Restaurant Group, Hostel World, Vianet. Brexit & other:

A DAY IN THE LIFE:

Still busy. Company meetings yesterday afternoon followed by site visit(s), if you know what I mean. On to the news:

RESTAURANT GROUP FULL YEAR TRADING UPDATE:

• Restaurant Group updates on full year numbers says ‘the results are expected to be in line with previous guidance.’

• RTN FY update: Total turnover +3.7% with 53 week LfL sales down 3.9%.

• RTN FY update: Group closed 37 sites in the year & opened 24. It says ‘recent trading continues to be challenging’

• RTN FY update: Q4 LfL sales down 5.9% ‘driven by underperformance across our Leisure brands.’

• RTN FY update: Changes now in process. Says ‘substantial price and proposition changes are required.’

• Restaurant Group concedes previous management had gone considerably too far down the high price, low cost route. Now will cut prices. Margins likely to be a challenge for some time to come. Group says ‘our strategic review of our other Leisure brands has revealed a need for similarly significant change.’

• RTN FY update: Will cut prices across all brands. Major margin impact expected. Group says ‘we are at the beginning of a transformation programme’. This will focus on ensuring ‘we are competitive on value with a distinctive offering that meets customers’ needs.’ Sounds like major price cuts & menu engineering to come.

• RTN FY update: Group is ‘building a better business which is leaner, faster and more focused.’

• RTN FY update: Outlook. Says ‘we expect the trading performance of the business in the first half of 2017 to remain difficult.’ It adds that [we] ‘anticipate momentum improving towards the end of this transitional year as our initiatives start to take effect.’ The group will also be annualising some pretty soft comps.

• RTN FY update: Re costs. Says ‘the Group will also face well documented external cost pressures from the increases in the National Living Wage, the National Minimum Wage, the Apprenticeship Levy, the revaluation of business rates, higher energy taxes and increased purchasing costs due to the combined effects of a devalued pound, and commodity inflation.’

• RTN FY update: Implication for margin is pretty clear. It is not positive. Lower menu prices, better service & lower costs suggest that profitability will be re-set at a materially lower level. Group says ‘at our Preliminary results on 9th March we will provide an update on the proposition development in Frankie & Benny’s, the strategic reviews of our other Leisure brands and the cost efficiency opportunities identified across the Group.’

• RTN FY update: CEO Andy McCue reports ‘since joining the Group in September, I have been impressed by my colleagues’ passion for our brands, and commitment to our customers through what has been a very difficult trading period. I’d like to thank them all for their positive contribution, and for their continuing support, as we make the necessary changes to offer better value and satisfaction to our customers.’

PUB, RESTAURANT & DRINKS PRODUCERS:

• The Telegraph reports that the Kuwaiti owners of the Little Chef chain have now received competing bids for the chain. Euro Garages are in the frame as buyers. The owners will evaluate all options

• Tesco is said to be facing new legal action over the historical accounting irregularities that it revealed in 2014

• Vianet is today to host a visit to its HQ in Stockton. It says ‘trading continues to be in line with management’s expectations with both Leisure and Vending divisions making good progress.’ It says ‘Vianet is also pleased to confirm that its defence in the US court against claims asserted by third parties has been successful.’

• Vianet says ‘the Board has decided, in line with its decision to accelerate the outsourcing of non-core activities, to close the Group’s manufacturing and warehousing facility in Bolton.’

• Vianet cautions on exceptional costs. Says ‘the legal costs related to the US defence, along with the rationalisation costs associated with the closure of the Bolton site, will be reported in the results for the second half of the financial year. These one-off exceptional items will not impact on the Group’s recommendation relating to payment of a final dividend.’

• Carlsberg and Heineken have joined a growing list of brewers in increasing beer prices. Carlsberg prices are increasing by 2.6% on average across the board, while Heineken has said it will add another 6p per pint across its brands. Both brewers said they had faced increased costs and were unable to absorb these within their businesses. Earlier this month, Molson Coors and AB InBev both revealed average price increases of 2.4% and 2.3% respectively.

• Drake & Morgan has acquired two further sites in the City and sold two of its Corney & Barrow sites following a review of the business. MCA writes that The Listing, will open in Cannon Green and will be followed by The Allegory in Principal Place – Brookfield’s 600,000sq ft of office, residential and retail space in Bishopsgate.

