Vianet, Booker, Kirin, eCigs, Ed’s, Monarch & other:

A DAY IN THE LIFE:

I felt a little sorry for a fellow passenger on the train down from York earlier in the week as he started chewing some sort of nicotine gum before the train had left the platform and he got through a whole pack of suspicious-looking drug-laced chewy sweets before we got to Peterborough.

And then he really started to twitch.

He hummed and hawed about jumping off to have a drag but left it a bit late and, like a passenger trying to step from a moving rowing boat to the shore, he nearly ended up in a right pickle as he didn’t get his fix and was left with the rest of the carriage watching him and various other would-be passengers trying to steal his seat.

And then the vape paraphernalia came out (see story below). And he looked at it longingly and then he caressed his empty packet of drug-sweets and then he disappeared to the loos for ten minutes or so and, though I thought I was missing an opportunity for a bit of healthy blackmail, I didn’t have the heart to grass him up. On to the news:

PUB, RESTAURANT & DRINKS PRODUCERS:

• Giraffe Concepts, part of Harry Ramsden’s owner Boparan Restaurants Holdings, has acquired Ed’s Easy Diner. This consists of the brand, the head office team, and 33 Ed’s restaurants.

• Vianet updates on H1 trading, says trading ‘was ahead of same period last year, achieving good growth in line with Board’s expectations.’

• Vianet says following ‘good growth’, it will declare a maintained H1 dividend of 1.7 pence per share. Group says ‘the Group’s UK core beer flow monitoring operations, including iDraught, has continued to strengthen its market position and maintained its contribution, and encouragingly there are signs that the rate of pub closures in the sector has slowed down.’

• Vianet chairman James Dickson reports ‘we have continued to make good commercial progress by delivering highly relevant solutions that drive strong returns for our customers.’

• Booker has released its interim results for the 24 weeks to 9 September, during which total sales grew by 13% to £2.5bn but like-for-like non-tobacco sales only rose by 0.1%. Profit before tax for the wholesaler grew by 9% to £81m, driving an 11% increase in basic EPS to 3.83p and an identical increase in interim dividend to 0.63p a share. Booker retains its strong balance sheet, with a net cash position of £105.7m. The integration of Londis and Budgens is going well, while its online and India businesses continue to grow well.

• The wholesaler says of its current trading that: ‘the first four weeks of the current half year is ahead of the same period last year,’ although it anticipates the ‘challenging consumer and market environment will persist through the coming year and the UK’s food market remains very competitive’.

• Japanese brewer Kirin is to take a 25% stake in Brooklyn Brewery & will take the rights to sell Brooklyn’s beers in Japan. The cost of the purchase has not been disclosed. Craft beers currently account for around 4% of the market in Japan (compared to >12% in the US), but this figure is expected to grow.

• The Resolution Foundation has suggested that wage growth will weaken next year and says rises in the NLW should moderate.

• Resolution Foundation suggests NLW should be £7.50 per hour next year, down from earlier suggestions of £9.60. Resolution told the BBC ‘the National Living Wage relates to average earnings and because of Brexit, many forecasters, including the Bank of England, revised down their earnings growth; therefore the National Living Wage has also been revised down.’

• E-Cigs are now the biggest ‘smoking cessation aid’ in the UK. Yet, as the IEA points out, health authorities worldwide are trying to ban them. The Institute of Economic Affairs reports the European Commission approved a new directive to reclassify e-cigarettes as tobacco products for tax purposes. It says ‘this move, when implemented, will drastically increase the cost of the device and further hinder its take up.’ The IEA maintains that it is hard to see why ‘harm reduction’ should not be central to government & fiscal decisions.

• Tesco has stopped selling a number of Unilever brands after the latter pushed for raised prices post Sterling’s collapse. Tesco has said it was ‘currently experiencing availability issues on a number of Unilever products’.

• Stock Spirits Group has announced the acquisition of three spirits brands from Bohemia Sekt s.r.o for CZK135 million (€5m). The purchase means the brands could be distributed and marketed by Stock Spirits by the end of the month, and is in line with the group’s stated strategy of expanding its portfolio in its target markets through value-enhancing bolt-on acquisitions. Production will be fully integrated into Stock Spirits’ Czech production facilities in Plzeň by January 2017.

• Mirek Stachowicz, Chief Executive of Stock Spirits, said: ‘We are delighted to add Prazska, Nordic Ice and Dynybyl to our line-up, having tracked these brands for some considerable time. They have a rich heritage and, with the appropriate brand investment and nurturing within our wider spirits portfolio, their addition will ensure Stock remains at the forefront of the Czech spirits market, which is so central to our business. As we stressed in our interim results announcement, we will continue to pursue further smaller bolt-on acquisitions to add to our brands line-up.’

