Langton Capital – 2016-09-01 – New openings, holidays, Gala Coral, Brexit & other:
A Day in the Life:
So given that it’s the first day of autumn today, at least as far as the meteorologists are concerned, I’m considering the weather.
And, with that in mind, whilst I know that over-optimism is a well-known cognitive bias. is it just me or do most people look from weather forecast to weather forecast until they find one that they like?
You might flip from the BBC to Sky to The Times, The Telegraph or even The FT or to one of the specialist sites like Metcheck. Accuweather or Intellicast until you find a site that assures you it won’t be raining at 4pm when you had intended to spark up the BBQ. And then, if you’re anything like me, when it comes to the late afternoon and the rain is still bouncing six inches high off the patio steps, you curse forecasts for always being wrong.
So that’s a generalisation bias creeping in there too but over-optimism also exists elsewhere. When it comes to motor cars, for example, I’ve lost more wing-mirrors to over-optimism when driving through tight spaces than I care to remember and it exists in the stock market too, where the number of ‘story-stocks’, those promising gold from Mars or usable oil from fish plankton consider to attract funds.
It’s coz we’re human, hey? Anyway, on to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Punch is testing out its new Village Pub & Kitchen concept in its Falcon division, which helps to create village-based community pubs with a high quality food offer. The Mall in Woodhall Spa, Lincolnshire, is one such pub and will boast exposed brickwork, a premium but homely feel, and a modern kitchen capable of delivering an updated menu once it reopens. The second site will be The Malt Shovel in Lichfield, with further sites planned to follow on from the two pilot sites.
• Punch, development director, David Wigham, said of the initiative: ‘This is an exciting opportunity for us to deliver outstanding hospitality in some great British pubs. We have a significant number of pubs across our estate which could fit the Village Pub & Kitchen concept in due course.’
• Tsingtao has seen an 11% drop in net income to 1.07bn yuan for its weakest first-half profit since 2012. China’s second-largest brewery has suffered from tougher foreign competition, a sluggish economy and poor summer weather.
• A paper published in a scientific journal suggests that moderate drinking can help combat inflammation, cardiovascular diseases and frailty.
• Brown-Forman Q1 like-for-like net sales excluding excise taxes rose 2% and operating profit grew 6% on an underlying basis, although currency effects continue to weigh on its headline figures.
• Gaucho Group’s Graham Hall has left as managing director of its casual dining brand, CAU, as the group restructures its senior team.
• iNTERTAIN has launched a new menu at its Walkabout bars which plays up to the brand’s Australian theme.
• Drake & Morgan will convert two Corney & Barrow sites to its own brands by the end of the year, writes MCA.
• Fast-growing US-based MOD Pizza expects to open another four sites in the UK this year after opening its first in Leeds in May.
• GfK’s Consumer Confidence Survey shows consumer confidence improved in August by five points to -7, although consumer saving fell.
• Non-exec Restaurant Group director Mike Tye Tuesday bought 7,284 shares in the company at 410p.
LEISURE TRAVEL & HOTELS:
• Cox and Kings has posted an 11% increase in revenues to £79.5m and a 9% rise in EBITDA to £40.5m for the first quarter ending 30 June.
• Irish Continental Group says a decline in tourist bookings in the aftermath of the Brexit vote has since recovered. The owner of Irish Ferries saw passenger numbers slip by 1.9% to 688,600 in the six months to June 30 over the same period last year due to ‘significantly lower’ number of foot passengers. However, a 5.5% increase in car carryings to 170,500 helped drive EBITDA up by €3.9m to €23.9m.
• Gala Coral yesterday released its results for the 12wks to 2 July saying that net revenue rose by 10% to £264m. Regarding retail, the group says ‘OTC stakes were 6% behind last year driven by a smaller LBO estate (average of 1,819 LBOs in the quarter compared to 1,848 in the prior year – a 2% reduction), higher levels of recycling in the prior year due to lower margins, the impact of more stringent customer “source of funds” checks (estimated to account for 2 percentage points of the decrease) and weaker underlying horse racing stakes.’ Online revenues rose by 19% to £76m.
• Regarding current trading, Gala Coral says ‘trading in the 8 weeks post the quarter end has been positive, with continued machines growth in Coral Retail, sports stakes well ahead in Eurobet Retail and good volume growth in Online. Sports gross win margins are, however, behind last year’s levels primarily due to poor horse racing results in the UK (especially in the week commencing 15th August) and as a result of very strong prior year comparators in Italy.’
• The boss of 888 has ruled out a tie-up with Rank Group in the wake of its failed £3.4bn bid for William Hill but says the group will continue to grow ‘with or without M&A’.
FINANCE & MARKETS:
• Moneyfacts reports millions of savers have been “devastated” by the recent halving of base rates. The average easy access rate is now below 0.5% for the first time. Cash ISA rates are below 1%.
• Search for yield leads to property bubbles.
• Nationwide has reported a “slight pick-up” in house price growth in the UK in August. See above. The Nationwide says prices rose by 0.6% between July and August. However, the group says that the outlook is still “clouded”. It says ‘the pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months.’
• Eurozone inflation came in below expectations at 0.2% for the year to July, unchanged on the year to June
• Outgoing US president Barack Obama is to urge world leaders to use fiscal policy to boost their respective economies. This at a time when the US is one of the only countries in the world putting its interest rates up.
• India grew at its slowest rate in 2yrs in Q2 managing an annual rate of ‘only’ 7.1% (down from 7.9% in Q1).
