Langton Capital – 2018-02-06 – Services PMI, shares, Bitcoin, Square Pie, Accor & other:
Services PMI, shares, Bitcoin, Square Pie, Accor & other:
A DAY IN THE LIFE:
Bit busy this morning after a day of hectic admin yesterday, VAT, office leases, dealing with MIFID II minutiae, quibbling over the meaning of the word ‘substantive’ etc., so we’ll keep it brief this morning and point out that, though the Mediterranean Sea is less than 5x as large as the North Sea in terms of surface area, it holds around 70x as much water.
This because, whilst the Med is 17,000 feet deep in places, the middle of the North Sea has only about 40 feet of water and, with the wind blowing in a certain direction and the tides working in your favour, you could touch the bottom (if you were 35’ tall and could hold your breath in six degree water and you carried a heavy weight etc.).
We mention this because the Germans, Dutch, Danes & Norwegians are considering building a monster wind-farm on the Dogger Bank off Hull at some point in the next 20yrs. We in Britain, apparently, are dragging our feet. On to the news:
• Langton has put together a compendium of around 3 dozen 60-seconds pieces (c200 words or so each) for distribution at £200 plus VAT, free to clients. Please let us know if you would like a copy.
PUB, RESTAURANT & DRINK PRODUCERS:
• EI Group bought back 245k of its own shares for cancellation yesterday at 135.5p per share.
• UK Services PMI fell in Jan to 53.0 from 54.2 in December. Analysts had been expecting a rise to 54.3. Observers have called it a triple-whammy of less than good news. All three measures, however, Services, Construction and Manufacturing, are currently above the 50.0 that implies expansion. See also Finance & Markets.
• A ‘perfect storm’ of softer retail demand, rising rents and rates, higher staffing costs, and food price inflation has led to the administration of five-strong London restaurant group Square Pie. Rob Croxon and Will Wright of KPMG have been appointed joint administrators. Square Pie founder Martin Dewey commented: ‘The collapse of the restaurant business was something we were desperate to avoid, and we were hopeful even as recently as last weekend that we could save the stores and the jobs, but unfortunately the backing didn’t materialise in the current leisure climate.’
• City AM reports that the owner of Bounce, Social Entertainment Ventures, will IPO in London or New York in the next five years as a result of its rapid growth. Bounce founder Adam Breeden plans to open several new sites in the UK and the US in the next few years, using funding from investors. ‘There’s a lot of people trying to get in on investing in the businesses but up until now we’ve been trying to raise money internally,’ he told the paper. ‘Now we’re going to be raising money externally.’
• Marston’s has confirmed it will move its bottling and canning line from the Charles Wells brewery in Bedford to Burton-upon-Trent, putting up to 40 jobs at risk. Speaking to the BBC, Richard Westwood, Marston’s managing director, said: ‘We have spent nine months looking at this, because one of the original intentions was to see if we could refurbish the line, but that is not going to be possible’.
• Asda promises to scrap all 5p single use carrier bags and cut 10% of plastic from its own-brand packaging in the next 12 months.
• Alibaba sets its sights on the Indian market after taking part in a $300m funding round for BigBasket, India’s leading online grocer. Other participants include; Sands Capital, International Finance Corp and Abraaj Capital.
• Online payment processing company, Stripe, is set to establish an engineering hub in Dublin – it’s first centre outside the US.
• Government data analysed by Altus shows that two pubs a day have been demolished or converted to alternate use since the new business rate regime was brought in last April. A total of 616 pubs have been removed from the rating list in the period.
• Province Brands, a Canadian company, has filed a patent for the production of beer brewed from cannabis. This follows Constellation’s acquisition of a 10% stake in Canopy Growth, another Canadian marijuana firm, for £141m.
• Wesfarmers, Australian owners of Homebase, has had to write down £584m after poor trading at Homebase, putting nearly 2,000 jobs at risk with up to 40 store closures.
• Lloyds Banking Group is cutting more than 900 jobs as it adapts to changing customer habits. The bank is creating more than 450 new roles which leaves a net loss at 465 posts.
