Langton Capital – 2019-02-06 – CAKE potential legal action, costs, services PMI, Stride Gaming & other:
CAKE potential legal action, costs, services PMI, Stride Gaming & other:
A DAY IN THE LIFE:
I’ve just got a new phone and, whilst it’s wonderful (and reasonably priced given that it is a mechanism whereby the Chinese will spy on one of the leaders of the Western World), I can’t stop it bing-bonging at me when there are news alerts on Sky or the BBC at 3am.
And that’s getting a bit tiresome.
Probably as tiresome, in fact, as the spy date that Beijing is getting back on my behaviour as it consists of metro, boulot, dodo (travel, work, sleep) with the occasional bout of modest drinking thrown in and a bit of gardening.
Still, it seems like a part of some masterplan is to stop me getting a full night’s sleep. On to the news:
PUBS & RESTAURANTS:
• Rather a light news day today.
• Investors’ Champion has reported that Luke Johnson has said he is supportive of legal action against former CAKE auditors Grant Thornton. This after Grant Thornton was fined £21m, the largest ever fine levied against a firm of accountants in the UK, for negligence in carrying out the audit of failed company Assetco.
• Grant Thornton has pointed out that directors rather than the company’s auditors are responsible for the veracity of the company’s accounts and for spotting fraud. This may be true, but it doesn’t resonate well with those that have lost money.
• Luke Johnson says a recent case against Grant Thornton has ‘possible relevance for a claim against them [Grant Thornton] as Patisserie Holdings’ auditors.’ The decision is in the hands of the administrators.
• To an outsider, the drop in estimated EBITDA from £30m to £12m then perhaps £5m in a good year is indicative of a deep-rooted fraud that could surely not have been caused by one or two rogue ‘credits’ (in a business selling cakes) for £10m or so each.
• This leaves us having to conclude at this stage that the fraud may have been spread over many if not most of the group’s outlets. A series of tests, from the till rolls in the shops, to the bankings, to the figures received at head office should have had a chance of spotting this misleading state of affairs many, many years before it came to light.
• Research from CGA and Prestige Purchasing has found that fish price inflation has fallen to its lowest level in five months this December. Soft drinks were found to have recorded the greatest degree of price rises due to sugar tax during the Christmas trading period.
• Chief Executive of Prestige Purchasing, Shaun Allen commented: ‘Whilst overall inflation remains at a high level in the foodservice market, it is encouraging to see some much-needed downward movements across a number of categories this month. However, with the departure date from the EU now less than two months away and the uncertainty of what potential impacts this could have on the food and drink supply chain, we are likely to continue to see high levels of volatility during 2019’.
• SIBA has written to the Minister Robert Jenrick asking for clarity that no brewer will lose any relief as a result of any reform to SBR.
• Sierra Nevada, the US independent brewer, has acquired San franciscan craft brewer, Sufferest for an undisclosed sum.
• MEATailer secures a new location for its MEATliquor brand in Marylebone, Wellbeck St. The restaurant will have a capacity of 300 and a late license with a separate entrance and exit after 11pm.
• The Distilled Spirits Council welcomes a US-UK agreement that will protect trade of wine and spirits after leaving the EU.
• Charles Wells reports a 226.9% increase in profit before tax to £4.6m in the year to September 2018. The Marston’s owned brewery undertook 13 developments, representing investment of £2.3m.
• The Markit January Services PMI came in at 50.1 in January after 51.2 in December. Markit says ‘the latest PMI survey results indicate that the UK economy is at risk of stalling or worse as escalating Brexit uncertainty coincides with a wider slower slowdown in the global economy.’
• Markit says ‘service sector growth ground almost to a halt in January, matching similar disappointing news in the manufacturing and construction sectors. The last three months have seen the economy slip into its weakest growth spell for six years, and indicate that GDP likely stagnated at the start of 2019 after eking out modest growth of just 0.1% in the fourth.’
• Markit echoes the thoughts of many when it says ‘at the risk of sounding like a broken record, Brexit uncertainty continues to be at the heart of the malaise as clients delayed orders and consumers were deeply reluctant to spend under the continuing cloud of hesitation, indecision and ambiguity.’
• Data from Barclaycard has found that spending climbed 6.4%, the highest level for five months.Survey data from Barclaycard however, has shown that customer remain cautious, with 70% stating they are much more careful to seek value for money.
• Unilever has acquired the snacking brand Graze for £150m, this is the first acquisition for the new chief executive of Unilever, Alan Jope.
HOLIDAYS & LEISURE TRAVEL:
• In a no-deal Brexit scenario, acceptance of the Ehic card may vary from country to country, with the Department of Health recommending travellers first check with the specific country they are visiting.
• Germania files for insolvency, terminating all existing flights and blaming soaring fuel costs, a weak euro, aircraft maintenance and delayed deliveries.
• Stride Gaming plc has updated on trading at its AGM saying ‘the Group’s trading performance since the start of the financial year has been broadly in line with the Board’s expectations despite the continued challenging trading conditions.’
