Langton Capital – 2016-05-06 – Intercontinental Hotels, pubs code, Merlin & other:
A Day in the Life:
In common with most dog owners, we occasionally have to leave our (partly) domesticated beast home alone when we go out.
And, whilst he doesn’t like this, he’s not too hard to get into the house because you can tempt him with a bit of food.
And here the turmoil – food versus boredom – is etched on his face and he can do a full-body shuffle whilst pretending, both to himself and others, that he’s not ultimately going to succumb to greed and bound into the house to snaffle up some little treat before being locked in whilst we go to the shops or somewhere even less exciting.
But here’s the thing. He won’t come in for just any old treat. It has to be human rather than dog food because, whether it’s some stale crust from a bacon sandwich or some stone-cold porridge from the day before, he feels better if he can eat what we eat, feels somehow more human.
And equality is a big thing. Check it out here . On to the news:
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• RTN & JDW. A couple of days ago we put our thoughts to paper. Comment found here
• See comments on UK services output under Finance & Markets below.
• A loophole spotted in the Pubs Code which would have made many licensees ineligible for MRO has delayed the introduction of the code. In its current form the code could have excluded as many as half of all tenants from MRO, as tenants would only have the right to trigger a review if the price of beer supplied rises by 3% above the Producer Price Index (which currently stands at -1.9%).
• A spokesman for the Dept. for Business, Skills & Innovation said ‘it is important to get the Pubs Code right for both tenants and pub-owning businesses. The code will come into force slightly later than first expected but we expect it to be in place this summer to support the pub industry and enable it to thrive.’
• Chair of The British Pub Confederation Greg Mulholland MP called the decision to delay the code just three weeks before it is due to commence ‘extraordinary’, while the British Pub Confederation has called on ‘the six large pub companies’ to honour the original start date of May 26, allowing all tenants with rent reviews from that day the right to MRO.
• BBPA says ‘the Government has made the right decision in recognising that more work is needed on the draft regulations. We are committed to working with them to bring the new Code into force as soon as possible and believe that a period of reflection will give time for the Adjudicator to issue guidance.’
• The ALMR on the other hand says it still believes that there is a commitment to implementing the code as quickly as possible
• Enterprise yesterday bought back c100k of its own shares at around 87p
• Morrison’s yesterday said that retail price deflation in the food retail sector was 2.6%. This has been a boost to the on-trade.
• Morrison’s sees further deflation to come but, when it stops, consumers may find themselves slightly more cash-strapped. The group says ‘we expect continued deflation and sustained improvement in customer satisfaction. Growing LFL volume remains a key priority for every member of the Morrison’s team.’ This money must be going somewhere.
• Hotel Chocolat’s upcoming IPO will value the upmarket chocolate retailer at £167m and £12m of the £55.5m from the share placing will go towards a store rollout.
• The 16-site 3Sixty Restaurants turnover for the year to end March 2016 grew by 15% to £17.4m as site EBITDA rose by 25% to £1.9m, writes MCA.
• The latest Beer Barometer from CGA shows a relatively stable 0.5% drop in the 1st quarter of 2016 and an increase in on trade sales. Beer now makes up just under half of all drinks sold in licensed premises.
• The latest ‘Ones to Watch’ report from Horizons finds American-themed barbecue pits, smokehouses, burger bars, and diners all growing strongly. Coffee shops are one of the most popular formats, while Dunkin Donuts is the fastest growing brand in terms of site openings.
• The frost that blighted Burgundy vineyards last week damaged almost half of the viticultural area, according to the Bourgogne Interprofession. Almost 23% of the vineyards have been damaged by over 70%.
• Christopher Snowdon of the IEA has labelled the Tobacco Products Directive is a ‘dog’s dinner’ and questions why the UK cannot set its own policy on the issue.
• Merlin: Poor hotel REVPAR may not mean a shortage of visitors. Could be too many rooms. VisitEngland says Feb inbound numbers highest on record. It says February numbers were up 8% on last year with last year itself up 6% on 2014. Some 2.25m visits were made to the country in the month. Admittedly it was 29 days long. VisitEngland says ‘these back-to-back record-breaking figures leave no doubt that 2016 is off to a cracking start for inbound tourism as we continue, through our international marketing campaigns, to promote Britain as the ‘Home of Amazing Moments,’ inspiring even more visitors to come and explore all our nations and regions.’
• We believe that Merlin should be benefiting from the lower Pound as more overseas visitors come to London. See IHG & China comments below
• Intercon reports Q1 numbers. Global REVPAR +1.5%, 5k new rooms opened, pipeline now 220k rooms w. 45% in build
• IHG Q1: Reports ‘good first quarter performance with strong brand momentum’. Rate +1.0%, occupancy +0.3%. CEO Richard Solomons says ‘we have made a good start to the year, driving RevPAR up 1.5% against the background of weak oil markets and the earlier timing of Easter, which affected several of our markets.’ He says ‘we continue our focus on building and leveraging scale where it matters, signing rooms into our pipeline at the fastest rate since 2008.’
• IHG adds ‘we also strengthened our position in the rapidly growing boutique segment, signing the first Kimpton Hotels & Restaurants property outside the Americas, in Amsterdam, and opening and signing a record number of rooms for our Hotel Indigo brand.’ CEO Solomons reports ‘looking ahead, despite economic and political uncertainty in some markets, current trading trends and the momentum behind our brands give us confidence for the rest of the year’.
