Langton Capital – 2016-12-07 – Pub trading, rents, burgers, spread-betting & other:
Pub trading, rents, burgers, spread-betting & other:
A DAY IN THE LIFE:
With Christmas almost upon us, Langton is willing to make a prediction: It Will Happen.
Indeed, it has happened every year for quite some time and the moniker ‘but it was late’ may well be added once again.
But whether it’s late or early, consumers have shown themselves willing to spend on the Big Occasion and it was this that helped see most operators through the credit crunch & recession which, though it feels as though it was only yesterday, was already the thick end of a decade ago.
However, the length of time since the last recession, QE exhaustion, increasing costs, Brexit uncertainty, the threat of some-time rising interest rates and the rest would appear to be casting something of a cloud over early to mid-2017 and the only reason that it isn’t casting a cloud further is that we can’t see that far.
So, one of the bigger questions that we may be asking come end-Feb or so is, will the big ticket retailers take the strain, shield the ‘affordable-treat’ boys from the worst of any spending drought?
Of course, we don’t know. No consumer can hold his/her breath under water indefinitely but, at this early stage, we would venture that small ticket spending should hold up – at least relatively – well. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Barclaycard has reported spending up some 5.1% y-o-y in November. It does not include Black Friday spend.
• Barclaycard says it is ‘looking at the shifting payment trend away from cash and into card (and related payments).’
• Barclaycard reports ‘pub and restaurant spending accelerated in November after a relatively weak October.’ It says ‘combined pub and restaurant spending growth was 13.9% in November vs. October’s reading of 12.4%. We would note that, unlike October, a month in which comps were tough as a result of the Rugby World Cup, comps were relatively easy this month; November 2015 combined spending growth was 12.2%.’
• Barclaycard says ‘at 14.2%, pub spending led the acceleration in November, coming in slightly ahead of the 12-month average of 13.1%. Restaurant spending growth was slightly lower at 13.5%, but this too registered above the 12-month average (12.8%). November marks the sixth month out of the last seven in which restaurant spending growth has lagged that of the pubs.’
• Allegra’s Project Café2017 Europe report finds that the European branded coffee shop market saw growth of 6.4% in 2016, compared to 9% a year earlier, adding 1,268 outlets. The UK, turkey, and Greece are the fastest growing markets in terms of coffee outlet expansion, with the UK the most developed, but the rate of growth has been slowing. In Europe, market leader Costa Coffee operates 2,512 outlets across 12 European countries, while McCafé and Starbucks trade from 2,199 outlets across 17 countries and 2,154 across 24 countries respectively. Starbucks was the fastest growing chain in 2016, opening 194 European stores and plans to open up in Italy.
• The report also identifies the sustained growth of artisan coffee shops across Europe and points to established artisan markets in the UK, Russia, the Nordics, and the Netherlands. Branded chains are adapting to this new development with new in-store designs, origin coffee, and fresh hand-prepared food. High-quality boutique chains which provide an authentic artisan experience with advanced business practices are highlighted as a key driver of growth in what Allegra believes is a new era in the global coffee industry.
• US buyout fund Bain Capital has ruled itself out of bidding for SABMiller’s Central and Eastern European beer brands being sold by AB InBev. Japanese brewer Asahi Group is seen as the front-runner to buy the brands, which include Pilsner Urguell in the Czech Republic and Tyskie and Lech in Poland, after recently outbidding private equity funds for Peroni and Grolsch.
• JW Lees has completed the purchase of four pubs from Greene King. It says ‘the purchase follows JW Lees’s strategy of growing its pub estate in the North West and the pubs will now be integrated into the JW Lees business as well as benefitting from capital investment. William Lees-Jones, Managing Director of JW Lees, said, ‘We are proud to be welcoming four new pubs into the JW Lees family and we remain hungry for acquisitions of both Managed and Tenanted pubs as well as hotels in the North West.’
• The Business Growth Fund has made a £3m loan to Bar Soba, the Glasgow-based bar & restaurant group reports MCA
• JDW Monday bought back 25k of its own shares for cancellation at 821p
• Fleurets’ annual rental survey highlights a 21% jump in rents for free-of-tie leases in London, with the average FoT rent in the capital now costing £107,674. The survey reported an 8% increase in free-of-tie leases over the past five years in the south and west as well as the Midlands. The north, meanwhile, has seen a 12% increase in free-of-tie lease rent over the past five years. ‘We have previously commented that there are concerns that London operators seeking to expand into the regions are taking space without fully considering local property values and have been outbidding the market to secure space,’ said Fleurets, adding: ‘What has been evident is that because a brand is successful in London, it does not mean that it will be successful in the regions.’
