Langton Capital – 2015-09-17 – Daily Wrap: SAB Miller, Merlin, London trading, UK wages & other:
Leisure Wrap & Other:So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details: Fed meeting, US interest rates: • Just in case anyone had forgotten, the US Fed concludes its 2dy meeting tonight & will announce its September interest rate decision during the night, our time. • Inevitable and a long time coming but the world may be a different place in the morning. • Interestingly US markets closed at 4wk highs on Weds night. SAB Miller, acquisitions in general: • A sage market commentator today opined ‘the prospect of a global mega-merger (SAB Miller/AB InBev) did no harm to the mood yesterday’ • He went on to say ‘such demonstrations of corporate confidence despite recent volatility can play an important role in rebuilding sentiment.’ • And this is true unless it is not. • Because mergers can also be driven by the desire to cut costs which itself may be driven by the fear that growth is slowing. • With this in mind, we observe that the international brewers had been banging on about EM growth for ages but now they’ve stopped. Merlin Q3 update – read-across for leisure in general: • Putting the accident & global growth opportunities to one side, Merlin, which hosted a Q3 update meeting earlier today, made a few interesting observations that have implications for leisure as a whole. o It said that London visitor numbers from the EU were down on the back of the weak Euro (strong Sterling). o They are also seeing ‘less domestic visitation’ in London – the implication being that more people were abroad on holiday in August. We would expect TCG and TUI to be upbeat when they report on Q4 on 24 Sept and 1 Oct respectively. o The group’s Gardaland (Italy) site was extremely busy & MERL suggested that some of the foreign visitors, predominantly Germans, visiting the site, may have visited London were Sterling not so strong. o The group’s Midway attractions performed more strongly in the UK’s regions than they did in the Capital. Thoughts on London: • Merlin has suggested that overseas visitor numbers are down. • London pubs are still busy. This is intuitively reasonable as overseas visitors may have made their absence felt more re the London Eye than they did at the Dog & Duck. It’s a culture thing. • The same can’t be said for some London restaurants. Tourists eat. And a smaller number of tourists will eat less than a larger number would have done. • Add to that capacity is going on. • This may end badly but, as we have commented on other occasions, at the micro-level, new entrants cause more trouble for incumbents (and the total market) than they do for themselves. Immediate spending power & longer term inflationary pressures: • UK wages are on the up. We’re reliably informed that the +2.9% YoY annual growth rate (ex-bonuses) recorded in the three months to July was the fastest recorded rate of wage growth since February 2009. • Inflation is at zero percent – so it doesn’t take a genius to work out that real wages are also increasing by 2.9%. • And, whilst cheaper commodity prices are captured in the 0% inflation figure mentioned above, the reduction in commodity prices impacts every-day items more directly than may be imagined. • Every day price reductions feature re utility costs, petrol, food and the like whilst areas of highest-inflation (or at least lack of deflation) will be areas heavily dependent upon labour costs. • These include contracts for personal service etc. such as hairdressers, taxis, plumbers, private school costs and the like – and these don’t have quite the same immediate impact upon the wallet (at least mentally) as does cheap petrol & milk. • More cash in various pockets should feed through to affordable treats by the end of the year. Currently, larger-ticket items are taking more than their fair share. • Longer term, of course, currency moves (strong Sterling) & cheap commodity prices may both reverse. • This could coincide with locked-in wage rises of 3% to 5% and inflation could re-emerge – but it has to be said that, at the moment, there is virtually no signs of this happening. Random information, hopefully not all of it useless (re most leisure operators etc.): • Oil near $50. Represents a rise over the last few days but still has to be put in context, the black stuff is down around 48% over the last 12mths. • Foodstuffs: Cocoa quite pricey, corn prices off the bottom but red meat prices, after holding up v white meat costs for some time, are now through the floor. • Punch aiming to sell a Camden pub for £2.5m. Suggests that there are still a few gold bricks knocking around. We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance): 1. SABMiller now in play. SAB will comment no later than 14 Oct whilst AB InBev is working toward agreement from SAB board. a. SAB + ABInBev would create a giant. Keep advisers busy for years + plenty of scraps from that table to keep others happy, too. 2. Punch pubs Camden town site on market for £2.5m + Conviviality confirms Matthew Clark sale should complete on 7 Oct a. Punch Taverns tweaking management team ahead of its strategy update with regards to the MRO Act this Nov says M+C 3. Savills says number of leisure occupiers that have expanded out of London has significantly increased over past 2yrs 4. A study by the University of Cambridge suggests restaurants and supermarkets should reduce their portion sizes to tackle obesity 5. Health professionals say that Public Health England’s comments on relative safety of vaping were ‘extraordinarily flimsy’ 6. Loungers to hit 70 sites in UK this week. Aims for 75 by year end and 100 some time in 2016. 7. Data from ZenithOptimedia’s Advertising Expenditure Forecasts shows the increasing importance of mobile advertising for brands 8. Thomas Cook shares rallied yesterday on speculation that the travel group could get bid for by Chinese investor Fosun. 9. STR data shows London hotel occupancy fell 1.8% in August to 85.4%. RevPAR increased 2.4% to £120.90. 10. Merlin Q3. Says achieved ‘growth despite challenging trading in Resort Theme Parks’ + is making ‘continued strategic progress’ a. MERL Q3: LfL growth 2.6% at Midway, 6.7% at Legoland but down 11.4% at Theme Parks. Group +0.3% LfL b. MERL Q3: Total growth 7.6% at Midway, 8.7% at Legoland but down 9.1% at Theme Parks. Group total +3.8% c. MERL Q3: Is ‘in line with revised expectations over the summer period’ with the accident + Sterling strength a negative. d. MERL Q3: Group says ‘while near term challenges remain, the Group is making good overall progress on its growth strategy.’ e. MERL outlook: Expects 2015 PBT to be in line w. last year. Accident has it a year’s growth but major progress beneath surface 11. Household spending power is rising thanks to the rapid acceleration in real wage growth brought about by the UK’s 0% inflation a. Jobs data ‘paint a mixed picture’ says David Kern at BCC. Unemployment up slightly but real wages more firmly in growth b. Bank sends mixed signals: Mark Carney told parliament the situation will be clearer by next year, others more hawkish. c. US consumer prices fell 0.1% in August due to falling petrol prices and a strong dollar, marking the first drop since January. |
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