Langton Capital – 2016-10-20 – Peach Tracker, consumer spending, wine prices & other:
Peach Tracker, consumer spending, wine prices & other:
A DAY IN THE LIFE:
Whilst I’m reasonably comfortable with the offside rule in football and LBW decisions in cricket, there are clearly some gaps in my education when it comes to food as I ended up on the wrong side of a debate the other day as to whether ricotta was a cheese, a type of pasta of some sort of (presumably Italian) bread.
And I’m pretty hazy with regard to linguini so what chance have I got when offered pajata, coratella or Quinto quarto (all of which are various dishes comprising flavoured pig or cow offal) and I wouldn’t know whether a petit verdot was a glass of wine or a hint that I should be leaving a tip after the meal.
I’m a bit better with coffees but I feel safest with (pronounceable) meat & two veg dishes, fish & chips or bacon, egg and black pudding and, as I was told when I was much, much younger, you can forget your kale and your rocket because there’s plenty of iron in a blood pie. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• September Peach Coffer Tracker has overall LfL sales +1.8% in the month, casual diners +2.2%, pubs +1.6%
• Tracker: Better performance from casual diners to be welcomed. Pubs up against Rugby World Cup comps last year. Would otherwise have been helped by the fact that the hottest day of the year this year was 13 September
• Tracker says ‘consumer spending on eating and drinking out continues to hold up post Brexit vote’. CGA Peach’s Peter Martin adds ‘it’s the third month in a row following the EU referendum that that sector has recorded positive growth, suggesting that consumer confidence remains upbeat following a sluggish start to the year.’ Martin continues ‘branded restaurant groups performed slightly better than managed pubs, with like-for-likes ahead 2.2%, against a 1.6% increase for the month for pub groups. This reverses the trend of July and August, which saw casual dining slightly down on 2015. However, the pub numbers can still be seen as good as the Rugby World Cup kicked off in mid-September last year, which helped boost the drinking out market.’
• Tracker remains upbeat. Says ‘the good weather will have helped trade this September, but the underlying trend for the market as a whole has been upwards right across the summer, so operators can take some heart from the fact that the public doesn’t appear to have cut back on going out despite the continuing longer-term economic uncertainty around Brexit.’
• Tracker has provinces performing more strongly than London in September. London +0.9% LfL but provinces +2.2%.
• Something of a trend emerging in house prices, consumer confidence, hotel occupancy & F&B spend with provinces outperforming London
• Tracker: New capacity still an issue. Total sales across contributing companies +5.0% but LfL sales just +1.8%
• Tracker: Year on year sales for the last 12mths running at +0.7%. Sluggish start to 2016 but better trading recently. Coffer Corporate Leisure reports ‘the hospitality sector continues to show growth post Brexit. Like-for-like sales are broadly in line with the recently released inflation numbers. Hospitality is often a bellwether of confidence and these figures show the continued resilience of UK consumers. However, the news this week that inflation has hit the highest levels for two years, plus rising import and fuel costs, could well mean that we start to see a dip in consumer confidence levels and reduced spend on eating-out as cost increases start to get passed on to customers.’
• Overall hospitality spend seen as ‘resilient’ post Brexit ‘despite plenty of doom-mongering predictions’ says RSM UK. It goes on to say ‘while wider retail is suffering, we believe the leisure and hospitality sector will prosper as consumers continue to divert discretionary spending into more regular bar and restaurant experiences given how embedded they have become to the UK social calendar’.
• Wilson Drinks Report suggests champagne prices could rise by around £3 per bottle. It says ‘the effective increase in the cost of wines imported from Europe into the UK market arising from the fall in the value of the Pound has put significant pressure on producer/distributor margins.’ The WDR goes on ‘interestingly, the impact of the fall in the Pound is significantly reduced if producers focus instead on trying to maintain their cash margin and not their gross margin %. In this case, Champagne would only need to increase by £2.30 not £3.06 for the same 15% decrease in the value of the Pound.’
