Coffer Peach Tracker, JDW, Revolution, costs & other:

A DAY IN THE LIFE:

For some reason I have the theme tune from the film Frozen going around and around in my head.

And that’s not a particularly pleasant place to be because, with some American female squawking at me and advising me to ‘let it go’ I can’t get on with my work.

Or with my walk for that matter because, having been presented with a Fitbit over Xmas, I’m now been bullied by the thing into getting off my backside every now and again just to keep it happy.

I think I’ll have to forget about it, take it to the swimming baths with me. That should show it who’s boss. On to the news:

COFFER PEACH TRACKER – DECEMBER 2016:

• Tracker shows LfL sales +2.2% nationally for 6wk Xmas period. London had best of it at +5.1% w. regions on +1.2%. Inflation is now 1.6%.

• Tracker: Despite it feeling a little ‘wet-led’, pubs & restaurants performed in line at +2.2% and +2.1% respectively

• Tracker: Shows a decent Xmas on top of the same in 2015 at +2.2% following on from +1.8%. Inflation was lower in 2015 as well. Peach’s Peter Martin reports ‘with all the uncertainty surrounding Brexit and growing cost concerns for the industry around staffing and business rates, these results will come as a welcome relief for operating companies.’ He says ‘they also show that people are still willing and able to go out to eat and drink and enjoy themselves given the right offer and opportunity.’

• Tracker’s Peter Martin comments ‘one interesting point is that, just like last year, Christmas started late with the increase in spending only beginning in the week leading up to Christmas Day itself, and continuing over New Year. For the first three weeks of the festive period, when most people were still at work, like-for-like sales were either flat or slightly down on the same weeks in 2015.’

• Tracker: Total sales over Xmas 6wks +5.4% (LfL +2.2%) showing material impact of new capacity.

• Tracker: Mark Sheehan of Coffer Corporate Leisure comments ‘these numbers are reflective of the mood among pub and restaurant operators where optimism is returning. There are going to be cost increases during 2017 and operators need to see sales growth to stand still. After a relatively tough autumn we believe consumers are now returning with more confidence.’

JD WETHERSPOON – Q2 ANALYSTS’ CONFERENCE CALL:

• Following its Q2 update earlier today, JD Wetherspoon hosted a conference call for analysts and our comments thereon are set out below:

• Trading:

• JD Wetherspoon has had a ‘reasonable’ H1 but expects trading in H2 to be tougher

• If Christmas was good, what were the shoulder periods like? Group won’t split the LfLs into the component parts. Overall, says that trading ‘was consistent over the period’

• How come the margin is moving around quite so much? Q2 is up against particularly low margins at this point last year. No major changes to the way the group is operating

• Group is ‘working hard to maintain momentum’ but it can see LfL sales tailing off. This hasn’t happened to date

• JDW will not split out LfLs into price & volume

• H2: Say it’s just not possible to stay at >3% LfL sales when inflation is c1% (at least at present). Also comps are tougher

• Food & drink inflation not risen sharply recently. Prices to customers ‘are likely to rise’

• Forecasts for the year to July 17 have risen ‘from c£82m to c£85m’

• Balance Sheet, Debt & Outlook:

• JDW not yet disclosing the proceeds for the 21 pubs that it has sold. As yet, the disposal has only had a ‘very modest’ impact on trading

• The 2 pubs opened have cost c£5m to £6m. Will update on the pipeline at H1 numbers.

• FY debt will be up £50m in H1. Mostly due to freehold reversions. Won’t give the numbers at this stage. Guidance on debt earlier had been ‘flat’ – so a lot has happened recently

• Re buybacks. Last year £54m & this year ‘broadly in line with that’

• Langton View: JD Wetherspoon has elaborated (a little bit) on its earlier comments.

• The outlook for profits is ‘a bit better’ on top of earlier comments that ‘it was a bit better’.

• The group has maintained good LfLs a little longer than it had anticipated and this will feed through to FY17 numbers.

• Forecasts for the current year will edge up from c£82m to c£85m.

• The group reiterates, however, that it expects H2 trading to be more challenging.

• Overall, JDW is a great company and it is doing pretty much everything right. However, its shares may be broadly up with events.

• The company, should prices to the consumer rise, will be a major beneficiary given its historically low margins. A few pence on a pint mean more to JDW than they do to most other operators.

PUNCH TAVERNS’ BID DOCUMENTATION:

• Punch Taverns’ Scheme Document has been published. Meeting on 10 Feb, any rival bids to be flushed out by 3 Feb.

• Punch Scheme Doc confirms irrevocable agreements to agree to bid only hold in the absence of a 200p rival offer

• Punch Scheme Doc confirms there is no Break Fee. A charge will not be levied by Patron & Heineken in the event of a rival bid. This may have been expected in light of the expense that the (current) bidders will presently be incurring.

