Langton Capital – 2015-09-28 – Punch Taverns, SAB, sugar consumption & other:
A Day in the Life:
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I’m told that Dulux has an app that will absorb pictures of the various rooms in your house and display them back at you with different coloured walls, etc., in order that you can choose what type of paint to splatter all over them.
And that’s just great, isn’t it but, to a person such as myself who couldn’t tell you without looking what colour our kitchen, living room, bedroom, bathroom walls are to start with, I don’t think I’ll be beating a path to the erstwhile ICI-owned colour-smith’s door.
I’ll be one download that the app won’t be getting and, in fact, if it had an ‘I’d-rather-be-chased-into-a-bank-of-nettles-by-a-swarm-of-angry-wasps-than-spend-time-looking-at-colour-charts’ button, I think I’d be inclined to favour it over the invitation to ‘choose colour’.
Heaven help us. It’s right up there with visiting Ikea. On a Bank Holiday Monday afternoon. On to the news:
Pub, Restaurant & Drinks Producer News:
• Punch Taverns’ CEO Duncan Garrood has added his weight to the suggestion that pubs are treated unfairly re VAT, business rates. Mr Garrood points out that pubs have to charge 20% VAT on food whilst supermarkets charge nothing on raw materials. He also suggests that pubs have to charge around 15p per pint in business rates whilst the figure for supermarkets could be as low as 2p. Garrood told the M+C ‘a lot of good work has been done and I have seen some fantastic investments. Unfortunately that is still only a moderate proportion of our business. There is a lot that remains un-invested. We are not alone in that in the industry. One of my absolute commitments is to keep the level of investment going. We need to make sure it’s appropriate but pubs that have received investment are in a much better position to compete – not just with other pubs but with casual dining,
• More from Punch Taverns. Separately Mr Garrood told the Sunday Telegraph ‘you’d think the Government would want to support the more labour-intense industries in hospitality, because it employs more people’. He told the M+C that his company’s interests were aligned with those of its lessees (at least before the MRO) and says ‘anyone looking at a lot of the stuff that is written about us would be forgiven for thinking that we are actively willing our licensees to fail and are only interested in seeing our pubs turned into convenience stores. I find that idea absolutely absurd. Why would I want our licensees to fail? Quite apart from the fact that it costs me £50,000 every time a publican fails, why on earth would it be in my best interests for a pub to be unsuccessful?’
• England lose to Wales but it might be the pubs that count the cost. Early England exit would cost industry in lost opportunities
• However, an early England Exit would help the nation’s food-led operators (as well as holiday companies, indoor attractions etc.)
• S Times suggests SAB bid could come as early as this week. Says ‘friendly’ talks continue. A merger would create a £180bn company
• M+C reports celebrity chef Jamie Oliver has now decided not to sell a stake in his restaurant business,
• Five Guys reported to be set to hit 40 sites by year end.
• Wagamama has put its Earl’s Court, Hampstead and Old Broad Street sites on the market, according to the M&C.
• Sarah Weir is stepping down as operations director at Davy’s to join Imbiba-backed Ruth & Robinson, M&C reports. The business is also thought to be in talks on a second site in north London.
• Coca-Cola Enterprises has launched ‘Ultra’, a range of zero-sugar and zero-calorie Monster energy drinks. Monster distributor CCE has high hopes for Ultra, which, since launching in the US three years ago, now accounts for a fifth of Monster sales in the country. The launch comes as UK sales of Monster are up 18% year to £127m [Nielsen 52 w/e 15 August 2015], which made it the fastest-growing major brand in the category.
• The Department of Health has stated it has no plans to introduce a sugar tax, despite Jamie Oliver’s petition gaining over 144,000 signatures.
• Propel reports that G1 Group, Scotland’s biggest independent managed operator, has seen full year operating profit rise 3% to £11.1m. The group spent a total of £4.9m on acquiring new properties in the year to 31 March 2015 but warned: ‘Despite the acquisition and development activity, the group approaches 2016 with caution. In the leisure sector, London and the south east, in particular, are experiencing rates of growth well ahead of other areas of England and Scotland.’
• Caravan is close to securing its third site in the London, in Bankside.
• Las Iguanas is changing its tips policy and introducing an automated ‘tronc’ system.
