A Day in the Life:

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So everything to our dog is a numbers game.

He can witter to go out because every now and then there’s be a rabbit on the grass and he can sniff his food-bowl every time he walks past because, very occasionally, somebody’s dropped something in it that he wasn’t aware of.

But, above all, he can follow you around constantly on the basis that, once in a while, you’ll do something interesting (open the fridge door & knock some pate on the floor, drop a sandwich or dash to the front door to see what the postman wants) and that, after all, makes it all worthwhile.

And he’s not in the least put off by the swift-180s that you might pull off when moving from one room to another before remembering something you’ve left behind. They’re all part of the rich tapestry, it’s strictly a ‘calories-in, calories-out’ calculation in his head.

Simple and true but somewhat annoying nonetheless. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Conviviality has stated that ongoing negotiations over purchase of Matthew Clark (50% Punch-owned) are progressing well.

• Jacques Borel has told the M&C that a staggered reduction in VAT for hospitality firms would allow them to adjust to changes.

• American-style fast-casual operator MEATliquor is in talks on three sites in and around London according co-founder tells M+C. Scott Collins also revealed his chain is in talks with several parties interested in investing in the business.

• Ed’s Easy Diner is to open in Doncaster’s Frenchgate Shopping Centre in time for Christmas.

• Telegraph reports Wetherspoon’s Friday FY numbers will ‘bear the scars from the breakfast price war it launched earlier this year’. Group is selling coffees at 99p per cup and is putting on the staff necessary to serve across a larger number of day slots.

• Byron stepping up its rate of new openings in the UK. Tells Telegraph it will open 15 new sites this year with 13 confirmed for 2016

• Britvic has launched Tango Orange Sugar Free in the face of mounting criticism of high sugar products. Kevin McNair, GB marketing director for Britvic, said: ‘Carbonates remains the number one soft drink sector and is currently being driven by increasing consumer demand for lower sugar options, reflected by the 6.2% value growth of Sugar Free Fruit Carbonates in the last year (Nielsen).’

• Jamie Oliver’s petition for a tax on sugar-added soft drinks has exceeded the 100,000 required to force a parliamentary debate. The chef has joined up with anti-sugar campaigners to produce a manifesto calling on Prime Minister David Cameron to impose a 20p per litre tax on all drinks with added sugar, equivalent to 7p on a 330ml can.

• Brazilian barbeque concept Cabana is joining Jamie Oliver’s Sugar Tax campaign and will implement a 10p tax on sugary drinks.

• Figures from the NPD Pub Watch tracker show that pubs’ share of family visits is continuing to decline. Visits with children decreased by 6.2% for the year ending June 2015 and now account for 19.6% of all pub meal occasions.  NPD director of foodservice, Cyril Lavenant, said: ‘It is possible that families now think that the food/menus that are offered in pubs are not relevant enough anymore for them as the competition is also working strongly to attract them.’

• The Co-operative Group has posted a first half pre-tax profit of £36m compared to a £9m loss for the same period last year. Although its convenience stores and funeral service continue to perform well, the group warned that investments in new stores could affect full-year earnings.

• James Horler-led 3Sixty Restaurants is looking at ‘many sites’ around the Midlands and the North for its second Ego in a Pub site.

• Tesco sells Homeplus (Korea) for £4.24bn on free of debt basis. See Nick Bubb below. CEO Dave Lewis reports ‘after a highly competitive process, we are announcing today the proposed sale of Homeplus, our business in the Republic of Korea. This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.’ He continues ‘I am confident that the agreement we have reached with MBK Partners presents an exciting opportunity for their continued success.’

• Sources indicate that Morrisons is set to receive between £30m and £50m from the sale of its convenience stores to Greybull Capital.

Holidays & Leisure Travel:

• A group of 144 Travelodge hotels has been listed for sale at £600m.

• The strong pound has allowed UK travellers to pay less than average hotel prices in 80% of European destinations for the first half of 2015. Figures come despite global hotel prices rising 1% for the same period.

Other Leisure:

• Bwin has accepted a £1.1bn takeover bid from GVC Holdings after initially agreeing to an offer from 888 worth around £900m. The firm said that they were also swayed by higher expected savings and GVC’s track record of integrating acquisitions, such as that of Sportingbet in 2013. On completion, Bwin shareholders will own two-thirds of the combined group in what amounts to a reverse takeover. Norbert Teufelberger, Bwin’s chief executive, will join the combined board as a non-executive director. Philip Yea, chairman of Bwin reports ‘this has been a long and necessarily protracted process.’ The FT reports Mr Yea as saying ‘we had a significant block of shares that was happy to support the board. On that basis, you cannot please all the shareholders and you need the board to show leadership.’

