Langton Capital – 2016-09-20 – Pub trading surveys, costs, hotel spending & other:
Pub surveys, rising costs, hotel spending etc.
A DAY IN THE LIFE:
Bar bells feature in many areas.
That’s the idea that there’s a lot of stuff at one end of the spectrum and a lot at the other – but very little in the middle – and here I’m thinking about business books.
Because there are a lot of books about success – How I Made it Happen (or the like) by Richard Branson, Warren Buffett, Sam Walton, Ray Kroc etc. – and there are a lot about mega-failures (Enron, Worldcom, LTCM, Madoff etc.) but there’s very little about modest success and there’s even less about what steps to miss out if you want to avoid failure.
And this is perhaps important because few of us (hopefully) are afflicted by the X-Factor illness whereby we think we’re the next Elvis (or Sam Walton, Ray Kroc etc.) but most of us could do with a few tips on how best to succeed and how to prevent ourselves from pancaking straight onto the pavement.
This, of course, suggests that there’s a gap in the market for books about the dark side of business and Langton can feel its literary horizons opening up. The short version might simply feature the advice not to be a short-sighted, blinkered, arrogant, entitled bum-hole but we’re sure we could pad that out. And as for a title, whilst ‘You Too Could Be A Failure Like Us’ does present itself, we’d be open to other suggestions. On to the news:
RECENT WEBSITE ARTICLES:
• August Tracker could/should have been better – here
• The weather in August – here
• Over-expansion issues – here
• Email, tweets etc. – here
PUB, RESTAURANT & DRINKS PRODUCERS:
• ALMR / Christie Benchmarking Reports concludes ‘additional costs could undermine sector growth’. Survey suggests ‘rising operating costs, particularly payroll costs threaten to undermine the growth of an evolving and innovative sector.’
• Benchmarking Report suggests food now accounts for 32% of sector turnover. ALMR’s Kate Nicholls says ‘the 2016 ALMR Christie& Co Benchmarking Report has been the largest, most comprehensive edition to date giving incomparable insight into the costs of doing businesses in the licensed hospitality sector.’ She adds ‘in terms of revenue, we are seeing results that back-up the ALMR’s recent Future Shock Report showing that customers are increasingly moving towards food options and away from drinks. Food sales now account for 32% of turnover with wet sales making up 61%, the lowest in the history of the Report.’
• Benchmarking Report suggests ‘evidence of rising costs coupled with uncertainty following the EU referendum, threaten to undermine the good work businesses are carrying out and could potentially derail investment in venues and staff. Operating costs now stand, on average, at 49.3% of turnover up from 47.7% in last year’s survey. Payroll costs now stand at 27.8% of turnover, a substantial amount with payroll costs set to rise over the short and medium term. Our recent employment survey showed tight profit margins of around 8-12%; a 1.5% increase in costs could reduce them by 11%.’
• ALMR on costs: The ALMR’s CEO Kate Nicholls continues ‘with the Government looking to introduce an Apprenticeship Levy and increases to the rates of National Living and Minimum Wages, clearly some pubs and bars are going to absorb these additional payroll costs. Businesses need confidence and certainty in order to plan and invest, but uncertainty over the UK’s exit of the European Union could undermine confidence in the sector and threaten investment. Sector recession in 2008 had a two year drag on growth and investment and turbulence following the triggering of Article 50 could have a similarly negative effect.’
• Ongoing evolution. Christie & Co reports ‘in all sectors, operators who can adapt will be the winners going forward. High Street venues are evolving, and their unique presence in the centre of the UK’s towns and cities allows savvy operators to promote daytime trade, whilst simultaneously positioning themselves to benefit from the vibrant evening economies on the circuits in which they are located. However, as these segments become increasingly competitive, we may see operators having to fight harder to maintain their market share, which in turn could reduce margins and profitability.’
• Christie says costs will ‘rise due to currency fluctuations and more expensive imports, and changes in consumer confidence could also impact on levels of discretionary spend.’
• Small brewer tells Langton input cost of materials has risen 35%.
• A new report from the Local Data Company points to a ‘dramatic’ 15% fall in the number of shop openings in the first half of the year. The LDC attributed said the fall was most likely due to uncertainty in the run-up to the EU referendum during what is usually a busy period for openings.
