Langton Capital – 2017-03-20 – Marston’s, Young & Co, Wagamama, inflation & other:
Marston’s, Young & Co, Wagamama, inflation & other:
A DAY IN THE LIFE:
In the days of post-truth politics, false news and intentional (or at least recklessly negligent) misspeaking, I think we should expect our language to evolve.
I mean, courtesy of foaming politicians both sides of the Atlantic, we already have ‘bigly’ and ‘cheaty’ (with the former not even attracting a cautionary MS Word wavy red line) and indeed ‘misspeak’ and I think the number of SSs or LLs in a word is now optional.
So ‘occasionally’ may be spelled with one, two or even three CCs, SSs and LLs and any attempt to suggest that one or other way of spelling could be ‘wrong’ is to be labelled anti-democratic in failing to take into account the will of the people.
Similarly, I expect we’ll soon be seeing the end of health warnings on tobacco products, alcohol, salt or fat-based foods and bungee-jumping kits as we’re ‘sick of experts’ and we can just power through 60 cigs a day and a bottle of gin if we just pull together and jab any old foreigner who comes within shouting distance stoutly in the chest whilst telling him or her just what we want. It’ll work out in the end. It always does. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Marston’s secures new debt finance. Replaces £257.5m facility with new, £320m line of credit. The group has negotiated ‘an incremental £40m accordion facility providing additional flexibility, at improved terms.’ The facility is being provided by Barclays, Lloyds, HSBC, Santander and the Bank of Ireland.
• Marston’s ahead of the curve on debt rescheduling. Current facility expired in Nob 2018, new one stretches to 2022.
• Marston’s debt: Coupon lower than previous facility, line of credit now extends beyond Brexit, adds some certainty. CEO Ralph Findlay reports ‘this new facility further improves the efficiency of our funding. It provides the Group with the certainty of long term financing whilst also taking advantage of current low interest rates, enabling Marston’s to fulfil its future expansion plans in the most cost effective way possible.’
• Mail on Sunday quotes ‘top bosses’ as saying that Britain needs its EU workers to succeed. Their loss would be a ‘massive blow’
• Mail on Sunday quotes Tim Martin as saying that he is a liber on immigration & that he believes immigration from the EU should stay at current levels. Mr Martin says ‘there is a low birth rate in Britain, but we need a gradually rising population in order to be a successful economy.’ He favours a points-based system of immigration
• Big days still reported to be holding up. Just a reminder that Easter falls into H2 this year for September year end companies. March year end companies, such as Fuller’s & Young & Co, will have no Easter in FY17 and two Easter breaks in FY18 (strictly speaking, Easter Sunday next year is on 1 April – the holiday could be split between both periods).
• Telegraph quotes Good Housekeeping magazine, a stranger in our house, as saying that Easter is becoming a ‘second Christmas’. Easter crackers are now apparently a thing.
• Young’s has closed its standalone Burger Shack & Bar in Wimbledon and will change the site back to its previous incarnation as the Five Stables. Young’s chief executive Patrick Dardis said the decision did not affect future plans to open more Burger Shack kiosks. Speaking to MCA, Dardis added: ‘We are about to open five more Burger Shacks in our pubs with gardens. That was always our intention and still is. We have another 20 opportunities identified.’
• Footfall across UK high streets rose by 0.1% year-on-year in February as consumers choose to dine out in restaurants, drink in bars, and pursue other leisure activities as they shop, according to the latest BRC data. “High streets are clearly benefiting as the destination of choice for dining and leisure, while shopping centres continue to underperform as they struggle with a weak entertainment and leisure offer, coupled with increasing caution among consumers around retail spend,’ commented Diane Wehrle, marketing and insights director at Springboard. Meanwhile, shopping centres ‘continue to underperform’, with visits to retail parks in February falling 1.6%.
