Langton Capital – 2017-12-13 – TUI, inflation, beer sales, Uber, cost issues & other:
TUI, inflation, beer sales, Uber, cost issues & other:
A DAY IN THE LIFE:
Bit rushed this morning. Site visits in Wapping last night. Will brave Westminster this evening & Bermondsey tomorrow. Tough gig but somebody has to do it. Please see MIFID II comments at the bottom of the email if applicable. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
As Mr Einstein said, if you can’t explain something in a very small number of words, then you may not understand it yourself.
Easier said than done, of course but, with the above in mind, we’re putting together a compendium of 60-seconds pieces.
These are all new (though we may put some historic 2017 efforts in the appendix) & will focus on two areas; companies & themes.
The former is pretty self-explanatory. The company pieces will comprise a very brief summary of our views on a given operator (in 60-seconds, roughly 200-words) whilst the latter will encompass themes, trends and our current thoughts thereon.
Themes will include discounting, cost pressures, overcapacity, the coffee phenomenon, delivery, the use of apps, Millennials, the grey market and so on and so on. There are more than you might think.
We’ll be busy over Christmas and the doc will be ready in early Jan but, if you would like a copy, please let us know. As mentioned, £200 plus VAT but free to clients.
PUB, RESTAURANT & DRINK PRODUCERS:
• See CPI & real wage comments under Finance & Markets.
• Outback Steakhouse co-founder Chris Sullivan is to leave Bloomin’ Brands Inc.’s board after having been with the company since 1988. Sullivan will remain a shareholder in Bloomin’ Brands, where he controls 1.2 million shares, or 1.17 percent of the total stock outstanding.
• Euro Garages has opened its 161st Subway store in the UK and Ireland. Euro Garages says ‘partnering with the Subway brand enhances our offering for our customers and we look forward to continuing our relationship with the brand, with the opening of new sites in 2018.’
• Molson Coors is to bring the world’s best selling beer Snow, a lager brewed in China, to the UK market. Snow has been the most popular beer in the world for each of the last 6yrs.
• Westminster City Council will oblige restaurants to seek planning permission if they intend to use food delivery apps. Residents have been complaining about noisy scooters.
• Alcohol sales are still rising in supermarkets in value terms on the back of continued premiumisation reports Kantar Worldpanel. Kantar says consumers are ‘choosing more expensive festive tipples’.
• Crussh Fit Food & Juice Bars has launched its own app offering customers multiple loyalty schemes, pre-ordering, streamlined payments, and a free coffee on download. It remains to be seen just how many separate branded food and drink ordering apps the average consumer is willing to keep on their phone, but this hasn’t stopped operators from jumping on the app bandwagon in recent times. The natural end point might well be an aggregator model a la Just Eat. In the meantime, however, Crussh comments: ‘The app will reward customer loyalty with multiple loyalty schemes, exclusive rewards and regular food offers. What also really excites us about launching the app, is the opportunity to better understand how our customers behave, and the ability to use this data to improve their experiences with Crussh.’
• Vietnamese restaurant group Pho is set to break the £30m-sales mark this financial year thanks to encouraging like-for-like growth, per MCA. The 25-strong company, which is led by managing director Mark Smith, saw turnover for the year to 27 February 2017 grow 33.7% to £25.9m and group EBITDA rise from £2m to £2.5m.
• Whitbread has teamed up with Black Sheep to create a coffee-infused beer named 1742 to celebrate its 275th anniversary.
• The UK’s status as the most popular country among Europeans looking for work abroad ‘is eroding fast’ according to new analysis by job site Indeed. The UK’s 31.8% share of EU15 cross-border job searches in the first nine months of 2017 is 14.7% lower than it was during the same period in 2015.
• Paris-based Unibail Rodamco is spending some £18bn on the acquisition of Westfield, which will result in a retail property giant worth $72.2bn spanning countries including Australia, Britain, France, Spain and the United States.
• The FDF has suggested that businesses could begin to scale back UK operations next year unless the government gives clarity over a post-Brexit transition period. The FDF stated: ‘Until a comprehensive UK-EU trade deal has been agreed, ratified and enters into force, we will need transitional arrangements to ensure businesses have continued access to vital imported ingredients and export markets’.
