Langton Capital – 2015-08-19 – Various roll-outs, supermarkets, Tunisia & other:
A Day in the Life:Follow us on Twitter at either @langtoncapital or @brumbymark. I know they talk about the dog days of August but don’t you think it’s just a little bit quiet out there? I mean the rural pub gardens could be doing a good trade and the airports may be busy but the Tube here in London is as near to deserted as you’re likely to see it and the pavements are empty. And August is a long month, this year. The Bank Holiday, which traditionally presages a physical if not a mental shift back to work is as late as it possibly can be on 31st this year meaning that we still, believe it or not, have a full week to go after this one’s over and a full two weeks before the kids get dragged back to school. So, whilst we office workers may be able to get a bit of thinking done, for those urbanites and urban businesses out there, it may be a case of holding your breath just a little bit longer. On to the news: The News:Pub, Restaurant & Drinks Producer News: • Constellation brands is to create a specialist ventures business in order to invest in new liquor, beer + wine companies and technologies • Constellation takes stake in ready-to-drink start-up, Crafthouse Cocktails, provider of pre-mixed drinks such as Moscow Mule • M+C reports Albert’s Schloss concept could be rolled out across major UK cities. Revolution Bars’ founders Roy Ellis + Neil Macleod have 50% stake. Ellis comments ‘for the complete offer of Schloss and live music venue I would imagine we are looking at the usual suspects – two in Scotland and then the major English cities and a couple in London – so probably 15. Then there is the possibility to operate a Schloss on its own, which widens the scope.’ • The Deltic Group, formerly known as Luminar, has relaunched its Canterbury club as an upmarket bar concept called Steinbeck & Shaw. Regional director Martin Winter said: ‘The launch of Steinbeck & Shaw in Canterbury is part of our strategy to constantly evolve our customer offer so that we exceed customer expectations. It’s something completely different from venues within our existing portfolio with an edgier, stripped back feel.’ • Las Iguanas co-founder Eren Ali will team up with Levi Roots to set up his Caribbean Smokehouse restaurant at the Westfield Stratford centre. Roots said of the new partnership: ‘I know Caribbean cuisine and Eren knows how to create successful dining experiences. It feels like the perfect partnership.’ • Asda sales dropped 4.7% in its second quarter and is feeling the effects of the ‘worst storm in retail history’. The supermarket last month lost its place as number two in the UK in terms of market share to Sainsbury’s for only the third time in 12 years. it has now reported 4 consecutive quarters of falling sales. Boss Andy Clarke says that the co has reached a “nadir”. He says, however. That ‘there are green shoots coming in the third quarter.’ • The WSTA believes wine tourism is an untapped source of growth for the sector, with the average US wine tourist spending £650. The Wine and Spirit Trade Association commented: ‘With an ever-increasing number of tourists, as well as a growing export market for English wine, it is an exciting realisation that our vineyards and wineries are competing with the best in the world.’ • McColl’s has extended its £85m revolving credit facility until 2020 as the convenience and newsagent group continues to expand. • Environment secretary Elizabeth Truss has called on retailers to introduce clearer labelling on their dairy products. The government has identified the need for supermarkets to include on labels whether their fresh food is from Britain. Truss claimed that currently, less than half the butter and cheese eaten in Britain is made from British milk. • Lindt + Sprungli overcame record high cocoa prices to deliver a 17.5% increase in H1 profits. A fungus outbreak and low rainfall in Ghana, the world’s second largest cocoa producer, has lowered output by 20%. • Symbol group Londis is launching a radio advertising campaign to attract bank holiday shoppers featuring its latest wine and beer deals. • Sainsbury’s is rolling out its Brand Match initiative to online orders today. • Coca-Cola is the FMCG brand most resilient to own-label competition according to a poll of 840 people by Instantly. Just under half (48%) of consumers said they would never replace the brand with a rival. Leisure Travel: • Thomas Cook has cancelled bookings to Tunisia until next February after the country’s state of emergency was extended for two months. Thomas Cook said in a statement: ‘The Foreign & Commonwealth Office has confirmed that the state of emergency in Tunisia had been extended by a further two months from 31 July 2015. Accordingly, the FCO has updated its advice, which counsels against all but essential travel to the country.’ It says customers will be able to cancel or amend their holiday free of charge. • IAG has reported its offer for Aer Lingus is now wholly unconditional. IAG CEO Willie Walsh reports ‘we’d like to welcome Aer Lingus into IAG. It will remain an iconic Irish brand with its base and management team in Ireland but will now grow as part of a strong, profitable airline group. This means new routes and more jobs benefitting customers, employees and the Irish economy and tourism’. • Air Partner has acquired aviation safety consultant Baines Simmons for £6m and the move is expected to be immediately earnings enhancing. Baines has built up a reputation with both trade and individual clients for its training and consultancy services. Air Partner paid £5.4m cash with a deferred consideration of £0.6m payable in January 2018 dependent on performance criteria for Baines, which achieved PBT of £0.7m on a turnover of £5.4m and net assets of £1m for the year to 31 December 2014. • More on Air Partner: Group trades on a PE of 15.8 for a market cap of £45.05m and a dividend yield of 5%, which is forecast to rise to 5.6%. The growing global aviation charter specialist, which charters for corporates, governments, organisations and individuals, also acquired Cabot Aviation for up to £1.2m in May this year. Mark Briffa, Chief Executive of Air Partner, said of the deal: ‘The acquisition of Baines Simmons is an exciting step for Air Partner. We look forward to working with the team at Baines Simmons on a range of strategic and complimentary growth opportunities from new regulatory changes, busier skies, greater organisational complexities, geographic expansion and new performance products and services.’ • Tourism is now the UK’s third largest service export, contributing some £60bn to the UK economy in 2014. • Gatwick boss Stewart Wingate has attacked the Airport Commission’s decision to recommend Heathrow for a new runway. Wingate took to the London Evening Standard to describe the report as ‘superficial’, ‘flawed’, ‘erroneous’ and ‘inconsistent’, adding that Gatwick’s proposal was both politically and economically more achievable. • The owners of London City Airport have brought in Credit Suisse to advise on a potential sales for the airport, which could go for £2bn. Sources close to the deal told Reuters the sale of the airport, which is 75% owned by GIP Global Infrastructure Partners and 25% owned by Oaktree Capital Management, could be completed as soon as this year. • Liverpool John Lennon airport has announced a major investment programme over the next five years. The move will allow owners The Peel Group to pay down debt, fund improvements to terminal buildings and plan for future growth by expanding facilities. Finance & Markets: • CPI inflation in July was 0.1% from 0% in June as a result of a smaller fall in clothing prices. The rise was muted by food and beverage prices, which continue to slide. David Kern, Chief Economist at the British Chambers of Commerce, said: ‘These latest figures confirm the recent pattern of inflation staying around 0% and we expect this trend to continue over the coming months. Our forecast is that inflation will start edging up slowly towards the end of this year, but will remain well below the 2% target until the second half of 2016.’ • Pound rises to 7.5yr high on benign inflation data + ‘hopes’ of rate rise. • MPC member Prof David Miles has said that interest rates in the UK will rise “pretty soon’ says ‘it’s a sign of health.’ Prof Miles adds ‘within the UK economy consumer confidence is strong, corporate confidence is pretty strong and the financial system is operating near normal now.’ He sees a potential ‘new normal’ for interest rates of perhaps between 2.5% and 3%, “materially lower” than historically. • World markets: UK mixed again yesterday, Europe + US down and Far East down in Weds trading • In Far East, the Shanghai Composite index fell 6.2% yesterday as concerns remain over the strength of the economy. • Oil unchanged at $48.60 per barrel • UK house prices blip up per ONS. Says annual rate rose to 5.7% in year to June up from 5.6% in year to May. Prices in Northern Ireland rose by 9% whilst those in Scotland fell by 0.6%. • An argument over changing the software that produces bitcoins could split the digital currency, according to core developers. Chinese bitcoin miners and others are worried that adopting a new version might affect control of the currency. Retail Roundup from Nick Bubb:Today’s Press and News: The Asda Q2 update gets plenty of coverage in the press, with the embattled CEO Andy Clarke widely quoted as saying that the awful -4.7% LFL sales performance was the “nadir” for the business and that he was “here to stay”, given the solid profits outcome. The other big news is that Marks & Spencer’s Online boss, Laura Wade-Gery, is taking 4 months maternity leave next month, at the age of 50. News Flow This Week: The WH Smith pre-close trading update tomorrow will probably get more focus than usual, given the recent row about Airport VAT policies, and the ONS Retail Sales figures for July are also out tomorrow. And there could be some news this week from Poundland, as in “mid to late August” the CMA is scheduled to issue its provisional findings on their proposed acquisition of the 99p Stores chain. Nick Bubb – nicholas_bubb@hotmail.com Tuesday Wrap: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: The price of pigs (re on-trade retailers, the consumer etc.): • Pig prices on the slide, good news for operators as 1) pig & chicken prices tend to track each other, 2) white meat influences the price of red and 3) if the price of beef/lamb doesn’t move in sympathy, at least there is a protein alternative. • Lower pork prices helpful therefore for the consumer directly & for leisure retailers as some of the margin enhancement may stick with them. • Good (on balance) for pork retailers such as Cranswick as price increases are Teflon (you pass them on quickly) and price reductions have something of the feel of Velcro about them. Too few chefs (re licensed retailers): • There are more class actions from kitchen staff in the US and union Unite is trying to marshal burger-flippers into throwing down their aprons. • But, though the Living Wage will play a role, when costs rise, it may well be old-fashioned supply and demand that’s to blame because, if we need another 11k chefs, then we may well have to pay up to get them – see earlier email. Tour operators, terrorism, Thailand etc. (re tour operators, TUI, TCG): • Bombs in Thailand are clearly a negative for the industry. • Tourists were involved with ‘at least 8 foreign nationals killed’ per BBC. • Thailand may not be a mass-market for the packaged tour industry but it is a major winter destination from the Nordic region and both TCG and TUI have material businesses in the north. • The UK Foreign Office has not (yet) issued any guidance re travel to Thailand. • TCG and TUI will therefore be left to judge demand for themselves and to reschedule destinations when or if necessary. • This will incur additional, as yet unquantified, costs and cannot be seen as anything other than negative news. Random information, hopefully not all of it useless (re most leisure operators etc.): • Commodity prices remain very low. Oil < $50 per barrel. Miners near 6yr lows & price of foodstuffs also lower. Cocoa down after a strong start to the year, recent rallies in soybean, wheat, corn now distant memories. • IPO market gone to sleep and, with AO World for example trading at 125p (IPO last year 285p, peak price c325p) perhaps that’s no surprise. • Cash in the consumer’s pocket. Rail fares may be rising ahead of inflation but the negative impact here is dwarfed by the positive effect of lower food and energy costs. • TUI to spin off peripheral assets; are we talking about Hapag Lloyd? It would appear so. Perhaps Late Rooms as well. • ASDA will update on trading (as a part of the Walmart trading statement) at lunchtime today. |
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