Langton Capital – 2018-09-10 – Gig economy, Deltic, Gaucho, US outlets, Hoseasons etc.:
Gig economy, Deltic, Gaucho, US outlets, Hoseasons etc.:
A DAY IN THE LIFE:
I know it’s autumn in all but name but all the geese in the North of England seem to be circling over our house and honking to each other.
They’re likely having one last, lengthy look around before they seek out the railway lines and follow them south and, truth be known, with the mist hanging over the grass and the smell of fallen fruit in the air, there’s something to be said for that.
Indeed, chunks of Langton will be at York railway station to head south shortly and, though we’re not really attempting to follow the wildlife to somewhere warmer, we could be leaving behind the single-digit temperatures, for a while at least.
Anyway, there’s plenty going on this week so, before we get fatally distracted looking out of the window, on to the news:
60 SECONDS ON THE GIG ECONOMY: SELF-EMPLOYED OR EXPLOITED WORKERS?
How did we get here?
• Extortionate taxi prices & consumer desire for food at your doorstep.
• Tech companies & the rise of apps on smartphones paved the way for disruptors such as Uber and Deliveroo. The companies are referred to as ‘New world tech’ .
• Virtually no barriers to entry for workers means anyone can work for these companies at the drop of a hat
Where are we now?
• Court battles are being won to give workers’ rights to those in the gig economy
• There is a negative reaction to delivery drivers/unlicensed cab drivers. Some councils are acting out against them. The public dislikes the congestion, pollution & noise all these extra drivers are causing – not to mention the personal info they are privy to
• Disruptors are being told to vet their workers more thoroughly before hiring them due to security concerns
• The stability of the new world tech companies is often called into question, with many running on low margins and burning through VC money
What does the future hold?
• The gig economy faces increased regulation in the near future, worker’s rights and security being the foremost issues
• As more industries get disrupted via apps it is likely the gig economy workforce will increase in size over the coming years
• Rapid advances in driverless cars could have knock on effects to the gig economy workers
PUBS & RESTAURANTS:
• Revolution Bars Group has confirmed that it is in the preliminary stages of considering an acquisition of The Deltic Group. Revolution reports ‘it is only in very preliminary dialogue with Deltic regarding such a potential transaction’. Revolution shares rose more than 10% ahead of the announcement.
• Deltic attempted to buy (or at least merge with) Revolution during Stonegate’s agreed (but subsequently failed) bid for the latter last year. Revolution Friday cautioned ‘there can be no certainty as to the terms, timing or structure of any such transaction, nor as to whether any such transaction will occur at all.’
• Statement of affairs from the administrators of Gaucho Grill show the company has a deficit to creditors of £65m. Assets, after the cost of liquidating them, of just £745k. Just how the company persuaded itself that it was fit to continue trading is unclear.
• US restaurant data has continued to recover in August with LfL sales up 1.8%, according to data from TDn2K. Texas was hit by Hurricane Harvey in August last year making the industry’s comps relatively soft. Victor Fernandez, vice president of insights and knowledge for TDn2K ‘At the end of July there was concern that restaurant sales might be slowing and the much-awaited recovery might be coming to an end. Nonetheless, sales in the first three weeks of August, which were pre-hurricane, were up 1.5 percent. Had this been the final result for the month, it would still have been the best performance since September of 2015 and it represented a 0.9 percentage point improvement over July’s same-store sales’.
• Coca-Cola is believed to be preparing a multibillion-pound bid for GlaxoSmithKline’s Horlicks, the group’s famous Indian drinks brand.
• Lakes Whisky Distillery is considering listing its shares on the London Stock Exchange and has appointed N+1 Singer as its nominated advisor and broker. Lakes revealed that from 2019, £2m worth of stock will be laid down annually with revenue having grown year-on-year, from £2.5m in 2015 to £4.3m achieved in 2017.
• Nigel Mills, CEO of The Lakes Distillery, commented: ‘We believe we are well positioned for growth, with multiple revenue streams, and an appreciating asset in the form of our whisky stock, developed using our multi-oak, multi-sherry led production process. We are exploring an IPO as a flexible source of capital to allow us to increase our production significantly, whilst remaining independent and focused on quality, as well as investing in our whisky stock, our sales and marketing capabilities and our distribution channels.’
• Morar HPI has suggested that the proportion of people ordering food for delivery in the UK rose from 31% to 36% over the last 6mths. Ordering is driven by availability and by lifestyle changes.