• Boparan Holdings has received a £350m takeover approach for Fox’s Biscuit business following talks last year with Ontario Teachers’ Pension Plan.

• Pub chips and roast potatoes are under the spotlight after the Food Standards Agency (FSA) issued a warning about the possibility of cancer-causing acrylamides. ALMR chief executive Kate Nicholls said: ‘Retailers should not be unduly worried. Provisions for hospitality venues have been in place for some time now regarding burnt food and most venues will be briefed and aware of any risks.’

• Michael East is become CEO of Australian wine company, Accolade Wines. Mr. East will replace outgoing Paul Schaafsma by the end of the first half of summer 2017

• UberEATS has set its eyes on India and is in talks with restaurants and delivery partners readying to launch the app in the country. The app is already running in 58 countries just 3 years after its launch in Los Angeles. Other online food ordering and delivery companies have faced difficulties in India.

LEISURE TRAVEL & HOTELS:

• Hostelworld updates on FY trading, says results ‘are anticipated to be in line with the Board’s expectations.’

• Hostelworld says it ‘has delivered 21% growth in bookings for its flagship Hostelworld brand in H2 2016, resulting in 18% growth for the year as a whole’

• Hostelworld reports it has ‘made good progress in its mobile business, with mobile (including tablet) now representing over 49% of Hostelworld brand bookings for the year (2015: 41%). The Group also saw further encouraging growth in penetration from its Elevate pricing product.’ CEO Feargal Mooney reports ‘set in the context of challenging market conditions, particularly in Europe in the second quarter, I am pleased with our second half performance and our continued momentum in the execution of strategy across mobile, pricing, geographic diversification, focused brand marketing and a more efficient booking mix. This positions the Group well to make further progress in 2017.’

• STR reports that a majority of hotel lenders expressed a cautious outlook for the hotel lending environment in 2017 in the US. It says ‘over the four years we have surveyed lenders, there has been a clear sentiment shift in their views of the industry from confident to cautious.’ STR continues ‘most lenders believe that asset values have peaked and are concerned about the economic outlook.’

• STR says no surveyed lenders believe hotel values will increase significantly in the next 12 months. It adds ‘54% of respondents predicted that hotel values will be flat in the next 12 months, and 41% of respondents anticipate values to decrease in the next 12 months.’

• A new study has found that, for some UK corporations, the cost of business travel has increased since the referendum six months ago. For the UK, some 16% of business travel buyers have experienced price rises compared to just 6% in continental Europe. The study involved 178 travel buyers.

• The recent slump in sterling in the 2017 financial year could result in EasyJet taking a hit of £100m or more. Pre-tax profits could be impacted by as much as £105m; with the budget airline today saying: ‘The pricing and operating environment remains tough with fuel prices remaining low and continued strong growth in European short haul capacity impacting yields across the industry.’ Despite passenger numbers rising by 8.2% in the 3 months to December 31, the airliner’s revenue per seat fell by 8.2% when measured on a constant currency basis.

• Eurotunnel’s Le Shuttle passenger service through the Channel Tunnel reached its best traffic levels last year since 2000, with 2% more passenger vehicles transported year-on-year. ‘This is a remarkable performance in the difficult context following the terrorist attacks which led to a reduction in tourism in France,’ Eurotunnel said.

OTHER LEISURE:

• Alibaba boosted revenues by 54% to Rmb53.25bn ($7.7bn) in the quarter to the end of December, prompting the group to lift its full-year growth guidance to 53%. The group also proved adept at squeezing more profitability from revenues than Amazon, posting net income of Rmb17.16bn for the quarter, as shares surged through the $100 barrier in New York. Alibaba attributed its ‘blowout quarter’ to more users spending more time on its platforms and being better able to monetise those users.

FINANCE & MARKETS:

• Supreme court rules HMG must go to parliament before triggering Article 50.

• May come as a relief as Scotland & Wales will not be in a position to prevent the exit.

