Langton Capital – 2022-08-23 – PREMIUM – Energy costs, footfall, WFH, inflation, Cineworld & other:
Energy costs, footfall, WFH, inflation, Cineworld & other:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: When it comes to wine, I am hardly an expert as, on a good day, I can just about tell red from white But only when I have my eyes open which means that it’s a mystery to me just why prices rise exponentially (and that’s becoming an overused word these days) as you get towards the bottom of your average wine list. However, I can see that the ‘value for money’ of wine – or any product – could rise in the early stages of the price curve as the cost of the packaging – and duty in the case of an alcoholic product – for something that is truly appalling will be a much larger percentage of the whole than it will be for a more expensive product. For example, if the packaging and transport and other delivery costs come to, say £3.00, then a £4.00 bottle of wine offers virtually no product of value when VAT and other costs are stripped out. Similarly, say a £5.00 bottle offers £1.00 ‘worth’ of wine, then a £10.00 bottle could offer £6.00 worth of value and, at a pinch, it could be worth paying for. Anyway, just getting back up to speed having been away (and we’re away from the weekend for a week). On to the news: PUBS & RESTAURANTS: Inflation. Economists at Citi have predicted that inflation in the UK will rise to 18.6% in January, pushed further by two more hikes in energy costs… • Inflation, which Bank of England governor Andrew Bailey said was ‘transitory’, is currently 10.1%, more than five times the Bank’s target rate of 2%. Citi says that interest rates will need to rise much further, it says they will need to move ‘well into restrictive territory, and quickly’ in order to stop inflation from becoming embedded in the system. Footfall: Springboard has reported that weekly footfall last week was down 19.3% on 2019 levels, but it says that this represented a 12.3% increase YoY. Heavy rains kept shoppers indoors in the first half of the week, with strike action impacting the rest of the period. • Springboard says that it was ‘clear that the train strike on Thursday led to employees working from home; footfall in Central London, Springboard’s Back to the Office Benchmark and in city centres across the UK all declined, whilst in market towns and in Outer London – which typically benefit from home working – footfall rose.’ It highlights the short term nature of the measure when it comments that ‘from Friday onwards footfall rose, but this was based on a low comparable due to exceptionally hot weather deterring shoppers from visiting retail destinations in the previous week.’ • Property companies. Shares in property co Hammerson fell by around 14% yesterday. Analysts put the drop down to declines in footfall. This has implications for operators of hospitality outlets, cafes, coffee shops and the like in city centres. Work from home: The energy price crisis may be impacting upon decisions as to whether or not to work from home. Startups.co.uk reports that going into the office this winter will be the most cost-effective decision that employees can make… • The company’s report suggests that outside of London, driving to the office (instead of working from home) will save an average of £21.16 a month. This increases to £35.76 per month in January. However, London workers are better off staying home than using the tube. They can make a saving of £85.60 per month across all six travel zones. Those who commute by bus in every city including London, will save money, versus working from home. In the US, Apple staff are reported to be resisting calls by CEO Tim Cook that they return to the office… • A group of employees, called Apple Together, has launched a petition demanding “location flexible work”. CEO Tim Cook has said that employees should be in the office for at least three days a week from next month. He says this will help generate the “in-person collaboration that is so essential to our culture”. Whilst this is a US issue, city centre operators of pubs, cafes, restaurants and the like will be hoping that such moves gain traction. Cost of living crisis: Octopus Energy claims that UK households cannot carry the cost of the Ukraine war which is set to push energy bills even higher… • No 10 previously said there would be no new policy before a new PM is in place, with the new leader set to be announced on 5 September. Flash PMI stats, which should give some indication as to the current state of the UK economy, are due out from Markit at 9.30am. Gas prices surged yesterday to new records on the back of Russian threats to cut off supplies to Europe. • Prices rose as high as 719p per therm, up around 13x on the average price over the decade before the invasion of Ukraine. The new energy price cap, for implementation in October, is due to be announced at the end of this week. There will be another likely increase in January next year. Other news: The Sun headlined last week that ‘the price of a London pint could hit £14 within three years as pubs deal with higher energy bills, rising wages and increased beer prices from brewers…’ • We aren’t sure of much in life but, in the teeth of a recession and a cost of living crisis, we are sure that consumers, at least in the mass market, will not pay £14 in a pub for a pint of beer that they