Langton Capital – 2016-11-29 – Big results day: Easy Hotel, SSP, Pat Val, Merlin & other:
Big results day: Easy Hotel, SSP, Pat Val, Merlin & other:
A DAY IN THE LIFE:
Is it just Langton or are watches going the same way as ties?
Because I haven’t worn either for quite some time and, taking ties in the first instance, though I can be obliged to wear a bit of bright cloth around my neck for a special occasion, results meetings and the like, I wouldn’t wear one for choice and it’s gone by the time my feet hit the pavement outside the venue.
And for watchmakers the outlook could be even bleaker.
Because there are phones, tablets, laptops and the rest constantly telling the time suggesting that you might not really need a chunk of metal hanging off your wrist to tell you the same thing. Just saying. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Patisserie Valerie has reported a 13.3% increase in revenue to £104.1m and an 18.2% rise in statutory pre-tax profit to £17.2m for the 12 months to 30 September. The fast-growing café and casual dining group grew its diluted earnings per share by 20.1% to 13.6p putting its share, which have come down as much as 43% over the course of 2016, on just under 19x earnings. Robust operating cash flows funded the opening of 21 new stores in the period, including its first in Northern Ireland and a standalone bakery in Edinburgh which will facilitate future expansion in Scotland, taking the group’s total store count to 184. Six new stores have opened since the year end, and Patisserie continues to target 20 store openings per annum.
• P Val. Luke Johnson, Executive Chairman, said: ‘Our strategy remains that of organic growth; however we are well positioned to make acquisitions should any suitable opportunities arise. Performance for the first eight weeks of the year has been encouraging and we have already opened six new stores. We have a strong pipeline for the year ahead with a number of promising locations already secured. We will continue to control costs and manage our supply chain in this period of macro-economic uncertainty, thus I am confident of another successful year of growth.’
• The OECD says ‘caution’ is needed as the UK raises the National Living Wage, which will grow to £7.50 an hour next April, given its possible impact on employment. The National Living Wage was introduced by Chancellor George Osborne in his Budget in July 2015 and came into effect in April this year, at a rate of £7.20 an hour for workers aged 25 and over. This will grow to £9 an hour by 2020. The UK’s Office for Budget Responsibility estimated it would give a pay rise to 1.3 million workers this year.
• Poundland has dismissed reports that it could axe of up to 10% of its estate following Steinhoff International’s £597m takeover. The budget retailer continues to look at ‘optimising its estate’, however.
• The Sainsbury’s Local nearest our office now has contactless payment. Perhaps it’s about time.
• Former Tesco CEO Philip Clarke will not face charges from the Serious Fraud Office over the firm’s recent accounting scandal. The SFO has said “following a thorough review of the evidence obtained … it has been decided not to initiate criminal proceedings on the grounds there is insufficient evidence to provide a realistic prospect of conviction.” Three former Tesco executives face trial in September 2017.
• Xmas pudding prices are rising per Mintec. The body says that the cost of the rest of a Christmas dinner is unchanged on last year
• Ikea will continue to lower prices despite the fall in Sterling. The group grew UK sales by 8.9% to £1.72bn in the year to August
SSP – FULL YEAR NUMBERS:
• SSP FY numbers. Group reports underlying profit £121.4m (+18.2% at constant currency) with LfL sales +3.0%.
• SSP says strong LfL sales ‘driven by growth in air passenger travel & retailing initiatives.’ Revenues were £1.99bn (+5% c.curr)
• SSP says margins higher, underlying EPS 15.5p (+16%) with total dividend for year of 5.4p (+26%).
• SSP says it has an ‘encouraging pipeline of new contracts’. CEO Kate Swann reports ‘SSP has delivered another good performance in 2016 and we continue to make progress on our strategic initiatives. Constant currency operating profit was up 18% driven by good like-for-like sales growth, further operational improvements and higher new contract openings. We continue to develop our presence across the world, particularly in North America and Asia Pacific.’
• SSP concludes ‘the new financial year has started in line with our expectations and whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets and our programme of operational improvements.’
EASY HOTEL – FULL YEAR NUMBERS:
• EasyHotel has reported FY numbers for the year to end-Sept. System sales are +6.8% at £21.3m, PBT +38.4%.
• EZH: Group revenue +8.7% at £6m with LfL revenue +13%. EBITDA +6.5% at £1.55m, EPS 1.4p (2015: 1.0p)
• EZH: Final dividend of 0.22p to make 0.33p for year (unchanged). Group says it is ‘on track to deliver development strategy’
• EZH: Group has ‘significantly accelerated development pipeline with 1,527 rooms now in development’ where ‘5 new owned hotel projects will add 576 rooms by early 2018’. Group will also add 951 new franchise rooms currently in its pipeline
• EZH: Post year end, the group raised £38m gross via a placing. It has completed a £7.2m refinancing & is good to go re growth
• EZH: Post year end has seen 2 new franchise hotels opened in Brussels and Amsterdam, and a new franchise agreement signed for easyHotel in Reading. It has also completed the acquisition of the Barcelona hotel development. CEO Guy Parsons reports ‘we are on track to deliver the development plans we announced in September 2016.’ He says ‘2015/2016 was a transformational year for easyHotel, with excellent operational progress made across the business and a significant acceleration of both our owned and franchise hotel development pipelines.’
