Langton Capital – 2017-03-01 – Shepherd Neame H1, AG Barr, mobile ordering & other:
Shepherd Neame H1, AG Barr, mobile ordering & other:
A DAY IN THE LIFE:
Had all the right intentions today. Got up early, booted computer up but then life got in the way. No Day in the Life, should be back tomorrow. On to the news:
SHEPHERD NEAME H1 NUMBERS:
• Shepherd Neame reports H1 numbers to 24 Dec, says this has been a ‘period of significant acquisition activity with investment in 13 new freehold pubs’
• Sheps H1: Group says turnover for the period increased by 7.4% to £79.2m (2015: £73.7m) with underlying operating profit +6.5% at £7.6m (2015: £7.2m)
• Sheps H1: Says it has seen a ‘strong trading performance in all areas of the business.’ This on top of strong comp numbers
• Sheps H1: H1 managed LfL sales up +5.3% (2015: +6.5%), with food sales up 3.3% and accommodation up 9.6%
• Sheps H1: Tenanted LfL EBITDAR +1.7% (2015: +2.7%). Group says average EBITDAR per pub was up 4.9% (2015: +7.2%)
• Sheps H1: Says ‘total own beer volumes excluding contract up 2.2%’ with reported PBT of £6.7m vs £8.7m last year on reduced disposal profits
• Sheps H1: Says underlying basic EPS +12.4% to 30p (2015: 26.7p). H1 dividend 5.62p vs 5.45p last year. NAV £12.69 vs £12.36
• Sheps H1: CEO Jonathan Neame reports ‘I am delighted to report a strong performance and a period of significant acquisition activity. Our pub business has been driven by good like-for-like sales growth. It is also encouraging to note solid growth in own brand beer volume.’
• Sheps H1: Co slightly cautious on outlook. CEO Jonathan Neame comments ‘we retain a cautious outlook as we are likely to be entering a period of increased cost inflation. However, I am confident that we have the right strategy and skills to deliver value for our shareholders for the long term.’
PUB, RESTAURANT & DRINK MANUFACTURERS:
• AG Barr has commented further on its commitment to reduce sugar across its portfolio saying it ‘confirms that by accelerating its long-standing sugar reduction programme, over 90% of its company owned soft drinks portfolio by volume will contain less than 5g of total sugar per 100ml by the autumn of this year.’ CEO Roger White reports ‘evidence shows that consumers want to reduce their sugar intake while still enjoying great tasting drinks.’ He says ‘we will continue to respond to our consumers and adapt to their changing preferences, offering great tasting products that are right for this generation of consumers and the next.’
• Starbucks has said that its mobile ordering initiative has been ‘wildly successful’. Founder Howard Schultz says ‘the challenge has been, it’s been so wildly successful that, in many stores, it’s created congestion in the morning that we are in the process of fixing.’ A number of large operators are in the process of developing proprietary software whilst others may turn to industry technology aggregators to provide a mobile solution.
• Domino’s Pizza same-store sales grew by 12.2% in the US in the fourth quarter to 1 January, cementing an annual same-store sales increase of 10.5%. Same-store sales over the past three years have increased at a compounded rate of 33 per cent and domestic same-store sales have increased for 23 straight quarters. Internationally, the chain’s 4.3% same-store sales growth was the 92nd straight quarter of growth.
• Private equity group Piper is in talks to invest in the four-strong single-steak dining concept Flat Iron, after beating off competition from Livingbridge and the Business Growth Fund. MCA writes that Piper’s investment could value Flat Iron, which was founded in 2012 by Charlie Carroll and has a fifth site lined up in King’s Cross and a sixth in the pipeline, at c£20m.
• Shares in Candy maker Hershey fell after-hours after it cut its earnings guidance for 2017 and announced a round of cost-cutting measures to protect its profit margins. The group now plans to reduce its global workforce by 15%.
• Gruppo Campari CEO Bob Kunze-Concewitz says the group experienced ‘sound growth’ in 2016, with sales up 4.2% to €1.7bn. Adjusted EBITDA grew by 6.6% to €405.3m and debt jumped to €1.2bn as a result of its €584.1m acquisition of Grand Marnier, although free cash flow was robust at €243.2m (+21.6%). Kunze-Concewitz commented: ‘The business benefited also from a positive contribution from external growth, in line with expectations, driven by Grand Marnier, net of the disposals of non-core lower margin businesses. Looking ahead to 2017, the outlook remains fairly balanced.’
