Langton Capital – 2016-09-13 – Goals Soccer, Sportech, staycations, spending & other:
A Day in the Life:
So what are the dangers of using Google Translate when corresponding for business purposes?
Well, they’re many and varied.
You may get the tone wrong, the nuances can’t really be got across and, occasionally, the vocabulary can be inappropriate as in the following (honestly true) story.
Niece prepares for prom. Likes the look of a silk dress. Can have it made to order in and shipped from China at an acceptable price so begins process of online registration, uploading details etc.
Height, ok. Waist size etc. seemed simple enough but, when she was asked for the size of her udders, she realised that she was communicating with someone whose English was perhaps not as good as it had first seemed. On to the news:
RECENT WEBSITE ARTICLES:
• Summer trading – here
• Over-expansion issues – here
• JD Wetherspoon numbers – here
• JD Wetherspoon analysts’ meeting – here
• Greene King trading update – here
PUB, RESTAURANT & DRINKS PRODUCERS:
• JD Wetherspoon is offering its 24,000 workers the option to move from zero-hour to permanent contracts following a successful trial earlier this year. Sports Direct and McDonalds have recently made similar decisions.
• TUC welcomes JDW move on zero-hours contracts saying ‘this would be great news for workers’. It adds ‘guaranteeing staff minimum hours is much better than leaving them unsure about how much work they will have from one day to the next. We hope that other employers follow suit. The success of the Wetherspoons trial proves that businesses can be successful without zero-hours contracts.’ JDW boss Tim Martin reports ‘we’ve already offered guaranteed hour contracts to a percentage of our workforce and they’ll all be offered one in the next three months.’
• JDW yesterday bought back 35,000 of its own shares for cancellation at an average price of 916p.
• A Visa & Markit Expenditure survey has suggested that consumer spending grew at its weakest pace in 15mths in August. It says spending fell by 1.4% month-on-month, versus a 1.1% rise in July (and a 0.5% drop in June.) The m-o-m series is always likely to be relatively volatile but the damage was done in August by a drop in spending on the High Street. Bars and Restaurants traded relatively well. The poll’s authors suggest ‘we will need more time and more data to see if anxiety around the Brexit vote and uncertainty over the UK’s economic future leads to a continuation of muted expenditure growth, or an outright decline in spending.’
• Employers in six out of nine sectors are less optimistic about adding jobs following the Brexit vote, according to the Manpower Employment Outlook Survey. The study of 2,100 employers highlighted financial services, construction, and utilities as reporting the biggest drops in confidence, and although UK job prospects held steady, Manpower commented that ‘cracks in the ice are appearing’. There has also been an 800% rise in applications for finance jobs in Dublin since the referendum.
• Mark Cahill, ManpowerGroup UK managing director, said: ‘Many finance operations in the City of London depend on the EU ‘banking passport’ and the fall in hiring intentions could reflect pessimism over the future of this agreement. The future of freedom of movement across the EU is of particular concern. As UK businesses are reliant on European talent to help fill the skills gap, we urge the government to prioritise maintaining the free movement of people across the EU during its negotiations.’
• The richest 1% of the UK population owns more than 20 times the wealth of the poorest 20%, according to Oxfam. The charity added that the news, which makes Britain one of the most unequal countries in the developed world, might have contributed to the EU referendum vote, and has urged Theresa May to close the gap between rich and poor.
• ‘Whatever your views on Brexit, the referendum brought divisions within our country to a head, with many people expressing distrust and disconnection with political processes and voting for change in the hope that it would improve their economic position,’ Oxfam said.
• Leisure services and inventory firm Christie Group has posted an operating loss of £0.9m (H1 15: £1.7m) and negative EPS but is expecting a ‘profitable second half’. Revenue was marginally down from £31.7m to £31.6m. The National Living Wage increased the service group’s cost base, while the ‘quantum of the first-half operating loss was compounded by commissions foregone in a reaction to the EU referendum decision’ and increased investment to drive growth.
