A Day in the Life:

Follow us on Twitter at either @langtoncapital or @brumbymark.

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

**LOST EMAILS – Yesterday Langton managed to permanently delete all the emails in its inbox. Thankfully, many had been filed in folders but, if you mailed yesterday prior to about 3pm, could you please resend whatever it was you pinged us as otherwise we won’t be able to respond – LOST EMAILS**

So here’s a question for you, do you ever dip biscuits in your tea?

Go on, I know you do but would you do it in a meeting?

And if you did and half a soggy digestive kerplunked into your cup and splattered your neatly spread out PowerPoint what would your disaster recovery plan be?

Would you pull up stumps, reckon you were in a deep enough hole and stop digging?

You could pretend that nothing had happened or would you be compelled to go in with your fingers, make an exhibition of yourself – something that is more dangerous than ever now that people have cameras on their phones – and make a bad situation worse, craft a Mr Bean-like farcical tragedy out of a simple mistake because that’s how I sometimes feel my IT management is developing, i.e. not well. Not well at all.

Anyway, there’s plenty going on out there so, while my machine’s at least working after a fashion, let’s move on to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Imbiba Partnership announces new concept. Is to launch BBQ, steak & wine units featuring celebrity chef Neil Rankin. The operation is looking to have six or seven sites in central London in the next 5yrs.

• Chipotle sales for Q4 last year were hit by E.coli health scare, reports the company. Sales down 6.8% to $997.5m in the quarter

• Chipotle has reported Q4 net income down by 44% at $67.9m due to reduced sales. Chairman & founder Steve Ells reports ‘the fourth quarter of 2015 was the most challenging period in Chipotle’s history.’ The group now believes that it has the E.coli issue behind it.

• Report from Mintel suggests popcorn may become more popular than the potato crisp as consumers look for healthy options. Mintel says sales of potato crisps fell to £1.34bn in 2015 — the second consecutive year of decline. They were outsold for the first time by other snacks. Mintel reports ‘the crisps market is experiencing deflation, with manufacturers and retailers turning to discounting to drive volumes as part of the supermarket price wars, and the category is losing out to healthier alternatives.’

• Risk Capital Partners-backed Red Hot World Buffet is thought to have placed two of its six sites, in Leicester and Nottingham, on the market writes M&C. The move could mean Risk Capital is looking to exit its investment in the buffet group.

• Draft House founder Charlie McVeigh has told the PMA that the Dry January effect on the pub trade is beginning to fade. He says that like-for-like sales this month were up 4.5%, on top of a 3.5% rise during the Christmas period. Mr McVeigh comments ‘food was definitely the driver last year but, in this quarter, it has been drinks and that’s especially true of January. There has been a real sense this month that people do want to support pubs and that they will come if you take the opportunity to do something different.’

• LVMH has reported stronger-than-expected Q4 numbers with resilient dales in Europe, Japan and the United States

• The Coaching Inn Group has acquired the 26-bed Kings Head in Richmond, North Yorkshire for £2m as part of its £20m expansion plan. The group aims to open five more sites this year to add to its portfolio of ten hotels, some four of which have been added in the past 12 months.

• Pub operator and brewer Brakspear has appointed Paul Gilchrist as director of retail for its eight-strong managed pub division. Brakspear chief executive Tom Davies said: ‘We’re delighted to have Paul on board. His outstanding credentials across the pub and restaurant arena make him the ideal candidate to steer our managed division at this exciting time in its development.’

• Sushisamba will replace Brasserie Blanc at Covent Garden’s Opera Terrace and will put £4m into designing and developing the site.

• Davis Coffer Lyons has added a little detail saying that ‘Capital & Counties Properties PLC and Samba Brands Management are delighted to announce that internationally renowned SUSHISAMBA has agreed terms to occupy Covent Garden’s famed Opera Terrace within the historic Market Building, creating their latest visionary London restaurant. SUSHISAMBA is operated by Samba Brands Management and has restaurants in London, New York, Las Vegas and Miami.’ It says ‘the Opera Terrace, which is located at the top of the Grade II listed building and comprises c. 9,000 sq ft including a balcony, is uniquely positioned with striking rooftop views across the Piazza. A bold and contemporary renovation of the site will see the existing conservatory replaced with a new Eric Parry glazed design’.

