Langton Capital – 2016-02-15 – Daily Wrap: All Leisure, market moves, sugar, confidence & other:
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:
The AIM market:
• All Leisure has today said that it is considering delisting from the AIM market.
• It’s probably safe to say that it has considered its statement long and hard before making it to the LSE.
• Chairman Roger Allard owns c60% of the group’s shares.
• The above would seem to be a comment on the costs versus the assumed benefits of the company having its shares publicly listed
Global worries swept aside by market’s desire to bounce:
• Markets very strong Friday & following through today. This despite poor Japanese GDP numbers (but stock market +7%), sluggish export numbers out of China and the fact that the US is closed today for Presidents’ Day
• Brexit fears swept aside.
• Oil price rise now seen as a good thing.
• Greek problem ignored – but it hasn’t gone away, it’s just been sleeping. PM Tsipras blames lack of progress on disagreements between his creditors on what the country should be doing about its bloated pension payments
To tax or not to tax?
• Sugar flip flopping goes on.
• Government last week ‘not discounted’ a tax but, by Monday, it apparently has.
• However, the FT suggests ‘ministers will use the threat of a levy to force the drinks industry to make healthier products.’
• There, they are probably pushing on an open door as manufacturers wish to (and wish to seen to) provide healthier products – particularly if these are being demanded by consumers
• There is a micro-macro problem here, however.
• Because if the threat of a tax is hanging over the whole industry, it may still be in the interests of any one operator to break ranks (or to hold out) and produce sweeter products than its competitors
• In a report to government, Public Health England suggested that ‘a price increase of a minimum of 10-20 per cent on high sugar products’ should be engineered in order to cut consumption
• There would be a major issue here in execution as the sugar cost of a slice of cake may be only 10% to 20% of the total cost to the consumer meaning that, in order to put up the price of the final product by 20%, a tax of 100% on the sugar content may be necessary
• Anything less may be lost in the mix
• Obesity is thought to cost the NHS £5.1bn
• Still positive per Grant Thornton, but running at its lowest level for three years.
• Grant Thornton says ‘this quarter’s reduction in business confidence continues a well-established downward trend, which developed against a difficult economic and political backdrop, particularly in the second half of 2015.’
• It adds ‘the Office for National Statistics (ONS) reported repeated declines in manufacturing output, while growth in retail sales slowed in the second half of the year.’
• It says ‘2015 also ended with a slight pick-up in inflation and reports of a large deterioration in the UK’s trade balance, which widened from £4.7bn in Q3 2015 to £8.7bn in Q4 2015. Globally, as we move into 2016, concerns persist about China’s slowing economy, and there are challenging political developments, including war in the Middle East and the consequent refugee crisis.’
• Quite sobering stuff but not perhaps a shock to the Stock Market, which at its low-point was some 22% off its mid-2015 peakl
Random information, hopefully not all of it useless:
• Perhaps more cash headed for consumers’ pockets as Aldi looks set to announce a new round of price cuts, in response to the recent moves by Morrison’s.
• Incoming Greene King chairman commits a meaningful £257k to shares in the company
• Oil price deemed to be ‘stronger’. It’s all a matter of definition. Looks good on a 3dy view. Considerably less so over a few months.
• Gold bugs getting themselves worked up. Gold up to $1220 per ounce. Hard to believe but it’s still down c2% over the last year.
• Soft commodity prices weak. With the exception of lean hogs. Though it operates throughout most of the supply chain, this may put a little pressure on Cranswick margins over the medium term. Pig prices had a big dip but they are up strongly over last quarter & are now up 4% over the last 12mths.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Greene King chairman elect Philip Yea has purchased 30k shares in the company at 859p per share
2. FT reports that HM Government has scrapped plans to introduce a sugar tax as a part of its battle against obesity
3. Enterprise Inns tells M&C company’s debt is not a problem. Says weak share price performance is down to volatile markets.
4. Meatliquor is taking over its smallest site so far, The Sea Cow in East Dulwich. Co-founder Scott Collins says will be hybrid.
5. UK eating out spend grew in 2015 thanks in part to key London operators taking their successful formats into the regions, per M&C Allegra
6. Loungers remains ‘broadly’ on track for c£78m of turnover in its current financial year from £48m in the year to 26 April 2015
7. The Sunday Times writes that PE backer of Pizza Hut Restaurants, Rutland Partners, has appointed advisors to oversee sale
8. The 19-strong stone baked pizza operator, Franco Manca, will open three new sites in April, including its first regional openings, Brighton & Guildford
9. All Leisure FY, says PAT £0.5m vs loss of £7.5m in previous year. Underlying loss, however, was £1.5m vs profit of £0.9m last year
a. All Leisure FY: Revenues £127.3m vs £138.9m ‘was lower due to dry-dock periods for both the Voyager and Minerva vessels’
b. All Leisure FY: Total bank & cash down to £10.2m vs £15.1m last year ‘given higher capital expenditure’. Says is considering de-listing
10. Action Hotels updates on trading, says its 9 hotels ‘performed strongly and in line with expectations’.
11. STR has reported that the US hotel industry now comprises of some 5m rooms in 52k properties across the country
12. Sky News reports that South Korea’s CGV cinema chain has made a £1bn approach to buy the Odeon & UCI chain in the UK
13. Eurostat figures show the Eurozone grew by 1.5% quarter-on-quarter in the last three months of 2015
14. Japan’s economy shrank in size by 0.4% in Q4 last year due to weaker domestic demand and slower housing investment
15. Greek PM Tsipras said over the weekend that arguments between its creditors were holding up the review of its bailout
16. Business confidence in the UK has fallen to its lowest level in 3yrs reports accountant Grant Thornton.