• With regards to the MRO, Fleurets says pubs that are most likely to benefit are those with high beer volumes, although ‘tenants need to fully consider the implications of going free of tie. Not only will there be the loss of SCORFA benefits, they are likely to have to sign up to a new lease based on typical commercial terms.’
• Fleurets reports free-of-tie and shell units in London have seen rent increases of 21% and 22% over 5yrs respectively. Rest of country came in at 7% and 10%.
• Fleurets reports most major pub companies have ceased their major disposal programmes. It says ‘managed House operators continued to see growth, with positive annual results being shown from companies such as Mitchells & Butler, J D Wetherspoon, Greene King and Marston’s. In addition, high street bar operators also showed positive results.’
• Fleurets says Brexit vote spells uncertainty with the longer term outlook a little less clear. Says, however, that ‘consumer confidence appears to have been maintained throughout this uncertain period with the likes of the restaurant operators all showing continued growth, which appears unabated.’
• Fleurets says ‘overall tied leases have shown a reduction in average rents.’ There are some hotspots, however, such as Manchester, Bristol, Birmingham and Leeds.
• Chipotle shares down 7% yesterday after CEO said in New York he was ‘not satisfied with the rate of recovery’. Same store sales were down 21.9% y-o-y in Q3 with the group’s shares down by a third.
• Catering company Rhubarb has been sold to private equity firm Livingbridge for an undisclosed sum.
• Michael Nolan is leaving as CEO of Smashburger after only 9mths in the job. Smashburger has 375 locations across the US
• The BBPA has said that it will take time to gain a fuller picture of the demand for legislative changes but there appears to be ‘very good awareness among tenants and leaseholders of the new system’. It will also take time for the implications for both tenants and leaseholders to become clearer as ‘the legislation is very complex and there are still different interpretations of some aspects.’
• The Scottish Beer & Pub Association CEO, Brigid Simmonds, has welcomed the government’s pubs study, which shows ‘clearly that the tied-model is working for Scotland’s pubs’. Just 17% of Scottish pubs operate under a beer tie, compared to 40% in the UK, meaning that similar legislation to the MRO might be less appropriate.
• Health ministers will consider whether minimum unit pricing and a reduction in the drink-drive limit will help reduce drink-related crimes and health issues.
• The CEO of Prestige Purchasing has warned that Brexit will have a fundamental impact on food and drink prices, with foodservice inflation expected to grow by 3.4% next year.
• Data provided by Vianet’s iDraught cellar and bar management system shows beer volumes up year-on-year on Saturday 3 December. A busy day of sport included England continuing its winning run in rugby union by beating Australia, while the Premier League contained two big clashes (Machester City vs. Chelsea and West Ham vs. Arsenal).
• The latest NPD Pub Tracker figures show weekday pub visits rose by 3.3% and weekend visits were up 3.4% in the year to 16 September.
• China’s wine imports in 2016 are expected to grow 25% year on year, with the fourth quarter expected to rise in both volume and value terms.
LEISURE TRAVEL & HOTELS:
• Abta will target families and older travellers in its new year ‘Travel with Confidence’ advertising campaign, which will educate against fraudulent websites and non-compliant companies.
• Shares in spreadbetting firms have crashed on the news that the FCA plans to tighten rules around CFD products, in line with similar moves by Europe. Christopher Woolard, the FCA’s executive director or strategy and competition, said: ‘We have serious concerns that an increasing number of retail clients are trading in CFD products without an adequate understanding of the risks involved, and as a result can incur rapid, large and unexpected losses. We are introducing stricter rules for CFD products to ensure the sector addresses the shortcomings identified, and that firms make sure that retail clients are aware of the high risks involved in trading these complex products.’
• More money was spent on vinyl than on downloaded albums last week for the first time, with the former hitting sales of £2.4m compared to £2.1m.
