Langton Capital – 2016-12-09 – Brands, the US market, spread-betters, FOBTs & other:
Brands, the US market, spread-betters, FOBTs & other:
A DAY IN THE LIFE:
Don’t you find it odd that, on the BT website, there are no phone numbers to ring?
I mean it’s become irritating that so few websites in general have phone numbers attached – instead they FAQs and whatnot but, as BT last seen was in the telephone business, it’s particularly odd in its case.
Anyway, we seem to have picked up several services, 1571 Call-back, Customer Privacy, Cheap Evening Calls, BT TV, BT Sport and others, that I’ve never used and didn’t even know we had, and I finally found a number to query the above on the online version of our bill and off I went.
But it was Press One for this and Press Two for that. Most of the options were regarding paying BT money (for the bill, to request easier payment terms, to set up a DD etc.) but when I’d finally realised I had to Press Four for ‘other’ about half a dozen times I got through to a human being and managed to cut our annual bill by 40% in about 2 minutes.
That’s Brexit Britain for you, we’ve all got to make ends meet. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• CGA Peach’s BrandTrack survey has suggested that restaurants are rated for quality whilst pubs are rated for value. It says ‘overall ratings are not what they could be.’ The survey ‘showed pub-restaurant brand ratings were lower than in any of the three previous years on four of the seven attributes, including food quality, service and value for money. For restaurant brands, this can be said of six of the seven attributes. In April 2013, for instance, 37% of consumers strongly agreed that they had received good food quality from restaurant brands—but by April 2016 the figure had dipped to 33%.’
• CGA Peach suggests that the power of brands may have diminished over the last three years. It says re recommendations, ‘restaurant brands perform rather better than the pub-restaurant brands here, with average advocacy percentages of 32% and 27% respectively. However, both these results are two to three percentage points lower than the equivalent survey in 2013.’
• Wagamama saw turnover grow 14.5% to £61.7m in its second quarter as like-for-like sales grew 9.1%, making for H1 turnover growth of 15.9% to £138.1m. The group’s adjusted EBITDA rose 16.8% in the first half to £23m and underlying free cashflow conversion remained strong at 102.8% of adjusted EBITDA. Six new restaurants were opened during the period, taking its total to 122 restaurants, while a further six franchise sites were established.
• Lion Capital is in exclusive talks to buy the Piper Equity backed, 90-strong Loungers chain reports Sky News. The chain should have c100 units by Easter next year
• Drake & Morgan has converted its second Corney & Barrow site, to be known as The Pagination in Cabot Square, Docklands. D&M acquired C&B earlier this year. It has already converted & opened one unit, The Otherist, on Old Broad Street in the City.
• US restaurants registered a 1.3% drop in same-store sales in November reports TDn2K. November was the 9th consecutive drop. Traffic growth is said to be down by 3% but spend per head is up. TDn2K reports ‘the economy expanded solidly over the summer and it looks like it picked up some steam in the fall. Given the lack of qualified workers, job gains were as good as could be expected and the unemployment rate dropped to its lowest level since August 2007.’ It continues ‘consumer income growth improved as a result. Household spending on retail products, including restaurants, is not keeping pace. Families are buying vehicles and homes and debt payments are limiting spending on other products. Trump’s tax and spending proposals should add to growth, but not until the second half of next year. The outlook is for income gains to improve and spending to rise, but the changing spending
• Brewdog’s latest bond offering has raised £2.9m. The group has said it will raise between £0.5m and £10m.
• Boparan Restaurant Group has appointed Tom Crowley as new chief executive with immediate effect. Boparan is the parent company of Giraffe World Kitchen, which Crowley previously worked as managing director, as well as Harry Ramsden’s, The Cinnamon Club, Burgers & Cocktails, and FishWorks. Commenting on this appointment, Crowley said: ‘Moving forward…we intend to quickly establish BRG as a major player in the hospitality market. Our objective is to further strengthen and grow the positions of all our brands nationally and internationally whilst at the same time creating a restaurant group with the capability of making future acquisitions.’
• Adolescents who drink alcohol heavily risk altering the development of their brains, according to a study by the University of Eastern Finland and Kuopio University Hospital. Researchers found that ‘cortical thinning’ was observable in young people who had been heavy drinkers via magnetic resonance imaging.
