Langton Capital – 2018-04-19 – Ten, problems vs solutions, Accor, Remy, recycling etc.:
Ten, problems vs solutions, Accor, Remy, recycling etc.:
A DAY IN THE LIFE:
I make my fair share of mistakes but, occasionally, it’s interesting to chuck one in just to see if anybody notices.
For example, when discussing the ‘tenants of capitalism’ or getting to the ‘route of the problem’, it can be more interesting seeing who picks you up on your use of language than may be the actual discussion that follows and, when spoken, you can chuck in that for all ‘intensive purposes’ the ‘delicate essence’ doesn’t add anything that the corner shop didn’t already sell.
But, at the end of the day, who are we trying to kid? The majority of our mistakes are just that; mistakes. On to the news:
A couple more in our ad hoc series of non-rhetorical questions regarding F&B and leisure in general. Today we ask can you tell the difference between the problem and the solution and then bemoan the ‘fact’ that the answer to the above is ‘no’.
QUESTIONS, QUESTIONS (10): Why people take a long time to dump bad ideas:
• Question: Why to people rarely see what they’re doing (or who they are) as a part of the problem, not a part of the solution? Mr Sorrell has exited WPP with some survivors saying (to his departing back) that he had an ‘owners’ mentality’. In more general terms, doggedness can also be bull-headedness, being focused means being blinkered. Conclusion: If you can’t see the problem in the room then you (or the way that you are doing business) could be the problem in the room.
QUESTIONS, QUESTIONS (11): Why is nothing simple?
• Question: Can you tell if someone is focused vs blinkered ex ante or only ex post? Like that blue-black, no it’s gold-black dress, sometimes a person can be two things at once. Or a product can be retro-chic and old-fashioned, reassuringly (or crushingly) expensive etc. and, being realistic, you won’t know the difference until you’re further down the road. Conclusion: Get over it. All children have small feet but not everybody with small feet is a child. Nobody said the answer was easy.
PUB, RESTAURANT & DRINK PRODUCERS:
• Marcel Khan is leaving Five Guys having played a key role in the burger brand’s expansion to over 80 sites in the UK and its recent move into Europe, per MCA. His departure is reportedly amicable as he moves on to pursue a new business challenge. Khan was formerly a regional managing director at Nando’s for eight years, before moving to Five Guys UK as director of operations and then becoming the group’s brand development director.
• Amazon’s international ecommerce offering now boasts a global shipping feature that allows users of its app to have products shipped to their location, providing the tech giant with enhanced reach.
• Costa Coffee wants to begin a ‘cup recycling revolution’ by recycling the same volume of disposable cups as it sells by 2020. The coffee operator will encourage waste collection firms to process some 500 million coffee cups a year by paying them a supplement of £70 a tonne. Costa managing director Dominic Paul said: ‘Costa is putting its money where its mouth is to find an immediate solution to increasing the volume of takeaway coffee cups being recycled in the UK. It also dispels the myth that coffee cups can’t be recycled!’
• A Bordeaux winemaker and oenologist believes the Bordeaux of 2050 could be much fruitier, have a lower alcohol content and lack the same capacity for ageing if temperatures in the region rise by 2 to 4 degrees, as forecasted by the Intergovernmental Panel on Climate Change. Pascal Chartonnet modelled the 2050 vintage by cultivating Cabernet Sauvignon and Merlot grapes in warmer Southern climates (Languedoc-Roussillon and Tunisia).
• Steve de Polo has been announced to be joining Byron Hamburgers as Commercial and Brand Director. Mr. De Polo joins Byron from EI Group.
• Remy Cointreau SA, the French spirits company, has stated that fourth-quarter revenue slightly rose by 2.6% to 265m euros.
• Amazon revealed it passed 100m Prime subscribers, the first time the company has released numbers on the service. The service has seen more than 5bn items shipped with it world wide last year.
• The price of British-grown salads are expected to rise as a long and gruelling winter takes its toll on farmers’ yields. The harsh winter has led to failing crops, dead animals and rising production costs for many UK farmers.
• The 2018 Wine Nation report from Accolade Wines has shown that it was a good year for New Zealand wines (up 7%) and Prosecco (up 23%) but a bad year for Champagne (down 18%), in the UK. Overall the report found that purchases of beer, wine and spirits had fallen by almost 2% across the off-trade during 2017.
