Langton Capital – 2016-07-26 – MRO, Brexit issues, William Hill & other:
A Day in the Life:
Langton is in the hills of northern Arizona. And it’s raining. A shortened email will be going out for a little while. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• The first tenants to accept the newly introduced market rent only option, introduced last week, are now coming forward. PMA writes that Trudy Thomas, of the Riflemans Arms in Droitwich, Worcestershire, has informed Marston’s that she intends to take the MRO option as her business is ‘just surviving’ following a rent dispute that arose last year.
• CGA Peach reports post-Brexit worries are hitting confidence in the eating and drinking-out market. It says consumer confidence and the falling pound are at the head of short-term worries
• CGA says staff recruitment post the Brexit vote is a ‘major long-term concern for sector bosses’. CGA Peach adds ‘confidence among the leaders of Britain’s restaurant, pub and bar groups has plummeted in the wake of the vote to leave the European Union’.
• CGA survey of 80 board-level directors ‘shows that optimism about the market has crashed. Just 15% of operators are upbeat about market prospects in the next six months, down from the 75% that registered market optimism in January’.
• CGA says ‘looking longer term, the picture is slightly brighter, but only slightly, with 30% of operators optimistic about the market over the coming two years.’ Around 65% of bosses interviewed saw the Brexit vote as negative for their operations.
• CGA says ‘rising raw material costs and falling customer confidence are the leading short-term concerns, with availability of people the number one long-term worry.’
• A study suggests that quitting smoking could lead to a reduced alcohol intake, contradicting the idea that kicking the habit might lead to an increase in drinking.
• AlixPartners is advising in the merger of the UK’s largest schools’ caterer, Brookwood, with CH&Co Group.
• Casella Family Brands has purchased Morris Wines from Pernod Ricard for an undisclosed sum, adding to the former’s premium wine portfolio.
• UK mortgage interest rates ‘show no signs of stopping’ despite already being at record lows, according to Moneyfacts.
LEISURE TRAVEL & HOTELS:
• Risk Capital Partners is in talks to sell Cruise.co.uk, which it acquired in 2013 for £20m, to Bridgepoint Development Capital for £50m. Other parties interested in making a deal for the web-only travel agent include TripAdvisor and Inflexion Private Equity.
• Police have warned that holidaymakers face weeks of delays at Dover due to increased security checks at the French border following the Nice attack.
• Verizon Communications is buying Yahoo’s core internet properties for $4.83bn in cash, concluding a laborious sale process for the former web giant.
• Nintendo shares fell by 17.7% after the gaming giant reminded investors that Niantic’s Pokemon Go’s success will have a limited impact on its profits. The group’s shares are still up 60% since the game’s release on 6 July.
• 888 Holdings & The Rank Group have confirmed that they are evaluating a possible offer for William Hill. The Consortium ‘sees significant industrial logic in the combination, through consolidation of their complementary online and land-based operations, delivery of substantial revenue and cost synergies and from the anticipated benefits of economies of scale which will accrue to all shareholders.’ It adds ‘no formal approach has yet been made to the Board of William Hill and there can be no certainty that any such approach will be made. Accordingly, there can be no certainty that any transaction will ultimately take place, nor as to the terms on which any such transaction might be constituted.’
• William Hill replies ‘the Board of William Hill would listen to and consider any proposal which might be forthcoming from the Consortium. However, it is not clear that a combination of William Hill with 888 and Rank will enhance William Hill’s strategic positioning or deliver superior value to William Hill’s strategy which is focused on increasing the Group’s diversification by growing its digital and international businesses.’
FINANCE & MARKETS:
• EY has reported that profit warnings issued by Britain’s largest companies have risen to the highest level since 2008 in Q2.
• UK markets edged lower against a strong European background on concerns following the CBI’s suggestion that Brexit proposals were hitting business confidence.
• The IEA has said that the UK should not – and will not be able to – limit migration.
• Aberdeen Asset Management has reported £9bn of outflows in the Brexit quarter.
