A Day in the Life:

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

So the Mighty Hull City has won eight of its last nine matches.

I’d repeat that, I don’t get many chances to say it but we don’t want to bore readers & nor do we, at this stage at least, want to rattle Arsenal, Chelsea, Tottenham, Manchester City supporters etc. at this still-relatively-early stage of the season because they may have to face us next.

Anyway, it’s time for the news but if you would like to spread the love and add a colleague or acquaintance to this email list then just let me know. On the other hand, you could just forward it to them & suggest that they hit the ‘subscribe’ button at the bottom and then, via the miracles of modern science, it will bung them on the list.

The News:

Pub, Restaurant & Drinks Producer News:

• Greene King chairman elect Philip Yea has purchased 30k shares in the company at 859p per share

• Social media campaign organiser Airship has reported that it has helped Italian restaurant brand Gusto to boost bookings. It says ‘in a three-month trial, Gusto, part of the Living Ventures group, saw revenue from bookings through social media increase by more than £20,000 a month across its 12 restaurants.’

• FT reports that HM Government has scrapped plans to introduce a sugar tax as a part of its battle against obesity

• Enterprise Inns CEO Simon Townsend has told M&C that the company’s debt is not a problem, and that its weak share price performance is down to volatile markets.

• MPs have received a special pint glass as part of the BBPA’s campaign for a cut in beer duty in the upcoming 16 March Budget. Brigid Simmonds, BBPA Chief Executive, commented: ‘Our campaign pint glass really gets the message home that beer drinkers in Britain still pay taxes that are hugely out of line with our neighbouring countries. It will take many years of action to undo the negative impact of our high tax rates. I would urge MPs to support a further penny off a pint in in the Budget and to sign Early Day Motion 919 in Parliament.’

• Meatliquor is taking over its smallest site so far, The Sea Cow in East Dulwich, and co-founder Scott Collins has promised it will be a ‘hybrid of all our other sites’.

• The Heavitree Brewery has reported a 0.56% increase in operating profit before tax of £1.4m for the year ended 31 October 2015. Turnover fell by £116k (1.6%) to £7.1m. In terms of outlook, the Chairman said: ‘I once again find myself drawing attention to the uncertainties which overshadow the trade whilst the economic recovery in our trading area slowly moves forward. There has been much debate about possible interest rate increases and the effects on small businesses, such as pub operators, of the introduction of the national living wage.

• ‘Most recently, the new, well publicised guidance on alcohol consumption from the UK Chief Medical Officer has added to the list of issues faced by today’s Licensee. With all these pressures very much in mind, we continue to attract great operators by offering a combination of stability with our new agreements; both tenancy and leasehold, an expanding choice of products and strong support from the head office team to all our houses.’

• UK eating out spend grew in 2015 thanks in part to key London operators taking their successful formats into the regions, according to M&C Allegra Foodservice figures. Average spend rose 6.8% and the number of visits per head per month rose 2% year-on-year in Q4.

• Loungers remains ‘broadly’ on track for c£78m of turnover in its current financial year from £48m in the year to 26 April 2015. MD Nick Collins also accepted that forecast run-rate site EBITDA would be ‘slightly impacted’ by its decision to introduce the National Living Wage to all of its employees, regardless of age, at the start of this year.

• The Sunday Times writes that PE backer of Pizza Hut Restaurants, Rutland Partners, has appointed advisors to oversee the sale of the pizza group.

• Hawksmoor co-founder Will Beckett has said the company’s World Trade Center site must become one of the top 15 grossing restaurants in New York in order to succeed. ‘The rent on the New York site is more than our six English restaurants put together, and for it to work it has to be in the top 15 grossing restaurants in the whole of New York We’re going to have to do $20m a year for it to be an unequivocal success,’ said Beckett, speaking to the FT. ‘It’s obviously way more than breaking even, but feels commensurate with the risk, which is not insignificant.’

• The 19-strong stone baked pizza operator, Franco Manca, will open three new sites in April, including its first regional openings in Brighton and Guildford. The Fulham Shore-owned business, which believes it can grow to over 40 sites, will also open a unit in Muswell Hill and has applied to open on the Sam’s Kitchen site in Kentish Town.

Leisure Travel:

• All Leisure FY, says PAT £0.5m vs loss of £7.5m in previous year. Underlying loss, however, was £1.5m vs profit of £0.9m last year

• All Leisure FY: Revenues £127.3m vs £138.9m ‘was lower due to dry-dock periods for both the Voyager and Minerva vessels’. Also says tour operating revenues lower on lower demand for Egypt.