• Wine prices could go up by an average of 29p per bottle and the cost of importing wine could increase by £225m a year inside the EU as a result of the falling pound. The figures come from the Wine and Spirit Trade Association, which said the industry is now bracing itself for a financial hit as 99% of the 1.8bn bottles of wine drunk in the UK are imported. Miles Beale, chief executive of the WSTA, commented: ‘[Price increases are] of grave concern to the wine industry and it is vital that Government come out in support of the trade which generates £17.3bn in economic activity.’
• SSP announces it has entered the Indian travel food and beverage market, creating a joint venture with K Hospitality Group
• SSP says it has agreed to create a joint venture, whereby SSP will own a 49% stake in Travel Food Services Private Limited (“TFS”), a leading operator of food and beverage concessions in travel locations in India. It adds ‘TFS operates food and beverage outlets in travel locations, with approximately 170 units in India including at six major airports in both domestic and international terminals and in railway stations. It also runs a number of airport lounges. In addition to these contracts, it operates food and beverage outlets at Muscat Airport in Oman. Its brand portfolio includes a number of strong in-house concepts as well as leading third party brands such as KFC, Krispy Kreme, Pizza Hut and Coffee Bean and Tea Leaf.’
• SSP is acquiring 49% of TFS for an expected net4 consideration of £57.9m. It reports ‘the acquisition will take place in two stages. The first stage is to acquire a 33% stake for an estimated net consideration of £39.0 million. This stage is expected to be fully completed by the end of February 2017. The second stage, to acquire a further 16%, is expected to take place by the end of 2018, for a net consideration of approximately £18.9 million, contingent upon the performance of the business.’ SSP says ‘the consideration will be satisfied out of existing debt facilities. The transaction is expected to be earnings enhancing in the first full year of operation and to exceed SSP’s cost of capital by the third full year following the first stage of the acquisition.’ CEO Kate Swann reports ‘this partnership is in line with the strategy we set out at our IPO. We have been looking for the
• US chain MOD Pizza will open its third UK restaurant in Gateshead on 10 November after securing a site at the intu Metrocentre shopping centre. The ‘build your own’ pizzeria was set up by Seattle Coffee Company founder Scott Svenson and now has 130 sites in the US. Its UK roll-out is part of a joint venture with Carphone Warehouse founder Sir Charles Dunstone, who also backs Five Guys in the UK.
• The New World Trading Company has seen adjusted profits jump by 63% to £3.5m and sales soar by 70% to £30.1m across its 15 pub-restaurants in the year to 31 March 2016. The fast-growing group has expanded its portfolio of sites across the country, with its seven openings in the year comprising four Botanists, two Trading Houses in London and Glasgow, and a new concept called The Club House in Liverpool. The Graphite Capital-owned group continues to be led by long-standing CEO Chris Hill and has upcoming openings in Sheffield and York.
• Greene King’s September Leisure Spend Tracker highlights the importance of Halloween as a night out, with 23% of 25-34 year-olds and 31% of 18-24 year-olds celebrating the event every year. Over half of respondents said it is important for local pubs to engage with seasonal events and two-thirds of Brits said they will see their Halloween spending stay the same or increase this year. The BBC has referred to the growing popularity of the holiday, fuelled mainly by younger generations, as ‘Halloween-flation’.
• The BBPA has welcomed the government’s UK Food and Drink International Action Plan 2016-2020, which is designed to boost UK export growth. The plan has been drafted by the government in collaboration with various trade bodies and revolves around three objectives: encouraging non-exporters to try exporting and to get current exporters to grow their targets; increasing companies’ capability to do so by raising productivity and skills in the sector; and identifying opportunities by building volume and trade opportunities in key markets.
• Brigid Simmonds, Chief Executive, British Beer & Pub Association, comments: ‘There is a tremendous appetite for British beer across the world, which seems to grow every year, with great quality and strong diversity from our brewers. The challenges of Brexit will be felt in the coming years, however, and it is vital that the UK seizes every opportunity to increase exports, with tariff-free access to EU markets, and no red tape for exporters, helping the UK food and drink industry to continue to build on their existing export success.’
