Langton Capital – 2017-07-31 – Heineken, Punch, Brexit, Starbucks & other:
Heineken, Punch, Brexit, Starbucks & other:
A DAY IN THE LIFE:
Welcome to the world of Mediterranean internet where a morning email can go out at 1pm, 2pm, you name it.
But still, nobody died. Where’s the Ouzo?
This week Langton will be either on, on the way to, or on the way back from a beach. Internet connectivity is patchy to say the bloomin’ least. Timing re sending out might be a problem. The email may be a bit shorter. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Heineken reports H1 numbers, says organic revenue +5.7% with revenue per hectolitre up +3.4%. Consolidated beer volume +2.6% ‘with growth in all regions’.
• Heineken reports operating profit +11.8% with operating margin +34bps. Net profit 1.036bn, up 10.5% organically. EPS is €1.82.
• Heineken CEO Jean-François van Boxmeer says ‘we delivered strong results in the first half year, with all four regions contributing positively to organic growth in volume, revenue and operating profit.’ The CEO continues saying ‘Europe delivered a good performance, momentum remained strong in Americas and Asia Pacific, and results improved in Africa Middle East & Eastern Europe despite continued difficult market conditions.’
• Heineken concludes ‘a well-balanced global footprint, sustained investment in our beer and cider brands, market leading innovations and a focus on premiumisation continue to differentiate our strategy and underpin our progress…whilst economic conditions are likely to remain volatile, our expectations for the full year are unchanged.’’
• Heineken reports ‘cider volume increased organically low single digit to reach 2.3 million hectolitres (2016: 2.2 million).’ It says ‘excluding the UK, where volume decline was partly due to delisting by a modern trade retailer, cider volume increased double digit.’
• Re Punch, Heineken updates on the facts but adds no new news. It says the latest is that ‘the CMA announced that there are reasonable grounds for believing that these proposals, or a modified version of them, might be acceptable to remedy the competition concerns it has identified. Subject to being approved by the relevant regulatory authorities, the acquisition is expected to complete by the end of August 2017.’
• A UK government advisor has said that farmers are suffering from ‘subsidy addiction’ & has said that the system of pay-outs should be overhauled reports the BBC.
• The Times reports McDonald’s is knocking at the door of a vast new home delivery market
• Evening Standard reports Brexit causing crisis in hiring bar and restaurant workers in London. The paper quotes Quaglino’s as saying ‘we are struggling to get staff in to fill the positions like waiters and waitresses and bartenders. Before, we would have lots of students from France and Italy as staff but that has changed. It’s made it more challenging.’
• Disappointing earnings for Starbucks saw the stock fall 9.2% last Friday to $54 whilst cigarette manufacturer Altria Group was down 9.5% to $66.94 on news that the US Food and Drug Administration is exploring proposals to limit the amount of nicotine in cigarettes.
• Starbucks will close all 379 of its Teavana stores over the coming year, saying that the mall-based tea shops ‘have been consistently underperforming’. The company said the closures would impact around 3,300 jobs. Teavana was acquired by Starbucks in 2012 for $620m.
• The MCA reports that average spend on eating out is up 6% to £7.55 but that participation is down 2% for the year up to June 2017. Visits to pubs and independent restaurants increased whereas fast food outlets lost out.
• Lucozade Sport has launched Fitwater, providing ‘functional water’, in the UK. This will be accompanied by a £3m advertising campaign across outdoor, experiential and social media.
• In the US Del Frisco’s Restaurant Group Inc failed to meet expectations in its Q2 earnings amid a continuing repositioning of its 3 concepts: Del Frisco’s Double Eagle Steak House, Sullivan’s Steakhouse and Del Frisco’s Grille. Same-store sales fell by 2.2% with CEO Norman Abdallah warning they would still be volatile in Q3 leading the stock to close 4.5% down
• CEO of Diageo, Ivan Menezes, said the company would ‘take Brexit in its stride’ and rated its performance over the last year at a ‘eight, possibly nine’ out of ten.
• A study published by Danish researchers in Diabetologia found that drinking moderately three to four times a week reduced a woman’s risk of type 2 diabetes by 32%, while it lowered a man’s risk by 27%. The study was carried out on over 70,000 people over five years.
• VJ Mallya is being pressed by Diageo to repay an initial £28m of a £53m total payoff agreement for him to cut all ties to United Spirits. Diageo also demands compensation to recover all losses from companies associated with Mallya.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• HotStats reports that UK hotel gross operating profit per available room (GOPPAR) was up 5.4% this month. The worldwide poll also revealed that RevPAR increased 6.2%, occupancy increased 0.6 points to 82.7% and ADR was up 5.4% yoy to £122.23.
• Travelzoo Q2 revenue for Europe fell 16% yoy to $7.9m with operating profit plummeting to $268k compared to $1.7m for the same period last year. The company’s Asia Pacific revenue fell 20% yoy to $2m. The results come after the resignation of Richard Singer, former Europe president for Travelzoo.
