Langton Capital – 2017-09-13 – Weather, Ten Ent., Gaming Realms, inflation & other:
Weather, Ten Ent., Gaming Realms, inflation & other:
A DAY IN THE LIFE:
Have you noticed how, when you want to Google your phone, laptop or table to see what sort of replacement battery they need or what RAM they have or whatever, you can never find the model number?
And, if you input Samsung Tablet or Nexus Phone, you 1) look rather lame and 2) will have a million or so models to scroll through looking to find the one that you have in your hand. And to say ‘it’s black’ doesn’t really help at all. On to the news:
60 SECONDS: A TALE OF TWO SEPTEMBERS:
Out-of-home Leisure: Weather matters
• Structural trends in out-of-home Leisure have grabbed the headlines recently, resulting in a string of profit warnings.
• More and more operators are stepping forward to comment on soft summer trading across the industry.
• This is because of factors including oversupply, commodity inflation, rising labour costs, and extortionate rents.
• Year-on-year weather variation also plays a key, albeit much more volatile, role in consumer demand. This must be accounted for.
Summer into Autumn: 2016 vs. 2017
• The three months ending August 2017 (14.7°C) has been broadly similar to the same period last year (14.9°C).
• This implies that the weather has had little to do with poor dining out figures so far, although figures are beginning to diverge.
• August was ‘a cooler month’ per Planalytics. London averaged 1.4°C cooler.
• September 2016 was remarkable. It contained the hottest day of the year (34.4°C on the 13th) and was some 2.2°C above average.
• September 2017, meanwhile, has been considerably less spectacular; today’s avg. temperature of 15.8°C compares to 24.9°C last year…
What might this Mean?
• If operators have found trading difficult even with stable year-on-year weather, then the September comps should be interesting.
• The weaker demand experienced so far might be exacerbated by less inviting weather.
• Some indoor leisure might benefit. Sites with beer gardens and outside seating will most likely see a pronounced decline.
PUB, RESTAURANT & DRINK PRODUCERS:
• Tasty shares fell 12% yesterday on its H1 numbers. The group is to cut all new units next year & expects tough trading to continue into 2018.
• Per FT, a worse than expected quarter for McDonald’s saw its shares sink 3.1% after data revealed same-store sales and domestic revenue is to come in well below Wall Street estimates. Analysts are predicting 4.5% growth in same-store sales, and 3.4% for the US market.
• No evidence has been found to indicate that drinking the odd alcoholic drink when pregnant is harmful for the child, research from the University of Bristol has shown. Excessive drinking has been shown to harm babies in the womb.
• The ALMR has stated that given the increase in inflation, the Government should bring forward its 2020 switch to CPI for business rates. Chief Executive of the ALMR, Kate Nicholls said ‘The current system linking to Retail Price Index, a measure discredited by the ONS itself, needs to be ditched at the earliest opportunity’.
• The BBPA has warned that the rise in inflation should not be used to hike up beer taxes in the autumn budget. Brigid Simmonds, Chief executive of the BBPA said ‘A second beer tax hike this year, based on inflation, would undo much of the good work done in tackling Britain’s sky-high rates of beer duty. Abolishing the hated, beer duty escalator saved many pubs and jobs, after years of unsustainable tax rises’.
• Starbucks has announced the development of a new cold extraction process that create a concentrated smooth tasting cold-pressed shot of espresso.
• Jason Warner, president for AB InBev’s Northern Europe division has stated that there ‘has to be an increase’ in the price of beer in the UK as inflation rises.
• Some 70% of UK drinkers say they ignore the government’s alcohol drinking guidelines, according to a new survey from YouGov including 1,663 adults.
• Consumers across the continent still want British products, with UK food and drink proving popular in countries like Belgium, France, Italy, and Germany. However the Grocer writes that, while demand remains strong, European distribution partners want answers about how export timescales and costs will be affected by Brexit.
• Meat Liquor has reported that its Dead Hippie Burger is the most-ordered dish on Deliveroo.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Inflexion Private Equity has backed the buyout of Virgin Experience Days, which sells more than 750,000 packages annually, ranging from luxury breaks to Formula 1 car racing days. The company has doubled sales to £50m over the past three years. As part of the deal Inflexion has brought in Simon McMurtrie as Virgin Experience chairman, who holds the same role at Oak Furniture Land.
