Langton Capital – 2017-05-09 – Goals, Wm Hill, Gear 4 Music, Marriott, costs & other:
Goals, Wm Hill, Gear 4 Music, Marriott, costs & other:
A DAY IN THE LIFE:
Technology’s great but it can also be pretty frustrating.
I mean how often have you picked something up, a phone, a camera, your FitBit or whatever and found that its battery light is flashing at you?
Quite often, I would imagine, which means that you have to find the charger (or worse still pry the back off and find out what type of batteries the thing takes) and then you remember that it’s not a simple mini-USB (or micro-USB or nano-USB or whichever variety is in fashion these days) but one of those pin-chargers that are steadily becoming extinct and which might be anywhere from the kitchen to the garage to one of the kids’ bedrooms.)
Or it might accidentally have fallen in the bin, one of which is conveniently but dangerously located close to the coffee table and, since the last thing to start flashing at me was one of the car keys, this could leave me in a pretty tricky position. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Just Eat. David Buttress, who stepped down as CEO of JE. in March due to “urgent family matters”, is to join 83North, one of the online food-ordering company’s investors. Mr Buttress, 40, will work 2dys per week before increasing his hours next year. JE, whose shares are up by nearly 40% over the last year, has also seen its CFO and chairman step down in recent months.
• Skills shortages. The Recruitment & Employment Confederation has said that the number of candidates available for jobs has fallen to a 16mth low. The REC reports ‘if British business is to thrive, then whichever party forms a government after June 8 needs to address the ever-shrinking pool of suitable candidates by investing in skills and career advice for UK jobseekers, as well as safeguarding access to the workers we need from abroad.’
• Carlsberg has announced that it plans to acquire a UK craft brewery in a bid to grow its portfolio of smaller brands. The Danish beer company could be ready later this year to purchase a craft brewery, however, chief executive Julian Momen commented ‘There’s lots [of UK craft breweries] out there, so finding the right one in the right location and making sure it fits with our existing portfolio is quite important, so we’re going through that process at the moment’
• Rising prices are likely to renew the squeeze on the British high street in the second quarter following a ‘brief respite’ over Easter, according to BRC figures. The British Retail Consortium estimated that the value of goods sold in its members’ stores rose 6.3% in April, compared with the same month in 2016. However, most of the rise was the result of Easter falling in mid-April this year, compared with late March last year. Meanwhile, UK inflation has risen to 2.3%.
• Kona Grill reports Q1 numbers, sees LfL sales down 4.3% over Q1 last year or down 3.6% excluding the 2016 Leap Day. The group is reporting a net loss of $3.4m. CEO Berke Bakay says ‘first quarter results are indicative of both the challenging operating environment and the changing retail and restaurant landscape. Our same-store sales decreased following six consecutive years of positive same-store sales as we faced our most difficult comparison of the year. On a two-year basis, however, flat same-store sales outpaced many of our casual dining peers. We believe this reflects our relatively stronger position within the industry.’
• St Austell Brewery has increased annual revenue by 13.2% to £153.2m in the 52-week period to 31 December 2016. The 178-strong pub operator saw operating profit climb 5.2% to £14m after having invested £25.9m in capital expenditure during the year.
• Camm & Hooper has announced that it will open a 6th site called Grace Hall this autumn, following an investment of £2m.
• A new mobile payment app, called Viva, will launch this summer, seeking to provide operators with real-time revenue and sales information as well as customer profile data.
• The ALMR has responded to the Conservative Party’s manifesto pledge to reduce immigration by stating that the drinking and eating out industry needs access to overseas employees. Chief executive of the ALMR, Kate Nicholls said ‘the eating and drinking out sector is heavily reliant on non-UK workers, particularly those from the European Union. Almost a quarter of the total hospitality and tourism workforce is comprised of non-UK workers and nearly half of those are EU migrants.’
• Over half of the UK’s electronic-cigarette users have given up smoking tobacco. Some 1.5 million vapers now consider themselves ex-tobacco smokers, compared to the 1.3 million that still use tobacco. Scientists currently believe that e-cigarettes present a much lower risk of exposure to harmful toxins than tobacco cigarettes.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Spain still no1. The Post Office Travel Money’s 2017 Holiday Spending Report predicts Spain to be the primary destination for almost a quarter of British holidaymakers, with France (18%) and Italy (17%) following up. Spain was held in high esteem by 91% of people who had been there before rating it as good value. Dubai was once more rated the worst value will only 44% of previous visitors saying it was good value.
• Holiday spending to drop? Deloitte suggests holiday spending over next 3mths could be “markedly lower” than last year. Long haul travel spend could be down 7pps.
• Deloitte reports older consumers may spend more on holidays this year but those aged 35-54 will be spending less. Deloitte reports ‘overall, consumers are continuing to prioritise holidays, which is why spending has increased for both long and short-haul trips. The long-term change in consumer behaviour, whereby consumers have favoured spending on experiences over goods, was a key reason for the leisure sector’s continued resilience throughout 2016.’
