Langton Capital – 2016-12-13 – Pub insolvencies, Hollywood Bowl, inflation & other:
Pub insolvencies, Hollywood Bowl, inflation & other:
A DAY IN THE LIFE:
I suppose like many people I’ve come to rely a bit on MS Word when it comes to my spelling.
And I know it’s annoying how it sometimes wants to replace an ‘s’ with a ‘z’ and how it would rather have one ‘l’ in the middle of a word rather than two, but it’s useful nonetheless.
However, when you wrongly use one word rather than another, it’s not much help at all.
Hence, when you automatically put an ‘h’ in the middle of the word ‘noting’ you can turn a positive sentence into a negative one, for instance ‘it was worth nothing that the company had a better second half year…’ etc.
Anyway, daft day with regards to meetings today starting at 8.30am. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• The number of pub and bar companies in the UK entering insolvency declined by 7% to 480 instances in the year to March, according to a report by Ortus Secured Finance. Investment in craft beer, food, and refurbishments has helped, with Nielsen CGA data showing the on-trade craft beer market grew by 40% in the year to January.
• LfL sales across UK pubs & restaurants broadly flat this year but here’s a thought; what’s the ex-delivery number doing?
• Delivery is boosting what are still called LfL sales but 20% or 30% is ending up in the hands of the marketers/delivery companies
• Delivery: Opening new markets. Roo Boxes (off-site kitchens) & providing food in wet-only pubs being two such examples
• Petrol prices may rise by 3p per litre to around 120p per the AA following OPEC’s decision to cut production
• UK inflation numbers for November are out later today
• Rising interest rates should reduce pension fund deficits across pub & restaurant operators – see Finance & Markets
• Greene King CEO Rooney Anand has been awarded 134,242 shares as a part of his LTIP. Mr Anand is retaining 70,878 shares after sales at 685p to cover taxes. He retains 599,919 sharees in the company.
• Dartmoor brewery has become a corporate member of Cask Marque.
• AG Barr is today hosting a visit to its Cumbernauld site. It says no new trading information will be disclosed.
• Marston’s has announced the appointment of Matthew Roberts to the Board as an NED from 1 March. He is currently Chief Financial Officer of Intu Properties plc (previously Capital Shopping Centres plc), a FTSE100 listed business. Prior to this, Matthew was Chief Financial officer of Gala Coral Group Ltd from 2004 to 2008. Marston’s chairman Roger Devlin comments ‘I am delighted to welcome Matthew to Marston’s and to the Board. His extensive property expertise and experience of a variety of high calibre, consumer-facing leisure and retail corporates will be highly relevant to Marston’s as we progress the continued development of our own business in pub-retailing and brewing.’
• The FCA is reported set to consult on the need (or otherwise) for regulation of the crowdfunding market
• Coaching Inn Group has won Les Routiers Conference Centre of the Year 2017 for its Three Swans property in Market Harborough. CEO Kevin Charity reports ‘our aim is to transform the fortunes of traditional coaching inns in busy market towns and, with our latest investment from the BGF helping support a £50million expansion, it gives us the opportunity to grow and invest in our estate.’
• Conviviality Retail has acquired the entire share capital of KMD Enterprises, which owns 15 convenience stores in the South East of England. The shops will be converted to the Bargain Booze Select Convenience fascia. David Robinson, MD of Conviviality Retail commented: ‘The acquisition of KMD further strengthens our convenience store business, and again demonstrates our ambitious growth plans in this area. These new stores are located in the South East of England and this is an important geographic expansion for Conviviality Retail as our brands are currently underrepresented in this region.’
• BBPA chief Brigid Simmonds says that Brexit will ‘dominate’ the sector next year, adding that the development presents both risks and opportunities. Simmonds comments: ‘We must make the case for light regulation and a more favourable tax regime… we also need to impress upon the government the importance of securing the labour and skills the sector needs and [make it clear] this debate is not just about the banking or motor industry.’
• Yesterday, Japanese brewer Asahi was reported to be close to finishing a £5bn takeover of a portfolio of European beers put on the market by SAB as part of its £79bn sale to AB InBev.
• Today AB InBev has announced that it is to sell the businesses formerly owned by SABMiller in E Europe to Asahi for Euro 7.3bn. The consideration is slightly ahead of expectations
• Pokémon GO is partnering with Starbucks to open new gyms and PokéStops at its sites in a move reminiscent of the tie up between Pokémon GO and McDonald’s in Japan.
• US restaurant companies will be a ‘market-share game’ as industry sales growth slows into 2017, per a report by Fitch. The ratings agency expects restaurant sales to grow 4% next year, down from the 5% pencilled in for 2016. The lack of traffic growth has come despite a host of economic data suggesting consumers have more money to spend and are more confident in the economy. Gas prices and the unemployment rate are low, and wages have risen.