• Coaching Inn Group has increased its group EBITDA to just over £1m on the back of a 5.8% like-for-like increase in sales.
• Wagamama has opened its first site in Jeddah, Saudi Arabia, after successful openings in Bahrain, the UAE, and Qatar.
• Travis Perkins, the UK’s biggest builders’ merchant, is closing 30 branches, putting 600 jobs at risk, due to an ‘uncertain UK outlook’ for next year. Profits at Travis Perkins are expected to be lower this year as a result of weak sales in its plumbing and heating division, where like-for-likes were down 4.1%, and the group is also making ‘further efficiency driven changes in the supply chain, resulting in an exceptional charge of £40-50m this year’.
LEISURE TRAVEL & HOTELS:
• Sir Richard Branson’s start-up cruise venture, Virgin Voyages, could launch with the first of three ships in 2020. The Virgin Group founder revealed that the line had officially signed a contract for three 2,700-passenger vessels with Italian shipyard Fincantieri.
• Downing Street has confirmed a special committee of cabinet minister has been tasked with choosing a ‘preferred option’ for airport expansion next week. However, a final House of Commons vote won’t transpire until winter 2017, with Heathrow currently the favourite.
• Iata boss Alexandre de Juniac has warned the aviation industry faces an ‘infrastructure crisis’ as air travel is forecast to rise from 3.8bn trips this year to 7.2bn by 2035. de Juniac said that ‘no matter how much or how quickly we innovate our processes, there is no getting around the need to be both smart and quick in growing airport and airspace capacity’, highlighting rising congestion in Europe and fast-growing areas such as the Gulf region and China.
• InterContinental Hotels Group has announced the signing of Hotel Indigo Milan, which is scheduled to open in early 2018.
• Yahoo’s profits jumped from $76.3m to $163m in the quarter to 30 September as sales rose 6.5% to $1.3bn. The results are some welcome good news for the tech group, whose plan to offload its core business to Verizon for $4.8bn recently hit a speed bump after a huge data breach was revealed.
• Two of Australian’s largest bookies are to merge. Tabcorp and Tatts Group would combined have an EV of around A$11.3bn
FINANCE & MARKETS:
• The UK jobless rate held steady at an 11yr low of 4.9% in the 3mths to August per the ONS. The number of people claiming benefit rose by around 10k to 1.66m. The ONS reports ‘these figures show that employment continued to grow over the summer and vacancies remain at high levels, suggesting continuing confidence in the economy.’
• ONS reports that average weekly earnings grew by 2.3% on an annual basis in the 3mths to August. The rate represents a small fall on the 3mths to July. The CBI said the rate of pay growth was ‘lacklustre’.
• Brexit campaigners suggest relative stability of jobs market proves ‘resilience’ of the UK economy since the 23 June Brexit vote
• Chancellor Philip Hammond has said that the Bank of England’s Monetary Policy Committee will remain responsible for monetary policy. Comments made by PM Theresa May at the Tory Party Conference had suggested that the Bank’s role could be reviewed.
• Asset manager U&I has reported that its property investments have declined in value by 5.2% since the 23 June Brexit vote
• Foxton’s shares are down by more than ¾ from their 2014 high of 400p. Shares around 95p after yesterday’s profit warning
• Travis Perkins & Laird also warn on profits
• BAML survey suggests fund managers putting more money into commodities and cash.
• B of England chief economist Andy Haldane has said that the Bank’s QE programme will lead to a £300bn spending boost in the UK. When the measures are unravelled, presumably there will be a £300bn reversal.
• World markets: UK & Europe higher. US up and Asia up in Thurs trade.
• Oil little changed. Down a little at around $52.60 per barrel
• Sterling virtually unchanged at around $1.229 per US$.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Greene King Sept Tracker shows spend on eating & drinking out +5% and +9% respectively y-o-y
• GNK tracker: Spending numbers down on August but up y-o-y. Household eating out spend hit £88.70 in Sept
• GNK Tracker: Shows spend on drinking out of the house up for the 2nd month in a row in September.
