Langton Capital – 2015-09-17 – SAB Miller, Merlin, Thomas Cook, Conviviality & other:
A Day in the Life:Follow us on Twitter at either @langtoncapital or @brumbymark. So I keep being asked if I’d like to load Windows 10. In response I wonder 1) what happened to Windows 9 and 2) just how much spyware has MS installed in my computer that it can pop up with such suggestions more than a year after I bought the laptop to which it is referring? I mean I’ve kind of got my head around the fact that MS (and Google for that matter) put the CIA, MI6 and the FSB to shame and I would hit the install button but for the fact that, like Pavlov’s dogs, I’ve finally learned from my experiences re IT and know that downloading anything to replace something that basically works already is an action fraught with danger. Anyway, we’ve installed it on our 9yr old daughter’s machine so she can be the guinea pig. Again. On to the news: The News:Pub, Restaurant & Drinks Producer News: • SABMiller has responded to speculation regarding AB InBev’s rumoured takeover bid, which could create a company worth $250bn (£162.2bn). SABMiller will deliver an announcement on the takeover by no later than 5pm on 14 October, by which time a formal proposal by AB InBev must be made. Shares in SAB shot up almost 20% on the news, while AB Inbev shares rose 7.41%. we have a little more comment in Wednesday’s wrap, below. • Punch has put a Camden town site on the market for £2.5m. • Conviviality this morning confirms that its Matthew Clark purchase should complete on 7 October • Savills says number of leisure occupiers that have expanded out of London has significantly increased over past 2yrs. It identifies >12 brands that have expanded from London to the provinces over the last year and the group’s UK head of leisure David Bell comments ‘we have witnessed a ‘domino effect’ in cities such as Manchester, Leeds, Cardiff and Birmingham, where a London centric operator has established itself and therefore provides confidence to other brands targeting similar demographics.’ Brands making the leap include Wahaca, Banana Tree and Hawksmoor in addition to fast-growing pizza chain Franco Manca, which has a Brighton site. • A study by the University of Cambridge suggests restaurants and supermarkets should reduce their portion sizes to tackle obesity. The review claims to contain the most conclusive evidence to date that suggests people’s tendency to overeat is linked to ‘overserving’ of bigger portions. • The BBPA has published a report highlighting the number of initiatives put in place to promote responsible drinking. The report shows how brewers, wholesalers, retailers, NGOs, government officials, law enforcement and other partners are coming together in both the UK and around the world to promote responsible drinking in communities. • A number of health professionals say that Public Health England’s comments on relative safety of vaping were ‘extraordinarily flimsy’ • Pete Brown presents Cask Ale research (forecast to take 20% of on-trade beer market by 2020) today at Brewers Hall. Cask ale is. • Truman launches new range of craft beers in keg to be available late Sept. Dispense fonts will feature a hand-cast bronze eagle. The eagle has been the symbol of Truman’s since the company was founded in 1666. CEO James Morgan comments ‘we are so excited to get these three new beers in drinkers’ hands.’ He adds ‘we wanted to bring the same quality to keg that we do to cask…with drinkers across the UK looking to experiment outside the usual bland beer brands, our new range provides them with exciting, modern flavours all backed with the Truman’s promise of drinkability, quality and consistency.’ • Morrisons is testing a new logo at its Merrion centre store in Leeds which will use a ‘friendly’ font that turns the ‘I’ in its name into a tree. A spokesman for the supermarket said: ‘Our recently relaunched Merrion Centre store features a variation of the Morrisons logo. We are constantly listening to customers to ensure that we reflect their changing needs and what makes Morrisons better and different.’ • New shadow environment secretary Kerry McCarthy has accused supermarkets of getting themselves ‘off the hook’ on food waste. McCarthy, who says that companies have shifted the blame onto consumers, has called for retailers to be ‘named and shamed’. • Household spending power is rising thanks to the rapid acceleration in real wage growth brought about by the UK’s 0% inflation. ONS figures show a 2.9% annual increase in average weekly earnings, excluding bonuses, in the three months to July. • French payments group Ingenico is preparing a £6.6bn cash offer for Worldpay, which has been considering a stock market listing. An IPO would have sent the British company straight into the FTSE 100. • Fast growing casual Thai brand Thaikhun has secured a second site in Scotland and its fifth in the UK, at the Silverburn shopping centre in Glasgow. Group operations director Ian Leigh said the group is aiming to open 40 to 50 sites in the UK, with 7 to 8 of those coming next year. • Loungers will hit the landmark of 70 sites in the UK with the opening of two new locations by the end of the week. The company is on track to reach 75 sites by the end of the year and has secured another 25 for 2016. Managing director Nick Collins said: ‘We’ve gradually ramped up the speed of the roll out and this has allowed the business to successfully adjust and adapt to the significant demands of increasing scale. We’re already doing deals for sites in 2017 and beyond and it is our intention to open 25+ sites a year going forward.’ The group should hit 75 sites by the end of this year. Collins comments ‘we’re going to hit our 2015 openings target and we’re well on course to open our 100th site by the end of next year.’ • Data from ZenithOptimedia’s Advertising Expenditure Forecasts shows the increasing importance of mobile advertising for brands. The report predicts that the UK’s mobile ad market will be worth £3.1bn by the end of the year—accounting for nearly 20p in every pound of ad spend. Newspapers, by contrast, account for £1.8bn, or 11% of the total. • The Scottish Licensed Trade Association (SLTA) is calling on both Holyrood and Westminster to save Scottish pubs from closures and job losses. The SLTA argues that its latest state of the nation survey of more than 600 outlets – over 10% of Scotland’s on-trade – shows drink driving regulations are having a significant negative impact on the industry, with some 55% of all outlets surveyed showing a decline in like for like sales in 2015. • Fuller’s is attempting to capture Rugby World Cup trade by launching a pop-up concept called London Pride Clubhouse tomorrow. • Speaking to the PMA, Cloudwater Brew co-founder Paul Jones has criticised pubs for failing to pay brewers for beer on time. Jones said: ‘There are those pubs, bar chains and distribution companies who essentially pay if and when they want to. It puts a huge pressure on breweries. We’re owed 27% of everything we’ve invoiced, which eats up all our profit margins and then some.’ • Punch Taverns has altered its management team ahead of its strategy update with regards to the MRO Act this November, the M&C reports. Neil Griffiths, who has been chief operating officer since February 2013, will move to chief strategy director and Steve Dando will become chief financial officer. Andy Crump, who has headed up the group’s core business in the North West since 2012 will become operations director for Falcon – a new division established as part of the upcoming strategy shift. • Research from HospitalityGEM concludes that pubs must try to take share from restaurants after finding that some 70% of consumers polled plan to book a restaurant for their office Christmas party rather than a pub. Holidays & Leisure Travel: • Thomas Cook shares rallied yesterday on speculation that the travel group could get bid for by Chinese investor Fosun. See further comment in Wednesday Wrap below. • STR data shows London hotel occupancy fell 1.8% in August to 85.4%, while ADR rose 4.2% to £141.59 and RevPAR increased 2.4% to £120.90. Other Leisure: • Merlin Q3. Says achieved ‘growth despite challenging trading in Resort Theme Parks’ + is making ‘continued strategic progress’ • MERL Q3: LfL growth 2.6% at Midway, 6.7% at Legoland but down 11.4% at Theme Parks. Group +0.3% LfL • MERL Q3: Total growth 7.6% at Midway, 8.7% at Legoland but down 9.1% at Theme Parks. Group total +3.8% • MERL Q3: Is ‘in line with revised expectations over the summer period’ with the accident + Sterling strength a negative. CEO Nick Varney comments ‘the trends we reported at the half year have continued throughout the summer. The performance of our LEGOLAND Parks Operating Group has remained strong, with very positive guest satisfaction. However, this has been offset by the impact of reduced visitation across the Resort Theme Parks Operating Group, primarily at Alton Towers Resort, and Euro weakness impacting visitation at our London attractions.’ • MERL Q3: Group says ‘while near term challenges remain, the Group is making good overall progress on its growth strategy.’ CEO Nick Varney comments ‘we have significant new investments planned across the estate and are well placed to deliver these in 2016 and beyond.’ • MERL Q3: Says ‘financial position of the business remains strong’. Debt is down ‘significantly’. • MERL outlook: Says ‘we continue to expect 2015 underlying profit before tax to be broadly in line with last year.’ Accident has therefore cost the group a year’s growth but, beneath the surface, a lot of progress is being made. MERL adds ‘based upon summer trading and forward bookings, Resort Theme Parks’ EBITDA is now expected to be in the lower part of the guided range of £40-50 million in 2015.’ The group concludes ‘although difficult to assess at this stage, we continue to believe that there may be an ongoing adverse impact on the Resort Theme Parks Operating Group profitability in 2016.’ Finance & Markets: • David Kern, the chief economist at the British Chambers of Commerce, commented on the ONS job data: ‘Today’s job figures paint a mixed picture. It is disappointing that unemployment rose again, and there was also a slight increase in the number of people claiming unemployment benefits in August… Overall, the figures confirm our assessment that the UK recovery is progressing at a satisfactory pace, but the rise in unemployment also indicates that our recovery is still fragile and significant risks will persist in view of the uncertain international situation.’ • More on unemployment: ‘Though the further increase in average earnings may be of concern to the MPC, the rate of increase remains below 3% and in the short term does not pose a threat to the Bank of England’s inflation target. We restate our view that the MPC should not consider increases in interest rates until well into 2016.’ • Bank sends mixed signals: Mark Carney told parliament the situation will be clearer by next year, others more hawkish. Carney said a decision (on whether or not to raise rates) will come into “sharper relief around the turn of this year”. Referring to the China slowdown and the potential for more shocks, MPC member Martin Weal has said ‘not only my experience of the period of above-target inflation but also more general statistical analysis suggests that apparently independent inflation shocks tend to come like buses, more than one at a time.’ • World markets: UK and Europe higher yesterday, US up later in the day + Far East up in Thurs trading • Oil price higher. Challenging $50 again and trading at around $49.80 this morning. • US consumer prices fell 0.1% in August due to falling petrol prices and a strong dollar, marking the first drop since January. Retail Roundup from Nick Bubb:
