Langton Capital – 2016-09-21 – Majestic warns, Saga H1, Shepherd Neame & other:
Majestic warns, Saga H1, Shepherd Neame & other:
A DAY IN THE LIFE:
So, as you get older, at what point do you cease to be a hypochondriac and become what’s known more accurately as a realist?
Well I’m hoping it’s a little way in the future and, as the morning aches and pains seem to be multiplying at the moment, I’ve decided to put it down to the weather.
Because all that damp out there, especially early in the morning, can’t be all that good for your joints, can it? Can it? Anyway, a couple of results this morning so, without further ado, let’s move on to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Majestic warns on 2017, says profit that year will be below expectations. Says will hit 3yr plan numbers by 2019.
• Majestic reports retail is ‘on track and making good progress on the transformation plan’ but will not hit targets.
• Majestic points to problems in Commercial division and rising costs in the USA.
• Majestic reports that its commercial business is still ‘not growing sales at the level to which we aspire’. Says indeed ‘the first half of the current financial year has proved to be even more challenging with the result that Commercial sales growth is flat year on year and the gross margin percentage achieved on those sales has declined by around 200 basis points.’ Profit here will be £2m below plan.
• Naked Wines in the USA has seen its direct mail campaign flop. Group says ‘we have now stopped this investment, but the short term impact will be higher costs in the first half of the year, with fewer new Angels acquired than hoped also impacting profits over the next 12 months. Accordingly, we now anticipate that the Naked Wines business will move back into making a small loss for the current financial year with an EBIT performance also approximately £2m lower than expectations. ‘
• Majestic CEO Rowan Gormley reports ‘it is very disappointing that two isolated factors are distracting from the great progress across the rest of the Group.’ He says ‘we have always said that we would adopt a test and learn approach, and be quick to redeploy capital from underperforming areas, which is exactly what we are doing. While, this approach is delivering good results in the other business units the scale of the US market means that even a test can have a material effect on profits.’
• Majestic CEO Gormley reports ‘despite these two factors [outlined above], I am pleased to say we are still on track to resume dividend payments this year and to deliver our goal of £500m sales by 2019. We look forward to giving more details at our Interim results in six weeks’ time.’
• Shepherd Neame has reported a 10.7% increase in underlying profit before tax to £10.3m on the back of a 1.2% rise in turnover to £139.9m for the 52 weeks to 25 June. Shepherd Neame’s proposed full year dividend has risen 3% to 22.05p per share, while basic EPS is up 13.1% to 84p, putting the group’s shares on just over 15 times basic earnings per share.
• The group’s pub estate performed well, with like-for-like sales at its managed pubs and hotels up 4.4% (liquor up 3.1%, food up 4.2%, and accommodation up 11.7%). Like-for-like tenanted EBITDAR grew by 2.7% and core own and licensed beer volumes edged up 0.3%. Shepherd Neame increased investment across its pub estate from £6.5m to £7.3m, with £2.2m in repairs and decorations.
• In the 10 weeks to 3 September 2016 like-for-like managed sales are up +8.2% and like-for-like EBITDAR from Tenanted pubs to 27 August is up +2.2%, while beer volumes are up 1.2%. The pub operator and brewer has also purchased eight pubs from Enterprise since year end.
• Jonathan Neame, Chief Executive, commented: ‘I am delighted to report a record set of results, with managed pubs our key driver of growth, and an impressive performance against our strategic objectives. In recent years, we have worked hard to improve the quality of our pub estate and modernise our brand portfolio. We have created a much stronger business with sustainable cashflows and the skills and ambition for further growth.’
• Diageo Q1 update, CEO Ivan Menezes reports ‘the 2017 fiscal year has started well. As expected, the momentum we created last year, strengthening our business through improved marketing, innovation, and commercial execution, has set us up to deliver a stronger performance. Key drivers of improved top line growth are our fiscal 2017 priorities: scotch, US spirits and India.’
• Diageo goes on to say ‘we have made a strong start to our productivity work and are moving at pace. As we no longer take productivity related costs as an exceptional item, in the first half these costs will impact our organic operating profit margin. In the second half productivity related costs will decline and be offset by higher savings as well as the benefits from our targeted reinvestment of those gains. This will contribute to organic margin expansion for the full year.’
• Overall, Diageo remains confident in full year numbers saying ‘our top line momentum and progress in implementing productivity changes, gives us continued confidence in achieving our objective of mid-single digit top line growth, and over three years ending fiscal 19 delivering 100bps of organic operating margin improvement.’
