A Day in the Life:

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So what’s the worst job in London?

All right, it may be a sewage worker or a mortician but I’d suggest that delivery driver must be right up there because, walking around as it do throughout the day in the capital, I’ve certainly never seen one look happy.

And fair enough, they bring a bit of grief down upon themselves by just rolling to a stop and putting their hazard warning lights on and jumping out for five minutes whilst in a queue of traffic but, at the end of the day, what else are they meant to do.

They might be able to park on the pavement. Or maybe around the corner but, in many parts of London, ‘parking around the corner’ might add five minutes or more to your journey time as you could get stuck in one way systems that feed you south of the river or to the other side of the M25.

So, whilst I’m not about to laud them for their often thoughtless, dangerous and downright insensitive behaviour, I do have a degree of sympathy. I’m sure if I ever drove a car in London I might think differently but, for the moment, let’s just move on to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Alix/CGA Market Growth Survey says ‘restaurant openings continue to make up for the fall in licensed premises caused by pub closures’.

• Alix/CGA Survey. Says that the ‘pace of expansion [of restaurants] is easing’. 2015 wet led numbers down 1.2%, food-led +1.6%.

• Openings: Wet led numbers still falling (down 1.2% in the year) but rate slowing in context of 12.6% fall over 5yrs

• Openings: Survey shows 0.1% increase in total number of licensed premises (to 124k), restaurants +1.6%, pubs down 1.2%

• Openings: Increase in restaurant numbers ‘largely [due] to the roll-out of casual dining operators around the country.’ Says ‘the net result is that Britain had just over 124,000 licensed premises in December, up by 0.1% on the same point a year earlier.’ The survey adds ‘after years of steady decline driven by the closure of drink-led pubs, the figures show that restaurants have restored the licensed trade to expansion mode.’

• Openings: Says restaurant numbers growing across most British regions. Fastest growth in Wales & North East (2.9% each).

• Openings: Says ‘growth in openings of licensed premises [incl. restaurants] in London was lower than the national average at 0.4%, reflecting suggestions that the market in the capital may be over-heating.’ Peter Martin comments ‘the casual dining sector remains buoyant, with established names rolling out and a steady flow of new concepts arriving to keep them on their toes. But with the pace of openings slowing, our latest Market Growth Monitor will give pause for thought to anyone who thinks the boom will last forever. Competition for market share is fiercer than ever, and the risk of saturation is likely to be an increasingly pressing issue this year.’ AlixPartners’ MD Paul Hemming reports ‘while the MGM data shows a slowing of new openings, it’s important to remember this is a net figure. It does not capture the ebb and flow of existing
sites changing hands between operators, and the on-going march of the multi-site branded operators taking market share from independents.’ He continues ‘that said, it is inevitable that site expansion will at some point slow, especially against the fierce expansion rate of recent times. It is becoming increasingly hard to find good sites at economic rents. With the backdrop of wage inflation, it’s is also difficult for operators to improve their operating margins, so many will just have to accept a lower return on capital as they grow.’

• CGA Peach Business Leaders’ Survey shows both optimism & caution. Competition, levels of spending & property costs among main concerns. Some 47% of respondents’ businesses performed ahead of expectations in 2015 and 25% of business leaders are now ‘very optimistic’ about business prospects for 2016.

• Business Leaders’ survey: Concern that ‘2015 might even have marked a high point for restaurant and pub operators.’ Survey suggests fragile consumer confidence on spending is a worry with only 52% of respondents saying they expected visit frequency to increase in 2016 vs 78% who had said the same thing last year.

• Leaders’ Survey: Main concerns for 2016 are re property & people costs. The NLW will add cost & rents rarely go down. Main areas of growth include premium fast food, trading at transport hubs and sales of craft beers. CGA Peach’s Peter Martin says ‘2016 is going to be another year of change and challenges for the eating and drinking out market. This fascinating survey shows that eating and drinking out remains substantial, stable and ambitious—but intrinsic growth is hard-won, and competition out there is more intense than ever before.’ He goes on to say that ‘for brands that can stay on top of trends, identify the right property and people and consistently deliver great customer experience, the future is bright.’