• Hydes Brewery Limited has purchased Chester-based pub company Woodward and Falconer, which owns 6 food-led pubs. Hydes Managing Director Chris Hopkins commented ‘This exciting acquisition represents a positive strategic move for the business. We very much look forward to working with the excellent team’s at all four pubs as we continue to develop our food-led business’.
• iNTERTAIN has opened its second new Walkabout bar of the year in Brighton following a £485,000 investment. The company is set to open its third newly acquired venue next week, also in a former Après site, in Solihull. Craft beers are now being served on tap at the sites.
• More from Intertain: John Leslie, CEO, commented: ‘It is great to be able to add another new venue to our portfolio and we are very pleased to be in Lichfield. We’re renowned as the best sports experience on the high street, so it’s great to be open for the Rugby World Cup.’
Holidays & Leisure Travel:
• Banksy’s Dismaland has attracted thousands of people to Weston-super-Mare, selling out every day for five weeks and bringing in around £20m of business.
• Analysis by PWC indicates London is experiencing its highest hotel occupancy levels for a decade, although a weak Euro is hampering growth. PWC expects London to see occupancy growth of 1%, bringing occupancy to 84% in 2015.
• Pinewood updates at AGM, says enjoying strong revenues with good visibility for rest of year. Group says ‘since the publication on 30 June 2015 of the Company’s audited results for the year ended 31 March 2015, the Company has enjoyed strong revenues from its core Media Services activity and there is good visibility into the remainder of the current year and the start of the next financial year. Media Investment deal flow on behalf of third party clients is expected to be weighted to the second half.’
• Profits at Nike for the three months to 31 August have beaten expectations, growing 23% to $1.18bn thanks to rapidly rising sales in China. Total revenues rose 5.4% to $8.41bn, with sales in Greater China up 30% to $886m. The results mark the ninth consecutive time that the company has beaten expectations for its profit.
• Spotify and Netflix have dislodged Rolex and Sony as most desired brands, reports The Telegraph
Finance & Markets:
• The U.S. economy expanded more than previously thought in the second quarter on stronger consumer spending and construction. The Commerce Department said on Friday gross domestic product rose at a 3.9% annual pace in the April-June quarter, up from the 3.7 percent pace reported last month.
• The preliminary Purchasing Managers Index for the services sector from Markit slipped to 55.6 in September from 56.1 in August. A reading over 50 signals expansion in economic activity.
• World markets: UK and Europe up Friday but US down later in day. Far East mostly lower in Monday trade
• Oil little changed since Friday at around $48.15 per barrel
Langton Licensed Retail Index – Major Movers
The LRI was down more or less in line with the index last week, falling 0.12% while the wider market was down 0.13%.
Mitchell’s & Butler was the biggest mover this week, falling 11.16% following the departure of chief exec Alistair Darby who will be replaced by COO Phil Urban who was previously in charge of Grovesnor Casinos for Rank Group. Mr Darby’s departure from the group does not depart from the trend at M&B which has seen five CEOs in the last seven years. Like for like sales at the group have been lagging their peers for some time now, and indeed fell 0.7% for the seven weeks to 12 September. Market data suggests that somebody is losing market share, and fingers are increasingly being pointed at M&B.
Greene King, Marston’s and JD Wetherspoon were down 2.96, 2.63, and 2.24 respectively as fears over the pub sector as the National Living Wage looms will have been exacerbated by M&B’s announcement on Tuesday.
Whitbread on the other hand was up 2.47% as brokers upgraded the stock last week, with investors perhaps glad to have been given some clarity on the group’s wage bill as a result of the NLW earlier this month.
Will Brumby – email@example.com
Retail Roundup from Nick Bubb:
Today’s Press and News: There are a number of previews of Wednesday’s Sainsbury Q2 update in today’s papers, eg in the Daily Mail, the FT and the Independent, with -1.2%/1.3% LFL sales expected, whilst the Times notes the upbeat outcome of the latest Hammerson “Retail Tracker” of sales activity in its shopping centres, with a 2.4% increase in LFL sales in the five weeks to September 19th driven by good fashion and footwear sales (with the “new collection of Nike Air Jordan Retro trainers almost selling out in one day at Brent Cross”).
Grocer 33 Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Grocer magazine on Friday afternoon had a special “Green” basket of eco-friendly and ethnically/locally sourced products and Sainsbury will have been delighted to be the cheapest, at £88.78, more than £2 less than Tesco and £3.66 less than Asda. The Waitrose basket of £102.92 was again well off the pace…There was further good news for Sainsbury, ahead of Wednesday’s trading update, in the separate Grocer “Mystery Shopper” survey on Service and Availability, as their 40,000 sq ft store in Islington easily topped the rankings, with a score of 74 out of 100.
