Langton Capital – 2018-07-03 – Pub trading, midge burgers, rates, cruise ships etc.:
Pub trading, midge burgers, rates, cruise ships etc.:
A DAY IN THE LIFE:
So, after the big summer family BBQ at the weekend, we’re still picking Nerf gun bullets out of the bushes and finding half-drunk glasses of booze in various nooks and crannies throughout the house.
And, though on would have hoped the adults were responsible for the drinks’ glasses, it’s by no means certain and, given the random drinking injuries suffered by a number of the grown-ups, there were clearly Nerf gun fights going on throughout the afternoon and evening.
Anyway, after a blinding Belgium Japan match last night, it’s the first big one for England tonight and, whilst Portugal, Germany and others usually knock us out of tournaments, we can be sure they won’t be doing that this time.
No, that honour will go to someone else.
But let’s hope for the best. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Met Office can see no end to the hot and dry weather. It says ‘hot weather remains in the forecast for much of the UK. Although temperatures won’t be quite as hot as last week, they will continue to remain well above average and it will remain largely dry.’ This is good for pubs but bad for restaurants & indoor attractions. Over time, consumers both 1) run out of money and 2) return to their more normal spending habits.
• Linklaters reports the number of restaurants in financial distress grew by 143% in the last six months, with 12 CVAs being issued compared to 17 in the the whole of 2017. Linklaters real estate partner Simon Price said the rising number of CVAs has led to ‘resistance and pressure from a number of landlords this year, calling for the government to reform the system.’
• Brander Lodge Hotel & Bistro, a 21-room Scottish hotel, received legal permission to serve ‘midge’ burgers made from the biting insects.
• Tesco has said that its “strategic alliance” with French retail giant Carrefour will focus on cutting costs to the customer. Any increase in the cash left in customers’ pockets will be good news for the leisure (and other) industries.
• Harry Ramsden, the Boparan Restaurant Group backed fish and chip chain has announced it is looking for multi-site franchise developers, as the group looks to expand.
• Halewood wines & Spirits will open a £1m city centre distillery for its Liverpool Gin brand at the end of 2018.
• The British Meat Processors Association has warned that the current carbon dioxide shortage could take two weeks before it is sorted out.
• Greene King has rebranded a London pub as The Golden Boot to show its support for England striker Harry Kane at this year’s World Cup. The pub, normally known as The Golden Fleece, is located in Manor Park.
• More than 7,000 UK High Street estate agents are showing signs of financial distress as a result of fewer sales and online competition, according to a study from accountancy firm Moore Stephens. Between 2014 and 2017 the number of transactions in London dropped by 20%, while sales across the UK have fallen by 1% in the past year.
• FT points out that business rates have hurt the High Street. At least some High Streets in the south of England. It reports ‘department stores hit by 26% rates rise as online rivals benefit from tax cut.’ M&S faces a rise in Business Rates for its Covent Garden store of around £500k per year.
HOLIDAYS & LEISURE TRAVEL:
• Travelodge has launched a new format called Travelodge Plus aimed at delivering a more enhanced product. Such moves can bring higher margins but may also result in ‘facility creep’, with budget operators focusing on moving up the chain and allowing newer budget and super-budget operators to steal market share.
• Pragma reports the cruise industry as the fastest growing sector in the leisure travel market, with passenger growth of almost 60% between 2008 and 2017. The sector has annual revenues of $11.7bn with 37 new cruise ships set to be built between 2018 and 2020. Pragma claims the industry has achieved this growth by appealing to both the young and the old, as well as appealing to increasing numbers of health-conscious customers such as offering yoga classes and other activities.
• IHG completes its 51% stake acquisition in Regent Hotels & Resorts for $39m in cash, payable in three tranches of $13m. The Regent brand will be brought into the top tier of IHG’s luxury segment going forward. IHG have the right to acquire the remaining 49% by 2026.
• AccorHotels signed an agreement with 15 banks to provide a $1.2bn revolving credit facility.
• A consultation on lottery reform commissioned by the Department for Digital, Culture, Media and Sport has found that the maximum sale proceeds from a single lottery draw from £4 million to £5 million. The Gambling Commission also found that the maximum single prize limit per draw should be raised to £500,000 from £400,000; and raising the maximum permitted annual ticket sales limit from £10 million to £100 million.
• Apple reveals plans to create its own Maps app using data captured from iPhones as well as a private fleet of cars equipped with cameras.
• Macau gambling growth slows. Revenues in the Chinese enclave (which is the only area in China where casinos are legal) grew 12.5% in June, below analysts’ expectations for growth of around 18%.
• HTC will cut 1,500 jobs in Taiwan in a ‘realignment of resources’ across the organisation, allowing ‘more flexible operations management’.
