A Day in the Life:

Follow us on Twitter at either @langtoncapital or @brumbymark.

Find previous emails at https://www.langtoncapital.co.uk/daily-notes/ 

It only takes a power cut or a WIFI failure to bring home to you just how much you rely on technology these days.

In fact, and coinciding with good numbers from Apple, I’d go so far as to suggest that this computer business could catch on.

Though I accept that I might be a little behind the curve in that regard. Indeed, on a day when Twitter (which I’ve yet to really catch up with) shows every sign of being overtaken by Instagram, Pinterest and Snapchat (no, really, what are they?) I’m struggling to keep up. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Whitbread Costa boss Chris Rogers has sold 24,000 shares in the company at £49.36 yielding some £1.2m

• Greene King Sept tracker: says was ‘mixed month for leisure spending among British households.’

• GNK Tracker: Says ‘the economic climate continues to be one in which consumer spending power is growing, however, households appeared to focus this additional capacity in other discretionary categories during the month. A resurgence in spend on Other Leisure, up 7% offset declines of 3% in both Eating Out and Drinking Out to leave overall leisure spend unchanged year-on-year.’

• GNK Tracker: Spend on eating + drinking out fell by 3% in each case. Says big days holding up but denies Halloween is popular. Says it ‘is still a horror for 52% of British adults who report they never have celebrated the day and do not intend to this year.’

• GNK highlights ‘while the recovery continues at national level there is a lag effect on consumer experience at household level.’ Says ‘this month’s figures show how volatile the economic recovery continues to be for UK consumers, with minor decreases in spending against this time last year being offset by a lower decline on spending against the summer months.’

• GNK Oct details. Households spent £208 on leisure in Sept, no change y-o-y and down £14 or 6% on August. The weather was brighter but colder than average. It says ‘sporting and other live events proved to be some of the strongest performing activities, the former no doubt boosted by the start of the Rugby World Cup.’

• GNK opinion on spending trends. Says ‘in September, average British household leisure spend remained unchanged year-on-year, despite inflation falling into negative territory for the second time in 2015. The falling costs of necessities continues to play a role in driving earnings growth in real terms.’

• GNK alludes to big-ticket spending, points out car sales in Sept strongest on record + non-food outperformed food. Other Leisure spending was up. Suggests the decline in eating and drinking out was not necessarily a longer term indicator.

• C+C reports 6mth numbers, revenues down 2.6% at €358.6m, EBITDA down 10.4% at €72.6m with EPS down 6.9% at 14.8c

• C+C sees ‘challenging period in core markets of Ireland and Scotland’ but has ‘significant growth in Export business’.

• C+C says ‘US business below expectation’ but ‘actions underway to improve earnings for FY17’. Is cutting costs. Says cash generation strong and reports ‘progressive dividend reflecting strong cash generation and balance sheet strength.

• C+C CEO Stephen Glancey reports ‘our performance in the first half reflects difficult trading conditions in our core markets of Ireland and Scotland. Many of the factors contributing to this are one-off or transitional, including poor weather; the transition to a brand led wholesale model; and, legislative change in Scotland. In aggregate, the headwinds will adversely impact profitability by €10 million in the financial year. Positively, the reception to our new brands such as Heverlee and Menebrea, access to the Drygate range and the launch of our new craft cider, Dowds Lane Big Vat cider to complement our Five Lamps craft beer in Ireland has been good.’

• C+C outlook: CEO says ‘looking ahead, we expect improved operational performance in Ireland and Scotland’. Says improvement is ‘underpinned by ongoing cost saving initiatives, sustained investment behind our brands and increased emphasis on niche and premium.’ Mr Glancey concludes ‘we are assuming that market conditions will continue to be testing particularly in our core markets in the coming months but we are confident that we are taking the right actions to build durable, long-term value for all shareholders and this is reflected in a 5.1% increase in our interim dividend.’

• Heineken Q3: Consol. revenues +7.5% organically, beer volumes +5.4% organically. Growth in Europe, Americas + Asia-Pacific.

• Heineken Q3: Sees flat volumes in Africa, Middle East + Eastern Europe. Margin guidance unchanged but forex will hit full year. CEO Jean-François van Boxmeer, reports ‘our strong performance in the third quarter is consistent with our earlier 2015 FY guidance that volume would be weighted to the second half of the year. HEINEKEN’s well-balanced global footprint, excellent portfolio of brands, including the recent addition of Red Stripe and partnership with Lagunitas, combined with a powerful innovation agenda are expected to continue to deliver positive top and bottom line growth.’

