WTB meeting, CAKE, McDonald’s, plastic & other:

A DAY IN THE LIFE:

No excuses today but nothing to say, either. Must try harder tomorrow. On to the news:

WHITBREAD H1 ANALYSTS’ MEETING…

General re the figures etc.

• Following its results announcement yesterday, Whitbread hosted a meeting for analysts.

• Premier Inn is now the main businesses. Inclusive of the group’s restaurants, it is the only business.

• Some 30% of PI’s pipeline is now in Germany. Profitability in Germany will be slower to build but early signs are good & PI’s Frankfurt hotel is up to industry numbers in terms of occupancy etc.

• PI is seeing ‘weaker consumer demand’. That said, business held up better and Q2 was better than Q1.

• The opposite (impacted by the weather & the World Cup) was true for restaurants. The group remains committed to restaurants as a business stream. Covers were OK but spend per head was down as a result of vouchering.

• The group is ‘cautious on UK demand’ and will be focussing more attention on Germany. EasyHotel has also said recently that it will focus more on Continental Europe.

• Re PI, Hub is now 3yrs old and is trading well. The first Zip hotel (rooms from as little as £19) will open in Cardiff in February. The rooms, inclusive of a shower cubicle, measure only around 85’.

• London performed better than the regions when adjusted for new capacity. Particularly in Q2. London LfLs (which are impacted by more capacity being put on by the group itself) were down 2% in H1. They were up 1% in the regions.

• The group will likely continue to acquire leasehold sites in city centres where freeholds are either not available or are prohibitively expensive.

• The search for efficiencies continues. Transitional services provided to Coke will last between 6mths and 24mths. There are various incentives in place to make this (and a handover) work.

The upcoming capital markets day:

• Whitbread will host a Capital Markets Day in February. With this in mind, it deferred a number of questions until then.

• It was questioned but as yet not willing or able to comment on:

o Return of cash to shareholders.

o Dividend policy.

o Further sale & leasebacks.

o The idea of an opco – propco structure.

o Pension funding.

• The group maintains that it has a ‘strong balance sheet’. But it says that its structure will be under review.

Langton comment:

• Whitbread’s shares were down by only 1.5% yesterday on what was a bad day for the market as a whole.

• The numbers were not overwhelming but investors seem prepared to stay put in order to benefit from whatever cash is coming back next year and in order to see just what Whitbread proposes for its future.

• At one extreme, the group could split opco – propco and push the button re franchising. It would then adopt a capital light model.

• This would have the benefit of accelerating growth but the group would lose control of some of its assets and, potentially, also the quality of its brand.

• At the other extreme, the company could remain broadly as it is. Some cash will come back to shareholders but the pension deficit and debt will also be reduced.

• The group would then have the flexibility to develop and nurture new businesses as it has done so successfully with Costa.

• The latter is less of a get-rich-quick model and it will be interesting to see just what the group proposes in February.

PUBS & RESTAURANTS:

• Times quotes source as saying CAKE shareholder{s} believe the company should not investigate its ‘potential incompetence’.

• AIM governance, auditors, executives, non-executive directors and others all coming under some pressure as to the role they played in the creating and unearthing of CAKE’s recent problems.

• Other observers say steady the ship before beginning (or making the major focus) a search for who to blame.

• McDonald’s shares rose by as much as 6.7% after the company reported global comparable sales up 4.2% in Q3. The growth was driven by investment in online and touch-screen ordering, renovating 12,000 US restaurants.

• McDonald’s plans to be 100% recyclable by 2020, with plans to end the use of plastic lids in its UK outlets. However, a global seaweed shortage is hampering plans to use biodegradable sauce sachets.

• The US based drinks group Constellation Brands is believed to be considering the sale of some of its US wine brands, after having announced a public offering of $2.15bn senior notes to finance its $4bn investment in cannabis company Canopy Growth.

• The London based group, Burger & Beyond is opening a new restaurant in Shoreditch.

• A report conducted by Brita Professional has found that hospitality workers spend up to 60 hours dealing with kitchen equipment breakdowns every year. Some 82% of employees said they had had to spend additional costs on unexpected repairs, causing additional stress.

• Following a restructuring earlier this year that saw 10% of sites close, the Andrew Walker-led grab and go chain EAT, is beginning its next stage of development, the MCA has reported.