• Commenting on the results, David Rugg, Chief Executive of Christie Group, said: ‘After a difficult first half in the run up to the EU referendum, progress has resumed. We have stepped up the margin in our stocktaking division and are seeing increased activity in our transactional business. We look forward to a stronger finish to the year.’
• The Guild of Beer Writers has debated the future of the British pub in front of an audience of around 50 brewers in Leeds. The audience debated the proposal that ‘coffee shops, café bars, restaurant chains and take-aways are making the traditional pub less relevant’. The proposal was voted down at the end of the debate.
• Pragma Consulting reports that domestic tourism is ‘shining through the gloom’ post the Brexit vote. It says ‘the weaker pound [which admittedly has been strengthening recently] has made our shores more attractive for foreign tourists, but a large share of the uplift has been due to Britons choosing to holiday at home rather than abroad.’ Pragma reports ‘a record-breaking 7.3 million people have opted for a staycation this year. A year-on-year increase in staycation spending of over 17% in 2016 is expected, amounting to a £2.4 billion boost to the UK’s tourism industry (valued at £127bn in 2015).’
• Carlsberg UK is teaming up with Brooklyn Brewery to handle the exclusive distribution of the latter’s portfolio of beers in the UK. Brooklyn Brewery’s range of drinks include Brooklyn Lager, Brooklyn Scorcher IPA, Brooklyn Summer Ale, and Brooklyn East IPA.
• The latest WSTA Market Report shows that the gin and wine trades continue to thrive in the UK, with over £1bn of fin sold over the past year. Sparkling wines sales have risen in the on-trade by 19% to £97m. With 49 new gin distilleries opening up across the UK over the past year, gin sales broke all previous records as the ‘gin revolution shows no signs of slowing’.
• The ALMR has written to the Department for Business Innovation and Skills about the ‘unfair, unworkable’ changes to business rates revaluation. ALMR Chief Executive Kate Nicholls said: ‘The proposed changes to the appeals system are unfair, imprecise and potentially unworkable in practice. The ALMR has written to the BIS to highlight this point and to urge a rethink against such a last-minute development.
• ‘The new guidelines revolve around the idea of “professional judgement” regarding valuation. Clearly, such a subjective notion is going to cause problems and inconsistencies throughout the process and across the entire system. There is no indication of how professional judgement is to be assessed, how it will be implemented or what margins of error permitted.
• ‘We also have the added problem of pub valuations being based on hypothetical fair maintainable trade. Additional scope for interpretation will only increase the probability of error in the system.’
• Lanson UK turnover rose 5% to £36.4m in 2015, although operating profit slid 38% to £1.1m as the ‘consistent growth’ of cheaper options such as Prosecco put pressure on its margins.
• Prezzo has reported a 13% increase in revenue to £213.8m for the 53 weeks ended 3 January 2016 as adjusted profit before tax fell slightly from £23.3m to £23.1m. The group’s estate grew from 259 restaurants to 276 and it aims to open 25-30 new sites each year going forward.
• Sainsbury’s is to introduce 200 digital click-and-collect points across its estate with Argos. Sainsbury’s completed its £1.4bn acquisition of Home Retail last week.
LEISURE TRAVEL & HOTELS:
• British holidaymakers may have to apply for visas to visit Europe once the UK leaves the EU should member states choose to adopt a model similar to the US waiver. The European Commission (EC) is due to unveil draft legislation for the EU travel information and authorisation system (Etias) later this year.
• Travellers could soon be able to pay £5 to skip passport queues at some UK airports, after the Home Office reportedly approved a controversial scheme. The move would be on top of existing time-saving charges like paying for priority boarding, but has been labelled a gimmick by unions.