• McDonald’s is to move its non-US tax base from Luxembourg to the UK, meaning the new holding company will pay UK tax on the royalties received outside the US. The Luxembourg tax affairs of the burger giant are currently under formal investigation by the European Commission.
• Jack Daniels owner, Brown-Forman, saw sales slip across its markets in the first half for fiscal-2017, although underlying sales grew in the US (+5%) and its developed markets (+2%).
• The chief public health officer of the US has described the use of e-cigarettes by children as ‘a major health concern’.
• The Committee on Advertising Practice is banning online ads for food and drinks high in fat, salt or sugar aimed at children.
LEISURE TRAVEL & HOTELS:
• The US hotel industry posted mostly negative results in the week ending 3 December, with occupancy down 1.5% to 56% and RevPAR falling 1% to $65.65. Average daily rate increased 0.5% to $117.31.
• AccorHotels is to invest €16m for a 5% stake in Singapore-based luxury group Banyan Tree Holdings, which runs 43 hotels, resorts, and spas across 28 countries in Asia.
• Rising oil prices and slowing demand will see airline profits fall for the first time in six years in 2017, per IATA, which forecasts a 16% drop in net profits to $29.8bn. Alexandre de Juniac, IATA’s new chief executive officer, said the profit slide amounts to a ‘very soft landing’ for the sector. ‘These three years are the best performance in the industry’s history,’ De Juniac said in a statement.
• The CEO of IATA, which represents around 260 airlines, added: ‘We need to put this into perspective. Record profits for airlines means earning more than our cost of capital. For most other businesses that would be considered a normal level of return to investors. But three years of sustainable profits is a first for the airline industry. And after many years of hard work in restructuring and re-engineering the business the industry is also more resilient. We should also recognise that profits are not evenly spread with the strongest performance concentrated in North America.’
• Shares in betting companies fell after a cross-party group of MPs has said maximum stakes on fixed-odds betting terminals should be cut from £100 to £2 to reduce ‘societal harm’. Labour MP Carolyn Harris said: ‘The government has a duty to protect the most vulnerable in our society and to act in the public interest. We therefore strongly urge them to properly regulate FOBTs and to do so with immediate effect’. Punters had allegedly been able to lose £300 per minute.
• The Association of British Bookmakers (ABB) has described the group of MPs as ‘a kangaroo court’ and a spokesman added: ‘It is a small group of anti-bookmaking MPs, funded by casinos and arcades that will benefit from undermining bookmakers… When a properly balanced and independent Select Committee of MPs investigated FOBTs, they came out strongly in favour of them. As opposed to that Select Committee report, this is a biased and highly misleading piece of work, with no material evidence to support their claims.’
• Six month enquiry into FOBTs suggests there is a “prima facie” case to cut the maximum stake of £100 a spin. It also suggests that the speed at which bets can be laid should be decreased from its present once every 20 seconds.
• Spread betting firms have been dealt another blow after Germany’s financial regulator pushed ahead with a clamp-down on CfD trading, just two days after a similar move in Britain. Shares in CMC Markets, IG Group and Plus500, the main listed CfD players on the London today market, all closed slid after Germany’s Federal Financial Supervisory Authority (BaFin) announced it planned to restrict the marketing, distribution and sale of CfDs to private investors. Shares in CMC fell 9.6% at 105.3p, having plunged 37.6% on the day the FCA published its proposals, which included imposing leverage limits and a ban on promotional offers. IG fell 6.7% to 478.8p, adding to Tuesday’s 38.4% drop, and Plus500 slid 3.8% to 362.75p on top of the 28.3% slump triggered by the FCA.
• Shares in casino operators took a dive on Friday as China’s UnionPay said its daily withdrawal limit from ATMs in Macau was to be halved. The move comes as part of Beijing’s battle against capital flight from the mainland
• Sportech yesterday reported that HMRC has been refused permission to appeal against Sportech’s £97m VAT win. It says ‘following the Court of Appeal’s unanimous judgment in favour of Sportech in relation to its £97m VAT repayment claim on the “Spot the Ball” game, Sportech is pleased to announce that the Supreme Court has refused Her Majesty’s Revenue & Customs (“HMRC”) permission to appeal. This now, for Sportech, successfully brings this matter to a close.’