• Pizza Express has said Asia remains an ‘exciting’ area of growth. Has 450 units in UK + Ireland, only 27 in Far East

• AB InBev is reported to have hired advisors to help with sale of US assets. Disposals will be necessary for regulatory approval. Molson Coors is clearly the favourite to buy the 58% stake it does not already own in its brewing venture.

• The CBRE’s latest UK Pubs Marketview has raised concerns over the NLW’s impact on increasingly popular turnover-related retail agreements. Deals offered by pubcos such as Enterprise Inns, with its Craft Union model, typically allow operators 18% of turnover to cover labour costs and it is unclear whether the introduction of the National Living Wage will be paid for by the pub companies or out of operators’ earnings.

• Deltic Group CEO Peter Marks has joined the board of the ALMR ‘reflecting a surge in membership from the late-night sector’. ALMR chief executive Kate Nicholls said: ‘This appointment underlines the ALMR’s commitment to the UK’s night-time economy and to late-night venues. We have been a vocal champion of nightclubs and had led the fight against Early Morning Restriction Orders and Late-Night Levies. We are looking forward to working with Peter to push for a fairer, flexible deal for late-night venues.’

• PizzaExpress UK LfL sales rose 5.6% for the year to 28 June and EBITDA was up 12.9% to £100.2m. The group opened 19 new restaurants in the UK and 11 internationally, while recent trials of a delivery service led CEO Richard Hodgson to declare there is ‘huge growth potential’ in the model.

• Brakspear has purchased the Church Street Townhouse, a 400 year-old Grade II listed building in Stratford-upon-Avon. The group’s managed estate now consists of six sites following its acquisition of the Townhouse, which has two bars, a dining room and 12 en-suite bedrooms.

• London-based salad group Chop’d is trialling a delivery service with London taxi company Gett, with customers using Gett’s app to order. Talking to the M&C, founder Eddie Holmes said the logistics of the service will be monitored with a view to making it a permanent service.

• More than 2,000 Morrisons staff are suing the supermarket chain after some of their personal and financial details were posted online in 2013. Morrisons has denied responsibility for the leak and says the legal action is fundamentally misconceived.

Leisure Travel & Hotels:

• Over three quarters (80%) of older travellers spend £1,000 on a holiday and more than half would spend over £3,000, according to research. Analysis by Silver Travel Advisor also found that around 60% research and select their holidays online, with most saying they would be influenced by online reviews.

• HNA Group and China Investment Corp are just two of the group’s looking to buy Starwood Hotels in what could be the biggest takeover of its kind ever.

Other Leisure:

• Bwin updates on Q3. Clean EBITDA +5% at 9mths. Sports betting down 8% (no World Cup) + cost savings in line. Ceo Norbert Teufelberger comments ‘whilst our year-on-year revenue performance has been held back by the impact of EU VAT and the absence of a major football tournament, we have a made a strong start in the fourth quarter, particularly in sports betting and casino. Our operating and financial performance is continuing to improve on the back of the changes that we initiated in previous periods – we have already achieved our full year target for cost savings of €15m and anticipate making further savings in Q4.’ He concludes ‘current trading has been strong, despite the impact of EU VAT and further declines in poker. With solid progress on expanding our mobile footprint and the full year benefit of the cost savings already made, we remain confident about the
outlook.’

• Twitter shares have fallen by c13% following a disappointing revenue forecast and reported slower user growth than expected. Those expecting more from CEO Jack Dorsey first earnings report were disappointed, as he delivered a downbeat view of Twitter’s earnings and criticized its product lineup. The group is forecasting Q4 revenue of $695 million and $710 million, well below analysts’ average estimate of $739.7 million

• Apple has reported a 22% jump in revenue to $51.5bn in the three months to September after selling more than 48 million iPhones in the period. The group said 2015 was its most successful year ever, with a net income of $11.1bn.

Finance & Markets:

• The UK’s economic growth slowed in the third quarter of 2015, with ONS figures showing gross domestic product fell to 0.5% from 0.7%. Part of the slowdown was due to the steepest drop in construction output in three years (of 2.2%) and output in the manufacturing sector also declined 0.3%.

