Langton Capital – 2016-07-11 – Business rates, consumer confidence, pub sales & other:
A Day in the Life:
So as a self-employed person I’m only too aware that I have no holiday pay or sick pay.
There’s no pension scheme, no overtime and, at the end of the day, if I don’t work, I don’t eat. And often times I work and I still don’t eat but of course this is by choice and things may be a little less harsh for workers with a contract of employment.
However, surely there should be some linkage between work and payment and, if that’s the case, it raises the question as to just why our MPs believe that they should continue drawing their respective salaries.
Because we have no government, no opposition and no obvious plan of action in the face of our current political problem and the economic downturn that it’s created.
Plan A was a mess and there is no Plan B. the electorate kicked the PM in the teeth so thank-you and goodbye said David Cameron and, because they didn’t expect to win in a month of Sundays and had no idea what they would do if they did, so did Messrs Johnson, Gove and Farage leaving us with a choice between the opportunistic & (is-it-just-me-but-is-she-frankly-scary) Andrea Leadsom and the somewhat calculating but now well-positioned Theresa May.
And, whilst Mark Carney seems to be valiantly trying to do his job, very few others in politics do so put them on a piece-rate, that’s what I say. On to the news:
RECENT WEBSITE ARTICLES:
• Leisure, the Brexit impact – here
• Recent notes – here
• Ongoing tweets, older emails found – here
PUB, RESTAURANT & DRINKS PRODUCERS:
• The British Beer & Pub Association supports government plans to make business rate revaluations more frequent and flexible. The BBPA has also put forward its own proposals for a new self-assessment model that would be based on the current method except with more of a focus on Fair Maintainable Turnover as opposed to pub operating costs.
• The Sunday Times reports that Fevertree is considering a move from AIM to the main market. It also points out that the £830m cap drinks maker has only £59m in sales. These are, however, rising rapidly.
• A report by the Resolution Foundation concludes that the UK referendum could, apparently, see EU migrant workers replaced by robots.
• Greene King is hoping to raise around £30m from the sale of 90 of its pubs, mostly tenanted, as part of the group’s shifting focus to its more profitable food-led sites. The sites will be sold off in small batches, not in a one-off transaction, reports The Sunday Times.
• Questor has deemed Wetherspoons shares a ‘sell’ on casual dining competition, Brexit-related consumer spending fears, and subsequent further margin pressure.
• MOD Pizza has secured its first flagship unit in central London, the Caffe Concerto site in Irving Street by Leicester Square, which is scheduled for a November opening.
• GfK has reported that consumer confidence has taken the sharpest dive in 21yrs in the wake of the Brexit vote on 23 June.
• GfK reports confidence among ‘remainers’ has collapsed by 13 points whilst Brexiters’ confidence has fallen by only 5pts. Joe Staton, Head of Market Dynamics at GfK, says ‘in these extraordinary times this one-off CCB Brexit Special gauges the temperature of consumer confidence right now. During this period of uncertainty, we’ve seen a very significant drop in confidence, as is clear from the fact that every one of our key measures has fallen, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months.’
• Shops over the weekend felt quiet. Might be the weather, might be the tennis, might be the football but could be Brexit uncertainty
• GfK says 60% of respondents expect economic outlook to worsen in the next 12mths. Some 20% believe it will improve
• GfK says confidence has taken its sharpest dip (down 19pps) in the generally-Brexit-favouring North of England. May have been a protest vote gone wrong
• GfK says ‘sectors like travel, fashion and lifestyle, home, living, DIY and grocery are particularly vulnerable’ to Brexit fallout. Says brands may hold up. Others say affordable treats may not fall as sharply as spending as a whole
• A Resolution Foundations survey has suggested that over a third of companies have passed the costs of the NLW on to customers. It reported that 29% had suffered a margin contraction
• Wettest June in decades has led to a rise in discounts on the High Street reports the British Retail Consortium. The Telegraph reports the BRC as saying ‘thirty-eight consecutive months of price deflation combined with the summer sales makes this a great time for shoppers to go out and buy.’
• Major investor ‘concerned’ over SAB deal in light of Sterling’s drop reports The Telegraph.
• The Financial Conduct Authority is looking into the UK’s £2.7bn crowdfunding sector for the second time in as many years, following widespread calls for tougher regulation. On Friday, the FCA said it was probing peer-to-peer platforms due to an influx of ‘retail investors who are less experienced or knowledgeable.’ Andrew Tyrie, the chairman of parliament’s Treasury Committee, also recently wrote to the FCA to warn that ‘poorly informed investors may be left with a false sense of security about the balance of risks versus returns’.
• Diageo is looking to recover an estimated Rs12bn (£138m) it says was diverted from its Indian subsidiary, United Spirits, by Indian tycoon Vijay Mallya from 2010 to 2014.
• The boss of Coca-Cola UK has renewed calls to abandon the sugar tax following the UK’s vote to leave the EU, which it says would force prices up and act as a ‘distraction’. Jon Woods added: ‘It’s bad for business at a time when we should be freeing our businesses from red tape and bureaucracy… It’s just another barrier to doing business and it’s bad for consumers. Shopping bills are going to go up as a result of it.’