• Deloitte comments that ‘with inflation rising, a weak pound and a slowdown in nominal wage growth, leisure consumers are starting to feel their pockets tighten, leading to a fall in spending on some habitual activities and small luxuries, such as buying the daily coffee.’ It continues ‘whilst this has yet to result in an actual reduction of overall leisure spending, this trend will be monitored closely. The overall health of the sector will be an important economic indicator in the months to come.’ Deloitte concludes ‘consumers with families, who may be feeling a squeeze on incomes, are showing signs of cutting back and have said that they are less likely to spend on holidays in Q2 2017. Older consumers are apparently less affected by the economic headwinds, and so are continuing to prioritise spending on holidays over the next three months.’
• Marriott International Q1 numbers. EPS 94c (+11% with Starwood-merger-related costs excluded). REVPAR +3.1% in US and worldwide.
• Marriott added >17,000 in Q1 to leave a pipeline of >430k rooms. Q1 net income $365m. EBITDA = $750m.
• Marriott CEO Arne Sorenson reports ‘we were pleased by our performance in the quarter across the board. RevPAR exceeded our expectations in North America and Europe due to stronger group attendance and higher-rated business transient demand. Demand in Greater China and elsewhere in the Asia Pacific region was also better than expected. With just over 3 percent RevPAR growth worldwide, our teams did an excellent job driving margin improvement of 100 basis points at company-operated hotels.’
• Marriott reports ‘given the stronger than expected RevPAR performance in North America in the first quarter and improving demand trends in the Europe and Asia Pacific regions, we have increased our full year 2017 RevPAR expectations.’
• Accor Hotels shares rose sharply yesterday on the announcement that it is in talks to sell off 80% of its Hotel Invest portfolio’
• Holiday booking fraud totaled £7.2m last year, as nearly 6,000 UK travellers fell victim to scams with average loss of £1,200 per person. The most common types of fraud involving airline tickets, booking accommodation online and timeshare sales. Two age groups were targeted the most; 20-29 and 30-39.
• The Stansted Express service is set to have a capacity upgrade of 29,000 more seats per week by this summer, according to plans by operator Greater Anglia.
• Staycity Aparthotels has signed a 25-year lease on Gateway House in Manchester, known locally as the ‘Lazy S’, in a move that will create 50 new jobs. The building consists of 182 short-let apartments and is located just outside of Piccadilly station. Staycity operates over 3,000 apartments across 10 European cities including Birmingham, Dublin, Edinburgh, London, Paris, Lyon and Marseille.
• The board of Elegant Hotels has announced that the acquisition of Treasure Beach Hotel in Barbados can now formally be completed.
• Gear4Music reports FY numbers, says has been ‘a transformational year, with record growth in sales and profits’
• G4M reports revenues for year to end-Feb of £58.1m (+58%) with underlying EBITDA of £3.6m (+115%). PBT is £2.6m.
• G4M says it has seen ‘strong revenue growth across the business, particularly in International markets (+124%)’ with ‘record profits driven by improved margin performance.’ Reports ‘active customers up 50% to 340,000’. Group has now opened Distribution Centres in Sweden and Germany ‘to enhance European customer proposition’ and the year has seen the acquisition of a software development team to accelerate e-commerce platform development. CEO Andrew Wass reports ‘this has been a transformational year for the business, with further expansion of the Gear4music brand driving record sales and profits.’ Mr Wass reports ‘in particular we have seen significant expansion in our International business where sales have been very strong. We have therefore accelerated investment in our European infrastructure to improve our customer proposition and reach, most notably through the opening of two
• G4M concludes ‘we begin our current financial year with good momentum and continued appetite from customers around the world for our market leading service and product offering. We are well positioned to deliver further growth and have plans in place to continue investing in our operational facilities and systems to support our growth plans. The next 12 months will be exciting as we move into our new head office in York, scale up our European operations, and enhance our worldwide proposition, and we remain confident in the long-term growth prospects for the Group.”’
• Goals updates on Q1 trading saying ‘although there remains much still to do, we have continued to make encouraging progress in executing our strategic plan this year’. Chairman Nick Basing reports ‘219 arenas will have been reinvested and re-laid by the end of H1’ and he says ‘construction on our third centre in Los Angeles, California, is due to commence in June.’ The group reports ‘group sales for the first 18 weeks of 2017 are above the levels achieved during last year and in line with current market expectations.’
• Wm Hill updates on first 17wks’ trading saying it has generated ‘growth in wagering and net revenue across all four divisions’. CEO Philip Bowcock reports ‘it has been a positive start to the year for William Hill across the board. Our Online business continues to deliver growth thanks to the improvements in product, user experience and marketing we have made. Retail is also seeing positive trends while our key international markets continue to perform well with double-digit wagering growth. Our transformation programme is progressing well and we are on track to deliver £40m of annualised savings by the year-end. Overall, we are in line with market expectations for 2017 at this early stage in the year.’