• Carillion job losses have risen to more than 800.
HOLIDAYS & LEISURE TRAVEL:
• Accor is reported to be close to completing a split of the business into a real estate and an operating company. The FT reports the co has 5 institutional investors to acquire part of AccorInvest, its real estate business.
• Travel Counsellors has had its busiest January ever with global revenues of £77.4 million. On 16 Jan, Sunday Times ran with the story that the group was for sale. Travel Counsellors has over 1,700 self-employed franchisees running their own travel businesses in 7 countries.
• Travelport reports a record-breaking January for fare shopping, with a 77% yoy increase in peak shopping rate messages per second and in overall 24-hour message volumes.
• Southampton reports a record breaking 2m cruise passengers from more than 500 ships during 2017. Numbers are expected to rise in 2018 with a number of ships calling into Southampton for the first time. Every time a cruise ship visits Southampton, it is estimated to bring a cash boost of £2 million to the local economy.
• Official figures show Turkish tourism revenue rebounding, growing 18.9% yoy to $26.3bn. Although still down on 2014’s record-breaking $34bn, high profile security campaigns as well as branded media advertising helped Turkey’s tourism industry start to recover.
• Verdant Leisure, backed by Palatine, has acquired Scoutscraft Holiday Centre as its fourth bolt-on acquisition since 2016.
• A Pragma background piece claims the eSports industry will be worth £1bn by 2020, with investment firms starting to look closely at opportunities in the space. Newzoo estimates the total viewership of eSports streams and events to be just over 194m unique users in 2017, projected to grow to 303m in 2020. Per viewer revenue was estimated to be £2.58 in 2017, with total revenues exceeding £493m. By 2020 these numbers are projected to grow to £3.68 and to £1bn respectively.
FINANCE & MARKETS:
• Services PMI suggests economy is growing at a quarterly rate of around 0.3% (down from 0.5% in Q4 last year. Markit comments ‘the pace of UK economic growth slowed sharply at the start of the year as January saw a triple whammy of weaker PMI surveys.’ See also Pubs, Restaurants & Drinks above.
• Markit says ‘service sector expansion slid to a 16-month low, reflecting a marked waning in growth of demand for business and consumer-facing services such as hotels and restaurants. Demand for transport and communication services was down for the second straight month.’
• Markit says ‘lingering concerns surrounding the UK’s exit from the EU’ are starting to slow the economy.
• Sales of new diesel cars fell by 25% in January
• President Trump has been criticised in the UK for saying that the NHS here is “going broke and not working”.
• Wall St had its biggest fall in 6yrs last night. Asia is heavily down in Tuesday trading. Earlier Monday, both the UK and Europe registered heavy falls. Fears of a ‘melt-up’ in markets now looks to be misplaced.
• Bitcoin is $6,164. It has lost 2/3 of its value in little more than a month.
• Sterling sharply down vs dollar (concerns of US interest rate rises) at $1.3968
• Pound down vs Euro at €1.1289
• Oil down at $66.94
• UK 10yr gilt yield unchanged at 2yr high of 1.56%. Bank of England meets on Thursday & is unlikely to jack rates
• Brexit, politics etc.:
o No10 says UK will definitely leave the single market
o Michel Barnier says some disruption to trade is inevitable if the UK leaves the single market
o David Davis confident he will have agreement on transition by March EU summit
o Times reports internal statement laying out Theresa May’s political strategy has been called “pathetic” & “anaemic” by her own ministers. The latter fear the government has no coherent plan
o Times says no10 ‘is where good ideas go to die’
• Langton is between offices. Please communicate via email. MIFID II is now in operation.
PRIOR DAY LATER TWEETS:
• Later tweets: VAT cut for F&B post-Brexit? Possibly but, with if GDP is in the slow lane, it’d be tough to sack nurses to provide cheaper beer
• UK services PMI comes in at 53.0. Below last month’s 54.2 & less than estimates of 54.3. Lowest in 16mths but still implies some growth
• With Bitcoin down the pan & Dow in biggest drop in 18mths, hopes of a ‘melt-up’ in asset prices may be misplaced
• Vince Cable calls on Corbyn to offer 2nd referendum. Would harvest young vote, sweep the card & implement hard socialist policies etc. etc.
