Langton Capital – 2015-09-24 – Daily Wrap: Wet led pubs, drinking trends, Thomas Cook & 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:
Rugby & wet-led pubs:
• Sport favours wet-led pubs over their food-led peers.
• It can be a big nothing for foodie operators but it is more often the wrong side of neutral & is actually negative.
• We’re not saying that’s the reason that Enterprise Inns’ shares were amongst the top ten risers in the FTSE250 – they were 3rd at plus 4.15% – and Greene King’s shares were amongst the top ten losers – they were 8th bottom at minus 1.55% – but it is consistent with what you may expect to see.
• That is, of course, if the market were a bit puerile & chose to favour short-term movements over longer term trends.
• So that’s a yes, then.
• For the record, Revolution reports 29 Sept, MARS updates 14 Oct, Whitbread is 20 Oct, Punch is 12 Nov, ditto Young & Co. Enterprise reports 17 Nov and Fuller’s H1s are on 20 Nov. Mitchells & Butlers should report around 25 Nov and Greene King reports H1 numbers on 2 Dec.
Drinking, social responsibility etc.
• See earlier email for more detail on BBPA Statistical Handbook.
• The BBPA rightly points out that alcohol consumption per capita has fallen by 19% since 2004.
• Disorder etc. is on the way down and, if alcohol-related diseases are more prevalent – there is some debate as to whether or not this is true – this can only be a lag effect because of the point made above.
• So, tempting though they may be, headlines along the lines of ‘boozed up Britain’ are simply misleading.
• Consumers, and particularly younger consumers, are simply drinking less.
• This may be hard for pioneers to accept – things should always happen now, my time (though it’s only 70yrs out of 6bn) has to be the most important etc. – but it is nonetheless true.
• The major battles re alcohol have been fought (or avoided) and, though misuse is still an issue, the majority of pubs have moved on
Thomas Cook Q4. Very good but not brilliant, company re-stocks its financial larder?
• Accountants really shouldn’t put something away for a rainy day – so let’s assume that they don’t.
• But it’s hard to start the next sentence with anything other than a ‘but’ because TCG has conceded that the Lates market has been strong and that Scandinavia has made a strong H2 recovery.
• It then goes on to say that trading is therefore in line with expectations when it must have been hard to expect poor weather in August in both the UK and in the Nordic countries, and for Sterling to be strong and for hundreds of thousands of consumers to decide at the same time that enough was enough & that they needed, deserved and were going to have, a foreign holiday.
• Hence we believe that TCG has something in the tank for its FY numbers on 25 Nov.
• We also see upside re 1) Fosun buying 5% in the market, 2) Fosun potentially bidding for the company and 3) via the launch of the inbound & outbound Chinese tourism JV with Fosun ‘this calendar year’.
• If investors want a slice of the Chinese tour operating market then TCG may be for them.
• Against the background of the above, we believe that a single-figure FY16 PER is too low.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Given buoyant trading and references to ‘robust’ trading from both TUI and TCG, it is not altogether surprising to see that On the Beach is coming to the market. TUI and TCG may be trying to differentiate their products but Dart Group (Jet2) and On the Beach have both demonstrated that there is plenty of demand for bucket & spade holidays out there.
• Sterling down a bit against the US$. Bets being laid that the Fed will raise rates come its December meeting.
• The latest composite PMI for the Eurozone was the best in 4yrs. Do with that what you will.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. BBPA Stats Handbook reports ‘no rise in alcohol consumption – but record tax receipts for Treasury’ + says UK taxes 14x those in Germany
a. BBPA says ‘sector remains a very healthy source of tax revenues for the Treasury, despite recent cuts in duty’
2. TGI Friday’s UK reports 10% rise in total sales in FY15 to date. Group to invest £3.5m in fitting out former Yates’s Leicester Sq.
3. Asda’s latest Income Tracker shows British consumers had an extra £18 a week to spend in August compared to 2014.
4. TCG Q4: Says ‘with our Summer 2015 holiday programme now almost fully sold, trading has progressed well overall’
a. TCG Q4: Says ‘all markets are performing in line with our expectations, while N Europe enjoyed particularly strong trading in H2’
b. TCG Q4: Adds ‘winter 2015/16 trading has started positively, with improved bookings in all major source markets.’
c. TCG Q4 – ‘guidance for the full year remains consistent with our expectations at the time of Q3 results in July’
d. TCG Q4: UK summer 95% sold, 1% > 2014, N Europe 99% sold (also 1% > 2014), Continental Europe 90% (same as 2014)
e. TCG says ‘our transformation continues at pace, as we execute our strategy for profitable growth.’ Will have China JV working by end-year
f. TCG Q4: Our feeling is that the year is ending very well indeed with late prices holding up and demand stronger than at this time last year
g. TCG: Single figure FY16 multiple, Fosun JV exciting, latter yet to buy 5% of TCG in market + some suggest could bid for whole co
5. TUI updates on Q4 trading, says ‘Summer 2015 trading has remained robust since our last update’.
a. TUI says ‘Winter 2015/2016 is trading in line w. expectations + we are pleased with early start to UK trading for Summer 2016.’
b. TUI says ‘the season is now almost fully sold, with bookings and average selling prices ahead of the prior year.’
c. TUI re UK: ‘Bookings are up 8% + average selling prices are down 1%, reflecting significantly lower jet fuel costs + impact of weaker €.’
6. Air Partner has reported a 13% rise in gross profit to £10.6m and a 100% leap in underlying PBT to £2.2m for the H1 to 31 July
a. Air Partner: The group credited a strong performance in commercial jets in the UK and Europe for its encouraging H1 numbers
7. On the Beach has confirmed plans to raise more than £90m in an IPO which will value the online travel agent at £240m.
8. 32Red H1 numbers, sees ‘record revenue performance’, sales £17.7m (+20%), PBT £0.1m (2014: £1.2m)
a. 32Red H1: Says is ‘confident of meeting full year expectations’ + ‘current trading in H2 to date remains strong’
9. Photo sharing app Instagram now has more than 400 million users compared to 300 million just nine months ago
10. ECB Chair Mario Draghi reports risks to Europe’s inflation + growth outlook have increased due to EM slowdown
11. Markets: UK + Europe up yesterday but US markets lower + Far East mostly down Thurs. Japan catching up on downside post 3dy holiday