Langton Capital – 2015-10-14 – Daily Wrap: Marston’s, average earnings, unemployment & 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:
Marston’s Q4 update – a few thoughts:
• LfL sales in Premium & Destination (+1.8%) and Taverns (+2.0%) are at the top end of expectations.
• The fact that both food & wet sales in P&D were +1.7% suggests that accommodation and/or machines did well. The former has been a feature across a couple of operators (e.g. JD Wetherspoon) and Marston’s goes to the trouble to point out that it will open at five lodges in FY16.
• Worth noting that the growth in sales in the last 11wks have been ahead of the 52wk figure – see earlier email.
• Strength in Leased (at +4% in terms of profit on a LfL basis) suggests that wet sales have been good.
• Beer numbers (+5% LfL in volume terms) would seem to confirm this.
• The improved ‘quality’ of earnings is worth mentioning. The string of dilutive disposals of bottom-end units has now run its course and the group should be able to generate near double-digit earnings growth from a high-quality portfolio of assets.
• The group’s rating (12.1x historic and 11.2x FY16 earnings) is undemanding and the prospective yield of 4.8% is attractive.
Employment numbers and earnings:
• ONS has reported that UK unemployment rate fell to a 7yr of 5.4% in the 3mths to August.
• Mark Carney at one stage had ‘forward-guided’ that he would put interest rates up when or if the rate of unemployment fell below 7%
• The number out of work is now around 1.77m and the proportion in employment has risen to 73.6% (22.77m), the highest on record
• Meanwhile, average earnings in the quarter were up by 3.0% including and by 2.8% excluding bonuses.
• ABTA has reported that 23% of those questioned in a study of 2,000 adults said that they expected to spend more on their holidays next year.
• That was portrayed as good news and, in an environment where inflation has been confirmed as less than zero, perhaps it is.
• Around 15% of respondents said they would spend less money on holidays in 2016 than they had this year.
• Away from financial considerations, 18% said they would travel to a country they have not previously visited next year, compared with 9% last year. That suggests that individuals try a new country every five years or so. Seems reasonable – perhaps a shade ambitious.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Oil price below $50. Will have an impact, in time, on 1) pricing structure for tour operators etc. and 2) more immediately on consumers via the price of petrol.
• SAB Miller share price the big mover yesterday. Some chatter in the Press that the competition authorities may not be a walkover.
• Domino’s is still delivering. Get it?
• Interesting to see that while certain pension funds in the US are considering suing Tesco over its profit misstatement, it would appear that Warren Buffett isn’t.
• SAB / AB InBev. Interesting to see that the 5th offer was the one that succeeded. Pays not to believe that the first offer is the last
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Marston’s Q4: Destination + Premium LfLs +1.8% on year, food + wet both +1.7%, accommodation + machines strong. Some recent acceleration
a. MARS Q3: Destination + Premium ‘operating margin is ahead of last year’. 25 units added, will open at least 27 next year
b. MARS Q3: Taverns: LfL sales for year +2.0% w. ‘growth of 3.1% in the last 11 weeks.’ Leased profits LfL +4% suggesting good recent trading
c. MARS Q3: Brewing: Strong performance, ex-Thwaites, own-brand beer volumes +5%, including acquisitions +15%.
d. MARS Q3: Re pension, triennial valuation completed, agrees ‘reduction in cash contributions from the current £13m to £7.5m p.a.’
e. MARS Q3: CEO Ralph Findlay reports ‘good progress’. Quality of earnings up, disposal programme complete, PER 11.2x, yield 4.8%
2. Domino’s Q3 update, says ‘strong sales momentum continues’. Says is ‘building on the already successful first half.’
a. Domino’s Q3: UK system sales +14.9%, y-t-d system sales +11.8%. Group sales in Q3 £214.5m (+19.4%).
b. Domino’s Q3: Says ‘trading in our core UK business was particularly robust driven by our continued investment in digital, now focussed on mobile.’
c. Domino’s revenue through digital +35% v Q3 last year with >75% of delivered sales in y-t-d have been online
d. Domino’s says ‘sales were also helped by relatively poor weather during the summer months’ It opened 12 new stores in Q3
e. Domino’s FY numbers will be ‘ahead of its expectations.’ CEO David Wild says ‘we are delighted by this performance’
3. Diageo agrees to sell major wine interests to Treasury Wine Estates for $552m. Net proceeds c£320m after costs + taxes
4. Smashburger sells 40% stake to Jollibee Foods of Philipines for $100m. Values Smashburger at c$335m
5. Imbiba-backed Wright + Bell recruits Jayne Baker, former retail director at M+B, as managing director
6. Scientists from the Ben-Gurion University of the Negev in Israel have said a glass of red wine a day could help fight type 2 diabetes.
7. Some 23% of UK consumers expect to spend more on their holidays next year, according to a study of 2,000 UK adults
8. ONS figures show CPI inflation fell to -0.1% in September as a result of smaller clothing price rises and falling fuel prices.