Langton Capital – 2017-12-04 – Discounting, delivery, recycling, Elegant Hotels & other:
Discounting, delivery, recycling, Elegant Hotels & other:
A DAY IN THE LIFE:
Expectations evolve over time, don’t they?
And they only tend to do so in one direction and, whilst I promise not to reprise the Yorkshiremen Sketch here, I should say that I remember enjoying Christmas even though we only had ten year old advent calendars where the chocolate had been taken out in the late-60s and all we had to cheer us up was fold the cardboard back and get a joyous flash of a miniature jaded Xmas tree, a wan-looking robin, a slushy snowman or whatever – but that wouldn’t be good enough these days, would it?
Because we got our youngest an advent calendar last week and, rather than say thank you, she pointed out, I’m sure she thought subtly, that some people at school had five and that there was a special part of the classroom reserved for those who only had one.
So, what did we do? Well rather than send her down the nearest pit or up the chimney, we bought a second. It was a compromise of sorts. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Beggar thy neighbour discounting continues apace.
• Sunday Times speculates on how casual diners are going to claw their way back from their current high (and getting higher) level of discounting. It suggests that cut price deals are being baked into peoples’ decisions as to whether or not to go out for a meal. Referring to consumers, it says many ‘have become so used to browsing the deals on websites such as Groupon, Living Social, Bownty and Square Meal that they are rarely willing to pay full price.’
• EI Group bought back another c97k of its own shares at 148.4p for cancellation on Friday.
• NIESR speculates that unemployment may be ‘too low’. It says low productivity is the flip side of our current low levels of joblessness. The maths may be right but there is more to having a job than statistics. Joblessness, and even more so the fear of joblessness, changes consumer behaviour.
• RBS is to close 259 branches and shed 680 jobs. As mentioned below, Thomas Cook is to close branches & cut jobs and Palmer & Harvey has just gone bust. They’re all doing their bit.
• The c140 strong pub chain Amber Taverns, has secured further investments from backers, Ares Capital Management, reports the MCA. The chain looks to add 10 to 12 new sites a year for the next five years.
• AB InBev has bought the Australian craft brewery Pirate Life for AU$10m
• The EU has accused AB InBev of abusing competition laws in Belgium, taking advantage of its dominant market position by ‘unfairly blocking’ supermarkets and wholesalers from buying brands such as Jupiler and Leffe at lower prices than they were sold for in France and the Netherlands.
• Alix Partners’ Foodservice Growth Report 2017 has shown that UK operators in the foodservice sector have achieved another year of double-digit growth, but fast-approaching cost headwinds look likely to slow growth in 2018.
• Casual Dining Group has announced that the group will reorganise its senior leadership team, with COO James Spragg assuming responsibility for Cafe Rouge as well as Bella Italia, while Cafe Rouge MD, Simon Wilkinson will take on the newly formed role managing director-strategic development.
• The final One Sixty, the smokehouse and bar concept founded by David Moore and Sean Martin, has been sold to a new operator called Damien McCrystal, the MCA has reported.
• The chief executive of the BBPA, Brigid Simmonds has commented on the Government’s plans to introduce a recycling deposit scheme stating: ‘It is right that the Government should focus on plastic waste from on-the-go consumption. The beer and pub industry contributes a significant amount to the current recycling infrastructure through the PRN system, ensuring a high rate of recycling of glass bottles and cans. With 93% of beer sales in pubs from reusable kegs and casks this also displaces billions of individual containers in each year. A deposit scheme would impose new costs on pubs, which already face big financial pressures. It is important therefore that pubs are exempt from any deposit scheme’.
• SSP Group have agreed to acquire part of the Stockheim group, a travel concessions business based in Germany. Stockheim reported sales of €30m in 2016 from 25 F&B outlets in airports and railway stations.
• In the US, Wendy’s has announced a delivery partnership with DoorDash. The company says it will service 1,400 locations in 48 markets by the end of the year.
• Co-op’s 125 East of England stores will start selling food that is up to a month beyond its ‘best-before’ date in an attempt to cut down on food waste. Customers will be able to buy out of date products such as tinned goods and dried foods for just 10p. Other supermarkets might follow.
• Toys R Us will close around a 25% of its 106 UK stores, with the closures being part of a deal to renegotiate debts, according to the BBC. The move will impact hundreds of jobs, with the toy giant employing around 3,000 people overall.
HOLIDAYS & LEISURE TRAVEL:
• Elegant Hotels Group has confirmed that it had a bid approach but says the talks have been terminated. The group says ‘the Board of Elegant Hotels notes the recent press speculation concerning the possibility of an offer being made for Elegant Hotels.’ It says ‘it had received an approach from Melia Hotels International…relating to a possible all cash offer for all of the issued and to be issued share capital of the Company which may be made by Melia Hotels or one of its investment affiliates. The Company further announces that discussions with Melia Hotels have now been terminated, and that Melia Hotels does not intend to make an offer to acquire the entire issued and to be issued ordinary share capital of Elegant Hotels.’
• Elegant. The Times had broken news of the talks. It reported that a bid of around 120p per share (£107m) was on the table. Investor Luke Johnson has a 12.5% stake in Elegant.
• Thomas Cook cabin crew have voted to accept a two-year pay deal worth around £500 a year each. The deal comes after months of “constructive negotiations” between Unite and the airline.
• Thomas Cook are set to close a further 50 stores affecting just under 400 staff, its largest round of closures since 2013.
• Lyft reports H1 revenue of $483m, more than triple last year’s figure of $150m. The ride-hailer’s net loss reduced by 27% to $206m.
