Langton Capital – 2018-05-29 – Pret, low alcohol, MROs, plastic, World Cup & other:
Pret, low alcohol, MROs, plastic, World Cup & other:
A DAY IN THE LIFE:
I cut the grass on Sunday and, rather foolishly, I set the cutter on low.
This made the grass look nice but, as it meant simply cutting more of the stuff off, the mower was clogging every couple of minutes meaning that a two-hour job took far longer.
This meant that Plan A quickly became ‘give up’ but, having started to cut the stuff shorter, I couldn’t really change, or I would have given our grass the look of a Mohican whose hair style was being grown out.
Not that anyone would have really cared but I found myself deciding it was bloodier to turn back than to push on so, while I should have been occupying a deckchair with a beer in my hand, I was turning the air blue and fishing around under a dirty lawnmower with a long stick.
All in all, it’s much more restful to be back at work. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Heineken is believed to be in talks to acquire a minority stake in Beavertown Brewery, the MCA has reported.
• The Private equity owner of Pret A Manger has agreed to sell the coffee chain for £1.5bn to JAB Holdings. Bridgepoint, the private equity group behind Pret, bought the group for £364m a decade ago.
• CEO of UKHospitality, Kate Nicholls, has commented on the European Commission’s extension of the low alcohol threshold from 2.8% to 3.5%: ‘This is a pragmatic and helpful step by the Commission. The extension of the threshold will allow for greater innovation across the sector and the continued promotion of healthier drinking habits and attitudes towards alcohol’.
• Home Chef, the meal kit firm has been acquired by Kroger in a deal valued at $700m.
• EI Group and Greene King have written to the Pubs Code Adjudicator claiming that it has gone beyond its legal powers. Market Rent Only options have been taken up in only a minority of cases. EI and Greene King argue that an MRO rent needs a completely new tenancy agreement. Tenants’ groups say that only a deed of variation is necessary. EI says the PCA’s March guidance was “open to interpretation and may be ¬incorrect in law”.
• The Bank of Mum & Dad is said to be ‘feeling the pinch’ per Legal & General. One in four property purchases by young people is said to have benefitted from a loan or gift from friends or relatives, most often the person’s parents.
• The EU is proposing a ban on single-use plastics products to help protect the marine environment. Straws, cotton buds, cutlery and drinks’ stirrers would be impacted.
• The Food & Farming industry has made more demands of the government in advance of Brexit. It says its concerns should be addressed as ‘a matter of priority’. It wants continued access to EU staff and says that recruitment difficulties from within the UK mean that it cannot function without access to labour elsewhere.
• Propel reports that Hotcha director James Liang is facing bankruptcy petition over £4m owed to business. It reports that the VAT fraud and money laundering investigation is ongoing.
• WH Smith has been voted the worst High Street retailer in the UK by contributors to a Which survey. The store is said to stock expensive products and its service is allegedly poor.
• Cake Box is to IPO at a valuation of between £40m and £50m reports the Sunday Times.
• Pepsi has bought Bare Snacks for an undisclosed sum.
• Wet-led operator Stonegate has said that it should see a £6m or so sales uplift from the World Cup, which starts on 14 June.
• Fast-food and restaurant outlets will now have to show the number of calories in each of their burgers or plates of food. The government has introduced the measures in a bid to help tackle obesity.
• The Ned has reaped the benefits of increasing its bar space at the expense of its spa options. The Soho House backed members club in London spent a further £2m converting part of its beauty parlour into another bar, even though the venue already has 15 of them.
• The FT has described 2018 as the ‘year of the CVA’. CVA’s are agreements with creditors that aim to keep faltering business afloat. The FT has questioned the efficacy of CVA’s stating that 14 of the 19 retailers that used a CVA since 2008 have since entered liquidation or administration anyway.
• Wagamama has beaten the Coffer Peach tracker every week for 4 years, recording 208 consecutive weeks of UK market outperformance.
• Winebuyers, the new direct-to-consumer e-commerce platform has secured over £1m in both crowdfunding and private investment in order to expand operations.
• Diageo is thought to be selling off up to $1bn of its US-focused spirit brands, including Goldschlager and Myer’s Rum.
