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

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

So, as we commence one of those cheeky – and currently rare – five-working-day weeks, a brief head nod to those who agreed with us that the air is currently thick with dandelion seeds.

Indeed, the benighted things are everywhere.

And, as water butts around the place will be similarly infested with them, gardeners may well be giving the pre-embryonic plants the best start in life by hydrating them as they hand-deliver them to whatever place it is that they least want them.

Anyway, that may become more evident after the things have had a while to grow but, in the meantime, let’s move on to the news:

PUBS & RESTAURANTS:

Foodservice inflation:

The CGA Prestige Foodservice Price Index reports that foodservice price inflation dropped to 18.9% in March 2023….

• UKHospitality CEO Kate Nicholls said ‘While five months of decline is positive, the fact of the matter is that almost 19% price inflation for food and drink is enough to ruin businesses, especially alongside energy costs and workforce challenges.’

• Ms Nicholls adds ‘much more needs to be done to tackle the cost increases businesses are experiencing in a meaningful way and that starts with energy, with Government forcing suppliers to renegotiate contracts with businesses that fixed during the height of the crisis.’ She says ‘only by tackling the root causes of inflation can hospitality businesses return to its position of driving economic growth.’

• Langton. The government can’t influence the global price of food or energy. All it can do – and it is admittedly a big ‘all’ – is raise taxes or borrow in order to transfer monies from one part of the economy (taxpayers or future taxpayers) to others (hospitality companies). It would almost certainly rather not do this.

Trade:

Coronation an unmitigated ‘bad’ for retail. MRI Springboard data shows the Coronation drew consumers away from stores and destinations a week ago on Saturday, with footfall across all UK retail destinations down 20.8% YoY…

• However, in Central London the increase in visitors to the Capital coming to witness the event in person meant the drop in footfall over the day as a whole from the week before was far smaller at minus 9.3%. Springboard goes on to say that Sunday was better – just down 1.1% on last Sunday, which was also the day before a Bank Holiday – with London once again the least bad geography.

Access to labour:

Home Secretary Suella Braverman has said that immigration must be reduced because Britain risks forgetting “how to do things for ourselves.” She says ‘we need to get overall immigration numbers down, and we mustn’t forget how to do things for ourselves. There is no good reason why we can’t train up enough HGV drivers, butchers, or fruit pickers.’

Other news:

US trade is set for a boost this Sunday as it is Mother’s Day on the other side of the Atlantic…

• CGA data shows that Mothers Day in 2022 with velocity up +69% vs average, making it the most valuable Sunday of 2022, with both traffic +43% and check value +18%.

JD Wetherspoon chairman Tim Martin has told the Daily Mail that over-60s who have exited the workforce should get back to work.

COMPANY NEWS:

The Times reports that 3% Restaurant Group shareholder Coltrane Asset Management has called for change at the company. Coltrane calls on RTN to be “open to all strategic options”. Coltrane supports proposals put forward by Oasis, which has a 12 per cent holding in Restaurant Group.

Punch Pubs Group Limited has updated on trading for its H1 (a 28wk period) to 26 February 2023 saying that ‘for the 28 weeks to 26 February 2023 total revenue was £158.1 million compared to £142.6 million in the prior year period of 28 weeks to 27 February 2022, with the conversion of pubs from Leased & Tenanted over to our Management…’

• Tenanted estate: Punch says its ‘Partnerships estate [is] contributing to the increased revenue.’ It says ‘EBITDA for the period was £37.5 million (prior year 28 weeks: £38.6 million) of which £38.9 million was classed as Underlying EBITDA (prior year 28 weeks: £39.7 million).’

• VAT comps. The prior year period results include the benefit of the temporary reduced rate for VAT on food and non-alcoholic drinks, and lower energy costs, with a combined impact of c.£3m over the 28 week period.

• LfL sales. The company says ‘all three divisions (Leased and Tenanted, Management Partnership and Laine) delivered like-for-like sales growth for the 28 week period when compared to the prior year, with the Leased and Tenanted division also delivering growth in like-for-like rental income.’

