RTN & cost of expansion, CAKE, gig economy, wages…

A DAY IN THE LIFE:

Should we be sparing a bit of thought for all the consultants out there?

Those no-doubt hard-working men & women who must package up a company’s pre-existing thoughts and re-market them in such a way that they involve an expensive restructuring plan or corporate transaction for which they get paid.

Or maybe not. Maybe we should watch House of Lies instead and take on board the thought that, if you’re a thousand miles and five years from the consequences of your actions, you might recommend all sorts of wild and wacky ideas which, at least until the tinsel falls off, look as though they could enhance shareholder value.

Or whatever. On to the news:

PUBS & RESTAURANTS:

• Restaurant Group pressing on with £4m per leasehold restaurant acquisition of Wagamama. Shareholders get their say on 28 November. Fees for advisors, underwriters etc. will run into the tens of millions.

• LDC points out that closure rate on High Street up 16.9%. Units now becoming available at little or no cost. Rents under downward pressure. Now, perhaps, could be the time to build a restaurant chain from scratch.

• No premiums, no goodwill, perhaps some F&E for free, maybe a capital contribution from landlords, rent free periods, sweetened terms, break clauses, no ‘upward-only’ clause etc.

• But that sounds like hard work. Better fix the problem, like, yesterday.

• Fulham Shore, meanwhile, preparing to open slightly more restaurants as property costs decline. The group said, in September last year, ‘given an increased availability of sites for sale due to the well-publicised pressures on other restaurant operators, we have decided to review our opening pipeline and to seek to improve terms with landlords of new sites we had already identified. This may delay some of our openings to later in this financial year.’

• Seems sensible to us. Openings at Fulham Shore may be a tad higher next year (and at lower prices).

• Patisserie Holdings. It’s all gone quiet over there. Group initially intended to relist its shares on 18 October. That didn’t happen. Co was able to say within a few hours of the irregularities being made public that it would generate sales of £120m and earn EBITDA of £12m for the year to Sept 2019. The investigators have been in for a month now and there have been no further comments.

• A Deliveroo commissioned report has found that riders see no merit in Government intervention in the gig economy. The report stated that riders are making an informed choice to avoid traditional employment and appreciate the flexibility of working for the likes of Deliveroo.

• The Chief Executive of the British Beer & Pub Association, Brigid Simmonds, has expressed her disappointment at the outcome of the low to no alcohol consultation outcome. Simmonds commented: ‘It is bitterly disappointing that the Department of Health has missed this opportunity to give consumers greater clarity when it comes to the labelling of low alcohol beers. Changing the current definition of ‘alcohol free’ beer from 0.05% ABV to 0.5% ABV – as we suggested during the consultation process – would have brought the UK in line with the rest of Europe and other global markets’.

• Starbucks Corp has reduced its corporate staff by 5%, following restructuring plans.

• A survey has discovered that more than half of global hospitality workers plan to leave their current position in the next six months.

• The boss of McDonald’s UK has stated that one of the biggest irritants is when people assume the fast food group only uses frozen food and microwaves, Paul Pomroy commented: ‘I get very irritated when people wrongly assume there’s a bank of microwaves back there. We cook proper food. We don’t take stuff out of a freezer and zap it. We have the shortest supply chain of any retailer’.

• Azzuri Group, parent company to Zizzi and Ask Italian has announced that sales have increased 8.5% to £279.8m, however, margins have come under pressure with underlying earnings falling 0.8% to £37m.

• Amber Taverns has revealed plans to roll out a new brand, following the success of its first iteration in Preston, the MCA has reported. Commenting on the new brand, managing director James Baer stated: ‘In design terms it is a bit edgier than a traditional pub or Hogarths , but still with the broad appeal to attract people who want a couple of pints and to enjoy the racing in the day and a younger cocktail crowd in the evening’.

• Having announced that CEO Scott Waddington was to step down earlier this year, SA Brain has reported to Companies’ House that Mr Waddington is no longer a director of the company.

