Enterprise Inns update, Thomas Cook, costs & other:

A DAY IN THE LIFE:

Computer issues this morning. On to the news:

LANGTON RESEARCH:

• Langton has produced a piece of research on the outlook for 2017. It’s free & can be found here

• We look at the macro trends etc. out there & comment on current developments. If you would like to advertise in these documents going forward, please let us know.

• See latest 60 seconds piece here

ENTERPRISE INNS – UPDATE OF FIRST 18 WEEKS OF 2016/17:

• Ahead of its AGM, which will be held later today, Enterprise inns has today updated on trading for the 18wk period to 4 February and our comments are set out below:

• Key Numbers:

• Enterprise says ‘trading in line with expectations’. The group is ‘maintaining like-for-like net income growth’

• The company adds that its ‘strategic evolution of [the] business [is] progressing well.’

• Enterprise says ‘we have made a good start to the financial year with Ei Publican Partnerships, our leased and tenanted estate, reporting like-for-like net income growth of 1.6% in the 18 weeks to 4 February 2017.’

• Operational & Strategic Highlights:

• The group says re trading ‘this steady improvement in performance has been achieved as a result of continued stabilisation of rental income and growing income from beer sales, driven by targeted capital investment, operational support and commercial benefits provided to our publicans.’

• ETI says ‘the execution of our strategic plan for the business is progressing well. We expect to be operating in the region of 400 commercial properties by the financial year end. Of these, 181 traded throughout this reporting period and the prior period, delivering like-for-like net income growth of 2.1%.’

• ETI adds ‘the trading performance and expansion of our managed house businesses is progressing in line with our expectations and we continue to expect to have in the region of 250 managed houses operational by 30 September 2017.’

• The group is to change its name from Enterprise Inns plc to EI Group plc.’ Enterprise says ‘this reflects the transformation of the Company’s business from a single, predominantly leased and tenanted operation, to a portfolio of businesses comprising a variety of operating models and trading styles designed to optimise the value derived from the asset base.’

• Balance sheet, cash flow & other:

• No additional comments

• Company comments on performance:

• CEO Simon Townsend reports ‘we are pleased to have made a good start to the year, delivering continued like-for-like growth in our leased and tenanted business and an encouraging performance from our commercial property and managed house businesses.’

• Mr Townsend continues ‘despite potential headwinds from legislative cost increases and the new regulatory environment we remain confident that we are on track to deliver our expectations for the full financial year.’

• The CEO adds ‘we have made good progress executing our operational strategy, in which the Group is evolving as a portfolio manager of operating assets.’

• Re the name change, Mr Townsend concludes ‘we believe the time is right to recognise that we now have strong, differentiated divisional businesses operating under a group umbrella and move forward under our new name of Ei Group plc.’

• Langton Comment: Enterprise’s shares have risen strongly in the wake of the bid for rival operator Punch Taverns.

• This has been supported by an improved trading performance and the company’s share buyback programme will have helped to mop up excess stock.

• The group has reassured that its strategy is being implanted and it has been able to advise that early results have been good.

• The plan appears solid. Execution remains a challenge but trading is in line with expectations across the group’s businesses.

• Re the outlook, Enterprise says trading is in line with expectations.

• As previously reported, the challenge for Enterprise remains 1) executing on plan and 2) persuading analysts and would-be shareholders that it should be valued on a ‘normal’ basis.

• This would appear, though these are early days, to be working.

• We reported in November that ‘the shares look to be far too cheap.’ We might, at this stage, simply remove the word ‘far’

• The above will not be achieved without effort but, as the company itself is buying back shares and trading continues to be in line with expectations, there are increasing grounds for optimism.