• MCA writes that London-based hospitality group, Ennismore, is looking to open a private member’s club and is in talks on a site in Mayfair.
• Airbnb has reported an 81% increase in inbound travel to the UK from July 2016 to July 2017. The UK is now Airbnb’s fifth-largest market, with 64,000 active listings in London alone.
• Amsterdam council considers plans to raise the city’s tourist tax in an effort to benefit the local economy. Tariffs on hotel stays could increase by up to €10 per night with tourists already paying 5% of the cost of their room in the city centre. Around 17m people visited Amsterdam in 2016 but Udo Kock, Alderman for finance, reportedly said ‘We need more people who actually spend money in the city,’.
• A lawyer from a Spanish hotel group has claimed that Scotland Yard is investigating the involvement of UK law firms in a £50m holiday illness scam. The source told the Mail on Sunday that British lawyers took a 60% cut of payments.
• British Airways have resumed flights between Miami and London today but other parts of Florida have remained grounded due to Hurricane Irma’s destruction. At least 6.5m homes in Florida are without power and relief operations are under way.
• Caribtours has taken the islands most affected by Hurricane Irma off sale till the end of the year. Managing director Paul Cleary said he was relieved the vast majority of the Caribbean has been left untouched and “remains in good shape” following the devastating category 5 hurricane.
• STR reports London hotels in August saw a 2.7% decline in occupancy levels yoy, but ADR grew 3.0% to £143.28 and RevPAR grew by 0.2% to £117.90.
• Bowling operator Ten Entertainment has reported H1 numbers saying it is ‘well on track for full-year’ estimates.
• Ten reports sales +2.2% with LfL sales up 0.4%. It reports adjusted EBITDA +10.8% at £9.4m with reported PBT down 84% at £0.4m on the back of exceptional IPO costs of £3.1m.
• Ten Entertainment reports adjusted H1 PBT +24% at £6m. Interim dividend is 3p. Chairman Nick Basing reports ‘following on from the Group’s IPO in April, we have achieved solid total sales growth in the first half of the financial year, positive like-for-like sales growth and completed the acquisition of three high quality sites.’ Mr Basing adds ‘the business is currently well on track to deliver the Board’s plans for the full year.’
• Ten Entertainment CEO Alan Hand reports ‘our growth strategy remains on track.’ He concludes ‘during the second half, we will continue to focus on our plans for growth including further site refurbishments, a longstanding and ongoing focus on the customer experience and an extension of the trial of a potentially transformational back of lanes technology.’
• Gaming Realms reports H1 numbers. Group says it is ‘on track to deliver positive Adjusted EBITDA in full year’. The group reports revenue +5% at £15.7m with an EBIDA loss of £894k, down from £3.1m last year. The loss per share is 1.37p, down from 2.22p last year.
• Gaming Realms reports it ‘is expected to be EBITDA positive for 2017 as a whole and significantly EBITDA positive in H2 2017’. CEO Patrick Southon says ‘the Group has made significant progress towards profitability in the first half of 2017, with H1 losses reduced, the Board anticipates that the Group will be EBITDA positive for the year as a whole.’ He continues ‘further progress is expected in the second half of 2017 across the business.’
• FT reports UK’s largest bookmakers are ‘set to lose at least £150m in annual revenues under planned curbs on betting machines denounced by campaigners as the “crack cocaine” of gambling.’ The paper says’ the government is expected to recommend new limits on fixed-odds betting terminals (FOBTs) — machines within betting shops which offer games such as roulette — when it announces the findings of a review into the gambling industry next month.’ The maximum stake of £100 is likely to be cut. Some activists want the figure to fall to £2 or £3 whilst others are pushing for £20 or so.
• Goals Soccer shares yesterday fell 7.4% on news that its recovery was taking longer than had been anticipated
• According to the telegraph, Vue international is planning to name Adam Crozier, former ITV CEO, as its new chairman. The appointment could be announced on Wednesday, subject to talks.
• Murdoch’s $15bn takeover of Sky is in doubt due to the British government toughening its stance on concerns about his US Fox News network. The news sent Sky shares down 5% before recovering at 937p, well below the £10.75 bid offer from Twenty-First Century Fox.