• A CGA Strategy survey suggests consumers will spend as much as 24% more on a cocktail that has been served properly and to a high standard. Speaking at the recent Morning Advertiser’s Future Trends: Spirits event last week, CGA Strategy director of client services Rachel Perryman said: ‘According to our research, 46% of consumers drink spirits in the on-trade and they will spend 24% more when the quality of the serve is right. This shows there’s definitely an opportunity for more growth in spirits in the on-trade and that’s about operators creating something that’s more appealing to customers.’

• Giggling Squid sales grew by 55% year-on-year to £11.8m in its most recent year and is expecting to grow from 17 sites to 25 by halfway through 2017, writes Propel.

• Free drink app Hooch has raised $1.5m to expand its drink a day subscription cocktail app, which entitles users to one free drink a day in different bars for $9.99 a month.

• Game Digital has announced a 5.1% fall in like-for-like sales to £822.5m for the 53 weeks to 30 July 2016, while profit before tax dropped by 81% to £4.9m. Adjusted (basic) earnings per share tumbled by 52.4% to just 8.9p as the video game retailer struggled in a ‘challenging UK console market’. The group has a ‘cautious outlook’ on current trading and expects adjusted FY16/17 EBITDA to be ‘broadly’ level with the current year ‘before the financial impact of its planned new live gaming activities’.

• Martyn Gibbs, Chief Executive Officer, said: ‘Market dynamics in the UK have undoubtedly been tough in the past year. The management team responded quickly to these new market conditions and have made significant progress with its action plan since January,’ but admitted the group recognises ‘that we need to continue to reposition and transform the business.’

• Although the results put Game Digital on a modest PE of 7.8 times at 70p, this is down from 230p at the start of the year, and the group still has a lot to do before it can tempt gamers to come shop in its stores rather than on the digital platforms set up by respective consoles and PC (Steam, Playstation Store et al.).

LEISURE TRAVEL & HOTELS:

• Greybull has put £165m into Monarch Airlines easing recent fears over the group’s finances. Andrew Swaffield, chief executive officer of The Monarch Group, said: ‘It is testament to the extensive effort by all parties, over the past weeks and months, that we are able to announce the largest investment in our 48-year history, as well as the renewal of our Atol licences. I’d like to thank the CAA, our shareholders, partners, loyal customers and the team at Monarch for helping us to achieve this successful outcome. We are now firmly focused on the future as a stronger Monarch.’

• Abta chief executive Mark Tanzer has warned against ‘complacency in government’ over Britain’s exit from the EU and related threats to free movement. Speaking at The Travel Convention in Abu Dhabi, Tanzer cautioned: ‘Economic interconnectedness continues to grow. But I want to warn against any complacency. Even before the Brexit referendum we were seeing barriers to migration rising. The IMF warned last week of a rising tide of protectionism.

• ‘The prime minister returned to a very traditional philosophy at the Conservative Party conference last week, [saying] that if you feel a citizen of the world you are a citizen of nowhere. I disagree with her. We’ve seen rising animosity to immigrants. [But] travel needs open borders – for visitors and for workers. We will be arguing for a [Brexit] solution that meets the needs of the industry.

• ‘Our priorities are open skies and free movement of people, and they are tied together. You can’t separate them and we’ll try to make the government realise that.’

• UK China flight numbers set to double with flights rising from 40 per week to 100. Cargo services will be unlimited. Transport secretary Chris Grayling said ‘this deal is a big moment for the UK. Strong connections with emerging markets like China are vital for us if we are to continue competing on the global economic stage. Hundreds of thousands of Chinese people visit the UK every year, spending hundreds of millions of pounds. Raising the number of permitted flights between the 2 countries will provide massive opportunities for our businesses, helping increase trade, create jobs and boost our economy up and down the country.’

• STR has reported that the number of hotel rooms in the process of being built in the Asia Pacific region stands at c582,000

• Christie & Co research shows that London RevPAR is down 2.3% year-to-August 2016 due to faltering occupancy levels as a result of supply side pressures. Approximately 8,500 additional rooms have come online between 2014and Q2 2016. The regional market remains more buoyant, however, with cities like Edinburgh, York, and Brighton helping to drive 3% RevPAR growth.

• STR’s September 2016 Pipeline Report shows 152,705 rooms in 1,016 projects Under Contract in Europe, up 17.5% year-on-year. Meanwhile, there were 549,142 rooms in 4,510 projects Under Contract in the United States, marking a 24.4% year-on-year rise.