• Per MCA, London Union will open its sixth Street Feast market in Wood Green.
HOLIDAYS & LEISURE TRAVEL:
• Unite union members employed by Menzies Aviation have called off a strike due to take place on the weekend following ‘productive talks’.
• China’s box office earnings are on track to surpass those of the US in 2018, making it the largest market in the world.
• A joint bid by Newcastle and Gateshead councils has been made to bring Channel 4 to the North East. The councils say the location would allow the company access to strong creative and digital sectors, as well as access to a young population and talent pool.
• High-profile US news websites including LA Times and the Chicago Times are temporarily unavailable in Europe as a result of the European Union’s General Data Protection Regulation (GDPR).
• Apple has been awarded $539m (£402.7m) after a jury found that rival Samsung copied some of Apple’s technology used to power the iPhone. At one point Apple was awarded $1bn by a jury, but an appeal court decided the group could not legally lay claim to the iPhone’s appearance and instead asked Samsung to pay a reduced amount.
FINANCE & MARKETS:
• The UK’s economic growth rate has been confirmed at 0.1% for the three months to end-March. The ONS says ‘overall, the economy performed poorly in the first quarter with manufacturing growth slowing and weak consumer-facing services.’ It continues ‘while there was some evidence of the poor weather hitting construction and high street shopping, this was offset to an extent by increased energy supply and online sales.’ This is the worst rate of growth since 2012.
• Sterling $1.3316 and €1.1453
• Oil down at $75.34
• UK 10yr gilt yield down at 1.33%
• Brexit, politics etc.:
o Quiet for Half Term as Customs’ Union rebellion grows per Bloomberg.
PRIOR DAY LATER TWEETS:
• Later tweets: Discounts ongoing. Prezzo, ASK & Café Rouge up to 40% off, Bella Italia 30% off, Pizza Express 25% off, Toby 3-meals-for-£10
• Gaucho is now considering all options, including a sale of its entire business. Carluccio edging towards CVA
• Bank says it may cut interest rates and print money if UK wobbles after a hard Brexit. Sticking plaster solution?
• Sir Ivan Rogers, former British ambassador to the EU, has said that Brexiters are peddling “buccaneering blather”
• BDO says sales week to 20 May down 5.1% at bricks & mortar stores and up only 4.2% online. Sluggish to say the least
• Langton footfall analysis has central York footfall down c40% over 8yrs. Mostly (arguably) due to online & edge-of-town development
START THE DAY WITH A SONG:
Last Friday’s song was That’s not Me by Skepta. To start the week off, who sang the following:
Drinking in the morning sun,
Blinking in the morning sun
Shaking off the heavy one
Heavy like a loaded gun
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): The surprise Dunelm profit warning on Friday morning was overshadowed in the Saturday papers by the overnight news that the hapless Aussie retailing conglomerate Wesfarmers had sold its struggling Homebase/Bunnings UK DIY business to the turnaround experts Hilco for just £1. The Times had a big splash on “The DIY disaster to end all DIY disasters”, highlighting that Archie Norman had advised against the acquisition of Homebase in early 2016, and also noted Hilco’s mixed record in UK Retailing, whilst its Business editorial mocked Wesfarmers’ “burnt offering” and its much-hyped “sausage sizzle” events, thundering that they made even more mistakes with the Homebase acquisition that Tesco did with Fresh & Easy in the US. The Telegraph noted, in passing that B&M also looked at taking the loss-making Homebase off their hands, after the business was
• Saturday Press and News (2): The Times was the only paper to properly cover the Dunelm profit warning (“Struggle on High Street catches up with Dunelm”), although, given the 11% share price slump, Dunelm was the lead story in the Daily Mail market report. The market report in the Times noted that Mothercare, Carpetright and Moss Bros are all bound to be dumped from the FT All-Share Index in Wednesday’s quarterly review and that Ocado will make it into the FTSE 100 index. The fast-growing and privately-owned outdoor sports chain Mountain Warehouse chose a bad day to get coverage for its strong results for y/e Feb, but it got a decent write-up in the Telegraph (“Mountain Warehouse defies retail gloom as profits climb”). The Telegraph and Times had snippets about the Sky News scoop that ASOS is looking to replace its Chairman Brian McBride and the Telegraph and Times also had snippets
• Saturday Press and News (3): The Guardian noted that the copyright row between Hotel Chocolat and Waitrose has been settled, with Waitrose backing down and dropping its lookalike own-label chocolate range. The FT review of the week highlighted that Marks & Spencer is accelerating its store closure programme and the City editorial in the Daily Mail looked at M&S’s problems, thundering that “Retailers must adapt or die” and, somehow, concluding that M&S investors should “hold the shares a little longer”. Finally, the City editorial in the Daily Mail also looked at the controversial ONS Retail Sales figures for April and slightly misquoted our old joke that “only fools and City economists look at the ONS measure of month-on-month seasonally adjusted Retail Sales volume for April”.