• Host Marriott recorded a strong Q2 with RevPAR up 1.7%, ADR increasing 0.8% and occupancy up 0.7% yoy. However, the company warned analysts that there may be a bumpy road ahead for the rest of 2017 with Q3 potentially being demonstrably weaker, largely due to calendar shifts.
• STR reports US hotels saw ADR increase 0.5% to $131.86, pushing RevPAR up 0.4% to $102.85 with occupancy down 0.2% to 78% for the week ending 22 July.
• Gear4music Friday announced that trading was in line. That was not deemed good enough & the group’s shares fell sharply. CEO Andrew Wass said ‘I am pleased to report that Gear4music’s trading performance in the financial year to date is in line with the Board’s expectations. UK and International revenue growth has continued to be strong relative to a very strong H1 FY17, and our new European distribution centres are materially improving our customer proposition in Northern Europe. We anticipate further momentum in European sales during the second half of the financial year.’ He concluded ‘based on the overall performance of the business during the financial year to date, the Board is confident of another year of good progress.
• BBC Three is to broadcast Gfinity’s Elite Series. The group’s shares rose on the news. Gfinity says ‘this contract, which is the first of its kind that the BBC has done for an esports series, will deliver content for the next six consecutive weeks with live Elite Series tournament play every Friday, Saturday and Sunday with British and international professional gamers battling it out for a total prize fund of £225,000 across the games Street Fighter V, Counter Strike: Global Offensive and Rocket League.’
• Adidas upgraded its full-year profit forecasts for the second time this year with revenue from continuing operations increasing 20% yoy to €5bn for the six months up to June. Forecasts now expect revenue to increase 17-19% compared to 12-14% with net income from continuing operations now expected to increase by 26-28% compared to 13-15%.
FINANCE & MARKETS:
• US GDP rose at an annualised rate of 2.6% in Q2 reports the US Commerce Department.
o Times quotes Matthew Parris as saying the Conservatives are criminally incompetent in their handling of Brexit. Mr Parris feels ‘deeply ashamed’ of the unfolding debacle.
o Philip Hammond has said that any transitional deal must end before the next general election. The latest date for said election is June 2022.
o Liam Fox has said that the free movement of people must end in order to ‘keep faith’ with the 23 June 16 Brexit vote
• Bank of England continues to sound the alarm over excess lending
• Eurozone consumer confidence down in July
• Oil up at $52.78
• Sterling $1.3128 and €1.1183
• UK 10yr gilt yield 1.21%
• World markets: UK, Europe & US all down on Friday. Asia mostly down in Monday trade
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The successful QUIZ IPO on Friday was featured in the FT and the Times, with both noting that the market cap peaked at £245m in first dealings on Friday morning, over 20% up on the offer price. Otherwise, there wasn’t much of note in the Saturday papers, although the Daily Mail picked up on the fall in CEO Wilf Walsh’s pay package last year, as revealed in the Carpetright Report & Accounts. The fast food chain McDonald’s was in the spotlight, with the Times profiling the UK boss, Paul Pomroy (highlighting the boom in Online ordering and home delivery, via Uber Eats) and the FT profiling the American CEO Steve Easterbrook. The FT also had feature on Amazon, flagging that its cap ex spending spree shows no signs of abating, whilst Lex column (“Amazon: hire and hire”) highlighted the concern on Wall Street about Amazon’s rising cost base, as it hires more and
• Sunday Press: The main story in the Sunday papers was the Sunday Telegraph article that the struggling grocery and tobacco wholesaler Palmer & Harvey has sent out an “SOS cash call”. The Sunday Times had a gloomy preview of Next’s Q2 trading update on Thursday and its Retail correspondent Oliver Shah had a full page feature article on “the secret world of Zara”, following a visit to Inditex HQ in Spain, highlighting the wealth of founder Amancio Ortega and the strength of Zara’s supply chain and range feedback system. The Mail on Sunday noted the profit slump at the struggling discount chain Wilko and it also had a feature on the bleak prospects for petrol station owners.
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw another win for Morrisons, but only thanks to a cheap deal on Ciroc vodka (£30 rather than its regular £37 price). Its £91.91 basket came in £3.91 cheaper than Sainsbury, which came in a surprise second. Asda was third, on £99.28, and had to dish out a hefty £5.59 voucher for failing to be at least 10% cheaper than its main rivals. Tesco was fourth, on £104.83, before its Brand Guarantee discount. Poor old Waitrose was a long way off the pace again, on £109.35, which was even more than guest retailer Ocado, on £106.56. The separate Online 33 survey was won by Ocado, despite its high basket price (£113.90, including delivery and plastic bags), scoring an impressive 93 out of 100 for Online Service and Availability metrics. The separate regular Grocer “Mystery
• News Flow This Week: As we head into the “dog days” of August, Tuesday brings the Greggs interims (plus the Apple Q3 out in the US), Wednesday brings the Travis Perkins interims and the much-awaited Next Q2 update is on Thursday. Thursday also brings the latest MPC interest rate decision, on the back of the Bank of England’s quarterly Inflation Report.