Langton Capital – 2023-09-18 – PREMIUM – Amber Taverns, ART, C Parcs, TUI, train strikes, insolvencies etc.:
Amber Taverns, ART, C Parcs, TUI, train strikes, insolvencies etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: Well, I got the grass cut yesterday and, not that I want to wish the summer away, I won’t be sorry if that’s the last time before April next year. Because being bumped and shaken for two hours isn’t much of a way to spend a Sunday and, as the thing’s too noisy to listen to podcasts or anything else for that matter, it’s boring into the bargain. And it’s chucking it down up here at the moment but anyway, enough of that. It’s the beginning of another scintillating week in the world of leisure so, without further ado, let’s move on to the news: PUBS & RESTAURANTS: Pavement licenses: The City of London Corporation has agreed to extend pavement licences to hospitality businesses, up to September 2024. There are currently 176 live licences, all of which are expected to reapply using the extended provisions…. • Chairman of the City Corporation’s licensing committee James Tumbridge says ‘as footfall continues to rise post-pandemic, ‘al fresco’ dining has made a fantastic contribution to the buzz in the City as visitors, workers and residents enjoy the numerous dining options we have to offer.’ • He adds ‘our vision for the Square Mile’s vibrant offer is to maintain this liveliness. We want to ensure our premises can where it is appropriate make use of the outdoors. Extending these licences is just one of the many ways we are supporting business.’ Selling prices: The MCA reports that prices at QSR restaurants have increased significantly since 2020, with the price of a McDonald’s Big Mac up 64%, a Subway Italian BMT up 61% and a fish finger wrap up 51% at Leon…. • Subway says ‘Subway restaurants are independently owned and operated. Each franchisee makes their own pricing decisions to ensure their viability within a trade area.’ It says ‘on average, across our menu, prices for Subs have increased by 22% between 2020 and 2023. This increase is largely set against market pressures, with food inflation costs on average increasing by 26% between 2019 and 2023.’ • McDonald’s comments that the prices quoted ‘could not be said to represent our broader estate.’ It says ‘we don’t have a definitive list of prices as ultimately, franchisees decide these on a restaurant by restaurant basis’. Trading: CGA has updated on weekly drink sales saying that these leapt 16% due to the good weather. CGA says ‘Britain’s early-September heatwave helped Britain’s On Premise to double-digit drinks sales growth last week.’ It says overall drink sales were 16% ahead of the same period in 2022 ‘as consumers flocked to pub gardens and terraces’…. • The number is comfortably ahead of inflation and splits as to cider, which is very weather sensitive, up 64~%, beer up 19%, soft drinks also up 19%, wine up 2% and spirits up 1%. The latter two categories seem to be trailing inflation. • CGA says this was ‘a very welcome boost to sales after growth of just 1% in each of the previous two weeks.’ It makes the point that ‘long drinks’ did particularly well. Jonathan Jones says ‘after dismal weather through August and weeks of flat sales, last week’s sunshine was a great relief for operators and suppliers.’ • Mr Jones says ‘as we would expect, it was a particularly stellar week for pubs with outdoor spaces and beer and cider brands. As the temperatures drop and we move towards the last quarter of 2023, where like-for-like sales growth will be less impacted by weather, this flurry of sales will hopefully provide some momentum for trading.’ DesignMyNight’s city survey has suggested that a half of Millennials in the UK say that drinking and dining out are ‘essential spend’. It adds that 46% of people of all ages would happy to spend up to £60 on a meal and says that 83% of respondents have changed their spending habits due to the cost of living crisis…. • DesignMyNight’s Katie Kirwan says ‘the going may be tough right now, but going out remains important to our audience across all price points. While we’ve seen that a demand for affordability is propping up the industry, quality of spending is equally as important, and people aren’t willing to sacrifice their money for the mediocre. ‘ • Ms Kirwan says ‘hospitality’s run of it post-covid has been difficult, but our consumer survey has shown that shared experiences are still there to be catered to, and that with over 50% of millennials seeing drinking and dining as a necessity, a cost of living crisis isn’t going to hold the industry back.’ The consumer: A KAM survey shows that 34% of people say they are planning to spend less this year in pubs and restaurants over the festive period this year, with around 49% saying they will visit a pub or bar or restaurant over the period. Over 39% of people said they will definitely be visiting a hospitality venue with 12 or more people. Insolvencies: The Insolvency Service has published its monthly numbers for July. This has been running on a monthly basis since Covid impacted in Q1 2020 and is intended to give an almost-real-time signal as to how the economy is performing. In August 2023, there was a total of 2,308 registered company insolvencies across England and Wales, 112 in Scotland and 12 in Northern Ireland…. • The numbers are up for the most part on July. In that month, there were 1,727 insolvencies in England & Wales, 97 in Scotland and 13 in Northern Ireland. Numbers have edged back up again having fallen in June and July. They remain well up on last year. • We remain of the belief that creditors are more active. The HMRC has presented more winding up petitions than it has in recent years and is deemed to be the main driver of the rise in compulsory liquidations. • It is likely also that, with interest rates much higher than they were pre-pandemic and with landlords having to pay interest on their own debt-piles, landlords may be likely to take action against debtors as well. With the Treasury short of cash and interest rates unlikely to fall any time soon, this may be set to continue. Comments welcome. Train strikes: The Aslef union said its members at 16 train companies in England would walk out on 30 September and 4 October. In addition, an overtime ban for drivers will take place on 29 September and for five days from 2 to 6 October. Other news: National Pubwatch (NPW) has launched its latest range of free information films to help licensees and pubwatches, including several short films offering free advice and help on a range of challenging issues such as whether Pubwatch membership should be a condition of a licence to how to promote The Ask for Angela initiative. Demographics: Estate agent Hamptons has reported that rising interest rates have kept would-be buyers out of the property-owning marked and have forced up rents. It says residential rents across Britain are rising at their fastest on record and are up around 12% on this time last year…. • Hamptons says ‘each passing month has ushered in a new rental market record.’ It adds ‘rents have risen more in the last 12 months than they did between 2015 and 2019. While the current pace of rental growth is unsustainable long term, many mortgaged landlords are being squeezed just as tightly as tenants.’ COMPANY NEWS: The MCA reports that Amber Taverns is open to new equity investment, with the group open to acquiring packages of pubs should the right opportunities arise. CEO James Baer said ‘The key for us, is obviously there has to be a plan, and we would like to grow by 12, 14, 16, 18 pubs a year – but the most important thing is to get the right pubs….’ • Mr Baer says we have a solid pipeline. We have a solid track record. That’s the core of what we do. If there’s an opportunity on a larger scale, then we look at that and consider that.’ He adds that sites are available, saying ‘people with empty properties 18 months ago, who thought they’ll just tough it out, are suddenly finding that if they owe money on those empty sites, there’s a lot more pain. They are being more realistic in asking prices for those properties.’ The Artisanal Spirits Company, which curates a number of single-cask and limited-edition whiskies and owns The Scotch Malt Whisky Society, has reported H1 numbers to end June saying that revenue rose 3% to £10.2m ‘with growth momentum gained in Q2-23, delivering +7% growth following a relatively flat Q1.’ The company reports ‘SMWS membership growth of 9% vs H1-22, with double digit growth in Europe, US, Japan and Franchises.’ It says ‘China also returned to membership growth through Q2, with membership up +8% vs H1-22.’ The company reports an adjusted EBITDA a loss of £1.8m against a prior year EBITDA loss of £0.3m. The group reports a loss before tax of £3.5m against a loss last year of £1.4m…. • CEO Andrew Dane reports ‘we are pleased to have achieved year on year revenue growth, particularly within the context of challenging macroeconomic headwinds in some of our key markets and cost of living pressures.’ He says ‘as we look ahead to trading in the balance of the year, despite the ongoing macroeconomic backdrop, we remain focused on delivering EBITDA at the consensus level, with the continued premiumisation trend, our expanding, loyal and engaged membership base and diversified global business model supporting our growth ambitions.’ Meal-kit delivery service Gousto cut 100 jobs at the end of last year, as the company falls short of its 2020 target of creating 1,000 new jobs by the end of 2022. Heineken plans to build a new €430m brewery in Mexico’s Yucatan state, creating 2,000 jobs. A spokesperson for Heineken said the new brewery will also ‘operate with minimal waste and utilise renewable energy sources through advanced processes, equipment, and technology’. MadaLuxe Spirits, a MadaLuxe Group Company, has acquired a majority of the UK-founded Tequila Enemigo brand. MadaLuxe Spirits is North America’s leading luxury distributor. Marks & Spencer is rolling out paper bags in all of its stores in a bid to cut plastics use. Supermarkets Morrisons, Waitrose and Aldi all use paper bags for customers, though some stores offer plastic bags as an option. HOTELS & LEISURE TRAVEL: Sky reports that the owner of Center Parcs’ operations in Britain, Brookfield Property Partners, is in talks with some of its own investors about the sale of a stake in the holiday resorts chain. It quotes a City source as saying the talks are understood to be at a preliminary stage, and may not lead to a deal. TUI is to open its first hotels in China. The group plans six units as a part of a pipeline of 23 new hotels across four continents. Eurocontrol has reported that the number of flights across European airspace was at 93% of pre-Covid 2019 levels in the first 12 days of September. Gatwick Airport had to cancel flights on Thursday due to a shortage of air traffic controllers. The National Air Traffic Services (Nats) apologised for its staffing shortages…. • This caused an understandably angry response from operators. Ryanair Boss Michael O’Leary said ‘It is unacceptable that more flights and hundreds of passengers are suffering delays to/from Gatwick Airport due to Nats CEO, Martin Rolfe’s blatant failure to adequately staff UK ATC.’ EasyJet CEO Johan Lundgren said the lack of staff had ‘plagued the industry and repeatedly let down customers all summer…Immediate action must be taken to fix the staffing shortages now while a more wide-ranging review examines broader issues to ensure Nats delivers robust services to passengers now and in the future.’ OTHER LEISURE: Apple is to modify its iPhone 12 in France after radiation concerns were raised in that country. The phones will remain unchanged in other territories. TikTok has been fined €345m by Ireland’s data watchdog following an investigation into how the social media platform processed children’s data. The DPC ruling described how child users progressed through the sign-up to the TikTok platform in such a manner that their accounts were set to public by default. Everton Football Club owner Farhad Moshiri has agreed to sell his 94% stake to American investment fund 777 Partners. The takeover would mean half of the 20 top-flight clubs are now American-owned. FINANCE & MARKETS: Public confidence in Andrew Bailey’s Bank of England is reported to have fallen to a record low as questions have been asked over its forecasting and handling of the economy…. • Ipsos says that 40% of respondents in its recent poll believed that the Bank was doing a bad job in its attempt to control inflation, Only 19% were happy with its performance. The net satisfaction rating of minus 21% is the lowest since at least 1999. • Langton. The Bank is likely to raise interest rates to 5.5% this week and the fact that consumers are being hit in their pockets could have helped drive dissatisfaction with the Bank’s performance. The Daily Mail quotes Interactive Investor as saying the Bank ‘has come under fire for failing to predict the scale and persistence of inflation. Market sentiment suggests that the Bank is odds on to increase interest rates to 5.5 per cent next week in a bid to further curb price increases.’ Rightmove reports that over a third of homes currently for sale have had at least one price cut whilst on the market. This is the highest proportion recorded in more than a decade. The size of the reduction, averaging 6.2%, is also the largest since January 2011. Sterling weaker at $$1.2392 and €1.1615. Oil unchanged at $94.47. UK 10yr gilt yield up 8bps at 4.36%. World markets broadly better on Friday but Far East mixed in Monday trade. London set to open around 17pts lower. RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): The front-page headlines in Saturday’s papers were pretty varied: the Guardian highlighted that “’Mass campaign ‘needed to curb unhealthy living”, whilst the Telegraph went with “Murdoch team told Sunak not to quit over partygate”. The Times noted that “PM rejects reprieve for petrol cars” and the Daily Mail ran with “Labour’s 20mph limit is beyond insane”. The FT focused on the Government’s so-called industrial strategy”, with an interview with the Chancellor: “Hunt rules out US-style subsidies”.
