PPHE, Paddy Power, YUM, Carlsberg, holiday spend etc.:

A DAY IN THE LIFE:

There are a whole lot of 21st Century problems out there. Failed internet deliveries, bad reception areas and the like but, for today, we’ll talk about:

Call Centres:

We spent 1 hour & 6 minutes on the phone the other day, ironically, with our phone provider.

This because they had blocked our access to a whole range of websites (BBC, most newspapers, social media etc.) in an attempt to irritate us into paying our bill.

And I suppose it worked but, to put the dispute(s) in context, we must move back in time a little.

Some three years ago, the company sent us a dongle to act as an emergency backup in case of internet failure.

But they sent this to an address that we had vacated two years earlier (and which had been demolished, where the co no longer provided us with a service etc.). it was ‘signed for’ (presumably by a builder or a homeless person) but then thrown in a skip as it had no usage on it for the next 36mths.

We then, admittedly belatedly, noticed that we had been paying £15 per month for this thing and asked for our money back.

Even in London we could have a good night out on five hundred quid plus vat and a reluctant compromise was agreed but the rebate was never credited to our account. We then (earlier this year) moved office again, generating another credit for unused line rental etc. such that we were materially in credit with the phone company, which we will call BT to protect the innocent.

We said we would pay the bills by direct debit, but this wasn’t set up because the DD forms sent related to the old account, the old address etc. and we therefore ‘didn’t pay our bill’ and got partially cut off.

And there’s more but, as it took nearly the full hour and six minutes to explain it all to a charming lady on the other side of the world somewhere, we’d better leave it there. On to the news:

PUB, RESTAURANT & DRINK PRODUCERS:

• Research from Deloitte shows that consumers cut their spending in pubs and bars by 3% and eating out by 2% year-on-year in Q1 2018 as part of a wider reduction in leisure spending. Consumers chose to prioritise spending on essentials during the period, with a decline in leisure spending in seven out of 11 categories compared to Q1 2017. Of those who spent less on going out, 45% said they they did so because they could not afford it.

• Divergence and evolution. Marston’s has continued to develop its Marston’s Telecoms business, which now has three UK datacentres and a turnover of almost £8 million, up from £500,000 in 2008.

• Marston’s Telecoms offers a range of services, including broadband/Ethernet, managed WANs, carrier services, hosted voice and managed WiFi, with customers not limited to its own outlets. Marston’s sells services to other pub and bar businesses such as Heineken and Punch Taverns, as well as the wider business community through a network of resellers.

• Technology Reseller magazine reports ‘Marston’s Telecoms currently has about 40 resellers and aims to increase that number to 300 as part of a strategy to double its turnover over the next few years.’

• YUM China has reported falling sales at its pizza business in Q1. The group’s shares fell by 9.3% in after-hours’ trading. The company reports ‘during the quarter, while Pizza Hut had some challenges with same-store sales growth and restaurant margin, we remain committed to our revitalization plan and key focus areas to drive sales growth. We believe our focus on food innovation and customer experience, together with the execution of strategic priorities in digital and delivery, has enabled us, and will continue to enable us, to build a stronger Yum China.’

• Carlsberg yesterday reported Q1 numbers saying that sales were 5% behind the previous year due to negative currency movements and a fall in volumes in Russia. Carlsberg comments ‘our volumes grew in all markets except for Russia.’ It says ‘the volume decline in Russia was impacted by the overall market decline of around 4-5% and tough comparables for the first quarter of 2017, as our market share decline accelerated during the year because of increased promotional pressure in the PET segment.’

• The Bank of England has reported a slowdown in unsecured lending ahead of what may be an increase in interest rates next week.

• Unsecured lending rose by an annualised 8.6% in March after having risen by 9.4% in the year to February. Both numbers are materially ahead of inflation at around 2.5%. Whilst hardly weak, the data could weigh on the interest rate decision next Thursday. The Bank could hold off for the moment.

• PizzaExpress managed a resilient 0.4% increase in like-for-like sales in the UK in 2017 in what it described as a ‘challenging market backdrop’. Overall like-for-like sales grew 1.4% in the 52 weeks to 31 December, with group turnover up to £543.2m, although EBITDA fell 8.9% to £94.6m as the group resorted to discounting.

• Jinlong Wang, chairman and chief executive of PizzaExpress, said: ’Despite considerable recent negative sentiment surrounding the restaurant industry in the UK, it is my belief that the growth fundamentals of the sector remain sound. With consumers increasingly seeking to spend their money on experiences and an ever-growing popular interest in food, the casual dining market is well placed to continue to benefit from these trends in the long term, although we remain cautious about prospects in the nearer term.’

