Langton Capital – 2019-09-10 – PREMIUM – Abokado, 888 Holdings, C&C, discounts etc.:
Abokado, 888 Holdings, C&C, discounts etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
A bit of a rush this morning but here’s a question for you, why do dogs bark at everything with wheels, are they personally affronted by the physics, or something?
Or do they genuinely think that, if they can catch that pesky bus, they’re going to give a good hiding and teach it not to drive as though it owns the road, at least not on Fido’s territory?
More likely it’s some sort of pursue instinct and, as the bin men, the postie and even the bus tend to come and then leave after the dog has had a good bark, he may be associating his barking with a retreating enemy so job done, innit.
Anyway, got a bit on so, without further ado, let’s move on to the news:
BOOK REVIEW: THINKING FAST & SLOW. DANIEL KAHNEMAN. Nobel Prize winning Psychologist Daniel Kahneman is famous for his work on decision making. 10 Sept 2019:
• Prof Kahneman says we are what we are. We have been ‘civilised’ for c1% of the time that we have been on earth. It is no wonder that we occasionally (or more than occasionally) ‘go back to our roots.
Do we really ‘control’ our own behaviour?
• Not entirely, no. Prof Kahneman calls instinctive thinking System I and ‘educated’ or ‘civilised’ thinking System II. He says the latter does not control the former, at least not to the extent that we hope and think it does.
• System I is easy. It requires less effort and, as such, is a fall-back if we can’t be bothered to think about things more deeply. E.g. ‘take back control’ vs the boring detail involved in experts unpicking 43yrs worth of legislation.
• People are overconfident. Often this is a male trait. Do or die etc. As a species, this may work as we do not need all the men. Women and children are more important & the species can afford for men to fight, take crazy risks, fall off cliffs, tussle with lions, drive too fast etc.
• However, this may not work too well with leaders in the developed world.
• Nothing is perfect. But System I has stood the test of time. At least on the Savannah and in small, stone-aged group.
• It has protected us as a species. We recoil from snakes etc. but it isn’t an answer to everything.
• Not falling for the ‘tricks’ that System I can play is about self-control. There is less of this about than we would like.
• We are primed to behave in certain ways. Assuming ceteris paribus that is. Draw a pair of eyes on the wall of the office and people will be more honest. Signing an ‘honesty clause’ before making an insurance claim ditto.
• This means we can fall for ‘strong leaders’ who are sure of themselves. See comments on overconfidence above.
• Repetition is powerful. It allows System I to take over. It’s easier to believe than to question. A lie, repeated often enough, becomes ‘the truth’.
• Anything a human can do to reduce cognitive strain, leads to a relief. A feel-good factor. Decision-making can be abrogated.
• Happy people think less. Miserable people might make better leaders. Jovial clowns make bad decisions. That’s a controversial one.
• Tired people are more receptive to adverts and commercials. Ditto hungry, worried or stressed people.
• Very little repetition is needed before things become normal. Witness bizarre cult behaviour, totalitarian regimes, slogans etc.
• We are primed to come to certain conclusions, and this can be corrupted. Some leaders know this intuitively, others read it in books.
• The ‘halo-effect’ means we ascribe other attributes to a good tennis player, a pleasant shopkeeper etc. They may know nothing about, say, politics.
What you see is all there is (WYSIATI):
• We concentrate on what is there, not what might be, or should be, there. Given a list, it’s hard to think beyond it.
• Cognitive ease influences the way in which we make decisions. If it’s easier (System I), then we’ll go that way.
• You can’t ask a question without influencing the answer.
• Everyone thinks they have ‘done more than their fair share’. A family may have done 150% of the housework. They are familiar with what they have done, but not what their parent or siblings may have done.
Other concerns & factors:
• This is a fascinating book but it’s a bit dense, there’s a lot to get through. Just a few random observations.
• Putting instructions in a faded font makes people concentrate more. System II has to take over.
• The Law of Small Numbers. More extreme outcomes are likely the smaller the sample size. This can lead to ‘bubbles’ and bad decision making.