• Gatwick has criticised ‘out of date’ growth forecasts and has reiterated its call for a second runway after reaching the 42 million-passenger mark 14 years sooner than expected. The Airports Commission had predicted that Gatwick would hit the landmark in 2030 and this data had been included in the government’s enquiry into airport expansion. Gatwick chief executive Steward Wingate said: ‘Our performance proves beyond any doubt that the Airports Commission’s report is fundamentally flawed… The Airports Commission said that Gatwick could not deliver long-haul routes yet we have added 20 this year alone putting us in the premier league of airports in Europe that serve 50 or more long-haul links.’
• TUI AG has agreed to sell Hotelbeds Group to GNVA Acquisitions Limited for a total cash consideration of €1.19m.
• Goals Soccer reports H1 numbers, says ‘recovery well underway’. Revenues £17.0m (2015: £17.1m), profit £3.8m (2015: ££4.5m).
• Goals reports EPS of 4.5p (vs 6.0p last year) and there is to be no H1 dividend. Group says LfL sales were down 2.0% in H1.
• Goals reports ‘the rate of like-for-like sales decline slowed significantly from minus 11.4% in H2 2015 to minus 2.0% following execution of the near-term operational improvement plan.’
• Goals reports ‘for the first 11 weeks of H2 there has been a return to like-for-like sales growth.’ Group has ‘underlying net cash from operations of £4.1m (2015: £4.3m)’ following £16.75m placing in June.
• Goals has set out a new, 5yr plan. Its new “Clubhouse 2020” concept will be in place in 3 sites in Q1 2017. The group says this will be rolled out, subject to results. Chairman Nick Basing reports ‘whilst the financial results were below potential, they were anticipated and I am encouraged that our initial performance improvement plan has resulted in positive like-for-like sales for the last 11 weeks.’ Basing adds ‘we have invested more capital in rejuvenating our core estate in the last 3 months than over the last 10 years. I am confident that this strategy will underpin future organic growth.’ Mr Basing concludes ‘there remains much still to do, but I am pleased to say that we are further ahead in the steps to recovery at this stage than we thought we would be. So far so good.’
• Goals goes on to say ‘the plan outlined in June 2016 is still in the early stages of development and implementation, with much still to achieve. However, following short term actions and tight cost control, and despite a challenging and competitive environment, trading has improved with the like-for-like sales decline largely arrested. Since the start of the second half of the year, trading has continued to progress with like-for-like sales returning to positive territory.’ The group concludes ‘we remain on track to deliver results consistent with the Board’s expectations for the year as a whole and look forward to the future with confidence.’
• Sportech has announced a proposed sale of The Football Pools for a total cash consideration of £97.25m to Burlywood. It reports ‘Burlywood’s management team proposes to apply for admission to trading on AIM of a new company incorporated for the purposes of acquiring The Football Pools, and to finance the acquisition of the business through a combination of equity from institutional investors and a new debt facility, for which a credit committee approved term sheet for up to £30m has been received.’
• Sportech reports disposal ‘represents an attractive opportunity to realise the value of The Football Pools following the implementation of its modernisation programme and as it continues to transition its business model.’ The group adds ‘there can be no certainty that the Proposed Disposal will complete and a further announcement will be made in due course.’
FINANCE & MARKETS:
• IMF boss Christine Lagarde is to stand trial on charges linked to her role as French Finance Minister in 2008 on 12 Dec.
• Rating agency Standard & Poor’s has said that the signs of a UK recovery post the Brexit vote may be a ‘mirage’. It says ‘while the news is encouraging, we believe it has no bearing on the cloudy longer-term outlook for the UK economy.’
• The Fed’s Lael Brainard said yesterday that the Bank should not move quickly on interest rates. A September rise looks unlikely. Brainard said ‘today’s new normal counsels prudence in the removal of policy accommodation.’ A move in December is still on the cards.
• Corporate activity is said to have ‘chilled’ post the Brexit vote. Reuters suggests deals are at the lowest level in 2 decades. Reuters reports ‘the number of deals involving UK companies fell to 707, a total value of $87.43 billion, in the 11 weeks since the Brexit vote. That was down from 1,060 deals worth a total of $125.22 billion in the same period last year.’
