Langton Capital – 2015-08-27 – Dining trends, global shares, oil, interest rates & other:
A Day in the Life:
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So I made an impulse purchase over the weekend.
It was one of those paper log makers. You know, the soggy-paper-squashing gizmos that makes mushed-up paper bricks from wet newspaper, the sort that you then stack in the sun and burn as logs during the winter?
And great fun making the things it was too. We managed, the nine-year-old and I, to go through two or three changes of clothing whilst mashing up a few months’ worth of old newspapers, credit card statements, torn up cereal boxes and the like after which we spread an uneven layer of soggy paper over the patio and puddled liquid goo over a large part of it into the boot.
Of course there was no way into or out of the house other than to wade through this mess but the sun was shining, the dog was joining in and we had a great time.
Until, that is, we realised that we’d created a couple of dozen bricks that, if the York weather in the autumn and the winter is anything like it usually is, will still be wet come winter. On to the news:
Pub, Restaurant & Drinks Producer News:
• NPD Group survey suggests Londoners more health-conscious when eating out. Or at least they say they are. Says London consumers twice as likely to be motivated to eat out by desire for a light or healthy meal than others in the country. Also says they are half as likely again to be prompted to try a particular outlet on the strength of recommendations.
• Greene King CFO Kirk Davis has bought 4,000 shares in the company at 821p.
• Starbucks is rolling out its Evenings model to 2,000 stores by 2019. The new format sees the group offering snacks + alcoholic drinks
• Food purchasing expert Beacon has reported that the input prices of commodity foods will become more volatile due to geopolitical issues
• Burgers still the most prevalent street food reports Horizons. But it says there are more ‘niche ingredients. The analyst focusses on products such as quinoa grains which it points out are now making it into the mainstream. Horizons says ‘many of these trends have been picked up and adapted from street vendors and small independent operators, particularly the more innovative, easy-to-eat hand-held dishes.’
• Morrison’s told by Advertising Standards Authority to be more clear about what its Match + More offer actually means. The ASA had been investigating a number of issues finding that the information re Match + More was not sufficient and TV ads did not make the fact that the minimum spend was £15.
• Propel reports Beds + Bars as turning in EBITDA +13% at £4.2m on turnover +10% at £36.9m in year to March 2015. Net debt fell from £25m to £13m after a re-finance with HSBC during the year. The group had hit a “perfect storm” in 2012 as UK visitor numbers were reduced during the Olympics.
• VoucherCodesPro.co.uk has said that just 12% of men aged over 30 listed beer as their favourite beverage. Spirits were more common at 24% and red wine took 19% of the vote with cider coming in at number 3 with 15%. The high calorie count and a ‘bloated’ sensation were cited as reasons for beer’s declining popularity. VoucherCodesPro.co reported ‘it seems that the classic pint of beer is on a downer, with many more Brits opting for spirit based drinks.’ It adds ‘there are, however, a lot of artisan, local brewers popping up around the UK, which could definitely see a resurgence in the British pint.’
• Off trade sales grew in value by 0.7% over the summer says Nielsen. It reports sparkling wine + spirits did well with beer down 12%. Nielsen says ‘price is relatively stable across spirits, however the category has been boosted by receiving more in-store display space in grocers, up 20% on summer 2014, with spirits likely gaining from beer and cider, which saw a 12% reduction’.
• Coffeeshop + cocktail bar Grind has raised £1.3m via crowdfunding, almost twice its original £750k target
• Castle Rock has released a new brew, the Crafty Flanker, in order to coincide with the World Cup rugby next month
• Brewdog is to open a third location in Sweden later this month.
• McDonald’s UK boss Paul Pomroy has defended zero hour contracts to the BBC saying they allow staff to stay flexible.
• Latest Deloitte Consumer Tracker shows fall in consumer confidence in Q2 2015, coinciding with election uncertainty. It was the first fall for 18 months but it says that spending on going out, eating out + holidays rose in Q2.
Holidays & Leisure Travel:
• PPHE reports H1 numbers, says revenues +12.4% to €141m, EBITDA +21.9% at €48.4m. REVPAR +12.5%, EPS +98% at 37c. Group, which ‘owns, leases, develops, operates and franchises full service upscale and lifestyle hotels in major gateway cities and regional centres, predominantly in Europe’, says this was a ‘strong first half performance with improved trading across our portfolio, delivering year-on-year revenue growth with occupancy, average room rate and RevPAR growth ahead of the European hotel market’. President + CEO Boris Ivesha reports ‘we are pleased with our results for the first half of 2015. Demand has been strong in the destinations in which we operate and our hotels have performed well, particularly in The Netherlands and Germany. We are continuing to invest in our hotel portfolio with three new hotels under construction and renovation works
• Playtech H1. Says group is ‘delivering on our strategy – strong underlying growth and strategic M+A’. Sales +33%, EBITDA +16%, EPS +19%.
• Playtech says average daily revenue in Gaming division for first 55 days of Q3 is +15% on last year (which benefited from the World Cup). Chairman Alan Jackson reports ‘we have made significant progress against all aspects of our strategy during the first half of the year. We have completed a series of strategic acquisitions to create and enhance our new Financials division, a high-growth and regulated industry, and our continued operational delivery across all business segments has translated into a strong financial performance across all key metrics, with revenues up by a third in the half year.’ He says ‘our Gaming business continues to go from strength to strength with our strategy of focussing on regulated markets driving growth. Our pipeline remains strong, with significant opportunities across all geographies, as customers seek to benefit from our
Finance & Markets:
• World markets: UK + Europe down yesterday but US up. Asia up in Thurs trading + UK markets looking like +80
• Oil price firmer at $44.15 per barrel. US crude stocks fell in week to 21 Aug but stocks built in gasoline + distillates
• Fed official William Dudley says rate rise in Sept now “seems less compelling” than it did a few weeks ago. You can say that again. Mr Dudley says ‘the slowdown in China could lead…to a slower global growth rate and less demand for the US economy.’ Nonetheless, the economic recovery remains on track in the US + Mr Dudley said there was little likelihood of any additional QE at this stage.