• People are not adequately sensitive to sample size. We favour certainty over doubt. We say ‘they think this down the pub’ but that doesn’t mean that the population as a whole will be of the same opinion.
• We jump to conclusions. We then become ‘invested’ in our conclusion and ‘double-down’ rather than take on board new evidence. Scientists wouldn’t get very far if they first made their minds up and then ignored subsequent experiments.
• You can ‘anchor’ people to a certain view. It is then hard for arguments to progress or diverge. Supermarkets saying ‘only 6 per customer’ will find customers buying more of something than they otherwise would have done. They have been ‘anchored’ to a feeling of scarcity.
• Re-reading Langton’s synopsis brought home just what a powerful book this is. There is much more in it. We may come back to it at some point in the future.
GENERAL NEWS – PUBS & RESTAURANTS:
• Abokado is to undergo a CVA. The operator says it has suffered from slow trading and from a ‘significant sophisticated online banking fraud which materially impacted working capital and compounded the trading issues.’ This occurred in July.
• Abokado has seen ‘raw material and labour cost pressures, property cost increases, intense competition as well as the impact of weakening consumer confidence.’ CEO Mark Lilley says the ‘proposed CVA will put Abokado in the best possible position to move forward in an uncertain environment. It will allow my excellent management team to continue pursuing our vision of bringing freshly made, Pacific-inspired food to more people.’
• C&C has, as previously reported, been ‘reviewing and seeking the views of a wide range of shareholders on the listing arrangements for C&C’s shares.’ It says most of its business is now in the UK and it is ‘appropriate for C&C to seek admission to the FTSE UK Index Series.’
• C&C will delist in Ireland from 7 October and is aiming to be listed in the UK from the FTSE UK Index Series quarterly review on 4 December 2019.
• Propel reports that Dan Warne, MD of Deliveroo in the UK & Ireland, has departed his job. Warne has led the UK & Ireland business since 2014.
• Property company Shaftesbury has celebrated the opening of its Seven Dials Market, to be run by KERB. Shaftesbury says ‘the opening of Seven Dials Market has brought something very special to Seven Dials. The line-up of operators is interesting, innovative and diverse, and the building itself also plays a key role.
• KERB adds ‘after seven years of creating and supporting a community of food traders to thrive on the streets of London, we are incredibly excited to be taking the next step for KERB.’
• Springboard has pointed to reduced numbers of shoppers on the country’s High Streets as shoppers continue to move to retail parks and to shop online.
• Springboard reports a 1.9% drop in shoppers last month compared with the same month a year ago. It says that shopping centres suffered a 2.2% drop in visitor numbers adding ‘only retail parks, with their combination of activities and shopping, were able to buck the trend, and there is little sign that the stresses on retail will abate any time soon.’
• Discounts at Pizza Express now up to 30% off food.
• Planning permission has been granted for the construction of a multi-million pound ‘distillery experience’ in Northumberland. The Gefrin Distillery Experience will create up to 50 new jobs.
• JD Wetherspoon & M&B’s Miller & Carter brand have been ranked among the healthiest high street businesses by a YouGov poll.
• The same poll placed Greggs as the top fast-food chain with Pizza Express at number two, then JDW (again), Costa Coffee and Zizzi.
• The Red Lion is the most common pub name in the UK. The Royal Oak is no2 with The Crown coming in at number three.
• The Sunday Times reports that the inquest into the death of a teenager who died after eating at a Byron burger restaurant is to resume this week. Byron comments ‘we would like to extend our deepest condolences to Owen’s family. We always take food allergies extremely seriously and have a comprehensive set of measures in place.’
• The US is reported to be considering potential tariffs on a number of French goods including wine. Bloomberg says this is as a result of the country’s digital tax levy.
• A subsidiary of Chinese online retailing giant Alibaba is to launch an e-commerce service in India in the next few months.
• US burger co Wendy’s reduced its profit outlook for the year as it is to roll out a breakfast menu across the US. One-time investments of around $20m are expected. Wendy’s no longer anticipates growth in its core earnings. Its shares dropped by 3% or so on the news.
• Shares in shopping centre owner Intu rose more than 10% yesterday on suggestions that it could be taken private.
