A Day in the Life:

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So with my PC telling me on a regular basis that I’m one of the 7bn or so consumers chosen to benefit from a free upgrade from Windows 8 to Windows 10, I’m left wondering just what happened to Windows 9 because I can’t remember coming across it.

I mean did the chaps at Microsoft miss out a finger on their journey to ten or did that particular version take a look at Windows 8 and die of shame?

Certainly my machine didn’t spend hour after hour proving that it had put some sort of time-sensitive worm into my system by asking me to update suggesting that the latter may be the case. And, after finding Windows 8 pre-installed on my latest laptop and then having to waste time and effort trying to install a Windows 7 lookalike over the top of it, I could quite see why. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• SAB Miller updates on Q2 (end-Sept) trading (had been expected 15 Oct) saying ‘growth accelerated in Q2’

• SAB Q2: CEO Alan Clark reports ‘we continued to drive strong growth in Africa and Latin America’ adds net revenue in growth in all regions

• SAB Q2: Currency moves pulled NPR down by 9% in both H1 and Q2. Constant currency growth was6% Q2, 4% in H1

• SAB Q2: Volumes +1%, mix adds 4%. Says ‘Africa and Latin America produced very strong and accelerating growth’ whilst group delivered a ‘solid relative performances in the USA, Australia and parts of Europe’. It says this latter was ‘delivered against a backdrop of challenging market conditions, and reflected good price realisation, innovation and positive premium segment growth.’ It cautions ‘performance in Poland was weak, due to continued adverse competitor price positioning.’ Premium lager volume growth was 4% and soft drinks volumes were up 4% ‘with good performances across both Latin America and Africa.’

• SAB Q2: Group says ‘China, group NPR grew 5%’ whilst NPR was down 14% in Poland and flat in the UK

• Greggs updates on Q3 trading. Sales +4.9% LfL, total sales some 5.0% higher. YTD LfL sales +5.6%, total +5.1%

• Greggs Q3: Says 158 refits completed YTD with 20 conversions of larger bakery cafés, 65 new shops, 47 closures

• Greggs Q3: Says its Balanced Choice and hot food options are ‘proving popular’ + it will continue its expansion with Euro Garages

• Greggs Q3: Group has added a distribution centre ‘to support growth plans’ and concludes ‘we have traded well in the third quarter’.

• Greggs Q3: Says costs controlled, sales ‘slightly ahead of our expectations’ with product initiatives gaining traction. Group says ‘with colder weather approaching we have relaunched our hot food menu’ and adds ‘our seasonal range for Halloween is back in shops’.

• Greggs Q3: Says refurbishment ‘continues to provide a good capital return and is transforming the quality of the shopping environment for our customers.’ It had 1,668 shops at 6 October and ‘acquired a freehold distribution depot adjacent to our existing bakery in Enfield’ in order to increase capacity in the South East.

• Greggs Q3: Re outlook ‘market conditions remain favourable with low cost pressures and a stronger consumer environment.’ Greggs goes on to say ‘we expect this to continue through to the end of the year after which increases to wage rates will drive greater inflationary pressure.’ Re cost pressures, it says ‘our standard rate for hourly-paid shop staff is already above the National Minimum Wage and we will maintain a competitive position in the market going forward.’ The group concludes ‘our sales performance is slightly ahead of our previous plan and, whilst comparatives will stiffen further in the fourth quarter, sales will benefit from additional shop openings. As a result we expect to deliver good growth for the year, slightly ahead of our previous expectations, and further progress against our strategic plan.’

• Amazon Dash features in the FT. See yesterday’s email or the Wrap below

• Chancellor George Osborne has announced that councils are to keep all of the business rates that they collect. The reform has been labelled ‘unhelpful’ by on-trade bodies with both the ALMR (below) and the BBPA suggesting that any changes will need to be closely monitored

• The M&C notes that the National Living Wage is being passed at a time when restaurant operators are already increasing pay to retain key staff. Widespread changes to tipping policies and the possibility of blanket regulation could further change labour costs in the industry.

• The Coaching Inn Group has more than doubled operating profit to £800,000 after pushing turnover in the year to March 2015 to over £10m. The group’s investment programme continues apace and site level EBITDA hit £2m.

• Coaching Inn Group: Finance Director Edward Walsh commented: ‘We’ve seen excellent growth across the estate, with investments at the Old Bridge, Holmfirth and the Three Swans, Market Harborough in particular helping to drive turnover over £10m. The resulting growth in site level profitability has been key in helping us to secure further external investment and gives us a strong platform for the next stage of our development.