• Marston’s has confirmed that NED Neil Goulden is to retire from the Board at the conclusion of the 2017 AGM in January. The group has announced ‘in preparation for this, Marston’s PLC is pleased to announce that Carolyn Bradley will assume the role of Senior Independent Director and become a member of the Remuneration Committee and Catherine Glickman will take over Chairmanship of the Remuneration Committee from the same date.’
• Marston’s announces ‘with effect from 1 October, Andrew Andrea’s title is changed to Chief Financial and Corporate Development Officer, recognising his additional responsibilities in relation to retail systems development, including EPOS, and contribution to the development of strategy.’
• Richoux announces MD Edward Standring ‘has resigned from the Company with immediate effect.’ The company says ‘the Board would like to thank Mr Standring for his work with the Company and wish him all the best for the future.’
• Employers have been warned they could be missing out on high quality staff because they are rejecting candidates with tattoos. The conciliation service Acas said negative attitudes about visible tattoos are outdated.
• The Society of Independent Brewers has reiterated that consumers are concerned about provenance when it comes to beer. MD Mike Benner has pointed out that 35% of respondents to a recent survey regard craft breweries as ‘artisanal’ and 22% associated the term with ‘small’ and 14% with ‘local’. and SIBA claims that all its full brewing members fall into these definitions. Larger brewers have recently been staking their claims in the craft beer market.
• Cask Marque is to relaunch its CaskFinder app in order to better help consumers find pubs selling decent beer. The latest Cask Report says ‘people are starting to talk about cask ale – Britain’s national drink – with more passion than was once thought possible.’ Paul Nunny reports ‘if licensees want to stay ahead in their game, they can use CaskFinder to supplement workforce training. Otherwise, they’ll find their staff being outflanked by customers when it comes to knowledge about their beers on their bar. That can’t be acceptable for anyone who takes retailing seriously.’
• Intertain, the owner of the Walkabout brand, ‘is restructuring its Operations team in order to support its next phase of development’. It has promoted current Operations Managers, John Creighton and Chris Lambert to Head of Operations, and Business Development and Acquisitions Manager respectively. CEO John Leslie reports ‘we have been on a very exciting journey so far, and these promotions mark the start of the next chapter.’
• Fuller, Smith & Turner has reported that it will buy back shares saying its ‘programme is irrevocable and non-discretionary and purchases may be made during close periods.’
• The Guild of Beer Writers is to raise its profile in order to ‘deliver greater value for its individual and corporate members.’ It has appointed industry PR executive Ros Shiel to help get its messages across. Shiel will be responsible for delivering a programme of events and training for members, as well as building greater awareness of the Guild among commissioning editors and others across print, digital and broadcast media.
• Enterprise Inns has reported that multiple-operator Pub Solutions (South West) has just taken on its fifth and sixth pubs
• Loungers like-for-like sales rose 4.8% over the 12-week period and the group has seen a marginal uplift following the referendum.
• A study from Kantar Worldpanel suggests alcohol sales rose by 8.5% in the summer, while sparkling wine sales jumped by 36%, as shoppers toasted the nation’s ‘celebratory mood’. Supermarket promotions and successful outings at the Olympics and Paralympics were credited for the buoyant performance.
• The Alchemist posted an 8% like-for-like sales increase in the year to date and is on track to report full-year turnover of £22m.
• Lidl is to enter the US market by opening as many as 150 stores in the US by 2018 as it takes on rival Aldi, which already has 1,300 US stores.
• Over three-quarters of people asked in a national survey by Public Health England are in favour of the legal drink-drive alcohol limit being lowered in the UK. The figures, which are part of the British Social Attitudes Survey, show that more than half of those asked are in favour of a minimum price per unit for alcohol.
• Reports of the imminent demise of the high street may be exaggerated, according to the new Omnico Retail Gap barometer.
LEISURE TRAVEL & HOTELS:
• Saga reports H1 numbers. PBT +8.5% at £109.9m, EPS 7.9p (+8.2%) and H1 dividend of 2.7p (2015: 2.2p)
• Saga says it is making progress ‘towards target range for debt ratio of between 1.5 and 2.0 times in the medium term’
• Saga reports ‘robust trading performance and visibility’ in its travel business. Group CEO Lance Batchelor reports ‘I am pleased that the business has made significant progress with our key strategic initiatives whilst delivering another robust financial performance. The strength of our core businesses and our operating model has again led to strong cash generation, enabling us to further reduce our debt ratio and giving us the confidence to increase our interim dividend by 23% to 2.7p.’
