A Day in the Life:

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

So Christmas time is always the period when I’m most at risk of reverting to my student-self.

In that I don’t get up as early as I usually do, I get to bed late, I eat and drink too much and, most disturbingly of all, I tend to get addicted to daytime television, including some shoes that I normally wouldn’t be seen dead scraping off the sole of my shoe.

And here there’s a degree of variety out there that was unknown when I graced the university that was dumb enough to let me in because you have the kids’ programmes (everyday staples), cookery programmes (less appealing with a hangover), Judge Rinder (a bit of an eye-opener) and Jeremy Kyle (just plain wrong) amongst many others to choose from.

However, my daytime drug of choice has to be Storage Wars where you can vicariously bid for containers of old junk and where the satisfaction to be had seems to be 1) sticking it to your rival bidders and then 2) trying to make a profit on whatever old rubbish you’ve bought, strictly in that order.

And whether you’re rooting for any of the scary women, the weaselly professionals or for the irredeemably mad Heavy D all I have to say is Boom! On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Fleurets updates on pub capital values says ‘2015 will be seen as the point where the economic recovery started to reach the pub property market in all regions of England and Wales.’ It adds ‘the effect is, however, not consistent for all locations, tenures or styles of operation.’

• Fleurets says higher London prices are driving buyers to see higher returns in the regions. It says ‘in some of these regional cities, high levels of city centre activity is also starting to tempt some operators to consider the secondary regional towns.’

• Fleurets says central London values remain strong but says it is also in ‘the early stages of increased deal activity in many northern towns’.

• Fleurets says ‘merger and acquisition activity is very firmly back on the agenda with several tenanted and managed package deals completed in the last 12 months.’ It says ‘with an abundance of private equity funds eager to invest in our asset backed, high cash flow sector, a lot more is sure to follow.’

• Fleurets says average freehold sale price is up 5.5% in 2015 vs 2014. It notes a 22% decrease in freehold sales volume

• Fleurets sees 46% increase in volume of leasehold deals with twice as many leasehold deals in the south

• Fleurets says ‘the underlying economic recovery and growing consumer confidence have stimulated sales growth.’ It says there are fewer bargain hunters around and adds the environment is now one ‘where the owners are now holding more of the cards and the buyers are fighting for the best of what’s around.’

• Market evolution. Fleurets notes ‘managed house operators continue to grow market share, either by new build (Marstons), individual acquisitions (JDW, Amber Taverns, etc), or by group deals (Greene King with Spirit and Stonegate with TCG).’ It says ‘much of the focus is on managed food led operations as this is a market in growth.’

• Fleurets says bottom end freeholds have risen in value but the supply of units coming onto the market has fallen by c23%. And this after a 25% fall the year before.

• Fleurets. ‘The mass disposal of bottom end tenanted pubs has now ended.’ Sales going forward will be more selective.

• Fleurets says 50% of the freeholds that it has sold remain as pubs (down from 56% in the year before).

• Big Hospitality predicts better quality takeaways and changes in the UK tipping mentality in 2016

• Technomic suggests that the fast casual segment grew most rapidly across restaurant segments in the US in 2015 with 7.1% unit growth

• Midscale family-style chains increased their number of units by 0.7% in the US in 2015 reports Technomic

• Carlsberg is scaling back its growth ambitions and is looking to dispose of non-core assets in an attempt to make itself a more resilient business. Its chairman Flemming Besenbacher told a Danish newspaper: ‘there was a time when Carlsberg had an ambition to be the fastest growing brewery… but with the development in Russia is no longer an ambition.’ The brewer closed two Russian breweries in January 2015 and announced in September that volume sales in eastern Europe and Russia had fallen by 16% in Q3.

• Champagne sales reached a record high of 312 million bottles last year, with value sales up 4.4% to €4.7bn. Official figures for 2015 will be published next month by the CIVC.

• The BBPA has welcomed the proposed changes to business rates incorporated in the Enterprise Bill currently going through parliament. The proposals put forward a new three-stage system that would make it easier for publicans to appeal their valuations.

