Langton Capital – 2016-09-30 – Brighton Pier, Merlin, accommodation, Brexit & other:
Brighton Pier, Merlin, accommodation, Brexit & other:A DAY IN THE LIFE: So the Brexit brouhaha continues. In fact, to some extent, it hasn’t really even begun yet as there has been a notable silence from the other side of the Channel where our German, French etc. cousins seem to be waiting, goalkeeper-like for us to line up the ball and take our best shot. And here there’s been little speculation as to how our current (and perhaps soon to be former) partners may respond. It’s true that, as we run a chronic trade deficit as a stand-along country (the EU is in surplus to the rest of the world, meanwhile), our trading partners have more to lose by cutting us off than we do ourselves but might the argument not move on, perhaps to the soft-stuff, i.e. people and what sort of country they want to live in? People-poaching may become a thing because, and here we may see developments at some point, if I were the German Chancellor, I’d be offering German passports to all Brits with a degree and no criminal record below the age of 30yrs. And I’d be offering the same to Brits between 30-40yrs with a degree, no criminal record and £100k to deposit in a Unity Bank and ditto for the over-40s with £0.5m. I’d then use the proceeds deposited in the Unity Bank to source accommodation for the youngsters & hey presto, average IQ rises, GDP on the up, nation prospers etc. On to the news: PUB, RESTAURANT & DRINKS PRODUCERS: • Pepsi yesterday reported Q3 numbers saying revenues were down 1.9% on the quarter – but that underlying revenues were up as currency moves were an adverse 3% during the quarter. • Pepsi Q3 EPS up 282% at 137c (incl. exceptionals). Group has seen organic growth of 4.2% in the quarter. Core, constant currency EPS +7% • Pepsi chairman & CEO Indra Noovi reports ‘we are pleased with our results for the third quarter and year to date.’ Ms Noovi reports ‘we are executing our strategy well and managing what is in our control. Our product portfolio, geographic mix and capability centers are enabling us to deliver balanced revenue and productivity.’ • Pepsi says ‘based on our year-to-date performance and our outlook for the fourth quarter, we are raising our full-year core constant currency EPS growth objective.’ • Pepsi comments on Europe & Sub-Saharan Africa saying this area was ‘negatively impacted by higher raw material costs (in local currency terms, driven by a strong U.S. dollar), operating cost inflation, adverse foreign exchange translation, higher advertising and marketing expenses, and incremental investments, partially offset by productivity gains.’ • FT reports first signs of price hikes on High St in response to post-Brexit vote weaker Sterling. Says prices up ‘from dishwashers to desktops and Chardonnays to phone chargers’. Some Apple prices rose 3wks ago. The FT reports that smaller retailers have put the price of some electrical goods up by 10%. • A report by the IFS has found that people in their 30s have around half the wealth that people of the same age did 10yrs ago. The IFS says the age group has around £27k vs £53k 10yrs ago and says 30-somethings will also find it harder to amass wealth in the future. It says ‘this is partly the result of the overall stagnation of working-age incomes but it also reflects the fact that the great recession hit the pay and employment of young adults the hardest.’ Housing costs will have also had an impact. • Commercial real estate company Colliers International has warned that upcoming business rate revaluations will be ‘the largest change in a generation’. The property tax, based on rental values, is a material cost for many small businesses and, while a transitional period was implemented in order to smooth the process, some business owners have vented their dismay at a rate revaluation that was originally due two years ago. • Paul Turner Mitchell, a business rates campaigner based in Rochdale, said: ‘Across the board in the North east, businesses have been paying artificially high bills for two years. So this is a kick in the teeth for them. There’s going to be some really struggling areas where there’ll be a huge reduction in rateable values, and they need the immediate value of that not a phasing in.’ • Supermarkets deliberately bake too much bread in-store as a marketing tool to attract shoppers, according to food waste charity The Real Junk Food Project. • Coaching Inns Group has reported its 3rd acquisition this year. The group is buying the Three Swans in Hungerford. Group now comprises 12 properties. The purchase is part of a £20m expansion plan. Coaching Inns reports ‘the traditional 26-bed Three Swans, positioned right on Hungerford High Street, still retains many original features, including the original archway to the courtyard for coaches.’ Group CEO Kevin Charity says ‘the next six months will see significant investment in the property, including refurbishing the accommodation areas and developing the food and beverage offering and experience, through the introduction of our Eatery and Coffee House brand. This will include a new outside area and a focus on trading right through the day from coffees in the morning to cocktails in the evening, which has been key to our success elsewhere.’ • The Botanist is opening its tenth site this week and the first since parent company New World Trading Company was acquired by Graphite Capital as part of an MBO in Sheffield. The group also has 5 bars under The Oast House, Smugglers Cove, The Trading House and The Club House brands. CEO Chris Hill said he is ‘incredibly excited’ about opening the 10,000 sq ft site in the grade II listed Prince Leopold’s Music Room, adding: ‘The character and atmosphere of Leopold Square is the perfect location for our brand and we look forward to making Sheffield our next home.’ A further site in York is slated to open in early November. • The ALMR has voiced concerns that businesses will still face unreasonable increases to their bills despite a ‘long overdue’ revaluation. ALMR CEO Kate Nicholls commented: ‘We are concerned though that the proposals will still result in increased rates bills for businesses with eating and drinking-out venues still bearing a disproportionate burden. • ‘It is still likely that 1 in 4 businesses will see their rates increase. At such a politically and economically unstable time, such a move could be potentially disastrous for businesses. With businesses relying on transitional relief, we are urging the Government to reconsider introducing high street rate relief to ensure that bills are equitable and affordable.’ • A study by the Money Advice Service (MAS) has found that more than 16 million people in the UK have savings of less than £100. The MAS found that more than half the adult population in Northern Ireland, the West Midlands, Yorkshire and Humber, North East England and Wales had savings below that level. MERLIN 38 WEEK UPDATE – ANALYSTS’ MEETING: Alton Towers’ Accident: • Has had a financial & emotional impact on the company. The group extends sympathy etc. & has worked strenuously to ensure that no such accident occurs again. Trading update: • Pleased with the overall revenue growth. Accommodation is a particular are of growth. Group is also pleased to be back in LfL operating growth. • MERL is ‘extremely confident’ over the longer term. In the short & medium term, terrorism, the weather, riots etc. can have an impact. • Midway. Grew sales at 3.7% in constant currencies but is down 0.4% LfL. Big city centres have been impacted by terrorism fears. London has been the most-impacted. There has been little recovery yet. Nick Varney says headline increases ‘are friends & family’ rather than spending, overseas tourists. The arrival of Disney in Shanghai has taken some business from MERL’s Madame Tussauds. Marketing spend may have to rise. Group is working on <3% LfL growth in FY17. Midway margins will not improve in FY17 due to new openings. Nick Varney says ‘this is the most important statement we have made today’. The group is ‘planning for continued volatility’. o Group says there isn’t a brand issue, it’s more location driven. o MERL is ‘very confident’ that it will hit its 40 site target. o Shrek has been successful in London. DreamWorks is now owned by Comcast/Universal. Latter ‘will honour their contract to open six’. No firm answer as yet. Clearly Universal operates its own parks. o Group is not counting on a Kung Fu Panda-themed site opening in China in 2018 (as had been previously hoped). • LEGOLAND. Tough in Florida. MERL relies more on domestic, US visitors & these numbers are down. Comps are tough. Group feels confident medium term. There are 2 movies coming out in FY17. • Theme Parks. These dipped but are now back in growth, up 3% in year to date. Alton Towers lost its schools market last year. Group should be back to 2014 levels by 2018. Thorpe Park & Chessington ‘had a good summer’. Gardaland been good, too. • Outlook. Halloween is the biggest week of the year, still all to play for. Group is half way to its 2,000 rooms for 2020. It has begun on (or opened) 19 of the 40 expected new Midway sites. Little Big City is a £6m capex attraction, aim is to roll it out. Will open a 2nd site in Asia in 2018. LEGOLAND Dubai (Oct) and Japan (April 2017) will open shortly with 3 more live sites to come. o Group believe 4% growth after recent slowdown should once again be achievable. LEISURE TRAVEL & HOTELS: • Merlin comments on UK-bound tourists saying it is ‘about friends & family, these are not free-spending visitors’. This goes some way to square off the apparently opposing comments from Merlin on the one hand and the somewhat more optimistic Visit Britain on the other. • Merlin comments on tourists still somewhat at odds with pub, restaurant experience. London is still pretty busy. Hotels are also seeing more guests. Problem there is that supply has exceeded demand growth. • Brighton Pier Group (was Eclectic) reports FY numbers, says revenues broadly flat at £22.6m, underlying profit £0.9m (2015: loss £0.5m. • Brighton Pier reports adjusted EPS