Langton Capital – 2015-09-30 – Daily Wrap: Big ticket / small ticket, late night operators, summer holidays & 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: Late night operators: • Revolution and Eclectic seem to be singing from the same hymn sheet. • Put in capex where necessary, focus on food, trade only over profitable day slots etc. • And that’s all good stuff but, in a sector with a significant number of very professional and successful operators, would-be investors may put their money elsewhere and consider that they do not need to be invested in this sub-sector at all. Summer for the tour operators: • It continues to look good. Saga today added its voice saying ‘we have made good progress again in the first half of the year in travel and in the year to date our reservation levels for departures in holidays and cruising for the remainder of this financial year and for the financial year ending 31 January 2017 are very encouraging.’ Sainsbury Q2 conference call – comment on inflation & big-ticket vs small-ticket: • SBRY commented earlier in the year (along with many other operators) that big-ticket spending was outstripping spending on affordable treats & small-ticket items in general. Today, the group said that car sales and house sales were still buoyant & that it was ‘fair to say that they were not yet benefiting fully from the consumer recovery’. • Commodity prices are the most volatile the group (or at least the group’s current management) has ever seen. • Disposable income has risen – but the group is now pointing to a 12mth to 18mth lag before spending trickles down to small ticket items. This is subtly different to the 9mth / end-of-this-year comments that were being made early in 2015. • Group says it is not yet seeing any Q on Q LfL growth. It sees ‘very little’ by way of inflationary pressures. Deflation ‘should abate this quarter (Q4/15) or early in 2016’. It confirms this is a reiteration of its previous comments. Sainsbury Q2 – impact of NLW on both costs & consumer spending patterns: • Group is ‘ahead of the curve’ in terms of National Living Wage. Wages will be at or around the Chancellor’s target by the time that the NLW comes into force. • It’s still hard to pass cost increases on to customers – hence the above, unless things change, could impact margins. • The NLW will boost incomes for the less-well-off. The propensity to spend here is high. The move could, just could, lead to a reverse of the trade-off between time & money that has seen people shopping ‘little & often’ in order to avoid waste, etc. Sainsbury Q2 – general points: • Group sees a ‘moderate uptick’ in KPIs. It says some of this is market-related but most is company-specific. It says this is not yet growth but is rather a moderation of decline. It is seeing an improvement quarter on quarter – ‘and at some point the line should go through zero’. • C-stores are ‘slightly ahead of zero in terms of LfLs’. They did see something of a slowdown over the summer. • Cost savings will be ahead of he previously-stated £200m p.a. • Deflation this quarter is between 1.5% and 2% (it was c2% in Q1). This should ‘at least begin to unwind’ in Q3 & Q4 (given what happened re falling prices in these quarters last year). This will clearly be impacted by any changes in exchange rates. • The level of promotional activity across the market ‘has reduced’. Much of this has been passed on in lower prices. Group tends to ‘put the value back into the product’. • Aldi & Amazon entering the online market? SBRY says that they face a challenge in delivering fresh food. Says the market is already served by ‘six, very professional firms’. • Re space-closures? Not anticipating any major closures. Random information, hopefully not all of it useless (re most leisure operators etc.): • Sterling down against both US$ and Euro. Not so as you would notice at the moment but, if this were to go on, it would put a little upward pressure on prices. • Heating oil prices higher. Everything is relative but it may be worth bearing in mind. • Markets in a much better mood today – but the China PMIs are tomorrow & they have the capacity to put the cat amongst the pigeons • Stonegate continues to bulk up. Markets may be a little volatile at the moment but some observers have suggested that an IPO may be on the cards. And if they haven’t, then Langton will – an IPO may be on the cards. • Interesting to see the monthly GFK Consumer Confidence Index refer to a ‘depressed back-to-school mood’ among consumers despite low inflation and rising wages. • Reminder – Plastic bags at supermarkets etc. will cost 5p from Monday. We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance): 1. Eclectic FY numbers: Reports revenues down to £22.3m (2014: £22.7m) + underlying EBITDA down to £1.8m from £2.6m. a. Eclectic: Reports pre-exceptional losses of £0.5m, post exceptional loss £5.8m. Loss per share 44.7p or 0.3p loss underlying b. Eclectic: Says remains cash positive. Trading over summer ‘as anticipated’. Says has ‘attractive portfolio of sites’. 2. AB InBev bid for SAB Miller is still meant to be this week. It’s Wednesday now. 3. Sapient Corporate Finance has advised Stonegate on the acquisition of 53 TCG pubs. The sites ‘the core of the TCG estate’ 4. Drake & Morgan is looking at sites outside of London for its Refinery concept, writes M&C. 5. J Sainsbury Q2: Saw total retail sales inch up 0.3% ex. fuel although LfL sales ex. fuel were down 1.1% for the 16 weeks to 26 Sept a. SBRY Q2: Mike Coupe CEO: ‘During the quarter we saw an improvement in our key trading metrics. Both volume and transactions grew’ 6. Research from the University of Gothenburg suggests drinking two pints of beer a week could reduce the risk of heart attacks in women 7. Saga H1 numbers. Says is ‘on track to meet market expectations for the full year’ with EBITDA [travel + fin. Services] +5.2% in H1 a. Saga H1: Has seen ‘sustained cash generation leading to further deleveraging’ and announces maiden H1 dividend of 2.2p b. Saga H1: Total group EBITDA £130.6m (+0.8%), PBT £101.3m (+140%), EPS 7.3p v 3.3p last year. It has seen continued growth in travel 8. WSJ reports Airbnb is putting some downward pressure on hotel prices in the US. It added c20k sites in N York last week 9. Peel Hotels says ‘improvement continues’ but bemoans ‘cost pressures, both payroll and operating expenses’. Says is making ‘satisfactory progress.’ 10. Global equity markets yesterday hit 2yr lows with commodity prices also markedly lower. Some recovery globally later. a. Bank of England says real rates, those paid or received by real people, are still falling – at least in August. b. IEA has said Jeremy Corbyn has ‘a wrongheaded and regressive economic agenda.’ No, go on; say what you think |
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