• Hotel Chocolat reports FY numbers. Revenue +12%, EBITDA +57% at £12.3m, PBT +181% at £8.2m
• IEA says Brexit may not be as inflationary as some are saying. Says seasonal workers could be imported to keep costs down.
• FT reports commercial property prices fell for the third month in succession in Sept. London & Scotland are said to be hardest-hit.
• DEFRA head and would-be PM Andrea Leadsom has said UK food & drink exports will remain a priority post Brexit
• Accor sees ‘robust growth in all of the Group’s key markets, except France and Belgium’. Terrorism taken a toll.
• Eurostar is to drop a number of services from December on the back of the introduction of longer trains
• Other tweets: Domino’s bounces after three down days, Restaurant Group shares up on director buying.
• Despite inflation rise, ONS sees ‘no evidence the lower pound is pushing prices of everyday consumer goods.’ Food prices actually dropped
• Inflation jump was despite lower food prices. Prices there (and fuel) likely to rise fairly sharply in months to come
• Profit warnings from Foxton’s, Laird, Travis Perkins. Does beg the question as to why the market is quite this high
• Property market doing the splits. Commercial & London in decline, regional prices, particularly houses, still rising
• Accor confirms trend, sees UK performing well but London REVPAR down 2%. UK provincial REVPAR +5%.
RETAIL NEWS WITH NICK BUBB:
• Grocery Market Share Watch: We didn’t have time yesterday to run through the detail of the latest monthly Kantar grocery market figures on Tuesday (for the 4 weeks and 12 weeks to Oct 9th), which were headlined “Tesco wins market share for first time in five years”. The data was seen by the City as being broadly encouraging for the industry as a whole, with food price deflation easing and the discounters continuing to slow down, but overall industry sales growth was just 0.1% in the latest 4 week period (down from +0.6% in the previous 4 week period), so the market share shifts were quite chunky. Tesco did indeed do well, with gross sales up by 2.5% over the latest 4 weeks, but ASDA was a big loser again, with sales down by as much as 6.6%, whilst Sainsbury was down by 0.2% and Morrison was, slightly disappointingly, down by 3.5%. Combined Aldi and Lidl sales growth was “only” 8.0%.
• Planet ONS Watch: In the real world, September (the 5 weeks to Oct 1st) was a mixed month on the High Street, with Food retailers doing better than Clothing retailers from the hot weather, as per the BRC-KPMG Retail Sales survey. But we will find out this morning how life was like last month on that strange parallel world, the Planet ONS, via the Office of National Statistics Retail Sales figures for September. For what it’s worth, the City consensus is for a 0.3% rise in “seasonally adjusted sales volume” month-on-month (+4.7% year-on-year), including petrol, but our friends at Capital Economics think that volumes could be flat.
• John Lewis Partnership Sales Watch: We noted yesterday that John Lewis is having a strong October, after a tough September, helped by the cooler weather and the launch of the new iPhone, and the sales growth of 8.5% gross in w/e Oct 15th was the third decent week in a row, with LFL sales nearly 7% up, although trading was very mixed. Boosted by the new iPhone launch, Electricals sales were up by 19.5% gross, whilst Fashion sales were up by 7.7% gross and Home sales were down by 0.5% gross. Over the last 11 weeks, gross sales at John Lewis are cumulatively now up by 3.4% (just over 2% up LFL), with Electricals sales now running up by 8.1% gross. Over at Waitrose, sales were more subdued last week, with gross sales only up by 3.9% (c0.5% up LFL) in w/e Oct 15th. Over the last 11 weeks, gross sales at Waitrose are cumulatively up by 3.7% (just under 0.5% up LFL).
• News Flow Today: The ONS Retail Sales figures for September (see above) are out at 9.30am this morning, about the same time that the impressive new John Lewis Leeds store opens its doors for the first time (anchoring Hammerson’s new Victoria Gate development). The Boots results are also published today, on the back of the Q4 results in the US for Walgreen (y/e August).