Foodservice inflation, Punch Pubs, Vianet, Parkdean, PPHE & other:

A DAY IN THE LIFE:

I know it’s not as bad as the police saying things like ‘the male exited the establishment and proceeded in a westerly direction’ when what they mean is ‘the bloke left the pub,’ but why do people say ‘more than’ when they could say ‘over’?

It’s just a little thing but ‘more than 70,000 at Wembley’ could be ‘over 70,000’ and ‘more than ten quid’ becomes ‘over a tenner’ etc.

Of course, it wouldn’t work for those semi-ironic comments such as ‘more than happy’ as ‘over-happy’ has a kind of ‘over-medicated’ feel to it and somebody who is ‘more than competent’ isn’t necessarily ‘over competent’.

Indeed, ‘more than cautious’ seems somehow positive whilst ‘over-cautious’ isn’t but anyway, that’s enough of that. It’s a busy day so let’s move on to the news:

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MARSTON’S H1 NUMBERS:

Marston’s has reported H1 numbers and our comments thereon are set out below:

Headline numbers:

• Marston’s has reported total revenues up 10.0% for H1 at £407m with LfL sales up 10.7% vs last year – and up by a more material 15% if last year is normalised to take account of the lower rate of VAT

• LfL sales are up by 17.9% vs the Covid-impacted H1 of FY20.

• Pub operating profit is up by 8%, reflecting higher energy costs, with the company reporting a marginal loss before tax of £2.9m (FY20: loss £6.1m) as a result of higher interest costs. Debt is down but bank rates have risen.

• The company is expecting to make a profit in its seasonally busier H2 and there is no change to guidance

Current trading:

• In the first 6wks of H2, MARS reports LfL (same VAT in both years) up 7.9% (vs the Coffer Peach Tracker up around 7.7%).

• Drink continues to outperform food and Marston’s sales have been ahead of the Coffer Peach Tracker in every month in H1

• MARS says it is ‘continuing to manage inflationary challenges within our control: energy costs secured with electricity fixed until end of H1 FY2024 and gas until end of March 2025; offsetting other costs through efficiencies and pricing strategies.’

• It adds that ‘trading patterns [are] normalising with encouraging consumer resilience.’ It adds that its ‘garden investment positions [its] estate well for the summer.’

• There is no change to guidance. The company reports that ‘operating profit [is] in line with expectations, with further cash generation and debt reduction expected.’

Balance sheet, cash, debt & cash flow:

• The company has generated cash of £12m in H1. The company tends to be cash negative in H1 but £24m of disposals (at a 39% premium to book value) turned the number around.

• Marston’s is guiding to between £50m and £60m of disposals in the full year, with the bulk of this coming off debt. Sales should be at a premium to net book value.

• NAV per share is 98p (down from 102p at the full year but up from 71p a year ago).

Company comment:

• CEO Andrew Andrea comments ‘the strategy which we outlined 18 months ago is progressing well and generating positive results which is pleasing.’

• He says ‘our H1 performance clearly demonstrates that consumers remain as keen as ever to celebrate – and socialise within – the Great British Pub.’

• Re the wider industry, the CEO says ‘the macro environment is becoming increasingly stable and recent evidence suggests that both the cost outlook, and consumer confidence, are steadily improving.’

• Mr Andrea reports ‘we continue to deliver upon our clear strategic objective to reduce debt and progress our path to profitability, albeit the seasonality of our trading profile means that the majority of the Group’s profit is characteristically H2 weighted.’

• He says ‘we have invested ahead in H1, to capitalise on the benefits of this in H2, and remain on track to meet our operating profit, cash generation and debt reduction targets for the year.’

• The company concludes ‘we look forward to delivering further positive progress as the year unfolds and remain confident that we have the strategy and the team in place to do so, maximising the opportunities open to us in the future and delivering shareholder value.’

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PUBS & RESTAURANTS:

Labour costs & wage growth:

The ONS has this morning reported on wages and employment levels for the three months to end-March. It says that growth in employees’ average total pay (including bonuses) was 5.8% (down from 5.9% in the three months to Feb) and growth in regular pay (excluding bonuses) was 6.7% in the quarter compared to last year (up 6.6% in the quarter to Feb)….’

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Inflation (food prices):

The National Farmers’ Union warns that higher food prices are here to stay, with President Minette Batters saying ‘I don’t see the situation changing any time soon. While the war in Ukraine continues, pressure on gas prices is going to remain higher….’

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On the same subject, supermarkets are being investigated by the CMA over high food and fuel prices (see comment on fuel below). ASDA says ‘the UK has one of the most competitive markets for food in the world, and as global prices begin to fall we are confident that the competitive nature of the industry will help food inflation fall as a result.’

And it must be the food manufacturers and retailers lucky week because PM Rishi Sunak is also to meet with industry leaders to discuss how the UK can improve its food market…

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Footfall:

Springboard reports that footfall in the week ending 14 May was -18% compared to the same week pre-pandemic. The large decrease was primarily driven by the week being bookended by bank holidays which impacted all three key destination types.

