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
Intercon, CAKE, Gail’s, BrewDog, Accor, Rank etc.:
A DAY IN THE LIFE:
Bit busy on other things this morning.
PATISSERIE HOLDINGS, BREAD, ETC.:
• No further announcements from CAKE yesterday.
• The MCA has commented on the pulled sale of Bread Holdings suggesting it could be that ‘the latest delay is not due to Brexit, but more to do with the current problems faced by Patisserie Holdings and that Gail’s chances of a float could be hampered by association.’
• The MCA is perhaps suggesting that trust is in short supply. This will be impacted further when we know whether or not the CAKE accounting mis-statements pre-dated the IPO. If they did, then there will be some serious questions asked as to the veracity of the documents that accompanied the float.
• A look at the accounts of Bread (parent of Gail’s), where Luke-Johnson-owned Risk Capital and associated companies own 51% of the shares by value, throws up some interesting facts.
• This article continues at some length but is being sent only to clients.
PUBS & RESTAURANTS:
• UKHospitality fears that the sector could be facing £113m in business rates increases next April, following the publication of September inflation figures. UKH chief executive Kate Nicholls said: ‘These inflation figures are used to set the annual increase in business rates, and our analysis shows that thousands of businesses will be hit by rises totalling a £113m bombshell’.
• Brigid Simmonds, CEO of the Scottish Beer & Pub Association has commented on the consultation by the City of Edinburgh Council for a ‘tourist tax’: ‘Any introduction of a ‘Tourism Tax’ in Edinburgh will see tourists having less money to spend in the city and only add to the challenges. Any introduction must therefore be accompanied by a reduction in tax elsewhere. The UK ranks almost bottom on any list on price competitiveness for tourists and unlike most countries in the EU does not offer reduced VAT on either accommodation or food’.
• The Morning Advertiser has reported that as many as 29 pubs are closing every week, with many landlords turning to crowdfunding to keep their boozer’s open.
• Even though the market as a whole is suffering, branded restaurants are still growing their market share, the MCA has reported. Larger, more established brands are seeing revenue growth with the likes of Franco Manca (23%), Nando’s (8%) and Côte (8%). MCA director of insight Steve Gotham stated: ‘Competition across branded restaurants is fierce and there have been a number of casualties in the last year. However, specialist concepts among small and medium brands are driving growth for the sector’.
• Starbucks has extended its licensing agreement with vending services supplier Selecta. Pieter Boven, director of strategic partnerships at Starbucks EMEA said: ‘The partnership between Starbucks and Selecta has given us the ability to deliver great Starbucks coffee to our customers through a premium self-serve solution, adhering to the highest quality standards’.
• Boparan restaurant Group has announced its intention for a first regional opening for its Slim Chickens brand, the MCA has reported.
• Castle Rock Brewery has created a Nottinghamian Celebration Ale named ‘Sir Peter Mansfield’ in partnership with Matt Davies, a student at the University of Nottingham.
• Bingo Academy relocates to The Kitty Hawk near Liverpool St, offering luxury bingo out of the bar’s large basement.
• Masons Yorkshire Gin, a craft gin distillery, has worked out that Brits have their first alcoholic drink on Christmas day at 11.54am. Londoners are first the the sauce, starting at 11.30am on average. More than a quarter of respondents started with a drink of Prosecco, Champagne or Bucks Fizz.
• Prosecco producers plan to hit one billion bottles in the near future, with the 2018 harvest expected to yield around 600m bottles.
• A case of ‘mad cow disease’ has been identified on a farm in Scotland.
• BrewDog has opened its 70th site worldwide in Canary Wharf.
HOLIDAYS & LEISURE TRAVEL:
• Intercontinental has reported Q3 net system size growth up 4.6%, with RevPAR up 2.7%. Keith Barr, CEO of the group stated: ‘We delivered a good third quarter performance. Our strategic focus on improving our rooms growth yielded strong results, driving net system size up 5.1% and our best performance for signings and openings in a decade. Global RevPAR grew 1.0%, with performance in the US impacted by strong prior year demand from the 2017 hurricanes’.
• French hospitality giant AccorHotels has announced that Q3 revenue has risen 22% to €1,033 million climbing 7.6% on last year. Sébastien Bazin, Chairman and Chief Executive Officer of AccorHotels, said: ‘AccorHotels turned in a solid performance in the third quarter, reflecting positive operating trends in the majority of our markets as well as the Group’s strong growth as a result of acquisitions made since the start of the year’.
• The former Monarch Airlines owner, Greybull Capital, will become the majority shareholder in Monarch Aircraft Engineering.
• US hotels have seen occupancy fall 0.7% to 71.9% during the week of 7-13 Oct, with ADR climbing 1.6% to $132.76 and RevPAR up 0.8% to $95.42.
• The holiday park operator, Darwin Escapes, is to open a new multi-million-pound luxury resort and spa in Norfolk.
• A Travelodge survey finds that nearly half of UK workers are regularly travelling for business. The results of the survey show Brits prefer face-to-face meetings, leading them to travel for business three days a week on average.
• Gatwick could spend up to £500m moving its emergency runway 12 metres to bring it into full passenger use. A fully operational second runway could allow the airport to handle up to 50,000 extra flights a year.
• Games Workshop has seen share decline more than 8% after the company warned that it faces ‘uncertainties in the trading periods ahead’. The board declared that despite currently trading well, it was aware that the 2018/19 financial year could be more difficult.
• Quarterly sales from Rank have vallen 5%. The company was hit as high rollers spent less at its Grosvenor Casinos. Mecca Bingo attendances fell.
