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:

Business confidence, business cycles etc.:

• Business confidence matters because it influences capex decisions.

• And those decisions in turn have an impact on employment levels, overtime payments and the like.

• And the ICAEW suggests that confidence levels are falling such that they are now at two year lows.

• A glance at the report – here – shows that business confidence is indeed at a 2yr low but also confirms that it is 1) in positive territory and 2) stands at an altogether higher level than that seen during the recession.

• The downturn in confidence is thus more likely indicative of a slowing in the economy, a pause for breath rather than a harbinger of something worse to come

• Nonetheless the downturn does serve to remind us that, if we were to return to what had previously been ‘normal’ business cycles of perhaps 8yrs or so, we are nearer the next ‘recession’ than we are the last

Selling out of restaurant operations:

• Nando’s owner Capricorn Ventures is a smart cookie.

• Usually at least and now we hear that it is to sell its GBK business.

• We could take this as a signal that the restaurant market was getting a little overheated but, as the owner is keeping a hold of its much bigger Nando’s operation, it may be more a comment on GBK specifically.

• Maybe Capricorn sees burgers as fit to burst?

• Or maybe it is tacitly conceding that it isn’t getting synergy benefits from its ownership of a second restaurant chain and, perhaps, that its purchase of Clapham House back in 2010 was not its smartest move.

Evolution of the consumer offer:

• As mentioned on a number of occasions, we believe that the only constant is change.

• And here we would lump the suggestion made by the IFS (see this morning’s email) that young people could actually be poorer than their parents at every stage of their lives.

• If true, and the cost of everything from housing through car insurance to medical costs and later retirement would suggest that it is, this is a real social issue.

• But from the financial standpoint, it does perhaps suggest that operators may be able to make more money going forward from the grey market than the youth market

• Of course units cannot be flipped over instantly from serving roasts to pensioners on a Sunday lunchtime to serving tequilas to their grandchildren 10hrs earlier in the morning (or vice versa) but capex plans for the multi-brand groups can be tweaked

• Capex can be diverted and, though youth-centric units may have more of a buzz, they may not be as busy going forwards as they would have been in the past

• Interesting also to see in Nick Bubb’s comments this morning (see earlier email) that The Times notes comments by Network Rail suggesting that millions of people now go to main railway stations not to travel, but to shop, eat & meet friends.

• Having passed through King’s Cross perhaps 1,000 times in the last decade, I can believe that’s true. Things have certainly changed over the last few years.

• However, wouldn’t it be better to have a life?

The run up to Christmas:

• Interesting to see Poundland (shares down 20% on another disappointment) saying ‘we have seen highly volatile trading conditions so far in the third quarter.’

• It adds ‘the quarter’s performance therefore depends more than ever upon the last six weeks’ trading towards Christmas.’

• Many licensed leisure operators will know the feeling well.

Random information, hopefully not all of it useless:

• Sterling up sharply against the Euro. Tourists in resort should notice the benefit immediately.

• Commodities little change. All weak except El Nino products. We’re all looking at Brent but, for the record, West Texas Intermediate fell briefly below $40 yesterday.

• Enterprise Inns’ share bounced for a second day yesterday.

• Bit of a dead cat going on with bounces in shares such as Pearson and Sainsbury.

• Travel stocks weak for obvious reasons.

• Dart Group. Great numbers (H1) but don’t you find the year end (March) a little odd? The travel side of the business makes >100% of its profits in H1 and losses in H2. Seems somehow to open the group up to a feeling of disappointment. TUI and TCG both have September year ends.

• Interest rates. Judging by the (lack of) reaction of the US$ and world equity markets to the Fed comments yesterday, it would seem as though a December interest rate rise is now baked into expectations

We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):

1. ICAEW/Grant Thornton business confidence survey shows confidence at lowest level since 2013, says post-Election honeymoon now over

a. Confidence: Index +15.6 in Q3 vs +22.4 in Q2, says ‘worryingly, capital investment growth continues to fall + is expected to slow further’

b. Confidence Index: Grant Thornton says ‘growth over 2015 as a whole is looking solid, though weaker than 2014’s stellar performance’

c. Economic backdrop: Given normal business cycle, a slowdown is on cards. It doesn’t feel right, does it but the recession was 6yrs ago

2. Nando’s owner Capricorn Ventures is reported to be close to selling its Gourmet Burger Kitchen operation says Sky News

3. Report by Institute for Fiscal Studies says young people could actually be be poorer than their parents at every stage of their lives

4. Domino’s Pizza Group PLC announces Paul Doughty, CFO, has resigned + will step down from Board at end-December.

5. Poundland has released H1 results for the six months to 27 September, with LfL sales down 2.8% in the period

6. Dart Group H1, reports revenues +14% at £1.02bn, underlying PBT +66% at £146.8m and underlying EPS +65% at 79.8p.

a. DTG H1: Has ‘exceptional summer season’ with numbers ‘underpinned by continued strong growth in the Leisure Travel business.’

b. DTG H1: Load factor up to 94.1% from 91.8% last year with yields up 16%. Distribution business profits almost doubled.

c. DTG H1: Group says ‘Board is optimistic that current market expectations for the full year will be achieved.’

7. AMEX has said that it expects global meetings and events spend to increase in 2016 for the first time in five years.

8. London & Partners suggests a boom in budget + also in five star brands will see the number of hotel rooms in London grow 12% by 2018

9. Fed seems supportive of Dec rate rise. Minutes say ‘US financial system [has] weathered the turbulence in global financial markets’

10. UK car production fell 0.7% y-o-y in Oct per SMMT. Year to date numbers still running at 10yr highs