• Sportech has received £93m from HMRC already. It will receive another c£4m in accrued interest shortly. HMRC will also have to pay Sportech’s costs. Sportech’s CEO Ian Penrose comments ‘we are delighted that after nearly eight years, this case is now over and the Supreme Court has upheld the unanimous decision of the Court of Appeal’.
FINANCE & MARKETS:
• The European Central Bank has extended its programme of QE to Dec 17 but has cut monthly purchases from €80bn to €60bn
• ECB to taper bond purchases but says it could extend the programme beyond Dec next year if deemed necessary. President Mario Draghi reports ‘tapering has not been discussed’.
• M&G fixed income manager Richard Woolnough has said that he will tilt his £16bn bond fund to the US & Europe in light of Brexit worries
• Fund managers selling bonds could drive up yields and increase borrowing costs for HMG (and for everyone else). M&G’s Woolnough reports ‘the UK capital market is going to become less important so I want to be in the US and Europe. I am biased towards doing more in those regions.’ He continues ‘if companies delist from the UK because of Brexit then as an investor you have to find somewhere else to go. The UK will not be as important to the capital market as it once was. We still have a little bit in the UK but not as much as we once did whereas our US and Europe exposure is getting bigger and bigger.’
• Japanese Q3 growth has been revised down to 1.3% from 2.2% earlier.
• World markets: UK & Europe higher yesterday & US also up. Asia mixed in Friday trade.
• Seasonally adjusted initial jobless claims in the US fell to 258k in the week to 3 December.
• Oil price up to $53.85 per barrel.
• Sterling down against US$ at $1.2584 but up against the Euro at 118.6. The Euro was weaker on continued QE
• Longer bond rates up in US. Were 3.02% yesterday but 3.10% today. UK 10yr gilts at 1.38%
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Inflation is coming in 2017 – but how much will there be, and who is most affected? See email for further comment
• Prices, they are a rising. Readers write: Wine prices (from 1 supplier) +10.7%, from another +4.7%. Beef up 24% in some cases, salmon +11%.
• Costs & Prices. Will operators try to maintain their percentage margins? Could get ugly.
• KFC’s plans to double the size of its estate would see it overtake McDonald’s in terms of unit numbers
• NIESR says ‘looking ahead, we do not expect such buoyant consumer spending growth to persist.
• Enterprise Inns reports 6th expert partnership: Dirty Liquor, in partnership with experienced operators Hugh O’Boyle and Caroline Jones
• Starbucks presents 5yr plan for growth, aims to add 12k stores globally to take it to c37k units by 2021
• JDW has announced that, following recent share buybacks, founder & chairman Tim Martin now owns some 30.01% of the company
• Five Guys has lined up 2 further flagship sites in S/W London, meaning the fast-expanding better burger brand will finish 2016 with 59 sites
• TUI has reported FY numbers saying ‘we have delivered a second year of strong performance post-merger’
• TUI reports 12.5% increase in underlying EBITA including Travelopia or 14.5% for continuing operations
• TUI outlook. Group should ‘deliver at least 10% growth in underlying EBITA in 2016/17’. It should maintain this to FY19.
• NIESR reports UK GDP grew by 0.4% in the quarter to end-Nov. It grew by the same amount in the quarter to October.
• The RICS has said that a paucity of homes for sale means that the UK housing market will get off to a slow start in 2017.
• Manufacturing production in UK sees biggest drop in over 4yrs in October. Oil & Gas production down 10.8%.
• Bank of England warns that commercial property prices in the UK have a ‘risk of further adjustment’ post the Brexit vote
• Later tweets: Sleaford by-election today. Libs = remain, UKIP = leave, Tories clueless & Labour nowhere. Politics on its head.
• Five Guys not quite 0 to 60. Will have 59 units by y/end. Quite an achievement but, when the dust settles, how many clunkers will there be?
• Disaggregating inflation. Customers are price takers but they can decline to buy. Companies must price set. And that’s the tricky part…
RETAIL NEWS WITH NICK BUBB:
Nick is on holiday.