Leisure Wrap & Other:

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. As always, contact us if you’d like further details:

Current pub & restaurant trading, August etc.

• The CGA Peach Tracker doesn’t encompass the whole industry but, as it covers perhaps a third of operators & it would be impossible to encompass all of the independents in any case, it’s a very useful steer. We would suggest that the take-away points are:

o Overall Growth: Growth slowed in August (to LfL 0.6%). This is, as mentioned, down on July but it is still ahead of the CPI which last seen was only 0.1%.

o New Build: Total sales were up by 4.3% (against 0.6% LfL) suggesting that around 4% of new capacity has been put on. This is impacting rental values (esp. in London), plot values and the like. Capacity cannot go on rising (in excess of population growth) indefinitely.

o More on New Build: The Tracker quotes Paul Newman, head of leisure and hospitality at Baker Tilly, as saying ‘we are seeing a number of well-funded, emerging young brands posting market-beating sales and we expect the larger operators to find it increasingly hard to maintain historic rates of LFL growth in the face of such stiff competition.’ This theme was explored by Langton in recent presentations, available on request.

o London v Provinces: London LfLs were +1.0%, somewhat better than the regions at 0.5% (and the whole country at +0.6%). London pubs performed more strongly (at the LfL level) than did London restaurants.

o Pubs v Restaurants: Pubs performed more strongly than restaurants. Drink led pubs were up 2.8% in LfL terms. This is partly because beer gardens got more use in what was an average August (2015) v a poor August 2014.

o Holidays overseas: The Tracker echoes comments from WTB and GOAL this week to the effect that many would-be customers appeared to have taken their holidays overseas. Interestingly Homebase this morning refers to ‘weaker overall market conditions in August’.

Random information, hopefully not all of it useless (re most leisure operators etc.):

• Commodity prices: Terry’s Chocolate Orange-lovers beware, orange juice & cocoa the only soft commodities showing any signs of life. Grains dirt cheap, meat prices down, coffee for free.

• Sterling up a little yesterday. Various bets still being placed on who amongst the developed nations will be the first to put rates up. Betting is still on the US, perhaps by only one eighth of a percentage point but maybe as early as later this month.

• Morrison’s recovery ‘will take time’. Should be no surprises there though the group’s shares are currently down a short 4% presumably on investor disappointment.

• Morrison’s C-Stores: Exiting at half entry cost isn’t something to be proud of but a mistake is a mistake and, if you get married in Vegas, it might be better to get divorced quickly rather than limp along for a couple of decades. It’s probably better not to take that analogy an awful lot further.

• Overseas holiday companies. Surely TCG and TUI shares should be rising a little. Both companies will update on Q4 trading later this month and, if GOAL, WTB, the Peach Tracker, Homebase, the BRC and others are to be believed, late demand out of the UK for overseas holidays has been very strong.

• Restaurant Group: Great stock, etc., but it’s not cheap & the companies above have suggested that August was not good & that shopping centres performed poorly.

We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):

1. Coffer Peach Tracker for Aug sees ‘weaker performance from restaurants, stronger from pubs’. Contrasts with Whitbread comment Tuesday

a. Aug Tracker: Overall, wet-led pubs best, restaurants < pubs + London good but more in pubs than restaurants. Capacity still an issue

b. Aug Tracker says overall ‘Britain’s managed pub + restaurant groups saw sales growth slow in August.’ Restaurants performed least well

c. Aug Tracker: LfL sales +0.6% with total sales, including impact of new openings, up 4.3%.  London better (esp. pubs) than rest of UK

d. Aug Tracker: Total sales +5.0% out of London, +2.4% inside M25. Shows some capacity in regions but poor London restaurants

e. Aug Tracker: Says Aug weather ‘nothing to write home about’ but says it was against a cold August 2014. Pubs therefore recovered somewhat

2. Morrison’s H1 numbers. H1 LfLs ex fuel’VAT down 2.7%, Q2 down 2.4%. Says goal is ‘making the core supermarkets strong again’.

a. MRW H1: Total sales down 5.1%, UPBT £141m (v £216m), UEPS down 35% at 3.73p and H1 dividend 1.5p v 4.03p last year

b. MRW: Says net debt down £254m to £2.1bn, announces closure of 11 more supermarkets today

c. MRW re outlook: Says ‘customers and colleagues are beginning to notice improvements, but the turnaround will take time’.

d. Morrison’s sells M Local stores for £25m in cash to team led by Mike Greene + backed by Greybull Capital LLP.

3. M+C reports Hippo Inns, JV between Rupert Clevely + Enterprise, will open first site in Oct, The Signal in Forest Hill

4. Institute of Economic Affairs director Chris Snowdon has spoken on BBC Radio Kent saying that alcohol duties should be sharply reduced

5. Research from M&B points to a growing ‘breakfast out’ trend, with over a third of those asked eating breakfast out more than once a month

6. The Restaurant Group’s Brunning & Price brand has bought three new sites and intends to acquire another ten in 2016.

7. BBPA has produced guidance booklet for pubs ahead of rugby world cup. It says ‘staffing requirements are crucial’.

8. Goals Soccer yesterday became the latest operator to suggest more consumers were abroad in Aug than domestic players would have liked

9. Sportech has announced that it has teamed up with Viggle in order to purchase fantasy sports assets, specifically DraftDay

10. UK manufacturing sector had weak July per ONS. Says output down 0.5% v same month year earlier

a. UK trade deficit worsened in July to £3.4bn from £2.6bn in June. Trade in goods worsened to £11.1bn v £8.5bn in June

b. NIESR has suggested UK growth probably slowed in 3mths to end August. Suggests growth of c0.5% v 0.6% in 3mths to end-July