Langton Capital – 2019-10-01 – PREMIUM – Revolution Bars, Greggs, Marston’s, wages etc.:
Revolution Bars, Greggs, Marston’s, wages etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Should you be proud or ashamed if you regularly don’t know who a single ‘celebrity’ or ‘influencer’ is when they appear on the various shows that fill our screens?
Because I don’t and, since the 1980s, I wouldn’t recognise any of the actors on Emmerdale, Corry, East Enders or Hollyoaks and, until I was put right recently, I thought that Brookside and The Bill were still going strong.
So, when the tabloids intrude on my consciousness from time to time to inform me that this, that or the other person will be on Love Island, in the Jungle or in some other excruciating, multi-week show intended to wheedle out their most embarrassing fears and desires, I really couldn’t care less.
This isn’t meant to be judgemental but it’s rather from a position of deep and relatively satisfying ignorance. On to the news:
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BOOK REVIEW: FREAKONOMICS BY STEVEN LEVITT: This quirky book made an impact when it was released in 2005. It generally suggests that we are ‘reason-driven’ and are wont to alight on an explanation that may not, in truth, be correct. 1 Oct 2019:
• Levitt maintains that the world is not impenetrable, it is just hard to interpret.
• We backward-rationalise. The reasoning behind an event, be it the fall of the Berlin Wall, movements in the crime rate or whatever, are ‘explained’ in a way that satisfies a need. But this may not be correct.
A bit more detail:
• Levitt looks at crime stats, particularly in New York, where the fear of ‘rising crime’ continued far beyond the point at which it had actually started to fall.
• At the point of comprehension, people began to look for reasons. It was more police, said the police, longer sentences said the imprisonment industry or better educations, said the teachers.
• Levitt was wary of false predictions & correlations etc. He said that theories can quickly become wisdoms. But they may still be wrong.
• In 15yrs, the murder rate in New York fell by more than three quarters and Levitt suggested that this may have been due to the legalisation of abortion from 1973.
• Clearly this was somewhat controversial but he concluded that the pool of potential criminals was simply smaller.
• In the economic world, he suggests doctors may overprescribe, estate agents may want to sell quickly & easily rather than for a high price. Re the latter, he says the private property of estate agents themselves tend to be on the market for 10dys longer and sell for 3% more.
• Levitt says that things may be correlated but not causal. For example, there are more police officers per capita in Washington than there are in Denver – but the extra police officers didn’t cause the murders.
• The book is a bit unstructured, but has some interesting things to say.
• Levitt says if you fine parents for picking their kids up late from school, it could increase tardiness as, if the fine is low, it removes moral guilt without imposing a large-enough financial sanction.
• Teachers may fiddle tests, telling themselves they are benefitting their kids. But they are really benefitting themselves.
• Smaller offices are more honest than large ones as there is less anonymity.
• Pleasant weather makes people pay more, cold weather, they pay less.
• Levitt says ‘sunlight is the best disinfectant.’ Ridicule is sometimes more effective than a reasoned argument.
The book goes on to pose a number of questions:
• Why do drug dealers live with their mums? Because the average foot soldier is ‘earning’ peanuts.
• Where have all the criminals gone? See comments on abortion above. They (abortions) don’t affect so much child numbers as they do the age at which their parents have them.
• What makes a perfect parent? Noise gets in the way. American parents worry about guns and their kids. But their back-yard swimming pool is much more dangerous.
• Do ‘destiny IQs’ exist? Bit of a controversial ones.
• Are kids damned by their names? Harlem in the 70s. Not one single Debby but nearly 300 girls named ‘Unique’ (or Uneek, Uneque, Uneqqee).
• Look at the big picture. The probability is that your estate agent is cheating you. If you are overweight and your ankles swell up, you probably have diabetes etc.
GENERAL NEWS – PUBS & RESTAURANTS:
• Marston’s is reported to have indicated that it requires bids on c150 tail-end pubs (for around £45m) by the end of this week. The group has recently cut back on its opening programme in order to more rapidly pay down debt whilst maintaining its dividend. It updates on full year trading on 15 October.