of 4.1p (2015: loss 0.3p). No dividend. Says business base has been broadened. Group says ‘the Board considers that the cash flow expected to be generated by the Pier business will be transformative to the Group’. • Brighton Pier says it’s cash generative & is seeing midweek student numbers up in its Eclectic division. Chairman Luke Johnson reports ‘this has been a transformational year for the Group. The acquisition of The Brighton Marine Palace and Pier Company, and the operational and financial improvement made within our bars division, mean the Group is well positioned to drive the growth of our business. Our ambition is to become a leading, experience-led attractions business in the UK. I believe we now have the right group structure and experienced management team to deliver that ambition.’ • Brighton says ‘during our first full summer of ownership, the Pier business has traded in line with our expectations.’ It says ‘good weather has continued to attract visitors to Brighton seafront, despite the significant disruption to rail services over recent months.’ • The US hotel industry posted year-on-year increases during the week to 24 September 2016, although the performance was skewed by the Yom Kippur and Eid al-Adha. The industry’s occupancy grew by 2.6% to 72%, while average daily rate rose by 6.3% to US$130.52, and revenue per available jumped 9% to US$94. • Turkish president Erdogan has said that emergency rule could extend beyond 12mths. He has rounded on the rating agencies that have recently cut his country’s bond rating to junk. Angry words will do little to help the country’s inbound tourism industry. Some 100,000 people across the police force, the civil service and the military, have been sacked or suspended since the failed coup earlier this year. • Intercontinental Hotels yesterday evening hosted a meeting for analysts at which it updated on its commercial & online strategy. • IHG now sends out 800,000,000 emails per annum in 15 different languages. The group has 11 call centres in 7 countries. • IHG reports mobile revenue +400% since 2012. App revenue is +57% year to date with 1.3m downloads this year. • Star Capital has sold superyacht shipyard business Blohm+Voss to trade rival Lurssen. • Jet2holidays is looking to grow its presence in the southeast after launching package holidays to 21 destinations from Stansted. Chief executive Steve Heapy admits the brand is ‘largely unknown’ in Stansted, which becomes its ninth UK base and its first in the south of England but believes ‘there’s a big desire from people in the Stansted catchment area to be able to travel with an Atol-licensed company on a fully protected package from their local airport.’ • A planned strike that would have halted domestic flights in Greece yesterday and today has been cancelled. • British Airways’ short-haul passengers will have to start paying for food and drink on-board from 11 January 2017. The new food will be provided by Marks and Spencer and include sandwiches priced at £3-£4.75, soft drinks from £1.50 and alcoholic drinks from £4. • Spanish boutique hotel group Room Mate is looking to expand in the UK starting with the competitive central London market. OTHER LEISURE: • Veteran media mogul Sumner Redstone is said to be recommending a merger between Viacom and CBS. Redstone controls both companies (votes at least) via his privately held National Amusements company. Reuters reports that Sumner’s daughter Shari favours recombining the two under the leadership of CBS Chief Executive Officer Leslie Moonves. • Spotify is in advanced talks to buy SoundCloud, which has recently been valued at $700m, as part of its preparations to IPO next year. FINANCE & MARKETS: • Business services group Capita yesterday warned on profits saying its Asset Services division has seen less activity in the short term, following the EU referendum. • HIS Markit and Expand have suggested that Europe’s financial institutions may have to spend a total of £1.6bn preparing for MiFID II. Langton currently stands just outside the list of 40 global investment banks and top 400 global asset managers that were surveyed • Brexiteer Liam Fox has said that the UK’s trade with the EU post exit will be “at least as free” as it is now. Nick Clegg says that he is “delusional” • World markets: UK & Europe up yesterday but US markets lower. Far East mostly lower in Friday trade • Oil off the top, Brent crude now changing hands at around $48.95 per barrel. YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE: • Merlin reassures that, post its ‘key summer trading period of July & August’, its 2020 milestones remain on track • Merlin says LfL constant currency growth was negative 0.4% at Midway, +2.2% at Legoland and +3.0% at Resorts. Group is +1.3% • Merlin says seeing ‘evidence of recovery in Resort Theme Parks Operating Group’ & continued growth in LEGOLAND Parks, despite tough comps • Merlin’s Midway attractions are still seeing ‘ongoing difficult trading in certain key markets’. • SABMiller’s shareholders have voted overwhelmingly in favour of its £79bn takeover by AB InBev. • BBPA stats show the on-trade sold less beer than supermarkets and c-stores for the first time on record (dating back to 1980) last year. • Air Partner reports H1 numbers, says results are ‘strong’ with ‘Broking and Consulting divisions both performing well.’ • The IMF has said once again that it believes low inflation and sluggish trade growth remain a threat to the global economy • Aberdeen Asset Management’s Martin Gilbert has warned that a bond bubble may be inflating • Other Tweets: Interesting to see Sterling a little better yesterday. Is it turning back into the petro-currency of yesteryear? • Cautious MERL comments re city centres contrasts slightly with macro-numbers showing inbound tourist numbers rising • London hotels putting prices up at budget end. £80 to £110 per night for short-notice budget or ultra-budget beds; what’s going on? • EZH does deal, share cap up by 60% at 18% prem. to share price. But Standard reports c80% of issue goes to Luxemburg property fund • IMF still warning world to spend & borrow more. Ms Lagarde to stand trial in fraud case this December RETAIL NEWS WITH NICK BUBB: • Consumer Confidence Watch: The widely followed GFK Consumer Confidence survey for September was published overnight and shows that the overall index has bounced from -7 in August to -1 in September. This is said to be “the best monthly rise since June 2015” and indicates that confidence has been restored to the levels seen before the EU Referendum vote in June. Commenting on the latest figures, Joe Staton, GfK’s Head of Market Dynamics, said “British consumers appear to have shrugged off Brexit fears about the economy as wages continue to grow faster than prices, rising employment boosts income, and low interest rates encourage people to spend rather than save”, but warned that this bounce may be “misplaced”. • John Lewis MD Watch: As expected, the John Lewis MD Andy Street was selected last night as the Tory candidate for the West Midlands Mayor election next year, so he is stepping down and the focus now turns to who will replace him internally. Andy’s former No 2, Andrew Murphy, who was promoted to be the Group Productivity Director last September, was the favourite, but at John Lewis, the Commercial Director Paula Nickolds and the Retail Director Mark Lewis will fancy their chances, whilst on the Board the former Waitrose FD, Tom Athron, now the Group Development Director, will also be in the mix… • Trade Press (1): The front cover photo of Retail Week magazine today is of the three people behind the relaunch of BHS Online (David Anderson, Sara Bradley and Dave West), with the headline “BHS is back”. RW also has a profile of Karen Byers of Sports Direct and an article about how Fashion retailers can “weather” the storm. In terms of news stories, RW focuses on the re-launch of the BHS website and the news that Aldi UK is prepared to sacrifice more profit margin to maintain price competitiveness. And in his column the Editor thunders that “It is time to end the tyranny of fashion seasons”, noting that the fast-growing Online Fashion star Boohoo hasn’t had any problems with “the weather” and flagging that BHS will have its work cut out to re-establish itself as a relevant brand Online.
• Trade Press (2): The front cover of Drapers magazine today is a striking photo of a catwalk model, flagging that Burberry’s first ‘see now, buy now’ collection was a highlight of this season’s London Fashion Week. There is a feature interview with the founder of Mountain Warehouse discussing its success, as well as reviews of the new store revamps at the fashion chain Warehouse and the Jersey department store de Gruchy. In terms of news stories, as well as the BHS Online re-launch, Drapers flags that House of Fraser is pinning its hopes on a good Christmas after a difficult year to date, Fashion sales have wilted in the warm September weather (prompting retailers to launch discounts of up to 50% on new season stock) and discounting will continue to be a “big part” of Boohoo’s strategy. Finally, in her column, the Editor thunders that • News Flow Next Week: As we move into October (and Q4), the big event next week is the Tesco interims on Wednesday and ahead of that the new Waitrose management team is holding a drinks party for Food Retailing analysts at the Waitrose Cookery Skool in Kings Cross on Tuesday evening. It is also a big week in the world of Furniture and Furnishings Retailing, with the SCS finals on Tuesday, the Topps Tiles pre-close on Wednesday and the Dunelm Q1 and DFS interims on Thursday. • Margate Watch: We were amused that the Joint MD of Boohoo, Carol Kane, began her presentation to analysts on the interim results on Tuesday with a cool video about the new autumn range and company developments and flagged that it was filmed in trendy Margate! We were even more amused when she said that the launch of the new Boohoo kidswear range was driven by market research showing that 29% of their customers are parents… |
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