Langton Capital – 2017-07-04 – Smoking in pubs, reckless lending, craft brewing & other:
Smoking in pubs, reckless lending, craft brewing & other:
A DAY IN THE LIFE:
So, we had a BBQ at the weekend.
And we won’t have been alone in that, I’m sure, but we somehow persuaded 20-plus people to come and, as the dog was able to do his ‘I haven’t been fed in a week’ act at least two dozen times, he for one was very happy.
And very well-fed by the look of him, too.
Indeed, he could hardly move. He was waddling around looking shamefully joyful and, when you’re a dog, there’s little doubt that the shame bit is going to come a distant second to the needs of one’s stomach and so it proved.
And whilst feeding prime burgers to a filthy animal seems somewhat wasteful, he’s been asleep pretty much 24-7 since, so there is some upside. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Carlsberg UK and Brooklyn Brewery have acquired London Fields Brewery and will run the business as a joint venture. Julian Momen, CEO of Carlsberg UK said ‘We’re thrilled to add London Fields Brewery to our growing portfolio of great quality craft and specialty beers’.
• A survey conducted by the pro-smoking group, Forest, has found the public to be split on whether to allow separate, well-ventilated smoking rooms in pubs. Of the 2000 respondents 48% said they would accept smoking rooms in pubs and clubs. Forest has found that 20.7% of pubs in England have closed since the introduction of the smoking ban in 2007.
• Re smoking, many operators consider that this boat has long-since sailed. The views of the 75% or so of customers who do not smoke is rare sought. Food, families & females along with accommodation and, in some cases, more innovative ‘experiential’ solutions have helped many pubs, indeed most, to weather the storm.
• One in four teenage mystery customers were served alcoholic beverages at on-trade venues in 2016 without being requested to show ID, research by Serve Legal has found.
• The off-trade fared a little better passing 82.5% of the alcohol IP checks in 2016, in tests conducted by Serve Legal. The director of Serve Legal, Ed Heaver, said ‘It should be an integral part of retail training and operational best practice, not a panic purchase after a sting by trading standards or the police’.
• Brewer and pub co Joseph Holt has grown its revenues to £59.2m in the year to end-Dec 2016, making pre-tax profits of £2.7m, down 2% on the prior year. The group bought 5 pubs during the year. The company now has access to a £25m refinancing package made available by the Royal Bank of Scotland, which is intended to support its future growth plans. The co says ‘the £25m is principally for acquisitions, it’s helped fund our first five. We’re looking at a few more at the moment, I’d be disappointed if we don’t buy something else in the remainder of this year.’
• The Japanese brewer, Asahi, has sold its remaining 20% stake in Tingyi-Asahi for $612m to local partner Tingyi.
• The Times reports that ‘fears about a crisis in sub-prime lending grew yesterday after leading City analysts warned that borrowers have limited flexibility to handle the rising cost of living.’ Over-borrowing has been something of a problem in the UK on a number of occasions in the past. City analysts were pointing at both the inbuilt desire of consumers to spend before they earn and reckless bank lending as possible causes of the problem.
• As real incomes are squeezed by inflation, personal borrowing should not really be rising at above 10%. City brokers have said that this may cause a problem partly as a result of ‘reckless’ lending in the car market.
• The value of wine imported to China dropped for the fifth month in a row, falling 3.47%. The total import value for the country is $912.5m, with 91.8% being imported. The dbHK has stated that China may be overstocked and that market consumption has not kept up with supply.
• Bacardi has bought a minority position in Teeling Irish Whiskey.
• J Sainsbury has updated on Q1 trading saying ‘the market is competitive and we continue to manage cost price pressures closely.’ See Nick Bubb below.
• Nisa has returned to pre-tax profit (£2.8m for the year end 2nd April 2017) ahead of a possible takeover by Sainsbury’s. The 3000 strong convenience shop chain lost £5.4m in 2016
• Subway plans to open another 500 stores by 2020 in the UK. This latest expansion plan would take Subway’s store count to 3000 in the UK, almost double that of its closest rival, Greggs (1698 stores).
• Deliveroo has changed the contract for its couriers after facing criticism from MPs over the so-called ‘gig economy’s’ treatment of workers. The food delivery business now specifies that freelance couriers can work for other businesses and do not have to wear Deliveroo-branded clothing in its new, shortened supplier agreement.
• The Resolution Foundation has urged that some self-employed people should be entitled to the national minimum wage. The think tank claims half of the 4.8m self-employed people earn less than £310 a week. The idea has been submitted to the Taylor review, a government investigation into the effect of new types of businesses in the ‘gig-economy’.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• The hospitality industry has grown more quickly than any other sector in the UK since the 2008 downturn and is forecast to create another 500,000 jobs over the next five years. The British Hospitality Association commissioned Ignite Economics to conduct the research, which found hospitality to be Britain’s fourth largest employer, accounting for 3.2 million direct jobs and a further 2.8 million indirect jobs.
• Tui and Spanish police are now working together to crack down on fake illness claims in resorts. Nick Longman, Tui UK & Ireland managing director, said ‘We fully support the steps they are taking to expose this kind of fraud and to investigate false or exaggerated cases. Through the work we are doing and the awareness we are raising of this type of activity, we’ve already seen one law firm drop more than 1,800 cases against us.’
