A Day in the Life:

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Rather than live in a rural idyll, the Family Brumby occupies what used to be a market garden in what may be fairly called a brown-field site and this is both good (nearly countryside but close to the shops) and bad (everything else) and this tends to impinge on our daily existence from time to time.

Because, amongst other things of dubious value, the lane that leads to our house was historically owned by the market garden & is now ours and, whilst this sounds exciting, it’s a public footpath.

Hence it can be more of a liability than an asset but, when the electricity board informed us that they wanted to sink a pylon’s cables under it, our eyes collectively lit up as a series of words such as greenmail, blackmail and extortion came to mind – but only for a second or two as they informed us at the same time that byelaw such and such allowed them to dig up our lane in the public interest without so much as a whiff of cash chez nous.

Well to cut a long story short they dug away.

And in the process they cut our telephone cable twice and then put a hole in our water pipe which, though not immediate, led to our water bills rising from £50 per quarter to £250 and then £550 as we diligently watered a field 24-7. Many thousands of pounds later, negotiations continue. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Competition + Markets Authority has blocked plans for Original Bowling Co and Bowlplex to merge. Says it would lead to less competition in the sector. CMA has looked at 6 local areas – Bristol, Bracknell, Cardiff, Dudley, Leeds/Casteford and Glasgow – and said there would be “insufficient competition” from other providers if the merger went ahead. It had no concerns in other parts of the UK. The CMA reports that, because of its concerns, ‘we therefore propose to refer the merger for an in-depth investigation unless TOBC offers a clear-cut remedy to address our competition concerns.’ The Original Bowling Club now has 5dys in which to respond to the CMA’s concerns.

• The hospitality industry will need to recruit an additional 11,000 chefs by 2022, according to workforce charity People 1st. Martin Christian-Kent, executive director of the charity, said the shift to fast casual ‘allied to a refocus on locality, seasonality and authenticity, has arguably fragmented the chef job description and increased the number of people who work under the job title of ‘chef’ but carry out wildly vary tasks using different skills.’

• Alan Miller, chairman of the Night-time Industries Association, has said red tape is to blame for failing nightclubs. The former owner of the Vibe Bar of Brick Lane warned that a concerted effort by the police and local councils to tie clubs down with too much red tape and an unsympathetic ‘new mentality from the authorities,’ which has seen several sites close after disputes.

• Rail fares have risen 3x faster than wages (25% v 9%) over last 5yrs points out the BBC, referring to a TUC study

• The booming craft beer industry is thought to be behind a 12% hike in the number of trade mark applications for beers to 1,485 in 2014.

• Healthy food chain Abokado has secured £2.6m of new funding following ‘another year of strong growth’ with sales up 33%.

• Farmers have welcomed Lidl’s decision to pay its suppliers more for the milk it sells following similar moves from Morrisons, Aldi and Asda.

• The Wall St Journal reports that more class action law suits over pay are being launched by employees in US restaurants

• Castle Rock Brewery has had a ‘bright performance’ in the year to 31 March as revenues grew 25% to £10m and profits also up to £646,894. Managing director of the Nottingham-based brewer, Colin Wilde, said of the increasingly competitive leisure environment:  ‘We’re working hard to innovate and increase customer loyalty to provide a high level of income sustainability.  The future promises a new income stream from the management services we provide for the recently formed The Beer Consortium Ltd.  This has two sites, one of which is currently undergoing significant refurbishment.  Our involvement and returns from the management of Lady Bay Inns Ltd remain strong.  Both of these contracts also provide an income element from tied beer supply.’

• A report from Canadean has found that coffee was China’s fastest-growing hot beverage in both volume and value terms from 2014 to 2019. Although tea remains the first choice and accounts for 82% of the Chinese hot drinks market, coffee is growing at a faster rate with a CAGR of 15.4% compared to the latter’s 5.6%. The hot coffee market in China is expected to more than double from $2.1bn in 2014 to $4.5bn in 2019.

Leisure Travel:

• TUI shares strong after Times reports co is considering spinning off non-mainstream assets

• A study by PwC, Tui and the Travel Foundation has found that tourism’s impact on a place is generally positive. The study used PwC’s Total Impact Measurement and Management (Timm) methodology at eight Tui Group hotels in Cyprus in a joint project with the Travel Foundation, studying their impact over a year.

• A bomb exploded close to the Erawan Shrine in central Bangkok yesterday, killing at least 27 people and injuring around 80. A second bomb is believed to have been deactivated and there are concerns that others might have been planted around Thailand’s capital.

