Langton Capital – 2017-05-10 – Compass Group, Dalata, Disney, UK hotels & other:
Compass Group, Dalata, Disney, UK hotels & other:
A DAY IN THE LIFE:
I’ve seen people told that they don’t eat enough ‘too small to keep a sparrow alive’ on a few occasions but, for the record, just what does it take to keep a sparrow alive?
Well, as it’s a pretty small animal, it has to eat around 40% of the calories it possesses in its whole body every day.
That’s about 18 calories. Hence, what it takes to keep a sparrow alive would feed the average human for about 10 minutes.
Should you choose to eat the sparrow itself (and it didn’t have a full belly), you could keep going for about 25 minutes but, if a sparrow would keep a human alive for 25 minutes, how long would a human keep the sparrow going?
Well, since there are around 160,000 calories in your average 13st man, the answer is about 25 years and, since the average sparrow only lives for a year or so*, that’s quite long enough. On to the news:
*Working out the ‘average’ lifespan of a sparrow is far from easy. Only 20% or so survive for more than a year but the oldest on record fell off its perch aged 23yrs. The mean age is therefore probably less than 6mths but the ‘range’ is much wider. We’ll go with a year.
PUB, RESTAURANT & DRINK PRODUCERS:
• Just Eat reports that the CMA intends to refer its review of Just Eat’s proposed acquisition of Hungryhouse to a “Phase 2” investigation. The company says ‘Just Eat looks forward to cooperating with the CMA and is committed to demonstrating to the CMA that the market is, and will remain, competitive following completion of the proposed transaction.’ It says ‘in the meantime, Just Eat will continue to operate its business as usual.’
• Compass Group reports H1 numbers. Revenues +3.6% at £11.6bn (in constant currencies) with operating profit +5.2% at £894m
• Compass Group H1 EPS comes in at 37.9p vs 36.4p last year. H1 dividend of 11.2p vs 10.6p last year with £1bn special pay-out.
• Compass Group says it has had ‘a good start to the year and proposes a £1bn special dividend.’ CEO Richard Cousins reports ‘Compass had a good six months, with the business performing as expected. North America continues to deliver excellent growth and trends in Europe are improving. In Rest of World, reasonable growth in Business & Industry, Healthcare and Education was offset by ongoing weakness in Brazil and our Offshore & Remote sector.’
• Compass Group says ‘we continue to drive operating efficiencies around the business which, combined with the end of the restructuring in our Offshore and Remote business, resulted in margin improvement of 20bps in the period.’
• CPH H1 comments ‘given our excellent cash generation and the strength of the business, we are announcing a £1 billion special dividend. This reflects our commitment to return surplus cash to shareholders whilst maintaining an efficient balance sheet.’
• Re the future, CPG comments ‘in the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue growth, margin improvement, as well as continued returns to shareholders.’
• Grupo Campari reports Q1 numbers, says sales boosted by growth of Aperol & Wild Turkey brands. Sales +8% in the Americas. This helped partly by de-stocking & also by rebound in Brazil.
• Grupo Campari reports organic sales +1% in Southern Europe, Mid-East & Asia and up by 12% in Northern Europe. Russia very strong with UK & Belgium posting double-digit sales increases.
• Grupo Campari reports sales of Aperol & Campari brands +18% and +3% respectively.
• The ALMR has warned that restricting immigration could halt growth for the UK restaurant industry. The ALMR reported ‘almost a quarter of the total hospitality and tourism workforce is comprised of non-UK workers and nearly half of those are EU migrants. This is a significant portion of the workforce, and pubs and restaurants will need to hire even more over the next few years if they are to continue growing.’
• Help for consumers, at least until Brexit, as O2 says it will allow the use of phone plans in Europe at no extra cost. Hope remains for a continuance after 2018 as the plan extends to all 47 European countries, not just those in the EU.
• Barclaycard says spending was up 5.5% up year-on-year in April but added that the increase was mainly driven by supermarkets and petrol stations, where spending grew by more than 11%. Paul Lockstone, managing director at Barclaycard, said: ‘A late Easter and rising prices provided a superficial boost to spending in April, but behind the headline figure it’s clear consumers are recognising and responding to the inflationary pressures being placed on household budgets. Despite growth across a number of categories, the spending picture in real terms is one of growing caution, as seen by declining confidence levels amongst the UK’s consumers.’
• Noodles & Company saw losses widen to $27.8m in the quarter to 4 April compared to a loss of $2.4m a year earlier. Much of the loss came from the impact of 55 store closures. Same-store sales fell 2.5% at company restaurants, and increased 1.1% at franchised locations.
• Coca-Cola’s CEO is looking to accelerate the company’s investments in start-ups as the world’s largest soft drinks company looks to diversify more quickly into healthier beverages and new trends.
