A Day in the Life:

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For previous emails, check out http://www.langtoncapital.co.uk/daily-notes/ 

So why is the plural of van, vans when the plural of man in men?

I mean I’m familiar with the concept of irregular verbs, I am, you are, he is, etc. so I suppose irregular plurals are not all that surprising but it does make it confusing for kids not to mention the couple of billion or so people who struggle with English as a second language.

And then there are all those words where you feel that you should stick an ‘I’ on the end. Hippopotami and octopi for example but, if the rule is that Latin based words ending in ‘US’ should take ‘I’ in the plural then what about campuses and viruses. And if animals should take the ‘I’ then why didn’t somebody mention that to Australia when it named the platypus?

Anyway, I suppose it’s easier to criticise than it is to build a language. I’d have a go myself but I couldn’t stand all that red, squiggly underlining that my computer would impose on me but commenting on the language is still fun. And, while we’re at it, why do we need the letter ‘C’? We have ‘K’ and we have ‘S’ and surely ‘Q’ could be replaced with ‘KW’ and why don’t we have an umlaut for longer vowels? On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Sept Coffer Peach Tracker has LfL sales +1.2% on same month last year. Restaurant operators outperform pubs. Says ‘Britain’s managed pub and restaurant sector is seeing steady, if unspectacular, sales growth in 2015, reflected in the latest trading data for September.’ It adds ‘collective like-for-like sales were up 1.2% on the same month last year, broadly in line with the underlying 12-month trend’.

• Tracker: ‘This year has generally been one of ‘steady-as-she-goes’ for the eating and drinking out market’ says Peter Martin. He adds ‘this time last year we were seeing growth of twice that rate, showing that despite the fact people are continuing to eat and drink out the bulk of any uplift in consuming spending is largely going elsewhere, such as on bigger ticket consumer goods.’ It could also be that new capacity is dampening LfL sales numbers.

• Tracker: ‘Numbers show that drink-led pubs performed strongly in last weeks of month, coinciding with start of Rugby World Cup’.

• Tracker: Restaurants +2.8% LfL in Sept with pubs +0.4% and wet-led operators helped by sunshine (but cooler weather).

• Tracker cautions competition across restaurants is ‘heating up, driven especially by ambitious brand rollouts by casual dining chains’.

• Tracker :Total sales +4.6% (+5.5% y-t-d) so new capacity is >3% across the sector. Restaurant total growth 7.5%, 10.6% outside M25

• Tracker: ‘London had a slightly worse month than the rest of the UK with LfL up 0.9% against 1.3% for the rest of the country.’ Indeed Coffer Group suggests ‘there is a continuing trend for operators to find value by the constant migration from an ever more expensive and competitive London area.’ David Coffer adds ‘tall trees can’t grow to the sky and there surely will be a point where rentals, premiums and menu pricing in central London become untenable. It will be interesting to see whether these trends continue.’

• Big ticket spending. Interesting to see UK automotive retailer Vertu report sales +14% and record £16.4m pre-tax profit for H1 to end-Aug.

• Sun Capital Partners founder Hugh Osmond has said the group’s new restaurant concept will focus on all-day dining, writes the M&C. He said that the group had decided to develop its own brand after talks to acquire one of Polpo or La Tasca fell through.

• Piper Private Equity research suggests London-based healthy food and breakfast-to-go operators could do worse than expanding into Manchester. 

• London-based Thai cafe concept Rosa’s has appointed Ed Francis, previously of Soho House, as operations director. Stephen Evans of GBK has also been brought in as property and development consultant ahead of the opening of its seventh site on Wilton Street, Victoria. Rosa’s co-founder Saiphin Moore commented: ‘The new additions to the team will help us take the business through its next stage of growth which may even involve bringing an experienced industry investor on board to accelerate our rollout.’

• Universities Superannuation Scheme (USS) is to acquire the Moto Group, the largest motorway service station operator in the UK. The USS, which is the UK’s largest pension fund, expects the two transactions to close later this month.

