Langton Capital – 2020-02-19 – PREMIUM – Green issues, migrant workers, Airbnb, SARS v Covid-19 etc.:
PREMIUM – Green issues, migrant workers, Airbnb, SARS v Covid-19 etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Whilst the rain has been a problem for many, it seems to have kept some indoor attractions busy as, when Langton tried to take some offspring, said offspring’s cousins etc to the cinema at the weekend, it couldn’t get it.
And, as we were being threatened with a showing of Dr Doolittle, that wasn’t an altogether bad result. Indeed, as we managed to get the kids into a later showing while we wandered around the supermarket and Wilko like lost souls spending money, it wasn’t a bad outcome at all as we weren’t going to get much gardening done, were we?
Anyway, the Langton estate, which is 1) large and 2) ugly by suburban standards, has been getting a good drenching such that we reckon 10cm of rain this weekend and 10cm the weekend past adds up to about 3,000 tonnes of water.
And all of that, apart from the bit that got into our downstairs loo and had to be chased out with a broom, is now on its way through the mud to the Foss and then the Ouse to make a nuisance of itself downstream in the coming days.
But it’s taking its time as the water table, judging by the odd hole that we and the rabbits have dug at random around the place, seems to be about three inches below the grass suggesting that our house, which thankfully the Victorians had the sense to build on a concrete plinth, could be gently floating downhill on a slow-moving tide of liquid mud. On to the news:
ADVERTISE WITH US:
Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.
SUSTAINABILITY, THE DEATH OF PLASTIC & OTHER GOOD STUFF: The hospitality industry is increasingly focusing on sustainability, good citizenship etc. 19 Feb 2020:
• Some trends look as though they are here to stay. Sustainability should perhaps rank alongside meat-free alternative foods, low-alcohol drinks etc and consumers are focusing more on such issues than ever before
• To say the least, there have been better times to be a plastics manufacturer
• Because, whether it’s plastic straws, single use ear pokers or carrier bags, usage, at lest in the West, may well have passed its peak
It’s more than just lip service:
• Whilst phasing out plastic straws was never going to threaten anybody’s business model, there appears to be a commitment, genuine for the most part, to make progress in this area
• Ditching plastic straws may be a relatively minor inconvenience but abandoning plastic water or soft-drink bottles is more serious and a number of companies are recycling waste fat, avoiding landfills and the like
• The fact that a number of companies have been specific in their aims (i.e. a such and such % reduction in whatever by year X) makes it more likely that progress will be made. Incentives (per Charlie Munger) matter. What gets measured, gets done.
• Marston’s achieved its aim of zero waste to landfill two years ahead of its target in 2018.
• Hilton Hotels has committed to halving its environmental impact by 2030.
• Accor says it will remove single-use plastics from guest bedrooms by 2022. It’s not clear if this will include shampoo miniatures etc.
A few products:
• All of the news below is from this calendar year.
• Plastic straws. A high profile but little disruption to business models. Airlines, hotels, pubs and the like have to varying degrees all committed to phasing them out.
• Plastic drinks bottles. Much more contentious. Coca Cola’s head of sustainability told the BBC that the company would not ditch single-use plastic bottles ‘because consumers still want them’.
o Coke uses some 3m tonnes of plastic packaging per year. It has pledged to use at least 50% recycled material in its packaging by 2030.
o You cannot buy plastic drinks bottles at certain sites, e.g. The Grand Canyon, because the authorities know just how many of them will be left littering the place up.
o Coco di Mama, interestingly a retailer rather than a producer, is to remove plastic water bottles from all of its shelves. It sells around 180k units per year.
o One Bottle at a Time has been picked up as a battle cry. Six independent tour operators have teamed up to remove up to one million plastic bottles from being used on their holidays by the end of 2020. The operators included Experience Travel, Holiday Architects & Pura Aventura.
o Britvic aims to be sourcing 50% of its plastic bottles in the UK from recycled plastic by 2025.
• Four and six-can plastic holders. Viral photos of distressed turtles etc entrapped by plastic rings have led a number of drinks producers such as Budweiser to phase them out in the UK. The situation in overseas markets is less clear.