PUB, RESTAURANT & DRINKS PRODUCERS:

• Deltic’s quarterly Night Index finds that November to January late night leisure spend was down but that January pay weekend ‘remains [a] big hit’, with one in five Brits heading to the bar. Trips to the cinema have risen in popularity, although pubs remain the most popular late night activity as ‘Brits lasted on average 12 days before giving up Dry January’. More people attempted the feat, however. The report also highlighted that Dry January is a more popular phenomenon with the younger generation. Almost half (45%) of 18-21 year olds took part this year, compared to only 17% of those aged 56 upwards.

• Peter Marks, Chief Executive of The Deltic Group commented: ‘What we have found is that over the festive season people tend to go out more often and for longer however in January this is reversed. For us the fact that the average amount spent on a late night out is down for this quarter is no surprise when you look at the period as a whole (November to January). There is a very long gap between the December and January pay days coupled with tighter personal finances following Christmas. Traditionally, January is a quiet month for the whole sector and this is reflected in our data. However it is fantastic to see that the January pay weekend remains a key event in the late night sector with many choosing to spend it in pubs, bars and clubs.’

• Itsu’s chief executive said at MCA’s recent Food To Go conference that the Asian-inspired brand is willing to adopt a franchise model as part of its international expansion. The c70-strong group believes it can grow to 200 units in the UK and is also preparing to make its US debut next year with a company owned site in New York.

• Speaking at the event, Ivan Schofield commented: ‘We have 70 at the moment but with an impressive concentration in London. We certainly see 150 – 200 but I prefer to take it 30 or 40 at a time. 200 would mean having cracked the code outside London, which we are making good progress on.’

• Carlsberg has warned the Russian beer market – the source of a sixth of last year’s operating profit — will shrink at least 5% this year following a ban on large bottles. The stock fell 3.8% in Copenhagen even as Carlsberg forecast higher earnings. ‘We’re depending on consumer confidence, and we don’t see those figures changing at this point in time,’ the CEO told analysts. ‘We are cautious — not pessimistic, not optimistic — but I think just realistic.’

• KFC intends to open four new sites under its urban box format in the next 12 months and could open as many as 70 across the UK in the longer term, per MCA.

• PizzaExpress, the Hony Capital-backed chain, has begun working with Just Eat through a select few central London sites. This comes after the pizza group signed a deal with Deliveroo to offer delivery across its c460-strong UK estate, writes MCA.

• Drake & Morgan is to convert a further two of its recently acquired Corney & Barrow sites into Refinery bars

• Tequila maker Jose Cuervo’s initial public offering is at least some four times oversubscribed, with the pricing of its 476.6 million shares expected to be at the upper limit of the 30 to 34 peso guidance range. A 34 peso pricing, combined with a 15% ‘overallotment option’ could allow the oldest continuously-producing tequila company to rake in upwards of $900m.

• China’s wine imports grew both in volume and value terms in 2016, per figures from the country’s Customs Department. The growth was bolstered by strong demand for bottled wine from Guangdong, Shanghai, Beijing and coastal regions in China, with wine imports totalling 638 million litres in 2016 (+15% year-on-year). Its import value also grew by 16.3% year-on-year to US$2.364bn.

• Matthew Clarke’s online sales on its Matthew Clarke Live Platform jumped 27% in value and 29% in volume year-on-year in December, resulting in the distributor’s most successful month ever.

• Amazon is extending its fast-growing Fresh delivery service to Surrey and Hampshire.

• Whole Foods’ shares fell yesterday in the US as the up market, aspirational food retailer reduced expectations

INFLATIONWATCH:

• The Bank of England says price rises will spread to other goods later this year as hedges expire, although more exports and ‘resilient consumer demand’ has encouraged more investment. ‘So far, the main effect on consumer prices had been higher food and fuel prices,’ said the central bank. ‘But a wider range of goods prices were expected to be affected over the coming year, causing inflation to rise further.’

• Lettuce has made a welcome return to Langton’s local Sainsbury’s albeit at the whopping price of 80p per head (c+45%).

• PMA warns trade licensees are facing a cost of price increases. Brewers have raised beer prices & some fear duty could rise also

THOMAS COOK – Q1 TRADING UPDATE:

• Thomas Cook updates on Q1 earnings, revenue +14% LfL to £1.6bn. Margin little changed at 22.1% (was 22.2%).

