Langton Capital – 2017-05-05 – DP Poland, IHG, MLC, UK drinking habits & other:
DP Poland, IHG, MLC, UK drinking habits & other:A DAY IN THE LIFE: So, the Duke of Edinburgh has let it be known that we can retire at ninety-six. Or when we can no longer stand up, whichever comes the earlier but thanks Phil, just another four decades or so to go, then. Anyway, it’s the end of a short week & it’s time for the news but if you would like to come off this email list please simply hit the unsubscribe button above. Similarly, if you are getting it forwarded and would like to go on directly or if you would like to recommend it to one of your colleagues, please just hit the subscribe button and/or suggest that your colleague does too. PUB, RESTAURANT & DRINK PRODUCERS: • DP Poland updates on trading from 1 Jan to date saying it is in line with management expectations. • DPP sees 21% LfL growth in System Sales in the quarter as a whole. This implies a sharp uptick in March as Jan & Feb were +16% • Group says it has opened 8 new stores to-date in 2017 & it now has 43 stores in 16 towns and cities. The group has a ‘pipeline of more store openings for 2017 and 2018’ and a new commissary is under construction. CEO Peter Shaw reports ‘2017 has started positively with 21% like-for-like System Sales growth in the first quarter. We have opened 8 stores to date in 2017, an unprecedented number in just over 4 months. We are continuing to identify a strong pipeline of store locations for further openings in 2017 and into 2018.’ • Revolution Bars has confirmed that CFO Chris Chambers is to leave the board on 6 May. The group says it has appointed Mike Foster as the Group’s Interim Chief Financial Officer saying ‘Mike will be working with the Company whilst the search for a permanent replacement Finance Director continues.’ • Shake Shack missed its numbers in the US last night and its shares fell by as much as 15% in after-hours trading. The group said that LfL sales were down by 2.5% in Q1. Profits for the quarter were some 55% up (on new openings) at $2.3m. CEO Randy Garutti said the group should see strong growth this year but said ‘we are clearly dissatisfied’ with our Q1 numbers. Shake Shack should open 36 sites this year to add to its c100 currently operating globally. • Derby Brewing, which is raising money on Crowdcube, says that it is making plans to allow would-be investors to sell their shares post investment. It says it is ‘thrilled to announce of our intention to create a secondary market to allow our investors the chance to buy and sell their shares in the future. We are in discussions with Asset Match, who carry out such functions for Brewdog, West Berkshire Brewery & Black Sheep Brewery to name a few. We hope this will once again show our commitment and passion to both our vision for Derby Brewing and to generating a genuine monetized return for our investors.’ • M&S has announced that Archie Norman is to succeed Robert Swannell as chairman. Mr Swannell will retire from the Board on 1 September • The number of adults drinking in the UK has fallen to its lowest level since 2005, the ONS has reported. The survey found that 56.9% of people surveyed had drank alcohol in the last week, down from 64.2% in 2005. • The ALMR has announced its latest Manifesto to help local and national governments support the eating and drinking out sector. Chief Executive of the ALMR, Kate Nicholls said ‘The sudden announcement of a snap General Election has given us an opportunity to engage with politicians who will be keen to court votes and we can ensure that promoting our sector is on the agenda.’ • Activity in the UK’s service sector accelerated in April, with new work growing at its fastest pace this year, as the Markit/CIPS purchasing managers’ index (PMI) for services rose to 55.8. This means the PMI has now been above 50 (the point which marks the cutoff between growth and contraction) for nine months in a row. Markit said the strong performance from the dominant services sector, together with similarly upbeat surveys for construction and manufacturing, suggests the economy is currently growing at twice the pace than that seen in the first quarter of the year (0.6%). • However, Markit said prices charged by service sector firms rose at their fastest rate since July 2008. IHS Markit economist Chris Williamson warned that rising inflation was likely to eventually curb growth. The UK economy grew by 0.3% in the first three months of the year, according to the initial estimate from the Office for National Statistics, the slowest growth rate since the first quarter of 2016. • Taittinger has become the first Champagne house to plant vines in England at its Kentish estate, Domaine Evremond. Pierre-Emmanuel commented: ‘Our family has always had a great affection for the UK and for Kent – my father Jean Taittinger twinned Canterbury with Reims when he was mayor of the latter in the 1950s. We have been very impressed by the quality of English sparkling wine being produced, and we believe the combination of chalk soils, climate and topography of our site in Kent are ideal for producing quality sparkling wine.’ • Dunkin’ Brands Q1 results have taken a hit resulting from a coffee price war that has broken out among US fast food chains, with flat revenue in stores open for more than a year. This compares to the 2 per cent growth recorded in the prior year period and missed expectations for a rise of 0.8%. The company attributed the slowdown to ‘a decline in traffic’ and an ‘increasingly-challenging environment for retail and restaurants’. • Adjusted for a one-off tax benefit, profit was $50.7m, or 54 cents per diluted share, beating consensus forecast of $44.4m or 48 cents a share and Dunkin’ has raised its full year earnings guidance despite the tough market conditions. It now expects earnings per diluted share to be in the $2.22 to $2.30 range and adjusted earnings to be between $2.40 to $2.43, compared to a previous expected range of $2.16 to $2.24 and adjusted profits in the range of $2.34 to $2.37. • Monster Beverage’s Q1 revenue rose 9% yoy to $742.1m but profits fell short of analyst targets of $185.2m with net income being $178m for Q1, an 8.6% rise yoy. The firm blamed this $7.2m shortfall on distributor terminations, shortages of two energy-drink products and a strong US dollar. HOLIDAYS, LEISURE TRAVEL & HOTEL • IHG reports Q1 numbers saying global REVPAR is +2.7% with 7k rooms added to the group’s network. CEO Richard Solomons reports ‘we have made a good start to 2017, with 3.4% net system size growth year-on-year and 2.7% RevPAR growth driven by increases in both rate and occupancy, and benefitting from the later timing of Easter.’ Mr Solomons continues ‘we continued our focus on building and leveraging scale in our priority markets, opening 49 hotels in the quarter, including our 300th for Greater China, and signing hotels into our pipeline at the fastest rate for the first quarter since 2008. We also strengthened our boutique portfolio with the opening of a Hotel Indigo property in downtown Los Angeles.’ • IHG reports ‘despite the uncertain economic and political environment in some markets, we remain confident in the outlook for 2017 and our ability to deliver sustainable growth into the future.’ • Millennium & Copthorne reports Q1 numbers, says London & New Zealand performed strongly. • MLC reports Q1 REVPAR +17.7% in Sterling & +4.6% in constant currency terms. PBT in Q1 down £5m at £13m. • MLC says it saw Q1 London RevPAR growth of 14.5%, which ‘reflected the lower pound boosting tourist numbers and a weak comparative quarter in the previous year.’ Chairman Kwek Leng Beng reports ‘group revenue improved during the first three months of 2017, particularly in London and New Zealand.’ He says, however, that ‘poor performance in the US region especially New York, remains a concern.’ Overall, the chairman says ‘we are addressing the issues contributing to the under-performance in this region and our immediate focus is on the US management structure, which is currently under review.’ • STR reports the London hotel industry bounced sharply in Q1 2017 with REVPAR the highest for any quarter on record. Occupancy was up to 76.1% (+480bps) and rate was +6.2%. REVPAR rose by 11.3% to £101.50. STR says its ‘analysts attribute the strong performance to a 7.7% spike in demand, likely driven by the devaluation of the British pound. Additionally, the Easter calendar shift from March 2016 to April 2017 moved more demand into Q1. Overall, demand was up 8.8% in March, and RevPAR rose 14.2%.’ • STR reports London hotel performance saw increases across all of the capital’s submarkets ‘with the highest levels in the London West End, Earls Court/Kensington/Chelsea and South Central London.’ STR reports ‘after the struggles of early 2016, we’ve seen consistent performance growth in London. What remains to be seen is how the market will react to an influx of new supply set to come online in the near future. London is clearly the development hotspot of Europe, with more than 13,000 rooms in the pipeline.’ • STR reports the US hotel industry increased REVPAR by 8.9% in the week to 29 April. • Increasing levels of terror attacks in Turkey forced Thomas Cook to slash its programme to the destination, the firm also made changes to the way it conveys Foreign Office travel advice. Peter Fankhauser, CEO, said ‘There were 15 terrorist attacks in destinations [we serve] last year and there was a demand drop of 30% to Turkey.’ and ‘As soon as there is a travel warning we stop flying. It is a clear line.’ • Global airline demand increased 6.8% yoy in Q1, driven by lower fares and a better global economic conditions. The industry also experienced increases in overall load factor (up to 80.4%) and capacity (up 6.1%). However, the industry is cautious over the potential impact on future figures of the US and UK laptop ban. • Delegates at the ITM annual conference were told that economists have missed a ‘good news story’ of global growth by focussing on Brexit and Trump too much. Leading economist Jim Power said ‘what’s happening in the global economy, more than anything else, is what drives travel’. • Jet2holidays will station private detectives in resorts in order to crack down on false holiday sickness claims. This follows last month’s Travel Weekly report that some Spanish holidaymakers are thinking about dropping all-inclusive offers to the UK market due to a steep increase in claims. • Airlines UK has called for the next government to abolish Air Passenger Duty and to ensure the continuation of air routes post-Brexit. OTHER LEISURE: • Galaxy Entertainment, a Macau casino operator, has said the gambling is transitioning to a ‘sustainable market recovery’. Gaming revenue in Macau rose rose 16.3% yoy in April to $2.5bn, a ninth successive month of growth. • Google parent Alphabet Inc has announced that it is to pay €306m to settle a tax dispute with Italy FINANCE & MARKETS: • Brexit: o Duke of Edinburgh’s retirement keeps Brexit below the crease o EU reported to be considering moving derivative clearing from London in a move that The Times says could put 80,000 jobs at risk. o Boris nowhere to be seen. o House of Lords suggests that 97% of UK’s food exports could be at risk if the country exits the EU with no trade deal. That’s the proportion of the UK’s food exports currently coming under the EU negotiated trade deals that will fall away in 2019. The House of Lords committee reports ‘it is essential, therefore, that the government should, as a matter of urgency, clarify whether or not such agreements could be grandfathered to preserve preferential trade arrangements for agri-food products.’ • New car sales fell 20% in April y-o-y, largely on the back of changes to excise duty. Total registrations are still +1.1% for the first 4mths of the year. The SMMT reports ‘it’s important to note that the market remains at record levels as customers still see many benefits in purchasing a new car. We therefore expect demand to stabilise over the year as the turbulence created by these tax changes decreases.’ • Mortgage approvals fell in March for the second month in a row. Approvals were down by 1.6% on February. Demand for re-mortgaging also fell. • Oil down sharply to year lows of around $47.14 • Sterling up vs US$ at 1.2919 • Pound down against a strong Euro at €1.1761 • UK 10yr gilts +4bps at 1.12% • World markets: UK mixed yesterday with Europe & US higher. Far East mostly lower in Friday trading YESTERDAY’S LATER TWEETS: • Feeder cattle prices strong, looks like price of red meat may be about to go up. UK milk prices stable albeit 35% up on last June • 74% chance of rate hike in US this June say bookies. UK 10yr gilt yield still languishing at around 1.08% • Next’s retail sales down by as much as 8%. What price the High Street? Says environment ‘remains challenging’ • Punch reports LfL EBITDA down but blames uncertainty re ownership of the group. Says has doubled its number of managed pubs • MRW sales numbers look good. But group says prices are rising, implies that margins may not be as good as first impressions suggest • JDW says needs 3% to 4% LfL growth just to stand still in terms of margins. No guidance from MRW but retail is challenging • SA Brain’s Coffee #1 continues land grab, says hopes to have 100 units operating by 2018. RETAIL NEWS WITH NICK BUBB: • Marks & Spencer (1): The Sky News story from Mark Kleinman last night that Marks & Spencer would announce its new Chairman this morning was, as usual, well-informed and it is indeed the highly respected Archie Norman who will take over from Robert Swannell on September 1st. Some people thought that Archie was too heavyweight for the role, which is non-executive, and it remains to be seen how much of “a back-seat driver” he is to CEO Steve Rowe. When he took over at the struggling Asda in 1991 he famously played down expectations of the turnaround and we see he is up to his old tricks again in today’s statement: “I am looking forward to taking on the role of the Chairmanship of Marks & Spencer a the business under Steve Rowe’s leadership faces into the considerable challenges ahead in a rapidly changing retail landscape”.
