MARS, GRG, OTB, jobs market, Scotland, retail sales & other:

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A DAY IN THE LIFE:

Do you ever try to get ahead of a problem or do you usually wait for it to slap you in the face and demand your attention?

Does your heating oil run out occasionally or do you have some equation pinned to the kitchen wall dragging in temperature averages, bathtime frequency and rooms-in-constant-use data or, like the rest of us, do you take the variable approach and take the odd slap whilst trying to avoid an out-and-out disaster?

Because I’m definitely in the latter camp.

Because, whilst I try to get ahead of blown tires by changing them when the tread gets a bit dodgy, I’m inconsistent with most other repairs, vehicular or otherwise and I have yet, as far as I can recall, to replace a laptop or a phone before it’s blown up and caused all sorts of problems, stress and the like.

And, talking about stress, the Mighty Hull City managed to turn up last night and Wembley and the most lucrative game in football awaits. No pressure lads. On to the news:

PUBS & RESTAURANTS:

Jobs market:

The EY Item Club has suggested that the UK jobs market will worsen as the year progresses with some 163k jobs net likely to be lost. It says that London will be one of the most directly impacted geographies with around 25k jobs likely to be cut in hospitality & retail…

• Separately, the placement index maintained by KPMG and the Recruitment and Employment Confederation has slipped to 47.5 in April, down from 49.2 in March. KPMG reports that ‘hiring decisions are being deferred, with the rise in temporary recruitment pointing to chief execs taking a more flexible approach to workforce planning.’

• The above has the capacity to both directly impact the spending ability of those losing their jobs and to also less directly impact the decisions to spend of the much larger number of workers who may believe that their jobs are less secure than they would like.

Scotland:

UKH Scotland says that reforming the broken business rates system should be the top business priority for the new Scottish Government. It also calls on the Scottish Government to invest in hospitality skills and ‘create sector-based work academy programmes to help people back into work and ensure Apprenticeship Levy funds support hospitality….’

• Director Leon Thompson says ‘an incoming Scottish Government has a prime opportunity to hit the ground running and take decisive action to fix the decades-old problem that is the broken business rates system.’ He says ‘delivering a fair and prosperous Scotland starts on our high streets and in our communities. Backing the hospitality businesses that are so central to our economy, society and culture should be a priority.’

• Mr Thompson says ‘committing to a lower poundage rate for hospitality would very quickly help to achieve fairer taxation, while giving hospitality the financial headroom it needs to create jobs, drive economic growth and lead regeneration.’ He concludes ‘this is the moment, at the start of a new Scottish Parliament, to send a clear message that Holyrood and the new Scottish Government will back business, back hospitality and back Scottish high streets and communities.’

• And, separately, the Scottish Hospitality Group has called on the Scottish Government to ‘turn to the real issues affecting businesses across Scotland.’ It says ‘hospitality cannot afford to wait any longer. Across the sector, businesses are facing enormous financial pressures, but the issue causing the greatest fear right now in Scotland, is the horrendous non-domestic rates hikes many operators have received.’

• The SHG says that ‘some businesses are facing increases of between 400 and 500%. These are not manageable rises; they are potentially business ending.’ It concludes that ‘the easiest and fastest way to stop businesses going to the wall is to follow the leadership shown in Northern Ireland and halt the revaluations immediately, and call an emergency summit.’

Retail sales:

The BRC-KPMG Retail Sales Monitor has reported that UK Total retail sales decreased by 3% year on year in April, against a growth of 7% in April 2025. It adds that ‘food sales decreased by 2.5% year on year in April, against a growth of 8.2% in April 2025’ and says that ‘non-Food sales decreased by 3.3% year on year in April, against a growth of 6.1% in April 2025….’

• BRC CEO Helen Dickinson says ‘April’s sales fall was largely driven by the Easter shift, with food hit hardest. But weak consumer confidence also played a role as fears about the Middle East conflict driving up living costs led shoppers to rein in. Big-ticket purchases fell, with the recent recovery in furniture losing steam, and uncertainty around summer holidays hitting discretionary spend. With the World Cup coming, retailers hope it will provide a lift, and early signs show demand for TVs and sound systems picking up.’