Nick Bubb – firstname.lastname@example.org
This was produced for distribution on Friday 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:
Day-parts, evolution, remaining relevant etc.
• Various studies suggest that restaurateurs should try to sell more at lunchtime. Do they get paid to say that?
• But based on the truism that rent, rates etc. are paid 24/7 and it’s not a good idea to let any would-be revenue-generating opportunity go begging.
• Horizons takes it a little further as director of marketing and business development, Emma Read comments that ‘consumers expect to be able to eat when they want, wherever they happen to be whether it’s out shopping, at work, travelling or in a garden centre. Lunch is extending beyond its traditional times – it could now be anything from mid-morning to late afternoon. Operators need to be prepared for this and adapt.’
• This leads us on to our on-going theme of evolution.
• You have to keep an eye on costs, of course. Breakfast sales may be depressing margins at JDW and not even that retailer would seek to keep its kitchens fully-staffed through the night but, overall, customers will ultimately get what they want – and if existing operators do not supply the goods, then a new entrant might.
• Further re evolution, we note that Taco Bell is now serving alcohol in the US, Pizza Express has said that it will deliver in London, Starbucks is to lend staff the cost of their rent-deposits and ABInBev is buying more craft breweries.
• It would appear that doing nothing is not really an option.
Big ticket spending versus small ticket:
• Sainsbury reports Q2 numbers next week.
• The group, whatever its tussles with its direct competitors, was early to spot the drift to big-ticket spending last year and in the first half of this.
• It went so far as to suggest that this should abate by the end of this calendar year and it’s October next week.
• Will be interesting to see if the group makes any further update re the nation’s annoying propensity to spend more on carpets, motor cars, holidays, furniture etc. versus good old bread, butter and bottles of milk.
Leisure – The Week Ahead
• Revolution Bars has its Full Year numbers on the 29th. The group listed back in March at 200p per share, the bottom of its indicated range. Since then the shares have fallen to c185p, admittedly in a falling market. Eclectic Bars has posted two profit warnings in the two years it’s been listed which may lead some investors to wonder if the late night drinking market is a sensible investment.
• Sainsbury’s produces its Q2 results on the 30th. The group suggested towards the start of this calendar year that it believed that small ticket spend should catch up to big ticket spend by the end of 2015 though this has yet to materialise.
• Saga has H1 numbers on the 30th, which, from a leisure perspective may be interesting for any comments on the August holiday market. Domestic leisure companies have been suggesting that August saw many UK consumers leave the country, though this seems to have been met with limited optimism from Tui and Thomas Cook.
• Compass has its Q4 on the 30th. Read across for UK leisure based companies is limited, but the group stated at its Q3 update that it felt ‘excited about the significant structural market opportunity globally and the potential for further revenue growth, margin improvement and continued returns to shareholders.’
• UK Mortgage approval levels come out on the 29th, having rebounded to February 2014 levels last month. UK GDP figures also come out on the 30th, having returned to pre-recession levels last time around. Will Brumby – email@example.com
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Markets all down yesterday – but that was before Ms Yellen’s speech, which clearly changes everything (not).
• Commodities belie hope of swift economic recovery, all lower. Except cocoa (weather), corn & wheat. Seeing the ‘recovery’ in the latter two prices requires the use of a microscope.
• Allied Minds’ share price halves. Just saying. Big for Mr Woodford. Ditto Drax. Not a good month, perhaps?
• SBUX says it will bust NLW, Lidl said the same thing last week. Others will have to follow suit or only have the pick of reject-staff. Hard to do the analysis but it’s worth remembering that this cost does have a silver-lining; would-be customers will have more cash in their pockets and, for those operators that remain relevant (see above), this can only be good news.
• Magner’s (C+C) does seem rather keen to own UK assets – either production or retailing. Earlier in the year it made approaches to Spirit Pub Company and now it would appear that it has been talking to Carlsberg. Group could provide an exit route for PE houses, perhaps Stonegate, though large, could be of interest?
• Interest rates: US betting now firmly on a December rise.
• Waitrose had another tough week last week. Bit early to suggest that the love-affair may be over but…