• Coaching Inn Group: ‘With the completed acquisition of the Royal Oak in Welshpool and two further sites expected to complete in October, we remain ahead of our acquisition target for the year as we aim to double the size of the estate before the end of 2018.’

• Hogs Back Brewery is marking England’s exit from the Rugby World Cup by renaming its 4.4% golden beer ‘England’s Glory’ to ‘Mourning Glory’. Managing director Rupert Thompson said: ‘As soon as the shock of England’s unfortunate exit sunk in, we were straight back to the drawing board to redesign the pump clip. It’s still a great beer, and we’re sure England’s battered supporters will see the funny side – eventually – and continue to toast those countries that do manage to progress with a pint or two of Mourning Glory.’

• A survey by AB InBev of 1,000 women in the UK aged over 25 found that 44% till think of beer as a ‘man’s drink’.

• Organisers have said visitor numbers fell to 5.9 million and beer consumption dropped to 7.3m litres at this year’s Oktoberfest. Munich’s mayor, Josef Schmid, told a local newspaper he blamed cold and damp weather and stronger border controls for the lower figures.

• Gordon Ramsay Group has posted a 4.2% rise in LfL sales in its UK restaurants for the year to 31 August. Meanwhile the group’s new £13m five-year banking facility with Barclays suggests that the search for a new investor to take up a 50% stake of the business (which would value it at up to £80m) has been put on ice.

• Research from CGA Strategy finds that more than half of all cocktail drinkers now have them in restaurants. CGA’s Mixed Drinks Report also shows that cocktails are now sold in around a quarter of all on-trade outlets in the UK and are becoming more popular in pubs. CGA Strategy client services director Rachel Perryman says: ‘Cocktails are one of the big growth areas in drinking out, and our Mixed Drinks Report shows how well the on-trade is catering for their drinkers now. Their soaring popularity in restaurants is a sign of just how far cocktails have penetrated into the mainstream, and the increasing sophistication of drinkers shows the trend has a long way to run yet.’

• The ALMR has cautioned that the proposed devolution of business rates powers should have careful checks and balances in place. ALMR Chief Executive Kate Nicholls said: ‘Local authorities do not have a good track record applying discretionary rates or supporting businesses in their areas. Any changes that are made by the local authority should be done so in order to boost investment at a local level and increase accountability to local businesses. There is some concern that any concessions that are made will be given solely to big ticket investment or high tech, rather than the bulk of small and medium-sized enterprises.

• ‘At present we have not been given any details of caps, checks, balances or challenges for businesses. We are hopeful that this development will incentivise business, but we will remain wary until we receive further details of the proposal.’

• Growth in the UK service sector slowed from 55.6 in August to 53.3 in September, its lowest rate in nearly two and a half years. Any reading over 50 in the Markit/CIPS service sector purchasing managers index indicates growth.

• Kristian Niemitz of the IEA has said that that living standards have been rising consistently over the past few decades. Although today’s poor are much better off than they would have been 50 years ago, Niemitz noted that rising house prices excluding people from home ownership and other factors partially offset the progress.

• Many smaller English stores are now charging 5p for carrier bags despite being legally exempt from the scheme.

Holidays & Leisure Travel:

• Patrick Dempsey, former managing director of Whitbread Hotels & Restaurants, is to become a non-executive director of Staycity. Dempsey will join the Dublin-based operator looks to take its total number of apartments and aparthotels from 1,000 to 10,000 across Europe by 2020. While at Whitbread, Dempsey was credited with doubling the size of its Premier Inn brand to some 60,000 rooms.

• Thomas Cook has announced further retail division restructuring + has put 48 jobs at risk of redundancy. A statement said the evolution will ‘enable the regional managers to place greater emphasis on the coaching, development and support of their teams in order to drive performance, compliance and to deliver exceptional service to our customers’.

• Wizz Air: Load load factor increased 3.3% year on year to 90.9% in September, while its 12 month rolling load factor was up 1.4% to 87.8%. The Switzerland-based low cost carrier saw total passengers up 22% on the month to 1,812,795 and capacity also rose 18% to 1,994,760.

• Wizz Air: In September, the Company confirmed an order with Airbus for 110 A321neo aircraft that will begin delivery in 2019 as well as an agreement and is financing six A321ceo aircraft, the first of which will join the fleet in November. The airline is also busy adding nine new routes to its network of 390, in Romania and Poland.