• EBITDA. Punch adds that ‘underlying EBITDA for the 52 weeks to 26 February 2023 was £82.5m, which compares positively to the £76.0m of Adjusted Underlying EBITDA from the wider Punch Group in the year to August 2019, being the most recent financial year prior to the Covid pandemic.’

• Tenanted to Managed: Re conversions, the company says ‘having converted 71 pubs from Leased and Tenanted across to the Management Partnership division since August 2021, the rate of pub conversions has slowed down as we take time to select and build the next pipeline of pubs for transformational investment and conversion, taking learnings from the successful conversions we have completed to date. The benefit of the EBITDA uplift from these recent conversions is still to be fully realised, and despite the significant increase in energy costs, we still expect to achieve a stabilised return on investment in excess of 20% on these investments.’

• Asset valuation: Punch says that ‘property assets increased by £7.9 million in the period to £903.4 million (14 August 2022: £895.5 million).’ It adds that ‘the Group benefits from operating a predominantly freehold estate, with 93% of the pub portfolio owned on a freehold or long leasehold (greater than 50 years remaining lease term) basis.’

• Financial position: The company reports that it ‘generated a net cash inflow from operating activities for the period of £35.2 million (prior year 28 weeks: £23.7 million).’ It says ‘as at the 26 February 2023 period end date the Group had £47.7 million of available liquidity (14 August 2022: £52.6 million), represented by £12.7m of cash balances and £35.0m undrawn against the revolving credit facility.’

Gordon Ramsay Restaurants has reported record revenues of £78.9m for the year to end August 2022, up from £26.2m in FY21. The company reports a loss of £505k.

Vianet Group plc has reported that it ‘has acquired the trade and assets of Beverage Metrics Inc, a Denver, USA based provider of inventory software solutions to the USA hospitality sector.’ It says ‘the initial consideration payable to BMI is £577,500….’

• It says this ‘will be satisfied in the form of the issue of 700,000 new ordinary Vianet shares at a price of 82.5p each with deferred consideration payable dependent on revenue performance metrics. The deferred consideration is 7% of net revenue of VAI for the period 01 April 2024 through 31 December 2028, payable in cash and capped at a maximum of £4 million.’

• Vianet says ‘together with our recent investment in SmartDraught this acquisition positions Vianet’s hospitality operations firmly on the path to growth in the UK and to establishing a profitable footprint in the USA. The management looks forward to elaborating further at the time of our FY 2023 results announcement on Tuesday 13 June 2023.

• Chairman James Dickson says ‘we are delighted to acquire the trade and assets of BMI’ and says ‘this increased presence in the USA together with our evolving strategic relationships will give us a significant boost in growing our presence in what is a huge market, as well as providing us with increased opportunities in our UK hospitality operations.’ He says ‘Vianet has had an encouraging start to FY2024 and looks forward to the future with great confidence.’

JD Wetherspoon CEO John Hutson on Friday sold 18,000 shares in the company at £7.80 to raise some £140k. As at the company’s last balance sheet date (July 2022), Mr Hutson held 196,618 shares in addition to shares under option.

Pernod Ricard is reported to have halted exports to Russia.

The MCA reports that Busaba is to expand its offering into the breakfast day part, with the Thai restaurant chain first trialling the new menu at three of its sites from early June.

MJMK has achieved its £1m crowdfunding target, with the company having raised £732k prior to launching the campaign. The funds will allow the restaurant chain to open Casa do Frango in Victoria this summer and also open a new venue with chef-partner Lastra.

Krispy Kreme reports Q1 net revenue up 12.5% to $419.0m, with adjusted EBITDA up 12.3% to $54.9m….

• Net income fell to $1.6m from $6.5m a year ago. CEO Mike Tattersfield stated ‘Our global Valentine’s Day and St. Patrick’s Day campaigns and specialty offerings such as Biscoff® Doughnuts resonated with consumers, showcasing the opportunities for premiumization as well as the gifting and sharing power of our brand.’

Pernod Ricard has joined ecoSpirits’ $10 million Series A funding round via its venture capital fund, Convivialité Ventures. The circular economy technology startup is committed to developing low carbon, low waste distribution systems for the alcohol industry.

