Langton Capital – 2019-09-09 – August Tracker, Thomas Cook, Air Partner etc.: (copy)
August Tracker, Thomas Cook, Air Partner etc.:
A DAY IN THE LIFE:
So, the grass didn’t get cut over the weekend because the mower threw a drive belt and I can’t get underneath the thing without risking having 300kg of filthy grass-cutting equipment fall on my head.
Which, as we’d put one rather lonely-looking short-grass stripe in the lawn, left us taking one step forward and at least two backwards because grass-cutting repair shops don’t open on a Sunday and they’re not likely to drop everything to help me put an oversized elastic band back on the machine in any case.
So, we’ve decided that long grass is ‘in’ this year and, if we have to live with it like this till next March or so, then so be it, do or die, come what may, dead in a ditch etc.
Of course, the more sensible thing to do would be to eat a bit of humble pie, ask the mower-menders if they could help me out, get the machine mended, cut the grass in a week or so and get on with our lives as though the whole thing had been a silly mistake. On to the news:
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AUGUST TRACKER: UK’s pubs & restaurants increase LfL sales by 1.6% in August and ‘maintain summer momentum’. 9 Sept 2019:
• The Coffer Peach Business Tracker for August reports that ‘collective like-for-like sales [were] up 1.6% in August.’
• The Tracker says that this maintains the momentum developed over the summer. Total LfL sales increased by 1.2% in July and rose by 1.4% in June.
• The summer as a whole has been impacted by choppy comps with the World Cup and the hot summer arguably distorting figures in 2018.
• Drink-led pubs and bars saw their LfL sales rise by 4.1% in August ‘on back of late month heatwave.’
• London outperformed the provinces with drink-led pubs in the capital recording a 5.0% increase in LfL sales. See Premium Email for more detail.
GENERAL NEWS – PUBS & RESTAURANTS:
• Domino’s Pizza Group has announced that Ian Bull, formerly finance director at Greene King, Ladbrokes and Parkdean, will succeed Helen Keays as Senior Independent Director with immediate effect.’
• The British Beer & Pub Association will encourage its members to label ingredients and calorie values on all beer bottles and cans in the EU by 2022. CEO Brigid Simmonds says ‘consumers want more details on what their beer contains and are conscious about calories too. They also want this information to be clear and transparent. In signing this memorandum of understanding, we are encouraging our members to display more information about calorie values and ingredients on cans and bottles of beer.’
• The MCA reports that turnover growth at branded restaurants should be around 1.9% in 2019. This is the slowest growth rate in a decade.
• The MCA says ‘the impressive growth of branded restaurants is diminishing, behind the strong growth of branded fast food and managed, branded and franchised pubs, at 4.8% and 4.1%, respectively.’
• The MCA says that branded restaurant outlet numbers are set to decline 1.4% in 2019 as ‘operators continue to focus on their existing estates for sales growth, aiming to improve standards whilst controlling costs, to grow average sales per customer and protect margins.’
• CGA has suggested that wine sales in the UK on-trade have continued to decline in 2019. It says, however, that ‘UK consumers are increasingly open to spending more on wine.’
• Volumes in the on-trade fell by 7.4% reports CGA with cash sales value down by some 2.4%. CGA says that while the value end of the market was still hugely important, there was significant interest in more expensive wines. It says ‘as consumers extend their knowledge of wine we see that more and more of them are willing to pay extra for it—so long as the quality is right. Educating drinkers about countries of origin and the differences between Old and New World could help to unlock extra spending.’
• Some 32.5% of shareholders voting at GNK’s Friday AGM voted against the approval of the directors’ remuneration report. Greene King says ‘we are disappointed by this result which we believe reflects some of our shareholders being aligned to the recommendation of one of the proxy voting agencies on this resolution, although other agencies and the majority of our leading shareholders (with whom we communicated with prior to the meeting) were supportive.’
• GNK says ‘we understand that some of our shareholders have concerns regarding the arrangements made for our former CEO’s [Rooney Anand’s] departure from Greene King. However, as we disclosed in our directors’ remuneration report, there were specific commercial reasons for the arrangements made (relating to our former CEO’s historic contractual terms and lack of restrictive covenants) and we believe the arrangements were necessary and appropriate to secure the best outcome for the company and its shareholders. The service contracts for all current directors conform to market expectations.’
• Greene King, which will have lost its independence by the end of the year, says ‘the remuneration committee will reflect on the results of this vote.’
