October 10, 2017

Pegler’s market report – 10.10.17: A bumpy ride

As published in the Brighton Argus (10.10.17) Business section under the title Pegler’s Market Report:

A bumpy ride

The pound has had a bumpy ride on fears that Tory MPs will attempt to topple the prime minister, bringing a fresh bout of political instability in the UK. While Theresa May has undoubtedly been the main catalyst behind the pound’s plunge over recent days, some disappointing PMI data from the manufacturing and construction sectors at the start of last week have also been key drivers.

Average prices in the capital have fallen for the first time since the financial crisis, amid fears that the housing market could stagnate when the UK leaves the European Union in 2019. Some economists have predicted that London’s property market will not shake off its slump until 2021, when it will return, once again, to be the fastest growing part of the UK. The prospects of continued uncertainty associated with the Brexit process, coupled with rising interest rates on the horizon, could trigger further adjustments in house prices and moderate growth in most regional markets over the short term.

Airline companies continue to be in the news – following the demise of both Ryanair and Monarch – easyJet retreated as its revenue-per-seat, a key health indicator for airlines, dipped due to the oversupply of seats in the sector.

Investors in the UK’s largest 10-pin bowling company could be about to hit a strike as the company suggested it would return cash to shareholders after its first year on the stock market. Hollywood Bowl said customers had continued to flock through its doors with sales up by 8.9pc in the past 12 months compared to the same period last year. While new openings had helped, management said like-for-like sales for the year to September, which include sites older than a year, were up a healthy 3.5pc.

Nightclub owner Deltic has stepped up the battle for Revolution Bars with a full outline of a counter offer in opposition to a £100m approach by Slug & Lettuce owner Stonegate. Deltic, which owns 57 clubs under brands including PRYZM and Fiction, said in August it planned to scupper Stonegate’s 203p-a-share bid that it made in July for the cocktail bar chain.

There is speculation that Merlin Entertainments, owner of Sea Life in Brighton, is circling iconic theme park operator SeaWorld to step up its overseas expansion. Merlin also manages Legoland, Thorpe Park and Alton Towers, some of the main attractions within the Group’s theme park portfolio. Analysts believe that the company’s track record of turning around underperforming assets would make such an acquisition a good fit.

Finally, Sofa retailer DFS is struggling amid a “very challenging market” as shoppers have become unwilling to splash out on new sofas and a weaker pound has pushed up costs.

By David Pegler, Brighton Capital Management