• FT on Brexit ‘chaos’ & Irish Times says Britain’s ‘humiliation is excruciating’. Guardian tells May to go, enough is enough etc.
• Global smartphone sales down 9% in volume terms in Q4 last year. There are simply enough of them now…Apple still driving prices up
• City AM: Social Entertainment Ventures (Bounce, Flight Club etc.)may float ‘in London or New York’ in next 5yrs. That’s a lifetime, mate
START THE DAY WITH A SONG:
Yesterday’s band was Primal Scream with their song Loaded. Today who sang:
I left my home in Georgia,
Headed for the ‘Frisco bay
Cause I’ve had nothing to live for
And look like nothin’s gonna come my way
RETAIL NEWS WITH NICK BUBB:
Ocado: If those shorts who have been nursing badly burnt fingers were looking for a way out of Ocado on the back of today’s finals then they must shouted in triumph at seeing the headline of an additional announcement “Proposed placing of new shares”…because, with world stockmarkets falling about their ears and with the share price almost in “bubble” territory, Ocado has decided to issue 31.5m new shares (5% of the equity), via a bookbuilding exercise, “to take advantage of our growth opportunities” and fund higher cap ex. It will be very interesting to see what happens to the share price today, but Ocado will be hoping to bank at least £140m out of the placing, before expenses. At 9.30am, Ocado boss Tim Steiner will face questions from analysts on the funding requirements of the Ocado Solutions business…
BRC-KPMG Retail Sales figures for January (4 weeks to Jan 27th): We flagged yesterday that strong Food sales were likely to again offset the weakness in Non-Food sales, to leave overall LFL sales no worse than flat for January and we weren’t too far out, as the outcome was +0.6% LFL. We had forgotten that there was a positive calendar distortion in the first week of the month, as New Year’s Eve (together with all its celebratory Food and Drink buying) fell in the January trading period this year and that looks to have pushed the overall Food LFL sales growth over the 3% mark (as buoyed by Food price inflation), although the exact outcome is buried in the 3-month moving average. By implication, overall Non-Food sales must have been nearly 1.5% down LFL, although that doesn’t look too bad, with Clothing actually up LFL. What dragged down the Non-Food outcome was “big ticket”, with
Grocery Market Share Watch: The latest monthly Kantar and Nielsen grocery sales data out at 8am this morning covers almost exactly the same period as the BRC-KPMG figures, ie the 4 (and 12) weeks to Jan 28th/29th, although a day can make a big difference to the reported outcome, given the calendar distortion around trading over the New Year.
SMMT New Car Sales: Yesterday’s figures from the SMMT for the UK new car market last month echoed the BRC-KPMG finding of tough conditions for “big ticket” retailers in January, with a fall of 6.3%, to c164,000 cars. Demand for petrol cars and “alternatively fuelled vehicles” rose, but failed to offset the continuing slump in diesel car sales, which were down 26% to c59,000 vehicles (still as much as 36% of the overall car market).
Bunnings Watch: We were too distracted by the surprise Tesco/Booker news yesterday to spot that “down under” the Wesfarmers conglomerate had announced more huge write-offs at its wretched Bunnings/Homebase DIY business, ahead of the upcoming interim results on Feb 21st, including a £444m goodwill write-off, stock write-downs of £37m (“relating to excess, unsuitable and display stock”) and store closure provisions of £40m. Before exceptional costs, the business is expected to lose a massive £97m in the six months to December (up from £28m a year ago), “reflecting the poor trading performance of Homebase”, as “early results from the 19 Bunnings pilot stores programme have been encouraging”. Not surprisingly, the Australian MD of the business, “PJ” Davis, has been “retired” and the recently recruited former B&Q Retail Director, Damian McGloughlin, has taken over. The future of the
News Flow This Week: Tomorrow morning ScS are taking analysts to see their new Chelmsford store and then on Thursday their rival DFS issues a pre-close trading update.