• JD Wetherspoon is to cut the price of a pint of beer by an average of 20p across its 879 pubs. More than 600 pubs will be selling Greene King-brewed Ruddles for £1.69 with a further 160 pubs offering a pint for £1.59 or less. Some 36 pubs will be selling pints for £1.39. Chairman Tim Martin says that lower tariffs post Brexit will mean that the price cuts should be sustainable.
• Big Hospitality reports street food market operator KERN as saying that there is room in London for more street markets.
• The number of bottles of wine produced in the UK last year has been revised down from 15.6m to 13.2m per DEFRA. A total of 3m vines are likely to be planted this year.
• The Social Market Foundation has said that Brexit will allow taxes on alcohol to be changed should the government wish to do so.
• JW Lees has announced a range of five new beers to be introduced for the Christmas period. The beers will include Plum Pudding and Big Bad Wolf.
• BBC reports on charity Wrap & government’s suggestion that restaurants should serve smaller portions in order to cut down on the c1m tonnes of food that is prepared but thrown away each year. Wrap says that 75% of it could have been eaten.
• Roadchef is to spend around £20m refurbishing its Watford Gap service station, the first to open in the UK.
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook Group is reported to be in a stand-off with its pension scheme trustees ahead of the upcoming meeting this week to decide upon the group’s £900m rescue deal per Sky.
• Sky reports that pension trustees are demanding ‘sweetened terms in exchange for backing the recapitalisation of the world’s oldest tour operator.’ The pension scheme is in surplus on an accounting basis
• Global aviation services company Air Partner plc has updated on H1 trading for the six months ended 31 July 2019 saying ‘since the Group’s AGM statement on 26 June 2019, the operating environment has continued to be challenging across the global aviation industry.’
• The group says ‘despite this macroeconomic backdrop, Air Partner’s first half performance has been slightly stronger than expected. It is now anticipated that the Group’s profits will be more evenly weighted across the first and second half of the financial year.’
• Air Partner adds ‘the global charter market is a volatile industry and, against this backdrop, the Group manages the business for the long term.’
• TripAdvisor has been accused of allowing fake five-star reviews to artificially boost the ratings of some of the world’s largest hotel brands. A Which? Travel investigation suggested that fake reviews were widespread. Which says ‘TripAdvisor’s failure to stop fake reviews and take strong action against hotels that abuse the system risks misleading millions of travellers and potentially ruining their holidays. Sites like TripAdvisor must do more to ensure the information on their platforms is reliable and if they continue to fall short, they should be compelled to make changes so holidaymakers are no longer at risk of being duped by a flood of fake reviews.’
• Hand Picked Hotels has seen losses increase in the year to 29 November 2018 to £4.3m. The group remains optimistic about its growth prospects. Turnover fell by 2.4% to £60.2m. The hotel company says ‘the group is still well positioned for growth as the market begins to recover, driven by investment that will deliver increases in sales and operating profit.’
• Which? has reported that Belfast International is the worst airport in the UK with an approval score of 42% based on long queues, crowded terminals and pricey parking charges. Luton came in at 43% with Manchester T3 at 47%. Doncaster Sheffield came top and was ranked as ‘cosy’.
• The US hotel industry saw occupancy fall by 0.4% in the week to 1 Sept with average rate +1.4%. REVPAR was +1.0%.
• Facebook made its dating service available to US users last week, a year or so after announcing that it was going to introduce it.
FINANCE & ECONOMICS:
• The Halifax reports that house prices in the UK rose by 1.8% in the year to August. It says ‘there was no real shift in house prices in August as the average property value grew by just 0.3% month on month.’
• Halifax says ‘while ongoing economic uncertainty continues to weigh on consumer sentiment – with evidence of both buyers and sellers exercising some caution – a number of important underlying factors such as affordability and employment remain strong.’
• The Recruitment and Employment Confederation has reported that August saw the slowest increase in job vacancies in the UK in 6yrs. The REC said ‘an uncertain outlook also weighed on candidate numbers’.
• The US economy added fewer jobs in August than expected. President Trump has called on the Fed to cut interest rates.
• Sterling down at $1.2278 and €1.1131. Oil up at $62.10. UK 10yr gilt yield down 9bps at 0.51%. World markets broadly higher with Far East mixed in Monday trade.
