Langton Capital – 2016-10-27 – C&C H1, Coke, European hotels, input costs & other:
C&C H1, Coke, European hotels, input costs & other:
A DAY IN THE LIFE:
Langton is on a beach still paying stupid rates for its Euros. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• C&C reports H1 numbers to end-August, says made ‘significant progress against operational priorities for FY2017’
• C&C H1. Says aim is to ‘stabilise trading in Ireland and Scotland’. Reports Bulmers volumes up +6% ‘supported by category growth and commercial initiatives’
• C&C H1 reports Tennent’s volumes up +2% in the Scottish IFT. Says it is ‘regaining share’. Magners’ brand volumes +11% with share up. Aim here is ‘to grow volume and share as category rationalises’
• C&C grows exports by 10% in volume terms – but to only 4% of group volumes. Magners says it aims to ‘expand premium and speciality portfolio to complement key brands strategy’. Here it has seen ‘+24% volume growth across our portfolio of premium and speciality beers and ciders comprising Heverlee, Menabrea, Clonmel 1650, Drygate, and Chaplin & Cork’s’.
• C&C reports will deliver €15m of cost savings and efficiency gains with a consolidation of production by end of calendar year.
• C&C says ‘fall in the value of sterling particularly following the Brexit vote had an adverse impact on reported revenues and operating profits of €24.4m and €2.8m, respectively’
• C&C reports diluted EPS down 6.1% at 13.9c. H1 ‘financial performance defined by currency headwind and investment in marketing’. Group has also expended funds on ‘price support to drive momentum in our core brands’.
• C&C reports ‘we are seeing some volatility in consumer behaviour across our industry as a result of the heightened economic uncertainty following the Brexit vote and subsequent devaluation in sterling.’ CEO Stephen Glancey reports ‘in the first half Bulmers grew by 6%, Tennent’s by 2% and Magners by 11% supported by increased brand investment and organisational focus.’ He adds ‘while reported earnings have been impacted by a combination of accelerated investment and currency we believe that this level of investment ultimately underpins long term brand values.’
• C&C’s Glancy reports ‘in the first half we have seen some variability in consumer demand and are cautious on forward consumer reaction to political and economic conditions in our core markets. However, we have a business that is capable of weathering these challenges and our confidence in the medium to long term outlook is based on the strength of our key brands, our business model and leading positions in Ireland and Scotland – where fundamentals remain strong.’
• C&C comments on minimum pricing in Scotland saying ‘C&C is a supporter of this initiative and we will work with the relevant authorities in Scotland and Ireland to ensure that we meet our obligations to the consumers and communities we serve.’
• Drake & Morgan has confirmed that it is to re-brand two of its recently-acquired Corney & Barrow sites into D&M units
• Dr Pepper Snapple is reported to be in talks to buy Bai Brands
• The BBPA has welcomed the government’s decision to increase the time during which employers can use the funding from their Apprenticeship Levy contribution from 18 months to two years. The trade body added ‘remains concerned, however, that employers will not be able to use their contributions for existing apprentices already working in the business,’ arguing that such a measure penalises those that have already invested in apprentices.
• The government has launched an inquiry into the changing nature of work and workers’ rights, a move the ALMR calls ‘a fantastic opportunity to promote the good work that the licensed hospitality sector is carrying out.’
• Leading figures from the beer and pub industry have given evidence to the House of Lords Committee inquiry into the Licensing Act 2003. BBPA chief executive Brigid Simmonds said she took the opportunity to ‘highlight to Peers that, after so many changes to the Licensing Act, the pub sector really needs a period of stability.’
• Kate Nicholls of the ALMR has called fruit machines an ‘important’ contribution to pubs’ revenue streams and is pushing for an increase in the stakes and prizes of these machines. In a statement, Kate Nichols said: ‘The ALMR will be responding to the review to push for a more attractive offer for customers to better reflect the changing nature of the licensed hospitality offering and to allow customers to play them responsibility in a supervised environment.’
