Wm Hill, by-elections, beer sales, optimism, costs & other:

A DAY IN THE LIFE:

Have you ever stood on a Lego brick in the bedroom in the dark when you’ve got no slippers on?

Because, though it’s fractionally less awful than standing on an upturned three-prong plug, there’s not much in it so, in the interests of safety, I think I might start lobbying for all Lego bricks to carry a health warning.

Said warning should be highly visible and either illuminated or should glow in the dark and, since we can all agree that standing on a Lego brick is not pleasant – but we can’t agree on much else now – I feel sure that it’s something that the Government would back wholeheartedly.

Indeed, it might end up at the top of the next Manifesto. We can park Brexit, the NHS, education and the rest until we’ve dealt with the threat emanating from our own kids’ toyboxes.

Anyway, it feels like it’s been something of a long week. On to the news:

PUB, RESTAURANT & DRINK MANUFACTURERS:

• Costs still an issue despite industry showing, once again, that it is capable of optimism.

• CGA Peach’s Business Leaders’ Survey of 250 senior executives, in partnership with Barclaycard, finds that two thirds of respondents are either very optimistic (10%) or fairly optimistic (57%) about their business prospects in the next 12 months. This is down on early last year but an improvement on November 2016, when nervousness over Brexit-related uncertainty was arguably at its highest. Only 48% of leaders are confident about the wider market in 2017, however, with concern about mounting costs coming to the fore.

• Food, families, females remain the way forward with beer sales under pressure.

• Remain relevant. That may be the key to success. Don’t have 2,000 or 3,000 or 4,000 of the wrong pubs selling the wrong things to the wrong people from the wrong locations at the wrong price. This is easier advice for new entrants to take than it is incumbents.

• The BBPA’s quarterly ‘Beer Barometer’ shows beer sales fell a per cent in 2016 (equivalent to 78 million pints), lending credence to calls for a one penny cut in beer duty in the Budget on 8th March. Prior to 2013, there was a 14% slump in sales under the controversial beer duty escalator, when a tax hike of 42% from 2008-13 was accompanied by 58,000 job losses and 7,000 pub closures.

• HMG sees concessions on Rates as cheap enough to offer. Seems less willing to take on health, education, demographic time bomb, debt problem, low productivity etc. Will be focussing on ‘The Shape of the New Pound Coin’ as the centrepiece of government policy next.

• Brigid Simmonds of the BBPA has welcomed the review of transitional relief and is calling for wider pub reform. Simmonds said: ‘There is a huge need for more transitional relief for the pubs most badly affected, so this review is welcome…However, a wider review is needed, so that the Government can consider the specific needs of the pub sector, which should have its own system of relief, given we are shouldering such an unfair share of the rates burden.  The BBPA believes that pubs are overpaying business rates by £500m.’

• Tim Martin has hit out at the government’s business rates increases and tax inequality, which will see JD Wetherspoon slapped with a multi-million pound bill.

• Imbiba is gearing up to launch a c£50m growth fund which will mark a departure from its traditional model of backing start-ups and see it partner with leisure operators across the UK. The fund’s advisory board includes former Spirit Pub Company chief executive Karen Jones, Vital Ingredient chairman Graham Turner, Brakspear chief executive Tom Davies, TGI Friday’s chief executive Karen Forrester and Martin Clarke, former head of leisure at Permira.

• Fuller’s London Pride Unfiltered launch is the group’s ‘biggest in a generation’ and is aimed at younger consumers.

• Starbucks to offer one-day-old, cold, bubbly thick black coffee to customers.

• Starbucks is to bring the nitro coffee trend over to the UK, after the product’s success in the US. Nitro Cold Brews are chilled coffees, that resemble Guinness in appearance.

• UK retailers saw sales recover from a January slump in February but have a negative outlook for the first time in more than four years, per CBI. Two-fifths of the 64 retailers surveyed by the Confederation for British Industry said that sales volumes were up year-on-year in February, while just under a third said they had fallen, giving a balance of +9 (upt from -8 in the previous month). However, investment intentions for the year ahead fell for the first time since May 2016 and the business situation was expected to worsen over the next three months by a margin of -7, compared to +12 in January, marking the first fall in expectations since August 2012.

HOLIDAYS & LEISURE TRAVEL:

• Storm Doris has caused disruption for more than 10,000 airline passengers. Multiple flights were grounded due to gusts in excess of 50mph and passengers have been urged to check flight information online for schedule updates.