• Morar reports younger consumers have seen the largest increase in ordering in. The polling organisation writes ‘customers still want the restaurant experience to socialise and celebrate, which is why eating out remains broadly stable. But when people spend the night at home, whether they are back late from work or are choosing a night in with a boxset, delivery means more opportunities for our restaurant partners.’
• Morar suggests restaurants could benefit from online delivery saying that 76% of respondents say they are more likely to dine in a restaurant that they have already had food delivered from.
• UKHospitality chief Kate Nicholls has warned that mandatory calorie labelling would stifle investment and create more red tape for businesses.
• Camden Town Brewery will replace India Hells with its new Show Off Lager, which will offer ‘stone fruit and citrus flavours’.
• Drinkaware is partnering with Public Health England to launch a new campaign aimed at helping middle-aged drinkers reduce the amount of alcohol they are drinking regularly. The campaign is called Drink Free Days.
• UKHospitality has announced the appointment of Jackie Marlow as its new chief operating officer.
• Waterstones acquires Foyles, a 115yo family-owned bookshop chain, in an effort to ‘champion’ real bookshops over online competition such as Amazon.
• Debenhams has hired a team of high end company doctors to design emergency turnaround plans as a full-blown crisis threatens to engulf the troubled department store chain, the Telegraph has reported.
HOLIDAYS & LEISURE TRAVEL
• Staycations & warm weather at home good for some. Hoseasons reports the prolonged summer heatwave led to an ‘unprecedented’ rise in demand for late breaks, up 7% yoy, with demand for cottages up 28%, luxury lodges up 13% and active holidays up 10%. The self-catering operator raised peak season capacity by 10% as web traffic surged 13% in terms of both sessions and users. Cornwall, Devon and Yorkshire attracted the greatest number of holidaymakers, with 12%, 11% and 8% of the company’s total bookings respectively.
• Worldwide airline passenger numbers have increased to over four billion for the first time last year. The Asia Pacific region flew the largest number of people at around 1.5bn, equating to about 36.3% of the market.
• Data from STR has shown that the US hotel industry saw occupancy rise 1.6% to 67% during the week ending 1 September, with ADR up 3% to $125.16 and RevPAR increasing 4.6% to $83.88.
• EU regulators have approved Apple’s c$400m acquisition of music identifying app Shazam.
• Tesla shares have tumbled following the resignation of two top executives. The resignations came hours after the firm’s CEO, Elon Musk, smoked marijuana live on a webcast with comedian Joe Rogan.
FINANCE & ECONOMICS:
• Bank of England survey on inflationary expectations sees respondents estimate ‘real’ current rate of inflation is 3.1% with 2.9% to come in the following 12mths.
• Bank of England survey says ‘by a margin of 51% to 7%, survey respondents believed that the economy would end up weaker rather than stronger if prices started to rise faster.’
• Halifax says house price inflation 3.7% in the last 12mths with a 0.1% rise in August. Observers had been looking for a small decline.
• Consumer borrowing grew by 8.5% in the year to July, down from 8.8% in June. The growth is the slowest since November 2015 but is still around 4x the rate of inflation (or the rate of wage growth).
• Annual wage growth in the US hit a 9yr high last month. Wages are up 2.9% on the same position a year ago.
• Sterling down vs dollar at $1.2912 but up vs Euro at €1.1184
• Oil up at $77.26
• UK 10yr gilt yield up 4bps at 1.46%
• World markets: UK down on Friday with Europe higher. US down and Far East lower in Monday trade
• Brexit etc.:
o Boris suicide bomber jibe leads to angry backlash.
o TUC calls on Labour to consider supporting a second referendum.
o TUC says it will call for a People’s Vote if the deal Mrs May manages to agree (if there is one) cannot be shown to protect jobs
o Poll of Unite, Unison & GMB members shows 2:1 in favour of a vote on any final Brexit deal. TUC says ‘crashing out’ of the EU ‘would be an absolute disaster for the people we represent. If we don’t get a deal that working people need, the TUC will be throwing its full weight behind a campaign for a popular vote so that people have a say.’
o Philip Hammond has said he is ‘sure’ the UK will reach a deal of some description
o European Research Group says 80 Tory MPs will vote against the Brexit deal unless it improves in Britain’s favour during negotiations
o Berkeley Group has said that says Brexit uncertainty amongst other factors holding back the UK housing market
PRIOR DAYS LATER TWEETS:
• Later tweets: Greene King 18wk update reassures, shares +13% at one stage, now settling back. EI Group also relatively upbeat
• Good summer & W Cup help wet-led end of the market. Good news. But will make comps tough next summer
• Halifax says house prices +0.1% m-o-m to take yearly move to +3.7%. Number ahead of expectations (and inflation).