• Goals Soccer Centres has announced that Nick Basing will move from Executive to Non-Executive Chairman. The group says ‘over the last year, Nick has taken an Executive role. In that time, he has overseen the introduction of a new strategic plan accompanied with a successful fundraising and led a significant strengthening of the Board.’
• Microsoft has won EU antitrust approval on Tuesday for its $26bn bid for LinkedIn, making it the group’s largest ever acquisition. The U.S. software company is aiming to enhance its core business products with LinkedIn’s suite of sales, marketing and recruiting services, allowing it to better compete with rivals in next-generation computing. LinkedIn generates the majority of its $3bn annual revenue from job hunters and recruiters who pay a monthly fee to post resumes and connect with people.
• Lego is to appoint its first foreign CEO and give its family owners a bigger role in developing the brand in a move that sees incumbent Jorgen Vig Knudstorp step down at the end of the year. Bali Padda of Britain and current COO will replace Knudstorp, who was the first executive from outside the Kristiansen clan.
FINANCE & MARKETS:
• What does a ‘red, white & blue’ Brexit mean? Low-brow Jingoistic nonsense of the lowest order or is it really the strategy?
• Australian GDP fell by 0.5% in the September quarter bringing to an end 5yrs of growth.
• World markets. Dow hits an all-time high. UK & Europe higher. Far East up in Wednesday trading.
• UK financial sector, which is currently twitching re Brexit, brought in £71.4bn of taxes last year per City of London
• UK trade deficit lower than expected due to ‘errors’. ONS says gap is 6% of GDP not the previously-reported 7%
• Eurozone GDP rose by 0.3% in Q3.
• Brent down a little at $53.65 per barrel
• Sterling trading down at $1.2657.
• US long interest rates up 3bps to 3.08%.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Stonegate acquires 30-strong Intertain (Walkabout) from Better Capital, for an undisclosed sum.
• Stonegate & Intertain. Says the latter shed some its unprofitable sites post the CVA in 2015. Stonegate will invest in remaining sites
• Vianet reports H1 numbers. Sales +1.4% at £7.06m ‘principally due to Vending Division growth’
• Shell’s forecourt C-stores renew coffee-on-the-go relationship with Costa Express & now have 740 machines in 536 UK sites
• McDonald’s plans push to improve McCafé brand, asks operators to install new $12,000 machines to improve quality of drinks
• City Pub Co has increased sales by 36.7% in the first 9mths of this year to £19.7m. The group now has 29 pubs.
• The HIS Markit/CIPS purchasing managers’ index for the UK’s service sector rose from 54.5 to 55.2 in November
• Thomas Cook has announced that it is to take full control of the retail stores currently operating under a JV with the Co-op.
• On the Beach reports FY numbers, says has seen ‘strong profit growth in a challenging market’. Sales +13% at £71.3m.
• Leeds Bradford airport is to get its own rail station as a part of a £270m improvement programme
• A Kantar TNS study suggests almost half (47%) of UK adults intend to take an overseas holiday in the next 12 months
• Mark Carney said yesterday that Britain has endured its first lost decade in 150yrs. He said global trade was under attack.
• Greek Finance Minister Euclid Tsakalotos has welcomed ‘progress’ in debt talks but warns Greece’s creditors not to push it too hard
• Later tweets: Bond proxy stocks slip a little further ahead of US rate rise. Jury’s out on which way next move will be in UK
• Copper price higher as soft commodities roll over. Good news for sweet coffee drinkers as both coffee & sugar prices now off the top
• Finance BS word spot today: ‘eventuate’. MS Word doesn’t give it a squiggly red, either. I think it means ‘happens’.
• Kantar says 47% adults to take o/seas holiday in next 12mths. Is that good? Means more than half won’t travel abroad.
• JDW puts money where mouth is. Shuts shops & buys back shares. New entrants crowding High St, bumping up rents etc. Why play that game?
• What did Stonegate pay for Intertain. Says is 5x proforma EBITDA. Pro forma excluding what? How much is acquired debt? How much equity?
• Coffee. Lavazza by our reckoning c6p per cup (now £5.70 per 750g), milk 8p (£1 for 4pts). Hence ex-VAT margin >90%.
• Coffee price. Cost c14p, retail c£2.65. If costs ‘rise 15%’ (i.e. 2p) then will operators try to jack prices up by 40p in New Year?
RETAIL NEWS WITH NICK BUBB:
Nick is on holiday.