Langton Capital – 2017-09-26 – Thomas Cook, Time Out, Hall & Woodhouse & other:
Thomas Cook, Time Out, Hall & Woodhouse & other:
A DAY IN THE LIFE:
Bit busy today. Results and all that. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Time Out Group has reported a 13% increase in revenue to £18.7m, although its adjusted operating loss nearly doubled to £9.4m as the evolving group continues to grow its digital and Time Out Market divisions. Digital revenue grew by 25%, while Time Out Lisbon’s increased visitor count of 1.7 million drove a 59% increase in revenue. The group finished the period with a net cash position of £30.9m.
• Time Out’s global monthly audience reach increased 77% to 242 million driven by the publication of increased Facebook video content. A market in Miami is set to open in 2018, with a lease agreement close to completion in a second major US city. Commenting on the results, Julio Bruno, CEO, said: ‘Looking forward, trading remains in-line with our expectations for the full year. As in previous years, revenue will be weighted to the second half and our operating leverage, combined with the global realignment of Time Out Digital and the continued success of Time Out Market, is expected to substantially improve our operating margin.’
• The ALMR has criticised Tower Hamlets Borough Council’s decision to introduce a late-night levy, which will ‘stifle investment, put jobs at risk and could ultimately see venues close’. The body added: ‘The decision is even more disappointing given the House of Lords Committee reviewing the Licensing Act acknowledged that the levy is unfit for purpose and recommended that it be abandoned altogether.’
• BBPA chief executive Brigid Simmonds has also called Tower Hamlets Council’s move ‘disappointing’ and also drew attention to the recent House of Lords report that concluded the Late Night Levy has ‘failed to reach its objectives and should be abolished.’
• Some of the country’s largest commercial property landlords have warned that demand is tailing off as businesses become more cautious about committing to new sites, per The Telegraph. The Crown Estate has pulled out of a £75m project to extend a shopping centre in Exeter after failing to garner enough interest in the new facilities, commenting: ‘Unfortunately in the current market, many retailers and restaurateurs are now more cautious about making new commitments, particularly in proposed developments, which take time to build and therefore require a commitment several years ahead.’
• AG Barr managed a 2.6% increase in profit before tax and exceptional items to £17.5m in the six months to 29 July. Although revenue grew by 8.8% to £136.6m, the drink brand owner’s operating margin slipped from 13.9% to 13. Commenting on the results, Roger White, Chief Executive said: ‘The strong sales momentum of the second half of last year has continued and has combined with significant progress from our innovation to deliver strong sales growth and market share gains in the period. While we maintain tight cost control across the business, we have increased investment in the support of our brands and innovation launches and expect to continue this across the full year. Our reformulation activities remain on track as we move into the final implementation stages of this initiative in what will be a busy second half.’
• Vianet has updated on H1 trading saying ‘trading for the first half of the current financial year is ahead of the same period last year with the growth in line with the Board’s expectations. As such, the Board intends to declare a maintained interim dividend of 1.7 pence per share.’
• Vianet chairman James Dickson comments ‘given the Group’s positive progress and encouraging prospects the Board is confident of continued growth.’
• Hall & Woodhouse has delivered accounts for the year to 28 Jan to Companies House saying turnover fell by 0.8% to £107.7m.
• Hall & Woodhouse reports underlying PBT of £7.1m vs £8,0m in prior year. EPS fell to £8.51 per share from £11.97 per share in 2016. The group is proposing an unchanged dividend of £3.02 per share.
• Hall & Woodhouse reports ‘the level of profit reflected the heavy investment during the year in our teams, public houses and brands as well as challenging market conditions’.
• Beds & Bars has announced that chairman Tim Sykes left the board of the company on 12 September. The company reports that Tim has been in the industry for over 40yrs. He joined Interpub, the company that was rebranded as Beds & Bars, in 1998. Tim was also chairman of the Association of Licensed Multiple Retailers for a period of three-years.
• CEO of Eat Andrew Walker has told CGA that millennials are “flightier” than their older counterparts and need to be given an indication of where their job can take them in order to inspire loyalty.’ He said that all the operators in the grab-and-go sector were fighting to get good people in a labour pool that was “getting tighter”, thanks in part to Brexit.
• A poll sponsored by St Austell Brewery has reported that Brits are happiest when in their local pub. It says ‘despite many pubs closing their doors, and more and more people opting to stay at home to have a drink, the nation’s love affair with their local is as strong as ever.’ The pub was also the most likely place to catch up with friends, outstripping cafés, restaurants and the gym.
