Langton Capital – 2016-10-17 – Inflation, lower Pound, London hotels, fuel prices & other:
Inflation & the lower Pound, London hotels, fuel prices & other:A DAY IN THE LIFE: Heard in the supermarket yesterday in response to questions as to whether an individual still went to the gym frequently. ‘I’ve decided to tone it down a little, I now recommend a lot of standing around.’ That’s my kind of regimen. On to the news: PUB, RESTAURANT & DRINKS PRODUCERS: • Restaurant Group has reported that new CEO Andrew McCue is to be given nil cost conditional options over 282,675 shares • JD Wetherspoon founder Tim Martin has said that the dramatic fall in sterling is good news for the British economy as it will lead to more tourism. Martin added: ‘I think the pound floats. It’s an economic stabiliser for the country. We needed the lower pound because we had a current account deficit… The problem you’ve got is if you’re in the eurozone and you’re Greece or Portugal and you’re hitched to the euro which is effectively part of the old Deutschmark and your currency is far too high for your economy.’ • Buying specialist Lynx Purchasing says that caterers should be negotiating with suppliers now to lock in prices on food and drink for Christmas menus. Dairy and cooking oil have been singled out as areas of rising prices. Rachel Dobson, Lynx Purchasing manager director, said, ‘We’re now clearer on the timetable for Brexit, but not the detail of what it will mean in terms of our trading relationship with Europe and the rest of the world. It’s understandable that suppliers are building plenty of caution and caveats into their forecasts, and with a wide range of products seeing changes in price, caterers will need to keep a close eye on their costs over the coming months… It looks unlikely that there’ll be too many last minute bargains on offer come December.’ • BrewDog has postponed the launch of production at its new US headquarters as a result of delays in the delivery of key equipment. The group originally expected to be able to brew its first beer at its 100,000 sq ft brewery in Columbus, Ohio, last month, but now thinks production will begin in February or March. • BrewDog’s bar division made a £1.2m loss in the year to end-Dec compared with a loss of only £46k in the year before reports Propel. Turnover rose from £10.9m to £15.0m. The company says ‘we have opened ten new sites taking us to 29 in total, including amazing sites in London and our home town of Aberdeen.’ • Bottled water company Highland Spring hit turnover of £103m in 2015 and reported PBT of £4.3m, up from £1.7m in 2014. • Former deputy PM Nick Clegg has suggested that a hard Brexit could lead to tariffs of up to 22% on food imported from the EU • Moody’s has reported that Coca Cola’s Africa purchase ‘will temporarily increase leverage’. It says purchase is ‘credit negative’ adding ‘it will temporarily increase its net leverage to 2.1x-2.2x net debt/EBITDA from approximately 2.0x as of year-end 2015.’ Moody’s goes on to say that disposals could leave Coke’s leverage unchanged over time. • The PMA reports that the government’s business rates revaluation will benefit the majority of licensees at the expense of higher turnover pubs mostly in the south east. A total of 53% of pubs are expected to see a decline in rates, while some 38% will see an increase, making for an overall increase of 0.2% of the total revenue raised in 2017/18. The ALMR has voiced its concern over a proposed cap on increases of 5% applying only to small businesses, leaving larger companies open to rises of as much as 35% and 45%. • Litmus Wines has introduced a new low-alcohol (8.5%) drink that mixes flavours of gin with that of wine and spring water called Ginking. • The prices of all grades of British wheat are rising, with UK feed wheat futures up 14% to £131.50/tonne since early summer. • Papa John’s UK business grew turnover by 19.6% to £50.5m and operating profit by 71.6% to £3.8m in the year to 27 December 2015. The group had 37 net new openings, taking its UK estate to 319 outlets, and double digit comparable sales growth. Despite the strong growth, the pizza market ‘remain[s] intensely competitive with significant promotional discounting continuing’ and the UK’s third largest pizza delivery operator added that ‘with the weakening of the GBP (re Euro exit vote) and most of our food ingredients being sourced outside the UK, we are seeing increases in our food input prices over the next six months. This will lead to some increase in prices to the UK consumer.’ • Papa John’s UK aims to ‘significantly grow’ its number of stores in the current year, while continuing to grow sales at its underlying outlets, and ‘the directors remain confident that the Papa John’s brand has made strides in our efforts to establish itself in the UK pizza sector and emulate the brand’s success in the US.’ LEISURE TRAVEL & HOTELS: • STR’s preliminary hotel data for September 2016 shows falling occupancy in the London market, down 1% to 88.3%, as supply continues to grow in excess of 2%. Average daily rate across the capital’s hotel market rose 0.7% to £164.76 – the highest for a September in London since 1995 — meaning revenue per available room only fell by 0.2% to £145.48 • EasyJet has injected a ‘multimillion-pound’ sum into a start-up accelerator that it hopes will lead to the next big thing in the travel-tech industry. • Action Hotels has announced a new hotel in Melbourne. The group has secured a 92yr lease on a plot of land at Melbourne Convention and Exhibition Centre for the development of a new four-star hotel. It says ‘the new hotel, which is expected to open in Q1 2018, will comprise 317 rooms and 14 apartments, making it the second largest hotel in Action’s portfolio.’ Chairman Sheikh Mubarak AM Al Sabah reports ‘I am delighted to announce the latest addition to our Australian portfolio, with a plot of land in a highly sought-after area of Melbourne. The hotel is ideally positioned in an attractive market with extremely positive fundamentals and rising demand, in a location that is currently underserved by midscale hotels.’ • STR reports basket of hotel stocks in US fell by 6.4% in September. Year to date, the basket is up by 1.3%. STR says ‘as we enter the final months of 2016, the U.S. hotel industry is bracing for a slowdown in demand growth and an acceleration in the number of open hotels.’ It says ‘STR expects nationwide occupancy to flatten or decline, as can already be seen in a number of Top 25 Markets. We expect RevPAR (revenue per available room) to continue to grow and be entirely driven by ADR (average daily rate) growth, but there is uncertainty around pricing power given we are entering a period of declining occupancies. Investors are clearly underwhelmed by the most recent and expected future performance, and the stock prices in September reflected that.’ • Eurostar is reported to be cutting train services and instituting redundancies as a result of a ‘challenging environment’ post 23 June • Visitors to Thailand have been advised to ‘behave respectfully’ as the country mourns the death of King Bhumibol Adulyadej. The FCO statement said: ‘Travellers should respect the feelings and sensitivities of the Thai people at this time. Access to entertainment, including restaurants, bars, and shopping areas may be restricted. You should behave respectfully when in public areas. If possible, wear sombre and respectful clothing when in public.’ OTHER LEISURE: • Microsoft has sought EU antitrust approval for its $26bn bid for social network LinkedIn, setting the ball rolling on a month-long review by regulators. • Samsung Electronics expects to take a $3bn hit to operating profit over the next two quarters due to the discontinuation of its Galaxy Note 7. This comes on top of an anticipated $2.3bn drop in Q3, taking total forecast losses as a result of the Note 7’s overheating issue to $5.3bn. Samsung shares fell by c8% last week. • Shares in Twitter have fallen 7% after Salesforce CEO Marc Benioff said his firm had ‘walked away’ from any potential deal. • Snapchat owner Snap Inc has moved a step closer to its $25bn IPO after appointing Morgan Stanley and Goldman Sachs as its underwriters. The listing could happen by March 2017 and will be the largest social media flotation since Twitter debuted in November 2013. • Ladbrokes has reported that, post its Gala Coral purchase, it has agreed to sell a total of 359 licensed betting offices. The sale is to Done Brothers (trading as “Betfred”) and StanJames (Abingdon) Limited (trading as “Stan James”). • Betfred to buy 322 betting shops from Ladbrokes for a cash consideration of £55.0m. Ladbrokes CEO Jim Mullen reports ‘the sale of these shops will clear the last significant hurdle to delivering on the merger with Coral and paves the way for our focus on completion and quickly delivering on the opportunities the merger offers.’ • Gaming company Crown Resorts has had 18 of its staff arrested in China as the authorities there continue to crackdown on gambling. Shares in the Australian group fell by 10% on the news. Crown says it ‘believes that Jason O’Connor, the head of Crown’s VIP International team, is one of 18 Crown employees being questioned by Chinese authorities.’ FINANCE & MARKETS: • UK economy faces “prolonged period” of weakness post Brexit vote reports Ernst & Young Item Club. It says the economy should grow by 1.9% this year but will then slow as inflation rises. It says the apparent stability of the economy since June’s Brexit vote was “deceptive”. EY’s Peter Spencer reports ‘so far it might look like the economy is taking Brexit in its stride, but this picture is deceptive. Sterling’s shaky performance this month provides a timely reminder that challenges lie ahead. As inflation returns over the winter it will squeeze household incomes and spending. The pressure on consumers and the cautious approach to spending by businesses mean that the UK is facing a period of relatively low growth.’ • Bank of England governor Mark Carney says the Bank could tolerate higher inflation for the sake of growth. He thinks that the 2% target could be breached either next year or shortly thereafter. • Weak pound holds up high street takeovers reports Telegraph as rising import costs make forecasting profits more difficult • Scottish First Minister Nicola Sturgeon has said that she believes Scotland may be able to negotiate a separate trade deal with the EU • World markets: UK & Europe higher on Friday, US also up. Far East markets mostly higher in Monday trade • Oil price down a little. Brent Crude changing hands around $51.90 per barrel. It earlier hit a 1yr high of around $53.55 • Sterling still below $1.22 per Pound. Currently sitting around $1.217 • Rightmove Friday reported UK house prices rose by 0.9% in October. Y-o-y prices are +4.2%. • UK construction index weaker than expected in August • Fed may need to run a “high-pressure economy” to reverse damage from financial crisis reports Chair Janet Yellen • Investor Jim Rogers has said Sterling will “certainly go under one dollar” if Scotland leaves the UK. Perhaps talking his book YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE: • Punch Taverns has said that it has seen an ‘astounding’ level of attendance at 6 recent nationwide roadshows. • Next boss Lord Wolfson has said that inflation will be a problem for retailers next year. • Soho House UK has posted a 24% increase in turnover to £104m for the 53 weeks to 3 January 2016 but lost £6.7m • Unilever has resolved its pricing dispute with Tesco, adding in a brief statement that it is pleased to move on from the ‘supply situation’. • Elegant Hotels updates on trading for full year, says results will be in line with market expectations. • The US hotel industry’s occupancy fell once more in the week to 8 October, down 1% to 70.9% • The BHA has said that London hotels are struggling to attract their fair share of Chinese visitors • The UK Brexit vote has ‘no impact’ on bookings per Thomas Cook UK MD Chris Mottershead, but terrorist attacks have ‘changed the industry’ • Consumer confidence in holiday bookings has not been rocked by the UK’s vote to leave the EU, according to PwC partner David Trunkfield • William Hill’s largest shareholder at 14.3%, Parvus Asset Management Europe is objecting to the group’s proposed £6bn merger with Amaya • The SNP is to prepare the ground for a second referendum on Scotland’s membership of the UK • Other Tweets: Action speak louder than words, Tesco’s saying it’s hard to pass on price rises. NXT says same thing re 2017. Inflation creeping in • ‘Golden Week’ apparently caused a boom in Chinese visitors. This on same day BHA says London hotels not getting fair share thereof RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The main focus in the Saturday papers was on the results announced on Friday by Mountain Warehouse and its hard-working PR advisers will be pleased by the array of different publicity photos in the Daily Mail, the Telegraph, the Daily Express and the Times, inter alia. The Telegraph also noted that the company has shelved plans for an IPO (Mountain Warehouse CEO and founder Mark Neale said “We explored it and meet with investors who were positive, but I was never wholly convinced…Then Brexit happened, and it made the decision not to do it much easier. It would make things quite tricky”). Most of the stockmarket reports led with the news that the Tesco share price rallied sharply on Friday after resolving the so-called “Marmite dispute” with Unilever. The FT and the Telegraph picked up on the news that more than 9,500 women who work at Asda have won the right to lodge
• Sunday Press: After the Tesco “Marmite dispute” with Unilever there were lot of follow up articles about the outlook for inflation after the slump in sterling, not least in the Sunday Times, which had an exclusive about the role played in the affair by Gina Boswell, the UK head of Unilever. The Sunday Telegraph highlighted that the weak pound is affecting High Street takeovers, with JD Sports’ talks to buy Go Outdoors bogged down in negotiations over price and the sale plans for The Original Factory Shop delayed until next year. The estimable Oliver Shah, the Retail correspondent of the Sunday Times also had a scoop that the beleaguered Philip Green has hired the leading human rights lawyer Lord Pannick QC, in an attempt to salvage his reputation, as MPs prepare to debate stripping him of his knighthood over the collapse of BHS. The Sunday Times also flagged that the administrators • News Flow This Week: The ASOS finals are tomorrow, along with the Burberry Q3 and the latest monthly Kantar/Nielsen grocery market figures. There is a trading update from that great DIY trade barometer, Travis Perkins, on Wednesday. The ONS Retail Sales figures for September are out on Thursday morning, along with the Alliance Boots interims, and the impressive new John Lewis Leeds store also opens on Thursday morning. |
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