• EZH reports ‘Board remains confident that by exploiting the strength of the brand, easyHotel will continue to outperform the budget hotel sector as consumers seek out the best value for money.’ CEO Guy Parsons concludes ‘with the experienced team we now have in place and the proceeds of our recent fundraising, we are in an excellent position to expand the easyHotel brand and deliver improving returns for our shareholders’.
• EZH re outlook. Says ‘outlook for the business is most encouraging.’ It concludes ‘the Group has an exciting opportunity ahead’ and says ‘we will continue to update shareholders regularly on our progress’.
LEISURE TRAVEL & HOTELS:
• Hogg Robinson managed to grow first half underlying operating profit by 4% at constant exchange rates despite a 3% drop in revenue. The group made ‘significant cost savings’ of £11.5m in the period as it reached the midway point of its three year restructuring, while its H1 free cash inflow rose by £2.3m to £6.5m and its net debt position fell by £25.5m to £31m. Underlying basic EPS grew 10% to 3.2p.
• Hogg’s Board believes the company will deliver a full-year performance in line with market expectations although it ‘notes that the future macroeconomic landscape looks less clear,’ and the group is beginning to see ‘a tightening in the market as our clients respond to the broader economic uncertainty’.
• The number of foreign holidaymakers visiting the UK fell by almost 400,000 in the first nine months of the year, according to the first British Hospitality Association Travel Monitor. The overall number of arrivals rose by 700,000, however, thanks to a 3.8% increase in business travellers and an 8.2% rise in the number of trips to friends and family members, although there ‘has been no post-European referendum tourist surge.’
• No collapsed pound boost to inbound tourism. BHA says it has been ‘confounding post-Brexit expectations’. Fear of terrorism and a rise in hate crimes against foreigners may be partly to blame post the vote. The BHA says ‘our analysis of the increase in the number of incoming people up to the end of September shows that it is not because of more leisure tourists, which might have been the initial impression.’
• Negative BHA news accords with comments from Merlin suggesting that it has seen no London boost
• On the Beach has announced that its CFO, Wendy Parry, is to retire on 16 Jan. She will be succeeded by Paul Meehan, currently Director at Gala Coral Interactive (Gibraltar) Ltd. (now part of the newly merged Ladbrokes Coral Group plc).
• The British ambassador to Jordan, Edward Oakden, says security measures implemented in Sharm el-Sheikh are still not adequate enough for UK flights to resume. Speaking to delegates at the Association of Independent Tour Operators’ annual conference in Jordan, Oakden commented that the Middle East region faces some ‘obvious challenges which are not going to be quickly resolved’ despite appeals by Egyptian tourist authorities and a raft of travel organisations including Aito, the UN World Travel Organisation and World Travel and Tourism Council.
• Thomas Cook is raising at least €300m in guaranteed senior unsecured fixed rate notes due 2022, to be used to redeem its 2017 notes and a portion of its 2020 notes. The travel group says the move will enhance its financing flexibility ‘consistent with the Company’s target of reducing fixed-term debt by a further £200m over the next two years.
• The use of serviced apartments for corporate travel increased significantly in 2016, according to a study from the Business Travel Show. It showed almost 40% of buyers spent more with serviced apartments this year than 2015, compared to increases of 19% and 13% in 2015 and 2014, respectively.
• Lufthansa pilots are striking again today and tomorrow after weekend talks failed to resolve a long-running dispute over pay.
• The over-50s are getting more adventurous and going on more holidays that when they were younger, per research for Abta.
• Members of train drivers’ union Aslef have voted to strike in response to Southern Railway’s move to driver-only trains. Southern’s drivers who are members of Aslef voted for walkouts by 87%. The union has announced its drivers will strike on 13-14 December, again on 16 December, and between 9-14 January.
• Merlin updates on 47wk trading, says group ‘anticipates reporting good profit growth in 2016, in line with expectations.’
• MERL reports ‘underlying trading in the Midway Attractions Operating Group has remained consistent’ & Resorts had good Halloween. This was helped by favourable weather.
• MERL reports ‘LEGOLAND Parks Operating Group has shown continued positive momentum following 2yrs of exceptional growth’. It cautions ‘trading in Florida remains soft due to challenging market conditions.’
• MERL reports ‘good progress has been made towards Merlin’s 2020 milestones, including the opening of LEGOLAND Dubai on 31 October and Madame Tussauds Istanbul on 28 November.’ The group is due to report preliminary results on 2 March 2017.
