Compass Group, On the Beach, input prices & other:

A DAY IN THE LIFE:

Bit busy today so straight on to the news:

PUNCH TAVERNS BID SITUATION:

• Emerald has confirmed that it will not make an offer for Punch Taverns, clearing the way for Heineken and Patron’s 180p per share bid.

• Punch has replied saying ‘the timetable for the recommended offer for Punch by Vine Acquisitions is as announced on 17 January 2017 with the relevant meetings of Punch shareholders on 10 February 2017 and completion is expected in the first half of 2017.’

• Heineken [with Patron] now looks to have a clear run at Punch.

• A bid from left field has to be considered unlikely at this stage.

• The 180p per share bid from the consortium remains at a c47% to Punch’s tangible net worth of c285p

• Langton remains of the view that it would take an accumulator 20yrs and more than 285p per share to build such an estate

• But realpolitik is at play here. Heineken has the money and a head start.

• A stage II competition inquiry is not out of the question. If Heineken, which already has >1,000 pubs of its own, was obliged to make a few disposals, it would not be likely to derail the deal.

• An enquiry could delay matters, however and, with the time value of money now a factor, a price in the mid-170s looks reasonable.

PUB, RESTAURANT & DRINKS PRODUCERS:

• Compass updates on Q1 trading, says organic revenue +2.8% ‘in line with our expectations.’ The group says ‘we continue to see strong levels of new business wins and good retention rates. Like for like revenues increased modestly, with some pricing offsetting weak volumes in our Offshore & Remote sector.’

• Compass Q1. Says ‘our operating margin moved forward slightly, as efficiencies generated through our management and performance (MAP) programme more than offset cost inflation and our investment in the exciting growth opportunities we see around the Group. In addition, the end of the restructuring programme in our Offshore & Remote business also contributed to the improvement in the operating margin in the quarter.’

• Compass re outlook. Says ‘our outlook for 2017 remains positive and unchanged.’ The group adds ‘growth in North America is strong, and both Europe and Rest of World are performing as expected with growth weighted to the second half. We continue to focus on driving efficiencies throughout the business and our margin expectations are also unchanged. In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth.’

• MCA’s latest Top of Mind survey shows a collapse of confidence in trading conditions, with the number of operators feeling positive about the current trading environment falling from 68% in Q4 2015 to 30% at the same point in 2016. The percentage of operators experiencing challenging conditions has more than doubled from 20% to 47%.

• According to Horizons’ latest Menu Trends Report, pizza has toppled the beef burger by being the number one dish on UK menus. This change has been due to pizzas success in the pub market, with pizza now being on the menu 50% of the time (previously 38%). Vegetarian burgers also enjoyed success this year, showing a menu frequency increase of 13%.

• Tesco could be made to ditch more than 600 stores unless it can convince regulators that its £3.9bn merger with Booker will not harm competition. Research from The Times shows that there are 635 Tesco stores located less than 500 metres away from a Premier, Londis, or Budgens shop. Tesco, which has a 28.3% share of the overall grocery market, and Booker have played down competition concerns, arguing that Booker owns only nine stores and that its franchise network operates independently.

• Pernod Ricard North America has taken a majority share in US distillery Smooth Ambler, which was set up in 2009 and produces bourbons and spirits. Pernod Ricard chairman and CEO Alexandre Ricard said the investment illustrated Pernod’s strategy of partnering with rising entrepreneurs sharing the same passion for authentic, high-quality brands.

• Bill’s plans to launch a new grab-and-go format under the name ‘Little Bill’s’ this summer in London and is also looking to step up the expansion of its core estate, per MCA.

• Johnny Depp’s former business managers are countersuing the Hollywood star, claiming that his excessive spending of more than $2m (£1.6m) a month had led to his financial troubles. Notable inclusions in Depp’s list of expense include a $30,000 a month wine bill and $3m spent on shooting Hunter S. Thompson’s ashes out of a cannon.

• 3Sixty Restaurants saw turnover grow by 16% to £17.4m in the year to 31 March, enabling it to swing from a £60,000 loss to a pre-tax profit of £327,388.

• Sir Ken Morrison, the founder of Morrisons, has passed away at the age of 85 following a short illness. Having opened his first supermarket in 1961, Morrison floated the company in 1968. In 2004, it acquired Safeway.

INFLATION WATCH:

• UK factory costs rose at the fastest rate on record last month but exports remained sluggish reports Markit

• British Retail Consortium says short term shop price declines do not mean inflation isn’t just around the corner. CEO Helen Dickinson reports ‘for now, consumers continue to benefit from falling shop prices year on year. However, fluctuations in the monthly figures belie an underlying trend of building cost pressures that are gradually feeding through from the fall in sterling combined with higher commodity prices.’ Ms Dickinson adds ‘this will inevitably mean that we start to see a general upward trend in inflation over 2017. In fact month-on-month food prices were up, although the impact of this on inflationary pressure was offset by the discounting of excess stock by a number of non-food retailers after a tepid sales performance over the festive period.’