• KERB have become the first street food company to supply London heritage venues such as Somerset House, Natural History Museum and Chiswick House.  

• Wine GB had its first annual tasting in London last week, showcasing the development of English and Welsh wines. Wine GB highlighted wine tourism, the building of its global brand, vocational training for the rural economy and government support as key areas with which to support the industry’s growth.

• RBS plans to close 162 high street branches across England and Wales, cutting 792 jobs in the process.

• The East London Liquor Company has raised £651k of its intended £750k on Crowdcube with some 28dys left in its campaign. ELLC says it is ‘the first gin, vodka and whisky distillery in east London in over 100 years.’ It has 1,000 accounts and had sales of £1.9m last year.

• The Cotswolds Distillery has raised £1.2m of an intended £2m on Crowdcube. The company is coming off a £30m valuation despite having sales of only £3.4m last year. The company says it ‘is one of the most highly rated artisanal distillers of gin and whisky in the world.’ Its products are .sold in Harrods, Majestic Wine, local Waitrose and other top UK outlets, and in 28 countries.’ The company says that ‘average sales growth has exceeded 100% pa.’

• Shake Shack has confirmed its first site in the City of London, at 45 Cannon Street.

• Alteri, Endless and Hilco are looking into potential deals to acquire Homebase after Perth-based Wesfarmers acknowledged it is looking to offload the struggling retailer.

• Restaurant delivery platform and potential rival to Just Eat, EasyFood, is aiming to recruit 1,000 partners in Birmingham by Christmas, before expanding into other cities. It aims to be in London towards the end of 2019.

• The Experience of the Future programme enacted by McDonald’s UK has seen the company refurbish 80% of its 1,270 restaurants leading to global comparable sales rising 5.5%.

• Mondelez, which owns Cadbury, beat Q1 estimates with sales of $6.77bn in Q1. The group says that it has cut costs and boosted margins. Some observers believe it has done this to head off shareholder activism or a straight bid approach. The group’s shares rose 1.8 per cent in after-hours trading.

HOLIDAYS & LEISURE TRAVEL:

• PPHE has reported Q1 numbers saying total revenue rose by 2.9% to £59.4m. The group says average room rate decreased by 2.8% with occupancy up 240bps. CEO Boris Ivesha says ‘we are pleased to report a solid performance during the first quarter, especially considering the strong prior year performance when we reported double digit revenue growth.’ PPHE says ‘trading since 31 March 2018 is in line with the Board’s expectations.’

• The latest Deloitte leisure consumer report claims holiday spend will be ‘significantly below’ the level seen last year for the current quarter. The report also said ‘Consumers also plan to reduce their spending on all habitual leisure activities, with the exception of playing sports and attending live sports events.’

• Package holiday prices in May are set to be as low as they were more than 20 years ago with a trip to the Costa Dorada falling by 22% yoy to £277 per person and holidays to the Neapolitan Riviera down 7.5% to £410pp. Tenerife heads holiday searches followed by Majorca and Crete. 

• HotStats reports a 5.6% drop in yoy profit per room in the UK this March due to unseasonal snow storms and it being the wettest March in a decade. Occupancy fell 0.6% to 75.2%, ADR dropped 0.3% to £109.91 and RevPAR fell 1.1% to £82.61. Utility costs soared by 11.5% year-on-year in March, to almost 4% of total revenue. 

• Lyft accounted for 19% of the US business travel ride-hailing market in Q1, up from 10% a year ago according to the latest Spendsmart report. Ride-hailing continues to dominate the business travel market, accounting for 70.5% of ground transport receipts. 

• Brighton council has decided not to renew Uber’s license in the city, saying the taxi app is not ‘fit and proper’. 

• IKEA is considering opening a hotel in the US and is currently looking at a site in New Haven, Connecticut. The company already has one hotel in Älmhult, Sweden. 

• Data from the Association of Serviced Apartment Providers and the STR has indicated that occupancy has fallen 1.5% year on year to 74.9%, whereas ADR has risen 3.5% to £133.87. RevPAR has climbed 1.9% to £100.31.

• Fred Olsen Cruises Lines has announced that it will target over 55s, following analysis which finds they are ‘healthier, wealthier and fitter than ever before’.

• Marriott Vacations Worldwide is det to acquire ILG for c$4.7bn, as the group looks to expand its presence in vacation clubs in Mexico and the Caribbean.

