Langton Capital – 2016-06-23 – Brexit vote, pub turnover, trampolining & other:
A Day in the Life:
So with the Polling Stations presumably banned from hanging out the bunting for fear of swaying the result, today’s going to be a big day as far as the political future of the UK is concerned.
But Langton, for one, can’t help but doubt the polling evidence that purports to show a close race in what we, at least, believe will be something of a landslide win for the Remain camp.
Of course we may be wrong.
Heaven knows what these pollsters get paid and maybe they’re earning their money in some secret-squirrel kind of way but it doesn’t feel that way to us and, with the betting firmly stuck around the 70:30 mark for weeks, we’d follow the money rather than the off-the-cuff remarks wheedled out of grumpy individuals by pollsters either over the telephone or face-to-face.
Anyway, perhaps we shouldn’t pre-judge. I mean with England taking on the might of the Republic of Iceland next Monday the result should be assured – but that doesn’t mean that it is, does it?
So we’ll see. But our money’s on the 10pm news shows, which will by that time be allowed to give us the results of their exit polls, telling us that it’s been a decisive Stay vote. On to the news:
RECENT WEBSITE ARTICLES:
• Continue evolution in casual dining (22 June) – here
• Margin-watch. Rising costs but price rises hard to come by (21 June) – here
• Pubs & restaurants, trading trends – here
• Other recent notes – here
• Ongoing tweets, older emails found – here
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• If we get a ‘Stay’ vote today, it should buoy domestic shares. Pubs fall firmly into this category.
• MCA forecasts pub turnover to grow in 2016. Says will ‘defy the slowdown in the wider eating out sector.
• MCA says pubs turnover growth to pick up. Restaurant growth is still higher but is slowing down.
• MCA’s latest UK Pub Market Report suggests turnover growth of 1% this year. Says ‘a resurgent pub sector is set to reach turnover growth of 1% this year, up from 0.1% in 2015. This is in contrast to the total eating out market which is set to reach turnover growth of 2.4% in 2016, slowing from 2.8% last year.’
• MCA reports total pub turnover of £21.55bn across c47,500 outlets. Number of outlets to fall to 45k by 2019. Says turnover will rise 2% p.a. to £22.8bn by that date.
• MCA: Some 69% of pub customers expect to maintain frequency of visits to pub over next 12-18mths. It says the top factor in encouraging people to pubs is food quality whilst the major negative is the need to drive home.
• MCA has 25% of operators saying that turnover is up ‘substantially’ over last year, ‘with food offers and events driving growth’
• MCA quotes tone as generally optimistic but says ‘tempering this optimism slightly, increases to business running costs, such as wages and utilities, are a key future concern. Higher beer prices, greater levels of red tape and worries about the general economic climate were also cited as main concerns.’ The report says ‘independent and free-house pubs are now seeing positive outlet growth, driven by pubcos releasing assets into the market that are bought up by independent operators.’
• Retail Week says Tesco is ready to sell its coffee chain, Harris & Hoole, to Caffé Nero just days after the news it is also selling Dobbie’s Garden Centres.
• Casual Dining Group has signed a franchise deal in Saudi Arabia to grow the Café Rouge and Bella Italia operator’s presence in the Middle East and Asia. Fawaz Alhokair Group will open Bella Italia sites in the country as part of an agreement to open 18 sites over the next four years. CDG chief executive Steve Richards described the deal as a statement of intent to become a global player and added the group is in ‘meaningful discussions over similar partnerships across the Middle East and Asia.’
• Morrison’s has offered to rehire former employees who stand to lose their jobs in the administration of recently offloaded convenience store chain My Local. Accountancy firm KPMG is working with Greybull Capital, which funded the acquisition of the 140 stores, in the hope of saving jobs and is holding discussions with other retailers regarding the sale of some My Local sites.
• Enterprise Inns yesterday bought back c113k of its own shares for cancellation at around 94p
• Technomic’s 2016 Snacking Occasion Consumer Trend Report shows that snack consumption in the US has risen markedly over the past two years. While 76% of consumers said they snack on a daily basis in 2014, 83% said the same this year. Technomic attributes the shifting trends in consumer snacking habits to increasingly busy lifestyles, smaller households that allow for more flexibility around meal, and the improving image of snacks as part of a healthful diet.
• Cloverleaf founders John Winder and Gary Douglas are preparing to open their first Touchwood site alongside Joseph Holt this August, after acquiring The Bowling Green from M&B.
• Ben & Jerry’s is working with New Belgium Brewing are collaborating on a new ice cream inspired beer called Chocolate Chip Cookie Dough Ale. The new beer, set to be released this Autumn, is the second time the two have worked together following last year’s Salted Caramel Brownie Ale. New Belgium Brewing is a craft brewery situated in Fort Collins, Colorado, opened in 1991 by Jeff Lebesch and Kim Jordan.
