Langton Capital – 2018-04-16 – Whitbread, overall spend, alcohol & health, Deliveroo etc.:
Whitbread, overall spend, alcohol & health, Deliveroo etc.:
A DAY IN THE LIFE:
So, we’ve finally got some good weather to look forward to this week.
The forecasters have been saying so for a while but, for me, the clincher was when Tesco (and even more so Aldi) started to devote valuable shelf space (or in this case floor space) to bags of charcoal and fire-lighters.
Anyway, the youngest and one of her cousins were rampaging around the garden over the weekend and we’re still assessing the damage. Apart from feeling that they had to leave a TV on in every room they visited, they’ve been applying their scouting skills and appear to have burnt down a part of a hedge.
It’ll grow back, of course. Which is more than can be said for my ladder which (it was rotten anyway, dad) appears to have been partially cut up for firewood.
We don’t feel compelled to talk about Hull City’s return to negative form over the weekend so let’s move on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Activist hedge fund Elliott Advisors has built a 6% stake in Whitbread, in a bid to force the group to spin off its Costa Coffee chain, the Sunday Times has reported. Elliott is now the largest shareholder in £7.2bn leisure giant, with hedge fund’s position worth £430m.
• Whitbread reports full year numbers on Wednesday 25 April.
• Luke Johnson has commented in his column in the Sunday Times that his sale of Draft House to Brewdog was not a reason for mourning. Mr Johnson has exited the business and Brewdog told the vendors a week before closing that it would not want founder Charlie McVeigh to stay with the business.
• The BBC has suggested that volume retailers may never expand to fill the gap currently being left by failed companies on the High Street.
• Lack of new entrants onto the High Street has an implication for capital values and, despite the prevalence of upward-only rental agreements, also on rents.
• BBC suggests that gyms, crazy golf outlets, patisserie outlets, discount stores and residential may plug the gap on the High Street. Arguably only the last of these has the scale needed to fill upcoming vacancies. Although ‘experiential’ is a real feature nowadays, the UK simply does not need or want another 10,000 or 20,000 more crazy golf outlets.
• MCA’s Eating Out Panel Consumer Dashboard for March 2018 measured a 10% increase in average spend and a 7% increase in frequency during breakfast hours for the month.
• Beds & Bars has reported a 9% rise in sales to over £50m for the year to March 2018 and is expected to report EBITDA of £4.53m, per MCA. The group is also looking to increase funding as it considers new investment opportunities in the new financial year.
• A study released by Cambridge University claiming that one alcoholic drink a day could shorten your life has been criticised as ‘scaremongering’ by industry bodies. ‘This study completely overlooks the well-documented health benefits light to moderate enjoyment of alcohol brings,’ said James Calder, head of communications for the Society of Independent Brewers (SIBA).
• SIBA says ‘The mental and social benefits of enjoying alcohol sensibly are also overlooked. We have 40 years of research that shows light to moderate drinking equals improved cognitive function and memory in ageing as well as reduced chance of vascular dementia,’ Calder continued. ‘What about the simple, social improvements to quality of life that being in a pub or taproom with your friends and family regularly brings to our wellbeing?’
• Causality is not the same as association. Drinkers may have other habits and it could be these that are impacting their health. Also, people who drink ‘more than one drink a day’ may in fact be drinking 10 a day.
• Deliveroo is encouraging restaurateurs and food business operators to open new ‘virtual brands’ as extensions of their existing kitchens and especially wants to see multiple brands from people operating in its Deliveroo-only Editions ‘dark kitchens’. Deliveroo claims it has 15 virtual brands running out of its Editions sites in the UK, with another 10 expected to launch in the summer. Several others run ‘virtual brands’ out of their own restaurant kitchens. Deliveroo CEO Will Shu extolled the benefits for ‘restaurant finances.’
• UK drinks wholesalers Matthew Clark and Bibendum say it is ‘business as usual’ following a change in ownership as a result of Conviviality’s administration. James Lousada, commercial director of Matthew Clark and Bibendum said: ‘We would like to apologise for the impact on our customers and suppliers over these past weeks and to reassure that we are working closely with partners across all categories to bring stock levels and service back to the excellent standards we hold ourselves to.’