• Plastic carrier bags. Aldi has just this week increased the price of plastic bags to 15p from 9p in a bid to reduce their unnecessary usage.
o Some magazine wrappers are now manufactured from potato starch.
• Energy usage is being targeted for environmental as well as financial reasons by a number of operators.
• Ditto fatbergs. McDonald’s says we ‘recycle the used cooking oil from our kitchens into biodiesel which is then used to fuel around 42% of our delivery fleet.’
• McDonald’s also says ‘due to more efficient frying vats the amount of used cooking oil our restaurants recycle has actually decreased over time.’
• No real conclusion at this stage as this is an ongoing issue.
• However, there appears to be a genuine shift in business practises, at least in the West. This will come at a modest cost but, as consumers should be aware of the moves being made, they may be prepared to pay for it.
PUBS & RESTAURANTS:
• Access to labour more difficult at a time when average wages are once again at all-time highs. See Finance & Markets.
• Low-skilled workers would not be able to get visas to enter and work in the UK under post-Brexit immigration plans announced by the government.
• Chief Executive of UKHospitality, Kate Nicholls has commented on the Government’s proposed new immigration system: ‘These proposals will cut off future growth and expansion and deter investment in Britain’s high streets. It will lead to reduced levels of service for customers and business closures. Hospitality is already facing an acute labour shortage, despite investing significantly in skills, training and increasing apprenticeships for the domestic workforce’.
• The BBPA has sent a letter to HM Treasury, signed by 85 Conservative MPs, calling on the Chancellor to cut Beer Duty in the upcoming Budget. Chairman of the All-Parliamentary Beer Group, Mike Wood commented: ‘Beer Duty remains much too high. It is much higher than any other major beer-producing country in Europe’.
• The Chinese operators the Baozilnn group and Chef Andrew Wong have seen sales decline due to a fallout from the Coronavirus
• The All Party Parliamentary Beer Group’s inquiry into ‘unlocking pubs’ potential’ is to be launched at the Red Lion in Westminster on Wednesday 26th February. Mike Wood, Chairman of the All-Party Parliamentary Beer Group, said: ‘There was an enormous degree of consensus in the evidence that we heard. Witnesses all told us of the vital role that pubs play in the UK – not only economically but, perhaps more importantly, socially’.
• Britvic has agreed to its first sustainability-linked credit facility, allowing the group to borrow up to £400m in the next five years. The margin of the facility will be linked to sustainability goals.
• Seafood specialists Wright Brothers has announced it will open a sixth site in London, at Bank station.
• Gibney’s Pub is set to open in the basement beneath Daffodil Mulligan restaurant in Shoreditch.
• ‘America’s first hemp-infused wine producer’ Sovereign Vines has ceased trading after coming up against opposition from federal authorities.
• Asda claims customers were ‘cautious’ over Christmas as it reported LfL sales were down 1.3% yoy in Q4 2019.
• The Derwent Arms in Malton has completed a £315k refurbishment provided by Punch with Publicans.
• Flight Club, the darts bar group, has announced it will open its first site in Yorkshire in Leeds this June.
• The brewer, Kirin has come under pressure from one of its biggest investors to make significant changes to its board or risk a proxy battle at its annual meeting.
• Hogs Back has celebrated its relaunch of its Nirvana Session IPA with a giveaway of English Cascade plants to pubs.
• The 139-year-old department store chain, Beales has closed its final 11 units, putting hundreds of jobs at risk.
• The Tofoo Co., a Yorkshire tofu manufacturer, has reported its turnover more than doubled in January, to more than £1m.
• US-based restaurant company Bloomin Brands, which in November said that it was considering strategic alternatives, has said it is still considering a sale but indicated the Brazilian Outback Steakhouse business seemed the most attractive to spin off. The company maintains ‘at this point in time, nothing compelling has materialized in terms of outright sale of the company.’
HOLIDAYS & LEISURE TRAVEL:
• Airbnb listings in London have quadrupled in the last four years, rising to 80,770 properties as of May 2019. As many as 23% of these are thought to be in breach of a legal 90-day limit in the capital. Danny Beales, a Camden Councillor, said ‘The short-term let market is far too easily exploited’.