FINANCE & MARKETS:
• UK CPI rose to 2.9% in the year to August from 2.6% in the year to July. Petrol and clothing prices were amongst the steepest risers.
• August RPI rost to 3.9% from 3.6% in the year to July.
o Toyota has said that uncertainties regarding the direction and timetable of Brexit could lead to it shifting some production away from the UK
o Jaguar Land Rover last week said Brexit was causing it some issues.
• Yorkshire Building Society reports that 54% of areas have seen wage growth exceed the rise in house prices over the last decade
• Oil up to $54.13
• Sterling stronger vs dollar at $1.3309
• Pound up vs Euro at €1.1106
• UK 10yr gilt yield up 10bps at 1.14%
• World markets: UK down yesterday but Europe & US closed higher. Far East mostly up in Wednesday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: STR has London hotel demand +1.2% in August. Problem is, supply rose 4.0%. Occupancy down 2.7% but rate +3.0%. REVPAR +0.2%.
• STR says re August in London ‘the number of rooms sold in the market went up, but supply grew at a quicker rate.’
• Tasty struggling, cuts expansion pipeline for 2018 to nil. Write down £9.5m. Believes problems extend to 2018.
• Discounting likely – or is it already with us? M&B’s Toby Carvery offering 2 meals for a tenner, Pizza Express 40% off, Prezzo 50% off etc.
• Tasty comments on trading (expected tough till into 2018) doesn’t help RTN recovery. Group buffeted by events, competitor action etc.
• Goals Soccer recovery taking longer than hoped. Remains ‘highly cautious about the pressure on consumer spending.’
• GNK shares down in current trading for third day running. Tasty comments re tough market into 2018 don’t help.
• Search for value. Primark is trading ‘particularly well’. Large ticket, not so much. See car sales, Safestyle comments etc.
• Weather comps very tough. Today average expected c15 degrees. Last year, it was nearly 25 degrees. Hottest day of year was in September
RETAIL NEWS WITH NICK BUBB:
• Dunelm: On the back of the announcement of the sudden departure of CEO John Browett two weeks ago, Dunelm shareholders were assured that, thanks to the autumnal weather, “trading in the first two months of the new financial year has started positively, with an encouraging like-for-like sales performance”. And on the back of today’s finals, for y/e June, the Chairman Andy Harrison again emphasises that the last 2 months have been encouraging, “with good LFL sales boosted by favourable weather comparatives”. We have to wait until Oct 11th for the full detail with the Q1 update, but Dunelm also say “we expect the trading climate to remain challenging with the disposable income of UK consumers under pressure”. And adjusted PBT for last year was 15% down at £109m, before £17m of exceptional costs, after a near £11m loss from the Worldstores acquisition (which is said to be going well).
• Halfords: Halfords has appointed Graham Stapleton, the head of Dixons Carphone’s software business, as its new CEO. He will join the company in January and Jill McDonald will leave the company at the end of this month to go off to head up M&S’s Clothing division. In the interim, Halfords CFO Jonny Mason will take charge as interim CEO.
• John Lewis Partnership Sales Watch: Yesterday’s sales figures for last week for JLP revealed that at John Lewis sales were up by 3.5% in gross terms (c2% up LFL) in w/e Sept 9th. Fashion was up by as much as 9.8% gross and Electricals were up 2.8% gross, but Home was down by 1.9% gross. Over the 26 weeks of the first half, John Lewis overall was only up by 1.6% gross (broadly flat LFL), but over the last 6 weeks sales have been up by 4.2% (c2.7% up LFL). At Waitrose sales were up by 6.4% gross (nearly 5% up LFL), albeit that was helped by the big “25% off” wine promotion and Half-Price Event…Over the 26 weeks of the first half, to end July, Waitrose was up by 1.9% gross (broadly flat LFL) and over the last 6 weeks sales have also been up by 1.9% gross, despite a weak August. That should mean that JLP is in a reasonably good mood about current trading on Thursday, when it reports its
• News Flow This Week: Tomorrow brings the much-awaited Next interims, the Morrisons interims, the John Lewis Partnership interims and the Booker Q2 sales.