Langton Capital – 2017-12-14 – November tracker, Domino’s, Carlsberg on trends etc.:
November tracker, Domino’s, Carlsberg on trends etc.:
A DAY IN THE LIFE:
Moving office at the moment. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
As Mr Einstein said, if you can’t explain something in a very small number of words, then you may not understand it yourself.
Easier said than done, of course but, with the above in mind, we’re putting together a compendium of 60-seconds pieces.
These are all new (though we may put some historic 2017 efforts in the appendix) & will focus on two areas; companies & themes.
The former is pretty self-explanatory. The company pieces will comprise a very brief summary of our views on a given operator (in 60-seconds, roughly 200-words) whilst the latter will encompass themes, trends and our current thoughts thereon.
Themes will include discounting, cost pressures, overcapacity, the coffee phenomenon, delivery, the use of apps, Millennials, the grey market and so on and so on. There are more than you might think.
We’ll be busy over Christmas and the doc will be ready in early Jan but, if you would like a copy, please let us know. As mentioned, £200 plus VAT but free to clients.
NOVEMBER COFFER PEACH TRACKER:
• Coffer Peach Tracker for Nov shows LfL sales +2.2% nationally with managed pubs & bars performing most strongly
• Tracker says ‘sales in Britain’s managed pubs, bars and restaurants enjoyed a welcome uplift in November after flat trading across most of the last six months, with collective like-for-like sales up 2.2% on the same month last year.’
• Nov pub sales +2.8% LfL with drink led businesses performing best. Restaurant chains +1.2% (against inflation of 3.1%)
• Tracker has provinces >> London with the former +2.7% and London units only +0.9%. Both numbers are below inflation
• Tracker’s Peter Martin comments ‘November’s numbers will be welcome news for a sector that has been hit hard this year with rising cost pressures across property, people and food, all squeezing operational margins.’
• Total sales +5.9% showing material impact of new openings. Tracker says, however, that new openings ‘have slowed significantly over the past year, particularly among restaurant brands.’ I think we all know why that is.
• Pubs now opening more units than restaurants. Mr Martin comments ‘fFor the first time in years, managed pub and bar groups are opening new sites at a faster rate than casual dining companies.’
• Underlying 12mth LfL increase remains at 1.2% (CPI 3.1%) with total sales +4.1%.
• Davis Coffer Lyons comments ‘it seems the reduced rate of new restaurant openings is helping to sustain like-for-like comparisons. The figures are somewhat stronger than some commentators were fearing, which will hopefully translate to some pleasing results over the festive period and that there will be some reasons to be cheerful as we enter the busiest trading season.’ The corporate agent continues ‘the figures are a particular relief for restaurant operators, who over the last two years have seen their underlying like-for-like growth rate cut by more than half due to competition from start-ups concepts and new brands who have increased choice for consumers in UK market towns and major cities.’
• RSM comments ‘the upbeat November results will have provided some respite for hard-pressed operators in the run up to Christmas. As the economic squeeze on living costs sees the emergence of a more cost-conscious consumer, it will be interesting to see which operators break rank to hike menu prices. With the all-important festive trading season in full swing, the sector will be looking to claw back lost margin to shore up finances ahead of the tougher first quarter of the New Year.’
• Langton comment. Whilst better than recent months, these are not really upbeat numbers. Sales are still rising more slowly than inflation and some of the costs being faced by (particularly restaurant) operators – rents, rates, labour etc. – seem to be rising more rapidly than do prices as a whole.
PUB, RESTAURANT & DRINK PRODUCERS:
• Domino’s Pizza Group has announced that it is to acquire a further 44.3% shareholding in Domino’s Iceland for EUR 30.2 million (£26.7 million), taking ownership to 95.3%
• Domino’s also announces the completion of its refinancing with a new revolving credit facility of £350 million through a syndicate of seven banks. CEO David Wild says ‘we’re really pleased to be increasing our ownership of Domino’s Iceland earlier than was planned. It’s a great business and after 18 months of partnership, we have good visibility of its strengths and further opportunities for growth. There is a strong financial and commercial rationale for buying out minorities now rather than waiting for the put or call option to be exercised.’
• Carlsberg’s third consumer insights report suggests that the pub is carving out a new role & says that the landscape of hospitality is evolving. It ‘confirms that the pub remains the number-one destination for consumers out-of-home.’