Other Leisure:

• Betfair shareholder Edward Wray and associate last night announced that Barclays was to place 7.35m of their shares in the company. This morning, Barclays has been able to announce that 8m shares were in fact placed and the placing price was £32.50 per Placing Share. It says exiting shareholders ‘LE PEIGNÉ and the Wray Shareholders remain very supportive of Betfair and its proposed merger with Paddy Power and have agreed to lock up those shares not sold in the Placing for 90 days from the closing of the Placing.’

Finance & Markets:

• IEA maintains its attack on Corbynomics saying that the 13 worst economic policy mistakes were clustered around the Corbynesque 1970s. the IEA says ‘adopting the kind of policies advocated by Jeremy Corbyn would be disastrous for the UK’s economy. Looking back at past economic policies tells us that nationalisation resulted in waste and inefficiency, powerful trade unions discouraged investment and high taxes hurt business.’

• World markets: UK strongly higher, what’s the problem? Europe up, US markets up + Far East higher in Tues trade

• Oil price creeping back towards $50 per barrel, trading now around $49.35

• Eurozone investor confidence slipped in October to 11.7 from 13.6 in September

Retail Roundup from Nick Bubb:

Greggs: Although Greggs has been a stellar performer so far this year, the shares are well off their end-July high, so the bulls were hoping that today’s trading update would provide a boost and they will not be disappointed to hear Greggs say “We have traded well in the third quarter, delivering increased sales while controlling costs”. In the 13 weeks to 3 October LFL sales grew by 4.9%, against strong comps, slightly ahead of their expectations, as “product initiatives across the day combined with our great value deals continue to drive increased customer visits and transaction values”.

Ted Baker: As expected, today’s interims (for the 28 weeks to 15 August) from Ted Baker are strong, with underlying PBT up 23% to £17.8m, on the back of a 24.5% increase in total sales to £227m. Progress has been good across all channels, but the growth in the US is particularly eye-catching, in both Retail and Wholesale. And it’s good to hear that the overall Retail gross margin remained constant at 64.0%, despite an increase in Outlet sales as a proportion of total sales. In terms of current trading, the only surprise is to hear that “sales in August were adversely impacted by a number of external factors”, but Ted goes on to say that “trading in September was broadly in line with our expectations and that our collections for the Autumn / Winter season have been well received”.

Dixons Carphone: Under the innocuous headline “Director Declaration”, Dixons Carphone has announced an interesting management reshuffle, with Graham Stapleton appointed, with immediate effect, the CEO of the Connected World Services division and Jeremy Fennell appointed Managing Director of Carphone Warehouse, to replace him.

John Lewis Sales Watch: That great High Street bellwether John Lewis will be the first to report on the impact on Fashion sales of last week’s “Indian Summer” and it would be best not to expect too much, but the comp was quite weak and the recent Apple launches will have boosted Electricals sales, so, ahead of Friday’s official figures for w/e Oct 3rd, we would pencil in c1%-2% LFL sales growth overall (ex the impact of the opening of the new Birmingham store).

Majestic Wine: Yesterday evening Majestic Wine held a wine tasting for analysts in the City and there was a good turnout to try some wines from both Majestic and Naked Wines, with the highlight being the new “Definition” own-label wines which have recently been launched in Majestic. And there was a bit of fishing in the other direction, ahead of the interims and strategic update on November 16th, with the new CEO Rowan Gormley asking the analysts what issues in the business they wanted to see addressed…

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:

Rugby & leisure:

• We won’t labour the point but England’s exit is not all bad news.

• Food led pubs were suffering when England played & they should bounce back – or at least avoid further dips.

• Ditto cinemas, bowling alleys and the like.

• And holidays traditionally pick up on an England exit – though this is more the case for football tournaments, which are typically held in June & July.

• And MARS & GNK’s wet-led pubs will still be benefitting via their Welsh & Scottish outlets. The former are particularly important for Marston’s.

• And, at the end of the day, what did we expect?

Evolution:

• So the young don’t cook says The Telegraph.

• That’s simplistic but directionally correct and trends tend to move from West to East across the Atlantic.

• Hence it is unlikely that fast food volumes will decline over the next couple of decades or so.

• And it is unlikely that they will remain constant meaning that, by a process of deduction, they are likely to rise.

• So the fast food industry (and the catering industry as a whole) should expand over time but, as new entrants keep making their presence felt, this is absolutely not the same thing as saying that LfL volumes should continue to rise.

• This confirms us in our view that evolution remains the only constant and that, for companies that decline to adapt, their markets are likely to contract

Interest rate trends:

• Weak US employment data on Friday has firmed up the markets & pushed expectations of a Fed rate rise all the way out to the end of Q1 next year.