The GMB has approached a business tribunal in a bid to get US retail giant Amazon to recognise it as a trade union. Amazon has refused to grant the union recognition claiming  voluntary recognition is not ‘an appropriate path’.

HOLIDAYS & LEISURE TRAVEL:

Parkdean Resorts UK Ltd has reported its FY numbers for the period ended 31 December 2021 to Companies House. These are dated numbers but the accounts were signed off on 26 April this year, so the comments are current. The company owns and operates 66 holiday parks in the UK under the Parkdean Resorts brand.

The company saw a sharp rebound in revenue YoY and generated an operating profit as the staycation market boomed from ongoing travel restrictions. Despite many pandemic-related restrictions still impacting trade during 2021, it was less severely affected than the period prior. Revenue rebounded to £117.0m from £67.0m the year prior…

• …with the increase driven by strong demand for staycations as well as less time spent in lockdowns compared to the prior period. EBITDA improved to £33.0m during the period from £10.6m in 2020.

• Improved trading conditions meant that Parkdean swung into an operating profit of £17.2m compared to a loss of £3.8m the year before. Operating margin was 14.7% during the period. The company recorded PBT of £17.0m, up from a loss of £4.2m.

PPHE Hotel Group has reported that it ‘is pleased to announce the inclusion of its owned premium lifestyle brand art’otel in Radisson Hotel Group’s brand portfolio, growing this portfolio to ten distinct brands under one overarching umbrella.’ CEO Boris Ivesha says ‘we are continuing to actively develop our premium lifestyle art’otel brand following the recent opening of our first art’otel in London, and we have a number of further exciting art’otel branded properties in our development pipeline.’

Gatwick saw flights diverted yesterday for almost an hour due to suspected drone activity.

Manchester Airport Group reports it handled a total of 4.8 million in April – up 16.4% YoY…

• Within the group, Manchester Airport handled almost 2.2 million passengers last month, up 15% YoY, and Stansted was up 16% YoY to more than 2.4 million travellers. Figures from Manchester airport show a shift in passenger trends in the first week of May with Alicante rising to the top slot, leapfrogging Dublin and Dubai.

Transatlantic air travel is reported to be running at 1.1m seats in the month of May. This equates to some 99% of May 2019 levels. Heathrow has the highest share of scheduled flights from the UK to the US this month.

OTHER LEISURE:

Elon Musk has named Linda Yaccarino, currently at NBC Universal, as the CEO designate at Twitter. Ms Yaccarino is currently

FINANCE & MARKETS:

Official data from the ONS on Friday showed the UK economy shrinking by 0.3% in March but growing by 0.1% in Q1. The prospect of a technical recession (two consecutive quarters of negative growth) is now looking remote….

• Services output fell by 0.5% in March whilst manufacturing rose by 0.7% and construction increased by 0.2%. The ONS says ‘the fall in March was driven by widespread decreases across the services sector. Despite the launch of new number plates, cars sales were low by historic standards – continuing the trend seen since the start of the pandemic – with warehousing, distribution and retail also having a poor month.’

• It adds ‘these falls were partially offset by a strong month for manufacturing as well as growth in gas production and distribution and also in construction.’ The ONS says ‘across the quarter as a whole, growth was driven by IT and construction, partially offset by falls in health, education and public administration, with these sectors affected by strikes.’

• The CBI says ‘the UK economy is proving more resilient than widely expected and it looks increasingly likely that the UK will avoid a recession this year. Underlying momentum appears to be firming, with our surveys showing growth expectations for the quarter ahead creeping back into positive territory for the first time in a year.’

• It adds ‘nonetheless, this is still going to be a difficult year for many UK households and businesses. Whilst we anticipate that inflation will slow rapidly through the summer, higher interest rates will act as a drag on spending. But we are likely to have weathered the worst of the storm, and expect a mild economic recovery in the year ahead.’

Brexiteer Sir James Dyson has said that PM Rishi Sunak’s promise to turn the UK into a science and technology superpower is a “mere political slogan”.

