Langton Capital – 2016-06-15 – Pubs code, DP Poland, Restaurant Group, Sky & other:
A Day in the Life:
Langton’s got an out-of-office 7.45am meeting this morning so no Day in the Life today. On to the news:
RECENT WEBSITE ARTICLES:
• Evolution in the coffee market – here
• London pubs – here
• Other recent notes – here
• Ongoing tweets, older emails found – here
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• An updated pubs code was published yesterday. The drafting errors that led to a delay in its implementation last month are said to have been ironed out. The code will now need to go through both Houses of Parliament but is expected to be implemented before parliament recesses for the summer on 21 July. Any delay in its implementation will be kept to a minimum.
• Pubs code to come into force the day it passes through Parliament.
• Pubs code says ‘the pub-owning businesses and tied tenants affected by these regulations have been aware since March 2015 that the pubs code, and associated regulations, should have come into force by 26 May 2016 and have been planning on this basis. It is the department’s intention that the delay should be kept to an absolute minimum and the pubs code regulations, together with this instrument, should be in force as close to that deadline as possible in order to offer the protection of the code to tied tenants. Accordingly, in all the circumstances, there are strong reasons for curtailing the usual 21-day period, and providing instead that this instrument commences the day after it is made.’
• Fitch Ratings has reviewed the UK pub sector & concluded that the outlook is still negative.
• Fitch says re pubs ‘there are new drivers of ongoing structural decline.’ It says younger people may shun the pub
• Fitch Ratings says re younger consumers ‘rising student loans, together with higher costs of living result in drinking and eating out being less affordable.’ It adds ‘cultural changes, partly driven by millennials, may also be shifting consumption towards lower volumes of higher quality craft beers with production increasing over the last few years, whereas total on-trade beer volumes have reduced.’
• Fitch on pubs: Says ‘we see a potential slowdown in organic revenue growth as estates move towards being fully invested. The route for future profit growth seems to be mostly attainable through acquisitions.’
• Fitch says bid activity in the pubs sector is ‘increasingly likely’ as organic growth may become harder to come by
• Fitch on pubs. Says costs rising, demographics unhelpful. Concedes that bid activity may support share prices
• Fitch negative for consumers overall. Says ‘we perceive some related longer-term risks as a widespread reduction in income levels and greater unemployment could suppress consumer spending.’
• Restaurant Group has announced that Barry Nightingale, last CFO of Monarch but also ex-Airtours, Betfred, is to join as CFO. The group says ‘Barry is an experienced CFO, having recently held that role at Monarch Airlines, where he played a considerable role in the turnaround and prior to that, at leisure giant Betfred, where he led the successful acquisition and integration of the Tote. He has previously held senior finance roles at UK Car Group, Easy Everything and Airtours, having qualified as a Chartered Accountant with Deloitte.’ CEO Danny Breithaupt adds ‘I am pleased to welcome Barry to the Company. I am delighted that he is able to join immediately and will be able to contribute to and support the implementation of the ongoing review of our operating strategy and brands.’ Chairman Debbie Hewitt comments ‘Barry has a broad commercial background and
• DP Poland has reported that NE Director Chris Moore has bought 1.2m shares at around 32.5p per share. Mr Moore now owns 2.19% of the company (some 2.9m shares). Chris Moore was CEO of Domino’s Pizza UK & Ireland for the four years to end-2011.
• BBPA chief Brigid Simmonds has called Cheltenham Council’s decision to abandon its Late Night Levy in favour of a Business Improvement District ‘very encouraging’.
• Epos data from a sample of 500 UK pubs suggest the industry enjoyed an estimated 26% uplift in sales over the opening weekend of Euro 2016. Wales saw the biggest increase, with sales up 41% on 2015, while English pubs saw a 23% rise.
• Sky has announced a 10% price increase for its commercial customers from 1 August 2016 ahead of the new football season, making it the second increase in six years. The broadcaster is looking to recoup some of the £4.176bn it paid for 126 matches (making for an average cost of some £11.07m per game). The total cost of the Premier League football rights came in at £5.136bn, marking a 71% increase on the last three-year rights deal, and was shared with rival broadcaster BT.
• Fuller’s is launching a marketing campaign focusing on the quality of its dishes and how the pub group’s chefs use ‘only the finest, freshest ingredients’. Simon Emeny, Fuller’s Chief Executive, said: ‘In recent years, food has been a big driver for our business and our customers are expecting the very best when they dine with us. We always plan for the long-term and this campaign raises the profile of food in Fuller’s, showcasing the very people that make it happen – our excellent chefs.’
• Toys ‘R Us posted a 13% rise in adjusted EBITDA to $79m and consolidated net sales of $2.32bn in Q1. The Bain-backed retailer also announced plans to refinance, with 50% of its debt set to mature in the next two years.