• Punch Scheme Doc. Bidders say premium is 40% but Punch’s share price has arguably been adrift from reality for some time. Tangible NAV is 285p & it would take a determined buyer a premium to that figure and 10yrs to 20yrs to put together a portfolio of this quality.

• Next developments. Play the clock down till week commencing 30 Jan. Then a rival bid either will or will not emerge late that week.

PUB, RESTAURANT & DRINKS PRODUCERS:

• Revolution Bars updates on H1 trading, says trading for the 26wks to 31 Dec was ‘in line with the Board’s expectations, reflecting a further period of growth in the number of sites, revenue and profit.’

• Revolution says LfL sales in H1 to end-Dec rose by 2% with overall sales +12.7%. The group is currently in the process of opening its 5th Revolución de Cuba bar, this one located in Southend on Sea, which is due to open in H2. CEO Mark McQuater reports ‘I am delighted to report another period of good progress for the Group.’ He says ‘we had a strong festive trading period across our existing estate and all of our new sites were open for Christmas and New Year where initial trading was encouraging, with Group sales increasing 16.2% over the five week trading period.’ Mr McQuater concludes ‘we continue to develop our pipeline and are currently on site at our fifth development in FY17 which will take the estate to 67 sites. We remain positive for the future prospects of the Group.’

• Greene King Tracker says ‘British households enjoyed Eating and Drinking Out this Christmas, as leisure spend in these areas rose 2% compared to the previous year.’ It goes on to say ‘in contrast, Other Leisure, which includes cinema and gym memberships, fell sharply in December, down 20% year-on-year, continuing the downward spiral pattern seen throughout 2016.’ Greene King’s Kenny Skelton comments ‘the Christmas period is a clear demonstration of consumer priorities as British households increased spending on Eating and Drinking Out at the expense of Other Leisure. These are increasingly ‘protected’ areas of spend with people unwilling to cut back on what they now consider essential leisure spending.’

• Price inflation on food and non-alcoholic drinks, as measured by FPI, fell slightly to +1.8% but was ahead of CPI (+1.1%) for December. There is an unsettled outlook for the next few months with volatility in both salad and fruit items imported from Spain and Italy, and salmon, cream and butter prices have all risen.

• Christopher Clare, Head of Consulting & Insight at Prestige Purchasing notes that ‘the level of volatility currently being experienced is significant, driven by a perfect storm of key commodity challenges and political and economic uncertainty’.  He continues, ‘the foodservice market typically reacts more quickly to the former given the market dynamics where the large number of individual customers have less influence on price changes being passed on.’

• The ALMR has called for clarity following the Prime Minister’s Brexit speech and is stressing the need to ensure stability for businesses. ALMR Chief Executive Kate Nicholls said: ‘The Prime Minister has repeatedly stated that securing the right to remain for EU workers is vital and this must remain a priority for our sector. We are still looking to the Government for concrete action rather than unconvincing reassurances and securing the right to remain for our enormously valuable team members is crucial to the ongoing success of the UK’s hospitality sector.’

• The monthly Markit Household Finance Index fell to 43.9 from 45.2 in December, with price pressures playing a ‘key role’ in stifling household morale. Consumer prices rose in December at the fastest pace since mid-2014, according to official data released on Tuesday. Households’ perceptions of inflation rose to their highest levels in three years and their appetite for major purchases declined to the lowest level since the start of 2015. Meanwhile, 62% of households expected the Bank of England to raise interest rates in the next 12 months — the highest proportion for a year and up from 56% in December.

• Over forty small and medium-sized breweries have launched a coalition aimed at improving Small Brewer Relief (SBR). The scheme, which provides a discount on beer duty to small brewers, was introduced back in 2002 and then extended in 2004 but has not been reviewed since. James Morgan, CEO of Truman’s Beer, said: ‘Small Brewers Relief was intended to encourage brewers to grow and invest in long term sustainable businesses (and has played an important part in the growth many have enjoyed including Truman’s), however, as with all tax reliefs there have been unintended consequences. Our industry will only thrive and be truly sustainable if any government support encourages long term investment in growth by brewers of all sizes in a more equitable fashion.”

• SIBA, the Society of Independent Brewers, has voiced concerns about calls from the Small Brewers’ Duty Reform Coalition for a review of SBR. Mike Benner, SIBA Managing Director said, ‘In today’s extremely competitive beer market ensuring access to market for Britain’s small brewers is absolutely central to the future of the industry. We welcome the spirit of cooperation voiced by the Coalition and we wish to engage constructively with all stakeholders to discuss if the current scheme could be improved, but we are not in favour of a Government-led review which would bring unnecessary uncertainty to small brewers.’