• Sunday Press and News (1): The main Retail scoop was the news from Oliver Shah of the Sunday Times that the landlords (including L&G and Westfield) are taking on House of Fraser over its controversial CVA plan and he followed this up with another feature on the growing backlash against the abuse of CVA’s (headlined “Is a CVA really just a dive in the penalty box?”). The Sunday Telegraph also flagged up the landlord’s showdown with House of Fraser.
• Sunday Press and News (2): Otherwise, the main focus in the Sunday papers was on the customer service evangelist and drum playing hi-fi king Julian Richer who has been recruited by his old friend Archie Norman to help shake up the culture at Marks & Spencer. The Sunday Times feature about Julian Richer was headlined “Archie’s guru is ready to drum sense into M&S”, whilst the Observer ran with “M&S boss turns to hi-fi entrepreneur to amp up profits”. Separately, the Observer noted that Julian Richer launched his new book “The Ethical Capitalist” in a Salvation Army hall in the West End on Thursday morning and also launched a crusade against tax avoiders. However, the Jeremy Warner column in the Sunday Telegraph thundered in his column that “Is Arche Norman too late? M&S may be past the point of no return”.
• Sunday Press and News (3): The Mail on Sunday flagged that Hilco is preparing to invest up to £75m in the turnaround of Homebase. Finally, the Observer had a major feature on the “Retail meltdown”, listing “six reasons why the biggest names on the UK High Street can’t make ends meet” (“Online rivals, Rising Costs, Consumption fatigue, High Street decline, Bad management and Spending squeeze”).
• Bank Holiday Monday Press: The Sunday Times story that the big landlords are fighting back against the controversial CVA process was followed up by detailed articles in the FT (“Landlords hit out at High Street restructuring”), the Times (“Landlords in revolt over growing “abuse” of insolvency plans”) and the Guardian (“Landlords prepare to do battle with High Street chains over rent cuts”). The Times also flagged that Julian Richer singled out the embattled Philip Green when he launched his crusade against tax avoiders on Thursday, whilst the Guardian noted that WH Smith came bottom of the annual survey of the Best and Worst High Street shops by Which magazine. The Telegraph highlighted the UK store expansion plans of the discount chain Hema and the owner of Pottery Barn/West Elm and also had features about the boss of Marshall Motors, Daksh Gupta, and the owner of Carnaby Street, the
• Dixons Carphone: The share price of Dixons Carphone has been recovering strongly since new CEO Alex Baldock took over, on the back of vibes about strong trading ahead of the World Cup. But, out of the blue, the company has come out with a profit warning today! The issue appears to be that although headline of PBT of £382m for y/e April will hit City expectations that will be only down to an odd one-off £25m systems implementation benefit, given gross margin pressures in Q4. And the company has come out with detailed guidance for the year that has just started, y/e April 2019, warning of a fall back to headline PBT of £300m! That is partly because of the impact of one-off items, but also reflects continued problems in the mobile phone business (despite the much-vaunted talks with the networks about better terms) and, amazingly, a £30m hit to “correct recent underinvestment in both our
• News Flow This Week: After the Bank Holiday yesterday, tomorrow brings the B&M finals and the latest monthly Kantar/Nielsen grocery sales data. Then on Thursday, as the month draws to a close, we get the monthly GFK Consumer Confidence index and the Card Factory AGM trading update.