Langton Capital – 2015-08-25 – Coffee, iNTERTAIN, pub prices, world markets & other:
A Day in the Life:Follow us on Twitter at either @langtoncapital or @brumbymark. So a material chunk of Langton Capital is in Las Vegas this week and the remainder, i.e. me, wishes it was there too. And that’s not just because we can see the Vegas texts that are being exchanged on WhatsApp and feel jealous, fancied a bit of time in the sun but rather chiefly because these are difficult and unrewarding, thinly populated and rather lonely markets and we can’t help feeling that if we put our money on red, at least we’d have a (nearly) 50% chance of getting it right. Because getting it wrong – or at least having little clue as to which way things are going to move in the short term – is rather emasculating. It leaves you feeling a bit like the three-year-old in the back of dad’s car. You know, the little chap who’s got a pretend steering wheel and who, from time to time, actually manages to persuade himself that his spinning and turning from left to right actually have an influence on what the car does on the road. But anyway, that’s the way it is at the moment. Whilst today may be a steadier day there’s still little room for any discrimination as that comes later. I think I’ll read a book. On to the news: The News:Pub, Restaurant & Drinks Producer News: • The Allegra World Coffee Portal has suggested that speciality coffee market set to double in value by 2020. It says the speciality coffee takes c15% of total volume of the out-of-home coffee currently & says the market should grow by 13% compound. • Intertain has reopened its Walkabout on Carver Street, Sheffield after month-long major refurbishment. The group says ‘the extensive renovation of the venue is part of the ongoing investment programme being undertaken by Walkabout’s parent company iNTERTAIN’ and CEO John Leslie adds ‘this is a very significant investment and we are extremely excited by it. Walkabout in Sheffield now has a real sense of individual style and in combination with such an iconic building, we’re certain it will achieve a great return on investment.’ He concludes ‘the move towards the new style Walkabout has been proving an extremely successful model for us, with a greater emphasis on daytime trading, as well as providing the same great atmosphere for big games and party nights.’ • Whiskey sales reported to have helped US spirits industry grow for 18th consecutive year says Beverage Information & Insights Group. It says sales in both the on- and off-trades across the US grew by 1.5% in 2014 to reach 211.8 million 9-liter cases. • Some 84% of Brits do not think NHS should treat alcoholics free-of-charge. • King’s College London reports that around a fifth of people over 65 drink to “unsafe levels” stated as 21 units for men, 14 for women. King’s College reports ‘as the Baby Boomer generation become seniors, they represent an ever increasing population of older people drinking at levels that pose a risk to their health.’ Dr Tony Rao says ‘this study shows the need for greater awareness of the potential for alcohol related harm in older people, particularly those of higher socio-economic status, who may suffer the consequences of ill health from alcohol at an earlier age than those in previous generations.’ • Peach has reported that London’s Borough Market is to host the capital’s first ever Pizza Festival in Sept, showcasing artisanal vendors • Propel has reported potato specialist Aviko as saying that pubs now first choice for eating out due to the value they offer • Sapient, which advised Punch on sale of 158 pubs, reports that the multiple achieved is the highest since 2007 for non-core tenanted pubs. Sapient’s Peter Hansen says ‘prices for tenanted pubs are rising, driven in part by new entrants attracted to the higher yields that pubs generate compared to other property assets.’ He adds ‘we expect further activity in light of the MRO legislation.’ • New owner of BHS. Retail Acquisitions, is reported to be looking to raise c£70m to fund a turnaround of the business Leisure Travel: • A study commissioned by Barclaycard has suggested overall number of holiday bookings is +10.3% this year. It says hotel spending rose by 7.8% and suggests that the economic recovery is helping Britons to spend more on holidays. Spend is +7.5% in the first six months of this year. • Tube strikes in London planned for Wed + Fri have been put off until the second full week of September (when holidaymakers are back) Other Leisure: • William Hill has announced the appointment of Philip Bowcock as CFO. Mr Bowcock, late of Cineworld, replaces Neil Cooper. William Hill CEO James Henderson comments ‘we are delighted to welcome Philip, whose extensive experience will be valuable as we continue to diversify and grow the business. Philip has played a lead role in strategic and financial changes at his previous companies and will bring both a strong strategic insight and rigorous financial acumen.’ Finance & Markets: • World markets: Bloody day yesterday with all markets down, London for 10th straight trading session. Bloomberg commodities hit 16yr low • World markets: Oils, miners badly hit but US more sanguine than Europe. China down 6% again (Tues) but rest of Far East up in Tues trade • Starbucks CEO Howard Schultz has told staff to be kinder to customers today as they (the latter) may have had a bad day on the markets. Fortune reports seeing an email sent to staff in which Mr Schultz says ‘today’s [Monday’s] financial market volatility, combined with great political uncertainty both at home and abroad, will undoubtedly have an effect on consumer confidence and perhaps even our customers’ attitudes and behaviour’. He continues ‘our customers are likely to experience an increased level of anxiety and concern. Please recognise this and – as you always have – remember that our success is not an entitlement, but something we need to earn, every day. Let’s be very sensitive to the pressures our customers may be feeling, and do everything we can to individually and collectively exceed their expectations.’ • Brent crude bouncing a little in Tues trade, now changing hands at c$43.40 per barrel, up from Mon’s 6yr lows • Sterling + US$ weak yesterday on reduced ‘hopes’ that interest rates would rise in the near term • BlackRock fixed income CIO Rick Rieder says he sees window US rate rise in September is now closing. Time is moving on Retail Roundup from Nick Bubb:
