Langton Capital – 2015-11-23 – Daily Wrap: Terror & travel, coffee, cocoa, lobsters & 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:
Terrorism – the market’s selective response:
• So the market seems to have judged that Thomas Cook, TUI and the other travel companies will be impacted by the recent terrorism problems but not SSP Group?
• The market has rightly assumed that travel to tourist destinations is likely to be affected, but we’d argue that travel in central Europe, given the attack took place on the continent, is also likely to be affected.
• SSPG has some 2,000 units. Of theses there are 237 in France, 205 in Germany and 41 in Belgium (which is the focus of current counter terrorism action), with another c650 are located in the UK.
• Most of these are at travel hubs
• We wouldn’t want to suggest that the falls in TCG and TUI were justified, but we’d argue if they’ve fallen, should not SSPG have gone down with them?
Terrorism & travel disruption. Holidays vs short breaks:
• Thomas Cook will outline on Weds just what recent travel disruption has cost it.
• But having said that, the downed Russian airliner & the outrage in Paris are outside the year (to Sept 2015) that the group is reporting.
• The group will nonetheless be under pressure to give some sort of indication as to the likely costs of further short-notice changes to schedules etc.
• Paris is a short break destination. Brussels ditto though it is also a major business and political hub.
• This market is much more intensively served by the budget airlines and the flag-carriers than is the market for 1wk and 2wk holidays.
• As such, the likes of Ryanair, EasyJet, IAG and others will be facing problems regarding 1) short term slack demand and 2) longer term shifts of demand between geographies.
• Hotel operators such as Intercontinental will be suffering from lower occupancy levels in Paris – and probably, though we have no figures as yet – in other gateway cities.
• Occupancy in Paris was anecdotally said to be down by around a half in the aftermath of the Friday 13 attacks.
• Travel shares have understandably reacted negatively to recent developments but the financial scale of the hit is as yet unclear
• Thomas Cook will be first up across holiday operators and, though the impact of recent attacks will be negative, the group remains an interesting play re China where Fosun has yet to buy 10% of its shares in the market
Random information, hopefully not all of it useless:
• Harris & Hoole. Just how has the company been able to lose so much money in so short a time period? And, following on from that, how committed to the business do you think we should consider Tesco to be medium term?
• Sounds like a horror B-Movie but the Daily Mail reports that Tesco is fighting back in the lobster price war with Lidl and Aldi
• Debenhams is asking suppliers for a 2% rebate (for early payment).
• Interestingly Grocer 33 (see earlier email) has allowed Lidl in as a guest retailer when comparing basket prices for the majors. Not surprisingly, it blew all competitors out of the park coming in at nearly 20% cheaper than ASDA.
• ASDA is losing that particular battle but Tesco still has it all to play for. The name of the ‘biggest loser’ has yet to be inked in.
• Tale of two profit warnings. Interesting to see Majestic Wines +10% last week and Poundland down 20%. Both had cautionary statements.
• Likewise interesting to see YNGA down last week but FSTA up – both on good numbers.
• Sterling reversing recent trends (at least in the very short term). Down against the Euro & up against the US$. Presumably the acceptance of a US rate rise is being factored in.
• Having said that, the Euro is at a 7mth low to the US$.
• Commodities floored. Copper at 6yr lows (and down 30% in the last 12mths) and gold at one year lows (down 8% on 12mths).
• El Nino soft commodity prices still strong but all others very weak. For example, sugar now flat on the year but soybeans down 15%. OJ up 3% on the year but Soybean Meal down by 26%.
• Strange week this week. Autumn statement on Weds, Thanksgiving (so no US) on Thursday and Black Friday on Friday.
• Draghi dovish. Euro interest rate rise thought to be more than a year away. US estimated December and UK end-Q1 next year. But all estimates subject to change without notice.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. House of Commons health select committee is likely to back plans to tax fizzy drinks says Sunday Express.
2. Report from Oxford Economics for the BBPA shows that UK pubs pay a total tax bill of some £7.3bn, or £140,000 for every pub
3. Casual Dining Group has told M+C that it is to open another three Bella Italia restaurants before Christmas
4. Part-owned by Tesco coffee shop chain Harris + Hoole has managed to lose £43.4m over the last couple of years
5. Meatliquor has become one of the first operators to sign up for a site at shipping-container leisure space Boxpark Croydon
6. Bacon and sausage sales have fallen 10% following a report from the World Health Organization which links processed meat to cancer.
7. Some 93.9% of the more than 18,000 consumers interviewed online by M&C Allegra eat out, with breakfast, lunch and dinner trade all improving
8. Ethically-sourced Brighton chicken restaurant Hen launches crowdfunding campaign for £100,000 to help open 6 London sites
9. Shares in Chipotle have fallen more than 12% after US health authorities reported 45 more cases of E. coli
10. PE firms ‘considering £1bn takeover bids for Argos + Homebase owner Home Retail’ following a slump in group’s share price.
11. TTG reports Hays boss John Hays as saying issues in Tunisia + Egypt will lead to price rises in other destinations.
a. Demand soars away from problem destinations. TTG reports summer 2016 bookings +42% in Portugal +34% in Canaries and +25% for Balearics
12. ABTA + UKinbound have called on HMG to provide greater funding to promote tourism into England – and not just for London
13. RAC says there’s a ‘very good chance’ petrol prices could fall to £1 per litre or less. Ave. price now 107p. Would put more cash in pockets
14. Euro recession may become permanent says left-of-centre think tank IPPR. It is ‘deeply alarmed’ by 10% unemployment rate across Europe
15. Analysts at Moody’s have reported that a Brexit may not necessarily imply a reduction in UK’s credit rating per Sunday Telegraph