Working from home:

The FT over the weekend highlighted the impact of the office property market quoting CoStar as saying that over 100m square feet of office space was now vacant in the UK, up 65% on pre-Covid levels and some 2/3 of the space is over 20yrs old. Hospitality has its own issues but the above puts the issue in a wider context…

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Government support, Zombie companies etc.:

Foodservice analyst Peter Backman reports that ‘almost 15,900 ‘accommodation and foodservice’ businesses that would have failed in more ‘normal times’ were kept alive during covid – in the period between March 2020 and June 2022.’ He says ‘although 2,150 of them have since failed that still means another 13,750 companies are set to fail….’

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On the same topic, law firm Higgs LLP has suggested that insolvencies in the hospitality sector could hit record highs this year. It says there is a ‘perfect storm’ of cost pressures….

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Planning:

The Campaign for Real Ale has suggested that making it easier to develop houses could fail to prevent more pub closures as change-of-use applications may be waved through….

Cost of living crisis.

Looking at petrol and diesel prices, the Competition and Markets Authority has said that the invasion of Ukraine does not explain all of the current higher level of prices. The CMA says that some factors are down to the retailers…

Other news:

Wine. WSTA CEO Miles Beale claims the government has failed to support the UK wine industry, instead delivering ‘opportunistic’ duty rises and ‘ill-thought out policies….’

Tips: The Employment (Allocation of Tips) Act 2023 will come into effect in 2024 and is expected to put £200 million back into the pockets of workers each year. Under the new law, all tips and service charges will belong to the employees, and businesses will not be allowed to use them for any other purpose….

COMPANY NEWS:

Britvic has reported H1 numbers saying that revenue rose by 7.9% to £794m with PBT up by 21.2% at £54.4m. The company reports EPS of 22.8p, up 17.5% and it is to pay a H1 dividend of 8.2p, up 5.1% on last year…

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Gregg’s has updated on Q1 trading, saying that LfL sales growth was 17.1% in Q1 (partly reflecting the impact of Omicron in early 2022). It says it has opened 63 shops and shut 26. The company sees ‘no change in inflation expectations’ and its expectations for the full year are unchanged…

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Engaged Capital, which has around a 6.6% stake in Shake Shack, is reported by the Wall St Journal to be pushing for three seats on the board of the company. That seems a little hefty for an investor that, after all, does not own the other 93.4%.

Asahi Group has reported Q1 numbers showing total revenue up by +7.9% year on year, mostly price-driven. Core operating profit was up by +24.3% year on year, down to ‘improved cost efficiencies and improvements, despite cost pressures….’

Per MCA, Stonegate CEO David McDowall is looking to capitalise on demand for customer experiences with pre-booked events…

Fuller’s has announced the return of ‘Opera in the Garden’, featuring 24 performances across 24 of its pubs from 18 June to 31 July. Tickets can be purchased from Fuller’s website.

Henkell Freixenet reports FY 2022 revenue up 8.5% to €1.2bn, making the company the top global sparkling wine producer with a global market share by value of 9.5%, according to IWSR data…

HOLIDAYS & LEISURE TRAVEL:

On the Beach has reported H1 numbers saying that revenue rose by 38% to £73.2m with the group loss before tax reduced from £7m to £6m. The group reports that ‘trading momentum has continued since 1 April 2023, and comparator periods will start to soften as we annualise widespread airline and airport disruption experienced during Summer 2022…;’

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Canadian private equity firm Brookfield is reported to have put UK holiday village company Center Parcs up for sale. The FT reports that the sale could raise between £4bn and £5bn. Brookfield bought Center Parcs in 2015 for around £2.4bn…

TUI is reported set to open 21 new travel branches across the UK in a move that runs against the trend over the last decade or so for more holidays to be booked online. TUI’s Belinda Vazquez says ‘there is no doubt that the high street has changed over the last few years but we are seeing a resurgence of people wanting that face-to-face interaction, especially since the pandemic leaving consumers looking for expert advice and reassurance’.

Hotel transactions: Property consultancy Knight Frank reports Q1 transactional activity doubled compared to the previous quarter, but deal volume remained significantly below the five-year quarter average of £1.2bn…

Travelodge reports revenue +25% vs 2019 levels to £909.9m in 2022, with Jo Boydell, CEO, pointing to ‘strong demand for events and short staycation breaks throughout the year as well as for essential business travel…’

LyvInn will open its first hotel on 15 May, located in Frankfurt. The project is backed by funds managed by Blantyre Capital Ltd with long-term committed capital in excess of €2.3bn. LyvInn was founded by Navneet Bali, former CEO and Chairman of Meininger Hotels and is looking to expand across Europe.

OTHER LEISURE:

Days after the UK has sought to block the deal, EU regulators have approved Microsoft’s $69bn bid to buy Activision Blizzard. The move will be the biggest deal ever in the gaming industry…

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FINANCE & MARKETS:

Sterling up at $1.2528 and €1.1509. Oil price higher at $75.53. UK 10yr gilt yield up 4bps at 3.82%. UK market set to open down around 8pts.

RETAIL WITH NICK BUBB:

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