Langton Capital – 2019-02-12 – TUI, discounts, beer sales, Just Eat, London hotels & other:
TUI, discounts, beer sales, Just Eat, London hotels & other:
A DAY IN THE LIFE:
My childhood memories are a bit dim now but, I can remember, in the 60s in Hull (a ‘progressive’ Northern city) we were taught to read using ITA.
It stands for Initial Teaching Alphabet (I always thought it was RTA – but that was just the Hull accent coming into play) and involves teaching kids to read phonetically with a bunch of other letters (to signify th, ng and so on) thrown in.
It looks like a not-unattractive but largely unintelligible cross between Anglo Saxon and gibberish but then, having learned to read like uneducated idiots, we were obliged to learn it all again at the age of seven and, after all the years of unforgivable trauma that this has caused, I’m looking for somebody to sue.
Or, I should say, Iym lukking for sumbodee too soo. On to the news:
PUBS & RESTAURANTS:
• Discounts still a major feature as we approach the second half of February. Prezzo 50% off, Bella Italia 40% off, Café Rouge 2nd main for a quid, Pizza Express 25% off etc.
• The road back to full margin will be a tough one. Everyday low pricing may have been a better offer. That and a decent, non-cynical, added value product.
• Little news on the sale process (if any) for Pat Val. Sports Direct will not bid. Luke Johnson and / or Risk Capital may have been considered as a bidder under some circumstances but, given the history of the company’s failure, that may not be possible (or sensible).
• Accountant BDO will release its 6-monthly Restaurants & Bars Report later this morning.
• BBPA has stated that beer sales have risen by 2.6% in 2018 across the on & off trades combined, representing its largest increase in 45 years. Beer sales were boosted by England’s success in the World Cup and good weather.
• Commenting on BBPA’s beer sale findings, Chief Executive of the organisation, Brigid Simmonds said: ‘2018 has been a good year for beer and pubs. Considering the heavy cost burdens the industry faces from high beer duty, business rates and rising costs in general, it’s great to see beer sales doing the best they have for some years’.
• The data confirms industry-wide comments that wet sales have performed well in recent months. Clearly the weather and the World Cup have been a positive influence but, as volumes have risen in absolute terms, the increased sales have not been as a result solely of premiumisation and LfL pub sales increases have not been driven solely by capacity reductions.
• The positive beer news for the year of 2018 as a whole was crowned by a c6% increase in beer volumes in December. Some seven months in 2018 saw volumes ahead of 2017 with sales in May, June & July being particularly strong.
• US activist investor Cat Rock demands Just Eat hand control to a rival through a delivery merger. The investor accuses Just Eat of ‘repeating past mistakes’.
• The Scotch Whisky Association has won a six-year legal battle to prevent a German distillery from using the term ‘Glen’ on its bottles.
• Starbucks is to launch a delivery trial in London later this month, in partnership with Uber Eats. Roz Brewer, group president and chief operating officer for Starbucks, said: ‘We’re building on key learnings from past delivery pilots and by integrating our ordering technology directly with Uber Eats, we’ve unlocked the ability to bring Starbucks to customers for those times when they’re not able to come to us’.
• UKHospitality has complained about Redbridge Council’s decision to introduce a late-night levy, with Chief Executive Kate Nicholls commenting: ‘It is ridiculous that we are still having a conversation about the non-existent merits of the late-night levy and councils are still considering introducing it. The House of Lords Licensing Committee stated that it had limited benefits to policing and managing the late-night economy and recommended that it should be abolished’.
• Michael Gove, environment secretary, has been warned by members of Britain’s food industry that the ‘catastrophic impact of a no-deal Brexit’ must be resolved before they are willing to continue cooperating with government consultations.
• Warrens Bakery expands its partnership with Casual Dining Group, aiming to reach 700 sites over the next five years.
HOLIDAYS & LEISURE TRAVEL:
• TUI reports Q1 performance in line with expectations, with underlying EBITA of -€84m. The loss was driven by weak performance in its Markets & Airlines business due to the knock-on impact of the Summer 2018 heatwave.
• TUI also reported overcapacities in Spain arising from the shift in demand to the Eastern Mediterranean, pressure on yields, continued Pound Sterling weakness, and strong ¬comparatives for Nordics in Q1 last year as factors that contributed to the loss.
• Regarding the 2019 outlook, TUI said ‘As detailed in our announcement on 6 February 2019, we expect underlying EBITA rebased at constant currency to be broadly stable in FY19 compared with the record performance in FY18 of EUR 1,177 m1, with a continued strong performance in Holiday Experiences offset by a continuation of sector headwinds in Markets & Airlines.’
