Langton Capital – 2017-07-06 – C&C, services PMI, JDW, Coffee no.1, Chas. Wells & other:
C&C, services PMI, JDW, Coffee no.1, Chas. Wells & other:
A DAY IN THE LIFE:
It’s getting hot out there again, isn’t it?
And that, as always, has positive implications for beer gardens, BBQs and water fountains but it can have less pleasant results for indoor leisure operators such as cinemas, bowling alleys and even casual dining restaurants.
Hence, we’ll be keeping our ear to the ground as to current trading and we’ll be trying to filter out the background noise.
Because the weather comes and goes but other issues, economic cycles, uncertainty (political, Brexit or re the interest rate environment or reckless bank personal lending) could have more long-lasting effects.
However, in the short term, with the services PMI still positive (though slipping) and current trading said to be reasonable, it’s interesting to note that the shares of GNK, MARS and some others are at four-year lows and the casual diners, most of whom are in private hands, are not exactly trading their socks off.
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PUB, RESTAURANT & DRINK PRODUCERS:
• Just Eat has announced that it has appointed Peter Plumb as Chief Executive Officer with effect from 18 September 2017. It adds ‘Peter will replace Paul Harrison who is fulfilling that role on an interim basis and who will then continue in his permanent role as Chief Financial Officer.’ Andrew Griffith, Interim Chairman of Just Eat, said: ‘Peter has an excellent track record of creating value for shareholders in high growth consumer digital businesses. His passion for customers and innovation, as well as his international experience in driving brands, and proven capability to retain, deepen and build senior management teams, made him a standout choice for the Board. Just Eat is the leading company in its sector and Peter’s expertise will ensure we continue to build on this platform.’
• JD Wetherspoon yesterday announced that it had bought back another 145k shares at an average price of 967p. The group has spent £3m in two days. JDW also reported that, during its upcoming closed period, it has ‘entered into an irrevocable and non-discretionary arrangement with Investec…to repurchase on its behalf and within certain pre-set parameters, ordinary shares in JD Wetherspoon for cancellation.’
• Tennents maker C&C Group has released an in line trading statement for the period to 1 March 2017 but adds it will be able to better judge the effectiveness of its recent NPD investment and ABI partnership ‘following the key trading months of July and August’. The premium and craft brands of Menabrea, Heverlee and Drygate had a strong period, with a number of significant new listings across all trade channels, although Bulmers suffered a loss in draught distribution as a result of ‘intense competition’. C&C also warned that full year performance will be hurt by currency movements and current €/£ exchange rates.
• UK services PMI in June slips to 53.4 in June from 53.8 in May. Still well above the 50.0 that implies growth. Markit says new business growth has slowed to nine-month lows but job creation is at a 14-month high.
• Markit reports business optimism has dropped to its second-lowest since December 2011. It has seen some incidences of ‘delayed decision-making’.
• Markit says June slowdown in service sector activity ‘was linked to a softer rise in incoming new work across the service economy.’ It says ‘anecdotal evidence cited Brexit-related risk aversion and heightened economic uncertainty as key factors holding back client spending.’
• Markit says ‘a slowing in services sector growth completes a triple-whammy of disappointing PMI survey readings.’ Markit qualifies its gloomy header somewhat when it says ‘the three PMI surveys are running at levels that are historically consistent with GDP growing by around 0.4% in the second quarter’. However, it says that the economy is losing momentum.
• Charles Wells has reported FY numbers to 1 Oct 2016 saying that turnover increased from £188.9m to £193.7m. EBITDA slipped to £14.5m from £17.0m though this was ‘mainly due to the reduction in profit on disposal of property’. Operating profit was £7.12m vs £7.06m last year.
• Charles Wells comments ‘the changes in the UK’s economic outlook post Brexit presents the company with both risks & opportunities’. It says it will focus on its managed houses but says ‘the business is, however, expecting price pressure from suppliers’.
• Loungers is reportedly looking at 79-strong Coffee#1 alongside other suitors who are believed to have submitted their first round bids for the SA Brain-owned coffee chain last week. MCA writes that Coffee#1 could be ‘a good logistical fit for Loungers – in terms of offer, geography of its existing estate and the latter’s ability to provide a ready-to-go head office facility’.
• About one in three non-British workers in the UK are considering leaving in the UK in the next five years, which could be ‘disastrous’ for the pub sector, according to leading bodies. Commenting on a survey from Deloitte, which found that 36% of non-British workers are thinking about leaving in the next five years, Oakman Inns chief executive Peter Borg-Neal said eating and drinking-out businesses would face ‘significant problems’, while the ALMR commented: ‘The end result could be disastrous for the sector and the knock-on effect for the UK’s high streets and economy could be significant’.
• The Pizza Pasta & Italian Food Association (PPIFA) has said the eating-out sector could be under threat if the Government doesn’t fill jobs in the UK with foreign workers after Brexit. The PPIFA asserts that more than half of the workforce currently working in food businesses across the UK would have to leave if there is no agreement made with the EU and Brexit is completed. The body added that these vacancies could not be wholly replaced by British nationals.