• Diageo strikes deal with Dr Vijay Mallya, who will leave as both Chairman and non-executive director of USL. Pays c£53m over 5yrs. Ivan Menezes, Chief Executive of Diageo, reports ‘India is an exciting growth opportunity, and USL has the management team, strategy and capability to deliver on that opportunity.  The agreement announced today is in the best interests of both Diageo and USL and allows USL to build on its strong platform in one of the biggest spirits markets in the world.’

• Licensing solicitors John Gaunt reports that the Licensing Committee in Hartlepool has resolved not to impose an EMRO at this time. It has said that there will need to ‘produce some or better evidence that an EMRO was warranted’.

• Casual Dining Group is set to sell its 4-strong US La Tasca division for around $2.5m reports Propel

• McDonald’s UK chief executive, Paul Pomroy, says the fast-food vendor is about to embark on one of the biggest transformations it has ever seen over the next year. The group will focus on improving the customer experience, expanding its Signature collection, and rolling out its table service initiatives.

• Speaking to M&C, Pomroy said: ‘We are going to pilot schemes that challenge the perceptions of McDonald’s, to get customers to truly re-appraise us as a brand. We will change the restaurant environment, the physical look and feel of the sites. I will never allow us to become complacent again, we need to more agile, more nimble and quicker to market with new concepts and new ideas.’

• Champagne shipments reached a record €4.75bn in value in 2015, according to figures from Comité Champagne, while volume sales were up 2% to 312.5m bottles.

• M&C Allegra Foodservice’s Delivery Service Analysis indicates the casual dining sector has yet to take full advantage of delivery. Of the 110 leading brands in the survey, 48% said they did not offer delivery.

• Nearly fifty MPs joined the BBPA, CAMRA, and SIBA yesterday, by sending a ‘Message in a Barrel’ to the chancellor ahead of the 16 March Budget. MPs posted their messages in Yorkshire brewer Theakston’s handcrafted barrel, calling for a further beer duty cut.

• Brigid Simmonds, Chief Executive of the British Beer & Pub Association, said: ‘I am delighted that so many MPs have shown their support for cutting beer duty. Still in pubs, two thirds of all alcoholic drinks sold are beer. Beer in pubs is now 20p cheaper than it would have been had the escalator remained in place.   Strong support from MPs always gives a real boost to our campaign – we have built a very strong case for further duty cuts to boost employment and protect pubs, as the industry still faces big cost pressures particularly in the next year.’

• Heineken is to spend an additional £20m on pub improvements over the course of 2016, with almost 30% of Star Pub & Bar’s estate of 1,050 standing to gain. The cash will be focused on funding new kitchens and improving the food offer in the relevant sites.

• A new Horizons survey shows mac ‘n’ cheese’s inclusion on British restaurant menus has grown by some 550% since 2010.

Leisure Travel:

• IAG FY: Says Q4 operating profit was €540m excluding Aer Lingus, €530m including it. Revenue for full year +13.3% to €22.9bn

• IAG FY: CEO Willie Walsh says ‘we’re reporting very strong full year results’. He reassures ‘Aer Lingus has made a positive contribution of €35 million operating profit since it joined the Group on 18 August last year.’ He adds ‘these results are in line with our recent target and have exceeded our original 2015 operating profit target of €1.5 billion that we set in 2011. It’s undoubtedly been a good year but it’s also been challenging with extreme volatility in the currency and fuel markets. The benefits gained from lower fuel prices have been partially offset by the stronger US dollar.’ Mr Walsh comments re the outlook ‘in 2016, IAG expects to generate an absolute operating profit increase similar to 2015.’

• Staycity is extending its Heathrow site by 250 apartments and will add a guest lounge, café, breakfast area, and terrace. Earlier this month, the fast-growing aparthotel operator opened 170 new apartments in Birmingham’s Newhall Square and has plans to more than triple its European footprint to 3,500 apartments over the next two years.

• European hotel industry occupancy rose by 1.4% YoY to 54.7%, according to January 2016 data from STR Global. Average daily rate grew by 1.5% to €100.52 and revenue per available room was up 3%.

• The Foreign Office is warning terrorists may by in the ‘advanced stages’ of preparing attacks in Indonesia and urges visitors to ‘exercise a high degree of caution’.

• Merlin will face charges under health and safety legislation over the Alton Towers rollercoaster accident that left five people seriously injured. A spokesman for Merlin commented: ‘We have cooperated fully with the Health and Safety Executive throughout their investigation while continuing to support those who were injured in the accident.