• Saga reports ‘we have seen no discernible impact to date from Britain’s decision to leave the European Union; this has been especially notable in our Travel business, where we polled customers recently and 99% said that Brexit would not make them reconsider their future holiday plans.’
• Saga concludes ‘the robust operational performance in H1 half means that we are on track to meet our targets for the full year.’
• Global private investment firm Starwood Capital Group has unveiled its new UK city centre hotel brand, Principal. The group has been formed from Starwood’s portfolio of UK hotels following a period of acquisitions over the last few years, and will mark its launch with the opening of three properties in November — The Principal Manchester (formerly The Palace Hotel), The Principal York (formerly The Royal York Hotel), and the Principal Edinburgh (formerly The George Hotel).
• The merger of Marriott & Starwood is now expected to complete on 23 Sept as approval for the merger has been given in China
• Airbnb has acquired Spanish trip planning start-up Trip4real, which connects travellers with local tour and activity organisers.
• A group of politicians is arguing for the government to lift its ban on flights to the Egyptian Red Sea resort of Sharm el-Sheikh. Group chairman of the all-party parliamentary group on Egypt, Sir Gerald Howarth MP, said in a recent TV interview, that a representative of the Department for Transport ‘felt that the conditions had been met to enable flights to resume,’. Howarth added: ‘We thought that they’d put in some pretty sophisticated checks there and we think a lot has been done.’
• Google has joined the battle to become the in-pocket trip organiser of choice for travellers with the launch of Google Trips. The Trips app provides details about the world’s top 200 cities drawn from Google’s curated content teams following the previous acquisitions of Frommers and Zagat.
• A total of $40.5bn was made in ancillary revenue, making up 8.7% of total sales for the 67 airlines covered in a 105-page report from IdeaWorksCompany.
• Theresa May will seek to drum up support for an upgrade in global airport security during her trip to the US this week. The Prime Minister wants other countries to improve baggage checks at airports, passenger screening, and sharing passenger details. Speaking before her visit to the UN, the PM said: ‘In the face of an increasing terrorist threat, it is vital that we work with other countries to keep our people safe. I am determined that the UK should take a leading role in driving progress towards greater aviation security.’
• 32Red reports H1 numbers, revenues +63% at £30.4m, EBITDA £4.5m (vs £1.2m), PBT £2.5m (vs £0.1%) and EPS of 2.8p (vs 0.1p).
• 32Red says has been a record H1, sees Italy on track to break even in the year. Mobile now 50% of casino revenue. Group is ‘confident of meeting management expectations for the full year’. CEO Ed Ware reports ‘we are delighted to report a record revenue and profitability performance for 32Red in the first half of 2016 which has been driven by strong growth across our business and brands.’
• 32Red confident re full year. CEO Ed Ware adds ‘we are also delighted to announce today the renewal of our contract with Microgaming’ and concludes ‘current trading remains strong with like-for-like NGR up 4% on very strong comparatives in the second half to date. Underpinned by our strong online gaming brands and exciting customer-focused offer, the Board remains confident of meeting its expectations for the full year.’
• As many as 700 gambling industry jobs could be lost in London due to the impending £3.3bn merger of Ladbrokes and Gala Coral Group. The merger of the bookmakers is expected to go through next month.
• Shares in online gaming group GVC rose yesterday after it lifted profit guidance post its purchase of Bwin. CEO Kenneth Alexander reports ‘we believe the organic growth potential of the group is now greater than originally anticipated at the time of the bwin.party transaction acquisition.’
FINANCE & MARKETS:
• MPC member Michael Saunders says Britain’s economy should grow at reasonable rate in coming years. He suggests that it will slow, but by less than most economists expect as it works its way past ‘modest’ problems caused by the Brexit vote. He says ‘in the near term, the next year or two, I think the economy will slow, but perhaps not slow as much as the consensus has been expecting’. He says that the ‘reasonable’ pace of growth should stretch over the next 10-15yrs.
• B of England’s Saunders says QE could be stepped up, says ‘there is substantial scope to expand asset purchases if needed.’
• Regional REIT has reported ‘no discernible impact’ from Brexit vote.
