Langton Capital – 2017-12-22 – Pub & restaurant numbers, tax cuts, confidence & other:
Pub & restaurant numbers, tax cuts, confidence & other:
A DAY IN THE LIFE:
Yesterday was a day for admin, football quizzes, emergency filing & early lunches.
But today will be a shade less productive. It’s the last day in the office for much of Britain. Langton is back in January & would like to wish a Merry Christmas & Happy New Year to all. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
Langton is putting together a compendium of 60-seconds pieces for publication early in the New Year. Suggestions for topics welcome.
These are all new (though we may put some historic 2017 efforts in the appendix) & will focus on two areas; companies & themes.
Themes will include discounting, cost pressures, overcapacity, the coffee phenomenon, delivery, the use of apps, Millennials, the grey market and so on and so on. There are more than you might think.
We’ll be busy over Christmas and the doc will be ready in early Jan but, if you would like a copy, please let us know. As mentioned, £200 plus VAT but free to clients.
PUB, RESTAURANT & DRINK PRODUCERS:
• CGA has reported that ‘Britain’s number of licensed premises has stayed level in the last year despite mounting cost pressures, patchy confidence and Brexit-related issues.’
• The latest Market Growth Monitor from CGA and AlixPartners shows the UK had 122,783 licensed premises in September 2017, which is ‘virtually identical to the total in September 2016.’
• CGA Monitor shows continued steady decline in the number of pubs in the UK whilst the number of restaurants continues to rise.
• CGA reports drink led-pub numbers fell by 2.3% last year with restaurant numbers up by 1.6%. Casual dining start-ups continue to push the numbers. CGA says ‘the figures are a sign of confidence in the licensed sector at the end of a year characterised by increases in food, property and people costs.’
• CGA reports ‘uncertainty over the consequences of the UK’s decision to leave the European Union, especially around the crucial issue of migrant labour, has dented the sector too.’ It says ‘CGA’s recent Business Confidence Survey revealed that just 30% of leaders felt optimistic about prospects for the eating and drinking out market over the next 12 months.’
• Re London, the report says ‘restaurant numbers in inner London have increased by 3.1% in the year to September—but fallen by 0.3% in outer London.’ The BHA yesterday reported that tourist arrivals had fallen in September despite the weaker pound.
• CGA’s Peter Martin comments ‘there is no escaping the fact that 2017 has been a very tough year for many pub and restaurant operators, with steep rises in food costs and Brexit just two of the big challenges.’ He says however ‘these Market Growth Monitor figures are proof of the steely resilience of the sector and consumers’ continued appetite for eating and drinking out.’
• CGA says ‘conditions aren’t about to get any easier next year, but there are reasons for cautious optimism as we draw towards the end of 2017.’
• AlixPartners MD Graeme Smith comments ‘at a site expansion level, the prevalent macro trends continue: a contracting pub market and the measured growth of food-led outlets. Although the market’s long-term fundamentals—including consumer demand—remain robust, the sector’s immediate trading performance is what positive operators are politely calling ‘soft’. Many parts of the market are currently under pressure, and like-for-like sales growth has slowed in a competitive environment. When combined with the backdrop of sustained cost inflation, profit growth is becoming harder to come by.’
• Steve Ritchie is appointed CEO of Papa John’s International Inc. He replaces founder John Schnatter, who will remain chairman.
• Ruby Tuesday has announced that, following its takeover, Aziz Hashim, managing partner of NRD Capital, is to serve as its interim CEO. Ruby Tuesday reports ‘it is our belief that by leveraging the brand’s core strengths – investing in its people and product, exploring new opportunities for growth, and executing operational excellence initiatives across the company – Ruby Tuesday can once again generate excitement with diners.’
• MPs have called for a deposit scheme to be introduced for plastic bottles.
• Nomad Foods is reportedly in talks to acquire Goodfella’s Pizza for about £200m
• FT reports shares in a US company that makes premium iced teas increased 500 per cent in pre-market trading on Thursday, after it said it would shift its focus to invest in blockchain technology.
• Just Eat continues to dominate the UK foodservice delivery market, with a 31% share of order volumes, according to MCA’s Foodservice Delivery Report. By comparison, Deliveroo lags Just Eat in the regions and has just 4% of UK order volumes.
• Veganism is viewed as the most difficult diet to accommodate when eating out, per research by Zizzi. Other problem areas for operators include non-gluten, non-dairy, and lactose intolerant. Of those surveyed with specialist diets, three-in-five vegans (63%) said they have ‘relaxed’ their principles when eating out, and 73% of those with a form of gluten intolerance have risked feeling sick because a non-gluten option wasn’t available.
• A significant reduction in US beer duty will save British beer exporters £7.2m when dealing with their biggest market. Taxes are being reduced by $2 per US barrel for all brewers exporting to the US from the UK at a time when the BBPA and the wider industry have targeted £100m of export growth over the next five years.