• JDW yesterday bought back 31,500 of its own shares for cancellation at an average price of 913.5p
• IPOs coming thick & fast, Krispy Kreme UK, Hollywood Bowl, City Pub Co on top of recent joiners Eclectic (now pier co), Revs etc.
• Payday lender CFO Lending has been ordered to repay £35m to its borrowers following a FCA investigation. The firm was found to have ‘serious failings’. It took money from some clients’ bank accounts without permission and charged some borrowers more than they owed. The FCA said ‘we discovered that CFO Lending was treating its customers unfairly and we made sure that they immediately stopped their unfair practices. Since then we have worked closely with CFO Lending, and are now satisfied with their progress and the way that they have addressed their previous mistakes.’
• The Co-op will now sell only British own-label bacon and lamb.
• Costa Coffee has installed its 6,000th self-service machine. It has been adding machines at around 70 per month for 5yrs
• Loungers will open its 14th site of the year tomorrow, kicking off a spate of new openings that will take its total for 2016 to 20.
• Chipotle Mexican Grill has appointed Jim Slater (ex-Costa Coffee, Bombay Sapphire Club) as the company’s managing director in Europe. Steve Ells, Chipotle founder, chairman, and co-CEO commented: ‘Jim not only believes in our commitment to change the way people think about and eat fast food, but he also celebrates our vision of building teams of top performers empowered to achieve high standards. We have great confidence in his abilities and expertise, and believe his leadership will help us enhance and grow our business in Europe.’
• Krispy Kreme’s London IPO next month will value the firm at around £200m.
• Marks & Spencer is trialling in-store click-and-collect lockers at its Teddington Simply Food store until the end of the year.
LEISURE TRAVEL & HOTELS:
• The mayor of New York City has promised a ‘very substantial’ police presence following Saturday night’s bomb blasts, which left 29 injured. Mayor di Blasio said: ‘New Yorkers are very smart and very practical. They’re going to see a very substantial police presence – a well-armed, well-trained Critical Response group, Strategic Response Group – Critical Response Command, Strategic Response Group.’ The FCO has not changed its travel advice.
• UK hotels have ramped up their refurbishment spending by 57% in the past year, from £1.03bn to £1.62bn, as competition increases. Business financiers Funding Options suggest online, low-cost competitors such as Airbnb are driving the shift alongside increasingly demanding customers looking for extra services and infrastructure such as free and constant Wi-Fi, spa treatments, and a wider selection of dining options.
• The British Hospitality Association has backed BIS committee chairman Iain Wright MP’s letter drawing attention to unscrupulous landlords taking advantage of sites like Airbnb. In his letter to Sadiq Kahn, Wright pointed out that home sharing platforms such as Airbnb ‘unfair competitive advantage over other providers of accommodation.’
• Profit projections in HotStats’ latest Hotel Market Profitability Forecast Report shows that some key markets are becoming less optimistic.
• Uber is rolling out scheduled rides to eight UK cities following its launch in London last month.
• Lyft expects self-driving cars to make up the majority of rides within five years.
• UK travellers may lose healthcare reciprocity if UK fails to stay in EEA post EU exit. EEA insists on freedom of movement
• Pinewood Group has announced that the scheme by which it will be taken over passed a shareholder vote yesterday.
• Electra Partners to IPO Hollywood Bowl, price set at 160p. Electra to hold 18% of the company post flotation
• Online gaming operator Stride Gaming has guided to full year revenue of £47m (FY 15: £27.8m) and EBITDA of £12.3m (FY 15: £7.3m). Eitan Boyd, Chief Executive of Stride Gaming, commented: ‘We are delighted with the organic growth from our underlying business which remains robust. This, coupled with the completion of our recent acquisitions, means we have significant scale, increased market share and are now the fourth largest online bingo operator in the UK. With these positive developments in mind the Company looks forward to the future with confidence.’
FINANCE & MARKETS:
• Business confidence fell in July post Brexit vote per Lloyds survey. Says index reflecting short term expectations of sales, orders and profits fell to 12% from 38% in January, its lowest level for four years.
• Lloyds reports small business owners in areas that voted Remain were more nervous than in areas that voted Leave, such as Wales
• Commercial property stabilising. Kames Capital has cut the value of its fair value adjustment from 10% to 5% on its property fund. Henderson reported to be set to reopen its property fund
• BBC reports UK financial institutions could lose their passporting rights if UK leaves EEA. The latter insists on freedom of movement. German central bank head Jens Weidmann has said some institutions may be obliged to re-locate from London. Passporting rights are ‘tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area’ says Mr Weidmann. He continued ‘Frankfurt is attractive and will welcome newcomers.’