• Soho House is close to closing a £275m debt deal with PE firm Permira Debt Managers as it looks to improve its balance sheet. The group’s membership has reached 65,000 across 18 clubs around the world, and there is a waiting list of 40,000, but this growth has stretched its finances and Soho House’s bonds have been repeatedly downgraded by ratings agencies.
• The pub sector has joined forces behind a new industry initiative to promote staying in pubs as an alternative to hotels. Stay in a Pub Director Paul Nunny added: ‘With the sector in its infancy, it is important to learn how we can continue to make gains with pub accommodation. As 80% of consumers want to book accommodation online, it is imperative that we are aware of the opportunities in relation to digital marketing, revenue management and getting to grips with TripAdvisor.’
• Real consumer spending growth will moderate from around 3% in 2016 to around 2% in 2017 and 1.7% in 2018, according to PwC’s latest analysis.
• Fourpure have been named the UK’s Brewery of the Year 2017 by the Society of Independent Brewers (SIBA) in their annual Business Awards 2017.
• New research by hospitality and leisure software provider Fourth has found that frontline female staff in the UK hospitality industry are paid marginally more than men per hours. The overall blended rate across hospitality sees women paid £7.84 per hour and men paid £7.82 per hour. The analysis is based on the hourly pay of thousands of hospitality workers and takes in hotel, restaurant, QSR and pub sectors. Incoming Government legislation requires businesses with 250 or more employees to publish their gender pay statistics by April 2018.
• Marketers are consistently overestimating how much budget they will assign to social media sites such as Facebook, Twitter, and Snapchat, according to the biannual CMO Survey.
• Wagamama has secured its first site in Italy, in the Orio Center outside Bergamo, writes MCA. The Duke Street Capital-backed group currently operates more than 160 restaurants located in 19 countries around the world.
• A new global report from Dunnhumby suggests that hypermarkets are increasingly being used for top-up shops as shoppers buy smaller baskets. Dunnhumby studied the behaviour of more than seven million customers across 15 different countries covering North & South America, Europe and Asia, in the two years up to October 2016 and found a 2.5% year-on-year increase globally in small basket visits taking place in large format stores.
HOLIDAYS, LEISURE TRAVEL & HOTELS:
• Travelodge is to open its largest ever hotel, a 395-bedroomed unit, on Middlesex St in London in 2018
• Arena Travel has purchased The River Cruise Line and Diamond Rail brands in the wake of Diamond Shortbreak Holidays’ administration.
• International Airlines Group (IAG) is launching a new low cost long-haul airline brand flying transatlantic from Spain. LEVEL will fly two new Airbus A330 aircraft branded in its own livery and fitted with 293 economy and 21 premium economy seats. Initially it will be operated by Iberia’s flight and cabin crew and will create up to 250 jobs based in Barcelona.
FINANCE & MARKETS:
• ONS reports average UK house price is 7.6x average annual earnings. It was c3x two decades ago. Low borrowing costs make debt affordable but this will change if and when rates rise.
• Rightmove house price index +2.3% for the year to March. In the month of March alone, prices rose by 1.3%
• Reuters suggests that the UK economy is sending ‘mixed signals’ re its readiness for Brexit. It says jobs’ growth has been impressive & GDP is growing but inflation (the CPI for February is announced tomorrow) is potentially a problem. Real wages may fall this year.
• Brent down a shade at $51.40
• Sterling a little better vs US$ at 123.9c
• Pound up vs Euro at 115.17c
• UK 10yr gilt yields down 1bp at 1.25%
• World markets: UK & Europe up on Friday but US markets down. Asian markets mixed in Monday trade
• Later tweets: Bank says inflation should peak at 2.75% early next year. Presupposes pay-rises aren’t baked in & assumes consumer takes cost-hike hit
• Hawkish B of England preparing way for rate rises? No time soon, that’s for sure. Bank sees consumer headwinds
• Pensioners better off than workers as triple lock moves incomes higher up the age scale. Sustainable? Probably not.
