Langton Capital – 2017-04-06 – Company takeovers, travel trends, London hotels & other:
Company takeovers, travel trends, London hotels & other:
A DAY IN THE LIFE:
So, the Mighty Hull City destroyed Middlesborough last night in a Houdini-like move that sees us edge out of the bottom three for the first time this year.
And thoroughly deserved the win was too and the fact that we’ve taken 16pts out of the last possible 18 at home suggests that both 1) we’re the team in form and 2) we were in a truly awful position about 10 matches ago.
Anyway, that’s enough of that. You can’t have a happy and balanced home life and be a Hull City supporter at the same time, you’ve got to be one or the other so, with the sun shining and the sports pages no longer a no-go area, let’s move on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Brewhouse & Kitchen reports FY numbers to 24 Sept, says operating profit for the period was £432k vs an operating loss of £187k last year. Group says ‘this is our 5th year of trading and our growth has remained strong’.
• Brewhouse & Kitchen reports revenues for year to 24 Sept of £8.8m, up from £5.0m last year. High interest charges pushed an operating profit of £432k into a net loss before taxation of £673k.
• Shares in Yum China, which operates 7,600 restaurants across China under the KFC and Pizza Hut brands, jumped by nearly 12% in after-market trading on the back of a 1% like-for-like increase in sales in the three months to the end of February. Total revenue came in at $1.28bn, down 2% from the prior year period but ahead of the $1.27bn the market was expecting. Net income rose by more than a fifth to $175m for the period amid a sharp drop in operating costs.
• AB Holdings, the owner of Caribou Coffee and Krispy Kreme Doughnuts, is to buy bakery chain Panera Bread Co for $7.2bn, as it expands its coffee and breakfast empire through the biggest-ever U.S. restaurant deal. JAB, the investment vehicle of Germany’s billionaire Reimann family, has built up an empire of coffee and food chains through a series of acquisitions in recent years, while Panera has about 2,000 bakery cafes in the United States.
• Moody’s has reported that Darden’s purchase of Cheddar’s Restaurant Is Credit Positive. It says that the 27 March acquisition ‘is credit positive because it will further expand Darden’s variety of product offerings, and with about 165 restaurants would place Cheddar’s well ahead of Darden’s fine dining and other concepts by number of locations.’
• Gousto has announced Friday deliveries of its recipe boxes, giving customers the option of seven days a week to receive their subscription box. Gousto CEO, Timo Boldt stated ‘We put our customers first and work to provide a service which fits in around their busy lifestyles, giving them complete flexibility and personalisation when it comes to weekly mealtimes.’
• The BoE will officially withdraw legal tender status of the paper £5 note featuring Elizabeth Fry on the 5th May 2017. Over 50% of all Fry fivers have been returned and destroyed, but it is believed there are still 160 million in circulation. In September a new polymer £10 note featuring Jane Austen will be issued.
• AlixPartners annual Private Equity survey has found that 58% of chief executives are replaced within the first two years of a business securing private equity funding. More than half (55%) of private equity firms selected a ‘lack of fit with strategic direction’ as the main reason for replacing a chief executive.
• Activity in the UK’s dominant services sector rose at a faster-than-expected pace in March, as the Markit/CIPS purchasing managers’ index (PMI) for services rose to 55. The services sector, which accounts for three-quarters of the UK economy, said business activity and new work grew at the strongest rate so far this year. However, cost pressures led to the fastest rise in prices since late 2008. Respondents were also optimistic about the year ahead, while there was evidence that the fall in the value of sterling since the Brexit vote had led to new sales inquiries from abroad and demand for overseas clients, especially in the US.
• A group of 10 brewers has submitted an ‘expression of interest’ to the Government in a bid to develop a new brewing apprenticeship standard.
• Delivery Hero, the online food ordering and delivery marketplace, has entered a regional partnership with central Europe restaurant operator AmRest. With this partnership, Delivery Hero will get an exclusive opportunity to add a wide variety of AmRest’s popular restaurants and brands across Poland to its food delivery platform. Drew O’Malley, Chief Digital and Operations Officer at AmRest, commented: ‘This exciting partnership is a key component of our AmRest Digital Strategy. Effectively, we are combining AmRest’s restaurant operational muscle and powerhouse brands like KFC and Pizza Hut with the technical know-how and digital operational capability of Delivery Hero’s PizzaPortal.pl with the ultimate goal of becoming the leader in the restaurant home delivery segment in Poland.’