• Tui Blue has opened its first hotel in Croatia, bringing ‘a modern lifestyle concept’ to a ‘historic building on Croatia’s Adriatic Sea’.
• Hotstats has reported that hotels in Brussels saw profit per room rise by 116.8% this month on the same month last year. This is as a result of a Nato conference.
• London’s diverse demand drivers will leave London’s hotels less susceptible to prolonged drop offs in performance following the recent terrorist attacks, writes HNN senior reporter Terence Baker.
• President Trump has ‘no plans’ to visit the UK in the near future
• Travel Counsellors is reportedly considering an IPO as it looks for further opportunities to grow. In 2014 PE house Equistone paid £100m for a 60% stake when transaction values were £307m. New accounts show total transaction values have surpassed £500m.
• Norwegian CEO Bjorn Kjos has claimed that fewer Britons will be able to afford to fly due to Brexit.
• Norwegian ECE has warned that UK internal flights might be discontinued, even before Brexit has been completed. This echoes earlier sentiment by Ryanair CEO Michael O’Leary
• Dropbox Inc is considering an IPO later this year as it starts interviewing investment banks in the coming weeks, according to Fortune. The file sharing company was valued at around $10bn in a private fundraising in 2014.
FINANCE & MARKETS:
• Mark Carney & Bank sure to be listening as Boris Johnson joins Michael Gove in calling for end of pay cap
• Modest wage settlements have thus far persuaded B o England that inflation could be temporary. Any baking in (via pay-rises) could lead to increased pressure for rate rises
• Outlook is for a bumpy ride. Consumer stocks slide despite belief that ‘affordable treat’ sales should hold up
• The B of England has said that the strikes, the first in 50yrs, which are planned for later this month, will not render it ‘inoperable’
• June manufacturing PMI shows slowdown in rate of growth. PMI of 54.3 versus estimates of over 56.0. Any number over 50.0 implies growth. Sterling weakened a bit on the news.
• Eurozone manufacturing PMI rose to 57.4 in June from 57.0 in May. Data suggests that the UK manufacturing sector is underperforming its peers despite the boost from weaker Sterling.
• Re UK, Markit reports ‘while the survey data add to signs that the economy is likely to have shown stronger growth in the second quarter, further doubts are raised as to whether this performance can be sustained into the second half of the year.’
• Oil up another 65c or so to $49.42
• Sterling a little lower on weaker than expected manufacturing data. Trading at $1.2945 and €1.1382.
• UK 10yr gilt yield unchanged at 1.26%
• World markets: UK mixed yesterday with Europe & the US higher. Far East mostly lower in Tuesday trading
o A delegation of City of London business leaders is to visit Brussels this week to push for a deal on financial services
o UK fishermen said to be happy. The proposed deal-withdrawal could increase the amount of fish caught by UK boats by a little more than 1%.
o Chancellor Philip Hammond says pay policy has not changed. Boris Johnson & Michael Gove are calling for the scrapping of the current 1% pay freeze for public sector workers. Mr Hammonds says that the government must “hold its nerve”.
YESTERDAY’S LATER TWEETS:
• Tories doomed post Brexit debacle unless they can appeal to the young says Mail on Sunday. Well, they can’t appeal to the young, so…?
• #MagicMoneyTree. Cabinet split as back-stabbing duo Gove / Boris pick up where they left off, both now suggesting pay rises for nurses, etc
• #MagicMoneyTree. Laptop crisis costs Langton an unforeseen £200. Where’s my money, Boris…? And I’d like a big bag of toffee, too.
• Global bond rates edging up. Discount rates follow. Therefore growth is ‘cheapened’ but also, pension deficits less onerous
• Restaurant / coffee shop saturation? Cushman & Wakefield commenting on glut of outlets, says ‘it enhances choice’. Well, yes, but…
RETAIL NEWS WITH NICK BUBB:
• Sainsbury: We flagged yesterday that in today’s Sainsbury Q1 update (for the 16 weeks to July 1st) the recently acquired Argos would not be separated out, but its impact looks to have been positive, notwithstanding the loss of the concessions in Homebase. When last reported, in Q4 (the nine weeks to 11 March), Argos was said to have delivered another strong quarter of growth, with LFL sales up by 4.3%. In Q1, the message is that “Argos continues to perform well, growing market share, with strong growth in Mobile, Audio and Tech categories and good growth in Core Electricals and Toys”, although its performance is buried under the “General Merchandise” line, which saw total sales up by only 1.0%. Apart from the impressive 7.2% sales growth in Clothing, the main surprise is that Food/Grocery was up by 3.0% overall, to drive total group sales growth of 2.7% (up by 2.3% LFL). Grocery was
• Today’s Press and News: The front pages have loads of photos of a beefy-looking Mike Ashley and the lurid revelations in the High Court yesterday about his drinking habits, in the legal battle with former executive Jeff Blue over his Sports Direct pay deal…
• News Flow This Week: As the first week of Wimbledon continues (come on Andy!), tomorrow brings the Ocado interims, the Topps Tiles Q3, the Booker Q1/AGM and the Sainsbury AGM. Thursday brings the ABF (Primark) trading update and on Friday we get the Dunelm Q4.