OTHER LEISURE:

• Paddy Power Betfair has reported Q1 numbers saying revenues were down 2% at £408m with underlying EBITDA down 8% at £102m. CEO Peter Jackson comments ‘we have made good progress against our strategic priorities.’ He says ‘we are today announcing that we intend to return £500m of cash to shareholders, representing a step towards a more efficient capital structure, whilst retaining substantial strategic flexibility.’

• The Hippodrome Casino Ltd has lodged accounts for the year to end-Dec 2017 with Companies’ House. The group generated revenues of £77.8m on the year (2016: £70.9m) and made an EBITDA of £8.9m (2016: £8.1m) before exceptional items.

• The Hippodrome reports it ‘increased both revenues and operating profit continuing its steady and consistent growth since opening in July 2012.’ The group says ‘live gaming, electronic and slots, cabaret, restaurant and bars all grew in popularity producing an overall increase in revenues of 9.7% across the year.’

• Hippodrome says its ‘business continues to develop and improved data base marketing systems together with sustained investment in resources and building infra structure are the primary drivers for future income and EBITDA growth.’ It says ‘the on-going success of The Hippodrome has been recognised by the global casino industry, with the business winning both UK casino of the year and International Casino of the year both awarded in early 2018.’

• The Hippodrome generated an operating profit of £5.5m (2016: £3.8m) and now has accumulated profits after tax of £2.3m since opening.

• Shares in Snap fell 17% after the company revealed the app was now less attractive to prospective users following its controversial redesign. Q1 saw four million new users, just over half the number forecast. Revenue was $230.7m for Q1, below analyst expectations.

• The UK Government will rule on Fox’s bid for Sky on 13 June.

• Apple has reported good Q1 numbers and a plan to buy back $100bn of stock on the back of solid iPhone sales.

• Facebook plans to launch an online dating service.

• Gibson guitars has filed for bankruptcy protection with $500m of debt.

• Vivendi has said that it is considering the future capital needs of its Universal Music Group subsidiary

• The largest climbing wall centre in the North is set to open in Leeds. The Clip ‘n Climb has cost around £1m to build and is to open on the 26th May.

• Gala Tent has seen a 30% rise in orders for garden marquees in the last month, which it has attributed to members of the public preparing events to mark the upcoming royal wedding.

FINANCE & MARKETS:

• UK manufacturing growth slipped to a 17mth low in April per the Markit/CIPS UK Manufacturing purchasing managers’ index. This makes an interest rate rise next week that bit less certain.

• UK manufacturing PMI fell to 53.9 in March down from the 54.9 recorded in March. Observers had been looking for a broadly unchanged number. Any reading above 50 indicates growth. Markit said ‘the start of the second quarter saw the UK manufacturing sector lose further steam.’ Markit continued ‘while adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance, making the chances of a near-term hike in interest rates by the Bank of England look increasingly remote.’

• Markit suggests that sluggish manufacturing growth indicates the 0.1% rate of GDP growth (per quarter) may be continuing.

• US average income rose by 0.3% in March

• US factory activity slowed for a second consecutive month in April as manufacturers complained about rising commodity prices following President Trump’s tariffs on steel and aluminium imports.

• Sterling down again on the back of weaker manufacturing numbers. Currently trading at $1.3612 and €1.1339

• Oil off a dollar and a half at $73.17

• UK 10yr gilt yield unchanged at 1.41%

• World markets: UK, Europe & US higher but Far East down in Wednesday trade.

• Brexit:

o UK government could rely on ‘trusted traders’ to self-police a non-existent Ulster / Republic of Ireland border.

o German magazine ‘Manager’ has suggested that Brexit is a major own goal for the UK economy.

o Jacob Rees Mogg has said this is not true. He says that President Trump will be the UK’s greatest friend after Brexit.

o Manager Magazine says the UK has a ‘long list of wishful notions’ and no real plan. It says ‘Britain’s diplomats are still brilliant’ but maintains that they have such a poor hand and disjointed political leaders that they are not making much progress.

o Boris Johnson and David Davis are labelled ‘demagogues and populist deniers of reality.’ The politicians say that they are not.

o Britain slipped from third to fifth in the list of German export partners over the last 12mths.

o Liam Fox has said the House of Lords is trying to “thwart the will of the British people” by putting hurdles in the way of the version of Brexit that he favours

o Liam Fox has said that the UK will not remain in the Customs Union post Brexit.

o Liam Fox has said that there have not yet been any trade discussions with the US regarding our post-Brexit relationship

o The Times reports that ‘the billionaire behind a pro-Brexit think tank was accused in the House of Commons yesterday of being a suspected Russian agent with links to money-laundering.’

