A Day in the Life:

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Find previous emails at https://www.langtoncapital.co.uk/daily-notes/ 

So somebody managed to pull one of our curtain rails off the wall over the weekend.

Fingers were pointed but, as everyone denied it but the dog, I had to conclude that it was the canine that did it and he’s been sent to bed in disgrace.

However, that left us with the job of putting it back up and, as a number of our offspring are now physically adult, we left it to them.

Which was interesting in a way because I now know that putting up a curtain pole is a four man job. You need one to play the guitar, two to play some sort of ultra-violent video game on the TV and the other to do the work whilst any underage child alternately dances around the room with a funny hat on and plays with the dog. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Fulham Shore reports H1 numbers to 27 Sept. Period now includes Franco Manca, bought on 21 April 2015. Group says ‘it has been another very busy 6mths for the Group, with both organic expansion + corporate activity.’

• Fulham Shore H1: Franco Manca up to 18 units, today’s numbers include a little over 5mths trading since acquisition.

• Fulham Shore H1: Sales £13.9m v £5.5m last year, operating profit £1.7m v £0.9m. Group opened 1 new Real Greek in H1.

• Fulham Shore H1: Period featured announcement of franchise agreement with Bukowski, will open unit in Soho spring 2016

• Fulham Shore H1: Group reports cash outflow as a result of new openings & had period end debt of £300k.

• Fulham Shore on current trading. Says now has 27 restaurants trading, 2 more to open in the spring. Chairman David Page comments ‘the Board is excited about the future with the prospect of expanding the Group’s excellent restaurant businesses. The Real Greek and Franco Manca are planning to open new restaurants, mainly in London and the Home Counties in the coming year and, for the first time, the Group expects to be opening Franco Manca pizzeria outside London during the financial year to March 2017. Contracts have been exchanged on three fantastic sites in very different locations: groovy Brighton; smart Guildford; and the large office and retail development of Nova Victoria behind Buckingham Palace.’ He adds ‘the Board continues to look for new sites’ and says ‘in line with the Group’s stated aims, the Board continues to seek investment opportunities
which have potential for expansion and significant capital growth. We look forward to the conclusion of the financial year with confidence.’

• The ALMR has brought YO! Sushi executive chairman Robin Rowland on to its board and has established a new Casual Dining CEO forum. Rowland is set to chair the forum, which will meet quarterly to discuss the rapidly growing casual dining sector. ALMR CEO Kate Nicholls commented: ‘The landscape of licensed hospitality has evolved significantly over recent years and casual dining businesses have helped drive a high street renaissance. Sophisticated and inventive eating-out options have provided a real boost to all sorts of licensed hospitality businesses and the ALMR is committed to supporting this vital part of the UK’s economy. We have welcomed a host of casual dining brands into membership this year and will push forward with work on a new Casual Dining CEO Forum, address the concerns of our casual dining members in a more focused and nuanced way.’

• All-day café, bar and restaurant group Loungers had record sales of £1.7m last week, with LfL sales up 7.2%, writes M&C. The group expects this week to be even busier. Loungers aims to grow to 200 sites by the end of 2021 and opened its 75th site (and 20th of the year) yesterday in Bury St Edmunds.

• Honest Burgers has confirmed a deal to open a 2,000 sq ft site across three floors on Southampton Street in Covent Garden in February. The news comes shortly after the burger brand opened its 11th restaurant in Peckham. Co-founder Dorian White said: ‘The new restaurant marks an exciting next step in the growth of our brand and we are very happy to be opening in one of the busiest, most popular locations in central London.’

• Restaurants and pub operators are raising menu prices in anticipation of a lucrative festive period, writes M&C Allegra Foodservice. The average Christmas party menu at casual restaurants has risen 12% to £23, while pubs have driven up the average price of their Christmas party menus 21% from £17.40 to £21.00.

• Spar added some 185 stores between May and October this year to take its total estate to 2,578. The 8% increase in store numbers was driven by a number of factors, including existing Spar retailers adding to their store portfolio, new retailers joining the symbol group, company store numbers growing, and a large number of stores from Euro Garages.

• Shop vacancy fell for the fourth successive month in November, from 13.3% to 12.7% year on year, meaning the UK’s high streets are at their most occupied since February 2010.

• Nisa has announced record Black Friday sales, with special deals on products fuelling an 11% rise year on year.

