Langton Capital – 2018-11-06 – Greene King CEO, Wm Hill, Morrison’s. costs & other:
Greene King CEO, Wm Hill, Morrison’s. costs & other:A DAY IN THE LIFE: With the High Street and physical shops in general suffering, you’d have thought that, where shops control their own car parks, they’d be a little less keen to hand out parking fines than they had been in the past. But no, says the man who’s just picked up a second £70 fine from a well known food-retailer (you know who you are) in just a few months, it would appear that Big Brother is alive and well and will send time-stamped photos of you and your car to you if you breach a 3hr limit by 15 minutes and then condemn you to twenty minutes of arguing at customer services in order to get the resulting fine struck off. The cases in question: • Fine no1. During the Beast from the East. Virtually us and a foot of snow in the carpark. Overstayed as (admittedly) visited a couple of other shops in the area. It ‘wouldn’t be green to go back to your car each time you wanted to move shops’ said the offender. i.e. me. Fine: £70. Result: fine struck off. • Fine no2: Overstayed 15 minutes. Visited the shop next door, got petrol, had a coffee in the food retailer & then spend eighty quid or so. ‘Wouldn’t be green’ said the offender again. ‘What if we had a sleeping baby in a pushchair?’ he moaned. Result: uncharacteristic gammon impression at customer services, fine struck off. Outcome: • More shopping online, less visits to the shops. An hour or so of wasted time & no money changed hands. General feeling of ill-will, being spied on etc. Anyway, that’s a micro-instance of a much wider macro problem. On to the news: PUBS & RESTAURANTS: • Greene King has reported that CEO Rooney Anand intends to step down from his position at the end of the current financial year, 30th April 2019. • GNK reports ‘the process to appoint his successor is well advanced and a further announcement concerning succession is expected to be made early in the new calendar year.’ • GNK chairman Philip Yea comments ‘Rooney has been CEO of Greene King since 2005 and has proven himself to be one of the most successful and longest serving business leaders our industry has seen, transforming our company over this period. He will leave us better positioned for the future. Although he remains in his role for another six months, I should like to take this opportunity to thank him publicly on behalf of the board, colleagues and shareholders for all he has done for them, the company and the industry.’ • CEO Rooney Anand comments ‘it has been a great privilege to lead Greene King for nearly 14 years and to serve as a director for 18 years.’ Mr Anand says ‘the business is performing in line with our expectations and ahead of the market. With a strong team and business culture firmly in place, the time is now right for me to hand over the baton.’ • CGA & Prestige Purchasing’s latest New Foodservice Price Index for September 2018 has reported that oils, fats and fish are currently 25% pricier than they were last year. • Price Index suggests that hot beverage and fruit prices are lower than they were a year ago. • CGA & Prestige report that ‘the possibility of a no-deal Brexit continues to dominate the risk agenda for buyers.’ Prestige says ‘we have seen a much higher level of volatility within some food supply markets this year, which once again is impacting margins for operators, who are already under pressure in this area.’ • CGA says ‘there are many other inflationary pressures beyond Brexit of course, but we see no sign of the turbulence easing as the date for leaving the EU draws nearer, and an anxious few months lie ahead as buyers await clarity on the terms of departure.’ • Springboard and NPD group have found that spend per meal delivery is 25% higher than overall average spend eating out. • A report from UKHospitality and Christie & Co has found that overheads paid by operators have risen to their highest rate for 12 years. Operating costs now equate to 52.5% of revenue for eating and drinking out businesses. • Pragma Consulting has reported that Stadiums are increasing using their premises for commercial activities beyond matchdays. The museum at FC Barcelona is now the most popular museum in Catalonia. • Morrison’s has updated on its Q3 to 4 Nov saying LfL sales ex fuel rose by 5.6% with retail +1.3% and wholesale +4.3%. • Morrison’s CEO David Potts reports ‘after another period of strong growth, and with more customers enjoying shopping at Morrisons, we have now completed three years of positive like for like.’ Mr Potts concludes ‘our exceptional team of food makers and shopkeepers are providing good quality food at great prices, and building a broader offer in store, online and for our wholesale customers.’ • The Korean owner of Wasabi is searching for new investment as the dining sector comes under pressure, the Sunday Times has reported. The group has hired PwC to find a cash injection. • Molson Coors’ UK division has announced profits have fallen by £15m despite a rise in turnover. The group stated that on-trade volumes declined 2.3%, with pre tax profit down to £56.8m from £71.3m for the year ending 31 December. • UKHospitality welcomes the Government’s plans to promote healthy attitudes to food and drink with chief executive Kate Nicholls saying ‘The hospitality sector is committed to promoting healthy attitudes to food and drink…We are ready and willing to support the Government, but we need to avoid any kneejerk measures that threaten businesses disproportionately.’ • Deltic Group is set to acquire three Tiger Tiger sites from Novus Leisure in Newcastle, Manchester and Portsmouth for an undisclosed sum. CEO Peter Marks said ‘We’re delighted with this acquisition… Our intention is to trade seamlessly through until the summer next year, whereby each of these sites will be rebranded to a new concept that is currently under development.’ • UK service sector expanding a little more slowly than recently reports HIS Markit (see Finance & Markets). • Amazon will offer US-based customers free shipping with no minimum purchase this holiday season, increasing its competition with Walmart and other rivals. Colin Sebastian of Baird Equity Research, said the offer could shave 5 percent to 6 percent off Amazon’s operating profit this quarter. • The Centre of Retail Research reports nearly 18% of Britons complete their Christmas shopping by the end of October. However, nearly 40% will leave their shopping till December. • Entry-level wages for staff at Lidl will increase from £8.75 per hour to £9 for staff outside London, with staff in London receiving £10.55 per hour. The rises are in line with new voluntary Real Living Wage rates. • The Organisation of Vine and Wine has found that global wine sales are on the up once more after hitting a record low in 2017. An estimated 282m hectolitres of wine was produced in 2018, up from 246.7m hectolitres last year. • Alibaba reports Q2 revenues up 54% to $12.4bn, with e-commerce driving the majority of sales, but below market expectations. • The Inn Collection Group appoints Ian Goulding as its new chairman as it plans to roll out strategic growth plans. • London Shuffle launches ‘Winter in S’moreditch’ allowing customers to cook S’mores on campfires on an outdoor terrace. • Crawshaw closes 35 butcher’s shops and one distribution centre, with administrators EY saying 19 ‘profitable’ stores would continue to operate. The reorganisation is expected to result in the loss of 354 jobs. HOLIDAYS & LEISURE TRAVEL: • GfK warns tour operators may need to discount in January with a Brexit deal only offering a ‘slight increase’ in booking levels. UK bookings overall for 2019 are 11% up year on year, but have dipped slightly in recent months. • ForwardKeys reports advance airline bookings for summer 2019 to EU destinations up 5.7% yoy. Bookings to destinations outside the EU were up 28.5%. • Brittany Ferries warns that UK holidaymakers are delaying booking Channel crossings due to Brexit uncertainty. Forward bookings from some of its regular customers were down between 4 and 5%. • Marriott International has reported Q3 numbers saying the group earned 138c per share, up 7% on a year ago. The company added more than 18,000 rooms during the third quarter. CEO Arne Sorenson said ‘in the third quarter, we were pleased to post gross fee revenues growth of 13 percent and adjusted EBITDA growth of 12 percent, as worldwide comparable systemwide hotel RevPAR increased roughly 2 percent.’ • Marriott says ‘for the full year 2018, we anticipate our number of rooms will increase nearly 7 percent gross while room deletions should total nearly 2 percent, resulting in net rooms growth of roughly 5 percent for the year.’ • Expedia Group has reported that hoteliers across the UK enjoyed a successful summer season as demand remained high from both domestic and international travellers. • Expedia reports for Q3 this year that UK hotels saw demand rise with the number of international visitors from China up by 180% and vistor numbers from the US, France and Australia up by 40%, 25% and 30% respectively. OTHER LEISURE: • William Hill reports Q3 numbers saying that group revenues are down 4% but that the online business is performing well. CEO Philip Bowcock comments ‘it has been another busy period for William Hill, with significant progress made on our plan to capitalise on the emerging US sports betting opportunity.’ • WMH says ‘looking at the second half performance so far, we have benefited from the later stages of the World Cup but otherwise football and racing margins have been weaker than expected.’ It says ‘taking all these factors into account, full-year operating profit is expected to be in the range of £225m to £245m, assuming normalised gross win margins in the remaining weeks of the year.’ FINANCE & ECONOMICS: • IHS Markit Services Sector PMI at 52.2 in October, down from 53.9 in September. Slowest rate of growth since July 2016. • Slower service sector demand puts downward pressure on GDP growth but also dampens expectations re interest rate rises. • HIS Markit reports ‘the disappointing server sector numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy.’ • Re GDP, IHS Markit says ‘combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%, setting the scene for GDP growth to weaken sharply in the fourth quarter.’ • Sterling a little stronger despite weak GDP data at $1.3053 and €1.1445 • Oil up at $72.78 • UK 10yr gilt yield unchanged at 1.50% • World markets better yesterday with Far East higher in Tuesday trade • Brexit etc.: o Deal sorted per some sources, still lots of work to do says Downing Street. Permanent customs union and quasi-EU membership looking the most likely outcome. PRIOR DAY LATER TWEETS: • Later tweets: Restaurant Group & Wagamama. As Dick Barton narrator said, with one bound our hero was free. Meanwhile, in the real world… • Synergies can prove elusive, operators get deal-fever as advisors advise to ‘do something’ (check their fee incentives) etc. etc. • Telegraph reports ‘RTN’s blockbuster takeover of Wagamama’s is under threat as concerns mount over the logic of the deal.’ Quite… • Discounting still rocking on. Beefeater (WTB) 33% off food, Toby & Harvester (MAB) kids eat for a quid, Pizza Express 25% off food etc. START THE DAY WITH A SONG: Yesterday’s song was Teenage Kicks by The Undertones. Today, who sang: Make it up as we go along, Feet on the ground, head in the sky It’s okay, I know nothing’s wrong, nothing RETAIL NEWS WITH NICK BUBB:
BRC-KPMG Retail Sales for October (the 4 weeks to Oct 27th): We expected another flattish LFL sales outcome for October and we weren’t far out, as the outcome was only +0.1% (after +0.5% LFL in July, +0.2% in August and -0.2% in September). The exact Food/Non-Food LFL sales split is, as usual, buried in the 3-month moving averages (of +1.2% and -1.0% respectively), but the Food Retailers look to have slowed to little more than +0.5% LFL last month and that would imply that Non-Food was surprisingly similar, only fractionally down LFL overall in October. That Non-Food performance last month is not at all bad, given how bad some big-ticket spending areas were, helped by a pick-up in Clothing, even though half-term was more spread out than last year (delaying some sales into November this year)…Paul Martin, UK Head of Retail at KPMG, said: “Grocery sales – which have been a ray of light – Morrison’s: Today’s Q3 update from Morrisons covers the 13 weeks to Nov 4th, so it includes most of the recently quieter period of trading for the supermarket industry, after the summer bonanza, but the underlying Retail income of +1.3% LFL is only “slightly” down on the +2.5% achieved in Q2 and strong Wholesale growth has pushed total LFL sales growth up to 5.6%. CEO Dave Potts trumpets about the business, but there is no comment in the statement on margins or profits. No doubt the conference call at 8am will give a bit more colour for analysts. ABF (Primark): Tomorrow’s M&S interims will make grim reading, as the seemingly inexorable decline of the business continues and, as if to rub their noses in it, the conglomerate ABF has announced strong results for mighty Primark in today’s finals for y/e Sept, with operating profits up 15% to £843m, despite a 2.1% decline in LFL sales. Europe was down 4.7% LFL, but the UK was up 1.2% LFL, despite the challenging market, albeit the second half was slightly down |
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