RETAIL NEWS WITH NICK BUBB:
• Sainsbury: The CMA has decided, on the information currently available to it, not to refer the anticipated acquisition by Sainsbury of Home Retail Group to a Phase 2 investigation and, although there is no more information available at this stage on its decision, Sainsbury’s management were always confident that the CMA would not be a problem, so the Argos deal can grind on to its much-awaited completion in a few weeks’ time.
• Planet ONS Watch: Ahead of yesterday’s Office of National Statistics Retail Sales figures for that strange parallel world, the Planet ONS, for June (the 5 weeks to July 2nd) we highlighted that our friends at Capital Economics looked for a 1.0% dip in “seasonally adjusted sales volume” month-on-month (+4.6% year-on-year) and thought that June reversed some of the previous strength in Retail Sales volume. And, would you believe it, they were right, as volumes fell back by 0.9% (up 4.3% year-on-year), with the ONS blaming weak Clothing sales and poor weather. However, most sensible people only look at the non-seasonally adjusted sales value figures and here the embattled ONS reported that overall growth slipped back from 3.1% in May to just 1.1%, despite improbably good trading for “Small Businesses”…
• BDO High Street Sales Tracker: As for July, we flagged on Wednesday that John Lewis are still doing pretty well so far, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for w/e July 17th flags that Fashion Store LFL sales slipped by 2.2% last week, despite a weak comp and the warmer weather at the weekend, although, as boosted by Homewares and Lifestyle sales, total Online sales were up by 23.3%…
• Burberry: The second day of the Burberry £100m share buyback programme saw them pick up c50,000 shares yesterday at c1318p, much the same as the previous day. Talking of share buybacks, we noticed that Howden were straight back into the market after their interims yesterday, buying about £1m-worth of stock.
• Today’s Press and News: With Howden, AO.com and MySale in focus on the retail beat yesterday the papers have plenty to talk about, but the big story is the publication of the Parliamentary inquiry into working practices at Sports Direct. Inevitably, the Guardian (which has long campaigned about the story) goes to town on the news, with a front page headline “Sports Direct run like a ‘Victorian workhouse’ say MPs”, lots of Editorial comment and a column by the Committee Chairman Iain Wright. But the FT also has a front page story (“Damming report condemns Ashley for “appalling” practices at Sports Direct”) and a follow-up article, while Lombard column points out that if Mike Ashley takes the company private he will be even less accountable for what goes on inside the business. As for AO.com, the FT also has a lot of coverage of
• Trade Press (1): The front cover of Retail Week magazine features a rather alarming photo of the new PM Theresa May pictured against a shot of a typical High Street, with the headline “What will Theresa May’s arrival in Downing Street mean for retailers?”. RW also has articles about how Ikea’s first new UK “bigbox” store in seven years is tailored to its area (ie Reading) and Lakeland’s first boss from outside the founding family. In terms of news stories, RW focus on the news that McColl’s has agreed to acquire 298 convenience stores from the Co-op for £117m in cash, Ocado will open a physical shop next month as part of the launch of its new “Fabled” health and beauty venture with Marie Claire (the 7,200 sq ft store will be in London’s Tottenham Court Walk), Tesco have been referred to Trading Standards by the NFU for
• Trade Press (2): The bright and bold front cover photo of Drapers magazine today of a fashion model flags that the main feature in Drapers is on the “Spring 2017 Women’s Fashion shows”. In terms of News stories, Drapers highlights that warmer weather lifted the mood across UK High Streets this week and fashion multiples reported a welcome upturn in trading, Fashion retail sourcing bosses and suppliers have expressed concerns over the safety of their workers in Turkey as a result of the social unrest that followed a failed coup at the weekend and the administrator to BHS is to close the ¬first tranche of 20 stores this weekend. Drapers also has a feature on the UK ambitions of the footwear brand Skechers. And in her column the Editor praises the quality of the entries in the Drapers “Independent Awards” to be held on Sept 14th.