• And KPMG adds that this was ‘a disappointing April for the retail sector, even factoring in an earlier Easter shifting some spending into March. Bar marginal growth for beauty, health and jewellery, retail sales fell across all other categories.’ It says ‘consumer confidence has been further dampened by rising prices due to the Iran conflict, with consumers cautious about potential ongoing effects.’

• Re the Food & Drink sector performance, Sarah Bradbury, CEO at the IGD, says ‘the impact of food price inflation is increasingly split by income, as lower income households are already feeling the impact of higher fuel costs and remain highly value focused, while higher income shoppers are more insulated, supported by elevated market interest rates and the upside for savings.’

Other news:

Various import bans imposed by Canadian provinces have led to a 63% drop in US exports of alcoholic products to the country. Chris Swonger, president and CEO of the Distilled Spirits Council of the United States, says that ‘President Donald Trump’s tariffs have prompted retaliatory action, particularly from the European Union and Canada, which has hurt the U.S. alcohol industry.’

MARSTON’S H1 NUMBERS

Marston’s has this morning reported H1 results for the 26 weeks to 28 March 2026 and our comments thereon are set out below:

Headline numbers:

• Marston’s reports revenue down 1.1% on an underlying basis at £422.7m. EBITDA is level at £85.9m and PBT is up 7.9% at £20.5m.

• MARS reports basic EPS up 9.1% at 2.4p and, as last year, there is no dividend.

• The NAV per share is up 19.6% at 128p.

• The group reports that LFL ‘sales for the half year were ahead of the market but down 0.5%.’

• The company had previously reported on a strong Christmas period and said at its Q1 update that ‘sales for the 17 weeks have remained resilient, with performance tracking in line with the prior year and continuing to outpace the total market.’

Strategic issues:

• MARS reports that its ‘adjusting for the impact of closure periods at new format pubs, underlying EBITDA was £2.0 million higher than H1 2025, and the underlying EBITDA margin was 20.7%, up 60 basis points.’

• It reports that ‘underlying operating profit increased to £64.4 million (H1 2025: £63.3 million) and underlying profit before tax increased to £20.5 million (H1 2025: £19.0 million), highlighting the strength of the Group’s operating model.’

• Some 60 new pub format refurbishments were completed in the H1. This is ‘ahead of the initial target of at least 50 for the year. In total, 91 pubs have now been reformatted across FY2025 and FY2026.’

• MARS says that ‘all new formats performing well, delivering average ROIC of 35% and like-for-like growth of approximately 20%, with formats enhancing guest experience, increasing spend per visit and accelerating digital adoption.’

Outlook:

• MARS reports a ‘strong summer trading outlook’ and says that it is ‘well positioned for H2.’

• The company says trading will be boosted by the ‘significant opportunity presented by the World Cup with all 91 newly invested sites now open and trading for the duration of H2.’

• It says that ‘LFL sales for the 31 weeks are down 1.5%, reflecting an extremely strong April last year.’

• MARS reports that ‘continued investment in our new pub formats is driving improved returns with the Group actively evaluating an expanded rollout programme of c.100 sites for FY2027’ and says that ‘cost discipline expected to support continued margin progression with good visibility; energy costs well managed, with electricity hedged to the end of FY2026 and gas through FY2027.’

• The company adds that we ‘remain on track to deliver >£50m recurring free cash flow target, supporting balance sheet strength; leverage on track to reduce to around 4.0x by year end.’

• Overall, the ‘Board remains confident in delivering full-year market expectations and in continuing to make progress against the targets set out at the Capital Markets Day.’

Company comment:

• CEO Justin Platt says ‘we have made excellent strategic progress in the first half, delivering a strong profit performance underpinned by further margin expansion.’

• He says ‘our disciplined operating model continues to drive efficiencies across the business, while enabling our hardworking local pub teams to focus on delivering great experiences for our guests every day.’

• Overall, ‘our pub investment strategy is performing particularly well, with 60 new pub formats launched during the year, significantly ahead of our original target. These new format pubs are proving incredibly popular with guests while delivering very attractive commercial returns.’

• Mr Platt concludes that ‘looking forward, we are very well positioned for the World Cup summer ahead and expect our pubs, especially our new Grandstand formats, to be in high demand.’

• He says ‘against this backdrop, we are encouraged by the outlook for H2 and remain on track to deliver full‑year market expectations.’