• Booker oversaw a 10% rise in operating profit to £75m and PBT to £74.1m despite a 1% fall in LfL sales to £2.2bn for the 24 weeks ended 11 September. LfL non-tobacco sales were up 0.6% and LfL tobacco sales were down 3%. Basic earnings per share rose 9% to 3.45p for the period, while its interim dividend has been pushed up 10% to 0.57p.

• Booker continued: The company commented on its oulook: ‘We anticipate that the challenging consumer and market environment will persist through the coming year and the UK’s food market remains very competitive. Whilst there is increasing price competition in the UK grocery and discount sectors, we will continue to deliver our plans to offer our customers even better choice, prices and service. We are on track to deliver an outcome for the financial year in line with our plans and to make progress in this challenging environment.’

• Tesco sells 14 development sites across southern England in transaction worth £250m

Holidays & Leisure Travel:

• Thomas Cook UK managing director Chris Mottershead has said the group is seeing signs of recovery following a ‘torrid period’. Mottershead told media at this week’s Abta Travel Convention that the group must combine the advantages of its heritage and long-serving staff with the latest technology, before announcing October 2015 as ‘the start of the next chapter’.

• Easyjet is looking to recruit over 1100 cabin crew and pilots after investing £2.7m in its ‘easyJet Gatwick Academy’. The new training centre will bring 40 jobs to Gatwick.

• VisitBritain data shows international visitors spent £2.5bn in Britain in the last four years as a result of its campaigns, beating the 2011 target of more than £500m. The GREAT campaign is thought to have added a further £630m in international visitor spend since January 2012. International tourism is growing fastest in the regions: visits to Wales in 2014 were up 7% on 2013 to 932, 000, Scotland visits rose 12% to 2.7 million, England (ex-London) visits increased 5% to 14.2 million and visits to London were up 4% to 18.8 million. VisitBritain is targeting international visit growth to Britain of more than 20% in the next five years to 42 million by 2020, or an additional £4.5bn.

• A survey of over 1,000 UK adults by Travelzoo has found that UK hotels offer the best customer service in Europe, with Spain second and Italy third. French hotels are considered to have the worst customer service. Boutique and luxury properties were named as the top hotel of choice, with London and Scotland rated as the top regions for service in each sector.

• PwC partner David Trunkfield has said the growth in the sharing economy will see a dramatic surge in the peer-to-peer business sector. The next decade will see 30% growth a year, with the value of peer-to-peer companies such as Airbnb estimated to hit $335 billion by 2025 against $15 billion in 2013.

Other Leisure:

• Rank Group Q1. Seen 8% increase in LfL revenues for 15wks to 11 Oct. Grosvenor +12% (total +12%), Mecca +3% (total +1%).

• Rank Q1: CEO Henry Birch says ‘the Group has had a good start to the financial year [with] a continued strong performance from our Grosvenor Casinos brand’. Digital is particularly strong.

• Rank sees ‘improving admissions trend in our Mecca venues combined with good growth in Mecca’s digital business.’ CEO Henry Birch continues ‘we continue to work on our five strategic priorities, particularly the development of our new digital platform which is on track to be launched in calendar Q1 2016 and we will provide a more detailed update at our forthcoming interim results in January 2016.’

• Rank London casinos ‘seen strong growth in revenue, up 19% compared to 6% in the provinces.’ Digital revenue +56%

• Rank’s bingo halls see increase in spend per visit offset by a reduction in customer visits but says ‘rate of decline in admissions has continued to slow’. Digital revenue was +10%

• Rank re outlook: Says ‘Board is encouraged that all of the Group’s businesses continue to make progress in line with management’s expectations and it remains confident in the Group’s prospects for the year.’

• Netflix reports Q3 miss with subscriber numbers below expectations. Profits also undershot, shares down 12% in after-hours trading. Netflix added 880k customers in Q3 against estimates as high as 1.25m.

• PE firm Terra Firma has been granted an extra year to sell off Odeon and UCI Cinemas Group. The 10-year buyout fund raised in 2004 – already extended previously – is now set to end in March 2017.