• All Leisure FY: Says total bank and cash declined to £10.2m vs £15.1m last year ‘given higher capital expenditure’. Group also made losses incurred on foreign currency hedge contracts during the period that have subsequently expired. Reiterates ‘on 30 November 2015 the Group entered a sale and leaseback in relation to the Hebridean Princess vessel, raising £3.0 million cash (less expenses) to improve liquidity.’ Points out ‘this was a post balance sheet event, not reflected in these financial statements.’

• All Leisure FY: Passenger numbers down 6% (cruise down 1%, tour operators down 9%) saying ‘bookings to the Eastern Mediterranean and North Africa, notably Egypt, Turkey and Cyprus were heavily impacted by the geo-political issues in the Middle East, whilst the Russian tours programme was cancelled due to restrictive new visa regulations that deterred passengers from booking.’

• All Leisure FY: Co says ‘the board is actively considering delisting from the AIM market.’

• All Leisure FY: Chairman Roger Allard comments ‘I am delighted to report that the All Leisure Group closed the year to 31 October 2015 with an overall Profit after Taxation of £0.5m, compared to a loss of £(7.5)m in the prior year. On an Underlying basis, there was a Profit after tax in the year of £1.0m (2014: profit of £0.6m). Trading conditions are however expected to remain very challenging, especially in view of the escalating conflict in the Middle East and recent acts of terrorism, and the effect these events may have on consumers’ propensity to travel.’ He continues ‘the board is actively considering delisting from the AIM market. It is mindful of the on-going costs of remaining as a publicly quoted company and the limited current and potential benefits available to the company. A further announcement will be made in due course.’

• Action Hotels updates on trading, says its 9 hotels ‘performed strongly and in line with expectations’. Revenue will be +16% and operating profit is expected to be up by 18% as compared to the previous financial year. The group increased its portfolio of operational rooms by 54% in 2015 ‘with the opening of Premier Inn Sharjah, ibis Seef Bahrain, along with the acquisition of ibis Budget Melbourne Airport, taking the total number of operating rooms across the portfolio to 1,561 as at 31st December 2015, a 55% increase since IPO.’

• Action Hotels. Trades at 45% discount to NAV ‘despite the consistent growth in the Group’s net asset value, EBITDA, net profit and dividend’. Says ‘the company’s target market of business and inter-regional travellers means Action Hotels is not dependent on international leisure tourism and therefore remains resilient to any declining trends in international tourism as a result of global or financial events.’

• STR has reported that the US hotel industry now comprises of some 5m rooms in 52k properties across the country. It says ‘select-service construction has been strong for the last two years and continues to remain so’. It says JW Marriott is the largest operator in the upper upscale segment with around 140k rooms in total.

Other Leisure:

• Sky News reports that South Korea’s CGV cinema chain has made a £1bn approach to buy the Odeon & UCI chain in the UK

Finance & Markets:

• Eurostat figures show the Eurozone grew by 1.5% quarter-on-quarter in the last three months of 2015, while the 28-strong EU grew 0.3%. Recent weakness has led some to believe that further monetary policy stimulus is required.

• Japan’s economy shrank in size by 0.4% in Q4 last year due to weaker domestic demand and slower housing investment

• UK sharply higher on Friday, Europe also. US higher and Far East firmly better in Monday trade

• Oil price up over the last three days, now trading at around $33.10 per barrel

• ECB says it is in talks with government of Italy about taking over some of its bad loans in return for funding

• Greek PM Tsipras said over the weekend that arguments between its creditors were holding up the review of its bailout. He said ‘there are differences among the lenders on Greece’s pension reform that are delaying the whole process.’

• Greek bank shares are now down some 60% in calendar 2016.

• Business confidence in the UK has fallen to its lowest level in 3yrs reports accountant Grant Thornton. It says ‘although the Chancellor was right to warn of a ‘cocktail of threats’, it is not all doom and gloom. Businesses expect sales and profits to continue to grow.’ It adds ‘there is also a prediction that export sales will start to grow in line with domestic sales as sterling weakens against the USD and euro, our largest trade partners. This has been flagged before but it hasn’t materialised.’

Langton Licensed Retail Index – Major Movers

The LRI underperformed the wider market last week, falling 4.87% against a 3.83% drop in the FTSE All-Share.

