25 Aug 17 – Deltic, Stonegate and Revolution, US oversupply, bank holiday & other:

A DAY IN THE LIFE:

Parts of Langton are on holiday. Back properly after the Bank Holiday but, for the meantime (and rural internet permitting), the email will go out in shortened form. On to the news:

PUB, RESTAURANT & DRINK PRODUCERS:

The Deltic Group has reported 1.4% growth in turnover to £102.2m for the year to 25 February  2017 and says of its outlook: ‘The trading performance continues to improve and there will be further improvements in the future from the continued refurbishment programme.’

Deltic CEO Peter Marks has told Propel his company is ‘very much in the game’ with regards to Revolution Bars, which has just recommended a £101.5m bid from Stonegate to shareholders, and is working to offer a counter bid.

Tired US restaurant brands are struggling to find private equity buyers to take them private as they look to arrest declining sales trends. ‘Private equity is more selective in pursuing higher growth, more millennial-focused, or on-trend categories, such as breakfast, regional cult favorites, or franchised, early-category players,’ said Brad Swanson, managing director, consumer and retail, with KeyBanc Capital Markets. ‘Some of the older, casual concepts in saturated sectors such as bar & grill are facing less robust process in the M&A market.’

HOLIDAYS, LEISURE TRAVEL & HOTEL:

EasyJet is aiming to tackle ‘an industry-wide stereotype’ by employing women in half of all its engineering roles as part of its Amy Johnson initiative. At present, only 5% of those working in the airline’s engineering department are female.

A planned strike by immigration staff at Portuguese airports has been lifted at the last minute.

The UK’s ban on laptops and other devices has been lifted on some flights to the UK from Turkey and Tunisia. The change applies to inbound flights from Istanbul Sabiha Goken airport and Tunis and another 13 airports will be reviewed on a case by case basis. Restrictions on carrying large phones, laptops, tablets and accessories into the cabin of UK-bound flights from Turkey, Egypt, Tunisia, Saudi Arabia, Jordan and Lebanon were imposed in March.

Abta estimates that as many as 2.1 million people are set to travel abroad this bank holiday weekend.

A terrorism alert was issued on Wednesday night after Dutch police, acting on a tip-off from Spanish police, stopped a van packed with gas cylinders outside a rock concert venue in Rotterdam. The Spanish police force has been investigating any possible links across Europe to the 12-strong terror cell responsible for the Las Ramblas attack, who had between them amassed more than 100 gas cylinders.

The SMMT has blamed its recent incorrect car sales figures on a faulty algorithm. In figures released on 16 August, the SMMT said used car sales had fallen sharply – 13.5% in the second quarter of this year, but the revised figures now show the fall was just 0.7%.

RETAIL NEWS WITH NICK BUBB:

Overall View: Well, the hedge fund shorts of Dixons Carphone will be delighted by today’s profit warning, but the news will revive the old fears about the low quality of earnings in the mobile phone business and management will be under pressure to explain why they haven’t communicated the problems in mobile phones more clearly before…

Sector trends/share prices: The All-Share index was flat yesterday, but the Food Retail sector was well up again, by 1.1% overall (TSCO +1.6%, BOK +0.9%, MRW +1.5%, MCLS +2.3%, OCDO -1.7%). The General Retail sector was down by 0.2% overall (GMD +35.0%, MKS +1.1%, TED +1.1%, MTC +3.3%, SPD +0.6%, ASC -1.6%, BOO -1.4%, DC -2.7%, JD -1.0%, BRBY -0.9%, NXT -0.5%, HFD -1.0%, DNLM -1.1%, VTU -2.2%). First thing today the market is expected to be up a tad, with Dixons Carphone in focus on the Retail beat.

Dixons Carphone: The Dixons Carphone share price has been drooping even lower in recent days, as if something was possibly amiss, so it’s good that the company has cleared the air today by bringing forward the Q1 update (for the 13 weeks to 29 July), but the profit warning will go down like a lead balloon in the City…as it’s less than 2 months since management trumpeted 10% growth in headline PBT to £501m in y/e April. We are now told that management expect to deliver group headline PBT for 2017/18 in the range of £360m to £440m! The message is that there has been continued good performance in Electricals in the UK, Nordics and Greece, but challenging conditions in the UK mobile phone market (as people hold on to their old phones for longer) and that the big and controversial one-off adjustments on phone revenue last year will reverse out this year…The analyst’s conference call at
7.30am should have been lively…

Grocery Market Share Watch: We noted yesterday that Tesco was seen as the main winner amongst the “Big 4” (with Sainsbury the main loser) in the latest Kantar grocery sales figures on Tuesday morning (for the 4 weeks to Aug 13th), but we didn’t have the figures for Asda and the discounters to hand at that stage. On a “Grocery Only” basis (as opposed to the usual “Total Till” basis, which includes Non-Food etc), the overall market was +2.9%, Tesco was +2.0%, Sainsbury was -1.3%, M&S Food was +5.7%, Morrison was +2.4%, Asda was +0.7%, Aldi was +20.3% and Lidl was +17.8%.

Today’s Press and News: The good news from Game Digital (with the shares rallying 35% yesterday!) vies with the bad news from Laura Ashley for coverage in today’s papers, but both get a lot of attention in the FT, with Laura Ashley providing the photo opportunity and Game providing the editorial comment (Lombard column points out that Game’s market cap has been less than the size of its year-end cash). Lombard column in the FT also mocks the laborious procedures for small investors to get their compensation from Tesco over the accounting scandal.

News Flow This Week: The Bank Holiday weekend isn’t far away now (hooray), but before that the CBI Distributive Trades survey for “August” is published at 11am (and will get the usual uncritical coverage in tomorrow’s papers…) and in the light of the unexpectedly good Game Digital trading update yesterday the GameStop Q2 results in the US will be worth a look this afternoon.

OTHER LEISURE:

The government says the UK will seek ‘new arrangements’ with the EU to allow for the continued free flow of personal data, which it believes is possible thanks to its ‘unprecedented’ alignment with EU law and the ‘deep and special relationship’ enjoyed by the two economic areas.

Net migration fell by 81,000 to 246,000 in the year to March 2017 — its lowest level in three years — following a surge in the number of EU nationals leaving the UK. More than half of the difference (51,000) is due to a decrease in net migration of EU citizens, with 17,000 of those coming from so-called EU8 countries (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia).

Household spending saw its lowest rise in two-and-a-half years of 0.1% in the three months to June. A major factor in the fall was lower spending on transport – including cars – which declined 2.2%, according to the ONS numbers.

A contract has been awarded to the Transport Research Laboratory (TRL) to test small convoys of partially driverless lorries on major British roads by the end of 2018.