LEISURE TRAVEL & HOTELS:
• The end of last week marked the start of what many operators are expecting to be a quiet lates market following a drop in the value of sterling and geopolitical issues.
• Bookings to the US appear to be bucking the ‘post-referendum slump’ trend, with one operator reporting bookings up by more than 80% year-on-year.
• The US hotel industry reported a 4.8% rise in occupancy to 71.5% for the week ending 2 July, while a 3.6% rise in average daily rate helped propel an 8.6% rise in RevPAR to $88.64.
• Tenerife’s minister of tourism has said that the UK’s decision to leave the EU will not affect Brits’ ‘love affair’ with the island. Tenerife’s tourist board revealed a 20.8% growth in UK visitor numbers during the first five months of the year compared to that of 2015 and Alberto Bernabe expects this ‘huge’ growth to be maintained throughout 2016.
• Betfred is reported to be the most likely operator to buy some 400 betting shops being sold by the merged Coral / Ladbrokes entity.
• Ninendo shares have jumped by more than 20% on the back of the success of its new Pokemon Go smartphone game.
FINANCE & MARKETS:
• The US economy created 287,000 jobs in June, recovering from a disappointing May figure of just 11,000, with growth across a range of sectors. The strong data puts the possibility of Fed rate rises back on the cards.
• The UK’s trade deficit increased in May as exports fell £2.1bn to £23.7bn and imports fell £1.6bn to £33.5bn although some anticipate higher demand due to a weaker pound. Howard Archer, chief economist at IHS Global Insight, said there is ‘no guarantee that the markedly weakened pound will provide a major boost to UK exports’ as any short term rise in value could be offset by weaker domestic demand.
• China’s trade minister Gao Hucheng has described the global economic situation as ‘complicated and grim’, adding that economies must combat sluggish growth and weak trade. Gao made the remarks at the start of a two-day meeting of trade ministers from G20 economies in Shanghai, and went on to say: ‘Global trade is dithering, international investment has yet to recover to levels before the financial crisis, the global economy has yet to find the propulsion for strong and sustainable growth.’
• IMF cuts Eurozone growth estimates for next 2yrs, partly in response to Brexit concerns. Says 2016 growth should be 1.6% (was 1.7%) and 2017 should see growth of 1.4% (was 1.7%).
• World markets: UK, Europe & US up on Friday. Far East markets mostly higher in Monday trading
• Oil price continues its slide as global investors switch back into ‘risk-off’ mode. Brent changing hands at $46.40 per barrel
LEISURE & ECOMOMIC NEWS – BREXIT SHOCK:
o Government (what government?) responds to 4.1m petition re 2nd referendum by saying that there will not be one. It says this was a ‘once in a generation vote’ and adds ‘we must now prepare for the process to exit the EU’. Despite the likelihood that things will change post the appointment of the next PM. it says ‘the Government is committed to ensuring the best possible outcome for the British people in the negotiations.’
o IEA says UK will not be able to restrict EU entry. Also says we could not or would not remover ‘over-stayers’. Somebody, at some time, will have to tell the electorate that they cannot have what they voted for
o IEA says Red Tape unlikely to be reduced post Brexit. It says extra regulations re restricting UK entry via visas would ‘more than outweigh any remotely plausible gains from reducing “EU red tape” post-Brexit’
o Sterling is now the weakest major currency in the world. It undershot the Argentinian peso last week
• Rates & monetary policy:
o Governor Carney is strapped to the wheel, steadying the ship. He will cut rates this week
o Battered UK savings rate likely to take a further hit as stumbling consumption is given electric shock treatment
o Annuity rates have been falling in response to lower gilt rates. Pensions could come under downward pressure
• Economy & business on the ground:
o See GfK survey in Pubs & Restaurants above.
o Lloyds Bank has reported that the UK economy is showing ‘signs of stress’. Stress seems to be the new mot de jour. The bank’s business tracker showed business activity in Q2 fell to three-year lows. It says ‘the increased uncertainty in the period leading up to the EU referendum naturally led businesses to be cautious.’ It adds ‘following the outcome of the referendum it is still too early to understand the full impact for businesses across the country.’
o BDO has reported that UK business output and optimism are now at 3yr lows. Rather optimistically given all of the unknowns, BDO says ‘in all likelihood, whatever arrangements the UK eventually arrives at with the EU won’t look very different from what we have at the moment. So businesses cannot afford to get caught up in the hysteria. They need to hold their nerve and continue to invest in the UK. We are at a crucial moment where we must be sensible in protecting the UK economy. We need a plan of action now that gives businesses the added confidence to progress with investment plans.’
o Germany’s FDP party has paid for a vehicle to circle central London advising entrepreneurs to ‘keep calm & move to Berlin’
o Tata Steel has put the sale of its UK business on hold
YESTERDAY IN A NUTSHELL – SEE LIVE TWEETS ON WEBSITE:
• Some of our morning tweets: Fuller’s has bought Docklands gastropub the Gun after current owner ETM Group put the site up for sale as part of a strategic shift
• Pepsi Q2 numbers, revenues down 3.3%, EPS 138c (+4%). CEO says environment continues to be ‘incredibly volatile’.
