Langton Capital – 2016-02-10 – Daily Wrap: Greene King, JDW, London hotels & 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:
Greene King Q3 update. Takeaway points:
• See earlier email for more detail.
• We would pick out the fact that Q3 numbers, for managed, tenanted and beer, were all better than their H1 counterparts. See email. These were modest increases but are a sign of acceleration nonetheless.
• There is no comment on margin. Nor are the words ‘bank’, ‘debt’ or ‘borrowing’ used in the statement.
• Marston’s (26 Jan) and M&B (28 Jan) both recently said that margins were higher. JD Wetherspoon (20 Jan) said that its own margins were down by 1.1% on the same period last year
• Xmas itself was very strong. This supports the contention of the trade that the ‘big days’ continue to hold up.
• The group says that trading is in line. Hence we would not expect to see changes to forecasts as a result of today’s statement.
• Group continues to buy back shares.
• Yesterday, the company bought back 150k shares at 678p for cancellation.
• The group has now bought back 970k (0.8% of the shares previously outstanding) shares for a total of £6.2m since its trading update on 20 Jan.
• The group has paid an average price of 634p, some 7.5% below today’s level.
• We’re hearing here that the market is difficult.
• Whitbread’s share price, though the group until recently has not been a major player, is reflecting this.
• It’s hard to legislate against gouging.
• Hoteliers will charge what the market will stand – but then along comes payback.
• The top of the market, maybe a year ago, features rising room rates and occupancy.
• It’s a win-win.
• But then occupancy stalls and declines. Rates go up further and REVPAR continues to increase. But it is rate rather than volume-driven.
• Then one or more players, usually those with gearing, cuts rates.
• The individual hotelier performs well but, before long, competitors have to follow suit and rates fall across the market.
• Towards the bottom, maybe a year or two from now, rates and occupancy are both falling and there’s real distress.
• And then the cycle turns again, occupancy starts to rise. Initially, operators do not dare to jack prices but, before long, they do – and it all starts over again.
• Fuller exposition will go out to clients later.
• Current thoughts will go out to clients later.
• Just when they think it can’t get any worse (soggy markets and Mifid II etc.), it does.
• IPO market could go into hibernation, government has already said that it’s Lloyds sale won’t be happening any time soon.
• Oil has a nasty correction, is currently attempting to regain its poise.
• Putting this morning’s move into context, the price fell by 13% in 3 trading sessions and it has now bounced by around 2%
• Yesterday, perhaps unsurprisingly, Carnival, Intercontinental Hotels and International Consolidated Airlines were three of the relatively few FTSE100 shares to end the day in positive territory
Random information, hopefully not all of it useless:
• Market looking to break its 7-session downward move. As at time of writing, looks set to do so. Yesterday we were close to 3yr lows.
• No help in this from Japan. Now down 8% in two sessions & down around 15% in a couple of weeks.
• Janet Yellen heads to Capitol Hill today as she will give two days of congressional testimony.
• Sterling down yesterday as traders struggle for direction. Sometimes, however, there is no direction…
• Commodities. Oil down, gold up, non-precious metals flat & softs weak
• Observation. The natural first reaction of anybody with an interest in a market, political situation etc. to change is ‘it doesn’t really matter’. That’s what we’ve heard with respect to corporate bond spreads. It’s just the oil stocks, some say. Then why are the banks falling? Why is credit costing more at a time when inflationary expectations and gilt yields are falling?
• Truisms. Tighter money leads to lower asset prices.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. GNK Q3: LfL sales +2.2% (managed) at 40wks with Spirit Managed LfL sales up 1.1%. Pub Partners +2.5%. Beer own brewed +3.9%.
a. GNK Q3: Says ‘in the two Christmas weeks, LfL sales grew 5.0% in Greene King & 5.2% in Spirit’
b. GNK Q3: Spirit integration is ‘progressing well’ and says that it has had an ‘encouraging performance in rebranded trial sites’
c. GNK opened 10 new sites in the year to date (Q3). Says disposal programme ‘is on track, w. 33 Pub Partners disposals so far this year.’
d. GNK Q3: Today’s numbers reassure that the group is on track and that trading is in line. Numbers should be unchanged.
2. JDW yesterday bought back a further 150k of its own shares at 678p per share.
3. Heineken reports full year numbers says has ‘organic revenue +3.5% with revenue per hectolitre up +1.3%’
a. Heineken full year consolidated beer volume +2.3% ‘with positive growth in Americas, Asia Pacific and Europe’
4. Carlsberg reports Q4 & FY numbers, says seen ‘strong cash flow delivery in a year of transition’.
a. Carlsberg: Organic net revenue growth of 2% for the year as a whole ‘driven by strong Asian performance.’
b. Carlsberg sees lower profits in Q4, down 23% ‘reflecting phasing differences, restructuring costs and higher central costs’
5. M&C Allegra Foodservice reports that Q4 2015 saw average spend/head per visit rise across all day parts y-o-y for the first time in 2yrs
6. Enterprise shares lose another 7.7%, shares now down 46% from last May. The group updates on trading tomorrow.
7. Coca Cola has reported Q4 numbers showing sales down 8% (on a strong US$) at $10bn and profits of $1.2bn or 28c per share
8. Disney shares fell 4% in after-hours after reporting slower growth at ESPN. Shares in Viacom down 14% on earnings miss
9. The GBTA says the majority of business travel buyers across Europe have not cut their budgets in the wake of the Fri 13 Paris attacks
10. UK hotel rates have risen by 26% over the last 4yrs reports HRS. London is now one of the most expensive cities in the world
a. Hotel Bulletin reports London market is to add a further 7,000 hotel bedrooms in 2016. It says demand growth remains subdued
b. Hotel Bulletin reports UK REVPAR grew by 2% in 2015. It says that in Q4, London occupancy fell for the 4th consecutive quarter
c. Hotel Bulletin suggests budget sector to feature 51% of room growth in next 3yrs across the UK.
d. Fitch Ratings has said it could see ‘a more challenging debt financing environment’ as regards lending in the coming year
11. Former City regulator Adair Turner says without radical intervention, UK economy could have low interest rates “almost indefinitely”