Gambling review, labour, inflation, Costa, RTN, Oakman & other:

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A DAY IN THE LIFE:

Schrodinger’s Cat is an interesting concept but, as I could never get my head around the idea of a cat being both dead and alive, I’ve got another one.

If someone tells you ‘you’ve got a letter’, is that a good, bad or a neutral event?

Well, Schrodinger may say that, until you know what’s in the letter it’s all of the above but, as a bean-counting accountant, I can’t help being more at home with an odds-based statement.

Hence, if three letters in ten comprise demands for money, one in fifty is money coming in – for us that’s just the paltry wayleave that the electricity people give us for stringing lines across our land or maybe the odd tiny refund for something or other – and 17 in every 25 letters are junk then you should, to one or two decimal places, be miserable when the post arrives as it saves you the bother of opening the letter.

It’s Friday, it’s a long weekend and it’s the news:

PUBS & RESTAURANTS:

Trading:

Ahead of next week’s local elections, UKHospitality is urging councils to take a pro-growth approach to licensing applications, enable a more streamlined approach to planning applications and actively promote hospitality jobs and skills through local authority channels…

• UKHospitality CEO Kate Nicholls said ‘a positive and enabling attitude to the sector at a local level can see it quickly generate economic growth and job opportunities. Backing our sector is undoubtedly one of the quickest ways local authorities can deliver benefits for businesses, residents and, ultimately, the country.’

Hospitality footfall:

Lumina Intelligence data shows that weekly eating and drinking out occasions have declined 6.7% YoY in the four weeks to 19 March, with spend growth remaining significantly behind inflation at +2.6%.

Labour market:

Freelance services marketplace Fiverr has suggested that some 47% of white collar workers sampled who had lost their jobs had ‘lost faith in salaried work. It adds its ‘findings show that 57% of individuals who were made redundant this year are now planning to explore alternatives to full-time work in their future careers…’

• Langton. Fiverr clearly has an interest in the outcome of its survey but it does say that ‘workers see self-employment as more secure than full-time work.’ From the point of view of a self-employed person that has just spent a couple of days producing VAT returns and doing other sundry admin, that may be a ‘the grass is greener’ kind of comment.

• Fiverr may not be wrong, however, when it says ‘in the current, troubling economy, workplace uncertainty is on the rise.’ Hospitality has been moving to reposition itself as a more attractive employer and work undertaken by Hospitality Rising in partnership with KAM (see yesterday’s email) suggests that it is having some success in doing so.

• Fiverr says ‘being made redundant is never a nice feeling’ but it adds that ‘laid off workers are seeking out new opportunities to find careers where they can find more meaning in their work and, through freelancing and self-employment, have the flexibility to make their roles work better around their own schedules and passions.’ Cut out the ‘freelancing and self-employment’ bit and this could be helpful news for hospitality.

Inflation:

The Office for National Statistics has said that falls in global food prices have not yet been passed through to customers by supermarkets. The BBC spoke to Unilever, which says it is not “profiteering in any form” from rising prices, and Sainsbury, which pointed out that falls at the wholesale level take time to feed through to the price of products on the shelf.

CEO of Sainsbury Simon Roberts yesterday suggested that it would be some time before it was clear whether or not grocery price inflation has peaked…

• Mr Roberts says ‘we really get how tough life is for so many households right now, which is why we are absolutely determined to battle inflation for our customers. Our focus on value has never been greater and we have spent more than £560 million keeping our prices low over the last two years.’

Rightmove has reported that average rents for properties across Britain have hit a new record with £2,500 per month now the average in London. This will impact some demographics more than others.

Train strikes:

Aslef has announced further train strikes for 12 and 31 May and for 3 June. The union recently turned down a fresh offer from 16 train firms, including a 4% pay rise for each of two years…

• The 12 May is the day before the Eurovision Song Contest final in Liverpool and 3 June is the date of the FA cup final (which is a Manchester derby).