• The amount of consumer spend on promotional items at UK supermarkets has hit its lowest level in 11 years, per Nielsen data. In the four weeks ending 25 March, only 26% of spend at UK supermarkets went on products with temporary price cuts or multi-buy offers, the lowest level since 2006 (also 26%). Mike Watkins, Nielsen’s UK head of retailer and business insight said: ‘The last few years have seen about a third of the typical supermarket shopping bill going on promotional items. However, to be more price competitive, supermarkets have turned temporary price reductions into permanent cuts, so there’s less promotional activity as many prices are cheaper all-year round.’
• Fitch Ratings has suggested that the retail default rate for the year in the US was now 1% but said that this figure could rise to 9%. Fitch says that negative LfLs and high debt levels had led to ‘negative cash flow, tight liquidity and unsustainable capital structures.’
HOLIDAYS, LEISURE TRAVEL & HOTEL
• STR data has shown no effect from the London Westminster attack on hotel occupancy for the week 22-28 March. Occupancy levels were found to remain within typical March performance patterns. Three days following the attack (25 March) London’s occupancy level was 86.4% while ADR rose to £147.32, a 22.6% increase on the same day last year.
• ‘Gig economy’ companies such as Uber, Deliveroo and Amazon have been accused by a parliamentary inquiry of tricking or forcing couriers into signing away their employment rights. The contracts stipulate that drivers/riders accept that they are not workers and that they agree not to challenge their self-employed status. This means the companies avoid paying the national living wage, employer pension contributions or sick pay.
• Uber is being sued after a passenger was attacked with a knife inside one of its vehicles. The incident happened in an ‘Uber Pool’, a feature that lets you share your trip with a stranger to bring the cost down. Uber has said the altercation did not involve them.
• Alitalia has cancelled 60% of scheduled flights on Wednesday as employees begin a 24-hour strike. The strike is over the loss-making airline’s plans to fire 16% of its staff.
• Analysis of holiday searches and bookings between October and the January peak period show a 25% jump in interest in UK staycations for summer 2017. While Spain remains a popular destination, France has fallen out of the top five this year (having been third last year), with Italy and Greece moving up a spot and Portugal coming in at five.
• Some British visitors to the US could be made to hand over social media passwords, phone contacts and financial records, as the US hasn’t ruled out ‘extreme vetting’. Officials told the Wall Street Journal that new security measures could apply to countries that take part in the US visa waiver scheme, such as the UK, Australia and Japan. However, a spokesman for the Department of Homeland Security said that ‘No final decisions have been made.’
• More than two thirds of corporate respondents to the European Business Travel Barometer predict that Brexit will have no impact on the sector. Alongside this, business travel spend is expected to outpace last year’s growth level of 1% to 2.5% in 2017. The American Express Global Business Travel study shows that there is an upbeat feeling about 2017 among European businesses.
• Marriott execs have told STR that they see growth opportunities in the extended stay segment of the market.
FINANCE & MARKETS:
• The B of England’s Gertjan Vlieghe has said that a consumer slowdown is already underway. He says that rate rises should be postponed. Vlieghe told Bloomberg ‘the consumer slowdown, which initially did not materialise, now appears to be underway. Given the hit to real income from a mix of subdued wage growth and rising inflation, I think the slowdown is more likely to intensify than fade away.’ Vlieghe added that a ‘more material’ drop in business confidence could materialise in the face of Brexit uncertainty.
• EU negotiator Michel Barnier has said that it is a waste of time for Britain to press for parallel trade and exit talks.
• Exit principles must be established before trade can be discussed. The UK is barred from talking to other countries during this period
• Scottish Conservatives have said that Scotland is now “on the path to recession”.
• Scottish GDP fell by 0.2% in Q4 last year whilst the UK as a whole grew by 0.7%. The drop in the price of oil (and a slowdown in oil-related industries) may be largely behind the fall. Scottish Finance Secretary Derek Mackay said ‘before the EU referendum, the UK government told us Brexit will make us ‘permanently poorer’. What is now quite clear is the economic reality of the Brexit vote.’