• ‘The company completed its own investigation and published the results in November, accepting responsibility for what happened. We have also kept the HSE fully informed of the subsequent actions that we have taken to ensure that something like this cannot happen again.’

• Air passenger duty (APD) for children over the age of 12 and under 16 will be abolished on economy flights from 1 March.

• The US hotel industry saw all three of its key performance metrics rise during the week of 14-20 February, according to STR Global. Occupancy inched up by 0.6% to 64.3%, while average daily rate rose by 2.1% to $120.04 and revenue per available room increased by 2.7% to $77.17.

• EasyJet has pulled all but one of its routes to Sharm el-Sheikh for the summer due to ‘reduced demand’. In a statement the airline said: ‘We have no confirmation from the UK government that we will be able to resume flights yet, but if we are these will be the only easyJet flights to Sharm el-Sheikh this summer. These flights are scheduled to operate from May 29. Assuming the Government’s travel advice does change, we expect to resume services from Manchester, Luton and Gatwick from the beginning of the winter season in October 2016.’ 

• Egyptian tourism officials will focus on security, cultural tourism, and the quality of its resorts as it seeks to win back tourism revenue.

• On The Beach founder Simon Cooper has warned that slashing holiday prices to Turkey will not help the country this summer.

Other Leisure:

• Wm Hill FY: Says ‘good progress on strategic priorities leaves William Hill well placed for 2016’.

• Wm Hill FY: Revenues down 1% at £1.6bn, operating profit down 22% at £291m, adjusted EPS down 17% at 24.7p, DPS +2.5% at 12.5p

• Wm Hill FY: CEO James Henderson reports ‘in the last 12 months we have made substantial operational progress against our three strategic priorities of omni-channel, technology and international.’ He says internationally, I’m particularly pleased that William Hill Australia is now benefitting from our reshaping and investment in the business.’ Mr Henderson concludes ‘as one of the largest scale businesses in gambling, the Board is confident in the outlook for the year ahead and believes the Group is well placed to deliver on its growth strategy.’

Finance & Markets:

• UK economic growth in Q4 last year has been confirmed by the ONS at 0.5%. Growth rate for FY15 was left at 2.2%

• BBA reports mortgage demand up to 47.5k as buy-to-let investors seek to beat the rise in Stamp Duty in April

• Consumer confidence in February has fallen to its lowest level in a year per GfK. It says ‘despite the positive impact of continued low interest rates and subdued inflation on our day-to-day household budgets, the feeble outlook for growth and a variety of economic uncertainties since the start of the year has depressed our New Year optimism.’

• World markets: UK and Europe up. Wall Street also strong & Far East up in Friday trading

• Oil price off its highs but still trading at just a little over $35 per barrel

Retail Roundup from Nick Bubb:

Sports Direct: As advised by a new PR firm, Keith Bishop (?), embattled Sports Direct has put out an unusual announcement today, to the effect that it will no longer borrow money at favourable interest rates from the loam facility of Mike Ashley’s investment vehicle MASH (the MALF), because: “The Group has been subject to unjustified criticism over related party transactions, including incorrect press coverage of the benefits of the MALF. It has been decided that it is in the best interests of the Group and its shareholders to avoid further criticism at this time”.

Consumer Confidence Watch: The monthly GFK Consumer Confidence Index published overnight shows that that the index slumped from +4 to 0, well below forecasts of +3, marking a 14-month low score for the index.”Despite the positive impact of continued low interest rates and subdued inflation on day-to-day household budgets, the feeble outlook for growth and a variety of economic uncertainties since the start of the year has depressed optimism” said GfK’s Joe Stanton.

BDO High Street Sales Tracker: The weekly High Street sales index of medium-sized Non-Food chains assembled by the accountants BDO again paints a gloomy picture today of underlying Fashion store trading momentum last week. Despite a weak comp, overall Fashion store LFL sales were down by 2.7% on last year in w/e Feb 21st and Total store LFL sales were down by 2.1% (including some Lifestyle and Homewares retailers), with BDO blaming “a lack of discounting and inconsistent weather”, but overall Non-Store/Online sales were up by 17.7%.

