Langton Capital – 2018-12-19 – Discounting, 888, Drake & Morgan, EU staff, TCG etc.:
Discounting, 888, Drake & Morgan, EU staff, TCG etc.:
A DAY IN THE LIFE:
So, should you tip your postman, milkman (if you still have one) and binmen at Christmas?
Well, being 1) mean and 2) unhappy at the prospect of struggling through the drizzle and mud to Sellotape a tenner to the wheelie bin, I was interested to know whether or not I was being silly and, as it’s apparently an age-thing and hardly anybody tips any more, it looks as though I was.
Only 22% bung the postman and 15% tip the binmen and, in some areas, councils have fessed up and said that ‘binmen earn more than you do’ and that you shouldn’t tip them as it’s presumably patronising and a waste of money.
Which was music to my ears and, as none of the above tradesmen have actually been on our property for years (think dog, teeth, chasing, biting, screaming etc.), our relationship with said people is distant at best.
Furthermore, the suggestion that ‘only old people tip’ was the final straw as, despite the evidence of the many mirrors in our house to the contrary, I like to think that I’m still young.
So, don’t blame me. And don’t even think of throwing my post in the bin and putting our rubbish through the letterbox as I’m just trying to stay current in an ever-changing world. On to the news:
PUBS & RESTAURANTS:
• Question to hospitality: was this how you planned the last week before Christmas? Bella Italia (Casual Dining Group) 30% off, Café Rouge (CDG) second main for £1 (around 45% off), Frankie & Benny’s (RTN) 30% off, Beefeater, Brewers’ Fayre & Table Table (WTB) 33% off, Harvester (MAB) kids for a quid, Nicholson’s (MAB) 25% off, Giraffe (Boparan), kids eat free etc. etc.
• Morning advertiser quoting staff at JDW saying that their strike action had forced the company into paying them 60p per hour extra. The company says that the pay rises would have taken place in any case. The MA reports that nationally, JDW wages went up by 20p but in Brighton, where the strikes took place, staff are to get an extra 40p per hour on top.
• Brighton staff have accused JDW of employing ‘bullying managers’. A shift organiser in Brighton is quoted as saying ‘if two pubs in the company can create this much change, imagine what we will achieve as we grow. We are already winning.’ JD Wetherspoon did not wish to comment, per the MA.
• Bar restaurant company Drake & Morgan has commented on its results for the 52wks to 25 March saying that turnover rose by 15.9% to £49.7m with LfL turnover up by 1.2%.
• D&M says adjusted EBITDA was flat at £5.0m with adjusted PBT of £1.3m. The group opened three new sites during the year under review.
• D&M sats ‘trading in the current financial year has been positive with good like-for-like sales and EBITDA growth.’ CFO James Sherrington reports ‘2017/18 was another year of progress for the business as the market faced challenging trading conditions. Despite this, like-for-like sales were positive and although margins were impacted by cost inflation in staff, food costs and property costs, we were able to maintain EBITDA in line with the previous year whilst making investments to support future growth. Trading in the current year has been positive with good like-for-like sales and EBITDA growth.’
• EI Group Tuesday bought back 336,613 shares for cancellation at 181.5p.
• Auditors taking a little more care in the wake of the Patisserie Holdings collapse, fraud and accounting misstatement. Revolution Bar Group has said that its auditors have informed it ‘that there were a number of errors and deficiencies in the text of the Independent Auditor’s Report…distributed to shareholders and approved at the Annual General Meeting held on 26 November 2018.’
• Revolution says ‘these errors have today been corrected in the version of the Accounts available to download on the Company’s website’ and reassures ‘there is no impact on the profit, balance sheet, earnings per share or other financial information disclosed in the Accounts with respect to either the Group or the Company.’ The group says ‘the opinion of the independent auditor on both the Group and Company accounts was, and remains, unqualified.’
• Data from Fourth has found that November saw a rise in EU hospitality workers in the UK, with 44% of new starters coming from the EU. Mike Shipley, Analytics & Insight Solutions Director at Fourth, said: ‘Against an uncertain political backdrop as to the future of the free movement of labour from the European Union, it is welcome news to see there has been an influx of EU workers entering the industry, after several months of falling numbers’.
• The FT has reported that Patisserie Valerie has appointed the former Starbucks man, Rhys Iley as group commercial director, as the group looks to move on from its accounting scandal.
• Chief Executive of UKHospitality, Kate Nicholls has commented on the industry’s efforts to cut salt from food, stating: ‘Hospitality venues have made significant efforts to reformulate menus, provide greater choice and transparency, and reduce salt. These efforts have been recognised by PHE’s report and we will continue to work towards targets to reduce salt and promote healthier attitudes to food’.
• A study has revealed that the UK is at risk of ‘sleepwalking’ into becoming a cashless society with millions of people in debt or living in rural areas being disadvantaged as a result. Author of the report, Natalie Ceeney said: ‘As cash use continues to fall, we need to safeguard the use of cash for those who need it, and at the same time work hard to ensure that everyone can participate in this digital economy.’.