• Chance of rate rise in US this month said to be ‘close to 100%’. That seems a tad definitive?!
• BDO High St Sales Tracker confirms view that shift to autumnal weather (6 degrees in York this morning) has boosted clothing sales
• GNK points to costs & margin as areas needing work. Pulling the levers that it can, though. Shares up on statement
START THE DAY WITH A SONG:
Last Friday’s song was Neat Neat Neat, by The Damned. Today who sang:
It’s far beyond a star,
It’s near beyond the moon
I know beyond a doubt
My heart will lead me there soon
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): There was a surprising amount of coverage in the Saturday papers of the news that Waterstone’s has bought its small rival, the seven-strong Foyles bookshop chain, and the Guardian in particular went to town on the story, with a photo of the historic Foyles Charing Cross Road store. The view of Waterstones MD James Daunt that the combined business will “champion the pleasures of real bookshops in the face of Amazon’s siren call” was widely quoted, although the City editorials in the Times and Daily Mail both noted that Waterstones is owned by the notorious hedge fund manager Paul Singer, of Elliott Associates, and that he is an unlikely saviour of bookshops.
• Saturday Press and News (2): In other news, the main Business story in the Times was an exclusive that the CEO of Tesco, Dave Lewis, that Retail is being “bled dry” by disproportionately high Business Rates and that if the Government decides not to reform the system “it will be a deliberate decision not to support the retail industry”. The Times also flagged up the management reshuffle at B&Q/Kingfisher (with B&Q boss Christian Mazauric moved to take over from Marc Tenart at Castorama in France and Screwfix boss Graham Bell promoted to run B&Q). The Director Dealing column in the FT Money section noted the £50m Ocado share sale by CEO Tim Steiner and linked it with the accounting policy row at its French partner Casino. And the veteran City commentator Neil Collins thundered in his FT column about the perils of buying IPO’s, highlighting the disaster at Footasylum, “a small
• Sunday Press and News (1): After weeks of focus on the problems of House of Fraser, it was the turn of the beleaguered Debenhams to fall under the spotlight in the Sunday papers, with the Sunday Telegraph flagging that Debenhams has called in the restructuring specialists at KPMG to weigh up a potential CVA and other emergency rescue plans and the Sunday Times highlighting that the leading credit insurer Euler Hermes has tightened terms for Debenhams suppliers. The Sunday Times also noted that a small House of Fraser supplier, the Tea Terrace chain, has joined Mike Ashley in calling for an Insolvency Service investigation into the behaviour of the former directors of House of Fraser. And, ahead of Thursday’s JLP interim results, the Mail on Sunday highlighted that price matching House of Fraser and Debenhams Sale promotions could cost John Lewis up to £50m in profits this year,
• Sunday Press and News (2): In other news, the lead Business story in the Observer was that Mike Ashley will not be attending the Sports Direct AGM on Wednesday to listen to investor complaints about poor corporate governance (“The investors aren’t happy. But Ashley doesn’t have to care”). The main Business story in the Sunday Telegraph was that High Street retailers and landlords have called on planning laws should be torn up so that abandoned shops can be more easily turned into cafes and gyms etc, whilst the Mail on Sunday highlighted the pressure from growing Online sales and quoted one company Chairman as saying that this Christmas period will be “the toughest many of us can remember”. The Midas investment column in the Mail on Sunday looked at Joules and said the recent fall has been overdone and the Questor investment column in the Sunday Telegraph looked at Marks & Spencer
ABF (Primark): Today’s pre-close update from the conglomerate ABF (for the 52 weeks to Sept 15th) for its key business, Primark, is slightly more subdued than the last update in early July, with overall LFL sales 2% down, but ABF call out the outperformance of the core UK operation: “Primark has performed well in the UK, where full year sales are expected to be 6% ahead of last year, and our share of the clothing market has increased significantly”. UK LFL sales growth for the full year is expected to be 1.5%, but that was driven by a strong first half and the second half was flat (albeit against strong comps). Primark was held back by sales in “Northern Europe”, but the operating profit margin recovered well in the second half and for the full year will be c11% compared to 10.4% in the previous year (and Primark expect to hold the margin in the new-year).
News Flow This Week: Tomorrow brings the JD Sports interims and the Superdry AGM. The Dunelm finals are on Wednesday, but they will be overshadowed by the high profile Sports Direct AGM that day…Then on Thursday we get the Morrisons interims and the much-awaited John Lewis Partnership interims.