• Jan Koum, founder of Whatsapp, has said the messaging service now has 900 million monthly active users. The app has now been downloaded over 1 billion times on Android and has added 100 million users since April.

Finance & Markets:

• US jobs growth slows in August but unemployment rate falls to 7.5yr low + wage growth picks up. Boosts interest rate rise fears. Betting appears to be on a nominal rise in Fed rates as early as this month in order to get ball rolling.

• G20 leaders agree to do something (undefined) to boost disappointingly slow growth. Reliance on low interest rates alone is insufficient. Communique says ‘monetary policies will continue to support economic activity consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth.’

• ECB cuts inflation + growth estimates for 2015 + following 2yrs. M Draghi says recovery is ‘at a somewhat weaker pace than expected’. Bank is now forecasting Eurozone economic growth of 1.4% this year (was 1.5%) then 1.7% in 2016, compared with its previous projection of 1.9%.

• World markets: UK markets sharply lower on Friday on renewed US rate-rise fears. Europe + US down but Far East mostly up on Mon trade

• Oil below $50 again, trading at around $49.30 per barrel

• UK new car registrations +9.6% in Aug v rise of 3.2% in July. Big ticket spending still on the up, should abate by year end

• Citizens’ Advice Bureau says c934k mortgage holders will not be able to pay off their interest-only mortgages

• Bob Pannell of Council of Mortgage Lenders has said UK housing market is “dysfunctional” + new build is slow

• German exports set to hit new record this year despite slowdown in China, which accounts for 6.6% of the country’s sales

• US trade deficit fell to a 5mth low in July per official figures. US Commerce Dept. says fell to $41.9bn v $45.2bn in June

Langton Licensed Retail Index – Major Movers

The LRI outperformed the falling market this week as China continues to worry the markets, falling 1.19% against the All-Share’s 2.92%.

Stocks which have been strong recently in the LRI took a bit of a bashing this week. Whitbread saw its shares down 2.25%, Domino’s was down 3.12% and Cineworld down 1.95%, as market worries seem to have investors taking profits from their winners.

Most of the other big caps were down, but by less than the index, with Merlin down 0.61%, M&B down 0.88% and Greene King down 0.79%.

The Restaurant Group and Marston’s fared better posting small gains of 0.29% and 0.13% respectively.  Wetherspoon was perhaps the biggest outlier, rising 2.66% to 772p, ahead of its finals on Friday this week, and only a few weeks after falling below the £7 barrier.

Interestingly Fuller’s was up 6.88% this week while Young & Co. was down 1.92%, in line with the index. 

While Enterprise Inns saw a 2.34% fall, Punch Taverns was up 3.20% following the group’s full year trading update, which seemed to have satisfied investors.

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

Langton Food Retail Index – The Grocer’s Dozen

Domestic stocks have had a less turbulent time of late than overseas resource stocks and so it has proved again for this week’s Food Retail Index.

Grocers

Ocado (-4.08%) led the grocers lower but trades at nearly 250 times earnings despite hitting a six month low of 326.30p. Morrisons performed the least badly, down -0.56% for the week, as it looks to make progress on its £30m-£50m disposal of its M-stores to Greybull Capital. The deal will be dwarfed by Tesco’s (-2.82%) anticipated disposal of its South Korean Homeplus business to an MBK Partners-led consortium for some £4bn.

Specialty/Wholesale

Booker’s share price appreciated by 5.68% to 178.9 following the news that the CMA has cleared its acquisition of Londis and Budgens. The deal is expected to go through on or before 14 September.

Discounters

McColl’s (-1.25%) remains modestly-valued on a PER of 10.1 and a yield of 5.4%. Investors appear yet to be convinced by the company’s strategy and prospects in its convenience store/newsagents market.