FINANCE & MARKETS:
• MPC member Gertjan Vlieghe has said that the uncertain outlook for the UK’s economy in the run up to Brexit demands that interest rates be held at their current lows. He told an audience at Sheffield University ‘for now, given our current economic outlook, and given the level of the exchange rate…the best contribution that monetary policy can make to returning inflation to target while avoiding undesirable volatility in output growth is to keep interest rates where they are now.’
• The Low Pay Commission has said that the NLW has not affected employment levels. It has found “no clear evidence” of shifts in employment levels or hours since the higher minimum wage was introduced in April. The OECD has said that the UK should be careful with plans to raise the NLW further against a background of economic fragility.
• OECD suggests global economic growth will pick up faster than previously expected partly because of a Trump boost in the US.
• OECD says world economy will grow by 3.3% next year, up 0.1% on its September estimate
• World markets: UK, Europe & US down yesterday. Far East mostly lower in Tuesday trade
• Brent rallying a little at around $47.95 per barrel
• Sterling down vs US$ at $1.24. Down also vs Euro at 117c.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• MOD pizza, Five Guys to open stores, Poundland to close them as High St churn continues. Richoux also closes units
• Remy Cointreau saw H1 operating profit jump 15.9% to €123.9m on the back of a 2.5% increase in net sales to €513.4m
• Brasserie Bar Co has reported like-for-like sales growth of 10% across its Brasserie Blanc estate and c6% in White Brasserie
• Five Guys has up to 16 sites in its UK pipeline that is could open next year, per MCA.
• Maidenhead-based long-haul specialist Skies The Limit, aka STL Holidays, has gone out of business
• Stride Gaming reports FY. Says seen ‘strong organic growth’ with revenues at £47.8m (+22%) & adj. EBITDA +27% at £12.3m
• Brexit brouhaha continues. UK economy grew by 0.5% in Q3 but Theresa May can’t sleep at night. Good she’s on the team.
• Ratio of house prices to average incomes in London is now over 14x. Where’s that going to end?
• Ladbrokes has said that the UK is now odds-on to remain in the EU until 2020. Tony Blair ‘has influenced its thinking’
• Later tweets: UK economy seems to be bumping along. Cost shocks next year perhaps but PMIs later this week should confirm OK at present
• Morrison’s seems to be getting its friends back. The Grocer says it’s a hot bed of cheap, pragmatic, ‘capital-light’, ideas”
• Black Friday a bit of a bust. Times = Blank Friday. Not sure if true or if headline was deemed too good to pass up
• True disruption. Telegraph – Amazon Marketplace helps 000s of Online start-ups to sell goods across world with little infrastructure
• New openings may be slowing but still plenty of them. Five Guys, MOD etc. Also Giggling Squid, various others.
RETAIL NEWS WITH NICK BUBB:
• Topps Tiles: The Topps Tiles share price has been under the cosh ahead of today’s finals (for the 52 weeks to Oct 1st), but the statement from Matt Williams, the CEO, seems perfectly OK, despite the ominous reference to “record revenue”: “I am pleased to report that Topps has delivered a strong performance for the year… Sales growth, combined with gross margin improvements and strong cost controls, generated an 8% increase in profits and a 17% increase in dividend”. Adjusted PBT was£22m on sales of £215m. “Like for like sales in the first eight weeks of the new financial year were ahead by 0.8%. Our proven strategy, well-invested business and market leading position, leave Topps well-placed for further progress in the year ahead” and Topps also flag, importantly, that “a stable gross margin is expected this year, despite significant FX headwinds”.
• MySale: The Online “Flash Sales” retailer MySale (backed by Mike Ashley and Philip Green) has been through its problems, but is now on the path of recovery and today’s AGM statement (y/e June) flags that “The current financial year has started well, with revenue growth rates similar to the second half of last year and with substantially enhanced gross profits… at this relatively early stage we would anticipate a full-year out turn slightly above the top end of the current range of analysts’ projections of $8.2 million to $8.5 million underlying EBITDA”.
• Rental Values Watch: Having flagged yesterday the record rent that Hotel Chocolat is paying for a site in Covent Garden, we ought to mention that we didn’t have time on Friday to highlight an excellent article on page 4 of the FT that day, headlined “Shops rise and fall in survival of the fittest”. It was based on research by the FT that examined the nearly 500,000 retail properties that have changed in rental value between the 2010 and 2016 Business Rates surveys and mapped the results, to show which High Streets have prospered and which have struggled. Four examples were featured: Stockport as a town centre that has lost out to out-of-town developments, Nottingham as a town centre that has seen big internal shifts (between the south and the north of the town), Bicester Village as a destination shopping success and Southwold as an attractive high-end coastal resort.
• News Flow This Week: The monthly GFK Consumer Confidence index is out first thing tomorrow and the FTSE Quarterly Index review comes out tomorrow evening. The McColl’s Q4 update and the ASOS AGM are then on Thursday, whilst the DFS AGM is on Friday.