LEISURE TRAVEL & HOTELS:
• STR’s May Pipeline Report for Europe shows 145,299 rooms in 960 projects under contract, up 9% year-on-year, with 63,759 rooms in construction. The UK reported the most rooms in construction with 15,481 rooms in 154 hotels. Three additional countries reported more than 5,000 rooms in the construction phase: Germany (10,535 rooms in 54 hotels); Turkey (8,245 rooms in 54 hotels); and Russia (7,379 rooms in 36 hotels).
• A total of 509,626 rooms in 4,151 projects are under contract in the US, making for a 19.7% increase year-on-year, according to STR.
• Lobby group Airlines for Europe estimates thousands of European passengers were at risk of travel disruption yesterday as more than 100 flights were cancelled. Ryanair alone has had to cancel 44 flights in the first week of Euro 2016 due to strike action in France, where air traffic controllers have had nine strike days in the past three months.
• A4E managing director, Thomas Reynaert, commented: ‘We are reaching a pathetic milestone: more than 50 ATC strikes in France over the last seven years which account for more than 150 days of disruption. The European Commission and governments must act immediately to protect the rights of millions of European travellers affected by this repeated and disproportionate industrial action.’
• Princess Cruises has established a new sales operation team in the UK to be headed by former sales communication and events executive Victoria Snelgar.
• Business travel in western Europe is set to grow by 6.3% to $211.2bn in 2016 and 6.8% in 2017 to $225.6bn despite recent terrorist attacks, according to a GBTA forecast. GBTA said that the main reasons for this projected growth in spending included low oil prices and interest rates, improved employment prospects and higher consumer spending.
• The Islamic State-inspired gunman responsible for the deaths of 49 people at a gay nightclub in Florida might have considered the nearby Disney World resort as a possible target. Security at US theme parks has been stepped up as a result of the reports in People magazine.
• Betfred is to pay out more than £800k after it was found that one of its customers was betting with stolen money
FINANCE & MARKETS:
• UK inflation rate (CPI) remains unchanged at 0.3% in May. Transport costs rose but clothing & other costs fell. The rate as measured by the RPI rose to 1.4% in May from 1.3% in April.
• UK house prices rose by 8.2% in the UK as a whole over the last year reports the ONS’s UK House Price Index. Prices rose by 14.5% in London but they rose by only 0.1% in the North East.
• US retail sales rose by 0.5% in May reports the US Commerce Department. The rise was the steepest since March last year
• German 10yr bond yields have moved below 0% for the first time.
• World markets: UK & Europe down yesterday & US lower in later trading. Far East trying to break trend as shares up in Weds trade
• Oil a little lower at around $49.15 per barrel
RETAIL NEWS WITH NICK BUBB:
• Today’s Press and News: The Ted Baker results and the continued share price collapse of Ocado get a decent amount of coverage and there is plenty of focus on the news that Philip Green has decided to attend the BHS hearing this morning, but the big news, ahead of tomorrow’s Poundland final results, is that a mystery buyer has snapped up most of Warburg Pincus’ stake in Poundland at 195p, a big premium to the current price…
YESTERDAY IN A NUTSHELL – SEE LIVE TWEETS ON WEBSITE:
• Some of the early tweets. Pragma consulting says independent coffee shops are fighting back after the massive Starbucks/Costa expansion of the last c15yrs
• Visa UK’s Consumer Spending Index up just 0.8% in May but strongest spending growth was observed in hotels, restaurants & bars (+6.7%)
• Greggs is planning to increase the number of healthy options on its menus with a gluten-free range and more vegetarian products
• French government asks cities hosting Euro 2016 matches to ban alcohol near venues and fan zones in the wake of last weekend’s violence
• Countrywide figures show Londoners spend c60% of their income in rent and prices in the capital have risen by 48% since 2007
• Preliminary data from STR indicates a 2.8% drop in occupancy in London during May as a 2.5% increase in supply met a drop in demand
• Elegant Hotels reports H1 numbers. Says it has turned in ‘a solid performance in a challenging trading environment.’
• ECB policies are ‘appropriate’ says Jens Weidmann, boss of the German Bundesbank. He cautioned against further easing
• Fed meeting concludes Wednesday. Chance of a rate rise slim to non-existent. Chance of a July rise said to be c20%.
• Other Tweets. Sterling sharply lower (from 147c to 141c in a week) as Brexit poll looms. Said to be a 40% chance of exit
• Lower Sterling has obvious (but opposite) implications for UK tourist spots, MERL etc. and overseas travel TCG, TUI
• We get it, there’s no inflation. So how come oil doubled, sugar is +58%, corn is +21% NLW coming in etc. etc. Some sort of dislocation here
• VIX up, bond yields at record lows, oil price edging back. Risk off. Gold/oil up to 26 barrels per ounce, was 24 last week
• Pound down, Brexit possibility up. How long before someone says ‘buy the US$ earners’?
• London hotels. Occupancy down, rates up. That won’t last. Someone likely to break ranks & cut prices if demand is lower
• Amazon Fresh finally hits the Ocado share price. Latter = biggest faller in 250 yesterday (down >7%) & down c10% today