• Stonegate is celebrating Shrove Tuesday (9 Feb) by giving away a pancake for every customer who purchases a main meal.

• Amazon is reported to be set to open as many as 400 physical bookstores per comments from a major American shopping centre operator.

Leisure Travel:

• Royal Caribbean reports FY numbers, says earnings of 483c were +42% over 2014. Group targeting around 600c this year.

• RCL says costs excluding fuel were down 0.6% on a Constant-Currency basis & yields on the same basis were +3.5%

• RCL re outlook. Group says net yields should rise by 2.0% to 4.0% on a Constant-Currency basis this year, sees EPS of 600c. Chairman & CEO Richard Fain reports ‘our core brands are firing on all cylinders, our new ships are performing exceptionally well and our costs are well controlled. This is driving 40%+ earnings growth in two consecutive years.’ Mr Fain goes on to say ‘these very gratifying results combined with a strong start to Wave position us well on our path’.

• Trade press reports Zika virus fears are keeping some would-be UK holidaymakers from visiting affected areas

• Choice Hotels is considering entering the ‘sharing economy’ reports STR. It could put 3rd party properties on a platform

• Princess Cruises has just had its ‘best ever January’, with bookings up 40% YoY and sales through the trade up 50%.

• EasyJet has unveiled designs for a hybrid aircraft that could save c50,000 tonnes of fuel and CO2 emissions annually. The ‘zero emissions hydrogen fuel system’ is similar to the technology being used in Formula 1 and has been proposed as part of the airline’s aim to reduce the carbon footprint of its passengers.

• Minor Hotel Group has completed its acquisition of Portugal-based Tivoli Hotels and Resorts in a deal worth €294.2m. The acquisition gives MHG 14 properties across Portugal and Brazil and the group now owns and operates properties in 22 countries.

• A record 5 million tourists visited Cancun in Mexico in 2015 as the average occupancy rate reached an all-time high of 82%.

Other Leisure:

• Nintendo has posted a 36% drop in net income to £168m in the quarter to December following disappointing Wii U sales. The under-pressure group has already started sending select developers a software kit for its upcoming ‘Nintendo NX’ console.

Finance & Markets:

• Eurozone unemployment fell to its lowest rate in over four years in December as the jobless rate dropped from 10.5% to 10.4%.

• UK construction sector growth slowed in January to its weakest level in nine months as economic uncertainty drags on new orders.

• German unemployment has fallen to an all-time low (since reunification) rate of 6.2%.

• World markets: UK and Europe sharply down yesterday. US down overnight & Far East lower in Weds trade

• Oil price lower at around $32.60 per barrel. US stock levels per latest American Petroleum Institute report

Retail Roundup from Nick Bubb:

Sainsbury/Home Retail:
The main focus of yesterday’s short conference call by Sainsbury to analysts on the agreed bid for Home Retail was on the clever financial engineering on the Argos loan book (netting £500m to fund the acquisition, via the Sainsbury’s Bank) and the aim to generate at least £120m in synergies. Much of the latter will come from moving Argos stores into Sainsbury stores and management again seemed very reliant on the data from the very successful trial of 10 inserts last summer…In case you were wondering, the much-vaunted 10 Argos inserts in Sainsbury that were opened last summer comprised: Nantwich, North Cheam, West Hove, Crayford, Calcot, Bognor Regis, Durham, Rustington (on the Sussex coast), Drumchapel (in Glasgow) and Keighley. The first 2 opened were in Nantwich (in Cheshire) and North Cheam (near Sutton in Surrey), back in May last year, and at the time the
Argos Director of Retail and Customer Operations, Steve Carson, said in the press release that: “Working with Sainsbury’s will help us to bring the convenience of the Argos offer to more customers. This is the first time we have had stores in these specific locations”.