• Carlsberg says the ‘key findings from the report include the break down and analysis of the popularly-labelled ‘millennial’ demographic.’ It says ‘experiences have become increasingly important and equally so, sharing them on social media – and as such creating ‘shareable’ moments remains vital for operators in an ever-competitive market.’
• Carlsberg suggests that premiumisation is still a feature of the current market. It says ‘the treat economy mega-trend of recent years shows no signs of abating and as a result while pub visits are fewer, when consumers are on the premises, they are looking for premium choices, experiences and serves, with the average spend per head up 3%.’ This compares with inflation of 3.1%.
• Carlsberg also points to health & moderation trends, moves in technology and the importance of beer and food ‘matching’ as ongoing features. Alistair Gaunt, VP Nationals Sales at Carlsberg UK comments ‘the pub remains the number one consumer choice for out-of-home occasions and whilst this is fantastic news, the last few years haven’t been without their challenges.’
• The FDF has said that a Brexit deal is ‘vital’ for the food & drink industry. It says that food prices would rise by 7% to 10% in the absence of an agreement.
• Famous Brands has appointed new management to GBK reports MCA. It says the new MD will be Derrian Nadauld.
• Draft House founder Charlie McVeigh has told the PMA that the Government has not done the pub sector ‘any favours’
• Chapel Down has announced that it has completed its £18.5m fundraising through the issue of new shares. The funds will go towards a new vineyard and strengthening sales and marketing functions.
• The Chief Executive of the ALMR, Kate Nicholls, has commented on the withdrawal from the EU: ‘the hospitality sector is a vital part of the UK’s economy, employing 10% of the workforce, generating 5% GDP and 1% capex. Growth in the eating and drinking out sector is at 9% and it generates 1-in-3 of all new jobs. Labour supply is a major concern for hospitality businesses as 1 in 8 of our workforce is an EU migrant so the priority has to be a speedy resolution on a future immigration policy. We need an orderly Brexit with plenty of detail for employers at the earliest opportunity, to ensure that this growth is not undermined unduly’.
• Simon Emeny, Chief Executive of Fuller Smith & Turner plc, has become the Chairman of the BBPA, replacing David Forde Managing Director of Heineken UK.
• Arby’s Restaurant Group Inc. has announced plans to expand in the Middle East. The roast beef sandwich chain plans to sites in Egypt, following the success of sites in Kuwait, Qatar and Saudi Arabia.
• The Glenesk Hotel in Scotland has officially broken the world record for the largest whiskey collection, with the hotel having 1031 varieties of whiskey commercially available.
• The majority of consumers has stated they are satisfied if their takeaway arrives within an hour, the MCA has found in its Foodservice Delivery Report.
• White Rabbit Growth Fund founder Chris Miller has likened London to the ‘Silicon Valley of food’ and says that consumers are now more concerned about sharing experiences on social media than traditional status symbolisers such as models of car. Speaking to KERB as part of its podcast, Miller commented: ‘All the creativity is happening at the early stages. It’s like old school music A&R guys who run around going to gigs trying to work out whose going to be the next rock star. London feels like the silicon valley of food. If you can find someone like Kricket, who had a two hour queue from a shipping container, in an area where there’s so much creativity, then the ability to expand that into other areas is huge.’
• Non-alcoholic beer sales in the off-trade grew by 27% during the 12 weeks to 3 December, according to data from Kantar World Panel. Overall, alcohol sales in the grocery market are up by nearly £172m on the same period last year. Kantar said that while while volume sales have increased, the growth was mainly a result of consumers choosing more expensive festive tipples. Gin, whisky and sparkling wine all saw significant growth: up by 26%, 10% and 7% respectively.
HOLIDAYS & LEISURE TRAVEL:
• Brussels has confirmed that EU flights could cease to operate from the UK unless a deal can be reached. The British pilots union warned that a no deal scenario should be great cause for concern, saying no deal ‘is not an option’.
• Tui is preparing contingency plans to offset uncertainty over the impact Brexit could have on flights between the UK and the rest of Europe
• York-based Quartz Travel will resume trading after being taken over by Millington Travel.
• UK flights must abide by EU environmental rules after Brexit, if the UK is to maintain its current level of access to the European aviation market, reports the sustainable transport group T&E.
• Ryanair faces strikes from pilots in Ireland over the Christmas period, while pilots and air traffic controllers in Italy may stage a walk-out this Friday.