• Saturday’s Press and News (2): In terms of Retail news on Saturday, the Games Workshop update got a fair amount of coverage, eg the Times flagged that “Games Workshop marches on after latest launch”, whilst the FT noted that “Warhammer maker surges”, after the c11% jump in the share price on Friday and the prestigious Lex column in the FT gave the company prime billing, dubbing it a “model stock” and concluding that “The market eagerly awaits Warhammer film rights, which could yield yet another pleasant surprise”. The FT also had a detailed article looking at why Wilko couldn’t be saved (“Wilko falls victim to litany of legacy problems”), noting that the “barriers to saving the discount chain included cost of running its infrastructure systems”. The Guardian had a feature article about the problems of Superdry results, noting the view of Julian Dunkerton that any fashion business has • unday’s Press and News (1): On Sunday, most of the front-pages focused on the allegations about the comedian Russell Brand in the Sunday Times, but the Observer’s main headline was “Labour wants new EU links in a reset of foreign policy”, whilst the Sunday Express went with the boom in private healthcare: “Million ditch crisis-hit NHS and go private”. • Sunday’s Press and News (2): On Sunday, in terms of Retail news, the Sunday Times flagged on its Business section front-page that Wilko staff face pension cuts after the company pension fund fell further into deficit, as well as noting that British Land is preparing a £750m sale of its flagship shopping centre in Meadowhall in Sheffield. The Sunday Telegraph had a hard-hitting Business editorial about JLP and Sharon White (“John Lewis boss should quit to save staff model”), thundering that “Sharon White is not up to the task of turning around the retailer and must make way for someone with more experience”. • Sunday’s Press and News (3): In terms of the Economics comment columns in the Sunday papers, we give our usual shout-out to the column by the Sunday Times Economics correspondent, David Smith (headlined “A pause that refreshes is the Bank’s best option”), in which he noted that “Older households are celebrating the highest rate on savings for years”. We also enjoyed the columns by the veteran City commentator Jeremy Warner in the Sunday Telegraph (headlined “Britain cannot follow blundering Von der Leyen into protectionism”) and by the veteran Economics commentator William Keegan in the Observer (headlined “We must tax and spend. Who will tell Labour’s leadership?”).
• Today’s News: There is no news on mainstream retailers this morning, but the world of Motor retailing will be interested to hear the complicated deal announced by Pendragon (best known for its Evans Halshaw and Stratstone brands). The plan is to sell the UK Motor Division to Lithia Motors, one of the largest automotive retailers in North America, for £250m, then distribute the proceeds to shareholders by way of a cash dividend. Pendragon and Lithia Motors have also agreed the terms of a strategic partnership with Lithia, including the rollout of Pinewood, the company’s dealer management software business, to Lithia’s existing 50 UK sites and the creation of a joint venture to accelerate Pinewood’s entry into the highly attractive North American DMS market. As part of the transaction, Pendragon’s Pinewood division will become a standalone entity, retaining Pendragon’s existing listing • BDO High Street Sales Tracker: The weekly BDO High Street Sales Tracker for medium-sized Non-Food chains still gets plenty of coverage (even though it is statistically flawed, is focused on relatively upmarket retailers, is very skewed to Fashion and underplays “big ticket” household spending), because…it is the only 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 wilted in the heat at the beginning of September. In the w/e Sept 10th, Total BDO sales (including a few Homewares and Lifestyle retailers, as well as all the Fashion retailers) were down by 4.2% LFL on the year before (with overall Store sales down 4.7% LFL and overall Online sales down by 3.1% LFL), with Fashion sales alone down by 6.9% LFL. • This Week’s News: There is quite a lot happening this week, kicking off tomorrow with the Kingfisher interims, the Ocado Retail Q3 update, the Moonpig AGM update, the Naked Wines finals and the latest monthly Nielsen grocery sales. Wednesday then brings the Frasers AGM, the Dunelm AGM, the Games Workshop AGM and the QUIZ AGM. On Thursday we then get the much-awaited Next interims and JD Sports interims, as well as the DFS finals and the latest MPC interest rate decision. Friday then brings the latest monthly GFK Consumer Confidence index and the ONS Retail Sales figures for August. |
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