• Mitie shares down yesterday as Brexcuse featured in its trading update.
• Oil around $45.80 per barrel for Brent Crude.
• World markets: UK and Europe higher yesterday but US down. Far East mostly higher in Tuesday trade
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• DP Poland has this morning reported H1 numbers saying ‘store opening momentum continues to build’ and 69% is online
• DPP now seen ‘15 consecutive quarters of double digit like-for-like System Sales growth, Q4 2012 – Q2 2016’.
• DPP H1 LfL system sales +28%. Current trading (July & Aug) +24%. Total H1 sales +57% on H1 last year
• DPP re outlook and current trading: Says ‘growth over the last two months has continued in the same vein as the first half’
• Telegraph reports bars & restaurants ‘came to the rescue of Britain’s beleaguered high streets last month’
• Small brewer tells Langton ‘our costs [grain etc., not labour] have risen by 35% and prices will have to rise’.
• City Pub Company has announced plans to float on AIM late next year after posting a 36% increase in first half sales to £12.1m
• McDonald’s might have to pay nearly $500m in back taxes to Luxembourg as a result of the ongoing European Commission’s tax probe
• Hollywood Bowl has priced its initial public offering at 160p per share, giving it a market capitalisation of £240m
• ICAEW reports ‘the post-vote period of complete confusion shows little sign of abating
• Sunday Times reports EU may take legal action to prevent UK negotiating trade deals with other countries until it has left the EU.
• Other tweets: Interest rates. Chance of a Fed rate hike this week said to be 12%. Chance of one before year-end still in the mid-50s
• Grocer 33 shows Tesco still cheaper than ASDA. So much for the latter’s price cuts. See Nick Bubb retail section http://www.langtoncapital.co.uk/
• Athleisure is new big trend. Pretty young things probably look OK in London but Lycra may face more of a challenge in Scunthorpe, Barnsley
• Next says can’t read retail trends as ‘nobody is buying our winter ranges’. Clearly weather influenced, things should change this week
• BRC says High St > Retail Parks. Former helped by pubs & bars but restaurants on the latter, e.g. RTN, not doing so well?
• DPP stats look stellar. But still a hockey stick, needs degree of faith. However, Poland is first world, pizza is pizza, outlook is good
• DPP & Brexit. Poland secure in EU and if Poles return to homeland, could be good for DPP.
• Bar bell politics. More at the left, more at the right. Crazy 70s Labour nutters or 50s Little Britain fictionistas. What a choice…
• Optimism vs pessimism. So you move to the Gherkin. Does that mean you all have a corner office, or will none of you?
RETAIL NEWS WITH NICK BUBB:
• Kingfisher: Ahead of today’s interims (for the 6 months to end July), the consensus forecast for underlying PBT was £430m, but Kingfisher have beaten that with an outcome of 436m, up 13.5%, helped by £17m of favourable FX translation movements. This is before lower than expected £18m of “transformation costs”, although the group is not changing its five year total transformation cost guidance of a hefty £800m. Véronique Laury, the CEO, says: “It has been a productive first half. We have delivered a good ‘business as usual’ result with both sales and profit growth. Performance has been driven by Poland and the UK, especially Screwfix, and a stable profit performance in France. This has been achieved alongside managing the start of our ambitious transformation plan, based on creating a unified company where customer needs come first. In the UK, the EU referendum has
• French Connection: There is, needless to say, no reference whatsoever to any pressure from activist investors in today’s interim results statement from the struggling French Connection, but the embattled Stephen Marks has some good news to point to, even though the loss before taxation of £7.9m was only flat on last year (with an improved Retail performance offset by tougher trading in Wholesale and Licensing), given a continued strong sales performance in the first six weeks of the second half: “There is still much work to do in the rest of the year to move the business forward significantly but we believe the team we have in place and momentum we are seeing will help us to achieve this. As ever, the overall result will be dependent on the Christmas trading period but the second half of the year has started well”.
• McColl’s: At yesterday’s EGM McColl’s shareholders gave their overwhelming backing to the proposed Co-op deal, but the £117m acquisition is still subject to CMA approval and, although that shouldn’t be a problem, as it stands the first of the 298 Co-op convenience stores won’t be transferred to McColl’s until the end of January.