• St Austell poll suggests Brits visit the pub twice a month on average, and three in ten say they often escape to the pub when they’re feeling stressed or annoyed. Roger Protz, editor of the latest Good Beer Guide, said: “The British pub is unique and it has a character and atmosphere that could never be replaced.”
• Forward ordering App company Ordoo has reported that, in this digital age, the ‘customer journey extends from the physical interaction in-venue and brands need to understand how to engage with customers in a digital world.’ Ordo suggests that online storytelling, shareable experiences, digital conversions, personalised information, timing and motivating incentives are now also a part of selling to the customer and in encouraging him/her into a return visit.
• FSR Magazine in the US has suggested that it is proving difficult to find buyers for chain Ruby Tuesday. It says ‘rumours of a possible Ruby Tuesday sale have swirled for months’ adding ‘the question, though, isn’t when, but who will buy it.’
• ‘KNEAD by Paul Hollywood’ — an ‘interactional kitchen environment’ that promotes fast service — is opening in Euston Station this year. Foodservice Equipment Journal writes that the bakery concept will be operated by SSP and revolves around serving busy customers in under one minute.
• AB InBev has acquired Australian craft brewery 4 Pines, which will sit alongside the brewer’s Carlton & United Breweries business in Australia.
• Wetherspoon is the latest pub chain to stop using plastic straws and will phase them out by the end of the year, at which point they will be replaced with biodegradable paper straws.
• Coffee chain Harris + Hoole is gearing up for expansion in central London three years on from a wave of closures resulting from Tesco’s profit misstatement scandal. The brand, which is now part of the Caffe Nero Group and has 37 stores, is preparing to launch a central London unit following the opening of a Tesco-based site in Kensington in early 2016.
• Greene King will open eight new Farmhouse Inn sites in the next three months, which will create more than 600 jobs and see the Farmhouse estate grow to 61 pubs. In April, Greene King revealed it had opened 14 of the new sites over the previous 12 months and recruited 1,000 staff to fuel the expansion.
• Black Sheep Brewery has appointed Andy Slee as its new chairman, succeeding founder, Paul Theakston. Slee has previously worked at Coca Cola and Punch Taverns.
• Distillery numbers in the UK increased by 45 last year to a total of 273. Miles Beale, chief executive of the Wine and Spirit Trade Association, said: ‘The rapid growth of distilleries, an increase of 135% since 2010, is yet another positive sign of the UK spirits industry going from strength to strength’.
• UK food and drink suppliers are not prepared for Brexit, The Grocer has reported. Productivity and investment already believed to be in decline.
• Aldi has experienced record sales in the UK and Ireland, with a rise of 13.5% to £8.7bn in 2016. The supermarket chain has however, seen operating profits fall sharply (down 17%) amid fierce price competition with other supermarkets .
• McDonald’s is the top-ranked food & beverage brand in Interbrand’s world’s top 100 most valuable brands. McDonald’s came in at 12 overall, with Apple and Google taking the two top spots on the list. Technology proved to be one of the most dominant sectors with 15 firms making the list.
THOMAS COOK FULL YEAR TRADING UPDATE:
• Thomas Cook has this morning updated on full year trading saying: ‘Summer 2017 [is] closing out as expected; full year underlying EBIT outlook unchanged.’ Our comments are set out below:
• Trading update:
• Group says summer is closing out as expected with higher customer satisfaction levels
• Winter 2017/18 booked revenue is up 6% ‘with growing demand for Turkey and North Africa’
• The group says it is making ‘significant progress on strategy through new alliances with Expedia and LMEY (announced separately this morning)’
• CEO Peter Fankhauser comments ‘Thomas Cook has enjoyed a good summer.’
• He says ‘customers from across our markets have shown a strong appetite for our holidays, picking a wide range of destinations in their search for the sun, with Greece, Bulgaria and Cyprus proving particularly popular.’
• Fankhauser adds ‘demand for Turkey and Egypt has also picked up as customers look for quality and value.’
• The CEO adds ‘meanwhile, bookings to Spain, our biggest destination overall, remain level with last year as we continue to manage through what has proven to be a very competitive trading environment, particularly for the UK.’
• Further detail:
• Thomas Cook says ‘the last month has been operationally challenging as our teams took care of the thousands of customers in the Caribbean and Florida impacted by Hurricane Irma.’
• CEO Fankhauser adds ‘I’m also delighted about the progress we’ve made strategically. The alliance with Expedia announced earlier this month will allow us to cut the complexity in our business and focus on our core holiday offering.’
• The group announces today ‘our new partnership with hotel property investor LMEY…gives us a stake in the popular German premium club brand Aldiana, and a platform from which to accelerate the growth of our own-brand hotels business.’
