Langton Capital – 2016-12-05 – Pat Val, inflation, unit openings, Italy & other:
Pat Val, inflation, unit openings, Italy & other:
A DAY IN THE LIFE:
So, looking at RNSs, what is it with the world ‘delighted’?
It seems to be a little over-used and, as it conjures up images of gleeful, chocolate-smeared 6yr olds, clapping their hands together whilst wetting their pants, it may not be the right word to use when referring to the sealing of a bond deal or the opening of a new hotel.
And it’s not the sort of word you’d find in an owner-operated company like JDW etc. but such criticism does beg the question, of course, as to what word to use.
Perhaps ‘relieved’ would do?
Or ‘somewhat satisfied’ or even ‘content’ but then who am I to comment, I’m only rather unfairly criticising and I don’t have to write these things. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Pat Val in ‘advanced talks’ to buy 13-strong Maison Blanc reports MCA. Says the business, which was acquired by Kout in 2007, has appointed Davis Coffer Lyons to handle the potential sale. Last week chairman of Pat Val Luke Johnson did not discount acquisitions as a route to growth.
• The BBPA is calling for an increase in the maximum stake in pub amusement machines from £1 to £1.50 and a maximum prize of £150, up from £100. These proposals, the BBPA argues, will help to ‘future proof’ amusement machines in the face of changing customer behaviour and expectations while providing an uplift to pub sector machine revenues.
• Brigid Simmonds, Chief Executive, British Beer & Pub Association, commented: ‘Operating costs for pubs are under pressure from recent increases in the national minimum and living wages, mandatory auto-enrolment pensions for employees, the apprenticeship levy and business rates. Income from amusement machines can be vitally important in keeping many pubs viable, and an increase in prize for Category C machines will enable pubs to invest in the business and keep an important social resource viable.’
• Meanwhile, the ALMR has called for an increase in stakes to £2 and has the same target as the BBPA in terms of the maximum prize. The ALMR is also pushing for a modernisation of standards, incorporating cashless payments, along the lines of remote gaming to allow for innovation in the sector.
• Research by CGA among business leaders shows that confidence is slowly returning to the eating and drinking out market although optimism still falls below the level seen at the start of the year. A survey of more than 200 senior executives in restaurant, pub, bar and café groups carried out across the country in November reveals that half (50%) are optimistic about prospects for the market in the next six months. Of those, a handful (5%) are very optimistic. Almost a quarter of executives (23%) remain pessimistic, and levels of optimism fall to just 36% when those same operators are asked about their confidence in the market over the next year with 72% of operators saying rising costs will have a ‘very significant’ impact on business.
• A new report from Public Health England shows that people in the UK drink more than in the 1980s despite a recent drop in consumption. The body found that, with alcohol now more affordable than ever, policies such as setting minimum pricing and tackling how alcohol is marketed by drinks firms could improve the nation’s health.
• BRC says shop prices down 1.7% in Nov vs same month last year. It says, however, that deflation could be coming to an end. The BRC comments ‘shop prices are still falling and deflation will continue to at least the end of the year, as the result of the battle for the wallet of Christmas shoppers. Looking ahead, we can expect a slow return to shop price inflation during 2017 with fresh foods, some of which are also seasonal and weather dependent, likely to be impacted sooner when increased supply chain costs finally begin to filter through to retail prices. However, retailers will keep running promotions and campaigns to encourage retail spend and this will continue to help shoppers to save money next year.’
• Coaching Inn Group has secured a further £10m cash injection from the Business Growth Fund to aid expansion. Coaching Inn boss Kevin Charity reports ‘this latest investment from the Business Growth Fund is testament to the strength of our business model and we’ve now set even more ambitious growth targets. It means that we are on track to achieve our growth plan without financial distractions or cash flow restrictions’.
• Caribbean restaurant chain Turtle Bay has reported sales up from £26m to £47m in the year to end-Feb with PBT of £7.6m.
• Pro Brexit Telegraph reports OBR as saying some food prices may fall if Brexit is handled in a certain way. The European Common Agricultural Policy has protected domestic farmers and kept some prices higher in the EU than on the world market. The OBR commented that Brexit ‘might lead to a situation where we needed to give less money to farmers than under the current arrangements, which would improve the public finances, and people would like it better because food would be cheaper.’ Farmers, of course, will have a different opinion.
• Admiral Taverns has reported revenues +1.7% to £69.5m and underlying EBITDA +11.7% to £12.8m in the year to end-May reports Propel
• The Resolution Foundation has reported that the number of agency workers in the UK could reach 1m by 2020 as job security erodes
• US National Restaurant News suggests that the US industry added 18,900 jobs in November. It says ‘there is a lot of money being invested into the space, both by lenders and by private-equity investors. That’s driving up pressure on restaurant executives to add locations.’
• Supply-push a thing in the US as well, then.
• Four-strong ‘single steak’ dining concept Flat Iron has appointed advisors to review its options, with several parties said to be interested in the business, per MCA.
• The BBPA has called for patience in the wait for a Scottish pub code and adjudicator, while the Scottish government conducts its evidence-based study.
• Yum! Brands is putting its corporate KFC sites in the UK up for sale as the company strives to become more efficient and capital light’. MCA reports that BDO has been appointed to market around 180 sites with a combined value of c£300m.
• A report from the Low Pay Commission has confirmed the abandonment of the £9 an hour target for the National Living Wage by 2020. In keeping with trade suggestions and campaigns, the NLW and National Minimum Wage will instead be set by the Low Pay Commission, with new targets proposing the NLW should be 60% of median earnings by 2020 (meaning a possible £8.40-£8.60) and the NMW should be pegged around the average earnings.
