Services sector, current trading, asset prices & other:

A DAY IN THE LIFE:

Have you noticed that the tab to save documents at the top of your Word or Excel programme is a floppy disk.

And I, for one, haven’t seen a floppy disk for over a decade and I’m sure there’s a whole generation under the age of 35 or so, who wouldn’t know what one was.

Anyway, a bit pushed this morning so on to the news:

PUB, RESTAURANT & DRINKS PRODUCERS:

• The Markit/CIPS services purchasing managers’ index (PMI) rose to 56.2 last month, from 55.2 in November – the highest level since July 2015. inflationary pressure in the sector continued, with prices charged rising at the strongest rate since April 2011.

• Craft Beer Co has reported LfL sales +11.3% in 2016 vs 2015. Dec trade was +8.4% LfL . MD & founder Martin Hayes comments ‘it’s been a great year for us, not only have our existing sites traded very well, but our St. Mary Axe site has blown-away expectations in year one and the new site in Limehouse has hit the ground running. The instant success of Limehouse has forced our hand to start phase two there earlier than we’d anticipated, which will result in us redeveloping the first floor to add trading space. What has perhaps been more satisfying is the performance of our established sites, with one being 13.5% up like for like 2016 over 2015, proving to me that there’s plenty left in the market for the right offer.’ Hayes adds ‘I still see a lot of growth in London for us, the trick, as always, is to find the right deals and not over-pay.’ He concludes ‘I’ll look to spend a lot of
time searching for landlords who share our desire to build a long-term relationship. The offer works in a very diverse range of areas already, so we can literally open anywhere but London is where we will focus.’

• Fleurets reports pub property market remains in reasonable shape, says ‘the pub property market has reached the year end with relatively little turbulence.’

• Fleurets says property ‘sales mix has moved away from bottom end pub sales, leaseholds and packages to increased volumes of free-house deals.’

• Fleurets reports freehold prices +4.9% last but ‘bottom end’ volumes down by 28%. Freehouse sales numbers +150%

• Fleurets reports leasehold property sales volumes down by 20%. Sees ‘no noticeable evidence of pricing adjustment’ post Brexit. Fleurets reports ‘Brexit has not impacted on transaction volumes either individually or in packages, as many might have expected. A number of deals were lost and attempts were made to renegotiate the odd transaction at the time of the announcement, but on the whole deals that had been agreed went through as planned. On an individual level the attraction of very low interest rates and positive trading performance has seen purchasers prepared to simply “do some business”, despite what may or may not happen in Europe.’

• Fleurets reports freehold sales price in North +18% but only +3% in south. It says the quality of pubs sold in the North improved. London prices +45%. Re year ahead, the agent says ‘much depends on the world economy post the Brexit vote and Trump election. The only certainty is uncertainty.’

• Re leasehold market, Fleurets says ‘we anticipate the increase in new free of tie lettings will continue, from a wider variety of Pub owners. Premiums for tied leasehold agreements will be supressed as the effects of MRO take effect. More surrender deals will be agreed and we will see the growth of more multiple operators of free of tie leased estates emerge.’

• Fleurets says a larger number of pubs that it sold in 2016 remain in use as pubs. Some 62.4% remained in Trade

• Constellation brands has reported that strong beer sales continued to drive revenue and profit growth for the latest quarter. Net sales grew 10% to $1.81 billion.

• Ruby Tuesday has reported results to end-Nov saying revenue declined by 17.7% to $214.7m (largely as a result of the sale of a number of company owned restaurants). The group says LfL sales were down by 4.1%. The group made a net loss of $38m. Interim President and Chief Executive Officer Lane Cardwell, commented ‘while the results of our fiscal second quarter were disappointing, I am excited about the strategic changes and the new product rollouts that began with the introduction of our Fresh New Menu in November and will continue in January with the national launch of our Fresh New Garden Bar.’ He says ‘we believe these efforts should change the trajectory of our business and drive shareholder value.’

• Nation’s Restaurant News in US points to retail store closures (dept. stores etc.) & questions whether restaurants might not also come under pressure. It says, however, that ‘the Internet isn’t having the impact on restaurants that it is having on retailers — it’s too fragmented a business with too many potential occasions for that to happen.’ Similar trends are in place in the UK where delivery is perhaps the main competitor to the eat-in market now. Much of the problem here involves cannibalisation.

• Nation’s Restaurant News in US says that growth of Netflix could be one reason why consumers aren’t eating at restaurants as much. The media streaming company is competing for both customers’ time and their money.