• MARS has previously indicated its intention to reduce debt by around £200m with asset sales of around £40m in FY20 built into that number. The disposal being suggested would be in addition to these implied sales with a number of £70m or so perhaps more likely should the sale of the parcel of 150 pubs go ahead.
• This would accelerate the debt reduction process but, in the short term, it would impact earnings as the return on the cash raised (or debt repaid) would be lower than that on the pubs being sold.
• MARS’ dividend would remain secure and, as the company is moving towards a position where it should generate around £50m p.a. after the payment of a maintained dividend, it will still be in a position where it can decide to either pay down debt further (by the £50m p.a.) or restart its new-build programme.
• MARS will update on trading the week after next and, though this suggested disposal will fall into FY20, the company is likely to guide on any impact that it may have. Trading should have been reasonable, though the year has ended with a period of poor weather. Nonetheless, wet sales (for what remains a vertically-integrated company) should be holding up well but food sales coming under a little more pressure. Debt, in line with earlier statements, is likely to rise modestly for the year just ending as this will not yet reflect the debt reduction programme.
• Revolution Bars Group has reported full year numbers to 29 June 2019 saying that it has seen ‘considerable progress’ in the year with the business now ‘stabilised’.
• RBG says its results are in line with market expectations. Sales are up 6.7% at £151.4m. Adjusted EBITDA is £11.1m (vs £15.0m) with adjusted EPS of 3.4p (vs 13.0p last year). The headline loss before tax is £5.6m vs a loss of £3.6m last year.
• RBG says its strategy is ‘now focused on building on the improvements gained, investing in the existing estate and reducing bank borrowings.’ By the end of the FY, the group had seen LfLs >0% in 5 of the last 7wks with pre-booked Christmas sales strong increasing 15% (up 8% LfL) on same time last year. CEO Rob Pitcher says ‘a return to positive like-for-like sales in Q1 of the current year reflects the hard work by the team in stabilising the business.’
• Pitcher says ‘we will utilise surplus cash to reduce debt to such an extent whereby any return to expansion of the estate will be self-funding.’
• Greggs has updated on Q3 trading saying it is seeing ‘continued very strong sales growth.’ Total sales are +12.4% in the 13wks to 28 Sept with LfL sales +7.4%.
• GRG says it has opened 56 net new shops in the year to date and says ‘our expectations for the full year remain unchanged.’ The company says ‘as expected, the rate of year-on-year sales growth moderated as we came up against stronger comparative sales from the previous year, but sales were still up strongly, driven predominantly by growth in customer numbers.’
• GRG says it is ‘building stocks of key ingredients and equipment that could be affected by disruption to the flow of goods into the UK’ but overall adds ‘we continue to expect that year-on-year sales growth in the balance of the year will reflect the strengthening comparatives seen in 2018, and our expectations for the full year outturn remain unchanged.’
• UK Hospitality has commented on yesterday’s announcement that the Government will oblige businesses to raise the National Living Wage to £10.50 per hour by 2024 saying ‘the Chancellor’s announcement threatens a double whammy of a further unprecedented cost increase for employers and an adjustment down in terms of age, so we will need a clear regulatory framework with an independent review by Low Pay Commission.’
• UKH says ‘there needs to be a way to adjust NLW levels to react to economic changes; no fixed end point to achieving 66% median earnings and mitigation measures. These measures might sensibly include cutting employment allowance and NICs to help low paid workers keep more money and incentivise job creation.’
• UKH adds ‘hospitality is keen to attract British talent and part of that process will be to raise entry level wages. However, the cumulative costs of regulation and taxes over the past three years have wiped a third off the margins of hospitality businesses and this move, if marshalled in too quickly, will hurt business, damage jobs and not just stifle growth but reverse it.’