• The BBPA believes that the amendment to the Neighbourhood Planning Bill in the House of Lord, which would stop pubs undergoing a change-of-use without planning permission, places unnecessary burdens on small pub operators. Brigid Simmonds, BBPA Chief Executive, commented: ‘These days, there are very blurred distinctions between pubs, bars and restaurants. If the right to change use were removed for pubs, there is a real concern that a pub could be penalised, or indeed prevented, from increasing its food offering by a local authority planning department. This would inevitably lead to disputes, costs and additional complexity for many small businesses, and take up the time of local authorities.’
• Mobile contactless payments leapt up by 247% in 2016, meaning spending on all forms of contactless systems now accounts for 28% of all non-cash transactions in the UK.
• North London bar Proud now allows customers to buy drinks using a ‘biometric payment’ — by using a bar-top finger scanner to read the unique pattern of veins in your index finger.
• ALMR boss Kate Nichols has said that Brexit discussions with HMG are progressing well. She believes a cliff edge could be avoided. Ms Nichols comments ‘we are seeing quite a significant shift and a Government appetite for finding a solution so there is going to be no cliff edge and there is going to be a right to remain – irrespective of whether you have applied for your residency.’
• Dark Star is to open a 5th site, this one in Crawley, in West Sussex
• A study undertaken by the SEC has suggested that equity crowdfunding platforms in the US are providing a new way of raising capital. That statement would appear to be true – but only as far as it goes. There is no comment as to value or return to shareholders
• Some MPs have warned that the retirement age may have to rise ‘above the natural lifespan’ in some areas
• The National Restaurant Association’s annual industry outlook says the US restaurant industry is expecting sales of about $799bn in 2017 as consumers continue to allocate more money towards eating out. The figure would mark a 4.3% increase on last year’s estimated sales of $766bn, with much of the growth set to come from limited-service options as consumers continue shifting their spending toward quicker, more convenience-oriented fare.
• Aldi has opened its 700th UK store and is targeting 1,000 by 2022, with £450m set aside for investment this year to improve its capacity and distribution network.
HOLIDAYS & LEISURE TRAVEL:
• Families of the victims of the Sousse, Tunisia terrorism attack in 2015 are to continue civil proceedings against TUI. The Coroner recently recorded a verdict of unlawful killing. It made no comment on negligence.
• PPHE Hotels reports full year numbers, says total revenue increased by 24.6% to £272.5 million ‘mainly due to the first time consolidation of our Croatian operations, new hotel openings and a currency exchange rate benefit.’
• PPHE says ‘on a like-for-like basis, revenue increased by 6.0%’ in the year to end-December. Group reports EBITDA +17.5% at £94.1m with LfL EBITDA +0.5%.
• PPHE normalised PBT +6.4% to £31.7m with EPS of 68p (2015: 71p). Group says it is ‘realising shareholder value via Special Dividend of £1.00 per ordinary share’. CEO Boris Ivesha reports ‘2016 has been a busy and fulfilling year for the Group and I am pleased to announce that we have continued to report a solid performance, particularly in the second half of the year, with revenues increasing across all of our regions in Europe over the year as a whole.’ Mr Ivesha continues ‘trading in the year to date is in line with the Board’s expectations in all markets, with the improved market conditions experienced in the second half of 2016 continuing into 2017. In the year ahead we expect further benefit from our new room inventory in London and Nuremberg where our market presence will be strengthened significantly.’
• Elegant Hotels has released an in-line trading update and ‘remains committed to its expansion strategy in both Barbados and the wider Caribbean islands’.
• Elegant Hotels reports that it has appointed Jeff Singleton to its Board with immediate effect. The co says ‘Jeff was appointed as the Group’s Interim Chief Financial Officer on 16 December 2016 and will now take over the role on a permanent basis.’
• Club Med generated revenue of €1.47bn and net income before tax and non-recurring items of €30m in 2016. EBITDA rose 15% year-on-year to €109m.