• Admiral Taverns sold 62 non-core pubs for a total of £10.6m and a further 19 core sites for a combined £7.9m during its latest financial year, writes Propel. The group earmarked a further 78 sites for disposal at its year end, around half of which have now either been sold or have had terms agreed.

• Vinopolis to close on 31 December 2015, only four days left until it stops taking visitors.

• Enterprise Inns’ CEO Simon Townsend saw his pay almost double to £1.63m in the financial year to end-Sept

• Brighton chicken concept Hen has raised its targeted £750k on Crowdcube.

• Nando’s has topped a list of leading food and beverage brands on Twitter, with its 1.5 million followers some half a million more than second place Dominos. Kat Hounsell, sales and marketing director at eDigitalResearch, said: ‘A key social media trend in 2016 will be focusing on listening, not just engaging. We’ve seen how a creative and engaging strategy can spread brand messages and increase customer reach but it’s more important than ever to listen to what these social customers are saying. Competition for consumers attention is fiercer than ever and by properly listening to what people have to say in real-time brands will be able to focus their social content and excel experiences.’

Travel & Hotels:

• Dart Group has agreed the purchase of three new Boeing 737-800NG planes on top of the 27 announced in early September. The total value of the transaction is $288m at current list prices and will be funded through a combination of internal resources and debt.

• TripAdvisor has reported that a third of travellers are planning to spend more on travel in 2016 than they did this year

• Hilton is considering spinning off its hotels into a REIT reports the FT. It says the company is ‘seeking to capitalise on high property valuations as the industry shifts attention to managing, rather than owning, hotels.’

Finance & Markets:

• US Fed raises rates in first upward move in more than 9yrs. Asian shares up on the well-flagged news.

• US Fed chair Janet Yellen says ‘with the economy performing well and expected to continue to do so, the committee judges that a modest increase in the federal funds rate is appropriate.’ She adds ‘the economic recovery has clearly come a long way.’

• US Fed has focused on employment as trigger for beginning to a “gradual” tightening. Yellen comments ‘the process is likely to proceed gradually.’

• UK pay growth slows in development that could delay rate rise this side of the Atlantic. Wages ex-bonuses +2.0% in 3mths to Oct.

• Growth in Eurozone slowed in Dec per latest PMI. Falls to 54.0 from 54.2 where any number >50.0 indicates growth

• National Association of Estate Agents + Association of Rental Letting Agents say UK home prices will rise 50% in next 10yrs. They believe that the price of the average house in London could almost double to £931,000. The NAEA reports ‘house prices are only going to go one way, and unfortunately that is up. For so many already priced out of the market, this is news aspiring house buyers will not want to hear. Ongoing house price inflation, combined with low wage inflation, tighter lending restrictions and a shortage of affordable housing, means owning a home will continue to be distant dream for many.’

• World markets: UK up ahead of US rate rise, Europe likewise. US markets up and Asia higher in Thursday trade

• Oil price down over last 24hrs, trading at around £37.20 per barrel.

• UK unemployment rate down to 5.2% in three months to October (from 5.3% in the 3mths to Sept).

Retail Roundup from Nick Bubb:

Ted Baker:
The area north of Kings Cross is rapidly becoming uber-trendy, as the developers move in and we remember thinking after visiting the new Waitrose Kings Cross store a couple of months ago that Ted Baker might well be tempted to get a piece of the action, as there were rumours at the time that the freehold of their HQ on St Pancras Way was up for sale. The former Post Office sorting office was renamed “The Ugly Brown Building” when Ted Baker moved in many years ago and it would not have been worth much at the time, but the company has announced today that it has paid as much as £55.25m for the freehold of the 80,000 sq ft property, an astonishingly low yield of 2.1%.  It also has acquired the option to buy half of a 25.000 sq ft property nearby. Ray Kelvin, the founder and CEO, says “The Ugly Brown Building has become an iconic building in a rapidly developing
central London location and a very important ingredient of Ted Baker’s history and unique personality”.

SuperGroup: We noted yesterday on the back of the interims from SuperGroup that analysts would try to prise something out of the management about current trading at the results meeting, but CEO Euan Sutherland pre-empted that by saying in his introduction that “Black Friday” had been successful, even though the group doesn’t really get involved, and that pre-Christmas promotional participation is actually slightly down on last year, despite the recent PR about their discounting. As for the sector background, he acknowledged that trading is “pretty tough” and that Christmas spending gets later every year, but he insisted that the group has not changed its position on Sale promotions.