• Rank’s LfL Grosvenor revenues were down 7.2%. Mecca fell 5%.
• Tesla acquires land for Shanghai factory, spending $140m on 860,000 sq m. Tesla expects the new site to produce its first vehicles in three years.
FINANCE & ECONOMICS:
• The Bank of England has cautioned that risky corporate debt could become an issue in the future. The MPC is ‘concerned’.
• China reported growth in Q3 of ‘only’ 6.5%, its lowest rate in nearly 10yrs.
• UK retail sales fell sharply in September after a strong summer per the ONS.
• Sterling down at $1.302 and €1.136
• Oil down at $79.53
• UK 10yr gilt yield down at 1.54%
• World markets all down yesterday. Far East mixed today.
• Brexit etc.:
o Prospect of extending the leaving period angers everyone & could weigh further on business investment & consumer confidence.
o Mrs May says ‘hard work’ to be done. But facts are stubborn things & nothing has changed re Ireland in the last 27mths.
PRIOR DAY LATER TWEETS:
• Later tweets: Telegraph says Luke Johnson ‘is facing yet another headache’ in that the sale of Gail’s Artisan Bakery is being ‘delayed by Brexit’.
• The Daily Mail reports that Patisserie Holdings may be investigated by the House of Commons Business Select Committee
• Games Workshop shares down 11% on confusing trading update. Sees trading ‘continued well’ but ‘uncertainties’ ahead.
• Retail sales down 0.8% m-o-m in September per ONS. Sees ‘stark slowdown in food sales’ after ‘a bumper summer’.
START THE DAY WITH A SONG:
Yesterday’s song was ‘Don’t look back into the Sun’ by the Libertines, but today who sang:
Now I'm ready to close my eyes,
And now I'm ready to close my mind
And now I'm ready to feel your hand
And lose my heart on the burning sands
RETAIL NEWS WITH NICK BUBB:
Pendragon: The UK’s biggest car dealer Pendragon (aka Stratstone and Evans Halshaw) is due to give a detailed Q3 update on Friday next week, but ahead of that it has warned today that the introduction of Worldwide Harmonised Light Vehicle Test Procedure ("WLTP") is causing further disruption in new car sales, with October showing a similar trend so far to the 20% fall in September…It has also warned, a little oddly, of increased costs from the investment in “used car factories” and as a result it has flagged that underlying profit before tax for 2018 is expected to be only £50m. No comparison is given, but it’s safe to assume that 2017 profits were a lot higher…
Planet ONS Watch: We flagged yesterday that, in the real world, weak Clothing and Food sales held back overall Retail Sales last month, as per the BRC-KPMG Retail Sales figures for September (the 5 weeks to Sept 29th). But “seasonally adjusted” life wasn’t too bad on that bizarre parallel world, the Planet ONS (aka the Office of National Statistics), via yesterday’s official Retail Sales figures for September…City economists were disappointed by the 0.8% fall in month-on-month seasonally adjusted sales volume (even though year-on-year volume growth was still 3.0%), but we focused, as usual, on the year-on-year non-seasonally adjusted sales value figures and the split between Large and Small Businesses. Overall Retail Sales (ex-petrol) were up by a solid 4.2% (after 5.0% growth in August), but the ONS reported only 3.1% sales growth for Large Businesses, versus 7.9% growth for Small Businesses…Unaccountably, the ONS yet again did not think this divergence worthy of any comment, preferring to focus instead on supposedly strong Jewellery sales, but, to be fair, it did highlight a marked slowdown in Food sales growth last month and weaker Online/Non-Store sales growth (as hit by a slump in the Small Retailer Non-Store category). We await, as ever, the monthly verdict of the Retail Sales experts, Retail Economics, next week.
Trade Press (1): The front page of Retail Week magazine today is a graphic about “Retail's Brexit headache”, to flag up the main feature on the key Brexit risks that retailers must address. RW also have features on the Warehouse Wage War (“How will rivals respond to Amazon's pay hike?”), Zalando (”The etailer that aims to be an operating system for fashion”) and Beefing Up M&S Food (“Retailer's new dream team hopes to revive its grocery division”, quoting our view that competition in premium food is stronger than ever).In his column, the Editor flags that Tesco boss Dave Lewis was on the nail when he called for radical change to the Business Rates regime and thunders “Follow Lewis’ lead and pressure MPs on rates”.
Trade Press (2): In Drapers magazine the Editor thunders in her column that “Thread has menswear etailing all sewn up”, noting that the Thread menswear business has received more funding. In terms of News stories, Drapers focus on the news that the Oasis and Warehouse Group is promoting COO Hash Ladha to take over as CEO from Liz Evans (who is moving on to run Fat Face) and that Coast became the latest casualty of the current tough trading climate last week, as it was sold to former Aurora stablemate Karen Millen through a pre-pack administration. And there is a feature interview with Ulric Jerome, the French tech entrepreneur who is now boss of the luxury website Matchesfashion.
BDO High Street Sales Tracker: We flagged on Wednesday that Home sales at John Lewis continued to struggle last week, but today’s BDO High Street Sales Tracker for medium-sized Non-Food chains for last week, w/e Sunday Oct 14th, highlights that their Homeware sales were flat (including Online). BDO Fashion sales were marginally down last week, however, and Total sales were down by 2.2% (3.9% down in terms of Store LFL sales and only up 5.4% Online).
News Flow Next Week: Things are quieter next week, with the Debenhams finals on Thursday the highlight, but the Travis Perkins (Wickes) Q3 trading update on Tuesday will provide an insight into the state of mind of “white van man” and the Pendragon Q3 update on Friday will talk about sales of vans and cars….