• Franco Manca will further strengthen its presence in London after securing a site in Islington, which comes on the heels of openings in Bournemouth and Richmond this month. The Fulham Shore-owned chain has secured the former Canas y Tapas unit at 72 Upper Street. MCA writes that the group is also on the verge of signing on sites in Bristol, Exeter, More London, Baker Street and Edinburgh.
• The London-based steak restaurant chain, Black & Blue, has sold two of its sites to Greyhound Cafe and Fancy Crab, reports the MCA.
• Sweeping spring frosts across Europe have devastated the crops of English sparkling wine producer Nyetimber, with bud losses of up to 90% in certain vineyard parcels in Hampshire and West Sussex.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• On the Beach reports that it has agreed to acquire the entire issued share capital of Sunshine.co.uk Limited, an online travel agent based in the UK for a total consideration of £12.0m (on a cash free debt free basis). CEO Simon Cooper reports ‘we are delighted to have acquired a brand as well-established with beach holidaymakers as sunshine.co.uk. This earnings enhancing transaction reflects the Board’s ambition to consolidate On the Beach’s leading position in the online beach holiday space while supporting our drive to exclusivity and underpinning our ability to further leverage our scale.
• Dalata Hotels updates on trading at AGM, says ‘following another year of significant growth in the size of our portfolio and earnings in 2016, trading performance in the first four months of 2017 has been marginally ahead of expectations.’ It says ‘RevPAR growth in our Dublin and Regional Ireland properties has been in line with expectations. We have experienced strong RevPAR growth in our London and Northern Ireland portfolios.’
• Dalata comments ‘we continue to look for opportunities to purchase the freehold interest of some of our existing hotels in Ireland. We are also looking to expand our Clayton and Maldron brands in the UK and are encouraged by the current pipeline of potential opportunities.’
• Alix Partners Hotel Bulletin reports hotel transaction values in Q1 2017 totalled £0.5bn with £0.4bn related to single asset transactions. This compares with the £0.3bn seen in Q1 last year. The Bulletin suggests that prices are finely balanced saying ‘it’s likely that, given demand growth in the last four quarters, many sellers are holding out for more significant prices while buyers are conscious of overpaying, particularly given expected operating cost challenges.’
• TripAdviser shares climbed in after-hours trading, as the group confirms its relaunch of its hotel shopping experience in the face of poor earning results. The company’s shares increased 5.7% to $46.92.
• Police in Istanbul have ejected two British tourists from an Airbnb apartment and confiscated their passports in a dispute over whether the company has the right to rent out the property. They claim Airbnb neither refunded or apologised to them, and allowed the host to continue to offer apartments.
• York River Boat Cruises has been taken over by City Cruises for £2.5m. The company currently carries about 100,000 passengers a year and will be renamed City Cruises York.
• Jet2 will introduce a summer 2018 package of 37 new routes from 9 UK bases providing 9.6 million seats. Spain, Portugal, Greece, Turkey, Cyprus & Italy will all get more seats in 2018, with ‘major growth’ planned for Krakow, Prague & Split.
• Tourico Holidays reports that UK travel bookings to China are up 40% in Q1. The UK, South Korea and the US continue to be the strongest source markets to China for Tourico.
• An IT failure with X-ray scanners at Stansted on 9 May led to hundreds of travellers missing their flights.
• A survey by HBBA reports that 52% of London hotels, conference venues and booking agencies say Brexit is having ‘a noticeable impact’ on their business as a weaker pound attracts more bookings. A further 7% said it was having ‘a major effect’.
• Paddy Power Betfair reports that it is to enter the daily fantasy sports market in the United States with the acquisition of an early-stage operator, DRAFT. It says ‘DRAFT is mobile-led, has a differentiated product and a strong management team. The business will continue to be run by Co-CEOs Jeremy Levine and Jordan Fliegel and will now have access to the Group’s marketing and technology capabilities.’ CEO Breon Corcoran reports ‘we are excited to be bringing DRAFT into the Group and to further increase our presence in the United States. DRAFT has a differentiated product and we believe the business, with the support of our marketing and technology expertise, can take share in the fast-growing daily fantasy sports market’.
• Walt Disney Q1 shows profits +11% to $2.4bn on revenues +3% at $13.3bn. Boss Robert Iger reports ‘we’re extremely pleased with our results.’ Sports cable company ESPN has lost subscribers but the group was helped by its studios, which released the live action Beauty and the Beast during the period.
• Disney revenues a shade below Wall Street expectations. Movie revenues +21%, theme parks +20%. Shares fell some 2.6% in after-hours trading.