• Virgin Wine’s boss Jay Wright has told db the industry is ‘not doing itself any favours’ by talking about price rises and trade tariffs. The online specialist has recently said it will not be putting up prices, unlike other retailers and suppliers including Bibendum and Naked Wines.
• Kantar Retail expects Lidl to generate as much as $8.8bn in sales by 2023 in the US as the discounter gears up for its 2018 launch. Lidl is planning to open 100 stores per year in the US and aims to hit 630 locations by 2023.
• Google’s home delivery service, Google Express, has now penetrated 90% of the US as part of the online giant’s aim to take on Amazon.
• More new independent convenience stores have opened in 2016 than those of ‘multiples’, who already have five sites or more. The findings, which show net independent c-store openings of 46 in the months between January and July compared to a net openings figure of just 3 for multiples, come from PwC and The Local Data Company.
• Coca-Cola global sales fell 7% to $10.6bn (£8.67bn) in the three months to September, marking the sixth consecutive quarterly decline in revenue for the carbonated drinks giant. Net profit also fell 28% to $1.05bn (£859m) in the quarter, but the figures were slightly better than expected. The Latin America and Europe, Middle East and Africa regions both posted a 4% slide in sales, although North America had 3% growth and Asia rose 4%.
LEISURE TRAVEL & HOTELS:
• EasyGroup has announced that its holding in EasyHotel has fallen to 34.6% following the latter’s recent share placing
• The average price of hotel rooms in Europe rose by 2% between July and September to €119.17, although occupancy fell by 0.5% to 77.7%. Occupancy in Paris fell by 15.3% to 71.6%, meaning the capital has suffered 14 months in a row of falling occupancy rates following the Bataclan terrorist attack.
• A report has suggested that around 20% of Britons would support an airline & airport alcohol ban. Some 80%, presumably, would not
• Moody’s has reported that the move by HNA Tourism to buy a 25% stake in Hilton is Credit Positive. The ratings agency reports ‘the sale is credit positive for Hilton because it will reduce the financial sponsor’s ownership stake to 21% from 46%. HNA will become the company’s largest shareholder now that Blackstone has reduced its stake, and will take two seats on Hilton’s board as a part of the transaction.’ It says ‘we view HNA as a long-term strategic investor in Hilton. HNA’s involvement will help Hilton expand in the Asia-Pacific market. We expect its Asian presence to expand to about 12% of its worldwide rooms in two to three years, from less than 7% of its worldwide rooms currently. Hilton has been focusing on growing its presence in Asia. As of 31 December 2015, about 27% of the rooms in its new hotel pipeline and 37% of its rooms under construction were in the Asia-Pacific
• Hotels in Europe reported a 0.5% fall in occupancy to 77.7% in the third quarter of 2016, while average daily rate rose 2% to €119.17 and RevPAR grew 1.5% to €92.58.
• The Competition & Markets Authority has approved the disposal of 360 Ladbrokes shops as part of its merger with Coral.
• Samsung has reported operating profits down by around 30% in the quarter to end-September on the back of Note 7 debacle
• Nintendo has warned full-year operating profit will be about a third lower than expected at 30bn yen because of poor Wii U sales and a strong yen. Sales fell by 33% to 136.8bn yen for the six months to September, although net profit more than trebled as the firm sold its controlling stake in US baseball team, the Seattle Mariners.
FINANCE & MARKETS:
• Oil price down to around $50.10 per barrel
• Sterling up a shade over the last 24hrs vs US$. Now trading around $1.221 to the Pound
• BBA reports mortgage approvals in UK in Sept rose to 38,250 against around 37,240 in the prior month
• World markets. UK & Europe down yesterday & US also lower. Far East down in Thursday trade
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Heineken reports Q3 numbers. Says consolidated beer volume +2.0% organically, w. growth in Americas, Asia Pacific & Europe
• Heineken sees ‘weaker volume in Africa Middle East & Eastern Europe’. Says premium beer sales +3.5%.