• Current trading:
• Thomas Cook reports re summer 2017 ‘overall Group bookings remain in line with our expectations, up 11% compared to this time last year, with average selling prices up 1%.’
• TCG adds ‘this position is unchanged since our last update at our third quarter results in July. Our Summer 2017 programme is now 91% sold for the Group, 2% more than at this time last year.’
• TCG says ‘sales have been driven by strong customer demand for our improved holiday and flight offering to a wide range of destinations including Greece, Bulgaria and Cyprus, together with long-haul destinations such as the USA.’
• TCG is able to say ‘demand for Turkey and Egypt has continued to increase’ whilst Spain is in line with last year.
• Northern Europe has delivered a very good performance. Continental Europe volumes are up 13%. Condor’s bookings are up 12% and the group reports ‘Condor’s recovery remains on track, with a return to profitability expected for the full year, in line with previous guidance.’
• In the UK, overall bookings are +8% ‘with pricing in line with last year’
• Re winter 2017/18, the group says its programme ‘is 37% sold, consistent with the same period last year.’ Turkey and North Africa are recovering.
• In the UK, bookings are up 5%, against a strong comparative period, with pricing up 3%.
• Summer 2018 is very early but the group says ‘we are pleased with the very early start to the programme. Overall bookings and pricing are ahead of last year, reflecting a good performance from the UK and Northern Europe’
• TCG says ‘our overall trading position remains unchanged since our last update.’
• It adds ‘we have seen strong demand for our holidays over the summer, supported by our focus on the customer and improvements in our holiday offering.’
• The group says ‘as a result, we continue to expect our full year underlying operating profit to be in line with current market expectations.’
• The group has separately announced that CFO Michael Healy is to retire. The board has appointed Bill Scott, currently Director of Financial Reporting, as his successor.
• Langton Comment: Thomas Cook’s shares have performed well since the group reported, at its Q3 update on 27 July, that it had turned in ‘a good performance for the third quarter’.
• This has been maintained to the year end and results will be in line with expectations.
• There is a lot of paddling going on below the waterline and, on the back of the Expedia deal announced earlier in the month, an agreement with property investor LMEY has been announced today.
• The group’s China JV gets no coverage this morning.
• Consensus numbers have the group trading on a next year PER of around 10x earnings. This is rather lower than one would expect for a company whose recovery is not complete.
• TCG’s China JV is potentially very exciting and we believe that its shares offer good value.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Saturday saw a second strike in a month by Thomas Cook pilots over failure to agree a pay and conditions deal. Further action by the pilots is planned with a 24-hour strike on September 29 and October 6. Saturday’s strike saw more than 40 flights scheduled.
• Cunard plans to build its first new ship in 12 years, taking its fleet up to 4 ships. The ship will join the fleet in 2022 and will be capable of holding 3,000 passengers. Senior vice president of Cunard, Simon Palethorpe, said ‘Cunard offers unrivalled luxury ocean experiences and the new ship firmly underpins our plans to continue our growth across international markets.’
• Sadiq Khan claims Uber has put ‘unfair pressure’ on Transport for London (TfL) using an ‘army’ of lawyers and PR experts after TfL denied it a new license. Uber is keen to hold talks with officials from TfL’s taxi department “as soon as possible”, Fred Jones a senior executive with Uber in the UK, told the Today Programme.
• Insolvent airline Air Berlin is pushing ahead with talks with EasyJet and Lufthansa about a possible sales.
• Google has partnered with Bose to provide the voice-based Google Assistant companion on Bose’s QC 35 II headphones.
• Bwin non-exec & former CEO Norbert Teufelberger has sold £2.5m worth of shares in the company.
FINANCE & MARKETS:
• Bank of England suggests lenders are underestimating the risk they are taking in consumer lending. It points to “pockets of risk”. The Bank says that in a “severe downturn”, the UK banks could lose £30bn. The Bank says, however, ‘this is not a material risk to economic growth, as consumer credit represents only 11% of overall household debt.’ The problem, of course, is that bad news likes company and that consumer defaults are often accompanied by problems elsewhere.
• ECB boss Mario Draghi has warned that monetary policy stimulus is still necessary across the Eurozone.
• Oil prices jumped yesterday to around $59.31, up around 3%, on rising geopolitical worries etc.
• Sterling down vs dollar at $1.3483
• Pound up vs Euro at €1.1371
• UK 10yr gilt yield down 3bps at 1.33%
• World markets: UK mixed yesterday with Europe up & US down. Far East mostly down in Tuesday trade
o Chuka Umunna reports Brexit of the type that was sold to the British public is not deliverable. Minimising disappointment is key.
o Labour intends to keep Britain in the customs union post Brexit. This, at the moment, is not possible without accepting the other ‘freedoms’ (of movement, capital & services).