• Trump’s updated travel ban has been delayed by the US government until next week. The first draft of the order banned refugees and immigrants from seven predominantly Muslim countries. The redraft is said to address some of the major concerns protesters flagged up.

• Immigration minister Robert Goodwill stated that the EU is considering the implementation of paid visa travel for UK citizens to the EU. The minister said the system could be based on the american electronic visas (ESTA) that currently cost £11.

• Abta chief executive Mark Tanzer has warned of a risk of ‘a general slowdown’ in the economy and is fighting to make air access to the EU a Brexit priority. Speaking at the Business Travel Show in London, Tanzer said: ‘We anticipated the hit to sterling. Now we see a general uptick in inflation which will eventually put a dampening effect on demand. We don’t know what will happen to the UK economy, [but] people are delaying decisions on investment.’

• The U.S. hotel industry reported mixed results in the three key performance metrics during the week of 12-18 February 2017, per STR. Occupancy fell 3.2% to 62.2% and RevPAR fell 0.2% to $77.36 despite a 3.1% increase in average daily rate to $124.41.

• STR data shows hotels in Europe grew occupancy by 5.1% in January 2017 to 57.1%, while average daily rate increased 2.4% to €99.25 and revenue per available room jumped by 7.6% to €56.66. The French market performed well year-on-year, as it recovered from security concerns, and Italy also saw strong growth.

• IAG reports Q4 numbers. CEO Willie Walsh reports ‘in the quarter, we made an operating profit before exceptional items of €620 million, up from a €530 million operating profit last year, with an improvement of our underlying passenger revenue trend.’ He says ‘for the full year, it was a good performance in a challenging environment with an operating profit of €2,535 million before exceptional items, up 8.6 per cent versus last year.’

• Commenting on the outlook, IAG reports ‘at current fuel prices and exchange rates, IAG expects its operating profit for 2017 to show an improvement year-on-year.’

WILLIAM HILL FULL YEAR NUMBERS:

• William Hill reports full year numbers. Revenue up 1% at £1.6bn with adjusted operating profits down 10% at £261.5m

• Wm Hill turns in 22.3p of earnings for FY16, down 10% on last year. Dividend is unchanged at 12.5p

• Wm Hill FY: Says ‘balance sheet remains healthy with net debt for covenant purposes at 1.8x EBITDA (2015: 1.3x)

• Wm Hill FY: Says it is seeing re current trading ‘positive trends in amounts wagered in all four divisions, including encouraging improvement in Online with UK Sportsbook wagering up 10% and UK Gaming net revenue up 8%’. The group reports that ‘sporting results [are] favourable in the UK, behind in Australia and the US.’

• Wm Hill FY: Group says it has 3 strategic priorities going forward. 1. To grow UK market share with increased investment in product, marketing and omni-channel. 2. To continue international revenue growth and 3. To deliver two key projects to support growth and reinvestment.

• Wm Hill FY: Interim CEO Philip Bowcock comments ‘2016 was a challenging year for William Hill, but one in which we made considerable operational progress, leaving us well-placed to drive the business forward in 2017. We have delivered extensive product, user experience and marketing improvements in Online, modernised our Retail management structure to focus more on the customer and continued to grow in our key international markets. There are now encouraging signs in all our divisions, in particular Online’s UK business, which is now delivering sustained growth.’

• Wm Hill FY: CEO continues ‘looking forward, we want to keep improving the customer experience.’ He says ‘we expect our transformation programme to continue delivering important efficiency savings that we can reinvest to deliver an even better customer experience and faster growth.’

• Wm Hill FY: Group concludes ‘we have a clear strategy to take the business forward and grow market share in the UK, while expanding our revenues internationally.’

OTHER LEISURE:

• Shares in online gambling company 32Red have leaped up as much as 16% following a bid by rival Kindred Group, which is offering 196p per share. The offer values the Gibraltar-based 32Red at £176m.

• The FT reports that gambling software group Playtech is hunting for more targets as part of its acquisitive growth strategy on the back of strong revenue growth. The group, which was founded by Israeli billionaire Teddy Sagi, spent €240m on a series of deals in 2016 and retains a cash pile of €545m.

FINANCE & MARKETS:

• Tories remain The Strongest of the Weak as they take Copeland from Labour. Corbyn manages to hold Stoke

• Barclays has said that it will beef up its operations in Frankfurt & Dublin during Brexit negotiations

• Brits may have to pay to travel in Europe post 2019 (see above)

• Germany’s budget surplus hit a post-1989 high of around €24bn in 2016.