Sterling mixed at $1.246 and €1.147. Oil down at $73.55. UK 10yr gilt yield up 7bps at 3.78%. World markets mixed to better on Friday & London set to open some 16pts better as at 6.30am.

RETAIL WITH NICK BUBB:

• Saturday’s Press and News (1): If you wanted to move on from last weekend’s Coronation overload, you would have found it hard to avoid the newly released picture of King Charles with his son Prince William and grandson Prince George that was plastered over many of the front pages of Saturday’s papers (eg “We three kings”, was the tag-line in both the Daily Mail and the Telegraph). The lead story in the Daily Mail, however, was its claim that 200 firms have supported its campaign to bring back tax-free shopping for overseas tourists, while the Telegraph flagged that India will wage a diplomatic campaign to reclaim the Koh-i-Noor diamond and other treasures from Britain (“India to demand return of colonial treasures”). A dispute between the US and South Africa has deepened, according to the Financial Times, over claims about covert arms supplies to Russia. Elsewhere, UK politics were the
focus, with the i reporting that the former Home Secretary Priti Patel will attack the Prime Minister at a Conservative Democratic Organisation summit of the Tory right-wing on Saturday evening (“Sunak guilty of “managed decline” of Tory party , warns Patel”), whilst the Guardian led with the news that Keir Starmer will say in a speech that Labour needs to be more radical (“Expect Blair-style reforms “on steroids” says Starmer”). The Times highlighted that the Prime Minister’s apparent focus on science and technology is “hot air”, according to a letter to the Times from James Dyson. 

• Saturday’s Press and News (2): In terms of Retail news, the slump in the THG share price on Friday, after it terminated bid discussions with the private equity giant Apollo, was the main talking point in Saturday’s papers, with many highlighting Matthew Moulding’s paranoid ravings on LinkedIn about “market manipulation” and his claims that Apollo wanted majority control of the business (at an unspecified price) and that THG would be worth “billions more” if it de-listed. The FT and the Daily Mail both had fair-sized articles about THG, but perhaps the best overview was in the Times (“THG boss lashes out at market as Apollo talks end”), which also had an article looking behind the story, noting that the activist investor Kelso supported the decision by THG, despite the slump in the share price…

• Saturday’s Press and News (3): The other big Retail focus was on the news that Tesco boss Ken Murphy was paid £4.4m last year (down from £4.75m the year before), despite the surge in food prices, as noted by the Guardian, the Times, the Daily Mail and the Telegraph. The Times also revealed the exact voting numbers in the JLP Council confidence vote on Sharon White’s leadership (“John Lewis staff body shows yellow card to Sharon White”), with 51 of the 61 members criticising her performance last year, but with 42 backing her plans for the new year. And the Guardian had a detailed article about what’s gone wrong at John Lewis/Waitrose (“The sagging shopping experience that needs reviving with a big dose of pizzazz”).

• Sunday’s Press and News (1): On Sunday, the Royal Family again dominated the front pages of the papers, with many featuring photos of Princess Kate playing the piano during the Eurovision Song Contest opening credits…Ludicrously, as she was only on for 10 seconds, the Mail on Sunday trumpeted “Kate’s Eurovision tribute to Ukraine”. “Wales, douze points” was the caption in the Sunday Times, whilst for the Sunday Telegraph she’s the “Princess of Scales”…The main story in the Sunday Telegraph, however, was a report that Labour plans to give millions of EU citizens the vote if it wins the next Election, whilst the Sunday Times led on the news that the nursing union leader Pat Cullen is demanding a double-digit pay rise, “in a U-turn from her previous position”. The turmoil within the Tory Party dominated the front page of the Observer (“Tory anarchy breaks out as revolt looks on Brexit
laws”), which claimed that Rishi Sunak is “losing control”.