• The Daily Mail says a ‘wall of inflation’ is about to hit the UK. Headline-grabbing but perhaps not wrong. Maybe a tiny, tiny wall?

• Bloomberg reports ‘UK inflation risks rise on record surge in factory costs’.

• Interest rates not thought likely to rise ‘till 2019’. Do we hear 2018, anyone? Maybe (heaven forbid) 2017?

LEISURE TRAVEL & HOTELS:

• On the Beach updates on first 4mths trading, says the group has ‘performed well’.

• OTB adds ‘volumes were impacted by the timing of the low cost carriers’ seat release for spring/summer capacity’. This led to a ‘noticeable shortening of lead times’ in what is the quietest period of the year.

• OTB says ‘since the start of the new calendar year booking volumes and revenue growth have strengthened and there has been a continuation of lower cost paid search marketing. This has resulted in revenue growth, after all marketing costs, for the 4 months to the end of January 2017 of +20% YOY.’

• OTB says the group will ‘leverage its scale and technological capability to consolidate its market leading position over the coming months.’ CEI Simon Cooper says ‘the first four months of the new financial year has delivered a further solid period of growth for On the Beach.’ He concludes ‘the Board remains confident in the Group’s outlook and will continue to evaluate opportunities to enhance its market share position.’

• Bali the fastest growing long haul beach destination of 2017 so far, with January bookings for Southall Travel rising 60% on the same period last year. Dubai remains the most popular long haul holiday destination.

• G Adventures has acquired the Swan Hellenic cruise brand, making Swan the third All Leisure brand picked up by G Adventures following purchases of Travelsphere and Just You. G Adventures confirmed the acquisition from All Leisure’s administrators Grant Thornton for an undisclosed sum covered the Swan Hellenic brand and intellectual property, but did not include Swan Hellenic’s single ship, Minerva, which had been leased and returned to its owners.

• BHA shows the number of holiday visitors to the UK in the year to November was down 1.2%.

• BHA says that the total number of inbound visitors, however, was up by 2.8%. The difference was made up by family visitors.

• BHA says UK outbound travellers rose by 6% in the first 11mths of 2016.

• BHA says that the November inbound number, however, was up almost a third. The

• BHA says ‘outbound holiday passenger numbers continue to grow strongly, suggesting a slowdown in the UK staycation market.’

• BHA says there could be something of ‘a headwind for consumer-facing businesses.’ CEO Ufi Ibrahim comments ‘thankfully trading in November has been very encouraging and has helped offset poor performance earlier in the year.’ She says ‘the low rate of sterling presents a great opportunity for our industry to welcome an increasing number of foreign visitors but we cannot and should not rely on fluctuating rates in the long term. With political and economic uncertainty increasing it is more important than ever to ensure UK tourism can compete. The UK continues to have on average twice the tourism VAT rate than that across Europe.’ Ms Ibrahim concludes ‘alongside businesses investing in the apprenticeship levy, rising business rates and the threat of online platforms such as Airbnb, this signals concern for businesses in the industry, four out of five of which are SMEs.’

• TTG reports a bumper start for the outbound travel industry in January. The journal says ‘record sales figures are being reported from both agents and operators as the peak booking month comes to a close. Operators are always keen to talk up a market, but agents on the frontline – who know the true picture – are confirming a healthy January.’ The weak Pound does not seem to be putting people off from spending their money abroad.

• A study of 178 travel buyers from The Business Travel Show more than 28% of travel managers are now using services such as Uber and Airbnb, compared to 8% in 2015. The study showed one of the main reasons behind the take up are cost and choice.

• The number of buyers with bigger travel budgets is on the rise for the first time in four years, a study from the Business Travel Show has found. The results of the seventh annual forecast show that 32% of buyers will have more money to spend in 2017, compared with 29% last year. This follows successive annual drops since 2013. Airline budgets will also rise for 40% of buyers, the highest number for the last three years.

• Uber is to partner with Daimler to use self-driving vehicles in the ‘coming years’.

OTHER LEISURE:

• Hollywood Bowl has opened its 55th Centre in Southampton City as part of the WestQuay Watermark development. Steve Burns, CEO at The Hollywood Bowl Group said: ‘The Southampton centre opening brings our total number of bowling centres across the UK to 55, and is one of our most high-tech and innovative designs to-date. While many of our centres operate in large out of town locations, Southampton is the latest in growing number of boutique Hollywood bowl venues in urban locations.’

FINANCE & MARKETS:

• January manufacturing PMI still positive at 55.9 but down a little on December’s figure of 56.1

• Roaming charges may be near to the end across the EU. Will be enacted perhaps just in time for the UK to leave

• Reuters reports that bankers across the EU are beginning to offer relocation inducements to UK banks to move to the Continent

• EU ministers said (by a Reuters ‘source’) to be ‘galled’ by Theresa May’s cosying up to Donald Trump

• Fed holds rates steady re interest rates. Three rises still thought likely this year. Bank of England opines today. Fed says ‘measures of consumer and business sentiment have improved of late.’