• The Fulham Shore chairman David Page’s new private investment vehicle, Putney Beach has raised over £2m to help launch new concept FIXED and for future acquisitions. Speaking to MCA, Page said that FIXED, which features fixed-price menu comprising steak, chicken, crab and burgers, was trading well across its current two sites in Northcote Road, Battersea and in Boxpark Croydon.

• Champagne shipped a total of 306.6 million bottles in 2016, down 2% year-on-year, per estimates released by the Comité Champagne.

• Online retailer Virgin Wines had its biggest ever Christmas last month, as sales rose by 15.4% in the nine weeks to 30 December to £12.6m and profit jumped 35% to £1.3m. Much of the growth was driven by increased membership, Prosecco sales, and a stronger B2B business.

• Clive Watson’s City Pub Company plans to reach 35 sites by September as part of its intention to list on AIM by the end of the year, per MCA.

• McDonald’s Corp is introducing two new sizes of its Big Mac burger in what is its first new product in 18 months. McDonald’s hopes the Big Mac promotion can be a shot in the arm early this year as it seeks to regain some momentum it has lost in recent months. Same-store sales in the U.S. slowed to 1.3% in the third quarter, and some analysts expect that number to turn negative in the fourth quarter as the chain laps a strong fourth quarter of 2015.

• Chuck E Cheese and Peter Piper Pizza owner CEC Entertainment Inc is in talks for an initial public offering in the second half of 2017. Irving, Texas-based CEC, which was taken private in 2014 through a $1.3bn deal with Apollo Global Management LLC, has talked with banks but not yet hired underwriters, and sources say the IPO could value it at more than $1bn.

• Food company Mondelez has sold Vegemite back into Australian ownership via a transaction with Bega Cheese

PREMIER FOODS’ Q3 TRADING UPDATE:

• Premier Foods’ shares yesterday fell by 11% on the news that higher costs and sluggish sales would depress operating profits by c10%

• Premier Foods Facts: Sterling has fallen & it is having to cope with the move from deflation to inflation.

• Premier Foods Bear Case: Co seems to regularly hit problems, its branded sales are sluggish & it still has a large pension fund & considerable debt

• Premier Foods Bull Case: Debt is still falling, group is profitable, the faster growth of unbranded is due to a) the incorporation of Knighton and b) higher sales to hard discounters and International is growing strongly.

• Premier Foods: Customers are now ‘aligned’, price rises will happen, pack sizes are being adjusted and £10m of costs will be saved in the year to March 2018 with a similar amount to follow the year after. Capex and marketing spend is higher & the Nissin products should hit the shelves this quarter.

• Premier Foods: The problems caused by the shift to inflation should be transitory but the group remains open to the allegation that it (at least appears to be) something of a problem magnet. Overall, we believe that the group will prosper.

• Premier Foods Press: Most consider the group’s problems to be external. The FT quotes shareholder Paulson & Co as calling for the group to be sold.

LEISURE TRAVEL & HOTELS:

• Operators are implementing contingency plans to fly thousands of British holidaymakers home from The Gambia amid a ‘deteriorating political situation and potential military intervention’. The country had presidential elections on 1 December.

FINANCE & MARKETS:

• UK unemployment fell 52k to 1.6m in the 3mths to November per the ONS. The rate is unchanged at an 11yr low of 4.8%,

• ONS reports wage growth picked up to 2.7%. The ONS reports ‘the rate at which pay is increasing continues to pick up in cash terms, though it remains moderate.’

• Brexit: Theresa May’s speech, though fulsome and direct, sharpened the divide across a split nation.

o Boris has warned against WWII Great Escape ‘punishment beatings’. No10 has said he is not accusing anyone of being a Nazi.

o Why is Boris’s name, he’s our Foreign Secretary for Heaven’s sake, so often linked to the words ‘buffoon’, ‘oaf’ and ‘apologise’? Less often with the words ‘diplomatic’, ‘sensitive’ or ‘thoughtful’.

o UK press split down predictable lines, European press focusing on Little Britain, cakes and eating them and widely airing the word ‘isolation’.

o UKIP says we’re going global & Donald Trump supports us. How did we get here?

o Daily Mash, fountain of all knowledge, asks ‘no, really, what’s the plan?’ It says ‘economists believe Britain now needs a strategy that is not insane’.

o HSBC says it may move 1,000 staff to Europe. UBS has alighted on roughly the same number, 1,000. Represents c20% of UK staff.

• US Fed says a pickup in manufacturing & “widespread” labour shortages suggest that the US economy is in good health. The latest Beige Book says ‘labour markets were reported to be tight or tightening…District reports cited widespread difficulties in finding workers for skilled positions. Many districts…expect labour markets to continue to tighten in 2017, with wage pressures likely to rise and the pace of hiring to hold steady or increase.’ Markets are currently expecting three interest rate rises this year.