Langton Comment:

• Marston’s, having exited its brewing JV with Carlsberg in July 2024, is now a focused, largely-freehold-based, pub retailer.

• Debt is falling and, in addition, its long term and fixed rate financing now looks good value as interest rates have risen.

• Inflation has abated. MARS has earlier this year succeeded in improving margins and it has previously confirmed that there is more to go for.

• Marston’s shares hit a multi-year high of nearly 70p at the beginning of this year but they have since surrendered more than a quarter of their value as the company pointed to flat sales to date at its Q1 update in January.

• The group has today confirmed that LFL sales are tracking behind last year but it maintains that it is outperforming the market.

• At its FY numbers, MARS alluded to a recommencement of dividend payments but, as last year, there is no dividend at the half year.

COMPANY NEWS:

The Coppa Collective has reported a rise in like-for-like sales and group revenue in its half-year trading update, reports Restaurant Online. The group saw a like-for-like sales growth of 3.2% in its core Coppa Club brand for the 26-weeks to 29 March 2026, with group like-for-like revenue rising to £25m, up from £24.7m….

• CEO Mark Loughborough says the growth is down to ‘the strength of the model: a clear offer, all-day relevance and good execution in a tough environment’. He says ‘we see a good pipeline of opportunities and will stay disciplined on both quality and terms as we look to grow. While there are some known headwinds in the second half, we are well prepared for them and remain confident in the direction of the business.’

Insolvency Insider reports that Las Iguanas, the Latin American-themed restaurant chain owned by private equity-backed Big Table Group, ‘has launched a restructuring plan aimed at eliminating approximately £37 million in loan note liabilities and resetting lease obligations across its UK estate.’

Wahaca chair Mark Selby, who has transitioned to the role from that of CEO, has told Restaurant Online that his successor, Gemma Glasson, ‘ticks every box…’

• He says ‘she’s gone through every element of the business’ and adds ‘her background is in accounting, which is great for the financial side, but she also really knows how to communicate and motivate people.’

Terroirs & Vignerons de Champagne has announced the appointment of Yann Bourigault as General Manager of Castelnau Wine Agencies UK. It says that Bourigault, who ‘brings more than 25 years’ international wine and Champagne experience’ to the role, will ‘lead the development of Champagne Castelnau and its on-trade presence in the UK.’

COMPASS GROUP – H1 RESULTS:

Compass Group yesterday reported H1 numbers. The shares finished trade yesterday around 2.3% higher. Our fuller comments below:

Headline numbers:

• The company, which now both reports results and denominates its shares in US$, reports that revenue on an underlying basis (stripping out currency effects) rose by 9% to $25.0bn.

• Operating profit was up 12% at $1.839bn and EPS was up by a similar 12% at 72.8c.

• The company is announcing a 13% hike in its dividend to 25.5c.

Outlook:

• Compass reports that it is ‘raising 2026 underlying operating profit growth guidance from around 10% to above 11%.’

• The company says this is ‘driven by organic revenue growth of around 7%, around 2% profit growth from M&A and ongoing margin progression.’

• CPG says ‘longer term, we remain confident in sustaining mid-to-high single-digit organic revenue growth, ongoing margin progression and profit growth ahead of revenue growth.’

Cash-flow, debt & shareholder returns:

• Compass reports that its ‘capital allocation framework is clear and unchanged’.

• It says it will ‘invest in the business to fund growth opportunities, target a strong investment-grade credit rating with a leverage target of around 1-1.5 times net debt to underlying EBITDA and pay an ordinary dividend, with any surplus capital being returned to shareholders.’

• The company says it aims to ‘pay out around 50% of underlying earnings through an interim and final dividend, with the interim dividend reflecting around one-third of the total annual dividend.’

Company comment:

• CEO Dominic Blakemore says ‘we’ve delivered a strong first-half performance, with underlying operating profit up 12%1, enabling us to increase our full-year profit guidance.’

• He says ‘we have great momentum across the business, driven by excellent new business wins, high levels of client retention and margin progression in both regions.’

• The CEO adds ‘we continue to invest in our competitive advantages – our sectorised model, purchasing scale and technology capabilities.’

• Re strategic issues, Mr Blakemore reports ‘recent acquisitions, including Vermaat in the Netherlands and Pro Care Management in Germany, further enhance our European platform, supporting long-term, sustainable growth.’ He says ‘by deploying data, technology and AI, we are operating more effectively and consistently at scale, improving decision-making and execution across the business.’