• Nationwide reports UK house price inflation moderated in January to an annualised 4.3%. Prices in Jan were up only 0.2%. It says ‘the outlook for the housing market remains clouded’ but adds ‘the economy has remained far stronger than expected in the wake of the Brexit vote. Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable at an 11-year-low in the three months to November.’

• Nationwide says ‘there are tentative signs that conditions may be about to soften.’ It says ‘employment growth has moderated and while wage growth has edged up in recent months, in real terms, earnings growth has already slowed.’

• Brent up a dollar or so at $56.55

• Sterling $1.2663 and stronger against the Euro at 117.4c.

• 10yr gilt yield 1.46% vs 1.43% yesterday. US 30yr treasury yield up 3bps at 3.08%

• World markets: UK & Europe up yesterday. US markets higher but Far East mostly down in Thursday trade

TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS:

• Emerald walks away from Punch. Clears way for Heineken and Patron’s 180p per share bid.

• Heineken [with Patron] now looks to have a clear run at Punch. A bid from left field has to be considered unlikely at this stage.

• The 180p per share bid from the consortium remains at a c47% to Punch’s tangible net worth of c285p

• Compass updates on Q1 trading, says organic revenue +2.8% ‘in line with our expectations.’

• MCA’s latest Top of Mind survey shows a collapse of confidence in trading conditions across sector bosses

• According to Horizons’ latest Menu Trends Report, pizza has toppled the beef burger by being the number one dish on UK menus.

• UK factory costs rose at the fastest rate on record last month but exports remained sluggish reports Markit

• Interest rates not thought likely to rise ‘till 2019’. Do we hear 2018, anyone? Maybe (heaven forbid) 2017?

• On the Beach updates on first 4mths trading, says group ‘performed well’ but has seen slower bookings on low-cost carriers’ seat releases

• BHA shows the number of holiday visitors to the UK in the year to November was down 1.2%.

• BHA says ‘outbound holiday passenger numbers continue to grow strongly, suggesting a slowdown in the UK staycation market.’

• BHA says there could be something of ‘a headwind for consumer-facing businesses.’

• January manufacturing PMI still positive at 55.9 but down a little on December’s figure of 56.1

• Fed holds rates steady re interest rates. Three rises still thought likely this year. Bank of England opines today.

• Nationwide reports UK house price inflation moderated in January to an annualised 4.3%. Says ‘conditions may be about to soften.’

• Later tweets yesterday: Emerald confirms won’t make rival offer for Punch Taverns. Shares ease back below the Heineken offer, likely to stay there till conclusion

• Consumer debt. Still rising, just a bit more slowly. Where’s the money coming from to pay it back, we wonder?

• Apple thrilled. Apple excited. Apple got $260bn. Apple got 259.9999bn more reasons than most people to be happy, thrilled, excited etc.

• Prices edging up. Shop inflation still subdued but there a distinct rumble across suppliers. Even sarnie prices said to be rising

• Later tweets yesterday: Emerald confirms won’t make rival offer for Punch Taverns. Shares ease back below the Heineken offer, likely to stay there till conclusion

• Consumer debt. Still rising, just a bit more slowly. Where’s the money coming from to pay it back, we wonder?

• Apple thrilled. Apple excited. Apple got $260bn. Apple got 259.9999bn more reasons than most people to be happy, thrilled, excited etc.

• Prices edging up. Shop inflation still subdued but there a distinct rumble across suppliers. Even sarnie prices said to be rising

RETAIL NEWS WITH NICK BUBB:

• Bunnings Watch: The first Homebase DIY store conversion opens today in sunny St Albans, but there was evidently a press visit yesterday, judging by the number of preview articles in the papers today, eg “Shopping with a sizzle of taste of DIY retail from Down Under” in the Guardian. It sounds like the brash Aussies have done away with much of the furniture and furnishings that Homebase had moved into and focused more on core DIY and we are pleased to hear that the number of staff has nearly doubled from before. We will be interested in due course to see how much the garden centre has changed, although we read that they are selling £500 olive trees…

• John Lewis Partnership Sales Watch: The debate is still raging about how bad 2017 will be for the consumer, but January is now over, so let’s see how the great bellwether JLP is doing. At Waitrose, things settled down last month after a negative blip over the New Year and gross sales were 3.3% up (+1.3% LFL) in w/e Jan 28th, a bit above the 2.8% run-rate (a bit under 0.8% up LFL) for the last 26 weeks of the second half. Over at John Lewis, w/e Jan 28th was also solid, with total sales up by 3.7% (up c1.5% LFL), a bit below the 26 week run-rate of +4.2% in gross sales (c2% up LFL), with Electricals sales up by 5.8% gross.