• Standard Life says it will lift property fund suspension at some point in Q4. Group says ‘we are moving towards an orderly reopening.’
• Treasury Select Committee chair Andrew Tyrie has said that up to 5,000 financial services firms could find the going much tougher if the UK is not allowed pass-porting rights
• World markets: UK up yesterday but Europe lower. US markets up but Asia mostly down in Wednesday trade
• Oil price up a little with Brent Crude trading around $46.50 per barrel.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• A new report from the Local Data Company points to a ‘dramatic’ 15% fall in the number of shop openings in H1
• Costa Coffee has installed its 6,000th self-service machine. It has been adding machines at around 70 / month for 5yrs
• UK travellers may lose healthcare reciprocity if UK fails to stay in EEA post EU exit. EEA insists on freedom of movement
• Business confidence fell in July post Brexit vote per Lloyds survey. Businesses worst hit in remain areas, OK in Wales
• Other tweets: Sterling takes a header into the dirt as US$ and Euro strengthen. Will help exporters, hurt users of overseas raw materials
• Commodities: small bounce in wheat, corn, soybean. Sweet stuff, OJ & sugar, still very expensive by recent standards
• Finsbury Foods warns ‘devaluation of ££ post Brexit will, if maintained, lead to a new era of cost inflation for many of our raw materials’
• Kingfisher points to strength across its Polish operations; hope those guys like pizza. DP Poland still looking good…
• Financial gambling co IG Group reports today on ‘challenging quarter’. Says revenues +5.1% but UK revenue down
• IG Group says trading in July & Aug ‘increasingly subdued’. In UK has seen ‘dull markets’ post EU vote
• Costa now got 6k coffee machines; why is there no competitor? In fact who, if anybody, is no2 in the machine market?
RETAIL NEWS WITH NICK BUBB:
• Bonmarche: Just as the weather has turned more seasonal, the struggling Bonmarche has put out yet another profit warning today, flagging that “trading in September has been extremely poor, largely as a consequence of the unseasonably hot weather which has not favoured sales of our new autumn ranges”. After seeing LFL sales down by 8% in Q2 (and in H1 as a whole), the Board has sensibly taken a more cautious view of the second half, given a sense that the clothing market is becoming more challenging. It will be interesting to hear what its peers M&S and Debenhams say about current trading in due course, but meanwhile the embattled new CEO Helen Connolly assures us that she is “…formulating my plans for the future. The direction of travel is right, but the effectiveness of execution needs to improve. My plans are therefore likely to focus on improving the clarity
• Majestic Wine: When we saw the “Trading Update” headline from Majestic Wine flash up on the screen we assumed that this was a good summer weather story and that it was upgrading profit forecasts because of bumper sales of wine for picnics and barbecues…Alas, the sub-heading was “Majestic announces profits below expectations in 2017, but remains on track to hit 3 year plan of £500m in sales by 2019”. Fortunately, the problem is confined to 2 specific Divisional issues (weak Commercial business and a costly reinvestment in recruitment for Naked Wines USA) and we are assured that Majestic Retail trading is “on track”, but the group’s fan club will have a bit of a hangover this morning…
• Retail Sales Watch: We noted last Friday that the ONS Retail Sales figures for August were a bit stronger than the City expected, but, what with one thing and another, we haven’t had time to look at the ONS figures in detail. There is, however, a new consultancy group to do that for us, namely Retail Economics, which is run by the excellent Richard Lim, who used to be in charge of the highly regarded monthly BRC-KPMG Retail sales survey. And the Retail Economics (RE) overview is that gross Retail sales rose by only 1.4% in August, year-on-year (non-seasonally adjusted), which is better than the BRC-KPMG measure of the August outcome, but much less than the ONS reported outcome of +3.8% and RE have a useful analysis of the differences between the various surveys and why the ONS (aka the “Planet ONS”) may have over-egged things. RE estimate that Food sales rose by as
• BRC Dinner Watch: Alongside the Retail Week Awards Dinner in March, the Annual BRC Dinner is the other big industry event and tonight’s dinner at the Grosvenor House in London will be well attended by the “great and the good”. After introductory remarks by BRC CEO Helen Dickinson, the new BRC Chairman, Richard Baker (of DFS fame) will talk about the many challenges facing the industry (including “the weather”) and will no doubt urge the new Chancellor to reform Business Rates and cut VAT. The after-Dinner speech will be from the comedian Sean Collins.