Planet ONS Watch:
JD Sports: Nick Bubb – nicholas_bubb@hotmail.com Wednesday Wrap:This was produced for distribution yesterday afternoon: 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: AB InBev makes approach to SAB Miller – now that would be a large brewer! • Following a period of consistent speculation, SAB this morning announced ‘the Board of SABMiller notes the recent press speculation and confirms that Anheuser-Busch InBev… has informed SABMiller that it intends to make a proposal to acquire SABMiller.’ • It goes on to say ‘no proposal has yet been received and the Board of SABMiller has no further details about the terms of any such proposal.’ It adds ‘the Board of SABMiller will review and respond as appropriate to any proposal which might be made.’ • SAB concludes ‘there can be no certainty that an offer will be made or as to the terms on which any offer might be made. In the interim, shareholders are strongly advised to retain their shares and to take no action.’ • AB InBev has also made an announcement saying ‘AB InBev’s intention is to work with SABMiller’s Board toward a recommended transaction.’ It also highlights ‘there can be no certainty that this approach will result in an offer or agreement, or as to the terms of any such agreement’ and it says ‘a further statement will be made as appropriate.’ • Any merger that did not involve truly massive disposals in order gain competition clearance would create an extremely large, global brewer. AB InBev is a clear global number one. SAB and Heineken vie for the no2 and each is about a half the size of AB InBev. Carlsberg is number four at around a third of the size of AB. • Customers may complain and competition authorities the world over may be sharpening their pencils but we would assume that a significant amount of planning has gone into the proposed deal and we await details with interest. Tour operators end summer strongly: • It seems to us as though the flip side to a somewhat weaker summer, especially August, for UK licensed & general retailers, is that the overseas holiday companies should have performed well. • Indeed Homebase, BDO, the Peach Tracker, Greene King and a number of other commentators have suggested that, notwithstanding the fact that Hoseasons (see below) had a good summer, more people were out of the country this August than they were last • We know about Tunisia, Greece etc. This should be in the price & both TCG & TUI have given some idea as to the size of the financial hit that they expect as a result of travel disruption over the summer • TCG updates on Q4 next Thursday (24 Sept) and TUI updates on 1 Oct. • We have no particular reason to believe that Scandinavia or Germany will have let the companies down and expect these updates to be relatively upbeat. • TUI was amongst the FTSE’s few fallers yesterday. It may have moved up a little post the absorption of TUI Travel – but this does not alter our view that trading should have been good • Thomas Cook is attracting some bid comment. The Travel Weekly (here) reports on the suggestion that Chinese minority shareholder Fosun could bid for c95% of Thomas Cook that it does not already own. • TW points out ‘Cook’s shares had been languishing just above the 100p mark for much of the summer, down from highs of around 185p following its successful turnaround under previous chief executive Harriet Green.’ It highlights the formation of the existing JV with Fosun and points out that this was ‘followed that with plans for a global deal which includes marketing the French all-inclusive operator’s holidays through 150 stores in the UK.’ It says ‘Fosun and Cook last month signed a join venture to acquire up to 50 hotels and resorts around the Mediterranean.’ In addition, Fosun has taken 5% of Thomas Cook via a placing and has announced that it intends to buy another 5% in the market. • We would prefer to buy the group on fundamentals but, hey, every little helps. Random information, hopefully not all of it useless (re most leisure operators etc.): • Price of corn still edging a little higher. Virtually all other commodities bumping along the bottom. • Deltic’s LfL sales look impressive at +7.5%. We are not clear at this point just how much capital spending may be involved in generating the increase. • Some interesting stuff on the changing uses of money here. Use of cheques halved, debit card usage x5 and no details on contactless as this is 2014 data: • Hoseasons has had its fifth good summer in a row. Staycations have benefited both the company & the economy. But we have to at least be mindful that we may be looking through the rear-view mirror. August seems to have been a winner for the tour operators, more people seem to be travelling overseas. |
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