• Consumer spending in the UK rose by 3.6% year-on-year in 2016, compared to 3.9% in 2015, after an uplift in the second half of the year. Spending in pubs and restaurants saw increases of 13% and 12.7% respectively.

• Be At One has enjoyed a record festive trading period with like-for-like sales up 10% for the five weeks of December.

• The BCC’s Quarterly Economic Survey for Q4 2016 of 7,250 companies shows an uptick in manufacturing and a partial recovery in services. The latter still remains below pre-referendum levels however, and both sectors expect prices to increase in the coming year, principally as a result of the cost of raw materials and other overheads.

• Commenting on the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said: ‘Overall, our findings suggest growth will continue in 2017, albeit at a more modest pace. The government must act strongly this year to support investment and improve the business environment – both of which are crucial to boosting business confidence, and therefore further growth.’

• Lidl is today launching its ‘Big on Quality, Lidl on Price’ ad campaign as part of a wider eight-week print and digital campaign.

• Home Bargains has purchased 11 Netto stores in the north of England in line with its expansion plans.

LEISURE TRAVEL & HOTELS:

• TTG reports All Leisure as confirming that c150 jobs will be lost as a result of the firm’s failure. Accountant Grant Thornton has confirmed that All Leisure’s cruise operations were “significantly loss-making”. Grant Thornton said ‘whilst I am extremely pleased to have concluded a sale of the Page and Moy business which safeguards the holidays and bookings for over 13,500 tours passengers and preserves 200 jobs, I am very disappointed that we have no alternative other than to close the remaining ALH operations.’

• The Reuben brothers have refinanced the Grosvenor House in a move that sees the hotel emerge from administration

• Easyjet has reported stats for December. Passenger numbers were +15.1% at 5.6m with the load factor at 89.9% (2015: 86.6%). For the rolling 12mths, volumes were +6.6% at 74.5m with a load factor down 10bps at 91.5%.

• The travel industry enjoyed a strong start to the peak booking period thanks to the best early sales for a summer season in years, per Travel Weekly.

• Monarch Airline’s CEO has said the UK should make a clean break with the EU and avoid a ‘soft’ Brexit. Andrew Swaffield commented: ‘I wanted us to stay in, which was my vote, or get out… If we decide we must stay in the single market and have everything we had before, we’re going to end up in the middle ground. We won’t be members, but we’ll have to apply all the rules. I don’t think that is a good place.’

• All Leisure Holidays’ administrators have confirmed the group’s cruise operations were the main reason for the collapse of the company. G Adventures stepped in to acquire the All Leisure tour operating brands, Travelsphere and Just You, from the administrators on Tuesday, saving 200 jobs.

• However, a further 50 employees have been made redundant together with most of the company’s 100 maritime staff.

• Birmingham airport has been named the number one most punctual airport globally by aviation data specialist OAG.

• The Business Travel Show’s seventh annual forecast has found that the number of buyers with bigger travel budgets is on the rise for the first time in four years. Around 32% of buyers will have more money to spend in 2017, compared with 29% last year, while Airline budgets will also rise for 40% of buyers.

OTHER LEISURE:

• Digital video sales (£1.3bn) have overtaken sales of DVDs and other physical formats (£943m) for the first time in 2016. This represents an increase in digital of over 20% on 2015 and has driven the video entertainment sector to 2.2% increase in sales, following three years of flat growth.

FINANCE & MARKETS:

• B of England economist Andy Haldane has said that the failure to predict the financial crisis was a “Michael Fish” moment. He said that, with hindsight, the economic models had been “rather narrow and rather fragile” which were “fine as long as the going was good” but when the world was “tipped upside down” by the 2008-09 crisis, they had failed to cope.

• UK services sector rebounded in December per Markit. It says ‘the rate of expansion of activity accelerated for the third month running to the sharpest since July 2015, fuelled by stronger growth in new work. Employment rose at a pace unchanged from November’s seven-month high, and sentiment towards the 12-month outlook strengthened despite ongoing uncertainty regarding Brexit and European elections.’

• Markit says ‘inflationary pressures in the sector [services] remained substantial, with prices charged rising at the strongest rate since April 2011.’

• The number of new cars sold in the UK hit an all-time high in 2016.

• World markets. UK up yesterday as it hit new records. Europe also up but US down. Far East mostly up in Friday trade

• Brent around $56.85 per barrel

• Sterling up a little overnight against a weaker US$. A pound buys 1.238 dollars.

• US interest rates lower with 30yr Treasuries yielding 2.96% (yesterday 3.05%). UK 10yr gilt yield 1.31% vs 1.34% a day ago.

TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS:

• The Markit/CIPS services purchasing managers’ index (PMI) rose to 56.2 last month, from 55.2 in November, the highest since July 2015

• Craft Beer Co has reported LfL sales +11.3% in 2016 vs 2015. Dec trade was +8.4% LfL .

• Fleurets reports pub property market remains in reasonable shape, says ‘sales mix has moved away from bottom end pub sales’

• Fleurets reports freehold prices +4.9% last but ‘bottom end’ volumes down by 28%. Freehouse sales numbers +150%

• Fleurets reports freehold sales price in North +18% but only +3% in south. It says the quality of pubs sold in the North improved

• Nation’s Restaurant News in US points to retail store closures (dept. stores etc.) & asks if restaurants might come under similar pressure

• Nation’s Restaurant News in US says that growth of Netflix could be one reason why consumers aren’t eating out as much

• Be At One has enjoyed a record festive trading period with like-for-like sales up 10% for the five weeks of December.

• TTG reports All Leisure as confirming that c150 jobs will be lost as a result of the firm’s failure.

• The travel industry enjoyed strong start to peak booking period with best early sales for a summer season in years, per Travel Weekly

• Monarch Airline’s CEO has said the UK should make a clean break with the EU and avoid a ‘soft’ Brexit.

• Birmingham airport has been named the number one most punctual airport globally by aviation data specialist OAG.

• B of England economist Andy Haldane has said that the failure to predict the financial crisis was a “Michael Fish” moment.

• Markit says ‘inflationary pressures in the sector [services] remained substantial’

• Yesterday’s later tweets: Time to switch from coffee to cocoa? Commodity prices for former +66% in last 12mths & for latter down 14%. Chocolate me up.

• ABF tumbled yesterday. Clearly (and probably correctly) the market sees it as a retailer. Why is it PER of c23x?

• Economics. Boring, yah? But it matters. Three rate rises expected in US this year, Pound likely to remain under pressure

• UK personal borrowing getting worrying. What are we doing borrowing more than at any time since 2005? Remember what happened then?

• Eurozone growth implied by PMIs nixes post-truth mantra that ‘Europe isn’t working’. Our services PMI today also very good

• Compare/contrast John Lewis with NXT yesterday is apples & oranges. One is 54dy full margin & the other is just Xmas week

RETAIL NEWS WITH NICK BUBB:

• Sports Direct: Even by their standards, the series of RNS announcements from Sports Direct yesterday afternoon were pretty bizarre: first came the 12.14pm confirmation that, even though 54% of the independent shareholders at the EGM had voted against the embattled Chairman Keith Hellawell, he would be staying on, thanks to the block vote of Mike Ashley. Then at 3.32pm (just after a separate announcement that the Odey hedge fund had topped up its stake to over 5%) came the announcement that, only 4 weeks after the company suspended its puny share buyback programme (with only £13m worth of shares bought back since July at an average price of c286p), the programme was being started again, with no explanation. Then at 3.52pm came a further update confirming that Mike Ashley had asked the Chairman to stay on, even if he is again voted down at the next AGM, with a cryptic statement that
“In view of continuing frustrations, the Board will meet in the near future to reconsider all options in relation to its review of corporate governance”.

• Trade Press: Neither Retail Week or Drapers magazine have been published today, continuing the prolonged Christmas and New Year break, but both were in the news yesterday, with the parent company, the media company Ascential (aka EMAP), announcing that Drapers is being parcelled off into a “Heritage Brands” division of 13 trade magazine titles that is now up for sale, with Retail Week the one magazine that Ascential will retain.

• Tip Watch: Talking of business magazines, the venerable Investor Chronicle (part of the FT group) today has published its eight Tips for 2017 and good old Ted Baker is one of them…

• News Flow Next Week: The pace of company updates picks up significantly next week, culminating with “Super Thursday”…The week should kick off with updates from Majestic Wine and JD Sports, although we haven’t got firm dates for them. Tuesday morning definitely brings the BRC-KPMG Retail Sales for November, the Morrisons update, the Boohoo update and the Topps Tiles Q3, whilst the latest Kantar/Nielsen grocery market share data should be out that morning. On Wednesday we then get the Sainsbury update, the Shoe Zone finals, the Signet Xmas update, the Ted Baker update and the Joules update. And then…quite apart from the ABF (Primark) update and the John Lewis Partnership Xmas overview, Thursday brings the Marks & Spencer Q3, the Tesco Q3, the SuperGroup interims and Q2, the Mothercare Q3, the Debenhams AGM update, the Booker Q3, the Dunelm Q2, the Moss Bros update, the ASOS update
and the AO.com update…Phew!