• Oil price hits one-month high but Brent now slipping a little. Was near $55 a barrel but now trading around $54.11.
• Sterling up at $1.2483 and €1.1694
• UK 10yr gilt rates up 3bps at 1.10%
• World markets: UK up yesterday but Europe down. US markets lower and markets in Asia down in Thursday trading
• Car registration numbers up in March. SMMT reports +8.4% on same month last year. Some buying brought forward by 1 April tax changes. SMMT reports ‘these record figures are undoubtedly boosted by consumers reacting to new VED changes, pulling forward purchases into March, especially those ultra-low emission vehicles that will no longer benefit from a zero-rate fee.’
YESTERDAY’S LATER TWEETS:
• Later tweets: Late Easter impacts retailers (Nielsen, Waitrose). Spending shift will impact pubs, too. Particularly March year or H1-end companies
• Late Easter should, repeat should, be associated with better weather. Wishful thinking but should help pub beer gardens
• Aldi & Lidl super-strong in March per Nielsen with total sales +18.7% in March. Resurgence of the discounters or a blip?
• When companies say they’re trading ‘broadly in line’, does that still mean ‘down a bit?
• Topps’ Tiles down 4.1% LfL in Q2. Some big-ticket spending being hit – but today’s motor sales numbers tell opposite side of story
• Food & drink costs up £21 per week for average UK consumer reports Kantar.
• Evolution in F&B. US restaurants report grab-n-go sales >> sit down. Also move to mobile ordering picking up steam
RETAIL NEWS WITH NICK BUBB:
• Nick’s “The Daily Retailer” is coming to you at the moment from the ski slopes of the Rocky Mountains of Colorado (where we are 7 hours behind BST).
• Sector trends/share prices: The All-Share index edged up by 0.2% yesterday and the Food Retail sector rallied a tad (MRW +0.7%, OCDO +0.6%, WINE +6.3%). The General Retail sector was down a tad overall (ASC -4.5%, GMD -3.9%, SPD -1.6%, MKS -0.8%, NXT -0.5%, BRBY -0.9%, DC +1.8%, DNLM +1.3%, HFD +1.2%, CARD +1.2%, BOO +2.8%, MYSL +2.4%). First thing today Mothercare will be in focus on the Retail beat, after its Q4 update.
• Weather Watch: It has been nicely spring-like in London recently, but memories about “the weather” are always notoriously short-term, so, ahead of Tuesday’s BRC-KPMG Retail Sales survey for March, we turned to the Retail weather consultants Planalytics for their regular monthly overview of how last month’s weather “should” have affected trading on the High Street. And their headline for March was “Mild weather continues”, noting that early spring warmth supported seasonal demand. Overall the UK was 1.5 degrees warmer than last year, at 7.7C, and the warmer temperatures in March helped get consumers into a spring mindset earlier than last year. But “while the weather was a constant positive impact through the month, the later Mother’s Day combined with Easter moving into April has provided a challenge in terms of clarifying retail sales comps”. However, the net impact on
• New Car Sales Watch: The benign weather in March may have helped new car sales, but the bigger impact probably came from cheap finance deals and the rush to beat the Vehicle Excise Duty increases this month. The March new car sales figures from the SMMT yesterday saw records tumble, with registrations up by 8.4% to c562,000 cars. Fleet demand was 12.6% up and private demand was 4.4% up. But Mike Hawes, SMMT Chief Executive, said: “This bumper performance probably means we will see a slowdown in April, exacerbated by the fact there are fewer selling days this year given Easter timing”.
• Today’s Press and News: The main news is that Tesco is calling time on 24-hour opening at more of its stores, as part of a swathe of operational changes affecting some 3000 staff, as highlighted by the Guardian, inter alia. The Times flags that a South Korean conglomerate, CJ Group, has joined the bidding battle for The Body Shop. The Times also noted that “Sterling weakness trips up Boots sales”, after Boots’ owner, Walgreens, reported an unexpected fall in its last quarter’s sales.
• News Flow This Week: Tomorrow brings the Dunelm Q3 update.