Langton Capital – 2015-10-22 – Daily Wrap: International companies, Sept trading, small ticket spending & 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:
US$ vs Euro & impact on reporting companies:
• Last week we pointed out that US companies tended to report sluggish numbers whilst those reporting in Euros were able to incorporate the following wind supplied by a weak Euro.
• This should be stripped out in the ‘constant currency’ calculations but, as people are just people, it has perhaps been tempting for some continental companies to step back and bask in good numbers.
• A couple of weeks ago we had Pepsi & YUM reporting that US$ strength was amongst the factors depressing sales numbers. Unilever and others were able to take the opposite view when reporting in Euro.
• Overnight we have had good numbers from Pernod and less-than-sparkling numbers from Coca Cola, for exactly the same reasons.
• Interestingly, Pernod performed well (even in constant currencies) in Europe & the US whilst the RoW, depressed by sluggish (post-bribery-crackdown) sales in China.
Poor August, September recovery:
• Pub & restaurant companies have conceded that Aug was tough.
• Several have said that Sept proved to be markedly better.
• Interestingly, Home Retail yesterday said that sales were “directionally as expected” but it accepted that the outcome was “nevertheless disappointing” because, after a tough August, the expected “step-up” in sales in September had been muted and had left the company more cautious about Christmas trading.
Housing caution. Will small ticket pick up the slack?
• Big ticket spending has been a feature of the current recovery in recent months.
• SBRY, NXT and others have suggested that this should have run its course by the end of this calendar year.
• The date is now being pushed out with some suggesting that consumers may have become permanently more parsimonious.
• Overlay this with the suggestion from Travis Perkins this morning that there may be something of a housing slowdown going on (it said ‘given the recent market weakness we now expect to deliver EBITA growth at the lower end of market expectations’) and there may be some who conclude we run the risk of going straight to jail but of not passing ‘Go’.
• It is to be hoped that small ticket spending picks up shortly but, we are increasingly minded to believe, that can’t be taken for granted.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Evolution. Change is the only constant, blah, blah. Interesting to see Wagamama making more of a move into takeaway. Wouldn’t be surprising to see Deliveroo, Just Eat or whatever also getting more involved.
• DP Poland up sharply yesterday. No new news (co reported H1 numbers on 21 Sep) but group is delivering. Every reason to believe it will continue to do so but 2018 remains the ‘crossover’ year.
• Orange juice prices on the up. Now up slightly on the year.
• Coffee prices weak (return to trend), hog prices also on the slide (ditto). Soybean prices a little off the bottom + sugar staging something of a rally, albeit still down 11% over last 12mths.
• Stock movements yesterday dominated by companies reporting. ARM & MERL on the up, HOME and PSON not so much.
• Someone mentioned the diamond market to me this morning & that made me pause for thought. I mean just how far have we advanced if we still think it fighting (either financially or literally) over shiny rocks?
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Q1 sales at Pernod +3% organically at €2.2bn. Says is ‘confirming the continuation of a gradual improvement in Sales growth’.
a. Pernod Q1. Europe sales +3%, Americas +6% (driven by US) and RoW +1% ‘due to a difficult environment in China’.
b. Pernod Q1 reported sales growth 9% (v3% organic) on € weakness. Top brands ‘posted a good performance (+2%)’.
c. Pernod CEO Alexandre Ricard reports ‘we continue to implement our long-term growth strategy, while increasing investments.’
2. Wagamama is reported to be set to scale up its takeaway offer with the launch of new packaging from yesterday
3. Coca Cola reports Q3 numbers, says net revenue declined 5% and organic revenue grew 3%. EPS 33c v 51c
4. BHA says government should take action against companies that are not transparent in their tips policy but ALMR says do not legislate
5. Diageo is selling its Chalone Vineyard winery after it was left out of last week’s £361m deal with Treasury Wine Estates.
6. Travelzoo is urging all UK MPs to attend a debate in Westminster on the issue of for taking children on holidays in term-time
7. Ladbrokes Q3: Says ‘trading [is] in line with our expectations – strategy implementation [is] underway.
a. Ladbrokes says group revenue down 0.7% in Q3 but up 2.0% excluding impact of last year’s World Cup. UK retail down 1% (up 1.1% ex W Cup)
b. LAD Q3: Says group EBIT £14.3m. Says stakes are +1.6% (or +3.5% adjusted for shop closures) but margin down 1.5ppts
8. Government borrowing fell in the first six months of the financial year to £46.3bn, down £7.5bn or 13.9% year on year, according to the ONS.
a. Governor of B of England Mark Carney has said in a speech that Britain derives material benefits from its membership of the EU