Finance & Markets:

• German Finance Minister Wolfgang Schaeuble said yesterday that he was prepared to go ahead with the proposed Greek bailout. He told ZDF ‘I can argue with full conviction, partly because I haven’t taken this decision lightly myself … that the right thing to do is to vote for this’.

• The Greek government is likely to call a confidence vote following a rebellion against the country’s new bailout deal. Ongoing political uncertainty could affect the implementation of the new bailout deal and a raft of tough austerity policies.

• World markets: UK down yesterday, Europe higher. US markets up in afternoon trade but Far East down in Tuesday business

• The FTSE 100 finished down 0.44 points or just 0.01% lower at 6,550.30 yesterday as mining companies were pushed to six-year lows.

• Oil price little changed at around $48.60 per barrel

• Seasonally adjusted Eurozone trade surplus, powered by Germany, rose to €21.9bn in June, up from €21.30 in May

• Germany’s central bank has said the country’s economic growth in the second half is set to be ‘solid’ after reporting 0.4% growth in Q2. The Bundesbank warned that China’s slowdown could add uncertainty over global economic prospects, saying: ‘The risks of a stronger economic slowdown [in China] remain high.’ In the meantime, Europe’s largest economy stands to gain from increases in real earnings domestically, a wider Eurozone recovery and accelerating growth in two of its key trading partners, Britain and the US.

• Website Moneyfacts said the average interest rate on the top ten savings accounts has increased from 1.39% to 1.48%. However, with more providers placing tighter restrictions on how many times you can take cash out of these accounts, Moneyfacts is suggesting the FCA take a closer look at the matter.

Retail Roundup from Nick Bubb:

John Lewis Sales Watch: After seeing sales wilt in the heat in early August, you might have thought that John Lewis would have seen a bit of a pick-up in trading last week, on the back of the cooler weather, but the fact is that a year ago the weather was even more helpfully bad (remember ex-Hurricane Bertha?), so the comp was tough and there is an adverse calendar shift for the key “back to skool” trade, as the Bank Holiday is a week later this year…Ahead of Friday’s official sales figures, we would therefore not be surprised to hear that sales were c2%-3% down LFL in w/e Aug 15th (some way below the c2.5% LFL cumulative growth seen in H1), to continue the weak start to H2.

News Watch:
The motor group Marshalls is trading at a decent c15% premium since it went public in April and it has announced a decent-looking maiden set of interim results today, with underlying PBT up by 10% to £10.5m on the back of 16% growth in revenue. Daksh Gupta, the Group CEO, says that “based on current market conditions, the Board’s outlook for the full year remains in line with our expectations”. McColls, the convenience store chain, was actually the first retailer to go public in the rash of IPO’s last year, but it has not been such a rewarding investment, with the shares trading c15% below the IPO price. Investors will be pleased to hear that McColl’s has announced a refinancing today, but will be wondering why the company needed to talk to its banks, as the existing facilities still had 3 years to run (the new deal pushes the expiry out to July 2020) and what
it cost McColl’s in break fees to secure a lower funding rate…

News Flow This Week: The Asda Q2 update and press briefing at mid-day today is probably going to be the main talking point this week, given the pressure building up on the CEO Andy Clarke from another weak LFL sales performance, but the WH Smith pre-close trading update on Thursday will get more focus than usual, given the recent row about Airport VAT policies. The ONS Retail Sales figures for July are also on Thursday. And there should be news this week from Poundland, as in “mid to late August” the CMA is scheduled to issue its provisional findings on the proposed acquisition of the 99p Stores chain.

Nick Bubb – nicholas_bubb@hotmail.com

Monday 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:

Is sugar the new tobacco?

• There’s competition for the ‘accolade’ from alcohol, salt & fats.

• But sugar may be a killer, some talk of a smoking gun.

• Mr Oliver still has the bit between his teeth, calling for 7p per can tax on fizzy drinks. Tax in Mexico seems to be working, say some. Others insist it’s a matter for education.

• Meanwhile fizzy drink makers perhaps racing against time, pushing their zero-sugar lines as the real thing.

Beer gardens, safe for the moment:

• Royal Society for Public Health has called for the ban to be extended.

• UKIP has said the ‘proposed beer garden smoking ban is the work of “crackpot killjoys”’

• The PMA reports the Department of Health as saying it has ‘no plan’ to extend the public smoking ban to pub gardens.

• At this stage, there will not even be a consultation on the proposals set out by the Royal Society of Public Health.