• TCG underlying loss £49m (was £50m) with net debt up a shade at £1.225bn (2015/16: £1.192bn).

• TCG says has made a ‘solid start to the year’. Says it has seen improved customer satisfaction over the quarter

• TCG says winter is 82% sold (in line) with summer 31% sold, some 9% ahead of this time last year

• TCG CEO Peter Fankhauser reports ‘we have delivered a solid performance for the first three months in line with our expectations, against a backdrop of continued uncertainty.’

• TCG CEO adds ‘our businesses in the UK and Northern Europe continued last summer’s strong performance into the first quarter, while our tour operating business in Continental Europe also improved. This helped to offset the pressures that Condor is experiencing in the German airline market. We have taken measures to address Condor’s challenges and expect to start to see the benefits come through in the second half, as we set out in November.’

• TCG concludes ‘we remain cautious about the rest of the year, given the uncertain political and economic outlook.’

• TCG adds ‘it’s still relatively early in the selling cycle for summer holidays, but based on current trading, and supported by further financial benefits from implementing our strategy, we expect our full year operating results to be in line with current market expectations.’

LEISURE TRAVEL & HOTELS:

• Priceline Group announces it is to buy Cheapflights’ owner Momondo Group for $550 million. Momondo reports ‘we look forward to becoming part of the Kayak family within The Priceline Group, and are very confident that the blend of brands and our different strengths will help us to jointly pursue what we both believe most passionately in – building products users love.’

• UKinbound’s Deirdre Wells warns that adding a bed tax in London may be seen as “fleecing” tourists. She says ‘I have yet to see a tax like this be sent where it was supposed to go.’ Ms Wells adds ‘we were really concerned to hear the mayor come out in favour of the bed tax. We should be doing everything we can to try and encourage people to come to the UK – saying you’re going to slap a tax on them when they get here is completely counterintuitive.’

• Trump’s ban prompted a 6.5% slump in worldwide flight bookings to the US according to data based on analysis of 16 million flight reservations a day. A senior industry figure stated that with respects to the UK there was ‘an immediate negative impact on bookings and searches to the US after the ban.’

• Fleurets’ London team has sold the Caring Hotel in Bayswater, London to the Arianya Group, after marketing the freehold interest off a guide price of £7m. The Arianya Group also owns and operates The Garden Court Hotel in W2.

• Thomas Cook has ended its commercial agreement with Jet2holidays, meaning Jet2holidays packages will no longer be offered for sale in any of Cook’s 790 shops. Rival Tui ended its commercial agreement with Jet2holidays in December last year, also removing the operator’s product from its Thomson and First Choice stores.

• Jet2’s rapid expansion has seen it close in on the ‘big two’ with November Atol figures showing that it is licensed to carry 2.27 million passengers – 45% more than its previous Atol and only 263,000 fewer than Cook. In July, its airline arm Jet2.com unveiled a base in Birmingham and in September revealed a significant programme out of Stansted. The airline already flies out of Belfast International, East Midlands, Edinburgh, Glasgow, Leeds Bradford, Manchester and Newcastle.

OTHER LEISURE:

• Virgin Active has offloaded 16 sites to David Lloyd Leisure, having already sold 35 gyms to Nuffield Health in 2015. Virgin Active will concentrate its efforts on its metropolitan and commuter hub operations.

FINANCE & MARKETS:

• B of England’s Agents’ Summary of Business Conditions suggests consumer spending growth had remained resilient in last quarter. It says this ‘was expected to ease during the year as prices rose. Investment intentions had edged higher and pointed to small increases in spending during 2017. Export volumes growth had risen due to the fall in sterling and stronger world growth.’

• B of England agents suggest ‘hiring plans had edged up’ but they see little change in staffing overall in the next 6mths.