• IHG Q1 by region. Americas REVPAR +1.9%, Europe +1.4%. Says Germany + Russia good but London weak
• IHG Q1: Says UK REVPAR flat with ‘a solid performance in the provinces, offset by softer industry-wide trading in London, predominantly due to supply increases’.
• PPHE Hotels has reported that it has completed the acquisition of the 80% of Arenaturist that it did not already own
• Economist Magazine reports that the number of cinema screens across China has been growing at 36% compound p.a. since 2011. Now that’s growth.
• Spending by Chinese tourists in duty free shops abroad up by 58% y-o-y reports Global Blue, a duty-free shops operator
• Chinese tourists spent $215bn on outbound travel last year, up 53% on prior year (Economist 30 April).
• Remember Thomas Cook’s JV with Fosun sees Chinese outbound tourists as a major growth area. And why wouldn’t it?
• Consumer demand for holidays remains high despite EU referendum uncertainty, according to the First Rate Holiday Confidence Index. The survey of over 5,000 UK adults last month shows that 56% intend to holiday abroad, although a further fall in the value of sterling could affect late bookings.
• A survey of 1,375 people found that 79% want restrictions on the amount of alcohol air passengers can drink, while one in ten want a complete ban on drinking on airplanes.
• Sabre saw revenue in its North America Travel Network grow by 23% and by 16% in its Airline and Hospitality Solutions business in its first quarter.
• Alibaba Q4 sales grew by 39%, although profit fell for the first time as it expanded into new areas such as food delivery. Net income fell 1.4% to 7.6bn yuan.
• News Corp swung to a net loss of $149m (£102.6m) for the three months to March due to a one off legal charge of $280m for claims of monopolising its in-store promotions market. Revenue was also down by 7.3%, attributed to ‘currency headwinds’.
FINANCE & MARKETS:
• UK services output slows. Markit/CIPS purchasing managers’ survey shows growth at around 0.1%, says economy near to ‘stalling’. Markit has already pointed to sluggish April growth in the construction & manufacturing industries.
• Markit says referendum causing jitters in the real economy. Services PMI down to 52.3 from 53.7 in March
• Services PMI now at lowest level since 2013. Brexit & Bremain proponents pointing the finger at each other. Very helpful. Markit says ‘some of the slowdown may be attributable to the early timing of Easter, though April also saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand linked to global growth jitters and ongoing government spending cuts.’ It adds ‘the deterioration in April pushes the surveys into territory which has in the past seen the Bank of England start to worry about the need to revive growth.’
• St Louis Fed president James Bullard has said that global headwinds preventing rate rises may have dissipated
• Meanwhile Atlanta Fed president Dennis Lockhart has said that he remains undecided about backing a US rate rise. He nonetheless said that he expects the economy to rebound from a weak Q1.
• World markets: UK slightly up yesterday. Europe mostly better but US down and Far East down in Friday trade
• Oil price down a little further, trading at around $44.85 per barrel.
Yester-tweet – Yesterday in a Nutshell: Live Tweets here
(SOME OF OUR) EARLY TWEETS:
• Restaurant Group AGM is a week today. Will be interesting to gauge mood of audience, level of participation etc.
• Q1 beer sales were 1% down year-on-year according to the BBPA’s latest ‘Beer Barometer’, marking the smallest first quarter drop since 2008
• Alcohol-related hospital admissions for under-18s have halved for males and is down by 42% for females since 08/09 per Local Alcohol Profiles
• Vertical integration back on the cards? A number of brewers appear ready to take their first steps into retail. Makes eminent sense to us
• IEA reports government’s decision to clamp down on tipping practices in restaurants is ‘opening up a new front in pay regulation’
• Supermarket promotions have dropped to their lowest level for over seven years as retailers shift to permanent price cuts
• WM Morrison Q1. LfL sales ex-fuel for the 13 weeks to 1 May were up 0.7% (+1.2% inc. fuel), although total sales fell 1.8%
• Millennium & Copthorne Q1 numbers down. Blames economic uncertainty and ‘the sharing economy’. Says outlook ‘uncertain’.
• Slide in sterling has yet to have a major impact on foreign travel, according to a report into Q1 figures by marketing specialist Sojern
• Goals Q1. Reports will be able to announce new CEO shortly. Says current sales are ‘marginally negative’
• Sterling weak, good for MERL & London attractions. Per VisitEngland, Feb (most recent month) was record for UK here
• MLC says gateway cities’ hotels less good than last year. Arguably is supply problem. Hence good volume numbers in London but poor LfLs
• MLC blames ‘sharing economy’. Most other operators still sanguine vs Airbnb. Could be ‘gateway cities’ particularly vulnerable?!
• Cattle prices low, soy prices high. Big yawn? Yes, but the latter are an important input, could be price rises downstream shortly?
• MAB price not following RTN down. Suggests will not be ‘the next RTN’. Could be, given poor share performance, it was the first??
• Macro, worried re global economy. Micro, companies say ‘everthing’s fine’. Now that’s not sustainable, is it?? Check blasé RNSs from 2008…
• QE, what the…? No gain without pain, can’t fabricate wealth. Could be we’re just inflating asset bubbles? Wouldn’t be the first time
• Planalytics points to cold spring. Clothing retailers concur. Summer’s warm, winter’s cold, yes, but the shoulder seasons can swing things
• Booze per capita down, hospital admissions down, violence down. People quick to point finger but when is on-trade ever given any credit?