Langton Capital – 2015-09-04 – Minimum pricing, sugar, Pernod Ricard, Yo Sushi & other:
A Day in the Life:
Follow us on Twitter at either @langtoncapital or @brumbymark.
Langton is not in the office this week but should be able to keep the email going before things get back to normal next week. The Day in the Life might be somewhat sporadic and there will be no Daily Wrap.
Pub, Restaurant & Drinks Producer News:
• Yo Sushi has reported LfL sales +3.8% in its year to end-November. Total sales are +7%, EBITDA +7.8% at £10.6m
• The European Court of Justice has declared that Scotland’s proposed minimum unit pricing could break EU free trade rules. Following the announcement ALMR chief executive Kate Nicholls suggested: ‘If local and national authorities are committed to tackling any perceived health harms due to alcohol, then a better course of action would be to focus on controlling unrestricted off-trade promotions.’
• Paul Chase, alcohol policy commentator, has welcome the EU’s ruling on Scottish minimum pricing saying it has been struck a fatal blow. He says the legislation to bring in a minimum unit price of 50p, which was passed in May 2012 but was delayed by an objection from the Scottish Whisky Association, has been found to be flawed. Mr Chase reports ‘I welcome today’s ruling by the European Court of Justice (ECJ) which looks set to reject minimum unit pricing for alcohol. The Scottish Government’s belief that putting a floor under alcohol prices would significantly reduce excessive consumption and health harms was never an evidence-based policy, but a piece of policy-based evidence.’ He adds ‘no matter how many false statistics they tried to crow-bar into the junk-science mathematical models used to justify this measure, the Advocate General has, with
• Pernod FD Gilles Bogaert reports co’s performance in UK has been ‘remarkable’ as group gains share. He says ‘in the last two years we gained share in the UK market, which is a remarkable performance considering the strength of the competition in the market. It has a lot to do with the quality of our team. We have had a very clear strategy and perfect execution, especially in the on trade.’ The best performing countries in Europe were Germany, Spain and the UK, “all of which grew at an outstanding pace.”
• Aspall, the Suffolk-based cider maker, is to increase capacity post a £2.2m investment to modernise its production facilities
• Propel reports Leon + Abokado are to add a 10p levy to the price of their sugary drinks in support of Jamie Oliver’s health campaign. Oliver has commented ‘I’ve spoken to some of the brightest people in the medical world over the last few years and they all agree that action is urgently needed if we don’t want the NHS to crumble completely because of the costs of diet-related disease like type-2 diabetes. One doctor recently told me that diet-related disease is one of the defining crises of our time. We need the government to step up.’
• Red Oak Taverns has acquired 146 tenanted pubs from the GRS Estate, bringing its total estate to 170 pubs. Co-Founder of Red Oak, Mark Grunnell, said: ‘We are very excited about this new phase of growth for the company.’ Red Oak Taverns was founded in 2011 from the acquisition of 32 tenanted pubs held by administrators and is now leased and tenanted. The M+C reports Ted Kennedy, who has run the GRS estate since 2010, as saying that the more than x9 Pub EBIT implies there should be future growth in the tenanted sector lie in the free-of-tie model. He says ‘once upon a time these pubs were all disposals and with the introduction of a different operating model they are now viable. I think that’s a very attractive story for investors looking at the tenanted pub sector. There’s a huge amount of potential out there in estates that other companies consider
• Online craft beer delivery service HonestBrew is seeking £300,000 of funding for 15% of its equity on crowdcube.
• A report from the IEA concludes that the alcohol industry contributes more to the UK economy than it takes away in costs. According to the Institute of Economic Affairs, although alcohol-related NHS, police, welfare and criminal justice costs added up to £3.9bn, some £10bn was generated of alcohol tax revenue was generated over the same period.
• Report author Christopher Snowdon said: ‘It is time to stop pretending that drinkers are a burden on taxpayers. Drinkers are taxpayers and they pay billions of pounds more than they cost the NHS, police service and welfare system combined. The economic evidence is very clear on this. Forty per cent of the EU’s entire alcohol tax bill is paid by drinkers in Britain and, as this new research shows, teetotallers in England are being subsidised by drinkers to the tune of at least six and a half billion pounds a year.’
• Tesco has chosen PE firm MBK Partners as preferred bidder to buy its South Korean business for up to $6.6bn according to sources.
• Charles Wells CEO, Paul Wells, is stepping down from his position at the Bedford-based brewer in order to become chairman. Justin Phillimore is set to become the new chief executive.