• Brigid Simmonds comments: ‘I welcome this tax reduction in the US, which will provide opportunities for British Brewers to pursue markets in the US. US small brewers still enjoy tax advantages over UK brewers. When they export to the UK, they receive all the advantages of the UK’s Small Brewer Relief, yet the Federal discounts offered in the US are not available to the UK’s small Brewers. This is something we tried hard to correct through the US/EU negotiations on TTIP and would like to see tackled under any forthcoming US/UK trade deal.’
Four-strong Peruvian concept Ceviche is exploring a launch outside the capital and is understood to have looked at several sites in the south east recently, per MCA.
• Britain’s pensions lifeboat said it would vote in favour of Toys ‘R’ Us UK’s restructuring plan after securing additional payments to the retailer’s pension fund.
• NRD Capital, a private equity firm specialising in franchised and multi-location businesses, has acquired US operator Ruby Tuesday.
HOLIDAYS & LEISURE TRAVEL:
• Travel Weekly reports that fewer than one in five of the 5,000-plus consumers asked in its Holiday Confidence Index think the British economy will grow next year. The paper writes that perhaps ‘the enormity of the Brexit decision has begun to sink in’ at a time when consumers are becoming less confident about their own finances, leading to a ‘significant number of respondents… [admitting] that rising living costs might scupper their holiday plans.’
• More than 4.5 million people are expected to leave the UK for Christmas and the new year, with today set to be the peak travel day, per Abta. Winter sun lovers are heading to the Canary Islands, Antalya in Turkey and Hurghada in Egypt, plus Mexico and the Dominican Republic. France, Italy and Austria are the most popular destinations for those looking for a traditional experience in a snowy destination, with Lapland and Iceland also selling well this year.
• A record number of passengers are expected to use Eurostar through the Channel Tunnel this Christmas and new year, with bookings up 2% on last year. The rise is driven by an 8% surge in sales of inbound visitors to London, boosted by the weak pound. A 22% rise is expected on Eurostar’s direct service to Disneyland Paris over the holidays as the park marks its 25th anniversary year, while an 18% increase in winter sports passengers is projected on the high-speed rail service to the Alps. December 29 is the peak day in the Christmas period, with more than 35,000 expected to travel across the Channel for new year’s eve celebrations.
• Donald Trump’s tax reforms will result in a financial boost to InterContinental Hotels Group, which will see its US tax rate cut by ‘mid to high’ single digit percentage points from 1 January. The company also expects a ‘significant, exceptional’ tax credit in the financial year the bill is signed into law, which would be realised in cash terms over a long period from 2018. Any updates will be provided at IHG’s 2017 preliminary results due to be issued on February 20.
• The US hotel industry reported occupancy rose 4.5% year over year to 56.4% during the week of 10-16 December. ADR increased 3.5% to $115.67 and RevPAR rose 8.1% to $65.24.
• GVC has formally announced its offer for Ladbrokes Coral. It says ‘the Enlarged Group will be a fast-growing, diversified, international online and retail sports betting led gaming group with more than 90 per cent. of Net Gaming Revenue generated from locally regulated/taxed markets.’
• GVC offers for each Ladbrokes Coral Share held at the Scheme Record Time, some 32.7 pence in cash, 0.141 ordinary GVC Shares and a contingent entitlement of up to a further 42.8 pence depending on the outcome of regulation into betting machines. GVC reports ‘following Completion, Ladbrokes Coral Shareholders will hold approximately 46.5 per cent. and GVC Shareholders will hold approximately 53.5 per cent of the issued share capital of the Enlarged Group on a fully diluted basis.’
• Alpine sport group Rossignol is in exclusive negotiations to buy Dale of Norway. Rossignal also recently acquired UK bicycle manufacturer Felt and outdoor/performance equipment brand Raidlight.
• The Met Office global temperature forecast suggests that 2018 will be another warm year globally but is unlikely to be a new record due to a moderate La Niña in the Pacific.
• Team Vitality — the leading French esports franchise and reigning EA SPORTS™ FIFA Ultimate Team World Champions — is the second new franchise to join Gfinity’s Elite Series season three. Neville Upton, Chief Executive of Gfinity, said: ‘Having the current reigning EA SPORTS™ FIFA Ultimate Team World Champions competing at next season’s Elite Series in March is quite a coup for Gfinity. As the Elite Series fanbase grows significantly from series to series, we are challenging ourselves to showcase the best global esports talent and we are delighted to welcome Team Vitality. Given their standing in European and Global esports, the highly decorated team will push the quality of the forthcoming Elite Series competition, one of the world’s premier esports leagues, to an even higher level.’
• Facebook Inc and Universal Music Group have announced a global agreement that will allow users to upload videos featuring music from Universal’s library across the former’s social media network, which also includes Instagram and Oculus.
FINANCE & MARKETS:
• Public sector borrowing fell to £8.7bn in November, down £0.2bn on last year per ONS. This was on the back of higher income tax receipts. The cumulative financial year borrowings are at £48.1bn, the lowest level since 2007.