• World markets. UK down yesterday & Europe also lower. US markets higher but Asia lower in Friday trade

• UK 10yr gilt yield on the slide. Down to 1.15% from 1.2% yesterday

• Oil up c25c at $56.55

• Sterling quite a bit stronger. Trading at $1.2552 vs $ (was $1.2438) and at 1.1863 vs Euro (was 1.1781)

YESTERDAY’S LATER TWEETS:

• Tweets: Davis says EU workers won’t go home as Brexit pivots away from EU immigration & towards freedom, greatness? No, really. Pivots towards what?

• Least Londoners moving house in 25yrs & Foxton’s listed when, end-13? Coincidence? Swapped their money for yours. Shares 4 quid & now 96p

• Howden says sees ‘softer trading conditions’ in UK in H2. Group has raised prices but sees volumes ‘weakened’. Lead indicator?

• US rate hike? Apparently betting is on an 18% chance in March, more likely in June. Fed will have to hurry to get 3 in this year

• UK manufacturing growth boosts Q4 GDP est. Now looking for 1.8% growth last year. Not shabby but headwinds building

RETAIL NEWS WITH NICK BUBB:

• BDO High Street Sales Tracker: We flagged on Wednesday that the shift of Valentine’s Day did not boost John Lewis much last week, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e Feb 19th saw Fashion Store LFL sales edge up by 0.7% against last year. Including Homewares and Lifestyle chains, total Store LFL sales were up by 2.3% and overall Online sales were up by as much as 30.8%, on top of 17.7% growth last year.

• CBI Distributive Trades Survey for “February”: the headline of the silly monthly CBI survey yesterday was “Retail sales rebound slightly in the year to February”, just because 40% of retailers surveyed said that sales volumes were “up”, whilst 31% said they were “down”, giving a so-called rounded “percentage balance” of +9% (versus -8% in “January”)…But only 64 retailers took part and the polling was completed two weeks ago, so only a fool (or a credulous journalist or a City economist) would place any store on the flimsy findings, particularly given the general evidence that February trading has been pretty dull so far…

• Westfield Watch: While trying to find the reference to stake-building in Intu Properties in Westfield’s final results on Wednesday “down under”, we came across some interesting stats on their UK flagship shopping centres. Annual sales at Westfield Stratford are said to be Aus$1.15bn and Westfield London is just under the Aus$1bn mark, but by 2020, once developments/extensions are built out, Westfield expect Westfield London to be their biggest centre, with sales of Aus$1.8bn (ie £1.1bn in today’s money), with Westfield Stratford at Aus$1.7bn (and Croydon Aus$1.2bn).

• Trade Press (1): The front cover of Retail Week magazine today is a photo of IKEA UK boss Gillian Drakeford in a high-vis builder’s jacket, flagging up a feature on “Laying new foundations at Ikea”. In terms of News stories, RW focuses on the news that Retailers this week intensified calls for a fairer Business Rates system as the Government faced renewed pressure to act before changes to rateable values take effect in April and that Clarks has launched a review of its store portfolio as new boss Mike Shearwood kick-starts plans to right-size and modernise shops. And in his column the Editor flags that the Business Rates hike will hit the High Street and young retailers the hardest and thunders that “the industry must carry on its fight for fundamental change to a broken system. Otherwise the Tescos and Ted Bakers of tomorrow could be taxed out of existence”.

• Trade Press (2): In Drapers magazine today the Editor focuses in her column on the appointment of Christos Angelides as the next boss of Reiss, noting that the response from industry contacts has been overwhelmingly positive, ¬and thunders approvingly that “David Reiss has found a suitable successor”. In terms of News stories, Drapers also focuses on the Clarks property review and the Business Rate row, but also flags that Edinburgh Woollen Mill Group is preparing to launch a new mini-department store concept in the former BHS unit in Carmarthen (a planning application has been submitted for a 16,900 sq ft “Days Department Store”). The main features are on Autumn 2017 Footwear and Accessories and the Aussie footwear and accessories brand RM Williams.

• News Flow Next Week: The ABF (Primark) pre-close and the McColl’s finals are out on Monday and the Greggs finals are on Tuesday. Tuesday will also bring some news on our old friends Poundland and Darty, via the Steinhoff Q1 and the FNAC finals respectively. On Wednesday we get the MySale interims and the Inchcape finals              and then Thursday brings the Travis Perkins finals and the Shoe Zone AGM.