• Red Letter Days, an experience gifting specialist owned by Theo Paphitis and Peter Jones, has been sold to Smartbox Group.
• UK marketers are set to increase ad spend by 12.6% to £290.5m, with cinema remaining a key advertising channel this year. DCM reports that 78% of the UK population are now cinemagoers.
• Las Vegas saw a 4.2% drop in visitors in October following the mass shooting at the beginning of the month. Gambling revenue on The Strip dropped 6.1% to $528.7 million, according to Bloomberg.
FINANCE & MARKETS:
• UK manufacturing grew at its fastest rate in more than four years in November per the latest PMI. The number hit 58.2, the highest in 51 months. The construction PMI is released today with the largest component of the economy, services, reporting tomorrow.
• Prize winning economist Joseph Stiglitz has told the BBC that trying to negotiate a trade deal with the Trump administration would be a waste of time. He points out that President Trump has made it clear he wants less generous trade relations with other nations.
• The German chambers of industry and commerce are to raise their 2017 growth forecast for the country to 2.3% per Der Spiegel.
• Goldman warns returns across all asset classes could fall over the medium term as QE reverses
• Fund manager Neil Woodford has said that there may be a bubble in some areas of the market
• Labour’s leader, Jeremy Corbyn, has said that yes, he is a threat to global banks’ business
• Oil up 60c or so at $63.45
• Sterling down vs dollar at $1.346
• Pound down vs Euro at €1.134
• UK 10yr gilt yield sharply lower at 1.23% (was 1.33%)
• World markets: UK down on Friday with Europe & US also lower. Asia mostly up in Monday trade
• Brexit, lame government etc.:
o The Mail reports JD Wetherspoon’s Tim Martin saying that ‘immigration is a good thing for Britain’s economy.’ He says access to labour from other countries will be necessary after Brexit
o Mrs May is in Brussels today.
o Pro Brexit MPs have told the PM to threaten to walk away from talks if the EU does not fall into line
o Commons committee says Brexit may affect the cost of medicines and hit UK pharmaceutical investment
PRIOR DAY’S LATER TWEETS:
• Later tweets: Marston’s reassures but Greene King deemed to have work to do. Latter paid a full price for Spirit. Fayre & Square been a drag
• Crowd funding valuations. Planet Earth to the dreamers; what kind of a return do you think these investments offer?
• Deltic takes 3% stake in Revolution. Clearly sees value. Further bid approach somewhere between ‘possible’ and ‘likely’.
• Games Workshop blips up on trebled H1 profits. Not bad. Operational gearing in action.
• BDO: Fashion sales down 0.8% week 26 Nov vs weak comps. Cold weather should help now. If not, there’s something going materially wrong
• Online sales flying. Plus 24.7% in week to 26 Nov on back of plus 22.6% a year ago.
START THE DAY WITH A SONG:
Friday’s song was Oasis: Live Forever. This morning, who sang:
Life is good,
And I feel great,
Cause mother says I was,
A great mistake
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The warning from the renowned fund manager Neil Woodford, in an interview with the FT Money supplement, that the lights are flashing red, in terms of another stockmarket bubble, got plenty of coverage in the Saturday papers, not least in the FT itself. However, Lex column in the FT highlighted the focus in his own investment portfolios and observed, tartly, that “just hope that biotech, housing and unlisted start-ups are not also in bubbles of greed the gods see fit to punish”, with the Business editorial in the Times making a similar point. The Times also had an excellent and detailed expose of the Palmer & Harvey MBO model that led to disaster for the grocery and tobacco wholesaler, highlighting the £77m of dividends paid out to management and shareholders. The Guardian also picked up on the latter revelation about P&H, as well as the news that the struggling
• Sunday Press: There were no great revelations in the Sunday papers, with the most interesting story perhaps the Mail on Sunday story that Marks & Spencer is poised to abandon dozens of plans for town centre store developments. The Sunday Times flagged that the big tobacco companies have scuppered any hope for a rescue for Palmer & Harvey by moving their wholesaling business to DHL and it also highlighted the mysterious £585m loan to a Virgin Islands offshoot of Toys R Us written off by the ailing UK business. The Sunday Times also had an article about the upsurge in discounting by restaurants on the High Street, whilst the Sunday Telegraph had a big feature about the battle for VIP customers by the big luxury brands. And the upcoming Mulberry results next week provided fashion model photo opportunities for the Observer and the Sunday Times.
Mccoll’s: Despite the upheaval in the convenience store market caused by the collapse of Palmer & Harvey last week, today’s pre-close update from McColl’s strikes an upbeat note, flagging that the full-year results (to Nov 26th) will be in line with expectations despite a 1.1% dip in LFL sales in the final quarter (not helped by “unfavourable weather”). As for P&H, the news is that “We are in ongoing discussions with our supply chain partners, and manufacturers, with a contingency plan already in place to ensure continuity of supply to the around 700 newsagents and smaller convenience stores, previously supplied by P&H, within our estate of 1,611 stores”.
Pendragon: The Motor dealer Pendragon has issued another strategy update today, confirming that it is to increase its focus on the UK used car market, by reducing its presence in UK premium new car sales (releasing £100m capital over the next 3 years) and selling its US business (with a valuation of £100m mooted). The veteran CEO, Trevor Finn, says “I believe this strategy will provide more reliable and sustainable returns”.
News Flow This Week: Tomorrow we get the BRC-KPMG Retail Sales for November (with a reasonably good Black Friday week likely to make up for weak sales in the rest of November, to leave overall LFL sales fairly flat) and the SMMT New Car sales for November. The Mulberry interims are on Thursday and the ABF (Primark) AGM is on Friday.