Langton Capital – 2017-02-21 – Intercontinental Hotels, Everyman, Punch & other:
Be at One, Intercontinental, Everyman, Punch & other:
A DAY IN THE LIFE:
It’s a feature of the tax system that VAT is only levied on ‘non-essentials’.
Well, sort of. But at least that’s broadly the principle as bread is zero-rated whilst but attracts VAT, there’s no additional tax on milk but there is on fizzy drinks etc.
And, whilst the government is at it, it could be trying to keep us happy as there is no VAT on biscuits – unless they are covered in chocolate – but you can hide the chocolate on the inside & still get away with it.
And, although there may be a nod towards health, it’s pleasing to see that other essentials, such as Mr Porky Pork Scratchings and double, triple-covered chocolate cakes with extra chocolate toppings are zero-rated whilst posh nosh such as orange juice and bottled water, attract VAT at the full rate of 20%.
So, I can take a hint. We’re being nudged towards a pork scratchings and cake diet. On to the news:
PUB, RESTAURANT & DRINK MANUFACTURERS:
• 31-strong bar group Be At One for sale at £60m reports The Times.
• Debtwire suggests Piper Private Equity owned Be At One has hired AlixPartners to find a buyer for the group
• Heineken’s on-trade director and ex-head of Star Pubs & Bars, Chris Jowsey, says ‘it’s in our interest to have a really vibrant sector’. Jowsey adds it’s important for Heineken to adopt a partnership approach with its new pubs, although the brewer has come under fire from operators for its annual beer increases.
• Share trading in Punch seems to have settled down. Whoever was short, and buying back shares at a shade over the Heineken offer price of 180p, seems to have stopped. The competition authorities report on their Phase I investigation on or before 24 April & the deal, unless there is a heavy, Phase II investigation, should close at the aforementioned 180p ‘sometime in H1 this year’.
• The 2016 harvest in Bordeaux was the largest since 2006, with 577 million litres produced (770m bottles of wine).
• Sainsbury’s boss Mike Coupe demands fundamental reform of the ‘archaic’ business rates system. He stated that the current system gives online retailers unfair advantage over bricks and mortar operations.
• The delivery conundrum:
o High street restaurants at a disadvantage as food prep and consumption will be in highly-business-rated A3 & A4 premises vs delivery, which may be prepared & despatched from industrial estates etc.
o Individual restaurants must devote a chunk of their high-street space to preparing food for delivery. Chains may consider setting up Roo Boxes or other, purpose built facilities to service this lower-margin segment.
• The Welsh Government is introducing a £10m fund to help high street retailers vulnerable to the business rates revaluation. The scheme will support almost 15,000 high street businesses.
INTERCONTINENTAL HOTELS FULL YEAR NUMBERS:
• IHG FY numbers: Group reports revenue down 4.9% (in US$) at $1.72bn with operating profit 4% up at $707m
• IHG reports a $400m special dividend will be returned to shareholders in Q2 this year.
• IHG FY: Reports adj. EPS of 203.3c (2015: 174.9c) with total dividends +11% at 94c.
• IHG FY: CEO Richard Solomons reports ‘our results clearly demonstrate our strong operational performance and the success of IHG’s long-term strategy, which have delivered a 9.5% increase in underlying profit and a 23% increase in underlying EPS.’ He continues ‘our cash generative business model underpins our decision to announce a $400 million special dividend and to propose an 11% increase in the total dividend for the year.’
• IHG FY: Group says ‘we continued our focus on enhancing the long-term sustainability of our competitive advantage by evolving our brand portfolio and by driving innovation in our digital and loyalty offer.’
• IHG FY: CEO Solomons reports ‘fundamentals for the hospitality industry remain compelling. Despite the uncertain environment in some markets, we remain confident in the outlook for the year ahead, as well as our ability to deliver sustainable growth into the future.’
• IHG FY highlights: Sees both REVPAR & room numbers grow over the year by 1.8% and 3.1% respectively
• Group has ‘signed 76k rooms into the pipeline, representing over 500 new hotels, the highest number of deals signed since 2008, demonstrating owner confidence in our brands.’
• Americas saw ‘rate-led REVPAR growth’
• Europe produced ‘market outperformance in priority markets and highest rooms signings for 9 years’
• AMEA was solid & the group outperformed in Greater China
LEISURE TRAVEL & HOTELS:
• Foreign tourists holidaying in the UK was up 15% over the Christmas period, according to new survey. The British Hospitality Association Travel Monitor report found that these visitors spent 2% less, and that there was a 10% decrease in business travellers in December.
• Donald Trump’s controversial presidency has put off almost ⅓ of Britons from holidaying there, research from Cheapflights suggests. Instead, alternative destinations have seen higher demand in searches with Thailand +27% and Mexico +22% whilst the US is -10% compared to this time last year.
• Kuoni’s annual trends report finds that touring and experiential travel are in demand this year by luxury holidayers. The report also found a 30% increase in bookings to Greece.
• Airbnb has bought Montreal-based Luxury Retreats International, which has a network of 4,000 homes worldwide, as part of its move into high-end vacation rentals.
• Hogg Robinson Group’s travel management business saw trade deteriorate in the second half of its financial year due to client losses, ‘the continued move to online booking and ongoing strong competitive pressure’. The group is mid-way through a three year restructuring.
• Everyman Media has announced its previously announced venue in Stratford-upon-Avon has now become unconditional.’ It says ‘it is expected that the new four screen site will open in the second quarter of 2017.’
