Langton Capital – 2017-06-05 – Free-of-tie leases, travel concerns, Marston’s & other:
Free-of-tie leases, travel concerns, Marston’s & other:
A DAY IN THE LIFE:
Back from the Med to what looks like a wet and blustery UK and Langton can thoroughly recommend Malta as an interesting destination.
Beaches may be in short supply but there’s plenty of sun, history and culture to go around and, with their 3-pin UK plugs, their driving on the left and their fluent but occasionally weird English, it’s something of an anachronism sitting as it does only a short hop from the North African coast.
And capital city Valletta takes over from Hull as the European City of Culture next year. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• DP Eurasia NV, the Domino’s Pizza master franchisee for Turkey, Russia, Georgia, and Azerbaijan, is to list on the London Stock Exchange on or around 3 July under the ticker DPEU. DP Eurasia NV is owned by Turkish Private Equity Fund II and DP Eurasia NV’s chief executive Aslan Saranga and has 571 stores. It intends to open roughly 70 sites this year, with 40 in Russia and 30 across its other three geographies. In the next few years, it expects to open 70-90 stores annually.
• Terrorism impacts London venues negatively. Terrible human cost but economic hit should not be ignored. Don’t want to overstate the case but it may be worth watching the share prices of Merlin, Young & Co, Fuller’s etc today. Companies with units on or near Borough High Street will be losing trade. Inbound tourist numbers may not fall immediately but plans currently being laid to visit the UK may be changed on the margin.
• Marston’s has announced the completion of its acquisition of Charles Wells Brewing and Beer Business from the Charles Wells Group.
• Figures from Ei Publican Partnerships, Marston’s, Punch Taverns, Star Pubs & Bars and Admiral Taverns show that only eight of their collective licensees have taken up the market-rent-only option in the past 11 months. The pub operators together own more than 9,000 pubs. The Publican’s Morning Advertiser writes that four of the pubcos revealed how many licensees had requested an MRO quote since July — Ei tenants made the most request at 171, while 90 Punch tenants, 6 Admiral tenants and six Marston’s tenants made an MRO quote request.
• People are drinking less, according to findings from the International Wine and Spirits Research, with a 1.3% fall in the global market for alcoholic drinks last year. The preceding five years averaged a fall of 0.3% per year despite a growing global population of legal drinking age consumers, with underperformance from large markets such as China, Russia, and Brazil partly responsible for the declining trend.
• Karaoke bar operator Lucky Voice is understood to have secured the former Wagamama basement unit on Fleet Street for its next opening later this year, per MCA.
• Heartstone Inns’ 4% like-for-like sales growth helped drive a 17% increase in revenue to £9.6m in 2016, with pub EBITDA jumping by 29% to £1.8m.
• Mintel research indicates that pub meals sales rose by 14% between 2012 and 2016 to £7.4bn in value, whereas sales of alcohol grew by just 6% and soft drinks by 7%. More than two thirds (69%) of pubgoers said one of the most important factors to make them choose one pub over another is the food quality, and 16% of diners said they would go to a pub or bar specifically to try a new menu.
• Malibu is to advertise on TV for the first time in 4yrs this summer.
• The ALMR will continue to oppose the idea of a late night levy in the London borough of Tower Hamlets and urged the London Mayor to do so at a recent meeting. ALMR Chief Executive Kate Nicholls said: ‘Our previous efforts in combating the introduction of the levy have managed to buy time for the sector, and the Council will now be forced to go through the entire process of consulting once again… Increasing costs for employers will undermine investment, risk jobs and increase the possibility that venues may be forced to close… We will be watching the Council closely and urging them not to heap costs on businesses and threaten the innovative, exciting and incredibly important nightlife that currently exists in Tower Hamlets.’