• UKH comments that ‘it’s incredibly frustrating that almost a year on from the start of this dispute, there appears to be no resolution in sight.’ CEO Kate Nicholls says ‘hospitality businesses are losing hope that the crucial summer season would be uninterrupted by disruption’ and she says hospitality businesses ‘have lost more than £3 billion in lost sales as a result of the strikes and there is no doubt that will increase as a result of today’s announcement, particularly as it will now impact the busy, high-demand summer period.’

Other news:

In Scotland, pubs, bars and restaurants that sell alcohol for consumption off the premises will no longer be expected to operate as ‘return points’ under changes to the Deposit Return Scheme. Circular economy minister Lorna Slater said these venues will no longer have to accept returns from members of the public and pay out 20p for each container…

• However, all hospitality premises will still participate in the scheme, paying a 20p deposit for each container they purchase from their supplier and receiving that payment back when the empty container is collected by the scheme administrator.

COMPANY NEWS:

Coca-Cola’s figures earlier in the week contained reports of a strong Q1 performance by Costa Coffee, driven by increased sales in the UK and China…

• Costa reports that unit volume grew by 9% in the quarter with the chain currently operating 2,700 stores in the UK and around 440 outlets in China. Costa Coffee is also expanding its bricks-and-mortar presence in the US, opening its fourth store, and its third in Coca-Cola’s home state of Atlanta, earlier this year.

Restaurant Group AGM. New York-based investor Irenic Capital Management has announced its intention to vote against The Restaurant Group’s remuneration policy….

• The move makes it the second shareholder to make such a declaration after Oasis Management, which described CEO Andy Hornby’s £658k salary as ‘disproportionate’. Irenic has suggested that TRG dispose of its ‘non-core assets’ and focus its attention solely on owning and growing the Wagamama brand.

Following a strategic review, Fuller’s is moving 23 pubs from its Managed division to Tenanted division…

• …with the ambition to deliver a better financial return from these units. A spokesperson for the company said ‘following 12 months’ trading free of restrictions, and in light of the changing economics of running a pub, we have undertaken a strategic review of the whole estate. As a result, we have decided to move a number of our pubs into our award-winning Tenanted Inns division.’

Speaking to Oakman’s Peter Borg-Neal, the MCA reports that the CEO has formulated and begun to implement an action plan to improve the group’s financial position following a decline in profits…

• It says ‘the plan ultimately involves Oakman building out its pipeline, improving profitability and realising an exit, once market conditions improve and the best value can be achieved.’ No timetable has been set.

• Mr Borg Neal says an IPO “does not appear to be an option”, because although Oakman’s enterprise value is large enough to make it viable, the business will need to show evidence of an upturn in fortunes before it can expect to achieve an “acceptable level of value for our shareholders”.

Pernod Ricard has reported 9mth numbers reporting a 2.2% dip in like-for-like sales in its Q3. The company reports sales up 8% to €9,507m for the first nine months of 2023 and €2.391 billion in the three months to 31 March. CEO Alexandre Ricard comments ‘our very strong €9m performance was broad-based and confirms the strength of our business, with resilient volumes, strong pricing and continued dynamism in all our regions and spirits categories…’

• He goes on to say that ‘while the global environment remains volatile and as markets normalise, we are confident in delivering a strong performance for the full year in FY23, with very strong sales expected in our fourth quarter. Our full year guidance for FY23 is for organic growth in profit from recurring operations of c. +10% with some operating margin expansion.’

The McManus Pub Group, which operates a predominately freehold pub estate of 21 pubs across Northern Home Counties and Essex, has reported audited results for the 52 weeks ended 30 July 2022 saying that ‘sales have returned to pre pandemic levels and the Group has a refurbished estate from which to move forward with a secure financial base and experienced management team’. The company reports sales up 66% to £14.6m with LfL sales up 17.1% on pre-pandemic levels…

• McManus Group reports that it ‘has seen encouraging trading performance in the first 26 weeks of the current financial year, like for like sales have held up well and remain on par with 2022.’ It says ‘as cost of living increases bite, we are seeing a sales mix swing from food to wet led pubs’.   