FINANCE & ECONOMICS:
• Deloitte survey of CFOs finds UK companies scaling back on investment & recruitment at steepest rate since 2012.
• Markit says all sector PMI now at 50.3 in Jan after 51.5 in Dec.
• New car sales down 1.6% in January versus last year. Annual sales fell by 7% in 2018 as a whole. Diesel demand in Jan was down 20%.
• Sterling down at $1.2953 and €1.1365. Oil down at $62. UK 10yr gilt yield down 5bp to 1.23%. World markets higher yesterday.
o FT reports Brexit’s tortured process is putting would-be exit campaigners off the whole idea in France, Italy & the Netherlands.
o Mrs May still running the clock down. Labour still keeping its mouth shut. The rest of us looking on.
o BBC reports some interviewees saying the loss of businesses and (other people’s) jobs is a price worth paying for sovereignty.
o Mrs May tells NI audience she is not proposing scrapping the Backstop. Her mandate from the Commons appeared to be to do just that (in one shape or form).
o CBI says UK risks ‘crashing out’ of 40 trade deals in the event of no-deal.
PRIOR DAY LATER TWEETS:
• Later tweets: Dealing with uncertainty. Critical and sometimes overlooked because, looking back from the future, we see uncertainty as an illusion
• Plenty of discounts still on offer with Prezzo & Giraffe at half price, Pizza Express 25% off, Toby two main meals for a tenner etc.
• CAKE. Luke Johnson considering suing Grant Thornton reports Investors’ Champion. Closed stores not paid staff for Jan service
• Democracy is great. But it gave us Boaty McBoatface & the Birdie Song & now it’s given us Brexit.
• Churchill, basically a democrat, said: ‘the best argument against democracy is a five-minute conversation with the average voter’.
• Labour does nothing. Accidentally following Napoleon’s brief when he said: ‘never interrupt your enemy when he [she] is making a mistake’
• HMV sees 100 stores rescued by Canada’s Sunrise Records. BRC KPMG numbers for Jan seem quite good (+1.8%) after tough Nov/Dec
• Markit Services PMI for Jan in at 50.1 versus 51.2 in Dec. Second weakest in 6yrs. Says UK economy at ‘risk of stalling or worse’
START THE DAY WITH A SONG:
Yesterday’s song was When You Were Young by the Killers, today who sang:
Self satisfaction for the factions,
Who formed to tear us apart
Oh I gave you the Midas touch
As you turned round to scratch out my heart
RETAIL NEWS WITH NICK BUBB:
Ocado: No sooner had CEO Tim Steiner finished dead-batting the questions from press and analysts yesterday morning about the rumoured deal with M&S, on the back of the Ocado finals, than his phone was buzzing with reports of a fire at the Andover warehouse and just before the 1pm the company put out a statement to confirm that the fire brigade was dealing with an incident in the ambient section and that order fulfilment had been suspended. That inevitably caused a brief slump in the Ocado share price, but it was soon over and the shares continued their upward climb, to close the day over 4% up…
Grocery Market Share Watch: The latest Kantar and Nielsen grocery sales figures (for the 4/12 weeks to Jan 26th/27th) came out yesterday morning and the headline of the Kantar monthly overview (which focused on the full 12 week period) was “New Year’s resolutions lead to healthy grocery sales”. In passing, Kantar flagged that 18.3m households shopped at either Aldi or Lidl over the 12-week period and that grocery price inflation has remained at 1.3%. Their rival Nielsen ran with the headline “Consumer Interest in Healthier Options Increases Grocery Sales”, flagging that overall industry sales value growth picked up from +1.8% to +3.3% during the last four-week period (which was the same as the BRC sales reporting period).
Waitrose Watch: After enjoying improved trading in January, Waitrose reported a decent start to the new financial year yesterday morning, in JLP’s weekly overview, with a 4.1% increase in gross ex-petrol sales (c4% up LFL) last week, in w/e Feb 2nd (helped slightly by the cold weather and earlier fall of Chinese New Year). With no new store openings to speak of, LFL sales were only flat in H2, but Waitrose worked hard to improve gross margins by cutting back on discounting and price promotions, so our expectation is still that Waitrose operating profits will recover to just under £200m pre-exceptionals in y/e Jan, in the final JLP results due on March 7th.
John Lewis Trading Watch: By contrast, John Lewis started the new financial year on a weak note last week, as the w/e Feb 2nd was down 4.4% gross (c6.5% down on a “LFL” basis, excluding new stores like Westfield), as they were hit by “the snow”. In terms of sales mix, Home sales were down 6.0% gross last week, Electricals were 5.1% down and Fashion/Beauty sales were down by 2.1% gross. However, LFL sales were c2% down in H2 and gross margins were under a lot of pressure (unlike Waitrose), so, after a poor H1, full-year operating profits at John Lewis will not make pretty reading (we have about £140m pencilled in, pre-exceptionals, c40% down).
News Flow This Week: Tomorrow brings the Superdry Q3 update and the latest MPC interest rate meeting/Bank of England Inflation Report.