• Monty Moran has stepped down as co-CEO at Chipotle Mexican Grill after a year of weak sales following food safety issues in 2015. Steve Ells, who had been co-CEO, has taken over as the sole CEO of the company he founded and turned into a successful restaurant chain. Same-store sales on a two-year basis have fallen 19.3% in each of the first three quarters this year.
HORIZONS – CURRENT TRENDS:
• Horizons has suggested that consumer confidence is ‘set to falter in the year ahead prompting foodservice growth to continue to slow’.
• Horizons suggests day-parts will continue to blur. Says we will see ‘continued erosion of traditional day-parts to which foodservice operators must respond with flexible menus throughout the day.’
• Horizons points to dessert offer as beneficiary of changing consumer tastes though ‘healthy eating remains a concern amongst UK diners’.
• Horizons says ‘economic uncertainty ahead of Britain’s exit from Europe will take its toll prompting consumers to reduce their discretionary spend next year and seek even better value for money from operators.’ MD Peter Backman says ‘while we will continue to see a number of innovative ideas and concepts coming to market the sector cannot escape the looming impact of Britain’s withdrawal from Europe which will put pressure on the price of food and equipment, energy and labour.’
• Horizons says more Brits may holiday at home if they cannot afford overseas holidays, should benefit some pubs.
• Horizons sees ‘a potential hike in menu prices’ & adds ‘shaky consumer confidence will see diners seeking out deals, vouchers and money-off promotions.’ The analyst says a positive could be a move away from reliance on labour & more efficient & reduce waste. Backman concludes ‘next year will be a year of uncertainty. We anticipate that foodservice growth will continue to slow thoughout the year. Operators must remain innovative and cater for changing demand patterns.’
LEISURE TRAVEL & HOTELS:
• Mark Warner is reportedly introducing ‘unavoidable’ surcharges to customers of between £30-£50pp ‘for the first time in many years’.
• STR’s preliminary November 2016 data for London shows a rebound in figures from last year’s hotel trade, which was impacted by the terror attacks in Paris. An 8.5% increase in demand eclipsed a 3% rise in supply, helping to drive 5.4% growth in occupancy to 86.1%. Average daily rate was also up 2.6% to £153.07 and revenue per available room rose by 8.2% to £131.78.
• Passenger numbers on Le Shuttle Channel Tunnel grew by 5.5% in November. Year to date, passenger numbers are +1.5%
• Passengers using Gatwick face further travel disruption this week in the run up to Christmas, with a three-day strike crippling train services to and from the airport. Members of the train drivers’ union Aslef will walk out on Tuesday, Wednesday and Friday, affecting an estimated 78,000 people.
• New travel alerts have been issued for Egypt and Turkey after recent attacks in Cairo and Istanbul leaving a combined 63 dead and 204 injured. Turkey has declared a national day of mourning. ‘You should remain vigilant at all times and follow the advice of local security officials,’ the FCO said in an updated travel advisory.
• Disneyland Paris is involved in a dispute with its investors over allegations it has paid out almost €1bn in excess charges for royalties and licences to Walt Disney.
• High load factors have helped Stansted to a record November, with more than 1.7 million passengers using the airport. The increase of 2.3% over the same month last year enabled the airport’s rolling annual passenger total to rise by 7.8% to 24.17 million over the previous 12 month period.
• Air Partner has announced the acquisition of Clockwork Research Limited, a leading Fatigue Risk Management consultancy, for an undisclosed sum. The consultancy reported revenue of £707,000 for the year to end-June.
• Hollywood Bowl reports FY numbers, sales +23.9% at £106.6m with LfL sales +6.8%. Adj. EBITDA +42.6% at £29.4m
• Hollywood Bowl FY. Debt down to 0.7x EBITDA & adj. EPS 13.2p. Maiden dividend of 0.19p (nil last year). CEO Stephen Burns reports ‘we are really pleased to report our maiden results as a listed business. It has been a transformational year for Hollywood Bowl. Listing on the stock market is an important step in the development of the business but it reflects on the strength of the business and the whole Hollywood Bowl team that at the same time we have also delivered a strong business performance. We continued to invest in and enhance the customer proposition meaning we have given millions of customers a great experience. By making sure we continue to focus on what our customers want, we are confident that Hollywood Bowl has a promising future as a listed business.’
• Hollywood Bowl reports ‘the new financial year has started well and in line with the Board’s expectations. From October through to the Easter holidays is a key trading period for any indoor leisure-based business and we have been pleased with the performance to date.’
• Cineworld has received clearance from the Competition and Markets Authority to acquire five Empire cinemas from Cinema Holdings Limited.
