it’s an issue for all of us”.
• News Flow Next Week: As we head into the last week of June, the pace of company news picks up, with the Debenhams Q3 update and the Carpetright finals on Tuesday, along with the latest Kantar/Nielsen grocery market share data. The Dixons Carphone finals are then on Wednesday, with the JD Sports AGM update on Thursday.