• Twitter is cutting 336 jobs, roughly 8% of its global workforce, as part of a restructuring of the business. The move comes just days after co-founder Jack Dorsey was confirmed as Twitter’s permanent chief executive.

Finance & Markets:

• Britain’s unemployment rate fell to 5.4% in the three months to August, down from 5.5% in the previous quarter, according to the ONS. The number of people in employment jumped by 140,000, pushing the employment rate to 73.6%, the highest since records began in 1971.

• Average earnings increased by 3% in the year to August, 0.1% up on the previous month and the highest since May.

• World markets: UK and Europe down yesterday. US down in later trade, Far East up a little in Thurs trade

• Oil price down over the last 24hrs to trade around $49.30 per barrel of Brent crude

• Consumer price inflation in China for September was 1.6% compared to analysts’ forecasts of 1.8% and 2% in August. Producer prices fell for a 43rd straight month as manufacturers cut prices to win business.

Retail Roundup from Nick Bubb:

WH Smith: Back on Aug 20th, in the pre-close update for y/e August, WH Smith said that, thanks to High Street sales being boosted over the summer by “some favourable publishing in books”, it expected the profit outcome for the year to be slightly ahead of the consensus of analysts’ expectations and today’s finals show that PBT was up 8% to £123m, with another chunky final dividend. The outlook statement says that “Looking ahead, our focus will remain on profitable growth, cash generation, investing in new opportunities and evolving our customer proposition, all to ensure we are well positioned for the future”. The analysts meeting in the City is at 9am.

Game Digital: Back on Aug 11th, in the pre-close update for y/e July, Game Digital said that it expected adjusted EBITDA to be in line with the market consensus of £46m-47m and that it also expected the overall UK video games market to grow slightly over the next twelve months. Well, yesterday’s share slump to 200p implied that something might be amiss, but today’s finals are in line, with adjusted EBITDA emerging at £46.9m (down 9%), and there is no profit warning: “Group trading so far this year has been in line with our expectations…Overall, given positive market dynamics together with the increased investment in the business, at this early stage in the year the Board expects the Group to achieve growth in the year ahead in line with expectations”. The analysts meeting in the City is at 10.30am.

Booker: Today’s interims from the grocery wholesaler Booker cover the 24 weeks to 11 September and, despite very sluggish top-line sales, PBT was 10% up at £74m.  As usual, the highly regarded Charles Wilson, the CEO, says “Our plan to Focus, Drive and Broaden Booker Group is on track”. A presentation for analysts is being held at 8.30am.

Burberry: We haven’t had time to look that closely at the Burberry Q2 update today (for the 3 months to end September), but the worry beforehand was that group performance would be hit by the slowdown in China and the comment that “For FY 2016, we expect that adjusted PBT will be broadly in line with the average of those analysts who have recently downgraded forecasts” is ominous, with the news that H1 Retail sales were only up by 2% underlying, “in an increasingly challenging environment for luxury customers”, implying that Q2 sales were down…

Tesco: Every little helps to prop up the Tesco balance sheet and Tesco has announced today that it has agreed the sale of fourteen Spenhill development sites across London, the South East and Bath, to a fund and clients advised by Meyer Bergman. The transaction is worth £250m.

N Brown:
Yesterday’s interims from the home shopping group N Brown seemed reassuring, in the context of its much-touted transition to be a Digital-led business, but we didn’t expect the shares to be nearly 8% up, in a dull market. Analysts and investors seemed pleased with the improved Q2 sales and the good start to H2, as well as the improved disclosure on margins and costs. H1 underlying trading profits of £35m were down 16%, but profits in the seasonally much more important H2 are expected to be ahead by at least as much. Management pointed to £8m of P&L “drags” in H1, namely a marketing spending timing impact of £2.8m, extra new store operating costs of £3.2m and higher depreciation of £2m. Interestingly, the hefty exceptional charges in H1 were mainly to do with the write-offs associated with the closure of all the stock clearance outlets. However, all
in all, it looks as if the embattled CEO Angela Spindler has at last learnt the wisdom of the WH Smith mantra of “under-promise and over-deliver”.