Trade Press (1): The unusual front cover of Retail Week magazine today is a photo of a liveried Harrods doorman, with the headline “Keeping up tradition at Harrods: How the retailer finds staff who put the customer first”. The main news stories are that Steinhoff is battling Sainsbury for control of Argos and that former M&S boss Stuart Rose told Retail Week that he believed “common sense will prevail” and that the country will vote to stay in the European Union in the Referendum. And the Editor looks in his column at the need for the industry’s voice to be heard in the EU “In or Out” debate and thunders that “High-stake Brexit debate demands Retail engagement”.

Trade Press (2):
The Editor of Drapers magazine also looks at the “Brexit” debate in her column today, as well as Amazon’s ambitions in the Fashion market, thundering that “Amazon is not seen as a serious fashion player by the consumer. Changing this perception has got to be the biggest focus for Amazon this year”. The main News story is that Fashion multiples, independents and suppliers have expressed mixed views over the impending Referendum on Britain’s membership of the European Union, but that most agree it would be better to stay in. Drapers also flags that Amazon’s appointment of the former Marks & Spencer Womenswear Director Frances Russell signals its intent to become a dominant force in the UK Fashion industry, although it notes our view that one of the challenges would be to increase consumer awareness of its fashion offer. Drapers also
has a story that Retailers are seeking discounts from suppliers to shore up margins after a sluggish start to the new season and highlights that the Inditex fascias Stradivarius and Pull & Bear will open stores at the Intu Trafford centre in Manchester this summer, as the Zara owner continues to expand the footprint of its other brands in the UK. The front cover feature article is Brian Brick talking about the turnaround of Moss Bros.

News Flow Next Week: As we move into March next week, things get a bit busier on the company news front, with the Greggs finals and MySale interims on Tuesday and the Travis Perkins finals on Thursday, whilst the car dealer Lookers is also due to report finals next week. Nick Bubb – nicholas_bubb@hotmail.com

Thursday 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:

Merlin, just a thought before we get to the numbers:

• Didn’t Merlin shares come down last year (at the group’s H1 numbers in September) because the group said that a then-strong Sterling was putting off visitors to London from the Continent?

• Indeed they did.

• The company said on 17 Sept that ‘as previously anticipated, Midway Asia’s strong performance has been offset to an extent by softer trading in London where the strength of Sterling against the Euro continues to impact domestic and international visitor numbers.’

• This captured some headlines at the time and the group’s shares (post the Alton Towers’ crash in June) remained weak throughout most of the summer and autumn

• But now, of course, the currency boot is on the other foot.

• Certainly MERL’s shares have been strong but, we would perhaps suggest, not as strong as they maybe should have been given recent currency movements

Merlin full year numbers:

• These looked like good numbers and, indeed, they are.

• Ex the larger parks’ division, which has been held back by the crash at Alton Towers, Merlin’s 2015 performance has been very strong.

• LEGOLAND has been very good and it is here, as well as in the Midway Attracitions’ business, that MERL sees most growth over the medium term

• The outlook for 2016 is for further good trading, new benchmarks have been set for 2020 (see earlier email for detail) and the group has the credible ambition to add 2,000 hotel rooms, 40 Midway attractions and 4 new LEGOLAND parks over the next four years

• We believed that the shares’ weakness in the wake of the Alton Towers crash was a buying opportunity and, whilst nobody would seek to diminish the gravity of what happened on the Smiler ride in June, this has proven to be the case

• We expect to see some forecasts edged up and in addition believe that the group’s PER will continue to expand as the market takes on board the likelihood of the group’s further, predictable expansion

Random information, hopefully not all of it useless:

• Sharp equity bounce back going on. A risk-on day. Market well above 6k as we write.

• China was down 6% yesterday but markets in Europe today have forgotten about that.

• UK 50dy moving averages are being re-tested. Until recently we’ve been in a downtrend with chartists encouraged to remain bearish by the sequence of lower highs. That progression of lower peaks could be broken if we move above (and hold above) around the 6020 level on the FTSE100.

• Meanwhile, fundamentals remain tricky. Expected EPS growth across the Eurozone has been pulled back to 5.6% from 8.0% and company reports in many cases continue to disappoint.

• Sterling weak. Implications as previously discussed. Volatility (the odd bounce as well as weakness) is likely to remain a feature of the currency markets until the UK vote on 23 June.

• Oil price bouncing. Black stuff stuck at above $34 per barrel as we write.

• Hog prices on the rise (decent proxy for white meat) and cattle prices also moving slightly upwards (or at least stable). Hog prices +8% over the last 12mths but cattle price down by 12% or so.