• World markets: UK up yesterday & Europe mostly higher. US up & Asia mostly higher in Thursday trade

• Brent down at around $54.35 per barrel

• Sterling down vs dollar at $1.2273 to the pound. Little changed vs Euro at 115.4c.

• UK 10yr bond yield up from 1.31% to 1.34% with 30yr treasuries in the US yielding 3.00% (Wednesday was 2.93%)

TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS:

• Tracker shows LfL sales +2.2% nationally for 6wk Xmas period. London had best of it at +5.1% w. regions on +1.2%. Inflation is now 1.6%.

• Tracker: Despite it feeling a little ‘wet-led’, pubs & restaurants performed in line at +2.2% and +2.1% respectively

• Tracker: Shows a decent Xmas on top of the same in 2015 at +2.2% following on from +1.8%. Inflation was lower in 2015 as well.

• Tracker: Total sales over Xmas 6wks +5.4% (LfL +2.2%) showing material impact of new capacity.

• JDW is ‘working hard to maintain momentum’ but it can see LfL sales tailing off. This hasn’t happened to date

• Punch Taverns’ Scheme Document has been published. Meeting on 10 Feb, any rival bids to be flushed out by 3 Feb.

• Punch Scheme Doc confirms irrevocable agreements to agree to bid only hold in the absence of a 200p rival offer

• Punch Scheme Doc confirms there is no Break Fee. A charge will not be levied by Patron & Heineken in the event of a rival bid

• Revolution Bars updates on H1 trading, says trading for the 26wks to 31 Dec was ‘in line with the Board’s expectations’

• Revolution says LfL sales in H1 to end-Dec rose by 2% with overall sales +12.7%

• Greene King Tracker says ‘British households enjoyed Eating and Drinking Out this Christmas

• The Fulham Shore chairman David Page’s new private investment vehicle, Putney Beach has raised over £2m to help launch new concept FIXED

• Clive Watson’s City Pub Company plans to reach 35 sites by September as part of its intention to list on AIM by the end of the year

• Premier Foods’ shares yesterday fell by 11% on the news that higher costs and sluggish sales would depress operating profits by c10%

• Premier Foods Facts: Sterling has fallen & it is having to cope with the move from deflation to inflation. Group hopes impact is transitory

• UK unemployment fell 52k to 1.6m in the 3mths to November per the ONS. The rate is unchanged at an 11yr low of 4.8%. Wages +2.7%

• UK press split down predictable lines re Brexit. European press focusing on Little Britain & isolation. Boris making Nazi jokes

• Later tweets: Cost increases. CPI m-o-m in December was +0.5%. That’s quite a move. More will feed through. Real wage squeeze on the cards

• Premier Foods today gives us a ‘stuck in the middle’ comment today. Squashed between global commodities on the one side & Tesco on the other

• Game Digital tells us UK sales down 18.3%. Trading conditions ‘remain tough’. Sad but if the co didn’t exist today, would you create it??

• JDW says Brexit could present a windfall for UK. But H2 LfLs will be lower. And costs will rise. Somehow, earnings forecasts are rising

RETAIL NEWS WITH NICK BUBB:

• Halfords: The Q3 today covers the 15 weeks to Jan 13th and it shows that the wheels are not coming off at Halfords, quite the reverse, as Retail LFL sales were up by a healthy 5.0% and “promotional activity was as planned and similar year-on-year”, with the gross margin in line with expectations. SO Halfords say that “there is no change to our expectation of group PBT for the current financial year, which is in line with market consensus. We have developed detailed plans in response to the increase in costs from adverse FX movement and we are confident that we will be able to fully mitigate the impact over time”. On top of that encouraging stuff, Halfords has announced an £8m minority investment in TyresOnTheDrive.com and a 10p special dividend. Plenty there for the analysts to chew over ahead of the 9am conf call.

• Pets At Home: Ahead of today’s Q3, the City was not particularly hopeful about Pets and so the disappointing 0.5% drop in Merchandise LFL sales (in the 12 weeks to Jan 5th) will not come as a huge surprise. CEO Ian Kellett says “In Merchandise, whilst overall sales were softer than anticipated, Online grew strongly, reflecting the momentum gained from our investments in seamless shopping. We saw a good performance in our Christmas range”. Fortunately, Services revenue grew well and cost control was tight, so Pets say that “With a quarter to go, our profit outlook for the year remains in line with expectations”. Conf call 8am. 

• News Flow This Week: Tomorrow brings the Bonmarche update and the ONS Retail Sales for December…and, over in the US, the much-dreaded inauguration of President Trump…