• Amazon has become the fifth biggest UK retail player, accounting for over £4 in every £100 spent on retail in 2017. Data from Global Data has indicated that Amazon is only trailing Tesco, Sainsbury’s, Asda and Morrisons in terms of market share.
• EAT has announced Arnaud Kaziewicz as its new executive chef as it launches a new salad and baguette range.
HOLIDAYS & LEISURE TRAVEL:
• AccorHotels has reported a 9.5% rise in Q1 driven by strong trading in Europe and Asia. The group’s Chief Financial Officer Jean-Jacques Morin stated ‘After this strong quarter, the group looks at the second quarter with confidence and optimism’.
• Eurotunnel issues positive outlook as progress is made in Brexit talks. CEO Jacques Gounon said ‘The growth on both sides of the Channel and progress made in the Brexit negotiations allow us to forecast EBITDA [earnings] of more than €735 million in 2022.’ Car traffic was up by 4% at 487,203 vehicles, helped by the Easter holiday getaway falling in March, despite ‘unfavourable weather conditions for tourism at the start of the year’.
• Safestay has announced numbers to end-Dec 2017 saying that it saw a 43% growth in total revenues to £10.5 million (including acquisitions made in 2017). The company reports adjusted EBITDA of £3.2m (2016: £2.2 million) in line with market expectations
• Safestay reports a loss before tax. This increased to £0.87m (2016: £0.47m) ‘due to increased finance costs (including leasehold properties)’
• Safestay reports ‘strong sales growth like for like occupancy (UK) +13.5% to 74% (31 December 2016: 65%)’. The group says it has a ‘well advanced capex programme with key projects in Madrid, Barcelona, and Elephant & Castle that together will add a further 330 beds to the portfolio’.
• Safestay Director Larry Lipman commenting on the results said: “Arguably this has been the most successful year for the Company to date, beginning with the refinancing of the Company which exemplified the embedded value in the business and providing the capital to support the threefold expansion of the portfolio.’ Mr Lipman says ‘we are looking forward to benefitting from a full year’s contribution from the assets that we have acquired and completing the investment projects we have underway.’
• White Hart Associates head of audit and regulation, Nicki Spoor, says that new package holiday regulations will provide greater protection to consumers but may also lead to increased prices. Spoor said ‘The Civil Aviation Authority has got consumer protection at its heart, but high on consumers’ list of priorities is the cost of holidays.’
• The European Court of Justice has ruled that passengers will be able to claim compensation when flights are suddenly delayed or cancelled due ton ‘wildcat’ strikes.
• US hotels saw occupancy up 0.9% to 68.5%, ADR up 3% to $131.56 and RevPAR up 3.9% to $90.17 for March 2018.
• Ten Entertainment, a leading UK tenpin bowling company, has announced that it has acquired two sites in Leeds and Luton, taking the group to 44 sites. The units will be bought from MFA Bowl for cash considerations of £1.3m. Nick Basing, Chairman, commented. These latest acquisitions are a further sign of the Group’s ability and opportunity to strengthen its strong national estate, in new markets with anticipated good rates of return on invested capital. We are happy with our performance so far this year’.
• Ten Entertainment also commented on Q1 trading stating LfL sales up 5.1%, beating market expectations.
• Netflix Inc is set to raise its investment in content across Europe and aims to spend $1bn on original shows this year.
FINANCE & MARKETS:
• The ONS yesterday reported that UK CPI fell to 2.5%, its lowest level for a year. This has clouded the picture re interest rate rises.
• The ONS says ‘inflation fell to its lowest rate in a year, with women’s clothing prices rising slower than usual for this time of year.’ The ONS says ‘alcohol and tobacco also helped ease inflation pressures, with tobacco duty rises linked to the Budget not appearing this March, thanks to its new autumn billing.’
• Sterling fell on the inflation news as did the UK 10yr gilt yield. See below.
• The NIESR says ‘UK January CPI inflation fell to 2.5% in March from 2.7% previously. Inflation has dropped to its lowest level in a year and by more than we expected, yet we believe that the MPC should remain on a gentle path of normalisation with a 25bp Bank Rate increase in May.’