• The group references food and drink inflation, energy costs and the shortage of labour as major issues during the year. Chairman Gary McManus says ‘post pandemic through challenging conditions the Group has achieved a strong recovery. Acquisitions and refurbishments have strengthened the pub estate.  Together with an experienced management team, the Group is in healthy position to weather future storms and expand when appropriate.’

The MCA reports that Tortilla CEO Richard Morris wants to expand its presence in travel hubs by further building its relationship with Compass Group and SSP. Morris said future target markets include France, Germany, and Spain.

The O2 has announced the launch of ‘The Residence’, an exclusive VIP members club with a 300-person capacity. The Residence will be located on Level 3 directly opposite the arena stage and will feature a first-of-its-kind retractable viewing platform named ‘The Walkway’.

Tata Starbucks ended its fiscal year ended March 2023 generating $132.7m revenue across 333 stores in 41 cities in India, adding 71 net new stores over the period. Parent company Tata Consumer Products said Tata Starbucks was now ‘looking to rapidly expand its presence in the coming years’.

EBay Inc Q1 revenue beat expectations, sending the company’s shares up 5% in after-hours trading. The company said sales had been driven by a selective push on items like collectibles and refurbished products as well as focusing on product categories including sneakers and watches.

HOLIDAYS & LEISURE TRAVEL:

Research by the World Travel & Tourism Council in collaboration with Oxford Economics shows that the global travel and tourism sector is forecast to fully rebound from the impact of Covid-19 by 2024….

• The study found that 34 countries have already exceeded 2019 levels and that nearly half of 185 countries worldwide will have either fully recovered to pre-pandemic levels or be within 95% of full recovery by the end of the year.

The WTTC said that the ongoing war in Ukraine and prolonged travel restrictions imposed by a number of countries such as China had a ‘significant impact’ on the global recovery but that the reopening of China’s borders from January ‘will propel the sector and see it recover to pre-pandemic levels next year’.

CLIA has reported that more British holidaymakers are open to taking a cruise holiday “then ever before.”

Lifestyle aparthotel company Locke is to open its sixth Locke in London in July 2023.

Research by Cirium suggests that the number of flights from UK airports over this weekend’s Bank Holiday will be around 86% of pre-pandemic levels.

GAMBLING ACT REVIEW:

White Paper:

The government yesterday produced its White Paper on its proposed Gambling Act Review. The proposed review could lead to the biggest shake up in regulation in a generation…

• The government says online slot machines were a particularly high-risk product. It says they are associated with large losses and is proposing stake limits of between £2 and £15 per spin for online machines with the lower figure applying to people under-25.

• Some companies including Flutter, SkyBet and Betfair, imposed slot limits of £10 from September 2021. There could be ‘checks’ imposed on gamblers who lose over £1,000 in a day or £2,000 over three months. Just how this would be applied is unclear. There appear to be no proposals to limit advertising.

Political reaction:

• Conservative MP Philip Davies suggested checks were not needed saying ‘the Conservative party used to believe in individual freedom and individual responsibility, but that seems to have gone out of the window with these affordability check proposals.’ He says ‘do the punters themselves get any say at all over how they can afford to spend their own hard-earned money?’

• Shadow culture secretary Lucy Powell says ‘we’ve long called for outdated gambling laws – introduced when smartphones weren’t part of our lives – to be updated so that they can tackle the challenges with gambling today.’

• She adds ‘while Labour has called for change, ministers have dragged their feet with the chaos we’ve seen in government meaning many false starts. We’ve had 10 different ministers in charge of gambling policy since a white paper was first promised in December 2020.’ Whilst most betting was in physical locations when the Gambling Act was introduced in 2005, it is now thought that the industry now makes two thirds of its revenues from online gambling.

Company comment:

• Flutter says ‘we welcome the review which puts customer protection at its heart.’ It says it ‘believes the GAR [Gambling Act Review] represents an important and necessary change for the industry, as it looks to ensure all operators raise standards and make responsible play a priority, as Flutter has done with its Play Well strategy.