• Heineken. Organic Q3 beer sales +0.6% in Europe but down 3.6% in Africa, Mid East & Eastern Europe.
• Heineken Q3 in Europe. Volumes were down in the UK ‘partly due to tough comparatives.’
• Punch Taverns has announced a partial redemption of its Class B4 Notes to take place on 1 Nov using £65m of the pub company’s cash.
• The Wine and Spirits Trade Association (WSTA) has warned customers to expect price hikes for both spirits and wine
• Thomas Cook chief Peter Fankhauser has joined calls for the abolition of Air Passenger Duty
• Bank of England’s Mark Carney says Bank’s monetary policy has had a positive impact on Britain’s economy “without parallel”.
• Carney reports Bank cannot ignore the impact Sterling’s slide will have on inflation
RETAIL NEWS WITH NICK BUBB:
• Debenhams: Today’s final results from Debenhams are, helpfully, headlined “Solid performance in line with expectations”, although “flat” might be a better description of the underlying PBT of £114m (52 weeks to end August), “reflecting a strong performance over Peak followed by a tougher second half trading environment”. There has been noting on current trading since June 22nd and there’s not much analysis of recent sales trends in the statement, apart from a reference to a more promotional and competitive marketplace. And, disappointingly, there is nothing about current trading and nothing about what the new CEO has in mind for the business. The Chairman, Ian Cheshire, just says “we look forward to updating the market in Spring 2017 on our longer term plans for the next phase of Debenhams’ development” and the presentation to analysts at 9am will be given by Suzanne Harlow, the
• Inchcape: The Q3 sales from the upmarket car dealer Inchcape are up by 4.3% in constant currency terms and the message form the CEO, one Stefan Bomhard, is that “Our performance this year remains in line with expectations and we continue to expect to deliver a resilient constant currency performance in 2016. With over three quarters of profits denominated in currencies other is n Sterling, our reported actual currency performance is benefiting from Sterling’s weakness. An anticipated slower top-line environment, the transactional currency pressure in Australia and uncertainty on the timing of a market recovery in North Asia impact the trading outlook for 2017. As such and as we increasingly look to leverage our global scale under the Ignite strategy, the Group is reviewing its fixed cost base to ensure we are appropriately positioned for the future”.
• Retail Sales Watch: We noted last Friday that the ONS Retail Sales figures for September were a bit weaker than the City expected, but, as usual, what with one thing and another, we haven’t had time to look at the ONS figures in detail. There is, however, an excellent new consultancy group to do that for us, namely Retail Economics, which is run by 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 1.2% last month, year-on-year (non-seasonally adjusted, ex-petrol), which is basically in line with the BRC-KPMG measure of the September outcome and a bit less than the ONS reported outcome of +2.4%, so the ONS (aka the “Planet ONS”) may have over-egged things again. RE estimate that Food sales rose by 1.3% last month, but overall growth was dragged down by the
• John Lewis Partnership Sales Watch: Of course, the focus now is on how October will turn out, rather than the outcome for September, and we noted last week that the great bellwether, John Lewis, has been having a strong October, after a tough September, helped by the cooler weather and the launch of the new iPhone. And the sales growth of 6.7% gross in w/e Oct 22nd was the fourth decent week in a row, with LFL sales nearly 5% up, although trading was mixed. Fashion sales were up by 10.3% gross, Electricals sales were up by 8.7% gross and Home sales were up by 2.3% gross. Over the last 12 weeks, gross sales at John Lewis are cumulatively now up by 3.7% (a bit over 2% up LFL), with Electricals sales running up by 8.1% gross and Fashion and Home both running up by 1.9%. Over at Waitrose, however, sales were very subdued last week, with gross sales down by 1.0% (over 4% down LFL) in w/e