• Canada’s economy contracted by 1.6% in Q2 on the back of lower oil and commodity prices.
• Nigeria’s economy is now in recession.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Punch Taverns has this morning updated on trading for 52wks to 20 Aug saying ‘performance in line with management expectations’
• Punch. Core estate in 1% LfL growth, debt down, no amortisation problems. Reports ‘retail division operating ahead of expectations’
• Punch reports ‘177 pubs identified to operate under the Retail contract, with 97 pubs trading or in progress of conversion at 20 Aug’
• Punch reports ‘2016 property valuation represents net uplift of c£40m on prior year valuation’
• Sports pub app MatchPint & CGA Strategy have compiled sales data in an attempt to discern the value of showing sport in pubs
• Brexit & F&B. MCA panel suggests ‘record spending levels at lunch and dinner, with breakfast also in strong growth
• Post Brexit ‘a quarter expect to reduce their eating out visits…while 13% expect to eat out more often’ per MCA
• UK pubs, a great institution but…See Langton comments in Telegraph here. This is not an industry where you can rest easy
• Booking data suggests destinations which have suffered terrorist attacks will continue to see a fall in international arrivals
• Hoseasons enjoyed a record summer of sales for 6th year thanks to a 14% y-o-y rise in bookings for self-catering specialist
• Overseas tourists attracted to London by weak ££ means hotels could stand to benefit from the aftermath of the referendum
• London hotel prices fell 16% last month to an average price per night of £143 – the lowest level since March per Trivago.
• CBI suggests optimism across UK service companies fell sharply post the 23 June vote but firms’ investment intentions lowest in 4yrs
• Mervyn King says Sterling’s fall mAy allow UK to re-balance away from imports. B of England data shows drop in mortgages to 18mth low
• Later Tweets: Punch debt. Yes, it’s high but it’s mortgage debt, not working capital, give Co a break. Debt to assets around 58%. Not too onerous
• Langton’s no chartist but FTSE100 graph looks as though it may be tipping over. UK down when other world markets better yesterday
• Corn & Wheat prices very low. Former now down 18% over last 12mths & latter down 23%. Soft input costs could depress other food products
• Wholesale milk prices up very slightly in July. Price still c20p per litre, down from 34p a couple of years ago. Good for food producers
• Punch. Could have free cash flow at some point. Enterprise is buying shares back. Punch could redeem PIKs and/or buy shares
RETAIL NEWS WITH NICK BUBB:
• High Street Sales Watch: It has been reported by Springboard that Bank Holiday footfall was down badly and it is rumoured that the BDO Fashion High Street Sales Tracker for w/e Sunday is particularly bad, but we haven’t yet heard from John Lewis (they would normally report their sales on a Tuesday for w/e Saturday, but because of the Bank Holiday last week’s figures won’t be announced until today). As usual, the weather determines much of the pattern of consumer spending in the short term…
• Yesterday’s Press and News: The row about the EU ruling about Apple’s massive tax avoidance in Ireland gets plenty of headlines today, although the FT also has a front page story headlined “Mood of caution emerges from mixed signals on economy after Brexit vote”, noting the improved GFK Consumer Confidence survey for August, as well as the lower mortgage approval and consumer borrowing figures. The FT market report leads with the bullish RBC report on Primark (ie ABF) and also notes their downgrade of Debenhams yesterday. The Times picks up the Sky News story that the Financial Reporting Council will announce today that it is no longer investigating Tesco’s former CFO Laurie McIlwee over the profit over-statement in 2014. Finally, the Yorkshire Post reports, loyally, that Morrisons has appointed the ex-Asda veteran Barry Williams as Trading Director for
• McColl’s: Today’s Q3 trading update (for the 13 weeks to Aug 28th) shows that LFL sales continued to fall, by 1.8%, but management still say that full-year profits will be in line with expectations and are pressing on with their transformational move into more upmarket convenience stores, with the big Co-op deal set to be approved by shareholders at the EGM on Sept 19th.
• FTSE Index Watch: Yesterday evening’s quarterly FTSE index review didn’t produce any great stories and Pendragon’s exit from the FTSE 350 had been flagged in advance, but it was still a bit of a surprise, as its market cap of just under £500m doesn’t seem that low and indeed it isn’t much lower than the £550m of its rival motor dealer Lookers. But the post-Brexit crash has taken its toll on Pendragon and the reduction in the number of issued shares via share buybacks hasn’t helped its cause, at the margin. Pendragon now joins newly promoted Motorpoint in the FTSE Small Cap index.
• John Lewis Partnership Sales Watch: We flagged yesterday that the hot weather in the South-East wouldn’t have helped the cause of John Lewis last week, given its impact on High Street footfall. And the sales fall of 3.5% gross in w/e Aug 27th implies that LFL sales were nearly 5% down, albeit the “back to skool” timing is broadly a week later this year. Ironically, Electricals had a solid week, at +2.6% gross on last year (boosted by sales of the new Dyson Hair Dryer), but the Home category saw sales fall by 1.7% gross and Fashion was heavily impacted by the warm weather, with sales down by 9.9% gross. Over the last 4 weeks, gross sales at John Lewis are cumulatively up by 0.5% (about 1% down LFL). In contrast, bumper sales of ice-cream and picnic and barbecue fare, as “shoppers prepared for an alfresco style Bank Holiday weekend”, boosted Waitrose, with