HOLIDAYS & LEISURE TRAVEL:

• Research by Eurotunnel shows that two in five Britons believe they will need a visa to travel to the EU post-Brexit, with half thinking travel regulations will change. Other findings include; 41% are unsure if they will be able to drive in the EU on a UK driving licence after Brexit and 39% do not know if they will be covered by the European Health Insurance Card (EHIC) after the UK leaves.

• Sarah Bishop, deputy director of aviation policy at the Department for Transport, has warned a third runway at Heathrow will not be enough to cope with passenger demand for flights within the next 30 years. 

OTHER LEISURE:

• Jackpot Joy has updated on 9mth trading saying ‘we are pleased with the quarterly performance of JPJ Group given reported gaming revenue growth of 8% and an uplift in adjusted EBITDA of 13%.’

• JPJ says ‘revenues at Jackpotjoy UK have been impacted by the responsible gambling measures we have implemented and the closure of a number of high value accounts.’

• The company says ‘overall, we remain confident in our outlook for the full year. We continue to enjoy a strong association with Gamesys in a relationship which provides mutual benefits and we are also excited by the significant growth opportunities that exist in both existing and new markets, where we are well-placed to take advantage of this promising backdrop.’

• The English Football Association is planning to reduce the number of foreign players allowed in each Premier League team to 12 from 17.

• Theresa May is believed to be facing a mass resignation of ministerial aides if she refuses to speed up the crackdown on fixed-odds betting terminals. The government recently delayed its plans to reduce the machines maximum bet from £100 to £2.

• A new £80m programme will create creative industry clusters in the eight cities of Bristol, Leeds, London, York, Cardiff, Belfast, Dundee and Edinburgh. Aardman, Burberry, Sony and the British Fashion Company are some of the brands involved in the programme. 

• Festicket, a music festival experience portal, secures $10.5m in Series D funding led by venture capital firm Beringea. Festicket’s two-sided marketplace taps into a network of over 4,000 accommodation and travel suppliers, allowing customers to book tickets to more than 1,200 music festivals.

• Hollywood Bowl completes a £450k rebrand of Bowlplex in Bristol, Longwell Green, with CEO Steve Burns saying ‘The rebranding…marks the eighth investment project of 2018 and completes our conversion of the Bowlplex estate into all-new Hollywood Bowls.’

FINANCE & ECONOMICS:

• Wages rose at their fastest rate in nearly 10yrs in the quarter to September reports the ONS. Basic wages were +3.2%.

• Unemployment rose by 21k in Q3. The unemployment rate rose to 4.1% from 4.0%. The total number of people employed rose by 23k to a new record of 32.4m.

• The ONS reports ‘the labour market is little changed on the previous three months, though still stronger than it was at this time last year. With faster wage growth and more subdued inflation, real earnings have picked up noticeably in the last few months.’

• Ex PM Gordon Brown says that a ‘myth of Dunkirk’ risks causing the UK to turn its back on international trade.

• Japan’s economy contracted by 1.2% in the quarter to September.

• Sterling up on EU deal hopes at $1.2984 and €1.15

• Oil down sharply at $65.09

• UK 10yr gilt yield up at 1.50%

• Brexit:

o PM to take Brexit agreement to Cabinet today. No10 said as recently as yesterday that a deal did not yet exist.

o Jo Johnson highlights that proposed deal is worse than the relationship that the UK currently has with the UK.

o Wheel turns full circle. Tory government takes us into Europe, fights about it for forty years & then takes us out. Jo Johnson refers to lingering impression of incompetence.

PRIOR DAY LATER TWEETS:

• Later tweets: Restaurant Group under pressure. Potential ‘elegant solution’ (debt, strategy, dividend) may be neither elegant nor a solution…?

• Transformative deals transform companies. But this may not always be for the better. Expensive acquisitions remain risky etc…

• Premier Foods. CEO to go, Ambrosia for sale, steady H1 numbers, debt coming down, could pay dividend March 2020…

• STR has reported strong October numbers for London’s hotel industry, with RevPAR climbing 13.4% to £142.73.