• Fed data shows investment plans falling for 2nd month in Sept. Suggests interest rate rise may be delayed

• World markets: UK and Europe down yesterday, ditto the US. Far East down in Weds trading + following US lead

• Oil price down a little, trading at c$47.80 per barrel

• UK GDP slows. Construction down but services activity held up better.

• The IMF has warned that economic growth in sub-Saharan Africa is slowing sharply and its forecast growth of 3.75% in 2016 is the lowest in six years.

Retail Roundup from Nick Bubb:

Next:
This time last year Next had to warn with its Q3 trading update that “the unusually warm weather” in October had knocked it off course a bit, but there were no real worries about recent trading ahead of today’s update for the 13 weeks to Oct 25th. Given the weak comps in the autumn, Next was confident at the time of the interims in early September about meeting its H2 full-price sales growth target of between 3.5% and 7.5% (after achieving 3.5% growth in H1) and after seeing 6% growth in Q3 it has not really changed its view. The famous weekly share price graph is interesting, however, in that it shows that the outcome for the quarter was skewed by a strong September and that October was relatively subdued…Apart from noting “the continued volatility of consumer demand”, there is no comment on the outlook for Xmas and the full-year profit guidance
is broadly unchanged.

Today’s Press and News:
We again haven’t seen all the papers, as we are still on holiday in Rome, but yesterday’s reassuring update from Carpetright looks to have been overshadowed by the news that Shop Direct announced “a third consecutive year of record profits” (on the back of the growth of its Very.co.uk brand). Most of the papers focus on the fashion model photo opportunities provided by Shop Direct, but the Times flags that “Carpetright brushes itself off and gets down to brass tacks”. The FT and the Telegraph highlight that Arcadia is to open Dorothy Perkins, Burtons and Evans concessions in five of Tesco’s biggest stores, whilst the Times notes that Tesco Chairman John Allan has bought nearly £300,000 of shares and bonds in the company. The Evening Standard flagged up the New West End Company forecast of Xmas spending in the West End (see below).
Finally, we can’t see much about the Apple Q4 results that came out in the US last night, but the message seemed to be that trading in China is holding up well.

Sainsbury Store Watch:
We flagged on Monday that Friday’s trip to see the revamp of the Sainsbury Alperton store showcased a quite radical re-think of how supermarkets need to adapt to make food shopping quicker and more convenient (and engineer a richer sales mix, via a bigger non-food and fresh food offer.  The 45,000 sq ft Alperton store in West London opened in 1991 and it was due a refit and Sainsbury closed it for a week in early September to do the work, reopening back on Sept 16th. The store has a large car park (with 500 spaces), but it is pretty typical otherwise and competes with Tesco and Asda in its catchment. The other 5 stores in the trial are at Harpenden (near St Albans), Devizes, Morecambe, Tamworth and Emersons Green (in North Bristol) and different elements are being tested at each store. The Alperton and Harpenden stores are the only ones to be testing the new
SmartShop technology that enables customers to scan products on their smartphones. All 6 stores have an average 30% more space given to Non-Food, which comes from shrinking back the Grocery offer, and move the Bakery from the back of the store to form part of a new “Food to Go” area at the front of the store, near the checkouts. No doubt Sainsbury will give some sense of the success of the trials and potential roll-out plans with the interims on Nov 11th.

West End Watch: Xmas may seem a long way away, but the New West End Company released its second annual forecast of Xmas spending yesterday, cautiously predicting that despite an expected 1.5% decrease in West End footfall, shops on Oxford Street, Bond Street and Regent Street etc should see an uplift in till receipts of 1.2% during the 6 weeks of the festive season (reflecting an uplift in consumer confidence, increasing spend from American visitors and the fact that Christmas Day falls on a Friday this year).

News Flow This Week: With the end of the month coming up fast now, the monthly CBI Distributive Trades survey is out tomorrow morning and the monthly GFK Consumer Confidence survey is out first thing on Friday. The Pets At Home pre-close update is also on Friday. Nick Bubb – nicholas_bubb@hotmail.com

Tuesday Wrap:

This was produced for distribution yesterday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:

Various studies into effect of alcohol:

• The Institute of Alcohol Studies has produced a report on the impact of alcohol on the emergency services – here

• The IAS recommends more treatment centres, a lower of the drink drive limit, the introduction of a ‘flexible Late Night Levy’, a reintroduction of the duty escalator and the introduction of a minimum price for alcohol

• Allied to the report, the police ‘have urged ministers to call time on 24-hour licensing, after three-quarters of police officers and 50% of ambulance staff told a survey they had been injured while handling drink-related violence’ per The Guardian.