• As regards the rest of the year, the CEO says ‘for 2026, we now expect underlying operating profit growth above 11%1, underpinned by organic revenue growth of around 7%, around 2% growth from M&A and ongoing margin progression.’

• Mr Blakemore concludes ‘looking further ahead, we remain confident in our ability to sustain mid-to-high single-digit organic revenue growth, ongoing margin progression and profit growth ahead of revenue growth.’

Langton comment:

• A glance at the charts, particularly the five-year chart, brings home the fact that many investors believe that CPG has recovered all and more of the ground it lost to the Covid pandemic when many of its customers effectively shut down.

• Some did not, of course, but the recovery, though there has been a recent pull-back, remains extremely impressive.

• As mentioned, having hit their all-time highs in February last year, the shares are currently trading at around 20% below that level. Whilst the price in Q1 last year may have been stretched, this is not an insubstantial drop.

• Contracted income, an area where CPG operates, is deemed to be – and almost certainly is – of a higher quality that walk-in revenues.

• We have focused on underlying numbers above. Givent that the reporting currency, the US$, has been weak, reported numbers show a more impressive rate of growth.

• Overall, and even after their drop, Compass Group’s shares are not cheap on most measures. There is little room for disappointment but, on today’s numbers, the company remains able to outperform vs estimates.

• The group raised c£2bn in new equity in May 2020 at what now looks like the extremely low price of 1025p per share. It has since bought some shares back but the share issue still means that EPS growth will lag that in profits.

• CPG remains an excellent company. It’s shares, whilst rarely cheap, may now offer some value.

HOLIDAYS & LEISURE TRAVEL:

Overseas holiday prices may fall, reports the FT. It says that ‘airlines across Europe are cutting prices for summer flights to counter a delay in bookings, as customers worry that jet fuel shortages will disrupt their holiday plans….’

• This is interesting as it raises a number of possibilities, several of which are hurtful in terms of business margins for holiday and flight providers. Consumers, for example, may be right. There may be a shortage of aviation fuel, in which case its price may rise further and, having sold flights at discounted rates, airlines could see their margins squeezed.

• The FT reports that ‘prices dropped by 10 per cent or more for 15 routes, including from Heathrow to Nice, Manchester to Palma and Gatwick to Barcelona. They fell by as much as 44 per cent for flights between Milan and Madrid.’ It adds that ‘on routes where prices rose, the changes were less significant. Price falls of 20 per cent or more were recorded on eight of the top 50 routes, while only two routes saw price rises of the same magnitude.’

Safestay has announced the appointment of Davide Caschili to the Board of Directors of the Company as Chief Operating Officer. It adds that ‘Davide Caschili has more than 25 years of hospitality experience, with a strong track record in hostel and hybrid hospitality operations across the UK, Italy and the US.’

Heathrow has reported that passenger numbers fell by 5.3% last month largely, it says, as a result of the conflict in the Middle East….

• CEO Thomas Woldbye says ‘while we have seen some short‑term disruption linked to the Middle East conflict, demand for travel remains strong with current fuel supplies stable.’ The company maintains that ‘underlying demand remains resilient.’

OTHER LEISURE:

Sky News reports that Vue, Europe’s largest cinema operator, ‘has appointed investment bankers to manage a sale or stock market listing which could value it at close to £1.5bn as it anticipates a summer box office bonanza.’

The FT reports that a stake sale has valued Barry and Eddie Hearn’s sports empire at more than £1bn….

• The FT notes that Sports investment firm Bruin Capital ‘has bought into Matchroom Holdings, whose interests range from professional darts and boxing to snooker and pool.’ Bruin now has a 15% stake.

The BBC reports that TikTok is introducing a subscription charge for UK users who do not want to see adverts on the platform.

FINANCE & MARKETS:

Sterling mixed at $1.3584 and €1.1555. Oil a shade lower at $104.74. UK 10 year gilt yield up 9 basis points at 5.00%. World markets up yesterday but London due to open down around 58 points as at 6.30am.

RETAIL WITH NICK BUBB:

Nick is taking a short break. But see Pubs & Restaurants above for the latest BRC-KPMG Retail Sales Monitor.