Langton Capital – 2018-10-30 – The Budget, Wagamama sale, Texas Roadhouse etc.
The Budget, Wagamama Sale, Texas Roadhouse etc:
A DAY IN THE LIFE:
It might just be me, but don’t you find that, when it’s cold, it’s hard to remember what it was like when it was hot and vice versa?
Because I find it something of a challenge to recall the July heat-wave now. Those days when, I vaguely remember, we had considered coming to the office in shorts and when sleeping was a problem, not because the duvet had fallen on the floor but rather because the air was deadly still, weighed a ton and was simmering just below boiling point, even in the middle of the night.
Indeed, things have changed. It’s November later in the week and the sweaters have been going on and coming off again for a few weeks now. But, with frost on the grass at the weekend and the mercury struggling to make it into double figures in the middle of the day, it’s nearly time to concede that it’s a tad colder and get the coat out again. On to the news:
PUBS & RESTAURANTS:
• In response to the Budget announced yesterday by Philip Hammond, Brigid Simmonds, Chief Executive of the British Beer & Pub Association has commented: ‘Pub-goers across the UK will be toasting the Chancellor tonight following his decision to freeze beer duty. This early Christmas present will save brewers, pubs and pub-goers £110 million and secure upwards of 3,000 jobs that would have been lost had beer duty gone up. Clearly, the Chancellor has listened to the seven in 10 people in the UK who said they’d like to see beer duty cut or frozen in the Budget. Pubs are so important to their local communities and 82% of the beer we drink here is brewed in the UK’.
• Kate Nicholls, Chief Executive of UKHospitality has also reacted to the Budget: ‘This was a positive Budget for hospitality, recognising and acknowledging our core campaigns around employment costs, business rates and digital paying its fair share – together with a positive outcome on excise duty, latte levy and non-residential capex and investment allowances. We estimate the measures announced in the Budget as a result of our campaigns are likely to save the trade £750m’.
• Chief executive of the Society of Independent Brewers, Mike Benner has remarked on the budget: ‘The Government has announced a review of Small Breweries’ Relief. SIBA, as the voice of British Independent brewing will be front and centre in working with Treasury to usher in the next chapter of SBR. We will ensure the smallest breweries are protected, growth is incentivised and the sustainability of UK brewing is the centrepiece of reform. A freeze in beer duty is good news for UK brewers, publicans and beer drinkers. A planned rise in line with inflation would have meant a £100m hit to Britain’s brewers’.
• Mike Clist, CEO of the British Institute of Innkeepers has responded to the Budget stating: ‘We are delighted to hear that business rates have been cut by one third for many of our members running businesses with a rateable value of under £51k. This will provide much-needed help to the most vulnerable pubs in our communities. In the longer term, root-and-branch business rate reform will be required to tackle the disparity between high street businesses and online retailers. The freeze on duty for beer, cider and spirits was unexpected, but very welcome, and will provide a much-needed boost to our industry’.
• The Restaurant Group is reportedly in advanced negotiation to acquire Wagamama for a reported £559m. The deal would be funded by an equity issue and a significant debt package. TRG currently operates 509 restaurants while Wagamama has just under 200.
• UHY Hacker Young has found that the profits at the UK top 100 restaurants have fallen by 80% to £37m, with a third of these now loss-making. UHY Hacker Young has stated that costs of closing struggling sites, higher business rates and rising minimum wages have taken a toll on restaurants’ profitability.
• Molson Coors has announced the completion of its cannabis-focused joint venture in Canada, with Hydropothecary Corp. The joint venture will be known as Truss, with Molson Coors’ chief commercial & strategy officer (Brett Vye) becoming the Truss’ CEO. Truss commented: ‘When consumable cannabis is legalised in Canada, Truss will be ready to make its mark as a responsible leader in providing high-quality beverages for the Canadian consumer,” said Vye. “Why ‘Truss’? We are joining together the extensive experience and excellent practices of each partner to build a powerful foundation for the future’.
• The Morning Advertiser reports that supermarket vodka is being sold at less than 50p per single measure, harming the on-trade where it would cost consumers roughly £2.61.
• Texas Roadhouse Inc has announced its third-quarter results, stating that sales increased 10% on last year to $596m, but restaurant margins have come under pressure with a decrease of 157 basis points to 16.2%.
HOLIDAYS & LEISURE TRAVEL:
• The 2018 China Business Travel Survey reports that 45% of Chinese companies expect their business travel spending to increase over the next 12 months, the strongest confidence since the survey was launched 14 years ago.
• A family of four have been convicted of contempt of court over fake holiday sickness claims. Jet2holidays and law firm Horwich Farrelly unearthed social media posts from the family at a time when they were meant to be suffering from diarrhoea and stomach cramps.
• A Lion Air boeing 737 carrying 188 people has crashed shortly after taking off from the Indonesian capital city of Jakarta.
• Cox & Kings sells PGL, a school and activity holidays firm, to Midlothian Capital Partners for £467m.
• Booking Holdings invests $200m in Southeast Asian ride-hailing app Grab, joining Uber as a minority investor.
FINANCE & ECONOMICS:
• Big ticket items are coming under pressure, exemplified in the slow down of new car sales, with sales down 20.5% in September. The Bank of England has attributed a fall in consumer credit of 7.7% in the year to September to the fall in big ticket spending.
START THE DAY WITH A SONG:
Yesterday’s song was ‘Don’t You (Forget about me)’ by Simple Minds. Today who sang:
“I’m expressing with my full capabilities,
And now I’m living in correctional facilities
Cause some don’t agree with how I do this
I get straight and meditate like a Buddhist”
RETAIL NEWS WITH NICK BUBB:
WH Smith: There have been rumours that WH Smith was looking at a Travel Retail acquisition in the US, but today’s announcement that it is buying the US airport retailer of digital accessories, InMotion, is a surprise. It is big (£155m in cash, nearly 10x EBITDA for this year), with 114 stores and it is a shift away from WH Smith’s main airport product focus, but CEO Stephen Clarke says “It doubles the size of our international travel business and provides us with attractive growth opportunities”. There is no change to WH Smith’s dividend or share buyback plans. In view of the importance of the deal, WH Smith has given a current trading update (the new year is off to a good start, with Travel Retail sales up 4% LFL and the High Street down 2% LFL) and is holding a conference call for analysts at 8am.
Halloween Watch: At the beginning of his intensely political Budget speech yesterday, the Chancellor joked that if it had been held on Wednesday it might have been mocked as “Hammo’s House of Horrors”…But Next have had no reservations about announcing their Q3 update tomorrow, despite the potential for Halloween headlines about “Wolfson’s woes: Next’s shop of horrors”…Back on Sept 25th, with the interims, Next were still feeling confident about a better than feared start to Q3 and the City has pencilled in c3% Brand sales growth for the period, but the quarter could be “a game of two halves” and it will be interesting to see how the last 6 weeks have gone, in terms of Retail and Online trading…
News Flow This Week: The Next Q3 update is out tomorrow (which is Halloween). Thursday then brings the Carpetright first half pre-close update, the John Whittaker “PUSU” bid deadline for Intu Properties and the Apple Q4 results in the US. And with the end of the month coming up quickly, we get, on the Economics front, the CBI Distributive Trades Survey for “October” this morning, whilst the latest monthly GFK Consumer Confidence index is out first thing tomorrow (ahead of the latest MPC interest rate decision and Bank of England Inflation Report on Thursday at noon).