Langton Capital – 2017-11-06 – City Pub Co, Jamie’s Italian, MLC, beer sales, Sportech &c.
City Pub Co, Jamie’s Italian, MLC, beer sales, Sportech &c.
A DAY IN THE LIFE:
Some things I get and some things I don’t get.
And there are other things that I don’t get that I don’t get, and I would posit that this is the most dangerous area to inhabit when making decisions because you can make some calamitous mistakes.
Like allowing the Brexit referendum, Mr Cameron because, with unintended consequences featuring prominently, it’s possible that social and economic exclusion, the fate of the JAMs, high house prices, a skewed jobs market, a Millennial generation that is poorer than its parents, job insecurity and the rest are currently combining with a flag-waving instinct and a ‘Britain-has-spoken’ attitude to make the 1970s look attractive, an era when the UK ‘stood alone’ and when it was a very different place.
It was a disaster area in terms of its economic performance, of course. Its standing in the world (and its architecture, fashion, music, hairstyles etc.) were arguably damaged forever but there may be emerging a certain fondness for those grainy black and white grainy TV images showing the UK on strike & going to the IMF etc. because we were at the same time sticking it to the rich, to the EU, to experts, to the establishment and to anyone else who dared to stick their head above the parapet.
Perhaps there is something slightly disturbing about that as a direction of travel? On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• The City Pub Group plans to raise £30m via an IPO on AIM. The group now runs 34 pubs in the south of England. The cash will be used to double the group’s estate in the next three to four years.
• Jamie’s Italian has needed help from its parent company after hitting cash flow problems. AlixPartners has been brought in to work on a recovery plan. Jamie Oliver Restaurants reports that the management team has been changed saying ‘the Jamie Oliver Holdings Group has provided a short term company loan into the business to support it through the tough trading environment and our programme of capital expenditure to ensure we fully maximise all our opportunities.’
• Crussh is to introduce a Christmas drink made with Brussel sprouts.
• Sales of beer in Britain’s pubs suffered the worst Q3 performance for five years, down 3.6%, according to figures in the Quarterly Beer Barometer from the BBPA. The decline equates to some 35 million fewer pints sold in Britain’s pubs, with some suggesting the 3.9% tax rise in the March Budget may have played a part. Brigid Simmonds comments: ‘When the Government was cutting or freezing beer duty from 2013-15, sales of British beer stabilised, after years of steep decline. With sales down this quarter, following the Budget tax hike, urgent action from the Chancellor is needed. Beer has had a 39 per cent tax rise in the past decade. With tax rates 14 times higher than in Germany, these levels are unsustainable.’
• Alcohol free beer is set to represent 10% of total beer sales, a specialist brewer has told The Morning Advertiser. Steve Magnall, chief executive of St Peter’s Brewery stated: ‘The market will grow and I think it will be 10% of total beer sales soon and you can see that happening already. It’s a bit like craft beer a few years ago – that was a smaller percentage of the market, but it has grown’.
• JD Wetherspoon has produced 500,000 beer mats, calling for the UK parliament to back its three-point Brexit manifesto. The mats also call for Prime Minister Theresa May, Labour leader Jeremy Corbyn, Liberal Democrat leader Vince Cable and MPs to ‘stop messing about’.
• The CGA has reported that increasing numbers of British consumers are deciding to drink premium beverages when they go out. The group have found that 43% of consumers choose high-quality drinks, with the figure rising to 54% among those aged between 18 and 34 year-olds.
• Luke Johnson has stepped down from his non-executive chairman role of Gaucho, the MCA has reported. Ex-Asda chief executive, Paul Mason is set to take over the role, with current chief executive of the group, Zeev Godik stating: ‘I’d like to thank Luke for his contribution to the group as chairman. We’re grateful that we will be able to continue drawing on his expertise of expansion programmes in the hospitality sector. We’re delighted to welcome Paul to the team. Paul brings extensive, hands-on experience in the consumer and retail landscape which will be invaluable in supporting our ambitious plans for the continued growth of the Group’.
• Backyard Brewhouse in Walsall and Thornbridge Brewery in Bakewell have been named the two best breweries in the Midlands at the SIBA Midlands Independent Beer Awards.
• Food service company Bakkavor is no longer proceeding with its stock market flotation ‘given the current volatility in the IPO market’. The group said: ‘Bakkavor will continue to pursue its proven strategy within the fast-growing fresh prepared food sector, where the group’s expertise and focus on innovation have made it a clear market leader.’
• Chapel Down has finished an ‘excellent’ harvest this year despite difficult English weather.
• More than 150,000 workers are set to get a pay rise as the voluntary living wage rate is pushed up by 30p an hour to £8.75. For those living in London, the rate will rise by 45p to £10.20 an hour. Living Wage Foundation director Katherine Chapman urged more employers to sign up to the scheme. ‘In-work poverty is today’s story,’ she said. ‘The new living wage rates will bring relief for thousands of UK workers being squeezed by stagnant wages and rising inflation.’