TUI – FULL YEAR NUMBERS:
• TUI has reported full year numbers to end-Sept saying this is the ‘third consecutive year of strong earnings growth.’
• TUI sees a 12% increase in underlying EBITA and a 34% increase in underlying EPS
• TUI FY: Group says we are ‘continuing to transform our business’. It says ‘56% of earnings are now delivered from own hotel and cruise brands, with a strong ROIC performance and less seasonal profile’.
• TUI says its ‘post-merger phase is complete’. It is seeing ‘double digit annual earnings growth with strong cash conversion and strong ROIC’. The group says its performance continues, driven increasingly by market demand and digitalisation benefits, as well as disciplined expansion of own hotel and cruise content.’
• TUI reports turnover up 8.1% at €18.5bn with underlying EBITA of €1.102bn.
• TUI EPS is €1.14 with a dividend of 65 cents up from 63 cents last year.
• TUI reports ‘we have delivered a third consecutive year of strong earnings growth’ saying ‘this was driven by growth across the business, including our own hotel and cruise content, Source Markets and the delivery of the final tranche of merger synergies.’
• Re current trading, TUI comments ‘demand for our holidays, hotels and cruises remains strong.’ It says ‘source Markets trading is progressing well, in line with our expectations. Winter volumes are ahead of prior year, with strong growth in bookings for Thailand, Cape Verde, North Africa and Cyprus.’
• TUI says ‘despite the Brexit backdrop, the UK continues to deliver a resilient performance in line with our expectations.’ It adds ‘year on year bookings and selling price for Winter 2017/18 reflect the very strong start in prior year trading (when bookings were up 19% including Marella Cruises) and impact of currency inflation.’
HOLIDAYS & LEISURE TRAVEL:
• Daimler AG chairman Dieter Zetsche is to replace outgoing Tui chairman, Dr Klaus Mangold, from October 2018. Mangold said: ‘With Dr Zetsche, we are gaining the services of a highly-regarded top manager for the supervisory board and as my successor as its chairman’.
• Passengers suffered delays of about six hours on the cross-Channel tunnel, due to ‘unforeseen capacity restrictions’ following snow-related disruption.
• LDC has backed the management buyout of cottage rental business Lakelovers Lettings agency.
• Supercity Aparthotels has acquired Light aparthotel, with plans to relaunch the group in 2018 following a refurbishment.
• Gatwick moved a record number of 2.9m passengers in November as the growth in long-haul routes continued.
• Heathrow has had its 13th record-breaking month in a row this November, with the airport handling 5.9m passengers, up 3.5% on the same month last year.
• British Airways cancelled hundreds of flights in response to the weekend’s snowstorm, despite other airlines continuing with business as usual.
• Bike-sharing startup LimeBike is launching in Europe with 500 bikes in Frankfurt and Zurich, after the group secured $50m in funding.
• York City Council is refusing to renew Uber’s license to operate in the area. York is investigating a number of complaints it had received about the service.
• Marriott is to open nearly 40 luxury hotels in 2018.
• Preliminary data for the US lodging industry for November shows that REVPAR grew by between 3% and 5%. Rate rose by around 2% whilst occupancy rose by c1%.
• The National Lottery has raised 15% less money (£1.6bn) for good causes, after customers turned from draw-based games to scratchcards.
• Walt Disney close to confirming its $60bn deal for 21st Century Fox’s entertainment assets. The sale is set to include 20th Century Fox film studio, Sky and Star satellite broadcasters in the UK, Europe and Asia.
FINANCE & MARKETS:
• UK CPI hit 3.1% in November, up from 3.0% in October & a little ahead of expectations per the ONS. Core CPI rose by 2.7%
• NIESR notes ‘CPI inflation was 3.1 per cent over the 12 month period to November. This is the highest reading since March 2012. Inflation is now more than 1 percentage point away from the 2 per cent inflation target, automatically triggering an explanatory letter from the Governor to the Chancellor.’ It continues ‘we expect inflation to peak at current levels in the final quarter of this year before dropping back to the target rate by mid-2019. The Bank will in our view raise the policy rate every six months until the policy rate reaches 2% by mid-2021, with the next increase in May. Wage growth is likely to remain under pressure as a result.’