• Brigid, Simmonds, BBPA Chief Executive, commented on the system: ‘It is one part of the jigsaw in what is much needed reform of the rates system, and we will continue to work for an effective revaluation in 2017, and encourage local councils to help pubs by cutting their rates burden, as well as calling for new ways of spreading the burden fairly among other businesses. We would also urge Government to reconsider the ending of Retail Relief in April 2016, which will add up to £1,500 to the rates bills of three-quarters of pubs, this April.’

• The ALMR’s Kate Nicholls has also weighed in on the Valuation Office Agency’s consultation on the business rates appeals system, warning: ‘We are pleased to see the Government addressing the issue of reform in this area, but we are also worried that the focus may be drifting away from once in a generation reform the Government has promised… First steps on the road to reform show the Government is listening, but meaningful, root and branch reform must follow quickly.’

• Salad bar chain Chop’d has secured a site in Leeds as part of the group’s aim to open at least six new stores this year. Speaking to M&C, co-founder Eddie Holmes said like-for-likes at the group were ‘quite extraordinary,’ and up c10%. Holmes is also optimistic that the salad concept’s partnership with Costa will grow as the coffee chain’s Fresco concept is rolled out.

• Zoe Tindall will step down as group finance director at Soho House to become finance director at the Casual Dining Group, writes M&C. Tindall has previously worked in similar positions at Pho, YO! Sushi and Be At One.

• Sainsbury’s has made an approach to Home Retail Group’s directors regarding a possible offer for the owner of Homebase and Argos. Sainsbury’s said in a statement any bid would present ‘an opportunity to bring together two of the UK’s leading retail businesses, with complementary product offers, focused on delivering quality products and services at fair prices, through an integrated, multi-channel proposition.’

• Home Retail later said that it had ‘rejected the approach which undervalued Home Retail Group and its long-term prospects.’ It says ‘there can be no certainty that a firm offer will be made, nor as to the terms on which any firm offer might be made.  The Board will issue a further statement if and when appropriate.  In the meantime, Home Retail Group shareholders are advised to take no action.’ It adds it is scheduled to release its latest trading statement on 14 January 2016.

Leisure Travel:

• IAG boss Willie Walsh has renewed his call to scrap air passenger duty, labelling the charge an ‘out of control rip-off’.

• A state of emergency has been extended in Tunisia until 21 February and the Foreign Office continues to advise against all but essential travel. The FCO warned that the threat of terrorism remains high, adding: ‘Further attacks remain highly likely, including against foreigners. Security forces remain on a high state of alert in Tunis and other locations.’

Other Leisure:

• Twitter is reported to be considering dumping its 140 character limit on the length of tweets in order to boost growth. Shares fell by 3% as investors considered whether the move, perhaps to as high as 10k characters per tweet, would change the nature of the social messaging platform

Finance & Markets:

• Inflation in the Eurozone remained at 0.2% in the year to Dec.

• World markets: UK up yesterday after a yoyo session. Europe higher, US also up but Far East (exc. Mainland China) down a little in Weds trade

• Oil price off the bottom but still down on a one-day view. Trading at around $36.50 after having been some 10c lower.

• UK construction PMI up in Dec. to 57.8 from 55.3.

Retail Roundup from Nick Bubb:

Home Retail/Sainsbury:
When we first heard the news yesterday afternoon (see Screen Watch below) that Sainsbury had made a bid approach for Home Retail, our first (rueful) thought was that we had actually toyed in the morning with making Home Retail our “Stock of the Year”…Our second thought was that Homebase was actually founded by Sainsbury’s (via a joint venture with the Belgian DIY retailer GB-Inno back in 1979, before being sold in 2001 to a private equity firm) and that is why it still shares many sites. But the major part of Home Retail is clearly Argos and our third thought was to wonder why the recent jv with Argos to open small concession units inside Sainsbury has encouraged it to want to own the whole thing (despite the intense competition from Amazon and Dixons Carphone)…The onus will now be on Home Retail to have something bullish to say about Xmas trading in the
scheduled update on Jan 14th (or earlier) and we would be surprised if Sainsbury don’t “put up” soon after that, ahead of the Feb 2nd Takeover Panel deadline. 