• Shares in Ladbrokes Coral fell by 9% yesterday on the news that talks with gambling group GVC about a potential takeover had broken down.
FINANCE & MARKETS:
• IMF boss Christine Lagarde faced her first day in court yesterday over charges related to cronyism and negligent payments.
• Oil rose again yesterday to an 18mth high.
• Manpower has reported that it is “business as usual” as far as recruitment is concerned. It says there was a pause post 23 June. MD Mark Cahill reports ‘when you look back at the Brexit vote, there was an awful lot of uncertainty before and after. But I think people are looking at 2017 and thinking, ‘We have got all our plans and budgets ahead of us and we just need to get on with it. There is no point hanging around thinking what is going to happen.’’
• World markets. UK & Europe down yesterday & US also lower. Far East mostly up in Tuesday trade
• Brent trading around $55.65, a shade lower overnight.
• Sterling down a little at 126.7c vs US$. Up to around 119c vs Euro
• US long rates unchanged (30yrs = 3.16%) ahead of Fed statement tomorrow. UK 10yr gilts up to 1.47% from 1.46%
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• C&C reports ‘existing contract brewing arrangements with AB InBev have been renewed and extended’.
• ETM Group saw turnover rise by 17% to £22.9m as group EBITDA grew 10.1% to £2.3m for the year ended 29 Feb
• The Sunday Times writes of Soho House’s tightening finances as the group negotiates a bold global expansion programme
• Bookatable has reported that pub bookings for Xmas Day are +12% on last year. They are now +26% on 2014
• US journal NRN has pointed out that, though restaurant shares are +5% on last year, LfL sales ‘have been weak all year.’
• Food & Drink Federation has called on the government to give reassurance to European workers that they will be allowed to remain
• Grocer suggests that rising food prices will have helped push inflation to its highest level for more than 2yrs later this week.
• Nando’s has reported revenues up to £809m in the year to February from £587m in 2015. PBT fell to £21.3m from £44.6m.
• Pizza Express has put the price of its Margherita Pizza up from around £8.45 to £9.10 at its Haymarket site
• Coke CEO Muhtar Kent is to retire in May next year. COO James Quncey, who is British, is to replace him
• Transport secretary Chris Grayling has rejected calls to cut the blood alcohol limit from 80mg per 100ml to 50mg
• MCA data show that menu price inflation has significantly outpaced the Consumer Price Index in the past year
• Tougher rules are needed to protect investors in crowdfunding platforms, per the FCA
• Travel growth globally is expected to continue to outpace economic growth by a couple of hundred basis points
• Accountants BDO say the economy has stabilised “in a lower gear” than it had been running at before the referendum.
• UK trade deficit down to £2bn in Oct. Good news as imports down by £1.8bn whilst exports up by £2bn
• Later Tweets: Interesting to see NFU calling for no expulsion of non-Brits post Brexit. Didn’t many of those areas vote strongly to quit EU?
• Selling Sky to US (ARM to Japan, others to China) to balance our payments. If overseas gilt buyers strike, will need to sell even more
• Economy. NFU wants EU labour to stay. Didn’t those areas vote Brexit? If 1% population (2% workforce) leave, where are we then?
• Cocoa price fallen. Bit late for Xmas & could be tough persuading producers to cut prices for Easter. Nonetheless, price down >20% recently
• Pizza Express jacks price. Definitively answered question whether they would try to maintain cash or percentage margin (A: the latter)
• Crowd funding in cross hairs. Legislation possible (or likely). Could come before (rather than the more usual ‘after’) the first collapses
• BDO. Economy stable but stuck in low gear. Where’s the upside. Wasn’t it ‘in one bound, we’ll be free’, have £350m p/wk for NHS etc.
• Fed decision on rates due Wednesday. Keep an eye on long bond. Rates sharply up in US over last week. Should ease some pension deficits
RETAIL NEWS WITH NICK BUBB:
• Carpetright: Today’s interims from Carpetright bring mixed news, with first half underlying PBT well down from £9m to £5m, because of what CEO Wilf Walsh calls “an increasingly competitive UK market”, but after a challenging first half Carpetright are accelerating their UK store revamp plans and are seeing encouragingly positive like-for-like current trading in the UK (up 2.6% in the six weeks to 10 December). As a result, the overall message is “as we enter the important January trading period, we remain comfortable with the range of market expectations” (the consensus for y/e April is £16.1m underlying PBT), which the City will find a relief, ahead of the 9am analysts meeting.
• News Flow This Week: The latest Kantar/Nielsen grocery market share data (for the 4 and the 12 weeks to Dec 4th) is out at 8am this morning. Tomorrow morning brings the Dixons Carphone interims (see above) and then we get the ONS Retail Sales figures for November on Thursday.