Pubs

Greene King and Marston’s were more or less in line with the wider market last week, with MARS down 3.76% and GNK down 3.17%.   The outlier again in the big pub groups was M&B who saw a 6.91% drop last week.  The group has some headwinds not faced by its competitors in the form of a weird share register and poor like for like performances of late, but if EPS forecasts for the group are accurate, the shares are currently on a PE of less than 7x.

Enterprise and Punch both saw sharp drops last week, with Punch down 8.62% and Enterprise down 18.36%.   Broker notes on Enterprise spooked the market ahead of the group’s Q1 update, which sent Punch worse in sympathy.  Following the update on Thursday ETI shares rallied a little, but worries over the group’s debt have caused the shares to halve in value since May.

JDW on the other hand saw a rise 2.31% with the shares ending the week above the £7 mark once again having dipped to 610p following its Q2 update in January.

Young’s was up 2.67% last week, beating Fuller’s who saw a 3.27% drop. 

Other Leisure

Travel related stocks seem to be having a bad time of late, and this may have been the cause for Travel hub F&B operator SSP Group’s 7.69% drop last week.   Travel to the Middle-East is likely to be subdued for some time, while European travel will have been impacted by the terrorism in November.

Cineworld and Merlin both slightly underperformed the main market down 4.97% and 4.62% apiece while Patisserie Valerie saw a 6.22% drop, as doubts again entered the minds of stock market bulls causing some to take a closer look at highly rated stocks. Will Brumby – will.brumby@langtoncapital.co.uk

Langton Food Retail Index – The Grocer’s Dozen

The FRI was down just -0.29% in a turbulent week thanks mainly to the positive performance of the index’s two largest constituents, Tesco (+1.31% to 177p) and Marks and Spencer (+0.51% to 417.4p).

Grocers

Tesco’s strong showing draws further attention to the underperformance of Sainsbury shares since the start of the year. Morrisons -2.12% fall to 172.48p was eclipsed by Sainsbury’s c5% slide to 238.12p, and the latter is now down just under 7% over the past six weeks. This compares to an 18% increase in Tesco’s share price and a 16.3% rise for Morrisons.

Specialty/Wholesale

Both Conviviality (-6.22% to 192.25p) and Booker (-5.31% to 159.5p) experienced declines, as the recent falls in the FTSE hit the more highly-valued shares the hardest. Conviviality has now given up 13.7% since the start of the year but, though Booker’s 8% fall is more in line with the market. Jack Brumby – jack.brumby@langtoncapital.co.uk

Retail Roundup from Nick Bubb:

Saturday Press:
The main focus in the Saturday papers was on the news that Burberry is facing a class action lawsuit in the US (over claims that it used misleading price tags at its Outlet stores to make shoppers believe they were getting bargains), as this got the attention of the Independent, the Daily Mail and the Times. The other big story was that Aldi is set to announce a new round of price cuts, in response to the recent moves by Morrisons, as flagged by the Times and the Telegraph, inter alia, whilst the Guardian flagged that Aldi’s new price comparison ads have been called misleading by its rivals. The market reports picked up the impact of Julian Dunkerton‘s share sale at 1200p on the SuperGroup share price. The Times had a feature interview with Hotel Chocolat boss Edwin Thirlwell (who has decided to focus Overseas expansion on Denmark rather than the US for the time
being) and the Telegraph had a snippet about the acquisition by the Online bike retailer Wiggle of its rival in Northern Ireland, Chain Reaction. Finally, the news that Waitrose boss Mark Price has been appointed a Trade Minister attracted more comment, with an article on the Times suggesting that he may have bitten off more than he chew, but we’ll give the final word to Chris Blackhurst in the Independent (which will sadly close down at the end of March), who thundered that Mark Price will make a good Trade Minister, if he is allowed to by the Civil Service.

Sunday Press:
There were plenty of gloomy articles in the Sunday papers about the growing financial crisis and the slump in the stockmarket last week, but the gloomy mood spread to a feature article in the Sunday Times about the growing problems of Next, headlined “Boy wonder Wolfson stumbles at Next”. On a brighter note, the Sunday Times highlighted the revival of the Jessops camera business under the entrepreneur Peter Jones and that private equity veteran Guy Hands is thinking of selling the Wyevale garden centre business for about £700m. The Sunday Telegraph had several retail stories, principally the news that troubled Matalan has been granted a reprieve by its banks over its mounting debt pile (Lloyds Bank has agreed to reset the debt covenants), but also that Mountain Warehouse is to ramp up its expansion in the US (as it prepares for an IPO) and that Tesco is being sued
by a property developer over land use restrictions. The Observer had a feature on Body Shop (now owned by L’Oréal) and how the CEO Jeremy Schwartz is keen to reconnect the business with its roots. Finally, the Sunday Express flagged the continued pressure on Asda from the growth of Aldi and Lidl, but noted our view that Asda’s profits should be steady enough given its focus on margin rather than sales.