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• JDW shares, normalised for property disposal profits, trading on around 22x historic earnings
• JDW margins were 6.9%. They are not expected to fall further – though JDW reiterates it does not target margins as such
• JDW EBITDA per pub is around the same level as 10yrs ago. JDW says this is no mean feat under the circumstances
• GNK numbers Friday were mixed but it was tone when discussing the industry’s outlook that might have gotten investors thinking.
• New boss of Asda ushered in his first wave of price cuts last Friday as the retailer seeks to reverse 7.5% fall in Q2 underlying sales
• The UK’s trade deficit fell in July to £4.5bn from £5.6bn in June per ONS. Exports rose by 0.2% whilst imports fell by 0.5%
• BCC cuts UK growth forecast, expects UK to grow by 1.8% this year (down from 2.2% estimate) & 1% next year (was 2.3%)
• The TUC has warned that employers should not use the UK’s vote for an exit from the European Union as an excuse to cut jobs
• Other tweets: Soft commodities weak overall. But ‘necessities’ (wheat, corn, soy) arguably weaker than others such as cocoa, sugar, coffee& OJ
• Hillary’s health. That & North Korea spook bond markets, drag down equities. Trump may play health wobbles to his advantage
• ASDA price cuts. Prices down but didn’t they put them up only recently? And Lidl was only 8% cheaper than ASDA but is now 13.5%
• TUC says no job cuts on Brexit. But one party (labour) can’t dictate confidence of another (capital). And re jobs, it’s the latter matters
• Clicks & mortar. Morrison’s providing lockers in its store for Amazon. Not a bad partner to have in that particular dance
RETAIL NEWS WITH NICK BUBB:
• JD Sports: Today’s interims (for the 6 months to end July) from the booming JD Sports are tremendous and on the back of that the lugubrious Executive Chairman Peter Cowgill comes out with some masterly understatements: noting that a 66% increase in underlying PBT to £77m has “exceeded reasonable expectations” and that “the positive nature of trading in the second half to date is encouraging”, notwithstanding the tough comps and importance of Xmas. The only disappointments are that the Outdoor Division is still losing money, although it is making progress, and the Interim dividend is only increased by 4% from 1.20p to 1.25p, “with cash retained in the Group to maximise the available funding for our ongoing growth opportunities” (net cash has zoomed up from £100m to £231m at the end of the half-year). But given the incredible growth in the core
• Ocado: Today’s Q3 update from Ocado (for the 12 weeks to Aug 7th) has given the hard-working management yet another opportunity to announce the long-awaited Overseas licensing deal, but, needless to say, the silence is deafening. And trading remains boringly predicable, with Retail sales up by 13.6%, much as expected, although Ocado trumpet a near 19% rise in order volumes. The comment from feisty CEO Tim Steiner that “As the market remains very competitive, we are seeing sustained and continuing margin pressure and there is nothing to suggest that this will change in the short term” is bound to hit the headlines…
• Today’s Press and News: The big story is the announcement from Marks & Spencer that, following a year out of the business on extended maternity leave, the Multi-Channel Director Laura Wade-Gery is to leave the business. Such an outcome had been rumoured ever since her rival Steve Rowe got the CEO job, but none of the newspapers gets into the delicate subject of whether she was pushed rather than jumped, notwithstanding the fulsome testimonials in the official statement. The other big focus is on the ABF pre-close update flagging sales and margin weakness at Primark, as this prompted a share price fall of over 10% yesterday (and related softness in M&S, Next, Debenhams etc). In other news, the Telegraph notes that Boden has said that profits fell by a quarter last year to c£24m, while sales edged up only marginally to £283m.
• News Flow This Week: Thursday brings the key updates from Next and John Lewis/Waitrose on the back of their interims (as well as the Morrisons interims, the Poundland Q2, the ONS Retail Sales figures for August and the latest MPC interest rate announcement). Before then, tomorrow brings us the Dunelm finals and the SuperGroup AGM.