• House of Commons likely to rubber-stamp exit. Crotchety old House of Lords may be a different matter

• UK automotive industry reduces investment in the UK in 2016 reports the SMMT

• Government borrowing fell to £6.9bn in December meaning that borrowing for the year is £63.8bn, £10.6bn down on 2015

• Chancellor could now hit his (increased) debt targets

• World markets: UK down yesterday with Europe up. US was also up and Far East is up in Wednesday trade

• Oil a shade lower at $55.35 per barrel

• Sterling little changed vs US$ at $1.252 and down vs Euro at 116.6c

• UK 10yr gilt yield up to 1.40% from 1.37%. US 30yr Treasury up 6bps at 3.05%

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

• Hostelworld updates on FY trading, says results ‘are anticipated to be in line with the Board’s expectations.’

• Hostelworld says it ‘has delivered 21% growth in bookings for its flagship Hostelworld brand’

• STR reports that a majority of hotel lenders expressed a cautious outlook for the hotel lending environment in 2017 in the US

• Restaurant Group updates on full year numbers says ‘the results are expected to be in line with previous guidance.’

• RTN FY update: Total turnover +3.7% with 53 week LfL sales down 3.9%. Q4 LfLs down 5.9%. Comps were softening by Q4 2015

• RTN FY update: Group closed 37 sites in the year & opened 24. It says ‘recent trading continues to be challenging’

• RTN FY update: Q4 LfL sales down 5.9% ‘driven by underperformance across our Leisure brands.’ Will cut prices there & elsewhere

• RTN FY update: Changes now in process. Says ‘substantial price and proposition changes are required.’

• RTN translation. Prices will be cut & service improved. Costs are rising & margins will be going in the opposite direction for some time

• Vianet is today to host a visit to its HQ in Stockton. It says ‘trading continues to be in line with management’s expectations

• Carlsberg and Heineken have joined a growing list of brewers in increasing beer prices. Carlsberg prices are increasing c2.6%

• Drake & Morgan has acquired two further sites in the City and sold two of its Corney & Barrow sites following a review

• A new study has found that, for some UK corporations, the cost of business travel has increased since the referendum 6mths

• Later tweets: Theresa May, confident of winning Supreme Court appeal (per 4 Nov), loses appeal. Article 50 vote to go to parliament

• Confident of winning Art50 appeal eh, Theresa? About as confident as you are that Brexit will be a success? Even more so? Alternative Facts?

• HMG may win Art50 in Commons. Career politicians too intimidated to object. Cranky old buggers in H of Lords? That’s another matter

• What am I missing? Alternative facts = Lies? Miss-speaking = Lying? Confident = clueless? Post truth politics in action.

• Coffee price on a mission to bankrupt addicts? Price +66% in US$ over 1yr but +95% in Sterling. Ouch, twitch…

RETAIL NEWS WITH NICK BUBB:

• WH Smith: Ahead of its AGM at 11.30am in the City this morning, WH Smith has reported on trading for the first 21 weeks of its y/e August financial year, to Jan 21st and although the comps were tough the business has come through well…The Travel Division delivered LFL +5% over this period a year ago, but it has delivered a better than expected +5% again (we expected +3%/4%), thanks to growth in passenger numbers: “particularly in the airport stores over the Christmas holiday period”. The High Street Division was up against flat LFL over the period (because of the adult colouring book craze), but it managed to partially make up for that, thanks to “our new seasonal stationery ranges and spoof humour books” and LFL sales were only down -3% (we expected -4%/5% LFL). The upshot of all that is, given the usual gross margin gains and cost savings, WH Smith have flagged that “we expect
profit growth for the year to be slightly ahead of plan”. How far the 225th Anniversary celebrations of the company help trade this year remains to be seen, but the City will be relieved by the strong Christmas trading performance.

• John Lewis Partnership Sales Watch: The debate is still raging about how good December was on the High Street, but January is almost over, so let’s see how JLP is doing. At Waitrose, things have settled down somewhat after a blip over the New Year and gross sales were 2.1% up (slightly down LFL) in w/e Jan 21st, a bit below the 2.7% run-rate for the last 25 weeks. Over at John Lewis, w/e Jan 21st was more solid, with total sales up by 4.9%, thanks to a 9.2% increase in Home, on the back of continuing Clearance deals. With one week to go of the second half/financial year, that outcome holds the 25 week run-rate at 4.2% for John Lewis gross sales (c2% up LFL), with Electricals sales running up by 5.8% gross.