• The US restaurant industry added 30,300 jobs last month despite higher labor costs and tepid overall sales, according to new federal data. With the economy as a whole adding 138,000 jobs during May (50,000 less than expected), this means that restaurants added more than one out of every five jobs.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Inbound tourism likely to be negatively impacted by ongoing terrorist activity. Crude terrorism more difficult to head off as PM says ‘enough is enough’. Ms May adds ‘we cannot and must not pretend that things can continue as they are.’ French & Canadian citizens reported to be amongst those killed.
• Terrorism remains high on the agenda. London stabbings (May & March), Manchester bomb & some 36 die in Philippine capital Manila as lone gunman shoots guests & sets fire to building.
• Facebook has said that it will make its social media platform a “hostile environment” for terrorists
• Former UK Prime Minister David Cameron hailed the Paris agreement on climate change as ‘a huge global achievement’ ahead of President Trump withdrawing the US from the deal. In an interview with Travel Weekly, Cameron said: ‘We made huge progress with Paris. It was a huge global achievement. Frankly, I am worried that the US administration is not prioritising the issue. This is an argument where Britain should not stand aside.’
• The US Supreme Court has been asked to remove legal blocks on a US travel ban on people from majority Muslim countries.
• Airline Association IATA has noted ‘a surge in passenger demand’ in April but added that the US laptop ban ‘may be affecting’ Middle East-US traffic. The latest traffic data showed a 10.7% worldwide rise in traffic — the fastest pace of growth for six years. Capacity was up 7.1% on a year ago. Iata reported that the performance was boosted by lower airfares, commenting: ‘The price of air travel in the first quarter was around 10% lower than a year ago after adjusting for inflation.’
• The US hotel industry reported a 0.5% rise in occupancy to 70.3% during the week ending 27 May, with ADR increasing 2.5% to $127.47 and RevPAR up 3.1% to $89.67.
• Luke Johnson has been appointed as a non-executive director of Elegant Hotels Group, which owns and operates several upscale freehold hotels and restaurants in Barbados. Simon Sherwood, Chairman of Elegant Hotels, commented: ‘We are delighted to be welcoming someone of Luke’s calibre and experience to the Board of Elegant Hotels. His wealth of leisure industry knowledge and his outstanding track record of helping companies to achieve their ambitious growth plans will be hugely additive to the Group as it continues to carry out its expansion programme in Barbados and the wider Caribbean. We see significant potential for continuing to enhance the food and beverage offering within our portfolio, and Luke’s expertise in that sector will therefore be particularly valuable.’
• Newly-listed experiential leisure company Escape Hunt has announced that it will change its financial year end to the end of December, in line with Experiential Ventures Ltd, the company into which it reversed on 3 May 2017. The group will update on trading for the 7mth period to end-December by 30 June. Escape Hunt goes on to say that it will report 6mth numbers to end-June by 30 September.
• Time Out Group has acquired its Australian licensing partner, Print and Digital Publishing Pty Ltd, which distributes the magazine to 5 Australian cities. CEO of Time Out, Julio Bruno, said ‘With the acquisition of Time Out Australia, we continue the global expansion of our iconic brand and our evolution as a worldwide digital, transactional business.’
• David Lloyd Leisure has exchanged contracts on the acquisition of the Park Club in west London and has recently purchased 14 Virgin Active clubs.
FINANCE & MARKETS:
• US$ falls to 7mth low on weaker-than-expected jobs data. The country created fewer jobs than expected in May though the rate of unemployment fell to a 16-year low of 4.3 percent.
• Brexit & Election:
o Campaigning suspended yesterday. Except by UKIP.
o Polls can be wrong but PM Theresa May likely to win 308 seats per YouGov.
o YouGov reported Friday that she would win 330 seats.
o Failure to debate with Mr Corbyn, until recently deemed ‘unelectable’, has weakened her position
o Press suggesting she is gutless & politically cowardly. Jeremy Paxman says she is running away at the first sound of gunfire
o 308 seats would leave her 18 short of a majority, with a hung parliament. The Conservatives would still be the largest party. When the election was called, she expected a 100-seat majority
• UK construction PMI rises to 56.0 in May from 53.1 in April. The May data is the highest level in 7mths. Markit reports ‘a sustained rebound in residential building provides an encouraging sign that the recent a soft patch for property values has not deterred new housing supply.’ It goes on to say ‘instead, strong labour market conditions, resilient demand and ultra-low mortgage rates appear to have helped boost work on residential development projects.’