• Macau is further restricting the use of ATM cards by mainland Chinese customers in Macau as the government fears the casino enclave is being used as a centre for capital flight and money laundering. In a bid to target middle men and gamblers who have been ignoring withdrawal limits, users of UnionPay, China’s sole clearinghouse for bank card transactions, will have to insert their identity cards into ATMs and have their identity verified by facial recognition software.
• Crown Resorts will sell its remaining stake in its Macau casino joint venture with Melco Resorts for $1.2bn. The two partners may compete against each other in the future, as Japan opens itself up to casino gambling creating an industry potentially worth $25bn a year.
• TPG Growth, a Texas-based private equity firm, has invested in Club Pilates in LA.
FINANCE & MARKETS:
• Halifax reports house prices down 0.2% in the 3mths to end-April, the first fall in nearly 5yrs. Halifax reports ‘housing demand appears to have been curbed in recent months due to the deterioration in housing affordability caused by a sustained period of rapid house price growth during 2014-16.’ Maybe overborrowing but not Brexit or fear of recession, then?
• Bank of England curbs on income multiples for lending against houses may provide a ceiling to house prices
• IHS Markit says ‘we suspect markedly weakening consumer fundamentals, likely mounting caution over making major spending decisions, and elevated house price to earnings ratios will weigh down further on housing market activity and house prices over the coming months.’
• Oil price down around 30c at $49.45
• Sterling down vs $ at 1.294
• Pound up vs Euro at 1.1845
• UK 10yr gilt yield up 3bps at 1.15%
• World markets: UK up yesterday but Europe lower. US a shade better with Far East mixed in Tuesday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: House prices falling per Halifax. Says prices down 0.2% in 3mths to April. First fall in c5yrs. B of England says mortgage demand down
• Some label Fevertree ‘expensive’. Understandable as PER is 60x, falling to 30x in 10yrs. Momentum (i.e. bigger fool theory) still positive
• Upcoming Labour train wreck. Blind driver boards vehicle. Nobody stopped him. Started engine, set off, ditto. Crashed. What a surprise?!
• Fulham Shore’s Franco Manca set to open in Bournemouth later this week, testing model in south. Plans in Edinburgh, too
RETAIL NEWS WITH NICK BUBB:
• Debenhams: Although the announcement yesterday morning that Sports Direct now has an effective 17.1% stake in Debenhams through put options and CFD’s aroused a lot of attention, this position is obviously not the same as having a proper stake and Debenhams made that point on the day of the strategy review. It is impossible to tell if he’s really long or short, but presumably his strategy is to make some money without putting up a lot of capital. The FT market reporter on the excellent Markets Live webcast on FT Alphaville yesterday said, interestingly, “I’ve yet to have it clarified whether the Goldman put option and the Monecor CFD’s should be considered a cumulative position or whether one hedges the other. It might be a disclosure rule quirk that it looks like he has 17% of Debs, when in fact he has a partly hedged 10%”. Either way, Mike Ashley has clearly had no influence on the
• BRC-KPMG Retail Sales for April (4 weeks to April 29th): As expected, the overnight BRC-KPMG Retail Sales for April were much improved, given the impact of the late Easter this year, but the bounce was more than the +2%/3% LFL we’d pencilled in, with LFL sales up by as much as 5.6%, to pull the 3 month average up to +1.2% LFL (Food +2.4% LFL and Non-Food up 0.3% LFL). The BRC highlighted that “consumer spend on Food and Non-Food items is diverging” and it looks as if Food was over 7% up LFL in April, helped by rising inflation, with Non-Food only about 4% up LFL. That having been said, the only weak spot in Non-Food was Household Textiles, albeit against a strong comp (“perhaps the start of April was too warm for buying duvets”). The Electricals segment was very mixed, with strong sales of mobile phones and tablets, sparked by the launch of new models from several brands, offset by
• Rich Retailer Watch: We flagged yesterday that in the annual Sunday Times Rich List of the UK’s Richest 1000 people the embattled Philip Green slumped to 41st place (from 29th last year) and Mike Ashley was down to 54th position (from 45th last year). Well above them were the likes of the Weston family, the Barclay brothers and Christo Wiese, but it’s more interesting to see the ups and downs of pure UK retailers. We thought the colourful Chris Dawson of The Range would be a lot higher, but his estimated fortune of £1.9bn only moved him up from 67th to 58th position and he was well behind Tommy Morris of Home Bargains on £3.1bn. The Arora brothers of B&M fame are worth £1.92bn, Stephen Rubin of Pentland is worth £2.3bn and the Lewis family of River Island fame are said to be worth £2.0bn.
• News Flow This Week: Tomorrow brings the Vertu Motors finals and then the SuperGroup Q4 update is on Thursday.