On the Beach, Rank, Sterling, Uber & others:

A DAY IN THE LIFE:

So, we got to Luxemburg City and Trier yesterday and, whilst we’ve been to both before, it was good to see them again because, though Trier hasn’t changed much & remains a beautiful little town with plenty to see and do, Luxembourg has changed a lot.

In fact, it’s sprouted dozens and dozens of large buildings such that the surroundings look like a squashed down and spread-out Docklands with conference centres and the like and, one suspects, several thousand desks for EU bureaucrats etc.

And the city reminded us very much of Geneva, where we lived for a few years around the Millennium. That is nice but rather self-satisfied, pleased with itself, money-driven and very, very expensive.

But Trier was good. Hiking in the Hunnsruck today (or rather pottering around in the woods looking for the nearest iced cream van). On to the news:

PUBS & RESTAURANTS:

• The discussion around Gaucho’s future continues and a debt-for-equity swap is the latest option to be put on the table. MCA writes that Newcastle-based hotel, bar and restaurant operator The Cairn Group is still in the running for Gaucho, alongside sector investor Luke Johnson, the Carlyle Group, Endless and Aurelius Equity. Richard Caring and D&D London are also thought to be interested in parts of the business.

• DP Eurasia’s stock price has almost halved in the past month from c170p to 91p as a result of the crash in value of the Turkish Lira following the US’ decision to increase tariffs on the country’s exports. The group floated in April 2017 at 200p, giving a market capitalisation of £291m. Today its market cap is around £134m.

• Cognac exports have increased for the fourth year in a row, by 5.4% in value and 8.2% in volume, setting a record for the most bottles exported within a 12 month period. In the 12 months from 1 August 2017 to 31 July 2018, by value the turnover from Cognac exports reached €3.2bn, accounting for nearly a quarter of the total value of exported French wines.

• Canned wine is flying off the shelves in the US, with year-on-year sales currently up 43%, according to Forbes.

• Imbiba-backed restaurant and bar group, Wright & Bell, has acquired Kingly Court-based chicken concept Whyte & Brown, per Big Hospitality. W&B’s managing director Sarah Clark and head of finance Alison Wong will join the chicken and egg-focused all-day restaurant’s board, while non-executive chairman David Hill has resigned, alongside directors Richard Walker, Nicholas Southgate and Guy Gillett.

• Christie & Co expects ‘at least another two or three restaurant groups will fall’ before the end of 2018 but acknowledged some operators, such as Wagamama and Nando’s, continue to prosper. Groups such as Jamie’s Italian, Prezzo, Byron and Carluccio’s have taken all pressed ahead with CVAs, while London-based operators, such as Barbecoa, Conran & Prescott, Hummus Brothers and, more recently, Gaucho Group have fallen into administration.

• The latest MCA data indicates that the eating out sector saw the highest participation level on record in Q2 despite the overall number of visits falling by 2.9%.

• Constellation Brands has increased its investment in the nascent marijuana industry, putting just under $4bn into a Canadian group called Canopy Growth to take its stake up to 38%. The transaction between Constellation and Canopy is the latest in a wave of pot deals, as traditional makers of beer and spirits eye what they believe is the next big market in Leisure.

HOLIDAYS & LEISURE TRAVEL

• On the Beach cautions on trading but says profits will be ‘broadly’ in line. It says ‘as has been widely publicised, the exceptionally hot UK weather that has been prevalent over recent months, combined with the football World Cup, has supressed holiday demand.’

• OTB says ‘this has impacted our headline revenue growth during the period, but the weaker demand has driven a significant reduction in the Group’s marketing spend, ensuring growth in revenue after marketing costs has remained strong. This is further testament to On the Beach’s resilient and flexible business model as we have previously demonstrated in similar circumstances. Whilst August and September are important trading months for the Group, the Board continues to expect that adjusted PBT for the financial year will be broadly in line with management expectations.’

• OTB also announces the purchase of Classic Collection Holidays Limited for £20m.

• OTB CEO Simon Cooper says ‘with regards recent trading, the resilient, flexible and asset-light nature of On the Beach’s business model, combined with our advanced technology, has allowed the business to swiftly adapt to the unprecedented three month heatwave and deliver an impressive performance.’

• Uber has reported lower losses but a slowdown in its rate of growth in Q2. The company lost $891m in the quarter compared with a $1.1bn loss in the same quarter last year. It is thought that the group has an IPO planned for next year.

• Uber reports sales of $2.7bn in the quarter, up 50% on last year but below Q1’s 67% rate of growth. Uber has pulled out of some major markets such as China, Southeast Asia and Russia over the last year after failing to fend off local competitors.

• The pound fell below $1.27 against the US dollar for the first time since June last year before recovering to $1.2713 on the back of weaker-than-forecast wage growth figures which were released on Tuesday. Average weekly earnings, excluding bonuses, rose by 2.7% – unchanged on the month before, according to the Office for National Statistics. Real wages grew by just 0.4% – a slight drop on last month’s 0.5% figure.

• Liverpool’s visitor economy is now worth over £4.5bn and supports 53,000 jobs and it remains the fifth most visited destination in the UK for overseas visitors, according to research commissioned by the Visitor Economy Team at Liverpool City Region Local Enterprise Partnership (LEP). The region welcomed over 64.2m visitors to the region – a 2.7% increase. This comprised of 59m day visitors (up 2.8%) and 5.3m staying visitors, up 2.6% on the previous year.