• CBI distributive trade survey shows rise in retail sales
• British Bankers Association says number of mortgage approvals rose in July. Some 46,000 loans were approved
• ECB member Peter Praet has said that China’s slowdown was intensifying deflationary pressures across the Eurozone
• WPP, which has an eye on most markets, yesterday commented ‘soft landing’ uncertainties in China were leading to some customer caution. It said ‘although corporate balance sheets are much stronger than pre-Lehman and confidence is higher as a result, the Eurozone, Middle East, BRICs hard or soft landing (particularly now China) and US deficit uncertainties still demand caution. The over $7 trillion net cash lying virtually idle in those balance sheets, still seems destined to remain so, with companies, even after the recent upturn in merger activity, unwilling to attempt excessive acquisition risk (except perhaps in our own industry) or expand capacity, particularly in mature markets, despite the Eurozone showing some signs of life.’
Retail Roundup from Nick Bubb:
Sainsbury’s: The news that shop staff at Sainsbury’s are to get a pay rise of 4%, the highest pay increase the company has awarded in more than a decade, looks quite chunky, but the City has had time to absorb its impact, as the press release about it (in which CEO Mike Coupe trumpets that “We know what a difference out store colleagues make to our customers each and every day and we’re totally committed to rewarding them well for the great service they provide”) was sent out by Sainsbury yesterday morning on embargo. And the fact that analysts don’t seem to be rushing to cut profit forecasts, even though the increase comes into effect this Sunday, implies that Sainsbury plan to pay for the wage increase either with savings elsewhere (eg in non-shop staff roles and in other overheads) or via selective price increases…
Planet CBI Watch:
Nick Bubb – email@example.com
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:
Greene King Leisure Tracker:
• See morning email for more detail. The Tracker is interesting on a number of levels the Tracker generally:
o Comments on July weather as bad. It wasn’t wonderful but it started with the hottest few days of 2015.
o It highlights that food is still outperforming wet sales. This has been a trend for some time – but there will have been some lapping of last year’s World Cup, which boosted wet and depressed food sales in 2015.
o Tracker says spend is ‘resilient’ but it concedes ‘recent figures show wage growth to have slowed + unemployment to have increased in 3mths to June’.
o It says this may ‘prove to be indicative of a change in momentum in Britain’s economic recovery’ and concedes ‘the broadly upward trajectory in leisure spending seen over the last year may start to become more subdued.’
o Events are still helpful. The Rugby World Cup should boost pub spending.
o GNK reports that spending in London & the South East fell by 2% in July v the same month last year.
o It says ‘despite a fall in spend among households in London and the South East, the trend in leisure spending remains largely positive in both areas.’ However, with virtually no forward visibility, trends are perhaps not apparent until they are in the past.
o Re London, GNK says ‘it will be interesting to see what impact, if any, the introduction of a 24 hour tube service has on the capital’s late night leisure economy following its launch in September.’ Agreed but it will probably be 1) marginal and 2) confined to a modest number of Central London locations.
Oil price fails to rally, consumers will benefit:
• Lower oil prices are good for the consumer and, as transport and heating costs impact most companies, they are good for the corporate sector (excluding oil companies) as well.
• Hence it is something of a relief to see that the oil price hasn’t immediately rebounded $6 or $7 on the back of somewhat more stable markets.
• But we suppose that is realistic as, whichever way you slice it, China is slowing down and some oil inventory numbers are coming out in the US this afternoon, the betting being that they will show there’s no shortage of oil out there.
• Added to which Iran may come back on stream and the Saudis, Russians and others need to pump in order to spend and we could have low prices with us for some time
• This will put more money into consumers’ pockets, it will restrain commodity price increases and put downward pressure on prices across the economies in general; what’s not to like?
Deflationary fears not going away:
• The ECB is said to be still on deflation-watch and, with oil prices remaining low, one can see why.
• But the authorities aren’t panicking yet. They see deflation as currently a commodity-issue and note that, often, with regard to commodities, what goes down may later go up.
• They would only panic (I’m sure they wouldn’t use that word) if deflation became baked in via pay decreases and the like.
• And here, with the Living Wage set to push up labour costs in the UK, one can say that either 1) the issue is being fortuitously headed off or 2) the authorities got their panicking in early.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• The price of gold hasn’t shot up, which says something at least about how some investors are viewing the current ‘crisis’.
• On a less-positive note, equity markets are lacking anything of a follow through.
• For the record, China lost 22% in 4dys. The UK market fell for 10 straight days and yesterday’s rally in the UK was the largest for 4yrs.
• Stock valuations, in some areas at least, are currently attractive. A basket of GSK, VOD, RDSA and MARS (amongst others) would yield you around 5%. Sounds pretty interesting if you’ve got money in the bank earning 0.5% but dividends, admittedly, can go down as well as up.
• Fed, observers et al now backing away from Sept 15 US interest rate rise. UK rise could be Q2 or Q3 next year. Would take quite a rally to bring UK expectations back to January 2016.
• Airbnb now becoming something of a real threat? Will be interesting to see if Whitbread stoops to comment on it in its 8 Sept trading update.
• Betting mergers all the rage. Gala Coral / Ladbrokes, Bwin / GVC and now Paddy Power & Betfair. Is this indicative of growth opportunities or of an industry that sees itself having to derive growth from mergers against an increasingly hostile regulatory environment?