• BrewDog has launched a new crowdfunding round to support its 2017 expansion plans and is aiming to raise between £500,000 – £10m. The brewer wants to grow its revenue by over 80%. ‘We’re now growing so quickly both in the UK and overseas we’ve got to continue to invest aggressively to keep up with the demand for our beers,’ said BrewDog co-founder James Watt in a video on the company’s Crowdcube page.
• Pernod Ricard has sold Domecq to Bodega Las Copas ‘in line with Pernod Ricard’s strategy to simplify its portfolio for growth and focus on its priority spirits and wines brands’.
• Just Eat has made its first ever robotic delivery using a six-wheeled device in partnership with Starship Technologies.
• Accolade Wines is holding a roadshow across Australia, New Zealand and Hong Kong as it prepares for its IPO listing next year.
LEISURE TRAVEL & HOTELS:
• Thomas Cook has announced that it succeeded in placing €750m of 6.25% bonds at par. Group CFO Michael Healy reports ‘I am delighted with the strong demand we have seen for our new bond, which has allowed us to increase the size of the issue from the €300 million we had expected, to €750 million. By extending maturities with a lower interest cost than our existing bonds, this bond greatly enhances our financial and operational flexibility, and supports the progress we are making towards our financial targets.’
• Action Hotels has announced that it has opened its third hotel in Oman, the 151-bedroomed Mercure Sohar. The opening takes the group’s estate to 12 hotels with 2,181 rooms. CEO Alain Debare reports ‘I am delighted to announce the opening of Mercure Sohar. Sohar port and free zone is an important link in Oman’s commercial industry and this ideal location means we are confident the hotel will be a successful addition to our portfolio as we continue to work towards our goal of 5,000 rooms by 2020.’
• Jet2holidays will introduce villa packages in summer 2018, starting with a portfolio of around 600 villas in destinations including Majorca, Menorca, mainland Spain and the Algarve.
• Thomas Cook has repeated its commitment to the high street, although it is re-focusing its retail network and closing certain stores.
• UK train fares will rise by an average of 2.3% from the start of next year, the Rail Delivery Group (RDG) has confirmed. The increase in prices is the highest since January 2014, when fares rose 2.8%.
• the latest Operator Sentiment Tracker produced by the Association of Serviced Apartment Providers (ASAP) and Savills shows serviced apartment operators are optimistic about 2017.
FINANCE & MARKETS:
• The Euro fell sharply against the US$ overnight as Italian PM Matteo Renzi offered his resignation post a poll defeat
• US rate rise now pretty much nailed on as unemployment there falls to 9yr low of 4.6% of the workforce
• US adds 178k non-farm jobs last month after a 142k increase in October per US Labor Dept
• ECB likely to announce 6mth extension to QE programme later this week per Reuters poll of economists
• B of England MPC member Andy Haldane has said that the Bank should not be ‘too hasty’ in raising rates. He says he is ‘comfortable with the current stance of monetary policy, with no bias on the direction of the next move in interest rates’. Mr Haldane adds ‘my personal view is that this provides grounds for not proceeding too hastily with any tightening of the monetary policy stance.’
• Reuters has reported a source ‘familiar with the matter’ as saying that UK banks are threatening to leave the country unless Britain negotiates a staggered exit from the EU. The BBA has declined to comment.
• UK construction PMI rose to 52.8 in Nov from 52.6 in Oct
• World markets: UK & Europe down on Friday but US up. Far East mostly down in Monday trade
• Brent a shade lower at around $54 per barrel
• Sterling $1.268 vs US$. Stronger at 120c vs a weak Euro in wake of Italian government’s poll defeat
• US 30yr bond rate up again at 3.08% in anticipation of rate increase next week
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Domino’s finds some further expansion down the back of the sofa. So too does Whitbread. Fortunate. Raison d’etre intact…
• Domino’s: Is it the dog that caught the bus? Decides it can open more stores than previously targeted. See email
• Whitbread may have been barking after the same bus. Now says it can also open more Costa’s & P Inns than previously stated.
• ETM Group has reported turnover up 17% to £22.2m (2015: £19.6m) with EBITDA +35% at £2.3m
• Howard Schultz, the chief executive of Starbucks, will step down next year to become executive chairman
• AB InBev is to open the first pub in what will be a European chain of units based on its craft beer Goose Island in London by Xmas
• Operators have criticised supermarkets for offering cut-price Christmas deals, which have seen pints of beer sell for as little as 64p
• Nestlé says it has made a scientific breakthrough that can cut the amount of sugar in its chocolate by 40% without affecting taste
• The STR has reported a positive performance in the three main hotel industry metrics, during the week of 20-26 November 2016
• British holidaymakers are turning to ‘safe haven’ destinations such as Spain, Portugal, Cyprus and Greece, per ForwardKeys
• Oil higher at around $53.40 per barrel. Currently easing back a little but sitting around 16mth highs.
• US 30yr bond rates rise sharply to 3.10%. Was around 2.98% in the middle of the week. 10yr bonds also at 18mth highs
• UK manufacturing PMI shows slowdown in growth in November. Rate fell from 54.2 to 53.4. Any number >50.0 still implies expansion
• Annual house price growth is at its lowest since Jan reports Nationwide. Group says prices now up 4.4% on year ago
• Later Tweets: Commodities. Sterling at 3mth highs & sugar, OJ prices off the top. Oil strong, though, even in Sterling terms. Meat prices off the bottom
• Sterling strength hurts FTSE100, mid-caps out-performing. Bond proxies take pasting as bond yields rise. Should lower pension deficits
• ABInBev to open Goose Island pubs as brewer realises that 300yr old vertical integration model actually makes sense
• Xmas nearly on us, how will operators trade? Weight of opinion suggests Xmas s/be OK & test will be circa March as Jan & Feb always awful
RETAIL NEWS WITH NICK BUBB:
Nick is on holiday.