Ocado:
As expected, yesterday’s Ocado analysts meeting was dominated by the vexed subject of the long-awaited Overseas licensing deal after the company said “Discussions with multiple potential international partners continue”. Why a deal has taken longer than expected to land remains unclear, but it sounds as if many potential partners have wanted to see the new/smaller/even more hi-tech Andover warehouse operating first and that will open shortly, with much of the new software and systems now patented. The feisty CEO, Tim Steiner, noted that Online Grocery retailing around the world is generally less advanced than in the UK, in market penetration terms, and that many potential partners have been in no rush to take a big long-term strategic decision, even with Ocado offering to do much of the heavy lifting upfront.  It sounds as if the first deal is not far
away, but any significant further delay will frustrate the bulls and encourage the shorts. Nick Bubb – nicholas_bubb@hotmail.com

Tuesday 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:

Greene King directors:

• Tim Bridge is leaving Greene King after 11yrs in the chair.

• This brings it home that CEO Rooney Anand has also been in his job for 11yrs.

• That’s a long time but, interestingly, Ralph Findlay has been CEO at Marston’s since 2001 and John Hutson has been CEO at JDW since God was a nipper.

• With the exception, perhaps, of MAB, the pubs sub-sector has a history of relative longevity with regard to its CEOs. Messrs Andrew Page (RTN), Giles Thorley (PUB) and Ted Tuppen (ETI), though now gone from their relative positions, also fell into this mould.

JDW still buying shares back:

• Co has announced that yesterday it bought back a further 78k of its own shares at an average of 680p

• It has now bought back 797k for £4.981m, an average of 625p per share.

• As the shares are now trading at 683p per share, how the vendors of the above stock now feel is perhaps best not reported

BP, the dilemma re holding your dividend:

• Arguably the oil stocks are going through what pubs & restaurants went through in 2008-09.

• As the credit crunch bit, many if not most leisure companies found themselves with stretched balance sheets, too-high dividends, etc.

• Many went bust, most cut their dividends and a number had rights issues.

• Some, indeed, are still not paying a dividend seven years later. ETI and PUB are non-payers and MAB has only just reinstated a payment to shareholders.

• BP has today held its dividend despite profits falling by 91%. Its shares have fallen, they are currently 8% lower.

• AAL a few weeks ago passed its dividend – and its shares also fell.

• So perhaps you’re damned if you do, damned if you don’t?

• The argument is that, if you don’t cut your dividend, you are consuming your own flesh. You will set yourself on a permanently lower trajectory. Though you may, the cynics could suggest, have a rights issue up your sleeve to be popped out when your share price has stabilised & when you perceive there to be ‘growth opportunities’.

• If you do cut your dividend, you’re seen as weak, vulnerable and, no matter how much you say you’re being decisive, you may not be believed.

• Nobody said, when the CEOs of these various companies took their 8-figure salary jobs, that it would be easy.

Random information, hopefully not all of it useless:

• Horizons has it that restaurateurs should curry favour with their customers in case there is (or ahead of) another recession. See earlier email. And, though we have to be careful that we don’t talk ourselves into a slowdown, this seems like good advice because, if anything, we’ve learned that, if you gouge customers in the upcycle, they will pay you back (or rather not pay you back) in the down.

• Sir Stelios is offering all grocery items in his new easyFoodstore, including noodle pots, sardines and tinned spaghetti hoops, for just 25p for the whole of February. This, though it won’t quite last at this price, will put more money into would-be pub & restaurant goers pockets.

• Am I right in thinking that revenue growth of 16% for Ocado may be a little low for a mould-breaking, disruptive online retailer? And what about margins?

• Stock market meant to open 20pts down but now, at time of writing, is down over 100pts. Go figure.

• Travel stocks up late yesterday on relief that the oil price rally was petering out. Oil stocks, unsurprisingly, took the opposite view.

• Sterling down against the US$ but up against the Euro. Nothing really changed out there with regard to the order in which countries are likely to hike rates – betting still US 3-4 rises this year, UK first rise Q1 next year, Eurozone unknown.