Topps Tiles: Today’s Q1 update (for the 13 weeks ended 2 January) from Topps Tiles looks fine and Matt Williams, the CEO, says “I am pleased to report an encouraging start to the financial year with like-for-like sales growth of 4.4% in the first quarter.  Our strategy of ‘Out-Specialising the Specialists’ continues to be very effective”. We also note that Topps Tiles has opened its second “lab store” in trendy Shoreditch, featuring a range of new display & merchandising treatments.

Card Factory: An interesting move has been announced at Card Factory: Karen Hubbard (Karen who?), the COO of B&M, is to take over as CEO from long-serving Richard Hayes, but everything looks friendly and Card Factory flag (ahead of the pre0clsoe on Jan 26th) that Christmas went to plan, with trading “in line with expectations”.

Next: We flagged yesterday that, with the shares likely to test the £69.62 share buyback price limit level first thing, the notoriously shrewd “Mr Share Buyback Man” was likely to waken from his slumbers at Next and he did indeed take advantage of the weakness prompted by the disappointing Directory sales to pick up £40m of stock at an average of £68.17…

John Lewis Partnership: Bright and early at 7am this morning, JLP announced that Waitrose was disappointing at Xmas, with LFL sales down by 1.4%, but John Lewis was better than expected at +5.1% LFL, thanks to strong Online growth. John Lewis Stores were down 3% LFL over last 6 weeks, despite a strong pick-up in Electricals and a bumper Clearance period last week, but Online was as much as 21% up (now 40% of total sales!). 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:

Christmas trading:

• Looks OK but not brilliant.

• A few (smaller, noisier & justifiably pleased-with-themselves) operators have said that LfL sales were in the +5% to +10% range.

• The larger operators have yet to comment.

• The industry should have benefited from the warmer weather.

• To this extent, the on-trade should have exhibited opposite trends to those of the general retailers

• Next this morning produced a chart showing that the warmer-than-average weather in Nov & Dec coincided with a dip in sales whilst the cooler early-Autumn weather boosted them

• London’s pubs saw big pavement crowds in December and, anecdotally, we hear that the temperature (16 degrees) on the winter solstice was the same as that on 21 June

Evolution continues apace.

• See also yesterday’s Wrap.

• Today we have SSP looking to sell booze from more of its fast food outlets and the news that contactless payment transactions have doubled at pubs & restaurants since the limit was raised from £20 to £30 last September

• Any other suggestions (re pervasive or evolutionary change) or comments gratefully received

Terrorism & Travel.

• The two don’t mix.

• Today we comment on the collapse in Paris hotel bookings.

• This, for the moment, is location-specific but, overall, terrorism is bad news as far as travel is concerned

Random information, hopefully not all of it useless:

• Capacity still going on, more King’s Cross units due to open.

• Next saying today that the online market is getting more competitive, ASOS holding up quite well but Ocado at 52wk lows. Interestingly Boohoo (see Nick Bubb comments this morning) has doubled from its recent lows (though it is only back to around half its immediately-post-IPO highs of c70p).

• Marks will update tomorrow. Market has been prepped to expect non-food sales down by as much as 8% (ex-online).

• Bad first day back for the markets yesterday. Bounce today had fizzled out by mid-morning.

• German market (fears of lower exports into China) and UK FTSE100 (miners weak) both down on China issues.

• Of the FTSE100’s top ten performing stocks yesterday, only two actually registered a rise.

• Oil price flat on its back. Gives the odd hiccup but, at $37, it looks out for the count. And that’s with Iran – Saudi issues in the background too.

• Soft commodities mostly week. Soybean meal Price down 27% over last 12mths. Coffee bumping around the bottom but off 32% over the last year. Sugar & Cocoa still outliers on the upside.

• Tesco share price down 5% yesterday (though up a tad today). Puts the shares (at a little over 143p) on c20yr lows. Company worked hard, built a monolith & shareholders poorer than they were two decades ago.