• Reuters has reported that clothing retailers have taken a hit to their margins as pre-Christmas sales falter. Following the profit warning released by ASOS, the group’s CEO Nick Beighton commented: ‘We have seen in fashion an unprecedented amount of discounting, certainly not something I’ve seen before, and that’s been across the board.’
• The BBPA has encouraged the government’s new strategy on waste management, with chief executive of the group, Kate Nicholls commenting: ‘We welcome this new waste strategy and the brewing and pub sectors will be working closely with the Government to achieve its aims. We support a Deposit Return Scheme (DRS) for plastic bottles and crucially the strategy’s recognition of the need for a UK-wide system, which is vital to avoid unnecessary costs and significant fraud risk in what is an integrated UK supply-chain and market for drinks containers’.
• The SIBA have also remarked upon the government’s new strategy to tackle waste, with Head of Public Affairs and Communications stating: ‘Independent brewers want to see the amount of recycled material go up, pollution go down and the costs of new cans and bottles to drop through increased use of recycled materials. But proposed reforms to the PRN (for producer packaging responsibility) could potentially increase costs to small brewers by a factor of 10. A badly designed, confusing or burdensome Deposit Return Scheme could also impact small brewers disproportionately’.
• Harden’s Best UK Restaurants 2019 has been launched, with York entering the top 20. The guide’s editor and co-founder Peter Harden said: ‘During Harden’s 28 years of reviewing, York has hitherto been one of those charming British cities with inspiring medieval architecture, but, by contrast, a middle-of-the-road selection of pubs, tea-shops and bistros. But in the last year or two, the city has shot to prominence as a foodie-magnet, with an assortment of Shoreditch-worthy arrivals in recent times such as Arras, Le Cochon Aveugle, Skosh and the yet-to-be-rated Roots’.
• Feed It Back, the customer feedback and online reputation specialists have found that special occasion bookings (birthdays/anniversaries etc.) in general generate positive reviews, however, they also the propensity to lead to extremely negative reviews.
• The Cambridge located gin brand Pinkster has raised £1.1m in private finances as the group looks to expand. Managing director of Pinkster, Stephen Marsh, said the fundraising ‘speaks volumes about the robustness of the business model, the strength of the product and the opportunities ahead’.
• The Danish bakery group, Ole & Steen is set to open its flagship London store on Charing Cross, as landlords Shaftesbury invest £15m into a mix-use development.
• Ofgem proposes to cut consumers’ bills by £45 a year from 2021 by reducing returns to shareholders to 4%.
HOLIDAYS & LEISURE TRAVEL:
• Travel Trade Gazette has reported Phil Gardner, sales and e-commerce director at Thomas Cook as saying ‘clearly one of our key tasks is to offer some reassurance around what we’re doing and the strategy that’s in place.’ He says the group will focus on its branded hotel stock and other areas where revenues were in growth.
• Thomas Cook’s Mr Gardner says ‘if you look at our group results the revenue is actually up 6% off the back of some difficult messages around profit. That’s a very positive sign because it makes it clear that as a business we have something to play with and strong customer demand on good revenues – our focus on profit is helped by the fact we’ve got good levels of revenue coming in.’
• Hotel News Now reports that US inbound tourism is not keeping pace with growth globally. Some comments made by president Trump may have put off would-be visitors.
• Chris Grayling, transport secretary, reassures airlines over air links with Europe post-Brexit after a supposed leaked government report warned people not to book holidays after March in the case of a no-deal Brexit.
• Ola, an Indian ride-hailing app, invests $100m in scooter rental start-up Vogo. Vogo scooters will appear in the Ola app going forwards.
• 888 has updated on full year trading saying ‘the second half of the financial year has seen 888 deliver further progress against the Group’s strategic objectives. Consequently, the Board remains confident that adjusted EBITDA for the full year will be in-line with its expectations.’
• CEO Itai Frieberger says ‘during the Period 888 has delivered continued progress against its strategic objectives. The Group has continued to focus on driving growth in regulated markets, enhancing compliance, and delivering exciting product innovation.’
• GVC has noted that the legislation to cut B2 maximum stakes to £2 has been formally enacted by the UK Government
• Twitter shares were down nearly 7% after it announced it was investigating unusual traffic that might be from state-sponsored hackers.
• Manchester United sacked Jose Mourinho on Tuesday, suffering their worst start to the league in 28 years and losing to rivals Liverpool 3-1. Mr Mourhinho will reportedly be paid more than £10m.
FINANCE & ECONOMICS:
• The ICAEW forecasts GDP growth in the UK to be 1.2% this year, the lowest since 2008. The ICAEW says ‘Q3’s performance presented a less than favourable platform for expansion in the last quarter of 2018.’
• ICAEW says ‘the economy’s strength in Q3 was entirely accounted for by a strong performance in July, with the monthly data showing GDP flat in both August and September. This suggests that the economy carried little momentum into Q4, a prediction reinforced by a modest 0.1% rise in output in October and a weaker set of CIPS activity surveys in October and November across the services, manufacturing and construction sectors compared to results in the third quarter.’
