Langton Capital – 2018-07-10 – Young & Co, W Cup, supply chain, holidays, Brain etc.:
Young & Co, W Cup, supply chain, holidays, Brain etc.:
A DAY IN THE LIFE:
Busy with meetings, football & ministerial resignations today & for the rest of the week. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Young & Co updates on Q1 trading saying the year ’has started well, with managed house sales for the first thirteen weeks up 8.8% in total and up 5.2% on a like-for-like basis.’
• YNGA says ‘this performance is very pleasing given the very tough comparatives delivered this time last year.’ It says ‘we are, once more, benefiting from a long period of very warm weather.’
• YNGA says ‘the macro-economic and political environment remains challenging and the continued uncertainty surrounding Britain’s future trading relationship with Europe is unhelpful for businesses. In addition, our sector faced huge cost headwinds last year and while these pressures have continued into the current year, they have slightly moderated.’
• YNGA concludes ‘despite these challenges, we remain confident in our winning strategy of running differentiated well-invested, individual, premium pubs in excellent locations, which has a proven track record of outperforming the sector. We will continue to invest in our estate, our technology and our people and therefore, when combined with the hard work put in by our teams throughout Young’s, we remain positive about the year ahead.’
• BRC reports uptick in spending associated with World Cup & warm weather. The British Retail Consortium has cautioned, however, that even if England win the World Cup, an outcome the Bank of England’s Mark Carney has said would give an ‘unadulterated’ boost to the UK economy, the ‘reality is that sales don’t grow on the feel-good factor alone.’ The BRC says ‘with household incomes still barely growing faster than inflation, conditions for consumers and retailers remain extremely tough.’
• Discounts tick up a notch as casual dining struggles in the hot weather & versus the World Cup.
• Beefeater (Whitbread) 33% off, Frankie & Benny’s (RTN) 40% off and Bella Italia (CDG) 30% off.
• Further discounts – 25% off at Pizza Express, 40% off at Prezzo and Café Rouge, second meal for a quid (effectively two for one)
• Delivery also impacted with Pizza Hut delivery 50% off over £20 and Dimino’s 30% off over £20.
• Artisinal pizza company Franco Manca, owned by Fulham Shore, is to open a unit in Cambridge tomorrow.
• Simon Mitchell, managing director of street food business Kerb, has told Propel that the street food market is ‘sustainable in its own right’, with some operators turning over more than £1m a year. Mitchell added: ‘You can set up and be trading for less than £10,000 – far less than a restaurant. This is a far less riskier way of seeing whether your food concept works and you can do it with much less pressure over more time than if you’ve taken on a big rent or loan or sold your house. You don’t have to have a restaurant any more.’ Street food will be reportedly worth £1.2bn in 2018.
• The British Retail Consortium says demand for beer, barbeques and big-screen televisions boosted retail sales last month, with like-for-like sales up 1.1% in June, compared to 1.2% in the same month a year ago. Total sales grew 2.3% against 2% a year ago. Pub expenditure rose 9.5% in June, with spending increasing 33% on the day of England’s first match against Tunisia. The betting industry also stands to benefit from football fever, with a turnover of £1.2bn, according to bookmaker William Hill.
• The Food & Drink Federation has said that ‘our fragile and highly integrated supply chains rely on seamless trade and common regulatory standards with our closest neighbours.’ The FDF welcome last Friday’s Chequers deal. Resignations since have suggested that there is some danger that the deal will unravel.
• Cardiff-based SA Brain has reported results for the year to end-Sep 2017 to Companies House saying that revenue declined by 8.9% to £123m with EBITDA down to £9.5m from £13.2m in the prior year.
• SA Brain reports a loss before tax of £100k, down from a profit in 2016 of £3.2m. The group says ‘during the year we understood a number of significant initiatives that will contribute to the long-term development of the group’. It says ‘we encountered a number of trading and cost control challenges which proved difficult to overcome, despite our best efforts to mitigate their effect’.
• Re Coffee No1, SA Brain says ‘total sales grew by 19.4% driven by new store openings’. It says ‘the performance of the new stores was more variable’. The group adds ‘we have undertaken a significant review’ and adds ‘we have slowed our rollout programme slightly’.
• Sainsbury’s is extending its Patisserie Valerie partnership to another 31 stores following a successful trial, meaning the cake-maker will have a presence in 70 of its sites.
• McDonald’s has begun testing plastic straw alternatives in the US.
• The UK heatwave has been good news for cider producers although the current CO2 shortage has meant producers are struggling to keep up with demand. ‘Our sales are up on last year and the demand is huge so far in the first couple of days in July,’ Nic Gronow, from Gwynt Y Ddraig cider in Llantwit Fardre, told the BBC. ‘The CO2 issue means we are out of stock in a large amount of our range. We expect to get things back to normal next week, but I think it will be in small quantities until the situation is back to normal.’
• Starbucks will ban plastic straws from all of its stores by 2020, amounting to the elimination of more than one billion plastic straws each year.
• Mothercare has increased the amount of stores it aims to shut by 2019 from 50 to 60 and has confirmed it will be raising another £32.5m from shareholders in a new share issue.
HOLIDAYS & LEISURE TRAVEL:
• With England progressing through the World Cup and an ongoing UK summer heatwave, airlines and operators have been forced to slash prices for last minute departures in an effort to drive up demand.
• According to prices tracked by The Independent on Saturday, Tui was selling a week’s package from Manchester to Marmaris in Turkey for £117, departing today. Another example was Tui offering a holiday to Gran Canaria departing yesterday from Norwich available for £199. Thomas Cook was selling a week on the Greek island of Zante for £222.
• Brokers suggested ‘the consensus was that overseas holiday bookings have weakened in the last few weeks. This was put down to a combination of the weather… and the World Cup.’