• CEO Peter Jackson says ‘we will constructively engage with the Government and Gambling Commission as part of the subsequent industry consultation process, with a focus on providing support to the minority at-risk of gambling harm without interfering disproportionately with the enjoyment of the vast majority.’

• Entain says ‘the review contains an extensive set of proposals, many of which align with actions that Entain has already implemented.’ It says it will look more closely at the proposals and comment accordingly. In the meantime, CEO Jette Nygaard-Andersen says the GAR ‘is an important step towards having a robust regulatory framework that is fit for the digital age and creates a level playing field for all operators.’

• Rank Group says that it ‘welcomes publication of the Government’s White Paper’ and says the objective is ‘striking the right balance between “consumer freedoms and choice on the one hand, and protection from harm on the other.”’ CEO John O’Reilly says ‘whilst our UK digital business will be impacted by a tightening of regulation, our land-based operations will benefit from the proposed regulatory changes and, in net terms, the Group will benefit.’

• Mr O’Reilly says ‘swift implementation of these much needed reforms is vital for the land-based sector as we look to meet the needs of today’s consumers whilst continuing to uphold our commitment to safer gambling.’

• Flutter shares finished the day down around 1.7% against a market down around 0.2%. It has taken a step closer to listing its shares in the US after shareholders approved the move at yesterday’s AGM. Entain shares were down by 0.8% and shares in Rank Group were up 10%.

Industry & trade comment

• UKH CEO Kate Nicholls comments ‘we particularly commend the report’s recommendation to bring contactless payment methods into consideration.’ She says ‘this an opportunity to improve player protection in pubs, by enabling better control of stake restrictions and limits imposed by the players themselves.’ She concludes ‘it is important to recognise that revenue from gambling machines can be a valuable source of income for struggling venues. We therefore hope this review marks a restoration of gambling machines in pubs, where they can be responsibly played and enjoyed.’

• There are a number of comments that the proposals do not go far enough. Dr Matt Gaskell, a consultant psychologist who runs the NHS Northern Gambling Service, is quoted in the Guardian as saying that ‘the industry will carry on making huge profits while people are suffering and dying.’

OTHER LEISURE:

Netflix has spent $6bn making TV shows and films in the UK since 2020, $2bn more than originally planned, and making it the company’s second biggest market for TV and film production after the US. For comparison, Amazon has said it spent more than £1bn in the UK on TV, movie and live sport between 2018 and 2022.

Snap Inc yesterday reported Q1 numbers and missed analyst expectations for quarterly revenue. Its shares fell 19% in after-market trading. The company is facing increased competition. It is not providing formal financial guidance but its internal revenue forecast for Q2 is $1.04 billion, down 6% year-over-year….

• CEO Evan Spiegel says ‘we are optimistic that our ad platform improvements are laying the foundation for future growth.’ The company lost $329 million during the quarter, down from a net loss of $360 million the previous year. Daily active users on Snapchat rose 15% year-over-year to 383 million.

FINANCE & MARKETS:

Trade & investment post Brexit. The Daily Telegraph writes that ‘the English Channel has “never seemed wider”, with the EU a more attractive business destination than Britain, Microsoft has said after its £55bn gaming mega-merger was struck down.’ Microsoft says ‘there’s a clear message here – the European Union is a more attractive place to start a business than the United Kingdom.’

Lloyds Bank suggests that business confidence has hit its highest level since May. Overall economic optimism rose by five points to 28 per cent.

The US Commerce Department reports that the US economy slowed in Q1 as investment by business was reduced. The economy grew 1.1% on an annualised basis.

Sterling higher at $1.2481 and €1.1332. Oil up at $78.98. UK 10yr gilt yield up 6bps at 3.80%. World markets moving better yesterday and London set to open up around 30pts as at 6.30am.

RETAIL WITH NICK BUBB:

• Nick is travelling.