• The University of Manchester has produced data that indicates consumers are less happy with the food and service in restaurants. The research showed people 56% were satisfied with meal’s value for money down from 69% in 2015.
• The London bar chain Flight Club is to open a third London site and has plans to take the concept to the US. The ‘social darts’ group will open their newest unit in Victoria’s NOVA development.
• Scott Waddington has officially announced that he will step down as Chief Executive of Brains. John Rhys, Chairman of the group said: ‘Scott has been a distinguished leader of the Company over the past 17 years. I have enjoyed working with him during that time and look forward to doing so over the coming months whilst we search for the right person to lead the business into the next stage of our development’.
• Coffee shops and ice cream parlours are occupying many of the newly vacant former retail sites in the UK, research from PwC has indicated.
• The Telegraph has reported a further 12,000 jobs are on the line on the UK’s high street, so far fifteen major retailers or restaurants have applied for CVAs in the last 12 months.
• The Canadian meat company Maple Leaf Foods has invested in edible insect producer Entomo Farms. Entomo Farms is north America’s largest insect farmer, supplying 50 food companies in eight countries.
• The UK’s garden centres have suffered its worst sales in five years (down 15-20%), following the recent bad weather. The UK’s pub beer garden useage may not have fared any better against the beast from the east.
HOLIDAYS & LEISURE TRAVEL:
• Leeds Bradford airport will be rebranded the ‘Yorkshire Airport’. The rebrand follows a complete revamp of the airport’s terminal and lounges.
• HNA has decided not to float Swissport, the air-service group, on the Swiss stock exchange ‘due to current market conditions’. Swissport reported revenues of €2.8bn last year.
• Heathrow has had its busiest departures day ever on the 30th of March, with more than 136,000 passengers traveling through.
• Rocket Internet, the Berlin-based tech investor, has announced revenue in key companies such as HelloFresh have risen 28% last year, while losses had narrowed once again over the past 12 months. Oliver Samwer, co-founder and chief executive of Rocket stated: ‘We delivered on our promise to create and crystalise value for our investors and to further improve the profitability of our selected companies’.
• Caesars Entertainment Corp has said that it will manage two luxury hotels and a beach club in Dubai. This is the casino operator’s first non-gaming resort.
• Sir Martin Sorrell is to leave WPP, the company that he founded 32yrs ago.
FINANCE & MARKETS:
• Rightmove has said that house prices rose by 1.6% in the year to April, compared with inflation of around 2.5%. Prices had risen by 2.1% in the year to March.
• Sterling up again at $1.4257 and €1.1559
• Oil little changed at $71.84
• UK 10yr gilt yield down 2bps at 1.43%
• World markets: UK & Europe up on Friday but US down. Far East mostly lower in Monday trade.
• Brexit etc.:
o Syria & Russia hogging the headlines but the Institute of Directors has said that a survey of 700 directors suggests that they remain optimistic for their own firms. The IoD says ‘after nearly a year of economic pessimism winning out among business leaders, the scales have tipped gently into the positive. It seems likely that meaningful progress in Brexit negotiations since December has brought some much needed reassurance.’
o Jaguar Land Rover is to cut 1,000 jobs. It says ‘in light of the continuing headwinds impacting the car industry, we are making some adjustments to our production schedules and the level of agency staff.’
o A group of MPs from across the main parties has called for the public to be given a vote on whatever deal is struck by David Davis with the EU later this year.
o Labour MP Chuka Umunna has pointed out that half a million younger people will have come of age in the period between the referendum and Brexit and he says that they should be given a vote. Similarly, around half a million older voters will have died
o Lord Marland, chairman of the Commonwealth Enterprise and Investment Council, has called for increased trade with the Commonwealth. Robert Peston has pointed out that much of it is a long way away and trade with the Commonwealth is a fraction of that with the EU.
