Langton Capital – 2015-09-28 – Daily Wrap: Rugby, Punch Taverns, London & other:
Leisure Wrap & Other:
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. As always, contact us if you’d like further details:
Rugby World Cup:
• England lost their first game – and the first big game of the tournament – to Wales by 28 points to 25.
• Not that the score means a lot to anyone other than the viewers because, sad to say, it’s the result that counts.
• And if England were to make an early exit from the Tournament, a proportion of the country’s pubs would be rather upset about it.
• But a material number wouldn’t be as it would mean that the UK’s food-led pubs could get back, more or less, to business as usual
• This because the Rugby (or the World Cup, the Euro’s or whatever) tend to both drag bodies & their money away from food-led outlets and they also leave some of the latter with something of a problem
• That is, should they show the sport – and risk upsetting families eating their tea – or should they pretend that it isn’t happening and risk having dad decline to take the family out, effectively losing the pub in question business that will not come back again
• Other loser from sporting events tend to include the holiday companies (less so at this time of year, more relevant given the timing of the big football events), cinemas, indoor attractions and other recipients of fair weather sports fans in general
Punch Taverns’ comments re strategy etc.
• Punch Taverns’ directors seem to be making themselves available and are commenting on the industry, tax matters and other issues.
• This, coming on top of the company’s teaser comments included within its RNS re the disposal of the group’s stake in Matthew Clark, suggest that a more fleshed-out comment on the group’s strategy will be forthcoming with the group’s full year numbers due 12 November.
• We would expect to see the group making comments very similar to those of Enterprise Inns (in May) such that it will be exploring managed & franchised options, will be selling more units, will keep some as they are and will set up an arms’ length property co in order to manage those units that choose to go free of tie.
• It’s always scary at the top.
• Sure, you would rather be at the top than the bottom but, when somebody asks you if the only way is down, it’s hard not to reply in the affirmative.
• Hence London hoteliers should be (and are) making hay whilst the sun is shining.
• But they should have one eye on the future and, when PWC suggests that the weak Euro is dampening visitor numbers from the Continent, it is simply echoing comments made by Merlin Entertainment earlier in the week.
• And this will ultimately impact rates.
• It may be that domestic UK, Russian, US and Chinese visitors are currently filling London hotels – and long may that continue – but an absence of European visitors will at some point make itself felt, occupancy levels are likely to slip a little and then rates will be cut in order to chase volume.
• Cycles were ever thus.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• SAB/InBev. Bid likely this week. The latter currently working on trying to keep it ‘friendly’ and the former working on getting the price up.
• Sugar. We’re genuinely not sure if there’s a smoking gun out there. It’s hard to get a neutral opinion – or at least one not influenced by one or other side of the argument – but the body language of the major players would seem to indicate that they would like to offer low or no sugar alternatives to their key products at the very least. The issue will clearly continue to impact producers, retailers etc. for some time to come.
• Red meat prices have collapsed recently. Pork (which is a workable proxy for chicken most of the time) has been weak for a while but feeder cattle prices are now down 23% on a year.
• Mining shares gave up 7% last week. Travel stocks had a reasonable day Friday (TUI +3.6% and IAG +4.1%). For some reason, TCG was a shade lower.
• China PMIs are on Thursday. Markets could remain a little nervous ahead of them (and over them and after them).
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Punch Taverns’ CEO Duncan Garrood has added his weight to the suggestion that pubs are treated unfairly re VAT, business rates
a. Punch: business rates cost pubs around 15p per pint v c2p in supermarkets. HMG should protect job-creating companies
2. SAB bid could come as early as this week. Observers see ‘friendly’ talks continuing. Merger would create a £180bn company
3. Sarah Weir is stepping down as operations director at Davy’s to join Imbiba-backed Ruth & Robinson, M+C reports
4. Coca-Cola Enterprises has launched ‘Ultra’, a range of zero-sugar and zero-calorie Monster energy drinks
a. Dept. of Health has stated it has no plans to introduce a sugar tax, despite Jamie Oliver’s petition gaining over 144,000 signatures.
5. England lose to Wales but it might be the pubs that count the cost. Early England exit would cost industry in lost opportunities
a. However, an early England Exit would help the nation’s food-led operators (as well as holiday companies, indoor attractions etc.)
6. G1 Group, Scotland’s biggest independent managed operator, has seen full year operating profit rise 3% to £11.1m reports Propel
7. Caravan is close to securing its third site in the London, in Bankside. Five Guys aiming for 40 by year end.
8. Banksy’s Dismaland attracts thousands to Weston-super-Mare. Is sold out every day for 5wks, brought in c£20m of business
9. London hotels. PWC says capital is experiencing highest occupancy for 10yrs (c84%) but weak Euro is a negative
10. Pinewood updates at AGM, says enjoying strong revenues with good visibility for rest of year. Expects H2 weighting
11. Spotify and Netflix have dislodged Rolex and Sony as most desired brands, reports The Telegraph
12. U.S. economy expanded more than previously thought in Q2 on stronger consumer spending and construction
13. Preliminary Markit PMI for services sector from fell to 55.6 in Sept from 56.1 in Aug. Reading >50 signals expansion