• Airbnb listings in London and Brighton are now one third of the number of hotel rooms available. Some 64,000 listings are available in the capital, compared to 197,970 hotel rooms. Peter Duffy, director at Moore Stephens, said: ‘Airbnb is increasingly taking market share from hotels. Hotel groups say this because Airbnb can bypass industry regulations allowing it to undercut the formal industry.’
• Pragma Consulting has reported that tour operators ‘are expanding their offering away from traditional package holidays to appeal to a more diverse group of holidaymakers – a tactic that is already showing success.’
• Pragma suggests that solo travellers are now a growth market. Similarly single-parent family trips are on the increase. Holidaymakers are also increasingly seeking ‘health and wellness’ holidays. Pragma asks ‘will the established players be agile enough to respond to these changing needs?’
• Tourism minister Michael Ellis has sought to reassure industry fears that Brexit could see hospitality providers struggling to attract sufficient labour. Speaking earlier in London, Ellis said: ‘We are taking steps to reduce uncertainty for as many people as possible as we prepare to withdraw from the European Union at the end of March next year. Securing the rights of citizens has always been the government’s priority – and we have delivered on this commitment.’
• Clia reports the cruise industry’s contribution to the European economy up 17% since 2015 to €47.86bn in 2017. The cruise sector generated more than 43,000 new jobs across Europe over the two years, with 403,621 now employed in cruise and cruise-related businesses.
• Spending by passengers and crew at UK port cities increased by 13% as a result of a combined 21% growth in embarkations and transit visits. There were more than 34 million passenger and 6.7 million crew visits to European ports in 2017, up by 9.6% on 2015.
• Baggage handlers at Luton airport plan to strike between 3am July 20 and 1.59pm July 22 over pay from employer Menzies Aviation.
• Twitter shares fell 9% on Monday after more than 70m fake accounts were suspended in May and June, possibly leading to a decline of monthly active users in Q2.
FINANCE & MARKETS:
• Germany and China have signed a number of commercial trade deals worth around €20bn in a further commitments to global free trade
• Sterling down to $1.3234 and €1.1269
• Oil up to $78.67
• UK 10yr gilt yield unchanged at 1.27%
• World markets: All up yesterday, Far East up today.
• Brexit and politics:
o Not good background against which to make long-term investment decisions.
o Boris gone, Davis exited, Gove stranded. Fox very quiet. Cabinet dominated by Remainers enacting a policy that they didn’t believe in.
o An unsettled-looking Rees Mogg is in vituperalative supernacopia of agonaphilopianism. No moves to unseat ‘call me stab vest’ Mrs May at this point. Tim Martin says: ‘keep our fish’.
o Sterling down, trading partners open-mouthed etc. Labour staring at perhaps thinking that they don’t want it
o Brexit white paper due Thursday, two & a bit years after exit vote. PM says she will go on and on and on
o PM tells Europe to back her. She perhaps needs all the friends she can get
o Just a thought: Did Boris press the wrong button on his smart phone & resign by accident?
START THE DAY WITH A SONG:
Yesterday’s song was Whose World Is This by Nas. Today, apparently with the 90’s on our minds, who sang:
Shaved heads rave heads on the pill got too much time to kill,
get into bands and gangs
PRIOR DAY TWEETS:
• Later tweets: Holiday sickness misuse. Number of claims management companies dealing with holiday sickness claims has gone down by a third. Strange, that
• Brexit consensus lasts less than a weekend as Davis resigns. Telegraph expects ‘wave of departures’ & poss. leadership challenge
• Labour staring at an open goal & 10yrs in power as Tories implode? Who’d’a thought it? Labour capacity to fumble ball, however, is legendary
• BBC breakfast says HM Gov ‘plunged into chaos’. Tim Martin tells program Gov can’t deliver Brexit people voted for
• Boris (‘f— business’) unhappy. Davis gone. Rees Mogg in vituperalative supernacopia of agonaphilopianism. Tim Martin: ‘keep our fish’
• Fisheries, and I say this as a Hull man, is less than 0.5% of GDP. And that’s assuming we have a market to sell it into
RETAIL NEWS WITH NICK BUBB:
Tesco: The highly regarded Charles Wilson is the brains behind Booker and was widely expected to take over from CEO Dave Lewis in due course, but Tesco has announced the shock news this morning that he is seriously ill and is having to step down as MD of the core Tesco UK business. He will, however, continue to lead the Booker business and will remain a member of the Executive Committee. To replace him, Jason Tarry, currently Group Chief Product Officer, will become the CEO of the UK business and Andrew Yaxley, currently CEO Ireland, will be promoted to Group Chief Product Officer. We wish Charles a speedy recovery.
Ocado; The Charles Wilson news has rather overshadowed the interims today from mighty Ocado, but there is nothing too obvious for the shorts to pick over, although H1 EBITDA was 14% down and Ocado has warned of more investment costs to come in H2. Given all its Overseas contract wins and the recent opening of the huge new CFC in Erith, Ocado has a lot on its plate at present…However, the feisty CEO, Tim Steiner, says: “We are confident that we have the ability to scale-up the business, deliver on our commitments, drive sustainable growth and deliver value to all our stakeholders”.
Marks & Spencer: If you’re unlucky enough to be a shareholder in M&S and want to go along to the AGM today to ask the new Chairman Archie Norman or the new FD Humphrey Singer about how bad Q1 trading was, then you need to make your way to Wembley by 11am…
News Flow This Week: Tomorrow brings the Burberry Q1 and the Sainsbury AGM. On Thursday we get the Dunelm Q4, the ASOS Q3, the Burberry AGM and the Pets at Home AGM.