• B&M H1 numbers below expectations. Sales in July & August (in H2) were lower. Discounters feeling the pinch?

• Land Secs says value of its shopping centres fell by only 2.9% in 6mths to Sept. Really?

START THE DAY WITH A SONG:

Yesterday’s song was Rescue Me by Fontella Bass. Today who sang:

Tried to get your attention all night long,

Asked you once, I asked you twice, asked you four times

If you’d like to dance to that song

RETAIL NEWS WITH NICK BUBB:

John Lewis Trading Watch: As the shadow of “Black Friday” looms larger, John Lewis traded surprisingly badly last week, according to yesterday’s weekly sales overview from JLP. The w/e Nov 10th saw gross sales as much as 8.3% down (c10.5% down on a LFL basis, excluding new stores), with John Lewis blaming “unseasonably mild weather and the fact we were price matching a competitor this time last year”. Well, the weather wasn’t that mild last week, and the comps were weak…LFL sales were down 4% last week last year and there was no reference in the trading review a year ago of any Sale price matching going on, so the weakness this year is a little worrying…Fashion sales were down by 11.1% gross last week, Home sales were down by 11.2% gross and Electricals were down by 2.8% in gross terms. The last 15 weeks are now running 0.7% down gross (c3% down LFL), pulled back by a 4.8% drop in Home
sales.

Waitrose Watch: Over at Waitrose, things were a bit better last week, with gross sales up 0.8%, ex-petrol, in w/e Nov 10th (also c0.8% up LFL, as there is no net new space). The last 15 weeks are cumulatively running down by c0.3% gross (despite the strong start to August for Waitrose), with the “Home and General Merchandise” category running 3.7% down.

British Land: We flagged yesterday that this is a big week in the world of Shopping Centre landlords and Landsecs kicked things off yesterday by revealing that the value of their shopping centre assets had fallen by only c3% in the first half (even though the Times flagged yesterday that the CBRE valuation index of “prime” shopping centres had seen rental yields move out from 4.0% to 4.5% in the last five months, implying a c10% fall in values). Today it is the turn of British Land (which is a big player in supermarkets, retail parks and department stores, as well as the owner of Meadowhall and many smaller centres) to reveal its Sept 30th asset valuations. And the interim statement shows a 4.5% fall in its overall Retail valuations (with a 14bps yield shift) and also notes “the number of CVAs from operators with challenged models.  We have seen polarisation play out in the context
of CVAs with the best stores seeing little or no reduction in rent and this is reflected in our portfolio, where we have seen fewer closures than the market overall”.

Intu Properties: Ahead of tomorrow afternoon’s revised “PUSU” deadline for the John Whittaker consortium for its bid for the beleaguered Intu Properties, we had been wondering how the news from Landsecs and British Land would affect the valuation models for Intu and the answer is that the consortium want even more time to weigh things up…It has been announced by Intu this morning that the deadline has been pushed back a week (on top of the existing 2 week extension): “Good progress has been made”, but the Consortium want another week “to enable continued discussions”.

Grocery Market Share Watch: We flagged yesterday that the latest Nielsen grocery sales figures (for the 4 weeks to Nov 3rd) showed that overall supermarket industry sales value growth slowed to +1.5%. The rival Kantar survey reported slightly better 1.7% growth for a similar 4 week period (to Nov 4th), but on a pure Grocery basis (ex-Non Food) overall sales growth was 2.1%, driven by combined Aldi/Lidl growth of 11.8%. Asda was up by 2.9% gross, Morrisons was up by 0.6% and Tesco was up by 0.2%, but Sainsbury was only flat and M&S Food was as much as 3.3% down…

News Flow This Week: Tomorrow brings the Card Factory Q3 update and the ONS Retail Sales figures for October, as well as the Asda/Walmart Q3 results.