• Brexit & politics:
o Boris told to get a deal or delay Brexit. His threat that he would rather die in a ditch than undertake the latter is rather dark.
o FT reports ‘much of continental Europe is hardening its attitude to Brexit’.
o Bill calling upon Mr Johnson to delay Brexit if no deal has passed through parliament should become an Act today.
o Amber Rudd & Jo Johnson gone. Matt Hancock, Nikki Morgan etc still in the Cabinet.
o Parliament could be prorogued as early as tonight.
START THE DAY WITH A SONG:
• The song is taking a short break due to exam commitments.
RETAIL WITH NICK BUBB:
• Saturday’s Press and News (1): The big story in the Saturday papers was the news that the beleaguered Arcadia fashion group had announced a huge £177m loss (after exceptional costs) for y/e August 2018 and, although this was ancient history in the terms of the recent CVA, this got tons of coverage. The Guardian highlighted that the auditors PwC had admitted that there is “material uncertainty” about whether Arcadia can refinance the £310m debt on the Oxford Circus flagship Top Shop store in December, but the Daily Mail spoke to the embattled Philip Green, who insisted that “I WILL save my business”.
• Saturday’s Press and News (2): The Times had a clutch of other Retail stories, notably a feature on the troubled Sports Direct, highlighting that the AGM next week will be held above the new Flannels store in Oxford Street and that other parts of the business, like Sofa.com and Game Digital, need scrutiny. The Times also flagged that H&M has been getting tough on rent deals with its UK landlords and noted that Naked Wines is still thinking of getting a US listing (given that most of the business and growth potential is now in the US) and that M&S has recruited the former Tesco Clubcard boss, Danielle Papagapiou, as Head of Loyalty. The Daily Mail focused on JD Sports in its “Popular Shares” column, ahead of next week’s interims, and on page 3 it had a big feature on the new Oxfam retail park store in Oxford. Finally, the veteran City commentator, Neil Collins, stuck the boot in
• Sunday’s Press and News (1): The resignation of the Work and Pensions Secretary, Amber Rudd, in disgust at the PM’s purge of moderate Tories and his failure to pursue a Brexit deal with the EU, was the main focus on the front pages of the Sunday papers, but there were quite a few Retail stories elsewhere. The main Business story in the Sunday Telegraph was that Sainsbury is weighing up its options for the troubled Sainsbury Bank ahead of the Capital Markets Day later this month. The Sunday Telegraph also flagged that the troubled Motor dealer Pendragon has been weighing up whether to call in restructuring experts and that creditors lost £100m from the collapse of the Jack Wills chain. The Sunday Times noted that a private equity firm is looking at a buy-out of the beleaguered Intu Properties shopping centre business, Morrisons is likely to announce a disappointing 2%
• Sunday’s Press and News (2): The Mail on Sunday highlighted that John Lewis Partnership is likely to announce weaker interim results next week, given the impact of discounting on John Lewis, quoting our forecast of a £15m pre-exceptional loss, even though Waitrose profits are likely to have held up pretty well. The Observer had a big feature on Marks & Spencer after its exit from the FTSE 100 (“Cheaper rivals and Online retailers have usurped M&S’s faded glory”). Including a look at what’s happened to the other retailers who were also in the FTSE 100 index when it was founded in 1984. Finally, the Review section of the Observer had a big feature on Greggs, headlined ”On a (vegan) roll: the rise and rise of Greggs”.
Primark Watch: Today’s pre-close update from the food manufacturing conglomerate ABF reveals that its mighty Retail arm, Primark, continues do well, albeit Q4 failed to strengthen. After 40 weeks of the financial year Primark was running 4% up in gross sales and that run-rate was maintained for the 52 weeks to Sept 14th (the City had pencilled in +5%, given weak Q4 comps). LFL sales were 2% down, with Europe down 3% and the UK down 1%. The US business continues to grow pretty well and Primark has announced that it is entering Poland next year, its thirteenth market. Most interest, however, will probably be in the warning that Primark’s very healthy operating margins will weaken in the new financial year, given higher markdowns and the impact of the weakness of sterling on buying costs.
News Flow This Week: There is plenty going on in the Retailing sector this week to distract us from the continuing political drama in Westminster…Tomorrow brings the JD Sports interims, whilst the embattled Sports Direct and Superdry both hold their AGM’s on Wednesday. Thursday then brings the Morrisons interims and the John Lewis Partnership interims.