• Shake Shack is looking to open another London site, in Canary Wharf, and is believed to be in advanced talks to take the Canteen restaurant in Canada Square. MCA writes that the US burger brand, which currently operates four sites in the UK, is willing to pay a premium in excess of £2m for the restaurant.
• The latest forecasts from IGD indicate the convenience store sector is set to grow by 11% to £41.9bn over the next five years. However, that growth will be harder earned as competition from discounters and supermarkets intensifies and the search for new sites becomes more challenging.
• The number of attendees at this year’s Stonehenge summer solstice tumbled by 50% to around 12,000 as a ban on alcohol and new car parking charges put people off.
LEISURE TRAVEL & HOTELS:
• A study commissioned by Visa and conducted with Oxford Economics predicts that the average UK household will spend some £9,300 a year on international travel by 2025. The UK’s total spend on global travel is predicted to reach £63.4bn in 2025, up 58% on 2015 levels, while global cross-border travel is expected to rise to some £979.9bn.
• EU referendum uncertainty does not appear to have dampened demand for summer holidays, with summer 2016 bookings to the end of May up 4% year-on-year. The strong prices reflect high demand for the western Med, and the fall in all-inclusive bookings to Tunisia, Turkey and Egypt.
• British Airways has ‘indefinitely’ suspended flights to Sharm el-Sheikh just days after hopes were raised that air services from the UK would resume for the winter. BA said in a statement: ‘The safety and security of our customers will always be our top priorities and we have suspended our flights from Gatwick to Sharm el-Sheikh indefinitely. Customers who hold bookings on any cancelled services for the coming winter season can claim a full refund or can use the money to cover a new booking with us for an alternative destination.’
• CBRE survey points to growth in trampolining centres. Says ‘we have seen the recent resurgence of bowling and gaming, however it is the trampolining sector which is the biggest consumer of big box leisure units at present’. It says ‘since the first trampoline park opened in 2014, there has been a surge of new openings across the UK’.
• Trampolinging? Despite having a 10yr old who likes to go, this looks like something of a fad to us. And signing all of those accident-disclaimer forms at the beginning isn’t much of a turn-on, either.
• Virgin Active, which already has three sites in Thailand, is planning a £150m, 40 club expansion across South East Asia. Virgin Active will also expand in southern Africa, where 15 new locations will be opened this year.
• Hornby, the model railway maker, has launched an emergency £8m share placing in order to put its turnaround plan back on track and repay its debts. Hornby will place new shares at 27p a share, a 15.6% discount to the closing price of 32p earlier this week as it looks to reduce the size of its business and focus on its core UK market. Hornby also revealed its pre-tax losses widened to £13.5m in the year to 31 March, from £187,000 the year before.
FINANCE & MARKETS:
• Construction unions have struck a pay deal assuring c400k members of a 2.5% pay rise this year.
• World markets: UK and Europe up yesterday but US lower. Far East mostly up in Thursday trading.
• Oil. Price currently rising but down over last 24hrs with Brent Crude changing hands at around $50.10 per barrel
• Consumer confidence index across the Eurozone fell to minus 7.3 in June from minus 7.0 in May
RETAIL NEWS WITH NICK BUBB:
• EU Referendum Watch: “Honest Nick” notes that the betting markets have always been very confident that the country would vote to Remain in the EU, notwithstanding a bit of a wobble last week as the Leave campaign moved ahead in the polls. This weight of money no doubt reflects the view that the economic and political case is so strong to remain in the EU, given the UK’s special status within the organisation and the power of the City of London, voters will choose in the end to run with the status quo and not take any risks, in these highly uncertain times. It is a great shame that the positive case for immigration has not been more clearly articulated by the Remain campaign, but in terms of the outcome of the vote the bookies are rarely wrong…although they may be freaked out by the adverse impact on turnout in London and the South-East from today’s heavy
• Tesco: Given the all-consuming focus on the outcome of the vexed EU Referendum today, this will be a classic day to bury bad news, but the Tesco Q1 trading update this morning (ahead of its AGM at 11am, in the readily accessible ExCeL centre in London Docklands) is headlined “Positive Momentum Continues” and UK LFL sales growth in the 13 weeks to May 28th of 0.3% was a tad ahead of expectations, with “New, exclusive fresh food brands performing very well”. CEO Dave Lewis says “I am confident that the improvements we are making for customers are working and will create long-term value for our shareholders”. And despite all the other recent disposals, Tesco has pulled a rabbit out of a hat by announcing the sale of the Harris + Hoole coffee chain to Café Nerro. Conf call at 8.30am.