• Sterling up vs dollar at $1.3381
• Pound up vs Euro at €1.1291
• 10yr gilt yield up 1bp at 1.26%
• World markets: UK markets hit all time highs yesterday with Europe & US also higher. Far East up in Friday trade
• Bitcoin off 9% overnight at around $14.3k.
• Brexit, weak government etc.:
o No more resignations (as at 7am) but Damian Green issue rumbles on
o David Davis has released some sectoral impact papers – after saying they didn’t exist having previously said that they did exist. The have been criticised for padding, repetition and plagiarism.
o Impact papers light on impact analysis. Guardian says paucity of detail ‘left many observers shocked’. Perhaps it would, wouldn’t it. But it quotes Lord Jay, former head of the Foreign Office, as saying ‘there is little overarching analysis by the government. No conclusions are drawn with regard to the UK’s future relationship with the EU.’
PRIOR DAY TWEETS:
• Later tweets: UK consumer confidence down in Dec to 5yr low says GfK. Says big ticket purchases fell, SMMT says production for UK market down 28%
• IMF says UK growth lower, country may have to raise taxes, is overspending etc. Michael Gove says buy more British cheese
• Clicks buying bricks. Airbnb close to buying Hoseasons, James’ Villas & a number of holiday cottage sites.
• Inbound tourism numbers fell in Sept per BHA. Says numbers (1% down) were ‘disheartening’
• Deputy PM Damien Green sacked for lying. Mrs May said to have no choice in sacking dishonest friend. May be lonelier in Cabinet
• IHG says pro-hotel move by hotelier (and President) Donald Trump will benefit it (and the industry) materially via substantial credit to P&L
• NY Times says ‘combination of EU inflexibility & British incompetence means [Brexit]…is likely to be on the European Union’s terms.’
START THE DAY WITH A SONG:
It is the busiest travel day of the year, so good luck to those who are travelling today. Yesterday’s song was Nat King Cole’s The Christmas Song. Today, who sang:
“Does your granny always tell you,
That the old songs are the best?
Then she’s up and rock ‘n’ rolling with the rest”
LANGTON IS CURRENTLY HOMELESS:
We are between offices. Alie Street no longer works & nor does the phone number shown below. We’re not really set up to pay two lots of rent so, rather than there be an overlap, there is currently a gap. The new office (on London Wall) should be functioning early in the New Year. Details to follow but, for the moment, please communicate via email.
MIFID II – YES, IT IS AS MUCH FUN AS YOU THINK IT IS:
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RETAIL NEWS WITH NICK BUBB:
• BDO High Street Sales Tracker: We flagged on Wednesday that overall sales at John Lewis held up pretty well last week, given the snow disruption on Dec 10th, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week (which excludes the snow-hit Sunday…) paints a much more sober picture of Store sales, as w/e Dec 10th saw Fashion Store LFL sales fall by 5.3% (versus a very weak comp of -6.8% LFL a year ago). Including Homewares and Lifestyle chains, total Store LFL sales were down by 4.8% last week (versus -5.3% a year ago). However, overall Online sales were strong, at +24.8% (versus +21.4% a year ago), with Online Fashion 20% up. Frustratingly, although the Store/Online split they provide is valuable, BDO still doesn’t publish a blended sales growth figure or provide an absolute sales figure.
• Andy Harrison Watch: Having said yesterday that Dunelm’s Chairman is the former Carphone Warehouse boss, Andy Harrison, it has been pointed out to us that Andy Harrison is in fact the former Whitbread boss and that we had got confused, in our eagerness to develop a mobile phone link, as it were, to the new Dunelm CEO, the former Dixons/Currys stalwart Nick Wilkinson. Sorry about that…To add to the potential confusion, Dixons Carphone announced at 8.30am yesterday that Andrew Harrison is to become Chairman of The Carphone Warehouse Limited with immediate effect. CEO Seb James said “As we reposition our model to enable Carphone Warehouse to flourish in this changing world, there is nobody better qualified or more able to lead this transition than Andrew” and the man himself (who used to be called “Stat” in his hey-day at Carphone) said “With the ongoing changes in the mobile market, I
• Trade Press: Neither Retail Week or Drapers magazine have been published today, alas, but both have been busy with news/stories/features on their websites. We have particularly enjoyed the series of interviews on Drapers, as part of Drapers’ 130th anniversary celebrations this year, eg with Ian Cheshire of Debenhams talking with Ray Kelvin of Ted Baker. We also enjoyed the Editorial on the Retail Week website: “Glad tidings: 10 ways retail gave back in 2017”, noting that “Whether it’s support for local good causes or nationwide campaigns, health and homelessness to digital skills or disaster aid, retailers have done their bit in 2017”. And, having listed the winners a week ago in Drapers‘ annual “Top 100” list of the most influential people in the fashion industry, we can report that one of the losers was the embattled Philip Green of Arcadia (he fell from 18th to 23rd position),