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

Retail Roundup from Nick Bubb:

Saturday Press:
The big story in the Saturday papers was that the Karen Millen CEO, Mike Shearwood, has left the business after it scrapped plans for a management buyout (this provided welcome fashion model photo opportunities in the Telegraph, the Times and the Daily Mail) and the Independent said that Susanne Given, the former COO of SuperGroup, may have been approached as a possible replacement. The state of Retail Sales was also a focus In the aftermath of Friday’s weak BDO High Street Sales survey for August:  the Telegraph, slightly oddly, highlighted an Ipsos survey that reported that London saw a record 9.5% decline in the shopper footfall during the Tube strike in the first week of August, whilst the Guardian noted that John Lewis reported its 4th week in a row of declining sales on Friday. The Guardian also flagged that new car sales increased by almost 10% in the month of
August to 79,060 vehicles, according to the Society of Motor Manufacturers and Traders (SMMT). The veteran City Editor of the Daily Mail thundered that Primark’s Irish origins will help its launch in Boston this week and the veteran FT commentator Neil Collins thundered in his column, after the resignation of CEO Nick Robertson, that ASOS is “a great business at a silly price”. The Daily Mail noted that Sports Direct faces the usual shareholder criticism at its AGM this week about the role of the Chairman and excessive bonuses. Finally, the stockmarket reports highlighted the downgrade of mighty Next on Friday by Exane, in a gloomy Retail sector note that highlighted the impact of increased Leisure spending on High Street sales.  

Sunday Press:
The main focus in the Sunday papers was on Morrisons, although there was also lots of coverage of Primark and Sports Direct. Ahead of the strategic review from the new CEO, Dave Potts, with Morrison’s interims on Thursday, the Observer mocked the fact that that his predecessor, the ill-fated Dalton Philips, “came up with all the right strategies, just not necessarily in the right order” and its Business editorial noted separately that, with Waitrose set to record falling LFL sales in its H1 on Thursday, “in a market when even Waitrose is struggling, Potts has a long hard road ahead”. However, the Sunday Express flagged that Morrisons will be “upbeat” on Thursday about the early results from the turnaround plan and the Sunday Telegraph said that Morrisons is rushing to push through the sale of the convenience store business for up to
£50m before Thursday. As for Primark, the Mail on Sunday noted the optimism about Thursday’s US launch in Boston and the Observer had a big article about the challenges that Primark will face in the US, whilst the Sunday Telegraph Business section had a front page photo of the Boston site, the old Filene’s Basement department store. The Mail on Sunday and the Observer had similar articles about the robust shareholder criticism of Sports Direct’s staff working conditions and Chairman ahead of Thursday’s AGM, whilst the Mail on Sunday also noted that Sports Direct may start a new venture called CoffeeClub. The main Business story in the Mail on Sunday, however, was that the former employees of Tesco’s Blinxbox operation have lost out on £10m of redundancy payments. The Sunday Times flagged that Tesco will announce tomorrow the much-mooted sale of its South
Korean business for £4bn to cut its debt mountain. The Sunday Telegraph highlighted that the Habitat business owned by Home Retail is on the expansion trail again and is looking to have 80 concessions across the UK, many in Homebase stores. Finally, the Sunday Express flagged that John Lewis is trialling a “virtual reality” system in its Oxford Street store that will allow shoppers to see how potential Furniture purchases would look in their homes.

Tesco: As had been well trailed in the weekend press, Tesco has announced today that it has sold its South Korean business, Homeplus, to the MBK consortium, for the expected £4bn, although on an EV basis the gross proceeds will be £4.24bn (but only £3.35bn net, after tax and costs). Not surprisingly, Tesco admit that the deal will be dilutive to EPS, even though trading in South Korea has weakened a lot of late, but the main aim is obviously to reduce the debt mountain and avoid a rights issue. Interestingly, however, Tesco say that the disposal will also give it the financial flexibility to buy some UK store freeholds.

Grocer 33 Watch: The widely followed Grocer “33” weekly supermarket pricing survey in the Grocer magazine on Friday afternoon showed that Tesco was lagging badly behind Asda and Morrisons as the kids went back to skool, prompting the Grocer to thunder that it is time for Tesco to sharpen its pencil. Asda’s £78.55 basket was a full £4 cheaper than Tesco, with the Morrison’s basket £3.60 cheaper. Interestingly, Sainsbury was only 43p cheaper than the Waitrose basket of £83.58. There was better news for Waitrose in the separate Grocer “Mystery Shopper” survey on Service and Availability, as their store in Altrincham just managed to beat the Tesco in Horsham to win the survey.

Conviviality Watch: We flagged on Friday that it was the deadline for the Conviviality Retail bid for Matthew Clark…and that there should be some news on that later in the day. And there was, via a holding statement at 4pm in the afternoon, which reassured the City that “Conviviality is pleased to report that discussions are progressing well. Conviviality will provide a further update to shareholders shortly”. There has been nothing more so far today, but presumably an announcement is not too far away. Bear in mind that trading in the shares is still suspended, given the amount of new equity Conviviality will be raising to help fund this transformational deal.

Nick Bubb – nicholas_bubb@hotmail.com