• Northern brewer and pub operator Camerons has acquired Leeds Brewery’s seven-strong pub estate for an undisclosed sum
• UK consumers changing holiday plans due to higher costs. Travelzoo says 3% of holidaymakers are making cancellations
• International arrivals to the UK continued to register negative year-on-year growth in May, according to the Travel Trends Index.
• Mortgage rates are inching downwards as the City anticipates another cut in interest rates next week, says there’s a 78% chance
• UK industrial production fell by 0.5% in May vs April. Markit said the decline in May was less painful than expected
• Halifax reports the annual rate of house price inflation eased to 8.4% in June, the lowest rate for a year
• Property. Aberdeen Asset Man. Puts 17% levy on exit. L&G cuts values by 15%. Property Week reports on a hiring freeze
• Consumer confidence has dropped by the largest amount in 21yrs reports GfK. It fell by 8pts to minus 9. Confidence impacts spending.
• Post truth/soundbite politics. Andrea Leadsom says we should ‘banish pessimism’. No details as to how. Or why. Or who will do it or when.
• Other Tweets: No gov., no opposition, no plan. Brexit bull case: ‘It might not be too bad’. How did we get here? Wouldn’t run a chip shop like this.
• FTSE250 > 100 yesterday in mini-bounce back. Carrying on today. Nothing really changed though, GfK poll the shocker
• Gold/oil price (no. barrels/ounce) still pointing in ‘risk-off’ direction. Fine but won’t drive economy, sleep all day & count your gold
• Rate cut next week, does it mean anything? Squeeze out the last drops of petrol onto the spluttering bonfire & then what?
• Banish pessimism Leadsom in row re CV ‘misspeaking’. City grandee? Not per FSA register http://tinyurl.com/hxscz9v
• We’ve done our bit per Gove, Johnson, Farage & regrettably Cameron. Over to you now. Banish pessimism & make it all better, will you?
• No plan Brexit. Big moves (Berlin Wall, buying a business…) often followed by comm. ‘now the real work begins’. But not in this case, heh?
• Brexit. No clue, no plan. Losers abound. Cameron, Gove, Johnson, Farage, truth, tolerance, City, property, Pound etc. Where are the winners?
• City analyst seeks new career. Toyboy sounds good as former Pirelli calendar girl model Estrada wins £75m divorce http://tinyurl.com/j7nvvqa
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The main focus in the Saturday papers was on the news that John Lewis is planning to build a £1bn own-brand home furnishings business by 2020, as noted by the Times and the Daily Mail, but the Telegraph added a twist to the story, by highlighting that Andy Street, the MD of John Lewis, has warned that the plunge in sterling could become a problem for the business next year and that he is concerned about Britain moving from a “political crisis to an economic crisis”. Marks & Spencer was also in the spotlight, with the market reports picking up the upgrade by Credit Suisse on Friday, whilst the FT flagged the embarrassing error by M&S in the group sales numbers in the Q1 trading update and the FT’s veteran commentator Neil Collins noted that although M&S is doomed to disappoint this is “in the price” and the dividend yield is
• Sunday Press: The Sunday papers were again full of the political turmoil in both the Tory and the Labour parties…as well as the expectation that the MPC will cut interest rates on Thursday in an effort to prop up the flagging economy, but there were plenty of Retail stories as well: the main Business story in the Mail on Sunday was that Retail lobby groups have joined forces to urge the Government to focus on reducing the burden of Business Rates instead of further cuts in corporation tax after the Brexit vote and the Sunday Telegraph also had a similar article. In other news, the Sunday Telegraph also noted that Steinhoff is finalising a £600m-plus takeover bid for Poundland ahead of the bid deadline this Wednesday and it found a useful fashion model photo opportunity in the news that the Crew Clothing fashion chain has reported some poor results. The Sunday Times flagged that the
• Today’s Press and News: The big sporting stories today are that yesterday afternoon the Men’s Final at Wimbledon was won by the great Andy Murray and that last night in Paris the Final of Euro 2016 was won by a not so great Portugal…In terms of Retail news, the Times highlights that Waitrose has said it will cut its payment terms to just seven days for all small suppliers, in a move to enhance its credentials as an ethical supermarket, whilst the Telegraph flags that the collapse of Austin Reed is likely to inflict huge losses on the chain’s unsecured creditors. The Telegraph also previews tomorrow’s trading update from ASOS, whilst the Times profiles Sean Clarke, as he takes over as CEO of Asda from Andy Clarke. In terms of today’s news, Majestic Wine has put out an announcement trumpeting that it has won “High Street Chain of the Year” at
• News Flow This Week: A busy week kicks off first thing tomorrow with the BRC-KPMG Retail Sales survey for June (which is likely to be subdued), quickly followed by the ASOS Q3 update and the annual media jamboree that is the Marks & Spencer AGM. Wednesday brings us the Burberry Q1 and the Steinhoff/Poundland “PUSU” deadline…Then on Thursday we get the SuperGroup finals, the Burberry AGM, the Mothercare Q1 and the Halfords Q1, plus the MPC’s decision on cutting interest rates…