• Everyman confirms its new Stratford site will be leased from a related party. Says it is on commercial terms. The group reports it ‘is pleased to announce the appointment of Simon Morgan as Non-Executive Chairman with immediate effect. At the same time, Philip Shotter has resigned as Non-Executive Chairman. The Board would like to thank Mr Shotter for his service to the Company.’
FINANCE & MARKETS:
• Race to the Right given impetus by Labour Party’s intransigence, incompetence and basic lack of appeal.
• By-elections coming up in Stoke & Copeland. Both ‘safe Labour’ but, with Mr Corbyn’s approval rating languishing at a record minus 38, he could lose both seats to ‘right wingers’ from UKIP and the Tory Party respectively.
• PM Theresa May is to have a ‘private conversation’ with Peugeot’s Carlos Tavares in a bid to protect Vauxhall jobs. Unsure what stick (or carrot for that matter) will be available.
• Brent up a shade at $56.20
• Sterling a little stronger at 124.45c vs US$ and 117.55c vs Euro
• UK 10yr gilt yield up a little at 1.23% (was 1.21%)
• Balance of UK firms reporting orderbooks above normal rose in February
• World markets: UK mixed to unchanged yesterday with Europe mostly up. US markets closed & Asia higher in Tuesday trade
TODAY IN A NUTSHELL:
• Heineken says is ‘in our interest to have a really vibrant sector’. Suggests it is not gouging on beer price rises
• Share trading in Punch seems to have settled down. Whoever was short, and buying back shares at >180p, appears to have stopped
• Sainsbury’s boss Mike Coupe demands fundamental reform of the ‘archaic’ business rates system
• Delivery conundrum. High Street restaurants have to devote higher-rated space to delivery prep. Newcomers may do it from industrial estates
• IHG FY numbers: Group reports revenue down 4.9% (in US$) at $1.72bn with operating profit 4% up at $707m
• Foreign tourists holidaying in the UK was up 15% over the Christmas period, according to BHA
• Donald Trump’s controversial presidency has put off almost ⅓ of Britons from holidaying there, research from Cheapflights suggests
• Kuoni’s annual trends report finds that touring and experiential travel are in demand this year by luxury holiday makers
• Later Monday tweets: Rightmove says prices still rising (+2.3% on year) but rate of increase slowed in Feb quickest in 6yrs. Most problems in S & London
• Markets said to be ‘looking through’ Trump to recovery. That’s a pretty big issue to look through.
• Sainsbury calls proposed (now abandoned) Kraft/ULVR creation a massive monolith. Pot calling kettle black there, surely?
• Visitor numbers into UK highest ever. Was Q3 & Q4 loaded. Benefit must be included in recent tracker numbers. And they weren’t brilliant
• Strip out high overseas visitor numbers & arguably UK from UK business a little sluggish. Even in London?
• EU staff voting with their feet, 27% of employers fear their staff are about to leave. Fancy washing dishes anyone? Anyone?
RETAIL NEWS WITH NICK BUBB:
• Retail Sales Watch: We flagged yesterday that the ONS Retail Sales figures for January were no longer boosted by improbably strong growth for “Small Retailers”, which meant that the Office of National Statistics reported total sales up by only 2.2% last month, whereas the BRC-KPMG measure of gross sales growth (which focuses on Large Retailers) was just 0.1%…So, who was right? Well, the new consultancy group, Retail Economics (RE), which is run by the estimable Richard Lim (who used to be in charge of the monthly BRC-KPMG Retail Sales survey), has just come out with its own overview and their estimate is that gross Retail sales rose in value by a mere 0.4% last month, year-on-year (non-seasonally adjusted, ex-petrol), which is again much closer to the BRC figure than the ONS (aka the “Planet ONS”). In December the RE estimate was sales rose by 3.4%. RE estimate that Food sales
• Today’s Press and News: The Hammerson final results yesterday get a fair amount of coverage in today’s papers, but the big Retail news yesterday that the former Next Product Director Christos Angelides (who a week ago was rumoured to be pitching up at M&S as Head of Clothing…) has been appointed the new CEO of the fashion chain Reiss and will be stepping down as a non-exec at the embattled French Connection. Talking of Next, the front page headline of the Yorkshire Post today is “The next Big Thing”, referring to Next’s plans to create a huge new flagship store in the White Rose centre near Leeds, by taking over the former BHS unit. The front page headline of the Times is “Tories turn on Minister in Business Rates battle” and the Daily Mail runs with “’Dodgy’ business rates dossier”, flagging that Sajid Javid has been accused of “peddling misinformation and half-truths”…
• Amazon Warehouse Watch: Mighty Amazon trumpeted yesterday that it is to create 5000 new jobs in the UK this year and, although that includes tech jobs and London/Fashion HQ jobs, it is clear that many of the jobs are warehouse jobs in the 3 new fulfilment centres in Tilbury, Doncaster and Daventry (which have obviously been planned for some time…). From the local press reports, it looks as if the Doncaster warehouse will add 500 jobs and the Daventry warehouse 300 jobs, so it is clear that the new Tilbury warehouse is the biggest one, as this will create at least 1500 jobs. This is a 2m sq ft monster on 4 floors, located on the new London Distribution Park close to Tilbury Docks. We would be concerned about the impact of all the extra traffic that the new Amazon warehouse will create on the already over-stretched A13 nearby and the M25 junction near the Lakeside shopping centre, but
• News Flow This Week: The hard-pressed spin-doctors at Asda will try to put their gloss on more weak sales figures this afternoon, on the back of the Wal-Mart Q4 results, with new CEO Sean Clarke overdue to set out his strategic plan. Tomorrow brings the CapCo finals and the Hotel Chocolat finals, whilst we get the Intu Properties finals and the Howden finals on Thursday