• Turkish Lira fell 13.8% in value against the dollar on Friday and a further 6% on the Monday, with many speculating that a surge in late holiday bookings to the country could occur, travel Weekly has reported.  Akin Koc, managing director of Turkey specialist Diamond Sky Holidays, added: ‘Turkey was already offering excellent value for money compared to rival countries in the Eurozone, but now even this has reached in incredible level’.

• Hotel construction growth has continued in New York, research from The Real Deal has reported.

• The main drivers of holiday price increases have been found to be fuel prices, dollar aircraft leasing costs and individual destinations’ exchange rates.

OTHER LEISURE:

• Rank Group reports full year profits to June saying sales fell by 2.3% to £738.0m with pre-exceptional EBITDA of £120.0m, down from £128.8m last year.

• Rank reports adjusted PBT of £74.3m, down from £79.3m in 2017. Adjusted EPS is 15.0p versus 16.0p last year. The full year dividend goes up from 7.30p to 7.45p.

• Rank says its group performance is in line with its revised expectations. This has been a ‘challenging year for Grosvenor’s casinos hit by low win margin, enhanced due diligence and extreme weather.’

• Rank says ‘Mecca’s performance [was] above expectations, as a result of good cost control’ and it adds ‘growth from UK digital continues but with a slowdown in H2.’ Regarding the outlook, Rank has a ‘new leadership team focused on operational improvements to drive sustained profit growth.’ CEO John O’Reilly says ‘I joined Rank because of its underlying potential. With the backdrop of a disappointing performance in 2017/18, we are now moving quickly to identify the key priorities which will begin to realise the significant underlying potential that I have now seen first-hand since joining the Group in early May.’

• Rank CEO continues ‘we are taking steps to increase our focus on the customer, to accelerate growth in the digital business, to drive cost efficiencies across the business and to strengthen our organisational capabilities. This will be delivered within a transformational programme framework, which will ensure that we deliver a growing Rank Group that is fit for the future.’

FINANCE & ECONOMICS:

• The ONS has reported that inflation rose to 2.5% in July from 2.4% in June. This represents the first rise in 4mths. Wage growth, at 2.7%, is still a shade ahead of the CPI but it lags the RPI, which is rising at 3.2% per annum.

• Reporting on the latest inflation numbers, the NIESR has said that ‘underlying inflation fell by 0.2 percentage points to 1.0 per cent in the year to July 2018, as measured by the trimmed mean.’ It says that most of the headline rise was caused by an increase in oil prices & implies that interest rates should not be used to dampen inflation in this instance.

• The IEA has said that sluggish productivity means that pay rises are being skewed away from some workers and very much in favour of others.

• Turkey has retaliated against US import tariffs hitting goods such as passenger cars, alcohol and tobacco. Tariffs on US tobacco go up to 60% and on US alcoholic drinks up to 140%. World markets fell on this and other news.

• Sterling up vs dollar at $1.2721 and down vs Euro at €1.1213

• Oil down at $72.17

• UK 10yr gilt yield down 4bps at 1.23%

• World markets: All down yesterday, Far East down today.

START THE DAY WITH A SONG:

Yesterday’s song was the gritty Lose Yourself by Eminem. Today, who sang:

So needless to say,

I’m odds and ends

But I’ll be stumbling away

Slowly learning that life is okay

RETAIL NEWS WITH NICK BUBB:

• Kingfisher: After Travis Perkins warned recently of poor trading at Wickes in Q2 but accelerating sales at Toolstation, there was some nervousness about what Kingfisher would say about the UK in their Q2 update today, but the UK is actually fine and it is France where the disappointment comes, In the UK, B&Q was up by 3.6% LFL in the 13 weeks to July 31st, with weather-related categories driving 7.0% of the growth, whilst Screwfix improved to deliver +5.5% LFL. In France, however, although the trade focused Brico Depotwas up 2.4% LFL, the core Castorama business was down LFL by 3.8%, “reflecting continued softer footfall and the impact of transformation-related activity”, with the LFL of weather-related categories only flat. Ahead of the detailed interims next month, Véronique Laury, the CEO, says, enigmatically, that: “we have put additional actions in place to support our full
year performance in France with the benefits expected to come through in H2”.

• Planet ONS Watch: The hot weather boosted supermarkets enough to push the overall BRC-KPMG Retail Sales figures for July over the line, despite Non-Food sales wilting, but we will find out at 9.30am what “seasonally adjusted” life was like last month on the High Street on that strange parallel world, the Planet ONS (aka the Office of National Statistics), via their official Retail Sales figures…City economists generally expect a 0.2% rise in month-on-month seasonally adjusted sales volume, although Capital Economics have pencilled in no change (to give year-on-year volume growth of 2.8%), for what it’s worth. We will be looking, as usual, at the non-seasonally adjusted sales value figures and the split in Non-Food between Large and Small Businesses.

• News Flow This Week: The Asda Wal-Mart Q2 results will be out at lunchtime and the Asda PR machine will be spinning about another quarter of decent LFL sales recovery.