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
Hostelworld, pub-going, Soda Stream, retail woes & other:
A DAY IN THE LIFE:
Well it’s hot again in London and, as I found to my cost yesterday, it’s not pleasant having to rush to a meeting from King’s Cross with 40kg of luggage and a backpack wearing a jacket in the blazing sun.
Which brings to mind the fact that, whilst we’ve been to Spain & Malta this year, the hottest weather by far that Langton has had to endure has been in Berlin (37 degrees) and London (mid-30s) whilst the Med (admittedly earlier in the year), struggled to make it past 25.
I’m sure that 500yrs ago we would have been prophesying the second coming and burning witches in response to such freakish weather and, fairly predictably, there is a bit of that going on re global warming (now renamed climate change) at the moment. Plus ca change, plus c’est la meme chose.
Anyway, a joke for you.
Jobbing clown makes a living. Heavy makeup, red nose, the works. Paints his toes red, white and blue to get a bit of a laugh but, one day, he decides to throw the rule book out of the window and he paints his toes black.
He gets unwell, does it again, same thing happens, and he goes to the doctor.
Well Bozo, says the doctor, I’ve seen this before. Sorry to tell you but you’re black-toes intolerant. On to the news:
PUBS & RESTAURANTS:
• The PMA has reported that 53% of UK adults stated that the pub was the location of preference for their leisure time, however, their survey also found that Brits have less spare time than ever before with just 10 hours a week.
• A pub landlord has refused to adopt the new marketing material for Bombardier beer after the brewer dropped any mention of the word ‘English’.
• The Conseil Interprofessionnel du Vin de Bordeaux has a landmark case in China against counterfeiters. The trade body which represents more than 7,000 producers in Bordeaux had claimed some Chinese wines had been produced bearing the fake labels of Bordeaux and Médoc.
• The Coca-Cola Company has announced that its Bottling Investments Group will taken over the management of its bottling operations in the Philippines.
• PepsiCo has bought Israeli carbonated water machine maker SodaStream in a deal worth $3.2bn, in keeping with the soft drinks giant’s strategy of focusing on healthier products. Outgoing CEO Indra Nooyi said: ‘PepsiCo and SodaStream are an inspired match. Daniel and his leadership team have built an extraordinary company that is offering consumers the ability to make great-tasting beverages while reducing the amount of waste generated. That focus is well-aligned with ‘performance with purpose’, our philosophy of making more nutritious products while limiting our environmental footprint.’
• Drivers and couriers who get their work from apps face a ‘heightened risk’ of collisions, according to research from University College London (UCL). Some 42% of ‘gig-economy’ respondents to a study reported vehicle damage because of a collision, often as a result of the time pressures they are put under as part of their jobs.
• Google is reportedly preparing its first bricks-and-mortar store close to its Chicago office.
• Shares in pork producers and breeders have fallen after an outbreak of African swine fever in a third region in China.
• Over 600 jobs are under threat at two House of Fraser warehouses, after the group stopped processing orders.
HOLIDAYS & LEISURE TRAVEL
• Hostelworld Group has reported H1 numbers down & cautioned that it has been impacted by competition and the hot weather in Europe. It says it has seen brand bookings up 6% during the period with group bookings growth of 2% (to 4.0m bookings).
• Hostelworld reports that a ‘deferral of revenue recognition [is] impacting reported earnings in 2018 as expected, but with no impact on cash receipts.’
• HSW reports its average commission rate increased to 15.3% (H1 2017: 14.2%) and says it is putting more money into technology development.
• HSW says net revenue ‘fell by 9% to €42.6m (H1 2017: €46.6m) as a result of the impact of deferred revenue.’
• Adjusted EBITDA is down 24% to €9.8m (H1 2017: €12.9m). It says ‘excluding the impact of deferred revenue, adjusted EBITDA would have increased 9% (€1.1m) to €14.1m, with margins maintained at 30%.’
• HSW is paying a H1 dividend of 4.8 Euro cents vs 5.1c last year. CEO Gary Morrison reports ‘overall, our first half results were in line with our expectations.’
• HSW CEO says ‘the market, particularly in Europe, is increasingly competitive. In addition the World Cup and the unusually hot weather in Europe have also led to a softness in bookings in the peak summer months of July and August. If these trends continue like for like, growth in Group bookings is likely to be flat for the full year given the expected declines in our supporting brands.’
• HSW says ‘weaker demand also leads to a natural reduction in variable marketing expenses. Combined, these actions will mitigate some of the softness in bookings at the EBITDA level. We continue to see strong underlying cash conversion.’
