Langton Capital – 2015-08-17 – Strada, sugar, Sportech, Greece, oil prices & other:
A Day in the Life:
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So now we have deer in our garden and that sounds lovely, doesn’t it?
But the sizeable beast, red deer are the world’s 4th largest deer behind only moose, elk & sambar deer and larger than reindeer at around 25 stones for an adult male, tend to trample fences, flowers and other flora and the leave material amounts of spoor lying around, which the dog can then roll in and/or eat after which he can rub what remains into the living room carpet.
And something, see above, seems to have stripped our runner bean plants of all their beans in addition to which, bark seems to be disappearing from various trees, our flower beds look as though the local hunt has ridden through them and our climbing honeysuckle isn’t climbing anymore because a couple of feed of it, head height to a deer, seem to have disappeared.
So deer, along with mosquitoes, slugs, snails, greenfly, blackfly, rabbits, rats, squirrels, foxes and magpies are going on my list. On to the news:
Pub, Restaurant & Drinks Producer News:
• M+C reports Strada is looking for new sites, quotes Hugh Osmond as saying it will have ‘trial of the new concept open shortly.’
• Jamie Oliver calls in Sunday Times for tax of 7p per can on fizzy drinks. Says he has lost two stones himself
• Tossed reported to have exceeded its £750k target for crowdfunding, has raised around £915k.
• Scotland’s Daily Record reports that the largest Indian restaurant chain north of the border, Ashoka, is up for sale
• Daily Telegraph quotes Peter Marks of Deltic (was Luminar) as saying dancing will never go out of fashion
• Average price of diesel now at lowest level since Jan 2010, helps put a little more money in consumers’ pockets
• Telegraph reports Morrison’s is in ‘advanced talks’ to to sell its convenience stores to Greybull Capital. The newspaper reports that Greybull, which saved Monarch from bankruptcy last year, will provide some ‘tens of millions of pounds’ in order to fund the takeover and provide working capital.
• Hackney Council is seeking independent food and leisure operators for its Dalston Western Curve regeneration project.
• Amber Taverns intends to grow its Hogarths ‘gin palace’ brand to seven units by the end of the year, M&C Allegra writes. Managing director James Baer told the publication that the company’s first outlet in Wales, the former Retros bar in Swansea, will be converted to the brand and opened in November.
• The Department of Health has clarified that there is ‘no plan’ to extend the public smoking ban to pub gardens. Speaking to the PMA, the department said there will not even be a consultation on the proposals recently set out by the Royal Society of Public Health.
• According to workforce development charity People 1st, 42% of chef vacancies are considered hard-to-fill. The charity estimates that another 11,000 chefs will be needed by 2020 to serve the industry’s needs.
• Daniel Clifford, chef-patron of two Michelin-starred Midsummer House, said that the industry would collapse if it didn’t confront the problem head on, warning: ‘If the industry doesn’t do something about it there’s going to be a demise of good places and we are going to lose the industry we love.’
• The Asia/Pacific hotel development pipeline rose 6.3% year-on-year in July thanks to strong growth in its upscale segment. Meanwhile the Caribbean/Mexico region saw a 3.5% increase in rooms under contract, while the Central/South America region posted a 7.9% rise.
• The Hilton London Euston hotel in Bloomsbury is set to undergo an £8m refurb that will add 17 rooms to the property.
• Ryanair CEO Michael O’Leary wants his airline’s new website to become the ‘Amazon of travel’. O’Leary said that the site would offer hotel rooms, price comparison and discounted concert tickets in an attempt to take share from third-party sites such as skyscanner, Booking.com and Google flights. Ryanair.com and its mobile app are currently being redeveloped.
• Flight specialist CheapOair.co.uk has seen demand for travel to Greek islands more than triple in the first seven months of the year. The firm describes a ‘mega surge’ in bookings, with flights from London to Rhodes and Corfu have seen the biggest moves with year-on-year increases of 567% and 270% respectively.
• Sportech reports Friday that it has received proposal from Contagious Gaming of Canada re a bid for the company. Sportech says ‘any recommended offer from Contagious Gaming, if made, would be at a premium to Sportech’s current share price of 62.63p as at 13 August 2015 and would comprise a majority in cash and the balance in new Contagious Gaming shares. In addition, Sportech shareholders would also receive approximately half of the net proceeds in the event of a successful VAT repayment claim* on the “Spot the Ball” game, with the balance going to the then enlarged Contagious Gaming group.’ It adds ‘the proposal is subject to due diligence, Contagious Gaming raising suitable financing and Contagious Gaming receiving a significant level of support for the proposal from Sportech shareholders’ and says ‘a further announcement will be made when
Finance & Markets:
• The International Monetary Fund has renewed its call on Eurozone ministers to offer Greek debt relief. IMF chief Christine Lagarde said the country, which will receive up to €86bn in loans in the next three years in exchange for tax rises and spending cuts, needs debt relief ‘well beyond what has been considered so far.’ Finance ministers are expected to consider the case for writing off a portion of Greek debt in the autumn.