• Pizza Express will scrap the 8% admin fee imposed on tips left by cards as the debate over industry practice continues. CEO Richard Hodgson explains ‘we have always been, and will continue to be, transparent about our tipping policies. We also agree with calls for greater clarity across the industry in order to ensure that staff are given a fair deal, and to enable customers to make an informed choice when it comes to tipping’
• The latest Markit services PMI fell to 55.6 August from 57.4 the month before.
Holidays & Leisure Travel:
• IAG updates on Aug traffic saying that it increased RPKs in the month by 8.6% y-o-y. Capacity was +6.1%. Premium traffic was +8.7%
• Central and eastern European low-cost carrier Wizz Air has posted a 19% rise in passenger numbers in August and a load factor of 93.2%. The August numbers gave the airline a rolling annual total of almost 18 million passengers, up 20% year-on-year thanks in part to the group’s new aircraft maintenance hangar in Budapest, which can accommodate its incoming Airbus A321 planes.
• Nice and Baden-Baden in Germany are being added to the airline’s network, while seven new routes from Bulgaria, Hungary, and Slovakia are also being introduced in the second half of the financial year. A sixth new aircraft will be added to Wizz Air’s base in Sofia and a tenth in Budapest from March 2016.
• Dart Group is to acquire 27 new Boeing 737-800s worth $2.6bn at a ‘significant’ discount. The planes are expected to enter service between September 2018 and April 2018. Chairman and CEO, Philip Meeson, said the purchase would be funded ‘through a combination of internal resources and debt.’
• Meeson said of the group’s outlook: ‘In view of the continued strong demand for our leisure travel package holiday and flight-only products, the board is optimistic that group performance for the financial year ending 31 March 2016 will materially exceed current market expectations.’ The company is due to issue a further trading update in mid-October following the half-year end.
• Ryanair has predicted increasing competition and continuing low oil prices could lead to the cost of fares tumbling.
• Ryanair has announced a 66% jump in full year net profit to €867m, ahead of previous guidance, with basic EPS up 69% to 62.59p. The steep rise was helped by the company’s net margin growing from 10% to 15%.
• EasyJet has increased its annual profit guidance following a record performance during August for the airline. The carrier said in its trading update planes were 94.4% full for the month as passenger numbers hit just under 7.1 million.
• 888 announces launch of major brands in Romania + Denmark following receipt of licenses from their respective regulators. The group says ‘thanks to the hard work of our team and the regulators involved, we are excited to offer our entertaining, secure and trusted gaming brands to players from Romania and Denmark. Launching in two regulated markets concurrently is another testimony of our ability to leverage our regulated technology and knowhow in delivering our market-leading products. We are proud to offer the 888 marquee brands in these markets, reaffirming our strategy to become a dominant operator in global gaming regulations’.
Finance & Markets:
• The European Central Bank has reduced its inflation and growth forecasts for 2015, 2016 and 2017 and expects ‘very low’ inflation. ECB president Mario Draghi said Europe’s economic recovery would continue, ‘albeit at a somewhat weaker pace than expected’.
• The New Democracy party could steal a win from Syriza in the Greek elections on 20 September, according to a poll by GPO. The study also found that Alexis Tsipras was less popular that conservative leader Evangelos Meimarakis.
• World markets: UK up yesterday, also Europe. US markets up later in the day but Far East mostly down in Fri trade
• Oil price steady at around $50.50 per barrel
Retail Roundup from Nick Bubb:
BDO High Street Sales Tracker: the weekly BDO “Fashion” sub-index is not representative of the mass-market, but, nevertheless, it is interesting that BDO Fashion store sales have been poor in recent weeks and BDO flag today that w/e Aug 30th was disappointing yet again, despite the autumnal weather, with overall Fashion store LFL sales down by 2.6% (albeit that was actually the best performance for 6 weeks!). Overall BDO LFL Store sales (including c20 Homewares and “Lifestyle” retailers) were down by 2.2%, but total Non-Store sales (including some Online-only retailers) picked up to increase by 19.1%…
News Flow Next Week: Next week is dominated by “Super Thursday”, but before that we get the ABF (Primark) pre-close on Monday and the BRC-KPMG Retail Sales figures for August first thing on Tuesday morning, whilst the prestigious World Retail Congress begins in sunny Rome on Tuesday. On Wednesday there is the Sports Direct IMS/AGM and analysts visit, plus the SuperGroup AGM and the Pets at Home AGM. Then on Thursday…the City has to absorb not just the Next interims and the Morrison’s interims, but also the John Lewis interims, the Dixons Carphone Q1/AGM, the Home Retail Q2, the Dunelm finals, the Darty Q1/AGM, the Carpetright AGM and the opening of the first Primark store in the USA, in downtown Boston…
Nick Bubb – email@example.com