• Philip Hammond is ready to scrap plans to raise business rate tax by 3.9% next April following lobbying campaigns from business groups. The business rate rise is currently pegged to August’s figure on the retail prices index of inflation, but senior government sources now say Hammond is poised to use the lower consumer prices index, which stands at 3%.
• Hedge funds have ramped up their short bets on three of Britain’s biggest high street chains as retailers continue to struggle against online competition and changing consumer trends. Investors have increased their short positions in Marks & Spencer, Next and Debenhams during the last few months to levels not seen since the financial crisis, according to the Mail on Sunday.
• Sales at Itsu grew by 17% last year to more than £100m. The fast-growing chain is aiming to open up to 10 restaurants next year, with most of these to be located outside of London. As revealed by MCA, Itsu will also open its first American shop in the Fashion District of New York next summer.
• ‘No deal’ Brexit could add as much as £930 a year to UK shopping bills if Britain walks away without a trade deal with the EU, writes The Guardian, citing ‘new research that reveals a disproportionate impact on poorer families and the unemployed. Meat, vegetables, dairy products, clothing and footwear would be subject to the largest consumer price rises should Britain revert to WTO rules under a ‘no-deal’ scenario, according to a study published in the National Institute Economic Review.
• Suntory and PepsiCo have formed a soft drinks joint venture in Southeast Asia that will see Suntory take a 51% stake in International Beverage, PepsiCo’s Thai beverage business, for around $289.6m.
• Toronto-based Freshii Inc said last week that its same-store sales increased 5.1% in the quarter ended Sept. 24, the chain’s 18th straight quarter of growth.
• Footasylum shares jumped by 23.4% following its admission to the LSE Aim market on 2 November.
• The National Farmers’ Union claims that fruit and vegetables are being left to rot on Britain’s farms due to a labour crisis in the industry. Farmer Ali Capper said his business had 20% fewer workers than usual in September.
HOLIDAYS & LEISURE TRAVEL:
• Millennium & Copthorne has announced an extension to its put-up-or-shut-up deadline from 6 Nov to 8 Dec. The group says its bidders (its majority shareholders) believe ‘that the period until the 8 December 2017 will provide sufficient time for them to gain such clarity [on whether they will gain approvals].’
• Hurricanes Irma and Maria have been blamed for causing a slip in global passenger demand for flights in September. Iata data shows demand up 5.7% yoy for the month, the slowest increase since February with Iata saying ‘US domestic travel fell 1.2%’.
• Despite an increasing appetite for outbound travelling in China, travel to the US has fallen by 10% so far this year whereas Canada and Mexico still attract Chinese tourists with numbers rising by 54% and 29% respectively.
• Sabre reported a 1.9% decrease in North American bookings last quarter due to the impact of recent hurricanes. However, bookings were up 16% in Europe, Middle East & Africa and 10.8% in Asia Pacific in Q3.
• Sportech has updated on Q3 & on its strategy review saying Q3 revenues rose by 7.6% to £18.3m with ytd sales +5.8%
• Sportech says it had £52.6m of assets with no debt as at 24 Aug. It says ‘since that time, the Group has disposed of its shares in NYX Gaming Group realising a further £2.3m of cash as against a carrying value of £1.3m. Cash (net of customer liabilities) as at 31 October 2017 was £68m.’
• Sportech says ‘as previously announced, the Group intends to make a further, and significant, distribution to shareholders this year. The precise timing of this distribution is conditional on the approval of the reduction of the Company’s share capital by the Scottish Court. The reduction of the Company’s share capital will create a capital reserve of up to £55.6m which would be the maximum available for potential shareholder distribution.’
• Sportech chairman Richard McGuire comments ‘the Group has continued to trade well in the first few weeks of the current quarter and the outcome for the full year remains in line with Board expectations. During the coming weeks, we expect to provide a further update on the proposed distribution to shareholders and, at the appropriate time, provide further comments relating to the ongoing Formal Sale Process. Our financial position remains robust, and will benefit further from annualised cost savings of at least £2 million.’
• Re its strategic review, Sportech comments that a formal sale process commenced on 19 Oct.
• US private equity group Leonard Green and Partners has acquired an 80% stake in PureGym, valuing the business at £600m.
FINANCE & MARKETS:
• UK services PMI on Friday stronger than expected.
• PM Mrs May has said the UK government will not protect the UK economy from market forces after Brexit. She does not want to shut the economy off from the rest of the world. Mrs May has said ‘we believe in the free market and won’t attempt to shield the economy from market forces.’
• US employers added 261,000 jobs in October. This was a little short of expectations.
• Oil up sharply at $62.39
• Sterling little changed vs dollar at $1.3072
• Sterling up vs Euro at €1.1256
• UK 10yr gilt yield up 1bp at 1.27%
• World markets: UK up on Friday, Europe higher and US also up. Far East down in Monday trade
o Arquiva and Bakkavor have pulled their London IPOs due to uncertainty.
o The CBI says current Brexit negotiations are a ‘soap opera’.
o JDW boss Tim Martin tells everyone to ‘stop messing about’
o Mark Carney tells Peston interest rates may have to rise further even if growth does not pick up due to poor productivity and changed circumstances post Brexit vote
o TV operators through COBA have cautioned that, if there is no Brexit trade deal, they may have to move some operations overseas
PRIOR DAY’S LATER TWEETS:
• SBUX sells Tazo tea, keeps Teavana. YUM says Pizza Hut doing well, Habit Burger announces sales slide, so does Cheesecake Factory
• Interest rate rise dubbed a ‘dovish rise’. Sterling down, gilt yields down. Betting on only 1% by end 2019.
• Getting it right. Ei goes for Escape Rooms, Pizza Union sources 4th site. Not so much = heavily discounting burger & pizza operators
• Services PMI beats expectations. Rises to 55.6 in Oct from 53.6 in Sept. Consistent with higher rates of growth, further rate rises etc.
• BDO points to 5th consecutive week of poor retail sales. Warm weather not helping. It’s colder now, so improvement expected / needed
START THE DAY WITH A SONG:
Yesterday’s song was ‘Nothin Compares 2 U’ by Sinead O’Connor. Today, who sang:
“I was just guessing
At numbers and figures
Pulling the puzzles apart”
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The strong reception to the launch of the new iPhone X on Friday was a feature in the Saturday papers, with both the FT and the Times flagging that the market cap of Apple is now nudging the $900bn level. The Telegraph found a photo opportunity in the launch of the new Asda Christmas TV ad, which has a “Willy Wonka”-style theme this year, and also flagged the news that Mothercare is cutting 200 jobs as it pulls back from older kidswear. The Guardian had a feature on the upcoming Marks & Spencer interims, flagging that more stores are likely to close as profits fall again. The Evening Standard on Friday had a feature interview with Peter Williams, the founder of the recently struggling fashion chain Jack Wills, who is “determined to never drop the ball again”. Finally, the Daily Mail “Big Shot of the Week” was Christopher Bailey of Burberry, noting that he’s always
• Sunday Press: Marks & Spencer was in the spotlight in the Sunday papers, with the Mail on Sunday flagging that new Chairman Archie Norman is likely to try shock-tactics to shake up the company’s culture, while the Sunday Times highlighted the likelihood of more M&S store closures and the Sunday Telegraph noted that CEO Steve Rowe has been emboldened to be more radical about his turnaround plans and is demanding rent reductions from landlords. Christopher Bailey and Burberry were also in focus, with a big feature in the Sunday Telegraph on how “the golden boy is checking out” and who might replace him, whilst the Sunday Times went nap on Phoebe Philo of Celine as his likely successor as Creative Director and the Observer flagged that the new CEO Marco Gobbetti will face questions this week with the Burberry interim results about the departure of Christopher Bailey. The Observer
Today’s Press and News: The lurid revelations about the use of offshore tax havens by the Queen have managed to knock the lurid revelations about the extra-parliamentary affairs of the enfeebled Government off the front pages today, not least in the Guardian, which screams “Queen’s cash invested in controversial retailer accused of exploiting the poor” (aka Brighthouse). The Daily Express, however, sticks to the safe subject of the weather: “Icy Blast To Sweep Britain”. The Telegraph follows up the Mail on Sunday story about the increasing short interest in the UK General Retail sector and also finds a fashion model photo opportunity in the obscure news that profits fell last year at the fashion chain Seasalt. Most of the company result previews this week focus on Marks & Spencer, but the Telegraph focuses on Halfords, whilst City AM also highlights Sainsbury and New Look. Finally,
News Flow This Week: A busy week kicks off with the SMMT New Car Sales figures for October later this morning. Then first thing tomorrow we get the eagerly awaited BRC-KPMG Retail Sales for October (which are likely to be c2% down LFL), followed by the ABF (Primark) finals and the Conviviality pre-close update, plus the New Look interims. Wednesday brings the Marks & Spencer interims. Then on Thursday we get the Sainsbury interims, the Burberry interims, the Halfords interims, the SuperGroup pre-close and the Lookers Q3 update. And one day soon the CMA will issue its delayed provisional findings on the Tesco bid for Booker. Finally, the much-hyped Christmas TV ads (including the famous John Lewis ad) get going this week (with Sainsbury one of the few retailers to wait until after Remembrance Day).