• Thomas Cook’s UK and Ireland managing director market disruptors like Airbnb will become regulated as customers demand ‘safety and security’. Speaking at the Abta Travel Convention 2016, Chris Mottershead commented: ‘What happens with companies like Airbnb is they become regulated. If you want the very best experience on your holiday you want someone to make sure it’s safe and secure. You’re not going to take a chance. There are pros and cons for everyone but it’s ultimately about that holiday experience.

• ‘As your business grows and becomes more established and get noticed people start to look more closely at your model. Technology changes and moves on, but for me that’s not what’s important, that’s just access to the customer. Our 800 shops are in demand which shows people still want that personal service.’

FINANCE & MARKETS:

• Tom Scholar, permanent secretary at the Treasury, has said that The City will be a high priority in talks re EU exit. Mr Scholar comments ‘the UK economy and UK exports are quite services-heavy, and financial services are an important part of that. So I think we will be very keen indeed to make sure the final agreement gives the proper place to financial services within that.’ He adds ‘so it will have a high priority in our discussions.’

• Minutes from the latest Fed meeting (Sept) show that the decision to hold rates was a ‘close call’. The minutes report ‘several members judged that it would be appropriate to increase the target range for the federal funds rate relatively soon if economic developments unfolded about as expected.’ They continue ‘it was noted that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labour market and inflation’.

• The Royal Institution of Chartered Surveyors has said that house buying demand is recovering from its “post-referendum jitters”. The RICS says ‘the market does now appear to be settling down following the significant headwinds encountered through the spring and summer. Buyers do appear to be returning, albeit relatively slowly, but the big issue that continues to be highlighted by respondents is the lack of fresh stock on the market.’

• World markets: UK & Europe down yesterday but US higher. Far East down in Thursday trading

• Oil off a little. Brent Crude now around $51.50 per barrel.

• Sterling off again, trading at around $1.2179 per Pound. Was around $1.46 pre the Brexit referendum. Petrol prices to rise perhaps this week

YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:

• Marston’s Q4 update. Trading in line, forecasts secure, LfLs all positive, 22 new pubs & 6 lodges this year. PER <10x.

• MARS Premium & Destination +2.3% LfL, Taverns’ +2.7%, LfL EBITDA from leased pubs is +2% on last year, brewing +13%

• CEO Ralph Findlay comments ‘Marston’s has delivered another year of solid progress with underlying growth across all of our pub divisions’

• Barclaycard data suggests consumer spending exceeded expectations in the wake of the EU referendum result

• Barclaycard says consumer spending +2.6% in July but +4.2% in the months of August and September

• YUM outlines that its China business will become a licensee of Yum! Brands in Mainland China.’

• Premier Foods has warned that warm weather in September has hit grocery sales numbers

• A consumer survey indicates that booking holidays via mobile phone is less popular now than it was a year ago

• 10yr gilt yields have passed 1% for the first time since the Brexit vote as Sterling has continued its fall

• Bellwether Alcoa disappointed in US overnight. Poor numbers. Could be something in suggestion that corporate earnings may struggle

• Domino’s Pizza Group says it ‘continued to trade well’ in Q3, although LfL system sales growth fell across its markets amid ‘tough comps’

RETAIL NEWS WITH NICK BUBB:

• Sports Direct: Amazingly, despite the debacle about the lack of hedging of the dollar exposure (which resulted in another profit warning last Friday), the FD of Sports Direct, Matt Pearson, has been able to find another job, so he has resigned…and Sports Direct has another “Acting CFO”, with one Herbert Monteith stepping up from the ranks of the Finance team to take over the reins…Although the new CEO, Mike Ashley, says “Matt has been a valued member of the Sports Direct family for over nine years and he will be a loss to the company”, the City is unlikely to be impressed with the news, particularly as there is no mention of any interest in an external candidate for the role…

• WH Smith: Ahead of today’s finals (for y/e August), the WH Smith share price has been under pressure, but investors should be cheered by decent-looking 10% EPS growth, on the back of 8% PBT growth to £132m, and the news of another £50m share buyback. CEO Stephen Clarke says “Looking ahead, we will continue to focus on profitable growth, cash generation and investing in new opportunities.  While the economic environment is uncertain, we are well positioned for the current year and beyond”. 

• Game Digital; The finals today from Game Digital (for y/e July) are said to be in line with expectations, but adjusted EBITDA was 42% down at £27m, given a challenging UK console market. And despite the usual trumpeting about “exciting” new releases, management have had to “…balance these positive future market events with the prevailing trading conditions. Accordingly, at this stage the Board retains a cautious outlook and reaffirms its previous guidance for the year. The Board expects Adjusted EBITDA for FY16/17 to be broadly level to the current year (on a 52 week basis), before the financial impact of its planned new live gaming activities and the impact of the property sale and leaseback announced on 28 September”.