• One battle doesn’t win a war and this is likely to remain more of a fighting retreat than it is to represent a line in the sand

Evolution ongoing, change is the only constant etc.

• Warming to a theme, Deltic suggests dancing will never go out of fashion. May be true but the number of people boogying & the frequency with which they do so could go down rather than up. We don’t want young people ending up like the consumers on Wall-E – here – but the trend to (and beyond) Facebook is well-established. Gen Y drinking less, going out less often.

• Sugar free soft drinks – see above.

• Morrison’s may be exiting C-stores altogether, not just trimming its estate. Some evolutionary trends may be dead-ends – or other operators could have filled the niche already.

• Amazon Fresh may or may not be a major competitor in the food-delivery market. Ocado’s shares fell Friday, now down 20% in a month.

• Ryanair wants to take on the online vendors, says it will offer concert tickets, hotel bookings and the rest.

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

• Consumer spending power: Diesel price at >5yr lows, milk ditto, commodities down after attempted rally = consumer better off.

• Commodity prices are all sliding, metals & food. Many blipped up then fell again. Orange juice the exception, go figure.

• Miners down Friday led to FTSE100 down and FTSE250 up. Former is heavily oil/miners influenced, latter more domestic.

• Business confidence up post ‘decisive’ election result says Institute of Chartered Accountants in England & Wales. That’s good as it tends to be a lead indicator. Confidence leads to capex and capex means jobs.

• Interest rates will go up at some point. MPC member Kristin Forbes may have twisted her analogies (she wrote ‘linger too long in the sun and your skin may take on a slightly pink glow. Enjoy the sunshine and low inflation this holiday season. But remember that neither are likely to persist. Stay vigilant against sunburn’) but she is right. Interest rates will go up (perhaps 10-15x) over the next few years.

• Chef vacancy numbers rising; this is becoming a big deal.

Langton Food Retail Index – The Grocer’s Dozen

The Food Retail Index contained a few heavy fallers in what proved to be another turbulent period on the markets last week. Tesco, by some way the index’s largest constituent, recorded the second-largest fall of 6.09%.

Grocers

As mentioned above Tesco dragged the grocers down, its 6.09% decline to 202.65p beaten only by Ocado’s 6.1% fall. The online retailer has lost over a quarter of its value over the past month and now trades at 361.9p per share, highlighting its inherent volatility and blue sky valuation despite continued operational progress. Ocado’s latest fall coincides with Amazon’s Fresh food launch.

Tesco’s underperformance can be partly attributed to slowing industry sales and fears over the sale of its valuable Dunhumby business and the complicated contractual wrangles over who retains ownership of the tech business’ data.

Specialty/Wholesale

With ten of the active shares in the index having posted falls for the week, it was a case of ‘you can’t keep a good stock down’ with Booker Group reporting a small 0.11% gain to near 52-week highs of 178p. Booker has been a strong performer over the past three months, rising nearly 19% as it continues to benefit from recent acquisitions and a solid trading performance.

Discounters

Poundland bucked the trend for the discounters with a 2.63% rise to 363.3p after a collection of institutional investors raised their stakes in the company ahead of its AGM. McColls, by contrast, has fallen by 8% in recent weeks to near 52-week lows of 148p a share, giving it a forecast dividend yield of 6.8% covered 1.6 times.

Jack Brumby – jack.brumby@langtoncapital.co.uk

Leisure – Licensed Retail Index – Major Movers

The LRI outperformed the FTSE All-Share, rising 0.19% against a 2.05% drop as China drove the miners and the wider market down last week.

Cineworld was the biggest mover, rising 12.48% following the group’s interim numbers last Thursday. The group saw strong pro-forma revenue growth of 11.3% and announced an interim dividend of 5p. Three films this year broke box office records, and the film schedule for the rest of the year continues to look good for cinemas.

The pub companies had a generally good week, with Greene King up 2.49%, Marston’s up 1.28% and JD Wetherspoon up 0.89%. Mitchell’s & Butler, however, was down 0.80% this week. Mid-cap restaurant chains also had a strong week with The Restaurant Group up 2.99%, Domino’s Pizza UK up 3.32% and Patisserie Valerie up 4.75%.

Merlin was down another 0.75% last week as the group struggles to rid itself of its recent bad press. The group may have been affected somewhat by a slight worsening in geopolitical sentiment given the renminbi devaluation and Greek debt problem, which likely also caused SSP Group to dip 0.33%.

Will Brumby – will.brumby@langtoncapital.co.uk