YESTERDAY’S LATER TWEETS:
• Later tweets: Discounts still coming thick & fast: Prezzo 50% off, Bella Italia 50% off, Pizza Express 30% off, Brown’s 20% off.
• MCA Eating Out Panel says further decline in frequency of visits to restaurants in August. Less bad than July, though
• Deliveroo raises money, loses it, raises more. What’s not to like? Joking apart, sight of profits (2019, 2020, 2021…?) would be nice
• Moody’s downgrades UK credit rating. Suggests Brexit fiasco is hitting economy. Government response? ‘No, it isn’t…’
• Chuka Umunna says Brexit, as sold to the British public, cannot be delivered. Mrs May offers £40bn for short term fix
• CBI warns manufacturing faltered in Sept after growth over summer. Economy still growing but at half rate of Eurozone
START THE DAY WITH A SONG:
Yesterday was that guilty pleasure Hall & Oates’ ‘I Can’t Go For That’. Today, who sang:
“You were sold a one direction/
I believe the resurrection’s on/
And you were wrong”
RETAIL NEWS WITH NICK BUBB:
• SuperGroup: The Capital Markets presentation by SuperGroup continues today, after an overnight stay in sunny Cheltenham, but, apart from the guff about “how the business is leveraging its position as a global digital brand, with a compelling vision for further growth through eight different channels to market”, the most interesting news has been the revelation that the name of the group is to be changed to Superdry Plc. CEO Euan Sutherland gushed that “Changing the name of the group to Superdry is an important step reflecting our focus on developing the iconic Superdry brand globally and digitally”.
• Card Factory: There is no sign of Card Factory wanting to change its name, although one of the reasons why its underlying EBITDA margin tumbled in H1 to 18.3% (from 20.2% in H1 last year) is the stronger growth in revenue from lower margin non-card sales, along with “investment in the future” and cost headwinds of c230bps (£4.2m) from foreign exchange and national living wage pressures.
• MySale: There was a telling 9% bounce in the share price of MySale yesterday, but before that the Australian-based Online flash sales website had been languishing, despite the surge in peers like Boohoo and ASOS. Today’s final results, however, look strong and major shareholders like the embattled Philip Green and Mike Ashley will be pleased to hear CEO Carl Jackson say that “This year has started well, with revenue growth accelerating from last year and strong growth in underlying profitability. Whilst our peak trading period is still ahead of us, we expect that underlying EBITDA for the year will be at least in line with the upper end of market expectations”.
• News Flow This Week: Tomorrow brings the Boohoo interims and the Hotel Chocolat finals. The Moss Bros interims are on Thursday and then the widely followed monthly GFK Consumer Confidence Index is out on Friday morning.
• Beckton Watch: We flagged on Friday that the new Shoe Zone “Big Box” store in East London is on the retail park at East Beckton, anchored by Asda. But there are many retail parks in Beckton…and the new 4,000 sq ft Shoe Zone is actually in the Gallions Reach retail park, which is anchored by a Tesco Extra and owned by Standard Life Investments. We apologise for any confusion caused, although there is a small conventional Shoe Zone store located inside the Asda, just to confuse things further. Now Beckton is not, if truth be told, the most beautiful part of the world, as Gallions Reach is located next to the biggest sewage works in Europe and was built on the site of what was once the largest gasworks in Europe, but it is at least relatively easy to get to, close to the junction of the A13 with the end of the North Circular.
• Online Fashion Disruptors: We also flagged on Friday that Retail Week magazine was a special Fashion edition and had an interesting feature on “The disruptors: Who will be the next Asos?”. The article actually asked who could the next Boohoo or Missguided be…but we have been asked to name names and we can therefore reveal that the six up-and-coming Online fashion businesses featured were: In the Style, MissPap, Brand Attic, Mennace (the new menswear website launched by Missguided), Missy Empire and Batoko.
• Movers and Shakers Watch: Talking of Boohoo.com, the influential blog Retail Insider (which is run by the estimable Glynn Davis) launched its annual “Movers and Shakers Top 100” List of the most influential people in digital retailing yesterday. Top of the tree was Jose Neves (the CEO & founder of Farfetch), with Peter Williams, the Chairman of Boohoo (who was also one of the judges!) in second place. In 4th place (up from 26th place last year) came Mahmud Kamani and Carol Kane, the co-founders and joint CEO’s of Boohoo.com: “Kamani and Kane continue to make a great team with their contrasting but complementary skills that ensure Boohoo remains focused on supplying ever faster fashion to its young customer base”.