• Alibaba chairman Jack Ma is to leave the company today. Mr Ma first owned a computer when he was 33 years old.
HOLIDAYS & LEISURE TRAVEL:
• Travelodge has reported higher sales and profits in the first half of its current year, the 6mth period to end-June.
• Travelodge reports sales up 6% with underlying profits up by £1.1m. Average room costs have slipped but the group credits its ‘super rooms’ concept and ‘budget chic’ Travelodge Plus hotels for the overall positive performance.
• Travelodge CEO Peter Gowers says the company should open 17 new hotels this year. He says ‘we’ve been investing in greater choice for customers while maintaining our reputation for low prices, helping us attract more and more people looking to make their travel money go further in these uncertain times.’
• Travelodge adds ‘against the backdrop of Brexit uncertainty and a slowing economy, there are clearly some challenging trends to deal with.’
• The number of tourists visiting Hong Kong fell by 40% in August from the same month a year ago. July had been only 5% behind 2018.
• Iata has reported that global passenger demand rose by 3.5% in July on the same month last year. International demand was up 2.7%. Both numbers, though positive, are down on growth rates seen earlier in the year.
• Iata says ‘July’s performance marked a soft start to the peak passenger demand season. Tariffs, trade wars, and uncertainty over Brexit are contributing to a weaker demand environment than we saw in 2018.’
• STR reports preliminary numbers for the US hotel industry in August saying that occupancy was broadly flat with rate up 2% and REVPAR consequently up 2% as well.
• Brand USA has said that it expects UK visitors to the US to stay flat at around 4.7m this year. Brand USA says ‘even a flat year is a good year and we’re not going to have sleepless nights over it.’
• 888 Holdings has reported H1 numbers saying it has made ‘continued strategic progress.’ Group revenue increased 2% to US$277.3 million (H1 2018: US$273.2 million) with LfL Group revenue up 7%.
• 888 reports adjusted EBITDA of US$41.8 million (H1 2018: US$52.4 million) with adjusted profit before tax of US$27.1 million (H1 2018: US$42.5 million).
• 888 CEO Itai Pazner says ‘888 has delivered a solid performance in the first half of 2019. The Group’s business in the UK has continued its recovery.’
• Mr Pazner continues ‘the Board continues to believe that 888 is very well positioned for the future as a result of the Group’s diversification across products and markets, product leadership, and first-class team. Trading during the second half of the financial year to date has been in line with the Board’s expectations with average daily revenue 6% higher year on year representing a 9% increase at constant currency. This has been led by a 24% year on year revenue increase in the UK.’
• Netflix and Amazon almost doubled the amount they spent making TV shows in Britain last year. Features include The Crown and Good Omens.
FINANCE & ECONOMICS:
• The ONS has reported that the UK economy grew by 0.3% in July providing a stronger start to Q3 than had been expected. Services led the way. The ONS says ‘while the largest part of the economy, the services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.’
• The NIESR says ‘the UK economy is on course to grow by 0.3 per cent in the third quarter of 2019, a resumption of growth after a 0.2 per cent fall in the second quarter when production had slackened after being boosted in the first quarter by stock-building ahead of the original Brexit departure date.’
• If correct, the UK will avoid a technical recession. NIESR says ‘it is not clear how long growth will continue. Only the services sector is expanding, primarily to meet higher demand from consumers driven by increased household incomes fuelled by rising real wages.’
• Meanwhile KPMG has suggested that the UK will slip into recession in the event of a no-deal Brexit.
• Sterling up at $1.2342 and €1.1172. Oil up at $62.80. UK 10yr gilt yield up 7bps at 0.58%. World markets mixed. UK down yesterday, Europe up and US mixed. Far East higher in Tuesday trade.