• Expectations in the last fortnight, therefore, have moved from a rate rise in Sept 15 to Dec 15 and now to March 16.

• The markets have taken this as good news – but this is by no means an easy call.

• Because average rates are only average rates because the spot rate spends 50% of the time below the average & 50% above.

• Hence low rates for longer imply high rates for longer.

• This apart from the issues re moral hazard, punishing savers, bailing out the profligate etc.

• However, for the moment, let’s go with it. This is ‘good’ news.

Langton’s Leisure Retail Index:

• The Leisure Index underperformed the market last week falling 0.79% while the All-Share was up 0.27%, as oil and gas stocks pushed the market higher.

• The index saw M&B continue to drop following its shocker week last week, down another 3.54%, with Greene King down another 1% seemingly in sympathy.   JD Wetherspoon and Marston’s however fared markedly better up 3.12% and 3.38% respectively.  England’s exit from the Rugby World Cup will have impacted wet led trading, however with most operators pushing more on the food led businesses trading at the big pubco’s is unlikely to have been too badly affected.

• Punch and Enterprise were down 1.65% and 3.15% respectively.   Tenanted pubs are typically wet led, and as such may have been down in anticipation of England’s exit from the competition. Today’s non-reaction of the shares suggests this was already in the price.

• Revolutions Bars was up 1.95% after decent interims which saw revenue up 2.9% and Like for Likes up 3%.

• Whitbread shares were down 1.95%.  The group has announced it will raise wages to above the National Living Wage without raising coffee prices this year. Will Brumby – will.brumby@langtoncapital.co.uk

Tesco H1 numbers on Wednesday:

• Tesco is expected to reveal a common branding strategy for its businesses when it updates on its H1 results this Wednesday, hot on the heels of Sainsbury’s well-received Q2 figures last week. Shares in the UK’s largest retailer rose c.7% last week as the listed grocers rallied as a result of Sainsbury’s statement, which could exacerbate any negative reaction should Tesco go on to disappoint just one week later.

• The group is currently valued at c19 times earnings and 2.1 times book value despite its share price having more or less halved since mid-2013 to 185p. It boasts a market cap of £14.6bn, although it is not hard to remember when this figure was pushing £20bn.

• The group has been busy lately further simplifying its SKUs and ending the practice of 24-hour stores. However it is worth bearing in mind that Tesco’s FY 2015 loss of £6.4bn was one of the UK’s five biggest corporate losses ever – a turnaround of this magnitude will require a lot of, well, turning around.

• The argument also remains that, as the UK’s market leader, Tesco also has more sales to protect from the relentless advance of the discounters (Aldi and Lidl), new competition (B&M Retail, new c-store entrants) and online (Ocado, Amazon Fresh and, recently, Aldi). Tesco has further to fall than its competitors as it is coming from a higher base.

• The latest Kantar figures show that, so far in 2015, Tesco has lost more market share than any of its competitors:

  04 January 2015 13 September 2015 Difference

Tesco 29.1% 28.2% -0.9%

Asda 16.8% 16.7% -0.1%

Sainsbury’s 16.9% 16.2% -0.7%

Morrisons 11.3% 10.7% -0.6%

Aldi 4.8% 5.6% +0.8%

Lidl 3.5% 4.2% +0.7%

While UK sales may show some signs of stabilising at Tesco, the apparent ruling out of the sale of its central Europe business means that a rights issue might be in order should the group’s credit rating and balance sheet deteriorate further. Jack Brumby – jack.brumby@langtoncapital.co.uk

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

• Commodity price trends maintained, cocoa expensive, corn & wheat off the bottom but other softs very weak.

• Amazon; will the incumbents cry ‘foul’. If, as our colleague Nick Bubb mentioned earlier this morning, Amazon Fresh is undercutting even ASDA, would the incumbents be right to suggest that the American giant is cross subsidising? Is it paying for food delivery losses from profits elsewhere in the business and, if it is, is this legal? Amazon may have built its business on a mountain of losses – but it has nonetheless built a massive business.

• Amazon Dash. This is worth knowing about. If Amazon can tap into requirements (new printer ink, washing powder or whatever) via the internet-of-things, will it be able to cut out traditional retailers altogether? Disruptive technology in its purest form but it’s hard to see how the above would work for clothing. Or bread or most foodstuffs.

• Sterling a shade firmer.

• The FT tells us over the weekend that PE firms have been active in the restaurant space and that prices are high. But that some people think they are not.