• Employers’ group EEF reports British manufacturing growth remains strong. Exports are rising & companies are positive about prospects for the rest of 2017. The EEF reports ‘industry is reporting that output and orders have continued to head higher in recent months and the recovery in manufacturing globally is a big part of the story. It’s very encouraging that UK manufacturers have positioned themselves to capitalise on the windfall of a competitive pound and resurgent world economy.’
• World Bank keeps global growth forecast for 2017 and 2018 unchanged at 2.70% and 2.90% respectively.
• Oil up 50c or so at $50.70
• Sterling down vs weak US$ at $1.2869
• Sterling weak vs Euro at €1.1422
• UK 10yr gilt yield down 3bps at 1.04%
• World markets: UK mixed on Friday with FTSE100 higher. Europe up and US also higher. Far East mostly higher in Monday trade
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The main Retail story in the Saturday papers was the big share sale in B&M by the Arora family, with the Guardian running that as one of its main Business features, whilst the FT also picked up on the news (“B&M family cash in £215m stake 3 years after flotation”). The FT also flagged that Mike Coupe missed out on a £1m bonus last year because Sainsbury missed its profits and sales targets. The Guardian also highlighted the news that Wal-Mart in the US is to ask its staff to deliver Online orders to customers on their way home from work (!). And talking of Online ordering, the Times and the Telegraph featured a Kantar report that the UK continues to lead the world in the size of Online grocery order baskets. The Times also tagged on the report from Ipsos of weak High Street footfall in May. The Telegraph noted that 3 Asian entrepreneurs are planning to bail
• Sunday Press: The early editions of the Sunday papers went to print too soon to report the shocking terrorist incident on Saturday night on London Bridge/Borough Market…but the main Retail focus was on the beleaguered Philip Green and Arcadia, with the Mail on Sunday revealing that he has belatedly filed his accounts for y/e August, with profits apparently only down by 16% to £211m. But with trading reported to be even worse in the new-year, the Sunday Times flagged that the consultants Mckinsey have been called in to help Arcadia grapple with the shift to Online shopping for fashion…Talking of which, the Mail on Sunday neatly juxtaposed the Arcadia story with a report that the City is now expecting mighty Boohoo to grow sales by 50% this year and that it is on track for £1bn in annual sales by 2020. In terms of other retailers reporting this week, the Sunday Times had a snippet
• Ocado: For one of the most shorted stocks in the market, the Ocado share price has had a remarkable run in recent weeks (from 240p atEaster to 317p), shrugging off denials by M&S of a deal with them, and it looks as if somebody knew something else, given the news today that Ocado has signed its first Overseas licensing tie-up. But a modest software deal with “a regional European retailer” (without any central warehousing) is hardly the big deal that the share price run has been discounting, so there may well be some profit-taking once the City has digested the deal and the shorts regain their nerve. Ocado say “The retailer wishes to remain anonymous until it launches its Online business in order to retain competitive advantage” and otherwise repeat their mantra that “Our discussions with other retailers across the globe are ongoing and we continue to expect to sign multiple deals
• News Flow This Week: As we head further on into June, this week gets busier, kicking off with the BRC-KPMG Retail Sales figures for May first thing tomorrow (with a modest LFL sales decline likely). Tomorrow also brings the AO World (aka AO.com) finals and the Joules pre-close update, whilst the Shoe Zone interims are on Wednesday. And the much-awaited General Election is on Thursday, along with the Q1 update from mighty Boohoo…