• Brexit & politics:
o House of Commons Speaker John Bercow is to stand down at the earliest date of either 31 October or the dissolution of parliament ahead of a General Election.
o The 5wk prorogation of parliament started yesterday evening.
o The Times reports that the team working on a Brexit deal has been shrunk down to just 4 individuals.
o Boris Johnson has told the Irish PM that not getting an exit deal would be a political failure.
o Veteran Tory Ken Clarke has said that a no-deal Brexit would be more damaging to the UK economy than would a Corbyn premiership.
o The Centre for Economics & Business Research has suggested that the UK’s post-Brexit economy could be transformed by a boom in the science, technology and healthcare industries.
o Tory Party still sitting on a comfortable poll lead. Labour & other turkeys not voting for Christmas. Not yet, at least.
o The bill demanding the PM delay Brexit if he cannot secure a deal has entered UK law.
o A Reuters poll suggests that most respondents believe that Brexit will be delayed. Some 35%, however, think the UK will crash out without a deal at the end of next month.
o Mr Johnson’s government lost a second attempt last night to force a General Election. Isn’t that played six, lost six?
o Theresa May’s chief Brexit negotiator Olly Robbins is to join investment bank Goldman Sachs next year in order to advise & look into ways that the US bank make money from the upheaval.
o FT quotes ‘opponent’ as saying ‘we are back to the Olympic Games image of Mr Johnson stuck on a zip line, waving Union flags and waiting for Labour to cut the wire.’
START THE DAY WITH A SONG:
• The song is taking a short break due to exam commitments.
RETAIL WITH NICK BUBB:
• JD Sports: The JD Sports share price has had an extraordinarily good run, propelling the market cap of the group over the £6bn mark, but there is no sign of the growth slowing down. Today’s interims (for the 26 weeks to August 3rd) are distorted by the new IFRS 16 accounting, but underlying PBT in the first half was 36% up at £166m (on the back of heady 10% LFL sales growth in the core UK chain) and the boss Peter Cowgill says that “Notwithstanding the ongoing uncertainty with regards to Brexit, the Board is confident that, without the impact from the transition to IFRS 16, the Group would have been on track to deliver headline profit before tax for the full year at the top end of market expectations which currently range from £402m to £424m”. One highlight is the strong contribution from the Finish Line acquisition in the US, helped by 5% LFL sales growth, and we look forward to
• Sports Direct Watch: Hot on the heels of the news that Flannels, the successful and upmarket bit of the Sports Direct empire of #MadMike, finally opened its much delayed flagship fashion store on Oxford Street last week, the Store Design expert John Ryan reports today in his daily Newstores blog that #MadMike has also just opened the 38,000 sq ft ex-BHS store in the centre of Leicester as a 2-floor USC and Sports Direct flagship store, in the premium style of the Lakeside store opened last year. And the Daily Mail picks up the Sky News story that #MadMike has bid for the struggling Links of London jewellery chain (although he is up against the scavenger fund Hilco).
• Today’s Press and News: We’ve only really had time to look at the FT so far this morning (as we are making our way to the JD Sports meeting in the City) and last night’s further defeats for the Government and stormy scenes in the beleaguered House of Commons came too late for the front page (although the resignation of the Speaker, John Bercow, is highlighted). In terms of Retail news, the main focus is on the Primark warning that operating margins will come under pressure in the next 12 months, but the Lombard column piece in the FT (“Pukka Primark”) says that “the Primark recipe looks good for a while yet”, despite the pressure on LFL sales. Lombard column also looks at the sum-of-the-parts debate about the embattled shopping centre group Intu Properties, after the share price jumped yesterday in response to the Sunday Times story that Orion Capital is interested in the value of the
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Morrisons break Asda’s eight week winning run, with a well-timed victory ahead of Thursday’s interims that reflected only 13 promotions. The overall Morrisons basket cost just £59.71, 69p cheaper than second placed Sainsbury. Asda was not far away on £60.77, but Tesco was well behind on £60.60 and Waitrose was way off the pace, as usual, on £71. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Tesco again, as its c25,000 sq ft superstore in Galston in Scotland (which is near Kilmarnock, south of Glasgow) came top, with 74 points out of 100, in a relatively low-scoring week.
• News Flow This Week: Tomorrow brings the AGM’s of both the embattled Sports Direct and Superdry. Thursday then brings the interims from both Morrisons and the John Lewis Partnership.