• Angela Merkel has called upon the IMF to take part in the most recent bailout for Greece. Tells ZDF ‘Mrs. Lagarde, the chief of the IMF, made very clear that if these conditions are met, then she will recommend to the IMF board that the IMF takes part in the programme from October. I have no doubts that what Mrs. Lagarde said will become reality.’
• World markets: UK mixed Friday, Europe lower, US up and Far East down in Monday trading
• Oil price more firmly below $50, trading off half a buck or so at around $48.50 per barrel
• Grant Thornton/ICAEW business confidence survey suggests that the ‘decisive general election result provided businesses with certainty for the year ahead.’ It says ‘confidence is nonetheless still well below the all-time high seen a year ago, and the latest results suggest that chronic skills shortages and a fall in investment expectations are fostering increased uncertainty in the medium term.’
• Japan’s economy shrank in Q2 by 0.4% against Q1. Sluggish exports + lower consumer spending were to blame
• MPC member Kristin Forbes has warned that waiting ‘too long’ to raise interest rates could undermine UK economic recovery. She says the particular risk would be if ‘interest rates then need to be increased faster than the gradual path which we expect.’
Retail Roundup from Nick Bubb:
Nick Bubb – firstname.lastname@example.org
This was produced for distribution yesterday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:
Punch, Matthew Clark & Conviviality Retail:
• It looks as though Conviviality has exclusivity and that a deal should be done before 5 September.
• At least it would appear that that’s the plan.
• For Punch, the amount of cash released is dependent upon working capital shifts to or from the associated company.
• But whatever cash is freed up will be useful as it can be used to help drive what is, after all, the company’s core business of running pubs
• Notes below are from last month – but little has changed
These comments from 9 July. Little that we know of has changed:
Matthew Clark, Conviviality & Punch Taverns (re Punch etc.):
• Matthew Clark has been considered a somewhat peripheral asset for some time
• This may be more pronounced as/when Punch moves more of its units to a managed model
• Conviviality is interested. It has said so, its shares are suspended at its own request (which presumably it would not wish to be the case for an extended period) and, though its surprise moment will now not be possible, it may have been intending a Monday RNS.
• So what is it worth?
• Well, in addition to running the risk of being wrong within a few hours, that’s not altogether easy to say
• The Telegraph suggested a ‘£200m deal’ (Punch owns half) around two months ago
• The business was ‘valued at £120m’ in 2007 when Punch & Constellation Brands (now Accolade Wines) became 50% partners
• Last year, it had £810m in revenues & generated £19m in EBITDA. The post-tax contribution to Punch’s P&L amounted to £6.2m
• A £200m disposal would therefore represent around £100m to Punch, a prior year PER of effectively 16x
• Any deal at around these levels, we would suggest, would be good news for Punch
• The group has low-hanging fruit re capex and, as it evolves its business model probably to include managed and franchised units, the cash could be effectively put to work elsewhere in the business.
The price of milk (re consumers, licensed leisure retailers, Premier Foods etc.):
• ASDA is to pay farmers more for its milk.
• It may still sell it at whatever price it chooses. Consumers may not have to pay more – this is good news for the leisure wallet
• This may be a PR exercise as, with a freely traded commodity, neither ASDA nor any individual farmer is in a position to much influence the price
• Wholesale users of the commodity, such as Premier Foods, should not find costs rising. Milk is currently selling at multi-year lows and this is unlikely to change over the medium term.
Evolution in the hotel market:
• See earlier email re London slowdown.
• Premier Inns & others have pointed to this for some time.
• Interestingly conferences are holding up well. True they are a lagging indicator. They can be scheduled a year or more in advance and, when it comes the day to attend, potentially nobody will be interested
• Long stay and apartments appear to be more of a genuine growth market.
• But re-tooling a hotel to offer apartments is not as simple as a change for pubs, for example to serve coffee, might be.
• Will take time, money etc. and it would be best to be ahead of the curve
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Oil still firmly below $50 (Brent) and trading at 6.5yr lows (West Texas). Time to be buying forward, boys?
• Corn has lost all its recent gains. Just can’t get inflation to take off, it appears. Lumber back at lows. Have a look at Mondi.
• Good TUI bounce on relief that Tunisia can be quantified & that foreign leisure travel market is still alive & well.
• Anti-smoking campaign moves to outdoor areas, witch hunt finds its second wind. Alcohol may be next but, over time, pubs & restaurants will continue to feature other services, accommodation, food etc.
• So will Labour really elect Jeremy Corbyn? Hard to see. Anybody who ‘wants to go back to the 1970s’ must want their bumps examining. And Mr Corbyn, at 66 and 4yrs Tony Blair’s senior, actually lived through that decade, what’s his excuse?