Poundland: N Brown Watch: You are probably wondering how on earth N Brown, the struggling home shopping company, managed to escape yesterday’s carnage and end Monday over 2% up…Well, the simple answer is that it was down a lot on Friday, falling over 9% on the back of a downgrade by Exane ahead of the interims in mid-October. But yesterday saw a different broker, Singer, take a contrary view and move the shares from Hold to Buy. So, over the last 2 trading days combined the shares are still well down…We know which side of the argument our money would be on, but it will be interesting to see if the shares come under more pressure today…
John Lewis Sales Watch:
Share Buyback Watch: News Flow This Week: The only scheduled company news this week, as we run up to the Bank Holiday weekend, is the Signet Q2 figures on Thursday, but, as we were waiting all last week for some news from Poundland, with no luck, we assume that the CMA will issue its provisional findings on their proposed acquisition of the 99p Stores chain at some point this week. As the end of the month is coming up fast now, the CBI Distributive Trades survey for “August” is out on Wednesday and the GFK Consumer Confidence survey for August is out first thing on Friday. And the latest Grocery market share figures (for the 4 and 12 weeks to August 16th) from Kantar and Nielsen come out tomorrow and Friday respectively. Monday 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: Punch disposal to NewRiver Retail: • On any other day, this might have received a supportive press. • But China is hogging the headlines & Punch’s shares, last seen, were actually off a penny or two on what has to be a sensible + incremental strategic deal • The disposal is on a historic EBIT multiple of 7.3x and are being sold at a small (£1m) premium to asset value. • We are awaiting news on the Matthew Clark sale, need a strategy update from new CEO Duncan Garrood and have a trading update from the company (Q4) coming on 1 September China & Global Markets: • We don’t want to turn this into a hard-core economics blog but, at the same time, it’s not possible to ignore what’s going on in China (and at the Fed) • China has to manage a slowdown in its annual rate of growth from >10% via its current 7% to perhaps 3% to 4% over the medium term • And it does not want to do this via negative numbers but, as I’m sure Lewis Hamilton would agree, slowing a car from 200mph to nearer zero going into a corner is a skill that not all possess • And China is more of a million-ton super-tanker than it is a super-car and global markets are understandably somewhat concerned • So this is a seminal period • The emergence of China as a global economic superpower has dominated finance for two decades and we may be moving into a new phase • And, disgraceful though it is as share prices are meant to anticipate changes, commodity share prices have mirrored Bloomberg’s commodity index, which is now trading at 16yr lows • The Shanghai Comp was down 8.5% overnight & all 2015 gains have now been erased – this could be ‘healthy’ but it is also worrisome Oil Prices, Inflation & Interest Rates: • Oil is flat on its back – see comments on China & commodities above. • This is deflationary. • The Fed and the Bank of England are mandated to combat inflation. • There is less of the latter around so interest rate rises may be shunted into 2016 in the case of the US and well-into 2016 in the case of the UK Whitbread & AirBNB: • We get a lot of our ideas from clients. • Many simply add to the store of knowledge (a.k.a. gossip) but some are then repackaged & branded Langton. • Nearly a year ago, it was suggested to us that AirBNB would move into the business end of the market & would become more of a threat to mid and low end business-room suppliers (i.e. Whitbread). • We tucked this away as interesting but premature and, judging by today’s stories, it is still the former but no longer the latter. Tips & Gratuities – a few bad apples? • See earlier email for the fruits of various investigative journalists’ digging. • Keeping tips for the company, using them to make up salaries to the minimum wage or charging waiters for the privilege of waiting tables do not resonate with a (reasonably) fair-minded consumer. • But such practices are not the norm. Many waiters, particularly in London, earn more than £15 per hour and not many of them, on the weight of recent evidence, look set to take strike action against their employers. Random information, hopefully not all of it useless (re most leisure operators etc.): • A paler version of what happened in the Far East overnight, European markets are down between 2% and 3% • Lucozade pushing low-sugar drinks; a bit overdue, part of an on-going, health-inspired & beneficial trend but not good for the sugar price longer term • New entrants: See comments on ex-Real Pubs entrepreneurs Nick Pring & Malcolm Heap above. Increased capacity can be a problem – but often more for incumbents than for the new entrants themselves. With the likes of Franca Manca growing rapidly, Pizza Express, ASK, Zizzi and Prezzo are likely to face more competition rather than less going forward. • Talk (again) of 100p per litre petrol will put money into consumers’ pockets. If it happens. • Good UK economic data (budget surplus in July, good prospects for GDP growth) utterly overwhelmed by China fears. • Greece? Not gone away but likewise overwhelmed by China. Rebels meet reality, wise up, splinter & become rebels again |
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