• Worldwide corporate travel spending rose almost 6% to $1.33 trillion in 2017 and is expected to grow more than 7% this year, per the Global Business Travel Association (GBTA). However, GBTA executive director Michael McCormick warned: ‘This pick-up in growth could signify an end to the ‘era of uncertainty’ in global business travel, but rising protectionism is coming at precisely the wrong time. The direction of trade policy is far and away the biggest wild card that could impact our forecast.’
• Accountancy firm Moore Stephens reports travel agency insolvencies down 30% in five years as internet disruption slows. The number of travel agency and tour operators going insolvent has fallen from 47 to 33 per annum due to Brits taking more holidays than at any time since 2011.
• Post Office Travel Money reports the holiday cost of living in Turkey down 50% following the collapse of the lira. Last August, £1 bought 4.3 lira compared to late last week when it bought 7.3 lira.
• The CAA’s latest UK Aviation Consumer Survey reports passenger satisfaction with flying down, with passengers singling out airport and airline response to disruptions and delays. Passenger satisfaction dropped to 83% this Spring compared to 90% a year earlier.
• Ola, an Indian ride-hailing app, has launched in the UK starting in Cardiff, Newport and the Vale of Glamorgan. The app will also be launching in Greater Manchester after obtaining licenses to operate in both areas.
• Krakow has become the favourite short-haul city break for British travelers, taking top spot from Amsterdam. The Capital of Lithuania, Vilnius has been ranked as the best value autumn/winter city break.
• Airport crime has doubled in two years, with a total 5,234 crimes reported in England and Wales in 2017.
• Sky has stated that it expects to pay advisers between £90-97m if Twenty-First Century Fox succeeds with its takeover of the group.
FINANCE & ECONOMICS:
• Sterling up at $1.2831 but down vs Euro at €1.1125
• Oil up 60c or so at $72.27
• UK 10yr gilt yield down 1bp at 1.23%
• World markets all up yesterday, Far East higher in Tuesday trade.
• Brexit etc.:
o Liam Fox is to say that the UK can be a ‘21st Century exporting superpower’. He wants to see the proportion of GDP represented by exports rise from 30% to 35%.
o The FSB has praised the aspiration but would like details and financial help.
o Around 45% of UK exports currently go to the EU. An additional amount is of products part produced here, part produced in the EU and ultimately exported to third party countries.
o Mr Fox, who is a medical doctor, was elected to parliament aged 25 and has not worked in industry or the private sector.
o Labour has said that the Tory export strategy is based on controversial arms sales.
o The CBI reports ‘we estimate that in every region of the country there are around 10% of businesses that could export, but don't, and we look forward to working alongside the Government to support and inspire them to seize the opportunity.’
PRIOR DAYS LATER TWEETS:
• CGA Tracker has restaurant sales down 4.8% in July (vs inflation of 2.3% & restaurant inflation of more than that). Blames heat, W Cup etc.
• CGA Tracker. Pubs +2.7% with wet led +6.6%. Restaurants very poor in the heat. RSM says is ‘painful on top of ongoing cost pressures’
• Upcoming Restaurant Group H1 will be interesting. July (dreadful across industry) is not in H1 but will come under ‘current trading’
• Sunday Times says ‘we are only at start of a wave of high-profile retail collapses’. Says physical retail ‘permanently less profitable’
• Times says Amazon is keen to buy some ex-Homebase stores as warehouses
START THE DAY WITH A SONG:
Yesterday’s song was ‘About Today’ by The National, today who sang:
I need you you you,
To see me through, babe
When the sun go down
Ain't nobody else around
RETAIL NEWS WITH NICK BUBB:
Game Digital: We haven’t heard from Game Digital for a while and we weren’t expecting to hear from them today, but a pre-close trading update for y/e July has been issued. The news is not that dramatic, although it is not particularly clear what the group is saying about the bottom-line outcome, given falling sales, falling gross margins and falling costs…What Game oddly call the “mint Retail” market has recovered by 6.2% in the UK in the last 6 months, but Game’s UK revenue has fallen by 3%, because of challenging conditions in the once highly profitable pre-owned games business. And although Game trumpet its collaboration with Sports Direct to open BELONG e-gaming arenas, only 1 has opened so far, in Westfield Stratford.
News Flow This Week: Things are very quiet this week, leading up to the Bank Holiday weekend, but the Sports Direct/House of Fraser situation will continue to fill some column inches in the newspapers (as will the silly CBI Distributive Trades survey for “August” on Thursday), whilst the carpet wholesaler Headlam announces its interim results tomorrow. The latest monthly Kantar and Nielsen grocery market share figures come out at 8am this morning (for the 4/12 weeks to Aug 11/12th).