• Bank says ‘price pressures had continued to build through supply chains following sterling’s fall. So far, the main effect on consumer prices had been higher food and fuel prices. But a wider range of goods prices were expected to be affected over the coming year, causing inflation to rise further.’

• Commons has voted to trigger Article 50. Lords to discuss later this month.

• Reuters reports support for Scottish independence has risen since PM’s choice of a Hard Brexit

• Oil up a shade at $55.45 per barrel

• Sterling lower at $1.2510

• UK 10yr gilt yield down to 1.26% from 1.29%. US 30yr treasury yield down 6bps at 2.96%.

• World markets: UK & Europe up yesterday, US also higher & Far East up in Thursday trade

TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS:

• Enterprise says Q1 ‘trading in line with expectations’. The group is ‘maintaining like-for-like net income growth’

• ETI pub partnerships +1.6% in 18 weeks to 4 Feb 2017. Commercial properties +2.1%.

• Deltic’s quarterly Night Index finds that November to January late night leisure spend was down

• Carlsberg has warned the Russian beer market – the source of a sixth of last year’s operating profit — will shrink at least 5% this year

• Drake & Morgan is to convert a further two of its recently acquired Corney & Barrow sites into Refinery bars

• Thomas Cook updates on Q1 earnings, revenue +14% LfL to £1.6bn. Margin little changed at 22.1% (was 22.2%).

• TCG says has made a ‘solid start to the year’. Says it has seen improved customer satisfaction over the quarter

• TCG says winter is 82% sold (in line) with summer 31% sold, some 9% ahead of this time last year. Says is a ‘solid performance’

• UKinbound’s Deirdre Wells warns that adding a bed tax in London may be seen as “fleecing” tourists.

• B of England’s Agents’ Summary of Business Conditions suggests consumer spending growth had remained resilient

• B of England agents suggest ‘hiring plans had edged up’ but they see little change in staffing overall in the next 6mths.

• Bank says ‘price pressures had continued to build through supply chains following sterling’s fall.’

• Later tweets Wednesday: IFS confirms tax burden to rise even as services are being cut. Simply got too far ahead of ourselves under Blair, Brown

• Dunelm says ‘trading was slightly softer’ than anticipated as customers decided to forego that extra cushion.

• John Lewis, albeit referring only to one week’s sales, says that sales of big ticket items such as furniture remain robust

• BP disappoints but dividend, which is paid in US$$s, is now around 7%. FTSE100 supported by US$$ earners

RETAIL NEWS WITH NICK BUBB:

• DFS Furniture: After yesterday’s poorly received Dunelm interims, DFS were on a hiding to nothing with their pre-close H1 trading update today, notwithstanding the more upbeat vibes from their peers ScS and Carpetright last week, but at least they have said “our expectations for the Group’s profit before tax in the full year (to the end of July) remain unchanged”. However, overall sales growth in the 26 weeks to Jan 28th was again nothing to write home about, at 7%, and management warn that “in 2017 the retailing of furniture in the UK faces an increased risk of a market slowdown given the uncertain outlook for consumer confidence”. Investors may be reassured to hear that “Strategic initiatives are delivering results” and that “…with its resilient operating model we believe the Group remains very well positioned…”.

• Weather Watch: It is turning colder again, but memories about “the weather” are always notoriously short-term, so, after Tuesday’s BRC-KPMG Retail Sales survey flagged that Fashion retailers had another tough month, we turned to the Retail weather consultants Planalytics for their regular monthly overview of how last month’s weather “should” have affected trading on the High Street. And their headline for January was “Colder than both Last Year and Normal”, noting that there was strong weather-driven demand to help stock clearance. Overall the UK was 1.1 degrees cooler than last year, at 4.0C, and it was also very dry again (which was good for High Street footfall). But there was a real North/South split, as the South-East was particularly susceptible to cold weather and London saw its coldest January of the past 55 years or so. Surprisingly, however, the net impact on
“Weather-driven demand” for winterwear was neutral compared to January 2016.