Today’s Press and News:
The main focus today is on the overnight BRC-Springboard footfall survey for January (as reported by the Independent, the Times and the Telegraph, inter alia), headlined “Best Overall Footfall Performance in Two Years” and showing that the High Street was up 0.2%, Shopping Centres were flat and Retail Parks increased footfall by 5.2%. The Daily Mail follows up the weekend press report that Mountain Warehouse is to ramp up its expansion in the US and, like the Observer, the Telegraph interviews Jeffrey Schwartz, the CEO of Body Shop (“I’m halfway to a hippy warrior”), to note the 40th anniversary of the chain’s creation. The Telegraph also reveals that losses at the ailing 99p Stores chain swelled to £11m in the year to January 2015. Finally, there are a few snippets about the surprising news that Iceland has overtaken Waitrose and Ocado to
deliver the best Online Grocery service, according to a consumer satisfaction survey from Which? magazine.

News Flow This Week: The Darty Q3 and the Asda Wal-Mart Q4 results are on Thursday, whilst the ONS Retail Sales figures for January come out on Friday and the Pendragon finals are due tomorrow. Nick Bubb – nicholas_bubb@hotmail.com

Friday Wrap:

This was produced for distribution Friday 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:

Drink drive limits:

• So there are no plans to put it down in England & Wales.

• And, though it’s clearly a hot political potato that may be reasonable.

• Not that it’s sensible to drink and drive but rather (though stats are hard to come by) because those who cause a problem when driving under the influence typically haven’t had 1.1, 1.2 or 1.3 pints but rather have had 4, 5 or 6 meaning that enforcement is perhaps critical.

Hotel trading:

• We reported earlier today that STR numbers had the US hotel industry reporting positive REVPAR for the week to 6 Feb.

• This is micro-analysis, of course, but it is of some interest.

• Because though REVPAR was up, this was >100% due to higher rates (up 5.2%) because occupancy was actually down by 1.9%.

• This, if maintained, is symptomatic of a market that is past its peak.

• We summarised the situation thus, earlier in the week. The top of the market, maybe a year ago, features rising room rates and occupancy. It’s a win-win. But then occupancy stalls and declines. Rates go up further and REVPAR continues to increase. But it is rate rather than volume-driven. Then one or more players, usually those with gearing, cuts rates. The individual hotelier performs well but, before long, competitors have to follow suit and rates fall across the market. Towards the bottom, maybe a year or two from now, rates and occupancy are both falling and there’s real distress. And then the cycle turns again, occupancy starts to rise. Initially, operators do not dare to jack prices but, before long, they do – and it all starts over again.

• We have no reason to think that anything has changed in the last two days.

• Nor have we much reason to believe that what is happening in the US is not also happening in the UK – particularly in London and, perhaps less strikingly, in areas such as Aberdeen where reduced oil-related spending is having an impact

Random information, hopefully not all of it useless:

• Equity markets in the middle of a meaningful bounce at time of writing. However, 80pts up has to be put in the context of 1,500pts down.

• Sterling similarly ‘bouncing’. But, having fallen 10% or so in recent weeks, it was up yesterday by half a percent or so against both the USD and Euro.

• RIO cut its dividend yesterday & fell. Rolls Royce did the same thing today and its shares are currently some 13% higher. Timing is everything.

• Some suggesting that a 4% dividend yield on the FTSE indices will provide some support. Against a gilt yield of around 1.3% that should be the case but, when the bears get the upper hand, it may mean little.

• Bounce in gold price now becoming rather irritating. What’s in it with the yellow stuff? Tend to follow the Warren Buffett logic (i.e. that you could fit all the gold in the world into a medium-sized warehouse and, if you left it for a decade, it wouldn’t actually produce anything worthwhile) but that’s not shared by the markets. Despite recent admittedly sharp bounce, however, it’s still up only 3% on the last 12mths.

• Oil price bounced a little but main story is that it failed to hold its rally to the $35 level. And even that would have been rather anaemic as far as rallies go.