Today’s Press and News: 
The main talking point in the papers today is the profit warning issued by mighty Wal-Mart yesterday and the FT gives that lots of coverage, with Lex column thundering that, after the 8% share price collapse, “Everyone saw that the trend was bad. Few anticipated how bad. And now that the scope of Walmart’s problems is clear, the company has presented a plan that will reassure no one”. More parochially, the other papers focus on the results from N Brown, given the fashion model photo opportunities, although Tempus column in the Times says that the shares should be “avoided for now”. There are also a few articles about the news that M&S has launched its “Sparks” loyalty card, eg in the Times, whilst the Guardian flags that Dave Forsey of Sports Direct has denied the charges against him over the USC collapse and the Daily Mail has a
big feature on the luxury goods company ST Dupont, which is chaired by Sharon Flood.

Store Opening Watch: If you’re in our beloved Oxford today, then by all means pop along to the Waitrose store opening on the Botley Road in West Oxford (the 24,500 sq ft unit has meat, fish and deli counters, a bakery and a 90-seat café). If, on the other hand, you’re in central Madrid today, then you could battle the crowds to see the big new Primark flagship store opening on the Gran Via, in the main shopping district (which ABF analysts were taken to see last night).

nicholas_bubb@hotmail.com

Wednesday 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:

Marston’s Q4 update – a few thoughts:

• LfL sales in Premium & Destination (+1.8%) and Taverns (+2.0%) are at the top end of expectations.

• The fact that both food & wet sales in P&D were +1.7% suggests that accommodation and/or machines did well. The former has been a feature across a couple of operators (e.g. JD Wetherspoon) and Marston’s goes to the trouble to point out that it will open at five lodges in FY16.

• Worth noting that the growth in sales in the last 11wks have been ahead of the 52wk figure – see earlier email.

• Strength in Leased (at +4% in terms of profit on a LfL basis) suggests that wet sales have been good.

• Beer numbers (+5% LfL in volume terms) would seem to confirm this.

• The improved ‘quality’ of earnings is worth mentioning. The string of dilutive disposals of bottom-end units has now run its course and the group should be able to generate near double-digit earnings growth from a high-quality portfolio of assets.

• The group’s rating (12.1x historic and 11.2x FY16 earnings) is undemanding and the prospective yield of 4.8% is attractive.

Employment numbers and earnings:

• ONS has reported that UK unemployment rate fell to a 7yr of 5.4% in the 3mths to August.

• Mark Carney at one stage had ‘forward-guided’ that he would put interest rates up when or if the rate of unemployment fell below 7%

• The number out of work is now around 1.77m and the proportion in employment has risen to 73.6% (22.77m), the highest on record

• Meanwhile, average earnings in the quarter were up by 3.0% including and by 2.8% excluding bonuses.

Holiday spending:

• ABTA has reported that 23% of those questioned in a study of 2,000 adults said that they expected to spend more on their holidays next year.

• That was portrayed as good news and, in an environment where inflation has been confirmed as less than zero, perhaps it is.

• Around 15% of respondents said they would spend less money on holidays in 2016 than they had this year.

• Away from financial considerations, 18% said they would travel to a country they have not previously visited next year, compared with 9% last year. That suggests that individuals try a new country every five years or so. Seems reasonable – perhaps a shade ambitious.

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

• Oil price below $50. Will have an impact, in time, on 1) pricing structure for tour operators etc. and 2) more immediately on consumers via the price of petrol.

• SAB Miller share price the big mover yesterday. Some chatter in the Press that the competition authorities may not be a walkover.

• Domino’s is still delivering. Get it?

• Interesting to see that while certain pension funds in the US are considering suing Tesco over its profit misstatement, it would appear that Warren Buffett isn’t.

• SAB / AB InBev. Interesting to see that the 5th offer was the one that succeeded. Pays not to believe that the first offer is the last