• TUI also commented on Brexit, saying ‘With regard to the UK’s exit from the EU in 2019, the main concern remains whether our airlines will continue to have access to EU airspace. We continue to develop scenarios and mitigating strategies for various outcomes, including a “hard Brexit”, depending on the political negotiations, with a focus to alleviate potential impacts from Brexit for the Group.’
• STR reports London hotel occupancy up 2.4% to 71.7%, ADR up 3.2% to £131.92 and RevPAR up 5.7% to £94.60 in January 2019.
• Global Travel Group managing director, Andy Stark, predicts a flurry of bookings in the next two months and urges companies to secure repeat customers.
• Heathrow reports 5.9m passengers travelled through the airport in January, up 2.1% yoy. Africa and East Asia continue to be among the best performing regions, up 9.7% and 5.6% respectively.
FINANCE & ECONOMICS:
• ONS reports UK economy grew by 1.4% in 2018, its slowest rate in 9yrs. Factory output including car production fell.
• ONS reports quarterly growth down to 0.2% in Q4. Chancellor Philip Hammond says the economy is still ‘fundamentally strong’.
• BBC reports ‘a slowdown was expected. But the economy has hit the brakes harder than economists thought it would.’ The UK has been impacted by Brexit uncertainty but has also been caught up in a global slowdown. Q4 growth in the UK, though slow, could have been ahead of that in many European countries.
• Economic momentum going into 2019 has been poor. The NIESR says ‘the UK economy weakened sharply at the end of 2018, with falls in output in all of the major sectors in December. While single month figures can be volatile, the widespread weakness in official output data and many business surveys does not augur well for economic performance in the United Kingdom in 2019.’
• Sterling lower at $1.2861 and €1.1402. Oil up a fraction at $61.82 and UK 10yr gilr rate 1.18%. World markets higher yesterday with Far East mixed this morning.
• Politics, Brexit etc.:
o Nasty Party still flag-waving & shooting from the hip in all directions. Incompetent Party wisely keeping schtum.
o UK Defence Secretary says UK military should be more muscular, spend more money etc. Has nobody read the history of the 50s & early 60s, the retreat from Empire, Balance of Payments problems, devaluation debacles etc.? Bases East of Aden? Really…
o Competence, where art thou?
o Trade department officials have said that it will not be possible to renegotiate all trade deals by end-March. The UK has signed 2 to date (Switzerland & Chile) and has c70, excluding the deal with the EU, to go. Dr Liam Fox said that trade deals would be ready to sign at a minute’s notice.
o Chris Grayling has declined to comment on any break fee with the now-sacked, ferry company that wasn’t a ferry company. The government is being sued by Eurotunnel for its ‘secretive & flawed’ decision to charter firms to run extra ferries.
o MPs have dismissed as having ‘no credibility’ the claim by chancellor Philip Hammond that there would be a ‘deal dividend’ when the UK agrees something, anything with the EU.
o Theresa May has ruled out a customs union with the EU. Labour has proposed this & Michel Barnier has said that it could be a solution to the problems in Ireland. A union would increase pressure to allow free movement of people and capital.
PRIOR DAY LATER TWEETS:
• Later tweets: Sports Direct pulls out of bid for (any of) Patisserie Holdings (company or sites) citing lack of credible information.
• A company can be toxic if controls were so poor that directors, auditors etc didn’t know how it was doing. Buying assets is safer
• LDC says some 18,355 shops were shut in 2018, largest number on record.
• TCG airline sale would reduce its debt but it would need to buy ‘lift’ from someone. Swap one set of liabilities for another?
• PwC partner Andrew Gray tells ABTA briefing that travel industry ‘should be thinking about the worst case’. No certainty in short term
• Dutch government talking to 250 UK companies about moving operations to Netherlands.
START THE DAY WITH A SONG:
Yesterday’s song was There is a Light That Never Goes Out by The Smiths. Today, who sang:
Another heart has made the grade,
Forget it, forget it, forget it
I don’t understand how the last card is played
RETAIL NEWS WITH NICK BUBB:
Debenhams: As flagged in today’s papers, the Debenhams refinancing deal has been announced at last this morning, but the company makes clear that the £40m extra headroom in the new facility is only “a bridge to facilitate a broader refinancing and recapitalisation” and that “a comprehensive refinancing” will need to be concluded by the end of Q2. In this context, it is brave to have also announced a new own-label long-term sourcing partnership with Li & Fung.
News Flow This Week: We had hoped to see the provisional verdict of the CMA on the planned merger of Sainsbury and Asda this week, but yesterday’s CMA announcement about the amended timetable did not imply that a decision is imminent…But we will get the Dunelm interims tomorrow and Thursday is definitely Valentine’s Day (even if the key Brexit vote in the House of Commons expected that day seems to have been postponed again…). The ONS Retail Sales figures for January are out on Friday morning.