• IMF reports that high global debt is a concern.
• Sterling down around a cent at $1.4196
• Pound down vs Euro at €1.1468
• Oil up nearly two bucks at $73.94
• UK 10yr gilt yield down 2bps at 1.41%
• World markets: UK up on weak Sterling. Europe higher with US also up and Asia up in Thursday trade
o The Lords yesterday defeated the government and voted that a way should be found to keep the UK in the EU customs union. This could be overturned when it returns to the Commons
o Brexit minister Steve Baker had earlier told the Lords not to ‘frustrate the [Brexit] process’. It would appear that nobody likes to be told how to do their jobs
o Bloomberg reports that ‘there is probably also a majority in the lower house for staying in the customs union’
o Problematically, this would also mean paying into the EU budget, allowing the free movement of people and it would prevent the UK from making its own trade deals
o Canada PM Justin Trudeau has said that he wants a ‘seamless’ deal struck with the UK
o IMF reports that the UK is falling further behind the world’s leading economies in terms of economic growth
PRIOR DAY LATER TWEETS:
• Later tweets: Why are casual diners shorter-lived than fast food joints? Think Pizza Land, Golden Egg or whatever vs KFC, McDonald’s…
• CGA & Alix Partners see fall in number of licensed outlets. Drink outlets down, but food still up – and therein lies the problem…?
• Contactless payment. Visa & Barclaycard pointing to 7% or 8% growth in pub & restaurant spending but it’s all due to contactless
• IMF says 2018 will be strongest year for global growth since 2011 at +3.9% but cuts UK growth estimate from 1.6% to 1.5%.
• Coffee futures down 30% over 6mths and down 12% this year. Milk price also lower. What odds cheaper coffee on the High Street?
• Discounters. Searching for a Sat Nav online. Same model, Aldi £79.99, Curry’s £129.99. And they ask why discounters are expanding..!
• Hammerson dumps Intu saying High Street property market has deteriorated since start of year. In hole, stop digging sort of analysis?
START THE DAY WITH A SONG:
Yesterday’s song was Come Together by the Beatles. Today who sang:
Is there anybody in there?
Just nod if you can hear me
Is there anyone at home?
Come on now
RETAIL NEWS WITH NICK BUBB:
Debenhams: The much-awaited Debenhams interims today (for the 26 weeks to March 3rd) are predictably poor and you can see why the weekend press was softened up with the news about the impact of the snow disruption at the very end of the period (not that Debenhams bothered to relay this at the time, via a pre-close update). It is also predictable that all this is dressed up with more guff from the new CEO Sergio Bucher about the success and acceleration of the “Debenhams Redesigned” strategy, but it is interesting that the CFO Matt Smith doesn’t want to hang about to see the results of this and is off to take the much easier job of being FD of Selfridges. As for the figures, underlying PBT halved to £42m, as result of weak sales and poor gross margins, the interim dividend is also halved, net debt has climbed to nearly £250m and exceptional costs are rising sharply. There is no
Share Price Watch: We said yesterday that it would be interesting to see what would happen to the Intu share price after Hammerson said that it wanted to walk away from its recommended offer and to see if the surprisingly good Q1 news would reverse a big chunk of the massive slump in the share price that Dignity has suffered. Well, the Intu share price was only c4% down at c200p (having touched 194p early on), implying that the likely failure of the bid had been broadly priced in. And the Dignity share price was only c11% up (having been nearly 20% up early on), implying that the market is still sceptical about its new business model.
Planet ONS Watch: Coincidentally, the prestigious KPMG-Ipsos Retail Think-Tank invited some good folk from the embattled ONS (the Office of National Statistics) to attend its quarterly meeting on Tuesday afternoon, to address our concerns about the accuracy of their monthly Retail Sales figures. It would be unfair to report everything that was said, particularly about the vexatious figures for Small Retailers, but it is clear that speed is more important than accuracy to the ONS and that as long as the 85% retailer response rate threshold is met by mid-month the ONS will take what they have at that stage as the gospel truth. As it happens, today brings the ONS Retail Sales for March. March was the 5 weeks to March 31st and the impact of all the snow disruption on Non-Food was more than offset by the impact of the earlier Easter on Food spending, judging by the BRC-KPMG Retail Sales