PRIOR DAY LATER TWEETS:

• Later tweets: Scotland has introduced a minimum unit pricing for alcohol of 50p from today. Businesses in Carlisle & Berwick putting on more staff?

• CGA Prestige says foodservice prices rose by 1.8% in the year to March. A shade below wage growth, more left over for beer?

• Could Sainsbury / ASDA really cut prices by 10%? Even a fraction of this would help the consumer, more so if others follow suit

• Jacob Rees Mogg says Pres. Trump is post-Brexit Britain’s biggest friends. Sadly, they say you should be judged by the friends you keep

• Carpetright says it sees ‘continued weakness in consumer confidence’. GDP in doldrums, wages still not > inflation

• Milk price continues to slide. Coffee too. When should we expect to see the price of High St lattes come down. Some time never. That’s when

• UK manufacturing PMI slips to 53.9 (from 54.8 in March). Lowest in 17mths. Still growing but 10 May rate hike must be in doubt

START THE DAY WITH A SONG:

Yesterday’s song was All Along The Watch Tower by Jimi Hendrix. Today, who sang:

I ask him very nicely if he’d like a cup of tea,

I can’t even see him cos the room is so smoky,

Don’t understand how one can watch so much TV

RETAIL NEWS WITH NICK BUBB:

Ocado: The Online grocery technology group Ocado was being pushed by the broker Peel Hunt yesterday, on the view that it would get more Overseas licensing deals. And, lo and behold, Ocdo has today announced a partnership with the leading Swedish supermarket chain ICA, to build a CFC in the Stockholm area. Ocado expects the deal to create significant long term value to the business and is holding a conference call for analyst at 8am.

Howden: Given the gloomy noises from Homebase and Wickes about the snow disruption in March, today’s Q1 trading update from the kitchen joinery business Howden might have been expected to be a bit subdued, but, no, there is no mention of the weather and Howden have to work quite hard to play down how good things have been! The 16 weeks to April 21st saw LFL store sales up by 13.3%, helped by weak comps, but there was a calendar timing benefit as well, so the underlying trend (over the last 14 weeks of the period) was up 8.6%. Even so, that is good going, with little help from price increases, so Howden must be doing something right, despite tougher comps ahead.

Pendragon: Today’s lengthy AGM trading update from Pendragon, which now calls itself the UK’s leading Online automotive dealer, insists that trading has been “in line with expectations”, but, extraordinarily, the fact that profits collapsed from £32.4m to £15.0m is buried in a tint footnote at the end!

Grocery Market Share Watch: The latest monthly Kantar and Nielsen grocery market share figures covered the 4 weeks and the 12 weeks to April 21st/22nd, so the last reporting period was heavily distorted by the shift of Easter and the shift in the weather. Nielsen eschewed any detailed commentary on the Sainsbury’s/Asda merger plan in their overview (although they said that their combined market share was c29%, versus c27% for Tesco) and stuck to the weather, flagging that “Unpredictable weather halts grocery sales momentum”, as total Grocery sales rose by only 1.2% year-on-year in the last 4 weeks – the lowest rise since January 2017. Kantar, however, stuck to their view that Sainsbury’s/Asda combined market share is over 31% and went on to say that “The two supermarkets appeal to different customer bases. Asda achieves nearly two-thirds of its sales outside London and the South-East of
England in contrast to Sainsbury’s, which registers 59% of its sales in those two areas. Sainsbury’s also appeals to more affluent shoppers (ABC1): this demographic accounted for 62% of all sales at Sainsbury’s in comparison to 46% of sales at Asda. Meanwhile, Sainsbury’s premium own-label line ‘Taste the Difference’ clocked up sales of £832m annually – nearly two and a half times the size of Asda’s ‘Extra Special’ range “. Kantar also flagged that Grocery price inflation slipped to +2.1% over the last 12 weeks.

John Lewis Watch: After the early Easter impact, another calendar distortion worked against John Lewis last week, as the May Day Bank Holiday fell a week earlier last year, so yesterday’s subdued weekly sales update from JLP (for w/e April 28th) shouldn’t be necessarily be taken too badly. Gross sales were 0.3% down (c1.5% down on a LFL basis, on our calculations). Fashion sales were up by 2.0% gross, but Home sales were down by 1.6% gross and Electricals were down by 1.9% gross. Over the last 13 weeks, of Q1, John Lewis was up cumulatively by only 1.5% gross (c0.5% up LFL).

Waitrose Watch: Over at Waitrose, momentum appeared to falter again last week, as the weather turned more mixed. Gross sales were up by 0.8% in w/e April 28th and the cumulative outcome for the last 13 weeks was +1.2% gross, which is also c0.5% up LFL.