• BA cabin crew have announced seven days of strike action, from 3-9 March, in the long-running dispute over pay.
• Transport app Uber has warned that tens of thousands of private hire drivers in London could lose their licences due to new English reading and writing requirements. There are over 110,000 private hire drivers in the British capital, according to TfL, but around 33,000 could fail to pass their renewal test due to the new language hurdle.
FINANCE & MARKETS:
• Deputy governor of the B of England Charlotte Hogg has suggested that there is no bubble in gilt markets. Perhaps the big bubble in gilt prices was obscuring it
• The BRC shop price index fell 1% y-o-y in February
• Australia’s economy has now gone 25yrs without a recession
• India’s rate of economic growth slipped in Q4 last year – but only to 7%
• Brent $56.74
• Sterling 123.74 vs US$ and 117.19 vs Euro
• UK 10yr gilt yield up to 1.15%
• World markets: UK and Europe up yesterday but the US fell. Asian markets are mostly higher in Wednesday trade
o Ex-PM John Major has been labelled a ‘moaner & a groaner’ by some pro-Brexit MPs
o Former chancellor George Osborne has said that leaving the EU without a trade deal would be ‘the biggest act of protectionism in British history’. Some would appear to be not averse to that outcome
o PM Theresa May has said that the government wants to secure a Brexit deal with the EU that will allow Nissan and other automakers to flourish in the UK
o Chancellor Philip Hammond has said that production will have to play a bigger role in driving the UK economy after strong consumer spending has kept it going since 23 June. He says ‘consumer borrowing and consumer spending have been an important component of the robustness of the economy over the last few months. What I hope to see over the course of 2017 is business investment and exports providing a greater share of growth.’
o Nissan has said that it needs the government to sponsor UK producers if it is to source more of its product domestically
RETAIL NEWS WITH NICK BUBB:
• Europe Watch Revisited: The FNAC/Darty Q4 and finals came out after the close in Paris yesterday evening, and Alexandre Bompard, Chairman and Chief Executive Officer of Fnac Darty, made the following comment: “Fnac Darty’s 2016 results…are all the more satisfying due to the rapid and effective integration of Fnac and Darty, as can be seen in the new objective to deliver the synergies one year ahead of schedule”. The operational takeover of Darty did not take place until the end of July 2016, but on a pro-forma basis group revenues of €7,418m in calendar 2016 were up 2.0% (at constant exchange rates) and operating income rose 23.1% to €203m. However, in Q4 Darty France sales fell slightly, reflecting the sharp decline in the TV category after the peak of activity in the first half of the year.
• John Lewis Watch: After the calendar shift of Valentine’s Day in the previous week, last week was hit by another timing shift, with the Debenhams’ “New Season Spectacular” Sale moved back a week (it started yesterday Online and starts instore today). Given the impact that has on John Lewis, through price matching on branded lines, gross sales were down by 3.1% (over 5% down LFL) in w/e Feb 25th a, with Fashion sales nearly 10% down LFL. That impact will reverse this week, but the later fall of Mothering Sunday will hold things back.
• Today’s Press and News: The front pages are dominated by the news that the embattled Philip Green has agreed to pay up to £363m into the BHS pension fund and there is much predictable comment about the likelihood that he is now “off the hook” in terms of his knighthood: the Daily Mail, cravenly, has officially dropped its reference to him as Sir Shifty. The other big news is that shares in Burberry surged, briefly, yesterday afternoon after the Belgian billionaire Albert Frère disclosed a 3% stake in the company.
• News Flow This Week: As we move into March, this evening brings the latest quarterly FTSE index review (with Dixons Carphone certain to be relegated from the FTSE 100) and then tomorrow we get the Travis Perkins finals and the Shoe Zone AGM.
• Waterstones Watch: The weekend press saw Waterstones in the spotlight over its low-profile branding in 3 “anti-brand” towns, but it is on our minds for a different reason, namely that we noticed the other day that the long-established branch on London Wall in the City (at the junction with Copthall Avenue) has just closed. To be fair, it looks as if the whole parade of shops on that side of the street, in front of the office buildings, is up for redevelopment, but that leaves the only Waterstones bookshop in the City the store on the edge of Leadenhall Market (although its “sister company” Daunts has an excellent bookshop on Cheapside)…