• Research by Korn Ferry has suggested that UK real wages will fall again throughout 2018 as inflation will exceed pay rises. It says ‘UK workers will find themselves worse off than French and German workers when it comes to salary increases. 2018 is set to be a tough year for UK business. Companies need to think about how they target the limited money they have available for pay increases to the parts of the business where it will have the most impact on employee performance.’
• House price growth slowed again in October per the RICS. Prices rose 4.5% in the year versus 4.8% in the year to September.
• Oil down $1.70 or so to $63.84
• Sterling slightly weaker vs dollar at $1.3329
• Pound down vs Euro at €1.1339
• UK 10yr gilt yield up 2bps at 1.22%
• World markets: UK up yesterday with US & Europe also higher. Asia mostly up in Wednesday trading
• Brexit etc.:
o EY Consulting says ‘there is a big point of no return coming up between now and the end of the first quarter of 2018, where banks and pharma companies need a strong signal to stop relocating activity. Manufacturers and retailers have some more time but cannot stall for long.’
o David Davis has made ‘unacceptable remarks’ says European Parliament’s chief negotiator Guy Verhofstadt. Verhofstadt said that the recent agreement was ‘a mere statement of intent’ meant that ‘good faith’ had been damaged.
PRIOR DAY LATER TWEETS:
• Later tweets: See e/m for update on mobile & contactless payments. Also crowd funding roundup. Westfield bought in monster $25bn deal.
• Westminster tells delivery companies not to make so much noise. Tells 21st century it can b*gger off too…
• Nielsen says shopper purchasing confidence has dropped to its lowest level since Q2 2015.
• Mrs May has says deal with EU is win for everyone. Mr Davis says it is not final. Brussels says Norway & Canada deals mutually exclusive
• Expert alert. US think tank Rand Corp says ‘nearly all possible trading relationships’ worse for UK post Brexit
• Xmas shortly but Prezzo offering 50% off mains until 14 December. What will it do in January, 150% off? Pizza Express 25% off total bill
• Carpetright shares down 7% as group says it will hit bottom of estimates. Says market is ‘volatile and unpredictable’
• CPI for Nov up to 3.1% from 3.0% in Oct. Core CPI 2.7%. RPI 4.0%. All above B of England targets & market expectations
START THE DAY WITH A SONG:
Yesterday’s song was ‘Stand By Me’ by Ben E King. Today who sang the following:
A smash of glass and a rumble of boots,
An electric train and a ripped up ‘phone booth,
Paint splattered walls and the cry of a tomcat
MIFID II – IT’S AS MUCH FUN AS YOU THINK IT IS:
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RETAIL NEWS WITH NICK BUBB:
• Dixons Carphone: We flagged yesterday that at the end of August, Dixons Carphone shocked investors by warning that full year profits were likely to plunge to between £360m and £440m (from £501m the year before), largely because of problems and accounting issues in “old” Carphone Warehouse, ie the mobile phone business. And ahead of today’s interims, the hard-working IR team had circulated that the consensus expectation for H1 PBT was only £63m, compared with £144m a year ago, with the bulk of the shortfall concentrated in the UK. So the £61m PBT outcome is no surprise (with UK EBIT plunging to just £34m vs £130m), albeit the City might have hoped for a beat and it is disappointing that the full-year profit range has now been shifted down to £360m-£400m, despite bumper Black Friday trading. On the bright side, the dividend is being maintained, thankfully, and the group has maintained
• John Lewis Watch: We also noted yesterday that good Electricals sales helped that great bellwether, John Lewis, deliver surprisingly good trading at the end of November and early December, over the Black Friday/Cyber Monday weeks, but it was all discount-driven and some trade was pulled forward from the key Christmas weeks. John Lewis announced its sales for last week at about 11am yesterday and, having been too cautious with his forecasts for each of the previous 2 weeks, it was third time lucky for “Honest Nick”, as he was bang on with his forecast of flat sales of £152m for w/e Dec 9th, despite a weak comp, which would be c0.5% down LFL. Electricals were up 1.4% gross, with Mobile up by 47%, interestingly, as the new iPhone 10 continued to perform well…
• News Flow This Week: The Sports Direct EGM about the £11m back pay owed to Mike Ashley’s brother is being held up in their sunny Shirebook HQ at 11am. Then tomorrow brings the Sports Direct interims, the Ocado Q4 sales update and the ONS Retail Sales figures for November.