FINANCE & MARKETS:
• UK manufacturing PMI fell slightly to 54.0 in June from 54.4 in May. Any reading above 50.0 implies expansion. Markit commented ‘the UK manufacturing sector ended the second quarter on a subdued footing.’
• Markit says ‘the turnaround in performance since the start the year has been remarkable, with impressive growth rates late last year turning into some of the weakest rates of expansion seen over the past two years in recent months. The slowdown in new order growth since earlier in the year has also left manufacturers increasingly reliant on backlogs of work and inventory building to maintain higher output.’
• US manufacturing picked up sharply in June.
• Sterling down at $1.3131 and €1.1287
• Oil down at $77.72
• UK 10yr gilt yield down 3bps at 1.26%
• World markets: UK & Europe down buy US higher yesterday. Far East down in Tuesday trade
• Brexit etc.:
o More than two years after the Brexit vote, PM Theresa May has asked the Treasury and Bank of England to analyse the impact of any Brexit deal struck with the EU.
o Treasury says MPs should be “properly informed” before they vote on any Brexit deal.
o Boris Johnson has called the Treasury the centre of resistance for Remain and has called it the enemy.
o Chancellor says he ‘will place the ‘maximum amount of analysis in the public domain’ on the economic and fiscal consequences of implementing the withdrawal agreement and future relationship, once it has been negotiated.’ Per Nikki Morgan
o BCC says firms are running out of patience over the lack of progress in the Brexit talks
o MPs meet at Chequers on Friday. Playing with the economic future of the country, a third best solution is now said to be on the table.
o Jacob Rees Mogg has told the Telegraph that up to 60 MPs will bring down the government if they do not get the Brexit that they want
o Foreign Office minister Alistair Burt on Twitter accuses colleagues of working for their own ideological cliques rather than for the country as a whole
START THE DAY WITH A SONG:
Yesterday’s song was I Don’t Like Mondays by The Boomtown Rats. Today, who sang:
All the kids have always known,
That the emperor wears no clothes
But they bow down to them anyway
Is better than being alone
PRIOR DAY TWEETS:
• Later tweets: BTC Hospitality (Apostrophe, Euphorium & Soho Coffee) announces loss of £6.4m in year to end-Jan. Negative net worth of £7.9m
• See earlier Langton comments for our take on how the PE and other models have led to high levels of debt, overexpansion etc.
• CDG in new £30m tied to debt for equity swap. As of last year, group had losses of £55m, negative equity of £96m & debts of £478m
• FT reports Wagamama is attracting interest from some of the largest PE houses in the US and Europe. Could be worth £750m
• Perceived winners & losers in casual dining market starkly contrasted? See Pret & Wagamama vs, well, most of the rest
• Met Office says hot, dry & sunny weather to continue for 10-14dys. Good for pubs but wallet fatigue will have already set in
• Homebase could soon join CVA bandwagon. Some 50k jobs lost on High St year to date per Press Assciation
• Tesco & Carrefour to collaborate to cut prices (and take a swipe at competitors, grind more margin from suppliers etc.?)
• Milk price at 5yr average levels but production at 5yr highs. Good for agricultural incomes, companies servicing that segment etc.
• Wet led beats food due to WWW. Wedding, Weather, World Cup. Will last a while but will we see players crowd this end of the pitch? (A = yes)
RETAIL NEWS WITH NICK BUBB:
ASOS: As expected, the non-exec Chairman of ASOS, Brian McBride, is stepping down after 6 years in the job, and the £5.1bn market cap company has announced this morning that he will be succeeded by the highly experienced Adam Crozier (of Football Association and ITV fame), who gushes in the statement that “The ASOS story is truly impressive and I am tremendously excited to become part of it”.
The Grocer Watch: We didn’t have room yesterday to flag that the widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda win again, thanks to an ultra-competitive £12 deal on the Italian aperitif Aperol (vs £15 for most of the competition). The Asda basket was £58.40, compared to £63.78 at Sainsbury, £63.05 at Morrisons and £61.35 at Tesco. Waitrose was well off the pace, as usual, on £69.21 and the magazine speculated that it may drop its Tesco price matching policy soon, to help its margin recovery target…The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Morrisons, as its 35,000 sq ft superstore in Ty Glas in Cardiff came top, albeit with only 71 points out of 100. Elsewhere in the magazine, The Grocer highlighted the odd decision by Tesco to drop its Brand Price Guarantee and quoted our
News Flow This Week: Notwithstanding the start of Wimbledon, this is traditionally one of the hottest weeks of the year in London, as it brings all the “Christmas in July” Christmas range previews. In terms of company news, tomorrow brings the Sainsbury Q1 and the Topps Tiles Q3, whilst we get the Superdry finals and the ABF (Primark) update on Thursday.