• Convenience are destinations for nearly one in five consumers who buy coffee on the go, according to a survey by One Poll, in collaboration with Nestlé Professional. The poll found that 53% of respondents buy coffee to go, of which 19% regularly purchase from convenience stores. Another 30% buy from supermarkets, while 23% do so from forecourts.
• Hippo Inns is set to open its tenth pub next week — the Royal Oak (previousl Stokes & Moncrieff) in Twickenham. The 2,927 sq ft site has undergone a £400,000 refurbishment.
• The American chicken chain Chick-fil-A has been named the hottest restaurant chain in the US once again. Over the past five years the chain’s sales have increased 73% to $7.9bn, making it the 8th largest restaurant chain in the US.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Jet2Holidays and another tour operator have had adverts banned for misleading consumers about discounted holiday deals.
• Spain continues to prove a popular destination for British package holidaymakers, with growth more than double that of this summer’s closest rival Greece. Other growing destinations include the Caribbean, Croatia, Cyprus and Portugal. Marginal growth has been seen by the Cape Verde Islands, Portugal, Mexico and Italy, while Turkey has seen an uptick from a low base. In contrast, the Gfk data shows Canada, France, Malta, and the United Arab Emirates to be down on last year, with Egypt registering the biggest decline.
• A portfolio of 10 Hilton-branded hotels have been put up for sale for £600m by Vincent Tchenguiz. The 603-bedroom Kensington Hilton is for sale individually, at £300m. Tchenguiz originally bought the portfolio for £300m in 2002, and leased the hotels back to Hilton until 2032.
FINANCE & MARKETS:
• UK services PMI slips to 53.4 from 53.8 in May. Slowing but still well above the 50.0 that implies growth
• June PMI says job creation is at a 14mth high but business optimism has slipped to its second lowest level since Dec-2011
• ONS data shows that UK productivity has slipped in Q1 this year. It had reached previous peak levels (reached in 2007), but is now 0.4% below that high-water mark. The ONS reports ‘UK labour productivity growth has struggled since the 2008 economic downturn, and the fall in the first quarter of 2017 brings to an end a recent run of quarters of positive growth.’
• UK new car sales fell by 4.8% in June versus the same month last year. The fall is the 3rd straight decline. Tax changes have skewed numbers but many observers believed that the impact would have washed through by now. The SMMT reports ‘demand for new cars has started to cool following five consecutive years of solid growth’.
• B of England targets potentially reckless car loans, amongst others, as a major cause for concern
• US operator Vantiv is to buy Worldpay for £9.1bn. The UK needs to sell around £10bn of assets per month to cover its trade deficit
• Reuters reports British PM Theresa May is ‘holding on — for now.’
• B of England MPC member Michael Saunders has said he is “reasonably confident” that lower consumer spending will be offset by higher exports
• Fed Reserve policymakers in the US are split on the outlook for inflation
• Oil down over a dollar at $48.12
• Sterling up a shade at $1.2938
• Pound also higher versus Euro at €1.1409
• UK 10yr gilt yield up 1bp at 1.26%
• World markets: UK & Europe higher yesterday with US also up. Far East mostly down in Thursday trading
o See Markit comments above. The researcher comments ‘with business optimism having been hit by the intensification of political uncertainty following the general election and commencement of Brexit negotiations, at the same time that households are battling against rising inflation, the indications are that the economy’s resilience is being tested.’
o Interest rates are more likely to rise by year end than they are to rise.
o Fishermen still happy as headline-grabbing dumping of agreements may increase their catch by 1%
YESTERDAY’S LATER TWEETS:
• Later tweets: Wheat price sharply higher over recent days. May feed through. Pay rises under the microscope as B of England mulls rate rise(s)
• UK services PMI. Small slowdown but 53.4 still implies growth. Nonetheless is weakest since Sept 2016.
• Markit reports step up in job creation but says business confidence is now ‘at its 2nd lowest level since Dec 2011’
• Markit says ‘slowing in services sector growth completes a triple-whammy of disappointing PMI survey readings.’ All still in growth, though.
• Topps Tiles sees bit of a pickup. Cites ‘modest improvement in trading over recent weeks’. Others refer to more challenging conditions
RETAIL NEWS WITH NICK BUBB:
• ABF (Primark): Today’s trading update from the sprawling conglomerate ABF is upbeat about the “jewel in its crown”, namely mighty Primark. The core UK Primark business has seen sales growth accelerate from 7% in the 24 weeks to 4 March (which was +2% LFL), to 9% in the 40 weeks to June 24, implying very strong trading over the last 16 weeks, boosted by strong Easter trading. Further afield, ABF flag that early trading at the new Primark stores in Florence in Italy and at Staten Island in New York and South Shore in Massachusetts in the US has been particularly good.
• Today’s Press and News: Today’s papers have more lurid revelations in the High Court yesterday about Mike Ashley: the front page of City AM is “Sports Direct: The Movie”, with MIke saying “I am not Obi-Wan Kenobi in charge of the Death Star”.
• News Flow This Week: As the first week of Wimbledon continues, along with the Hampton Court Flower Show and the Lords Test against South Africa, tomorrow brings the Dunelm Q4.