• The bar operators, Arc Inspirations has announced plans to open a Manahatta in Newcastle on Collingwood Street. 

• Uber aims to take food delivery to the skies by 2021 through the use of flying drones.

• The Institute of Economic Affairs says one of the last challenges left on the political agenda for this legislative year is banning single-use plastics, and collecting more single-use plastic drinks bottles.

HOLIDAYS & LEISURE TRAVEL:

• Sainsbury’s Bank Travel Insurance reports one in ten people, 5.6 million, have already booked their 2019 summer holiday. Europe is the destination for 49% of bookings, with North America second at 8%.

• Uber CEO Dara Khosrowshahi has revealed plans to have all its London vehicles electric by 2025, incentivising drivers by charging customers an extra 15p per mile when inside an electric vehicle.  

• German online travel-booking platform, GoEuro, raises $150m in an investment round led by Kinnevik and Temasek.

FINANCE & ECONOMICS:

• CBI reports business optimism at its lowest level since immediately after the June 2016 Brexit vote.

• Manufacturing orders fell at their fastest rate in three years in the quarter to end-Oct says the CBI.

• EU has told Italy to revise its budget.

• Sterling a shade higher at $1.2983 and €1.132

• Oil down shareply at $76.76

• UK 10yr gilt yield down 4bps at 1.48%

• World markets down yesterday but Far East up in Wednesday trade.

• Brexit etc.:

o Mrs May to face 1922 Committee today.

o Sunday Times poll for a new referendum riding at 72:28 in favour.

o YouGov says a poll held today would be 53:35 in favour of staying in the EU.

o Tory Party risks alienating just about everyone as it pushes ahead with suboptimal (but possibly achievable) Brexit deal.

o National Audit Office told that UK border may not be ready for a no-deal Brexit. Health industry advised to find other ways to secure access to drugs & medicine etc.

PRIOR DAY LATER TWEETS:

• Meetings yesterday, back tomorrow.

START THE DAY WITH A SONG:

Yesterday’s song was Men’s Needs by The Cribs. Today, who sang:

How can you have a day without a night,

You’re the book that I have opened

And now I’ve got to know much more

RETAIL NEWS WITH NICK BUBB:

• Intu Properties: On yesterday’s analyst’s conference call to discuss the Q3 trading update and property devaluation, David Fischel, the CEO of the embattled shopping centre giant Intu, was, inevitably, asked about the group’s exposure to Debenhams. And he admitted that the 10 Debenhams stores in the Intu portfolio account for just under 3% of total rental income, but he doubted if any would be affected by the rumoured store closure plans and Intu’s revised overall assumption of c1% net rental income growth in 2019 assumes, rightly or wrongly, that there is no material tenant failure like House of Fraser (eg Debenhams) next year…  

• Debenhams: It remains to be seen what Sergio Bucher, the CEO and Rachel Osborne, the new CFO, say about current trading (as well as the dividend, the planned sale of Magasin and UK store closures…) at tomorrow’s final results presentation, but at least the beleaguered Debenhams has had the decency to hold off from its latest “Spectacular” Sale until Friday (a planned promotion, timed around the monthly payday and skool half-term)…  

• John Lewis Trading Watch: Despite the boost from price-matching a competitor’s promotion last week (House of Fraser presumably), John Lewis continues to struggle, given its exposure to the troubled Homewares/Furniture market, according to yesterday’s weekly sales overview from JLP. The w/e Oct 20th saw gross sales down by 1.2% (nearly 3.5% down on a LFL basis, ex new stores), with Fashion sales up 3.3% gross, but with Electricals down by 1.8% in gross terms and Home sales down by 4.9% gross. With one week left in Q3, overall gross sales are running 0.3% down over the last 12 weeks combined (nearly 2.5% down LFL), pulled back by a 4.5% drop in Home sales.

• Waitrose Watch: Over at Waitrose last week was also disappointing, with gross sales 0.5% down, ex-petrol, in w/e Oct 20th (also c0.5% down LFL), despite strong sales of early Christmas lines. The last 12 weeks overall have also been down by c0.5% gross, despite the strong start to August for Waitrose, with the “Home and General Merchandise” category running 3.4% down.

• News Flow This Week: The much-awaited Debenhams finals are tomorrow and there is a Pendragon Q3 update on Friday.