Planet ONS Watch: We will find out at 9.30am today what life was like last month on that strange parallel world, the Planet ONS, via the ONS Retail Sales figures for November. In the real world, it was, of course, a disappointing month, as per the BRC-KPMG survey, despite strong Black Friday Online sales growth. But City economists focus on the month-on-month movement in “seasonally adjusted sales volume” and that is a very different thing from growing sales value year-on-year…For what it’s worth, our friends at Capital Economics expect overall year-on-year volume growth of about 4% and so have pencilled in a small 0.5% monthly rise in November, in line with consensus. Nick Bubb – nicholas_bubb@hotmail.com

Wednesday 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:

Consumer behaviour, cycles etc.:

• We know that the 2007-08 bust was large by historic standards. And the 2009-10 recession was deep and the recovery therefrom has been shallow.

• There don’t appear to be the ‘boom times’ that one would associate with a ‘normal’ recovery but then again who’s to say what’s ‘normal’?

• Because the last upturn lasted from 1992 to 2007. Hardly normal but that in itself means that nobody below the age of 25 or so had even lived through a cycle.

• Perhaps the 1982-90 recovery period was more normal?

• But the UK during that period was recovering from a period of de-industrialisation that was not repeated in 2008-09 and therefore the bounce, given the arrival of new technology etc. into the bargain, was perhaps stronger than would otherwise have bene the case.

• Hence we might be thrown back to the 70s or even the 60s in an attempt to remember what is ‘normal’ and who amongst us can credibly do that?

• All of which suggests that this just might be the ‘new normal’.

• Trading is challenging, the mediocre have nowhere to hide and comments this morning from a number of general retailers seem to support this theory.

• Bonmarche has warned on profits (warm weather) and Carpetright has said that consumer confidence is “fragile” and the economic recovery is “slow”.

Trends in licensed retailing, property values etc.:

• In the licensed arena, Coffer Group’s Mark Sheehan has suggested that the leisure investment sector is likely to see a slow-down in transactions from 2015.

• It puts this down to a shortage of prime properties – but this could also be partly as a result of operators refusing to pay what have become extremely high occupancy costs, especially in the Capital.

• Sheehan tells the M&C ‘yield compression will come to an end, and investors will need to rely on rental growth to generate returns and profit.’

• This may not be possible (given the already-high starting point) and Sheehan concludes ‘some softening in the leisure commercial property market is quite possible.’

• With properties, the rent divided by the going yield gives the property price. If the latter goes up and the former stays the same, then asset prices could contract.

• That is a sanitised way of saying that they could fall.

London hotel occupancy:

• So was it Paris that caused a dip in occupancy across London hotels?

• The industry will be hoping so. For the record, occupancy fell 3.5ppts on the month per STR Global.

• Achieved rate, however, was up by 2.2%.

• Worryingly, STR says demand fell by 1.9% whilst supply rose by 1.7%.

• Just a reminder as to how cycles move:

1. Peak, high rate, high occupancy.
2. Topping out, even higher rate, lower occupancy.
3. Reaction, lower rates, falling occupancy.
4. Bottom, low rates, low occupancy.
5. Recovery, low rates, rising occupancy
6. Go to 1)

Random information, hopefully not all of it useless:

• Evolution still alive & well as Yo Sushi opens its first dedicated bar (albeit within a restaurant)

• Domino’s German merger looks to have been well-received. The group still has a third of what will be a much-enlarged business but, to some extent, out of sight, out of mind.

• Domino’s Pizza Poland (separate company) sees director putting money where mouth is. Current DPP director & former DP UK CEO Chris Moore puts a further hundred grand into the company.

• Starbucks has paid a bit of tax. What does it want, critics ask, a medal?

• Markets extremely strong yesterday and following through this morning.

• Sterling little changed against either Greenback or the Euro.

• Oil prices ‘firmer’ but has to be taken in context. Price now over $38 but just a shade above 11yr lows. Price was >$110 only 18mths ago. Hence price is perhaps a $1 off its lows but >$70 off its highs.

• Commodity prices much the same. Metals weak (though ‘stable’ – but then again so is a patient in a coma) & foods also lowly priced. Take red meat, for example, price of feeder cattle is down some 31% over the last 12mths: