Langton Capital – 2016-06-24 – Brexit morning after, outlook for leisure, hotels & other:
A Day in the Life:
So that didn’t go quite the way that the bookies expected.
The pollsters seem to have been right and the money that was put down in the country’s betting shops and in the markets was wrong.
We’re in uncharted territory. Will the PM (and Chancellor) resign, will Boris be PM by the end of next month, what does it mean for London as a financial centre, what will happen to house prices there and elsewhere etc. etc.?
There’s a geographic split and a demographic split and a general feeling of uncertainty but, in the meantime, the markets have been open and they have had their say.
Sterling is down against the US$ by around 10% and is trading at it is lowest level for over 30yrs. The market is forecast to open more than 500 (or c10%) points lower.
And there will be a degree of uncertainty going forward. All of which is not necessarily very good for the markets, capital or, ultimately, labour. Anyway, on to the news:
RECENT WEBSITE ARTICLES:
• Continue evolution in casual dining (22 June) – here
• Margin-watch. Rising costs but price rises hard to come by (21 June) – here
• Pubs & restaurants, trading trends – here
• Other recent notes – here
• Ongoing tweets, older emails found – here
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• Brexit not helpful for domestic stocks. GDP expected to be lower, less money to be spent etc. But life goes on.
• We’ve got decent weather, the football, rising real wages but, on the other hand, we’ve now got a Brexit to deal with.
• Labour says Jeremy Corbyn is now the only leader capable of uniting a divided Britain
• After confirming that his company was to purchase Harris & Hoole from Tesco, Chairman & CEO of Caffe Nero Gerry Ford said yesterday ‘today’s acquisition is the start of an exciting new journey for both Harris & Hoole and Caffè Nero. Harris & Hoole has a strong reputation for high quality coffee and that is what Caffè Nero is all about. This focus on coffee quality coupled with their enthusiastic and knowledgeable baristas give me reason to be excited about developing and growing the Harris & Hoole business over the coming years.’
• Domino’s Pizza Group has confirmed that its 3 for 1 share split will take place from Monday morning. Shareholders will own three times as many shares in the company as previously but the share price should drop by two thirds.
• Enterprise Inns yesterday bought back 120,100 of its own shares for cancellation at around 95p. They will be cheaper today
• Whitbread is incubating a new all-day dining concept called Picknic Kitchen and will be trialling its first site in Milton Keynes this autumn, writes MCA. The concept will boast a varied menu and smaller portions so that customers can mix and match various dishes, reflecting customer trends in the sector.
• A new study has confirmed Paris as the world’s booziest city, with some 690 million bottles of wine consumed in the French capital a year. Conducted by INSEEC business school and the International Organisation of Vine and Wine (OIV), the study put London in fourth place, behind Ruhr (in Germany) and Buenos Aires.
• Just Eat’s chairman, John Hughes, has sold 265,000 shares in the digital takeaway marketplace at 442.32p per share.
• MCA’s latest EatingOut Panel data shows soft drink consumption spiked in the first quarter, outperforming coffee and alcohol. Hot drinks lost market share across all day parts after being dragged down by a fall in coffee.
LEISURE TRAVEL & HOTELS:
• Brexit hits Sterling. That hurts overseas travellers (poss. TCG, TUI) but should drag in more visitors to UK (MERL, some hotels).
• Hotel market ‘could face strong headwinds for future growth’ post Brexit vote reports STR. It says ‘while is it impossible to quantify the exact extent of the proposed Brexit, it most likely would have some impact on current hotel performance in the U.K.’
• STR says hotels growth could stall on Brexit. Says ‘London and Regional U.K. hotels have experienced the longest 12-month moving average period of RevPAR growth since January 2007, albeit growth has slowed recently.’ STR says that it and Tourism Economics ‘believe the recent fluctuation of the British pound on the currency market exchange is an early indicator of the overall impact that Brexit could have on the overall economy—which would filter down to the hotel industry. Most of the impact is likely to be on travel confidence, especially business travel, which is likely to derive from the uncertain environment.’
• STR says ‘one possible Brexit scenario would be negative for London’s hotel industry’. Says size of hit ‘is difficult to gauge’.
• Lower rate of Sterling could pull in overseas visitors. Won’t help those going abroad over the summer, however.
o US hotel industry occupancy fell 0.1% to 74.6% in the week ending 18 June, while average daily rate rose 3.5% to $126.89 and revenue per available room rose 3.3% to $94.62.
o Major destinations are at risk of becoming ‘overcrowded’ as a result of the growth of home-sharing sites, according to Abta’s chief executive. Mark Tanzer highlighted New York City as one destination that has started to put limits on the letting of private apartments but said the issue will be ‘increasingly pressing on major tourist destinations’.
• Travel money outlets have come close to running out of cash ahead of the EU referendum amid a jump in demand for dollars and euros. The Post Office, which processes one in four of all UK foreign exchange transactions, saw currency sales jump 74% year-on-year on Tuesday.
• Four board members as well as CEO Federico Tejera have been ousted from Spain’s NH Hotel Group as a result of a potential conflicts of interest with its largest shareholder. Chinese conglomerate HNA recently acquired NH Hotel’s rival firm Carlson Rezidor earlier this year. An NH pokesperson commented: ‘The Board is willing to work with HNA to resolve the conflict of interest created by the Carlson Rezidor transaction and, if appropriate, will look for the mechanism to welcome them back to the Board. We will explore any opportunities that are in the best interest of all shareholders. The current focus is to make NH Hotel Group stand robust as an independent entity whilst achieving best in class corporate governance practices.’
• Ryanair is looking into launching a budget hotel booking site later in the year which will allow customers to book rooms alongside their flights.
• Major airlines including EasyJet, British Airways, and Ryanair have all been affected by a walkout by French air traffic control staff. Thousands of travellers have been affected by what amounts to the 10th day of strikes by the country’s ATC unions in just the last three months.
• Blackberry has posted a $670m (£450m) net loss in the last three months – almost three times the loss made in the preceding quarter. The technology group has suffered from restructuring costs and a write-down of assets, without which Blackberry would have recorded a modest $14m profit. The Canadian mobile phone company maintains that full year losses will be lower than expected.
FINANCE & MARKETS:
• UK votes to leave EU, Sterling drops by 10% vs US dollar.
• World markets: Will be very different today but, yesterday, UK, Europe & US markets rose. Far East down in Fri trade
• Oil price down sharply on Brexit vote. Brent Crude trading at around $48.40 per barrel.
• Eurozone services PMI down to 52.4 in June from 53.2 in May. German manufacturing PMI rises to 54.4 from 52.1
RETAIL NEWS WITH NICK BUBB:
o News Flow Next Week: After all the focus this week on the outcome of the EU Referendum it will be a relief to get back to normal next week, which begins with the start of Wimbledon on Monday (come on Andy!) and the England vs Iceland game in Euro 2016 on Monday evening. Then Tuesday brings the Ocado interims and the Carpetright finals, plus the latest Kantar/Nielsen grocery market share figures, with the Dixons Carphone finals and the ASOS Strategy Day following on Wednesday. And as the end of the month is coming up fast now, we get the CBI Distributive Trades survey for “June” on Tuesday and the monthly GFK Consumer Confidence survey first thing on Thursday.
o John Lewis Partnership Sales Watch: Last week’s trading was a bit subdued by the wet and cool weather: at John Lewis, w/e June 18th saw overall gross sales up by 4.2% on last year (despite a 239% increase in umbrellas sales), so that over the last 20 weeks John Lewis sales are now running up by 5.3% (just under 4% up LFL). Over at Waitrose, sales over the last 20 weeks are now up by 2.8% gross (up a tad LFL), after a modest 1.4% increase in gross sales last week.
YESTERDAY IN A NUTSHELL – SEE LIVE TWEETS ON WEBSITE:
• Some of our morning tweets: MCA says pubs turnover growth to pick up. Restaurant growth is still higher but is slowing down.
• MCA reports total pub turnover of £21.55bn across c47,500 outlets. Number of outlets to fall to 45k by 2019.
• MCA quotes tone as generally optimistic but says ‘tempering this optimism slightly, increases to business running costs’ remain a concern
• Cloverleaf founders John Winder and Gary Douglas are preparing to open their first Touchwood site alongside Joseph Holt this August
• Visa study shows average UK household spending c£9,300 a year on international travel by 2025.
• BA has ‘indefinitely’ suspended flights to Sharm el-Sheikh days after hopes were raised that air services from the UK would resume
• Other Tweets: Gold oil price (no. of barrels needed to buy one ounce) down to 25.3 from 26.3 last week on calmed nerves. Was >34 in March.
• Hog prices at 12mth highs (+7%) & feeder cattle at 12mth lows (down 36%). There must be a reason but what would that be then?
• Lower beef vs pig prices mean Langton favours burgers. May be less bacon on the summer BBQ.
• Polls open. Neck & neck, my eye. Likely to be a landslide ‘stay’ in Langton’s opinion. Though we stand ready to erase this Tweet later…
• Sterling at 6mth highs. Real money being bet on a ‘stay’ vote. Punters lie to pollsters, what can I say?
• Summer holiday bookings said to be unaffected by EU poll. Booking to end May running ahead but fell June on poll & Euro footie
• If Iceland beat England? Buy holiday stocks & strong liquor. The former will rise & the latter’s for medicinal purposes…