FINANCE & MARKETS:
• Brexit & election:
o Corbyn says won’t quit when he loses the election. Raises prospect of a General Election every 2yrs while he’s at the helm in order for the Tories to bank another easy 24mths
o Boris still missing, presumed gagged. Ditto Diane Abbott. Shame, really.
o Electricity caps look a bit batty. Detail awaited.
• NIESR reports UK should grow 1.7% this year and 1.9% next. Expects only 0.3% in Q1 this year. Leaves quite a lot to do in Qs 2, 3 & 4
• NIESR says inflation should peak at 3.4% before the end of this year.
• NIESR expects no UK interest rate hike this year. Suggests further austerity is needed in the next Parliament
• NIESR says Q1 slowdown ‘can be largely attributed to a softening in service sector output, consistent with a moderation in consumer spending, which was the engine of growth in 2016.’ This has picked up a little in April.
• NIESR expects UK labour market to continue to be ‘robust’. The body comments ‘GDP growth over the next couple of years will be subdued, growing at less than the economy’s long-run potential rate of 2 per cent per annum, but households will feel the pinch from rising consumer price inflation. The rate of inflation is expected to rise from 2.3 per cent per annum in March to almost 3½ per cent by the end of 2017. By 2018 we expect consumer spending growth to have effectively stalled.’
• Germany reports higher trade surplus in March at €25.4bn (April €20.0bn). Current account surplus also higher
• Oil down 40c or so at $49.03
• Sterling up very slightly vs US$ at 1.2948
• Sterling up vs Euro at 1.1888
• UK 10yr gilt yield up 5bps to 1.20. Has now risen 20bps this month.
• World markets: UK up with Europe mixed yesterday. US down but Asia mostly up in Wednesday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Vix (volatility measure) in USA at 24yr lows as Q1 reporting season comes to an end. Numbers generally deemed acceptable
• BRC & Barclaycard point to strong April sales. Credited partly/largely to movement of Easter into Q2
• BRC points to food spend up, non-food much more sluggish. Former ‘helped’ by inflation as consumers must pay more to eat
• Deloitte says Q2 holiday spending will be sharply lower this year. May be right as big ticket items may take the strain
• What’s in a word? Goals ‘in line’ (a.k.a. steady), Gear 4 Music ‘in line’ (a.k.a. sales roaring).
• Premier Foods secures CADB cake contract till 2022, possibly 2025. Opens up 36 new territories incl. China, India, Japan
RETAIL NEWS WITH NICK BUBB:
• Vertu Motors: Ahead of today’s finals from the fast-growing Vertu Motors (which has a market cap of £180m) the motor retailing industry has been under a bit of a cloud, after the weak SMMT new car sales figures for April and the growing concern about the sustainability of the cheap finance boom. But smaller rival Cambria Autombiles brushed aside these issues yesterday when it reported interims and so has Vertu: today’s statement is headlined “Record profitability, excellent cash conversion and robust balance sheet to drive future growth” (albeit there is no mention of the mere 1% rise in EPS in y/e Feb) and the company says “Encouraging outlook, with robust trading in March and April 2017- Board remains confident about the Group’s prospects for the year ahead”.
• John Lewis Partnership Sales Watch: We flagged yesterday that after the Easter-timing blips of March and April, we will have to see how May turns out to judge the underlying Retail Sales trend, notwithstanding any Election distortions, and the evidence from last week’s JLP figures is that things are a bit subdued (not helped by the recent cloudy/chilly weather in the South-East). At John Lewis total sales were up by 2.3% gross (c0.5% up LFL) in w/e May 6th and that left John Lewis running up only 1.1% up gross (c0.7% down LFL) on a cumulative basis over the last 14 weeks. Over at Waitrose w/e May 6th saw sales rise by only 0.9% gross (about 1% down LFL) and so over the last 14 weeks combined Waitrose was 1.9% up gross (flat LFL).
• Today’s Press and News: The news in yesterday’s JLP Annual Accounts that JLP has had to make a £36m provision for a potential infringement of the HMRC rules on complying with the National Minimum Wage regulations gets plenty of coverage, even hitting the front page of the FT…Lombard column in the FT notes that “both The Daily Telegraph and The Guardian have leapt upon the employee-owned retailer’s latest crime: trying to provide its employee-owners with a regular income” and thunders that “Evidently, the law – and these (tapas) bar-room lawyers – cannot differentiate between inadvertent underpayment on a full-time contract and systematic underpayment on zero-hours contracts. Will they now boycott John Lewis’s linen casuals in favour of Sports Direct’s?”. In terms of today’s news the UK economic forecast from the well-respected NIESR that “the rate of inflation is expected to rise to
• News Flow This Week: Tomorrow brings the SuperGroup pre-close trading update (which will be the first time the company has reported since the interims and Xmas update on Jan 12th).