• Sunday’s Press and News (2): On Sunday, in terms of Retail news, the Sunday Times continued its focus on the problems of the John Lewis Partnership, with Business Editor Oliver Shah devoting his column to the subject, thundering that “Sharon White and John Lewis are trapped in an unhappy marriage” and noting that the “fudge” over the confidence vote begged an obvious question: “If the past has been a failure, what’s going to make the future a success?”. The Mail on Sunday also had an article about the JLP Council confidence vote on Sharon White’s leadership (“John Lewis boss survives…but massive revolt casts a shadow”), noting that, although next month’s AGM will not be a forum for more grumbling, the JLP Council can vote again in September. The Sunday Times also looked at the problems of John Allan, the Chairman of Tesco (“Trouble in the aisles for the Tesco boss never far from
controversy”), whilst its “Prufrock” gossip column highlighted the rumour that the former IR Director of Morrisons, the former analyst Andrew Kasoulis, is tipped to take up the IR role at Frasers. The Mail on Sunday also flagged that the value of the Tesco pension fund has dived by £9bn, Harold Tillman (“one of the biggest names in British fashion”) has become the latest figure to back the Mail’s campaign to restore VAT-free shopping for tourists and Burberry is expected to report on Thursday that profits jumped by more than a fifth last year (“Boost for Burberry as rich dress to impress”). 

• Sunday’s Press and News (3): In terms of Economics comments in the Sunday papers, we give our usual shout-out to the column by the Sunday Times Economics correspondent, David Smith (“Halving inflation isn’t going to transform Tory fortunes”), in which he noted that “People think a fall in inflation means lower prices, not a slower pace of rises”. We also enjoyed the columns by the veteran City commentator, Jeremy Warner, in the Sunday Telegraph (headlined “Savers have no right to expect an inflation-beating return any more”) and by the veteran Economics commentator, William Keegan, in the Observer (headlined “Now Brexit brings a bitter Tory reckoning at the polls”).

• Today’s News: The Currys pre-close update (for y/e April) upgrades profit guidance, with the group full year adjusted PBT now expected to be £110m-120m (the previous guidance was around £104m) UK trading has been better than expectations, “especially in the final two months of the year”, with LFL sales only 4% down since Christmas. And though the Nordics trading environment remains challenging, with LFL sales down 15% since Christmas, the company says that “under new management we have made progress on margins and costs”.

• Today’s Press: According to the invaluable Guardian morning email briefing, the controversial Home Secretary, Suella Braverman, appears across many of the front pages today. The Guardian itself says “Braverman rejects Tory calls to ease visa rules”. The Telegraph says “Braverman pushes PM to deliver on migrants”, while the i says “Sunak under pressure to get ‘tougher’ on migrants”. The Times reports on comments from the Home Secretary saying migration must be cut under the headline: “Britons will forget how to work, says Braverman”. In other news, the Financial Times reports that “G7 and EU to heap pressure on Russia with ban on reopening of gas pipelines”, while the Daily Mail claims that “Starmer to use EU citizens to ‘rig’ polls”.

• BDO High Street Sales Tracker: We were asked the other day why the weekly BDO High Street Sales Tracker for medium-sized Non-Food chains gets so much attention, given all the caveats we make about it (ie that it is statistically flawed, is focused on relatively upmarket businesses, is very skewed to Fashion and underplays “big ticket” spending). The answer is that it is only the weekly (as opposed to monthly) guide to what’s happening to retail spending…and the latest survey, for what it’s worth, shows that trading was again subdued in the w/e May 7th. This could have reflected the impact of the Coronation weekend diversions, but the recent downturn is beginning to feel like a trend, rather than a blip: Total BDO sales (including a few Homewares and Lifestyle retailers, as well as the Fashion retailers) were down 3.2% LFL on the year before (with Store sales down by 1.7% and Online
sales down by 3.6%), with Fashion sales alone down by 7.5% LFL.

• News Flow This Week: A busy week continues tomorrow with the Boohoo finals, the Greggs trading update and the Land Secs finals. On Wednesday we get the JD Sports finals, the Watches of Switzerland Q4, the British Land finals and the Greggs AGM. Thursday then brings the Burberry finals and the Next AGM, whilst the monthly GFK Consumer Confidence index is out first thing on Friday. Over in the US, it’s a busy week for Q1 earnings from retailers like Home Depot, Target and Walmart, plus JD’s big rival Footlocker (on Friday).