• Debenhams Watch; We have often been accused of being too cynical about Debenhams, but it looks like we were too charitable about the retiring CEO Mike Sharp yesterday…We flagged that, given the unhelpful impact on Fashion sales of the cold weather in March/April, the Debenhams trading update for the last 15 weeks was a relief, but on a “constant currency basis” LFL sales were actually down by as much as 1.6% (implying over 2% down LFL in the core UK business) and the City was disappointed that gross margins were impacted by increased promotional activity (despite the much-touted aim to cut back on discounting). Management flagged that clothing market share was stable, in a down market, and that full-year profits (y/e August) are still likely to be “within the range of expectations”, thanks to good cost control, but the City consensus edged down to flat
• Retail Sales Watch: We noted last Friday that the ONS Retail Sales figures for May were much stronger than expected, but, what with one thing and another, we haven’t had time to look at the ONS figures in detail. There is, however, a new consultancy group to do that for us, namely Retail Economics, which is run by the excellent Richard Lim, who used to be in charge of the BRC-KPMG Retail sales survey. And the Retail Economics overview is that gross Retail sales rose by 2.6% in May, year-on-year (non-seasonally adjusted), which is roughly half-way between the BRC and ONS measures of the May outcome, which is the fastest growth since September 2015, suggesting that consumers have shrugged off any fears over the EU Referendum. We will have to see what the outcome of June is, given the less helpful weather, but for more detail on how Retail Economics saw May see:
• Yesterday’s Press and News: The BHS and Philip Green saga continues, with the Times and Guardian focusing on the news that MPs have written to Philip Green’s wife, Tina Green, seeking written information about the “opaque web” of privately-owned family businesses which helped make the sale of BHS to Retail Acquisitions possible. We can’t see much about the trading statement from the recently floated fashion chain Joules, but the Daily Mail picks up our comment that the cosy reshuffle announced at the discount retailer Shoe Zone will raise eyebrows in corporate governance circles. It is widely reported that the convenience store chain My Local (aka the old Morrisons chain) is on the verge of collapse after filing a notice of intention to appoint administrators, putting 1,700 jobs at risk. The Times flags that Sports Direct is in talks with New York-based
• News Flow This Week: The outcome of the vexed EU Referendum tomorrow is obviously the big talking point this week, so tomorrow will be a classic day to bury bad news…and it will be interesting to hear about the outcome of the Tesco Q1 trading update and AGM.
YESTERDAY IN A NUTSHELL – SEE LIVE TWEETS ON WEBSITE:
• Some of our morning tweets: WTB conf. call: Group insists that it is taking market share. Hotel market, however, is ‘weaker than expected, particularly in London’.
• WTB conf. call: Group now has 4 Hub units open, 3 in London and 1 in Edinburgh. There is a pipeline for 12 units.
• WTB conf. call: Restaurant transactions down c2%, prices up. Ditto Costa. Also seeing same trend in hotels.
• WTB conf. call: Group had ‘good reaction’ to Costa price increases. Says product is inelastic. WTB followed rather than led the market
• Greene King Tracker. May survey shows household spending on leisure in UK fell by 3% over same month a year ago.
• GNK Tracker: May spend (down 3%) impacted by shift in Whitsun half term holiday partly into June
• GNK Tracker: Lower May spend due to fall in ‘Other Leisure’ spending. Spend on drinking out up fractionally
• JDW CEO John Hutson has sold 2,500 shares in the company at 733p. He now owns 73,315 shares.
• Deliveroo has begun selective trials with Bill’s, KFC, and Burger King, and is also in talks with pub chains regarding delivery options
• Motel One Group, a German budget hotel chain, is reported to be searching for sites in the UK.
• Federal Reserve chair Janet Yellen has suggested that rates may not rise in the US until the jobs market picks up again.
• Government borrowing fell £0.4bn year-on-year to £9.7bn in May, beating expectations of £9.5bn
• Other Tweets: Franco Manca to open in Debenhams Westfield. Latter says has ‘a further 30 food offers planned to open by the Autumn’
• Debenhams, just done deal with Franco Manca, says ‘approximately 40% of our stores will have a new food offer by Christmas 2016.’
• Franco in Debenhams. Brand extension. Also could expand to provinces, would de-risk move outside London & help with brand recognition.
• Sterling still gaining ground. Could help overseas tour operators (TCG, TUI) but not quite such good news for Merlin, London hotels etc.
• Football & holiday bookings inversely linked. The former will finish, later rather than sooner, but then expect a blitz of bookings…
• Ex-MRW c-stores could call in administrator. Lease reversion an issue? Though MRW presumably sold the co rather than the sites?
• Delivery is a big deal. Deliveroo trials w. Bill’s, KFC, BK. Also click & collect. See Franco Manca at https://order.francomanca.co.uk/#/
• How far will delivery go? Could we get our beer delivered during the match? Bit anti-social, surely??
• Crowded house? Motel One, Tune, EasyHotel, Travelodge & Premier Inn. And others, no doubt, all fishing in the same pond…