• Marks & Spencer (2): We are still rather bemused about the news that that Jill McDonald is be the next M&S Clothing boss and there are doubtless many executives in the Fashion retailing industry, at home and abroad, who will be feeling that they were better qualified for the role. But “left field” choices can sometimes be inspiring and it’s worth recalling that many thought Matt Davies of Halfords an unusual choice a couple of years ago to be head of Tesco UK. The future of M&S lies in Food and the task of managing the inexorable decline of M&S Clothing may well need new talents from outside the Fashion industry. Maybe the M&S Clothing MD job (which, like the Halfords CEO role, has also been a bit of a revolving door in recent years) is crying out for somebody like Jill who’s good with customers and people, but for this to be true M&S need to be sure who their • Rich List Watch: The annual Sunday Times Rich List is published this weekend, but the Times has already flagged that the embattled Philip Green and his Monaco-based wife, Tina, have seen their joint fortune fall by £433m since last year to a mere £2.87bn (back in 2004 it was estimated at £3.61bn). Over the years it has been interesting to see the increasingly fanciful valuations placed by the Sunday Times on Philip’s increasingly beleaguered fashion empire Arcadia and we note that the latest valuation will still be based on the Arcadia Accounts to y/e August 2015, as he has not yet filed Accounts for y/e August 2016…In case you’re wondering, he has until the end of May (ie 9 months after the year-end) to file the Accounts at Companies House or risk a fine…and it perhaps goes without saying that Arcadia’s profits will be well down… • BDO High Street Sales Tracker: We flagged yesterday that trading at John Lewis last week was subdued, despite aggressive price-matching of competitor promotions, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e April 30th saw Fashion Store LFL sales dip by 3.1% against last year, even though the comp was very weak. Including Homewares and Lifestyle chains, total Store LFL sales were down by 1.0%. And overall Online sales were only up by 11.1% (despite relatively weak 16.2% growth a year ago). • Trade Press: Alas, because of the Bank Holiday, neither Retail Week magazine or Drapers magazine have been published today, although their websites have good coverage of the big news this week from Next and M&S, inter alia. The Drapers website (which also has a testing Quiz of the week’s Fashion news) also reveals that revenue at the Online fashion business Missguided increased by 75% to £206m (of which 40% was International) in the 12 months to March 2017. The Retail Week website also flags that the ailing fashion chain Store Twenty One is teetering on the brink of administration. Incidentally, last week’s RW had a great quote from James Daunt of Waterstones: “Elections always impacts us because when life becomes very much more interesting, you read your newspaper more, listen to the radio and if you do that you have less time to read books”. • News Flow Next Week: Things are quieter next week, as we move further into May. The BRC-KPMG Retail Sales for April are out first thing on Tuesday, Wednesday brings the Vertu Motors finals and then the SuperGroup Q4 update is on Thursday.
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