• ‘Police officers also said that 53% of their time was spent dealing with drink-related crime, and ambulance staff said 37% of their time was taken up tackling problems arising from alcohol.’

• This is clearly not good news but, less justifiably, The Guardian says ‘the majority (68%) of police officers surveyed blamed the introduction of 24-hour licensing in 2005 for alcohol-related crime, and many called for a return to the traditional closing times of 11pm for pubs and 2-3am for clubs.’

• As the CEO of the BBPA points out ‘24-hour drinking is very much a myth, as on average, pubs close less than half an hour later than they did under the previous Licensing Act.’

• A return to previous closure times would not affect the majority of food-led, accommodation-based or residential pubs.

• However, whilst there seems to be a move to liberalise gambling (wall-to-wall advertising post 9pm) and allow ambulance-chasing lawyers to tout for business, clamping down in one area seems a little incongruous

• And, after all, isn’t it all shades of grey? The ‘53% of time’ isn’t dealing with alcohol, it’s dealing with people who are inclined to abuse alcohol – and that’s a much bigger issue.

• It’s hard not to be rude here but they probably also spend 53% of their time dealing with people who have tattoos or are jobless or go to bed after 11pm but, whilst there may be an association, there isn’t any causality

• It would be a shame to throw out the baby with the bathwater because, as the BBPA says, ‘pubs provide a vital community function and we want to encourage drinking in a responsible environment like the pub.’

• It adds ‘UK alcohol consumption is falling overall and is down 18 per cent since 2004.’

Sugar taxes:

• I may not be alone is finding it hard to believe that, as was also mentioned re minimum pricing for alcohol, there is no link between price and demand.

• I mean it’s simply not credible, is it?

• If sugar-based drinks were ten times as expensive, demand would fall. So the causality is established & all the rest is a matter of scale.

• Sure, there would be illegal sugar-stills popping up here and there – and there’s plenty of sugar to be had from a bag of apples – but that’s another issue.

• The base issue is surely not ‘will a tax work’ but rather is price the best way to address the issue

• It may be convenient to call for a tax but, as with the suggestion that higher prices would ‘solve’ any perceived alcohol ‘problem’, it’s also somewhat simplistic

Big ticket, small ticket:

• Whilst we may have moved on to wondering about the consumers’ desire to spend at all rather than just looking at the big-ticket, small-ticket split, it’s interesting to note Carpetright’s comments this morning.

• Despite caution from Travis Perkins last week, Carpetright group says trading is fine.

• Sales are +4% LfL.

• There is no change in full year profit guidance.

• We await further comment from the small ticket leisure and other retailers and, on that topic, Greene King will produce its latest leisure tracker tomorrow

Things can change:

• A propos of nothing it’s interesting to see that things can change.

• Emerging markets were just the ticket for the branded consumer goods companies, for example, until they weren’t.

• Ditto Waitrose, whose halo has recently slipped.

• Of course social and demographic changes do lead to more permanent changes but the above begs the question as to whether, in a couple of years, we won’t be praising big-shed food retailing and small ticket spending

Random information, hopefully not all of it useless (re most leisure operators etc.):

• UK earnings. BP is an exception, Whitbread was as well but there are a number of UK companies reporting & missing their numbers. Such actions lead one to periodically question the market’s rating.

• Oil price broken down below $48 after a few days steady between $48 and $48.50

• Coffee price down again, sugar rally fades.

• Pig prices down again, should be helpful for Cranswick. Group passes both higher and lower prices on – but margins have a habit of widening on falling prices. Price of hogs now down c28% over the last year.

• Payday lenders getting caught miss selling; not such a surprise, surely? Talk Talk down on ball-fumbling.

• Cooler weather good for the fashion retailers (see Nick Bubb this morning). Cooler weather also helpful for Premier Foods, custards, sauces and the like. Group reports H1 numbers on 10 Nov.

• Off our patch but, if VW is as good as or better than anyone else in the world when it comes to making car engines, why did they have to cheat when the others (allegedly) didn’t?