can buy for little more than a quid in the supermarket. The Sun quotes JDW’s Tim Martin as saying the choice is either to axe tax or kill pubs. KAM reports that 29% of pub visits and 37% of restaurant visits are completely alcohol-free. People’s desire to reduce alcohol is also increasing, with 55% of adults responding positively to this claim, versus 32% in 2021. Not a good day for leisure yesterday as the penny dropped re the implications of higher fuel bills (and interest charges) for consumers and operators alike… • Jet2, SSP, C&C and EasyJet down 4%. • Rank, Domino’s & Hollywood Bowl down 5% • On the Beach, TUI, 888 & Deliveroo down 6% • Fever Tree down 7%, Jet2 down 9%, Hostmore 13% off and Cineworld another 21% lower COMPANY NEWS: Veggie. In the US, Burger King will test a plant-based chicken sandwich in the Cincinnati & Ohio markets on 22 August. Burger King and Impossible Foods first launched the plant-based Impossible Whopper in 2019. Strikes. Budweiser Brewing Group workers have turned down the latest pay offer from the company, with 275 GMB workers taking strike action starting on 22 August ‘with a series of stoppages over eight days, impacting all departments and shifts across the site’. Cotswolds Distillery plans to ramp up its production of English whisky and gin with the support of a £3m funding package from Santander UK. Annual alcohol production will increase from 125,000 litres currently, to a capacity of 500,000 litres this autumn. Keurig Dr Pepper is in talks with Vital Pharmaceuticals to acquire Bang Energy drinks, with sources suggesting the deal could be worth in the area of $2-3bn. Top end London restaurant brand Bob Bob Ricard has secured additional funding from SME funding specialist ThinCats. HOLIDAYS & LEISURE TRAVEL: The ONS reports that 34% of those who travelled abroad in the previous eight weeks had experienced some form of disruption. One in four reported disruption due to flight cancellations and four in five reported delays to flights or increased waiting time onboard aircraft. British Airways will cut a further 10,000 flights from its schedule at Heathrow this winter. BA is aiming to minimise disruption. It says it will protect “key holiday destinations over half-term” in October. OTHER LEISURE: Cineworld. Shares down 0.87p. doesn’t sound like a lot but that’s another 21% off the price… • During the credit crunch we ran a series of stories on the 99% club. That is, those shares that lost 99% of their value. The club started off being the 90% club but the shares didn’t stop falling and it’s worth remembering that a share that falls by 99%, first fell by 98% – and then it halved. Likewise, a company that has fallen by 99% will have to rise by 10,000% in order to get back to where it started from. • CINE needs to fall by another 0.22p or so to join the 99% club. We would not bet against this happening. A bankruptcy process is very likely. The legal case that it lost vs Cineplex of Canada leaves CINE liable to pay (subject to appeal), some C$1.23bn. Heaven knows what would happen to this during a bankruptcy, but it will keep the lawyers in fees. • It is likely that the legal action would rank behind secured creditors. But it is also worth bearing in mind that almost everything ranks ahead of equity. As we tweeted yesterday, everybody likes a challenge, but it will be interesting watching the management & directors try to hang onto their jobs after losing everybody’s money and whilst trying to raise more. Sony PlayStation is being sued for £5bn by nine million claimants amid accusations it ‘ripped people off’ with overpriced games and in-game purchases. • The company had allegedly charged a 30% commission on every digital game and in-game purchase made through the PlayStation Store. The estimated damages per individual member of the class is between £67 and £562 excluding interest. HMRC has served a winding up petition to Worcester Warriors Rugby Club as it owes the tax service more than £6m. • A club spokesperson said ‘Worcester Warriors, along with many other businesses and most sports clubs have found the past two years extremely challenging owing to the Covid-19 pandemic and the rise in the cost of living.’ The row at Twitter continues to make money for lawyers as Elon Musk has subpoenaed former Twitter CEO Jack Dorsey. A trial to decide whether Mr Musk should be forced to go ahead with his previously announced bid for Twitter is scheduled for 17 October. FINANCE & MARKETS: Writing in The Telegraph, economist Roger Bootle comments that ‘even though nominal house prices may only fall by about 5pc, in real terms they will fall by much more – perhaps by as much as 20pc, which would be in the same ballpark as the corrections in real house prices that occurred in 1979-82 and 2007-13.’ If inflation (the CPI) gets to 18% plus in January and drags the RPI with it, then the servicing costs for UK government debt will rise sharply higher. Sterling mixed at $1.1763 and €1.1838. Euro fallen below parity with dollar on Russia gas fears. Oil higher at $97.00. UK 10yr gilt yield up another 8bps at 2.50%. World markets weak yesterday & London set to open some 19pts lower as at 6.30am. FORTHCOMING NEWS: Very quiet week in the run up to the August Bank Holiday weekend. Flash PMI numbers are released on Tuesday. RETAIL WITH NICK BUBB: Nick is taking a well-earned break & is back after the Bank Holiday. |
|