PRIOR DAY LATER TWEETS:
• Later tweets: Tracker: CGA points to a ‘brutal’ March with LfL sales down 3.1% (vs inflation of plus 2.5% & restaurant costs much more than that)
• Tracker: Easter +5.9% on 2017 LfL. Monday was rained out. Maths suggests Fri to Sun must have shot the lights out. Didn’t feel that way…
• Moving annual weather to end-March pretty horrible. Channel Five has 60 race meets abandoned y-t-d vs only 16 last year
• CGA Prestige Price Index. Food price inflation only 0.5% in year to Feb. Worst disruption past but kitchen labour costs rising sharply
• Royal Institution of Chartered Surveyors has reported that there are few signs of any pickup in the UK housing market
START THE DAY WITH A SONG:
Last Friday’s song was Landslide by Fleetwood Mac but today who sang:
Pistols shots ring out in the bar room night
Enter Patty Valentine from the upper hall
She sees the bartender in a pool of blood
Cries out, “My God, they killed them all!”
RETAIL NEWS WITH NICK BUBB:
Saturday Press and News: The main stories in the Saturday papers were the news that the French shopping centre giant Klepierre officially abandoned its bid for Hammerson on Friday morning (ahead of tonight’s formal “PUSU” bid deadline) and the news that the former Kingfisher boss Gerry Murphy has been made Chairman of Burberry, replacing the veteran John Peace. The FT also had a big article about Dixons Carphone and how the new boss Alex Baldock has to get the struggling mobile phone business back on track. The veteran City commentator Neil Collins highlighted in his FT column the gloomy view of UBS of what ongoing “channel shift” will do to the profitability of M&S and Debenhams, whilst the FT market report noted that UBS moved to Buy on Card Factory on Friday.
Sunday Press and News: The Mail on Sunday had an exclusive 3-page interview with the embattled Philip Green of Arcadia, but failed to land a real blow: he bitterly regrets doing the deal with Dominic Chappell, but denies any wrongdoing over BHS (“Defiance of a wounded tycoon”). The main Business story in the Sunday Times was that the activist investor Elliott Advisors (of Game Digital fame) is pushing Whitbread to demerge Costa Coffee, but the main feature was on the bankrupt Conviviality, revealing that the accountants EY warned it last year that its cash controls needed to be tightened (“Revealed: How not to run a p***-up in an off-licence”). The Sunday Times also flagged that the Hammerson bid for Intu Properties is on a knife-edge and that Hammerson may soon renegotiate the deal or walk away, in response to shareholder criticism of the deal. The Sunday Telegraph said that Debenhams
Today’s Press and News: The Guardian and the Telegraph follow up the Mail on Sunday ‘s exclusive interview with the embattled Philip Green , in which he said he bitterly regretted doing the BHS deal with Dominic Chappell, but the main focus is on the Sunday Times story that Whitbread faces calls for a break-up, as well as the weak Visa spending report for March and the weak BRC-Springboard footfall figures. The Times has a big splash on Waitrose and the revelations about grumpy letters from staff in the company magazine: “Waitrose crippled by restructuring disaster, says staff”.
The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda make a swift return to the winner’s enclosure after last week’s defeat, but it was pressed hard by Tesco. The Asda basket of £55.36 was £1.53 cheaper than Tesco, but that was before a £1.15 instant Brand Guarantee discount from Tesco and Asda had to give out a hefty £5.45 Price Guarantee voucher, for failing to be over 10% cheaper than its main supermarket rivals. Sainsbury’s was only £2.22 more expensive than Asda and Morrisons wasn’t far behind on £59.19. Waitrose came last, on £64.15. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Sainsbury, as its 48, 000 sq ft superstore in Bracknell easily top-scored, with 86 points out of 100 (the Waitrose in Mountsorrel, Loughborough came bottom of the survey, with only 54
News Flow This Week: Tomorrow brings the ABF (Primark) interims, the JD Sports finals and the Majestic Wine Capital Markets Day in the City. On Thursday we get the Debenhams interims and the ONS Retail Sales for March, with Friday bringing the Bonmarche trading update and the Steinhoff AGM.