• English wine producer Chapel Down has reported numbers showing that losses almost trebled to £1.7m as the company ploughed money into expanding its vineyards and building a new brewery. In January, the firm opened its distillery, cocktail bar and restaurant, Gin Works.
• Jamie Oliver Group saw profits halve on the back of problems at the group’s restaurant division last year. The accounts reveal that Jamie Oliver received a £5.2m pay-out from his business empire before the UK restaurant operation collapsed with the loss of around 1,000 jobs.
• Jamie Oliver Group described its performance last year as ‘resilient’. It may have a different view for its performance in 2019. CEO Paul Hunt said (re 2018) that ‘we have emerged from the past six months with complete clarity around our vision and values, as well as a renewed focus on what we want to achieve in the coming years.’
• Emma McClarkin has been appointed as new CEO of the British Beer & Pub Association. Ms McClarkin was an MEP for 10yrs. Chairman Simon Emeny comments ‘Emma has a genuine passion for beer and pubs, combined with the technical skills needed to champion this fantastic industry. She has drive and enthusiasm and I’m excited about the energy she brings to the role.’ Emeny says that outgoing CEO Brigid Simmonds leaves an ‘incredible legacy’. Ms McClarkin has described herself as a ‘happy Brexiteer’.
• Carlsberg has said that it will halve its water usage at its brewery in in Fredericia, Denmark and reduce energy consumption by 10%. Carlsberg says ‘this is a big investment for us, but also a necessary next step on our journey towards ZERO water waste across all our breweries.’
• Research from Pragma Consulting has found that 19% of the general population have bought experiential gifts in 2018, compared to a third of millennials doing so. More than half (56%) of UK adults surveyed said they preferred the idea of receiving experiences over material gifts.
• Pragma Consulting found that the top five experience gifts bough in the UK in 2018 were, theatre, Spa, Concert tickets, Meals and cooking courses and Red letter day vouchers.
• The valuation consultancy, Brand Finance has found that the introduction of plain packaging to alcohol could cause brand-owning companies to lose a total of $234bn.
• The hospitality group, G1 Group has seen its revenue increase 5% to £132.2m for the year ended 31 March 2019. Brian McGhee, chairman of G1 Group , said ‘In 2017/2018, it is reassuring to see continued solid growth at G1 with significant increases in turnover, operating profit and EBITDA. Despite the challenges from rises in labour, rates and utility costs, a combination of targeted investment and careful management has enabled G1 to achieve strong results’.
• The Scottish spirits group, William Grant & Sons has seen its revenue increase 11.6% to £1.3bn during 2018.
• Zonal customers have launched a new Menu Management solution that will help clients to track recipe and menu information including allergens.
• McDonald’s has invested £4.3bn in its UK restaurants in the last 45 years, with the chain currently operating more than 1,280 restaurants in the UK. Since 2015, McDonald’s and its franchisees have invested over £500m in revamped kitchens and new technology such as self-order kiosks and delivery apps.
• DoorDash has warned users of a major security breach on May 4, 2019, affecting 4.9m users. DoorDash said ‘we became aware of unusual activity involving a third-party service provider. We immediately launched an investigation and outside security experts were engaged to assess what occurred.’
• Naïfs, a vegan and vegetarian bistro, is set to open in 56 Goldsmith Road, Peckham in October.
HOLIDAYS & LEISURE TRAVEL:
• The CAA has launched the biggest Atol refund programme ever, covering 360,000 people in the wake of the Thomas Cook collapse. A total of 106,000 Thomas Cook holidaymakers have been flown back to UK in the week since the operation began.
• Jet2.com and Jet2holidays is planning to conduct UK recruitment roadshows in the wake of Thomas Cook’s collapse, as well as organising drop-in sessions for former Thomas Cook staff working in resorts overseas.
• Business secretary Andrea Leadsom has come under criticism for not speaking to Thomas Cook executives during increasingly frantic talks between the company and the government leading up to its collapse last week.