• ICAEW sees 2019 as being a little brighter with 1.6% growth, still below trend.
• RICS says it expects around 5% fewer houses to be sold in 2019 than will be sold in 2018. Prices will stagnate. RICS points to Brexit worries and the high price of houses relative to incomes saying ‘house prices are now a greater multiple of earnings than at any point since records began. Such high house prices are shutting more and more people from accessing the market.’
• President Trump has warned the Fed not to raise interest rates today.
• Sterling down at $1.2655 and €1.1116.
• Oil down at $56.69.
• UK 10yr gilt yield up 1bp at 1.28%.
o Government to ramp up no deal preps. Has waited more than 900 days through the 1,000 day period between the referendum and 29 March 2019 to do so. This may not be seen as a credible threat in Brussels. However, it is entirely possible that the UK will crash out of the EU by accident.
o Playing with fire. No-deal Brexit, economic turmoil, general election, Labour government, exchange controls and no external (EU) moderating hand on government behaviour could lock us all in to some Dantean existence for a few decades.
o Private bankers at Credit Suisse are reported to have advised clients to consider moving assets out of the UK. Lack of Brexit clarity, potential further weakness in Sterling and the threat of a Labour government and perhaps exchange controls are behind the warning.
o Vote on Mrs May’s partial Brexit will not take place for another three weeks. Parliament to take a two-week Christmas holiday.
o The CBI, British Chambers of Commerce, Institute of Directors, Federation of Small Businesses and the EEF, the manufacturers’ organisation, have expressed dismay that MPs are playing party politics with the future of the UK and have not yet provided certainty for business.
o Brexit minister Stephen Barclay said yesterday that the UK could not suspend Article 50 temporarily.
PRIOR DAY LATER TWEETS:
• Later tweets: Visa card spend down (IHS Markit), record discounting (Deloitte), business confidence strained (CGA), trading bloody tough (Langton)…
• High St woes. Values must fall. Leisure can’t fill all the voids. Needs re-engineering as experiential, artisanal, residential etc.
• EasyHotel has announced the conditional agreement for a 209-room hotel close to Paris-Charles de Gaulle Airport, France.
• Inflation. BoE will leave rates unch. on Thursday but oil prices (down) & wages (up) is comparing apples with oranges
• Tory civil war re Europe rolls on with UK PLC as collateral damage. Labour should be 30pts ahead but are a rudderless shambles themselves
• Labour & Tory indecision, self-interest etc. ‘A plague o’ both your houses.’ (W Shakespeare). ‘What the bloody hell is going on?’ (Langton)
• UK household finances index at 6mth low. Huge (retail and F&B) discounts in the week before Xmas. Could get very sticky…
• Banks pull plug? How about 1) after shops’ve banked the Xmas takings but 2) before they pay Q1/19 rent & VAT? That is, now.
• Trump took credit for US market & economic booms. Now both are in reverse, it’s no-doubt someone else’s fault
• 80% discounts on High Street as carefully-sourced Xmas stock ends up on the rummage rail. Oh, dear. Sales OK, margins horrible…?
START THE DAY WITH A SONG:
Yesterday’s song was What’s Going On by Marvin Gaye. Today who sang:
She’s a rhino,
She’s a whino
She’s a tightrope
We’ll be fine though
RETAIL NEWS WITH NICK BUBB:
John Lewis Trading Watch: We noted yesterday that the trading comps last week were relatively soft because of the snow we had a year ago and trading at John Lewis was better, helped by more promotional activity, according to yesterday’s weekly sales overview from JLP. As we have been flagging, the graph of overall JLP sales now includes Waitrose as well, so it is no longer possible to see the “pure” John Lewis sales graph, but we estimate that John Lewis fell back from a massive £230m (inc VAT) of gross sales in Black Friday week, w/e Nov 24th, to £167m in w/e Dec 1st and £141m in w/e Dec 8th, but improved to c£170m in w/e Dec 15th. Last week was up 1.8% gross (nearly 0.5% down on a LFL basis, excluding new stores). In terms of sales mix, Electricals were down by 4.3% in gross terms last week and Home sales were down by 1.7% gross, but Fashion/Beauty sales were up by 9.3% gross, boosted
Waitrose Watch: Over at Waitrose, weak sales last week continued to be blamed on “a planned decision” to reduce promotional activity, with gross sales down by 1.9%, ex-petrol, in w/e Dec 15th (c2% down LFL, as there is hardly any net new space). The last 20 weeks are cumulatively running down by c0.7% gross (despite the strong start to August for Waitrose), with the “Home and General Merchandise” category running 4.5% down. For Waitrose, however, it is still worth noting that the big Christmas sales peak is still to come this week, whereas at John Lewis the Christmas week now, alas, pales into insignificance compared to Black Friday week…
News Flow This Week: There is no more company news scheduled this week and there is still no sign of any profit warnings from Debenhams or Marks & Spencer…but, on the Economics front, we get the CBI Distributive Trades survey for “December” this morning, the ONS Retail Sales figures for November on tomorrow morning and the widely followed monthly GFK Consumer Confidence survey first thing on Friday.