• Young & Co and Fuller’s will have no Easter at all in their FY17 numbers but two will fall into FY18. It is what it is.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: Apart from all the coverage of the astonishing news that the discredited former Chancellor, George Osborne, has been appointed as the Editor of the Evening Standard…the most interesting story in the Saturday papers was the Times’ story that “Sports Direct takes new shot at Debenhams”, flagging that Mike Ashley has increased his stake in Debenhams further, via CFD’s, to 13.4%. Not to be outdone, the Daily Mail’s main Business story had the rather sensational headline “Burberry fights to fend off takeover”, although it turned out to be just flagging that the new Burberry management team is committed to a range/store refresh and cost-cutting programme. The Daily Mail also made a big deal of the news that customers can now order Indian takeaways in Morrisons’ Bradford stores. The Guardian had a story on its UK News pages about the decline in the e-book market, noting that
• Sunday Press: The spotlight in the Sunday papers fell on Next, ahead of its final results next week, with a widespread assumption that profits will be down and that management will be gloomy: the Observer said that CEO Simon Wolfson is “an Eeyore-ish character whose default setting is caution, if not outright pessimism”. And the Business Leader column in the Observer mocked the embattled Philip Green’s relatively humble 65th birthday bash at the Dorchester last week, with its “B-list” attendees, but noted that “Green’s rehabilitation has started”. The Sunday Telegraph leapt at the fashion model photo opportunity provided by the obscure news that the small Seasalt fashion chain reported a 20% rise in sales last year. The Sunday Times revealed that Whitbread and DFS Chairman Richard Baker won its FTSE 100 “NED of the Year” Award and also highlighted that its estimable Retail
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda’s recent run of success come to a crashing end, with Morrisons snatching the top spot, with its basket of £54.10 coming in 94p cheaper than Sainsbury and £1.36 cheaper than Asda. So Asda, which had won the 3 previous week’s surveys by a big margin, wasn’t even in 2nd spot and it therefore had to give out a hefty £7.35 Price Guarantee voucher, for the first time in 4 weeks. Tesco was a long way behind its rivals, with a £57.48 basket, but after its instant £3.45 Brand Guarantee discount it was actually 7p cheaper than Morrisons! As usual, Waitrose was in last place, on a £61.44 (c14% more than Morrisons), but there was better news for Waitrose in the separate regular Grocer “Mystery Shopper” weekly survey on Store Service and Availability, as its store in
• Today’s Press and News: Thin pickings today, although there are a few previews of the Next finals on Thursday and the FT has a rather startling front-page headline for those who still have the final episode of “SS: GB” on TV last night still fresh in their minds: “UK seeks German defence pact to bolster post-Brexit solidarity”.
• News Flow This Week: The highlight of this week is the Next final results on Thursday, as CEO Simon Wolfson’s view of the economic outlook will be eagerly awaited, but on Wednesday the Anglo-French DIY group Kingfisher will be in the spotlight with its finals (with B&Q expected to be benefiting from the fact that Bunnings/Homebase has lost UK market share in kitchens and bathrooms). Tomorrow bring the ScS interims, whilst Thursday also brings the Ted Baker finals and the ONS Retail Sales for February.
• TIPS Watch: The great Cheltenham Festival jumps racing concluded on Friday and it’s time to weigh up how our alter ego, “Honest Nick”, did with his 3 each-way Tips each day. Now, like many English trainers, we failed to find a winner, alas, but place money kept us alive…On Friday Master Blueyes came nowhere in the 1.30, but Wholestone was 3rd at 13-2 in the 2.50 and Dandridge was 4th at 13-2 in the 5.30. So, 6 of our 12 e/w Tips were placed (excluding Footpad) and at a quarter of the odds that meant we had a better record than many tipsters in the press). We would have done better with more Irish selections, as Ireland won an amazing 19 of the 28 races over the 4 days (with the great Irish trainer Willie Mullins and his great Irish rival Gordon Elliott both ending up with 6 winners each)…