• PWC comments on the global hotel market saying that ‘the outlook for 2020 is for slower global economic growth (of about 2.8%) as the global economy is affected by the USChina trade war, the risk of a no-deal Brexit, the threat of a sharp Eurozone slowdown and debt default risks in emerging economies.’ It says ‘international tourism is on the rise and 2018 saw a record 1.4 billion international tourist arrivals. But, the UNWTO World Tourism Organisation reports a slower pace of growth than seen in recent exceptionally strong years.’
• Leisure reasonable, B2B a bit less so. PWC concludes ‘tourism growth exceeds the rate of global economic growth and in the UK, the weak pound has provided an upside for inbound leisure travel. This latest UK Hotels Forecast reflects these trends with weaker business and leisure confidence and continued high new supply additions. More reliant on UK GDP, regional hotel market conditions are expected to get tougher.’
• Some 500 hotels in Spain could close after Thomas Cook collapse reports France 24. It quotes Spanish sources as saying the ‘situation could get worse if the government doesn’t take immediate action.’
• The capacity is likely to be filled but there will be significant disruption in the short and medium term. If the balance sheets of the various companies are not built to survive this kind of shock, then businesses could fail.
• Tunisian hotels are reported to have suffered at €70 million loss as a result of TCG’s collapse. The Tunisia National Tourist Office reports that 40 hotels were not paid.
• Bad debts in destination markets could incentives operators there (hotel companies etc.) to ask surviving operators for more cash up front. However, in the short term, their bargaining position will be weak.
• Marriott remains upbeat saying ‘it is crystal clear that Chinese travellers are still travelling abroad, (but) they’re much less likely to come to the U.S. today than they were just a few years ago.’
• STR has reported that August daily rate in the US rose 0.9% with REVPAR up. REVPAR has now been in an up-cycle in the US for 112 months.
FINANCE & ECONOMICS:
• The CBI reports that optimism in the financial services sector has fallen at its fastest pace since the financial crisis in the run up to Brexit.
• Chancellor Sajid Javid has now promised billions to consumers, business, the NHS, prisons, the police etc. and has said he will not borrow more or increase taxes.
• Sterling level at $1.2285 and €1.1279. Oil down at $59.68. UK 10yr gilt yield up 1bp at 0.49%. World markets up except in the UK with the Far East higher in Tuesday trade.
• Brexit & politics:
o The Independent has reported a source as saying that the Queen has asked her aides for the first time during her reign for clarification on just when and how she could dismiss a prime minister if that person refuses to step aside.
o The BBC reports HMG will put legal texts to Michel Barnier in the next few days. PM Boris Johnson says ‘I’m cautiously optimistic. We have made some pretty big moves, we are waiting to see whether our European friends will help us and whether we can find the right landing zone.’
o Opposition parties are still considering whether or not to table a vote of confidence in the current government.
o Sajid Javid has said that he would bring the ‘full armoury of economic policy’ to bear in the event of a no-deal Brexit.
START THE DAY WITH A SONG:
• Training courses intruding. Back soon.
RETAIL WITH NICK BUBB:
• Sainsbury: Out of the blue, Sainsbury has announced that the highly-regarded John Rogers, the former CFO and now the MD of Argos and the hot favourite to succeed Mike Coupe as CEO in due course, has got fed up with waiting and is leaving to become the CFO the advertising group WPP.
• JD Sports: JD Sports has been unable to persuade the wretched CMA from stopping its investigation of the Footasylum takeover so the Phase 2 inquiry will proceed and this will take more months of management time…
• ScS: With today’s finals (for y/e July), the Sunderland-based sofa and carpet retailer ScS emulate their bigger rival DFS last week in boasting about the sales growth they achieved in the year, but they also flag that current trading is “subdued” and that in the new-year it is a case of “so-fa, so bad”: LFL sales orders have tumbled by 7.6% over the last 2 months. The adverse impact of the hot weather over the key August Bank Holiday gets a mention, but ScS also highlight “the increased political and economic uncertainty that the UK is currently facing”