• Jeannette Linfoot is to leave Saga after leading the group’s tour operations division for two years, to be replaced by Robin Shaw.
• Private equity firm Silverfleet Capital has acquired a majority stake in the river cruise and escorted tours specialist operator Riviera Travel, for an undisclosed sum.
• Preliminary November data released from STR has indicated that the London hotel market saw occupancy down 2.8% to 83.7%, ADR increase 1% to £153.96 and RevPAR fall 1.8% to £128.87.
FINANCE & MARKETS:
• Wage growth is 2.3%. This is the 7th month that it has lagged inflation.
• ONS reports unemployment fell by 26k to 1.43m in latest quarter. Rate of 4.3%. Joint lowest in 42yrs.
• US Fed has put up rates by 0.25%. This is as expected & is the third rate rise in 2017.
• China has put up rates by 5bps.
• Oil down to $62.79
• Sterling up v dollar at $1.3431
• Pound up v Euro at €1.1354
• UK 10yr gilt down 1bp at 1.21%
• World markets: UK down yesterday with Europe & US down. Asia mostly lower in Thursday trade
• Brexit etc.:
o HMG loses vote. Both houses of parliament will vote on Brexit deal.
o Mrs May in Brussels today. Seems the EU officials rarely come to London.
o Diplomat David Davis under fire for lack of diplomacy.
PRIOR DAY LATER TWEETS:
• Later tweets: TUI putting in place plans to deal with potential flight problems post Brexit. Hopes deal will be in place prior to exit
• UK CPI hit 3.1% in November. Wage growth 2.3%. Give 7th month of declining real incomes.
• Unemployment at 4.3%. Down a shade further to sit at new, 42yr low.
• David Davis accused of damaging good faith by suggesting current Brexit agreement isn’t really binding.
START THE DAY WITH A SONG:
Yesterday’s song was ‘That’s Entertainment’ by The Jam. Today who sang:
I remember when,
I remember, I remember when I lost my mind,
There was something so pleasant about that place
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RETAIL NEWS WITH NICK BUBB:
• Sports Direct: Fresh from his resounding defeat in yesterday’s EGM vote about the £11m back pay supposedly owed to his brother, Mike Ashley has popped up again today to announce the much-awaited Sports Direct interims. At the time of the AGM statement in early September, the company’s outlook remained “optimistic”, in line with the statement given with the finals on 20 July that it aimed to achieve growth in underlying EBITDA of c5%-15% during FY18, but there were no figures given and the only news was that “trading in our new generation flagship stores continues to exceed our expectations”. And Sports Direct are on target, as underlying EBITDA was 7% up at £156m in the 26 weeks to 29 October, but that owed a lot to store closures and loss elimination in the ailing European business, with the core UK Sports Retail business reporting sales down by 1% (“due to reduced online promotional
• Ocado: We flagged on Tuesday that the latest Kantar grocery sales survey (for the 12 weeks to Dec 3rd) said that “Online grocery sales growth has slowed considerably to just 2.8% during the past 12 weeks”, so there was a lot of interest in what Ocado would say in its Q4 sales update today (for the 14 weeks to Dec 3rd), even though the Ocado share price hasn’t been too shaken. And 11.6% sales growth isn’t too bad, but it is below the usual 14/155% run-rate, notwithstanding the big increase in operational capacity, via the opening of CFC 3 (which Ocado now trumpet is 50% more busy than at the start of the quarter). But the focus today in the 7.30am analysts conf call will be on CEO Tim Steiner’s admission that “While we continue to report sector leading double digit sales growth in our retail business, a shortage of capacity, with the lack of drivers in certain locations being the
• Planet ONS Watch: In the real world, November (the 4 weeks to Nov 25th) was a reasonable month on the High Street overall for the big retailers, as per the recent BRC-KPMG Retail Sales survey, with Food sales buoyed by high food price inflation and Non-Food sales propped up to a degree by Black Friday discounting. But we will find out at 9.30am this morning what life was like last month on that legendary parallel world, the Planet ONS, as per the Office of National Statistics Retail Sales figures for November…Our friends at Capital Economics have pencilled in a 0.2% month-on-month rise in seasonally adjusted sales volume, which would leave the year-on-year growth rate at just +0.1% in November, but the City consensus is that month-on-month volume will be up by 0.4%. We will obviously be ignoring these silly volume figures and focusing on the year-on-year, non-seasonally adjusted, sales