• New cases of coronavirus in the Chinese province at the epicenter of the outbreak fell for the second day in a row.
• Covid 19 vs SARS. Recovery from the latter (post 2003) was rapid for Asian hotels – though it was aided by the boom that led up to the 2008 financial crisis.
• STR has found that hotels in China recovered quickly after the SARS outbreak in 2003. Jesper Palmqvist, STR’s Area Director for the Asia Pacific region commented: ‘we felt it important to analyze hotel performance and recovery in China during the early part of the millennium in order to derive possible projections for 2020. All areas of the country, which likely differed in terms of number of reported cases, suffered a negative impact during the SARS outbreak. Some recovered quicker than others, but all bounced back swiftly after containment’.
• Choice Hotels International has reported full year numbers saying that net income in Q4 was $42.2 million and $222.9 million for the full year. This was ahead of analysts’ expectations. The company’s US hotels reported a 3.1% aggregate increase in units and a 4.3% growth in rooms since December 31, 2018.
• Atlanta-based Blackhall Studios is to invest £150m in building a new film and television complex in Reading to cater for content production. Blackhall was behind Venom and Jumanji. The company said major clients such as Disney, Universal and Sony were all ‘asking us to expand into the UK to meet their desire to create productions here’.
FINANCE & ECONOMICS:
• The ONS has reported that average weekly earnings rose by 3.2% in the year to Q4. The NIESR says ‘we expect the recent slowing in earnings growth since June 2019 to be temporary as there is little slack in the labour market.’
• The NIESR says ‘but even then the level of real average weekly earnings has remarkably only just returned to its 2008 level, which reflects the enduring severity of the financial crisis on the average British worker.’
• The Budget will go ahead on 11 March. Rishi Sunak is ‘cracking on with preparations’ he says.
• Sterling up a little at $1.30 and €1.2039. Oil up a shade at $58.17. UK 10yr gilt yield down 2bps at 0.62%. World markets lower yesterday but Far East up in Wednesday trade.
• Brexit & politics:
o Early days in the sabre-rattling game but Reuters reports the EU has ‘hardened its stance for looming negotiations on a new deal with Britain, from firmer demands for fair competition guarantees that would “stand the test of time” to raising the prospect of demanding the return of stolen cultural goods from London.’
START THE DAY WITH A SONG:
Yesterday’s song was Men in Black by Will Smith, today who sang:
Some come back billy, won’t you come on home,
Come back mary, you’ve been away so long
The streets are empty, and your mother’s gone
The girls are crying, it’s been oh so long
RETAIL WITH NICK BUBB:
Pendragon: The embattled Motor dealer Pendragon (which trades as Evans Halshaw and Stratstone etc) has announced that its acting Chairman since Oct 2019, the American Bill Berman, has been appointed Chief Executive Officer with immediate effect. Before joining Pendragon as a non-exec Director in April 2019, Bill was the President and Chief Operating Officer of AutoNation, the largest car retailer in America. In the statement, he gushes “In my relatively short time with the business, it is already clear to me that Pendragon is a company with great potential and a talented team”.
Asda: If Walmart is serious about floating off Asda next year, the calendar Q4 results yesterday were pretty uninspiring, even if the -1.3% LFL overall sales outcome wasn’t quite as bad as we’d feared, given that it was dragged down by poor Clothing sales. The presentation by Walmart on the back of their final results for y/e Jan in the US highlighted that Asda’s gross margins in Q4 were well down, “as a result of strategic price investments, discounting in Apparel and a shift in mx towards lower gross margin categories”. Needless to say, the separate Asda PR release didn’t mention the weak gross margins and reiterated the focus on “driving growth where customers care” (whatever that means), highlighting the 5% growth in Q4 sales of the Extra Special range and the 10.3% growth in Home Shopping sales. Interestingly, however, the Judith McKenna presentation on the Walmart International
News Flow This Week: The Laura Ashley interims are out tomorrow, along with the ONS Retail Sales figures for January.