Langton Capital – 2018-02-08 – EI Group, Compass, Revs, Goals, T Cook, MLC etc.:
EI Group, Compass, Revs, Goals, T Cook, MLC etc.:
A DAY IN THE LIFE:
Bit busy this morning as a result of all the trading updates. On to the news:
EI GROUP Q1 TRADING UPDATE:
• EI Group has updated on the first 18 weeks’ trading of its current financial year saying it has seen ‘growth maintained across all parts of the business, in line with expectations’
• EIG reports in Publican Partnerships it has ‘made a steady start to the financial year with our leased and tenanted estate reporting like-for-like net income growth of 0.5% in the 18 weeks to 3 February 2018.’
• EIG says ‘whilst market conditions and unhelpful weather have had some impact on our performance this year, we are continuing to make progress with our plans. We continue to invest in our leased and tenanted business in order to both improve estate quality and drive income growth by working closely with our publicans and sharing our growing expertise gained from our managed operations.’
• In Managed Pubs, EIG says ‘we have continued to convert selected pubs from our leased and tenanted business to our managed estate, which now comprises 291 pubs, and we expect to convert a further 75-100 pubs to managed during the remainder of the current financial year.’
• EIG says ‘pubs that have traded as managed pubs throughout both the 18 weeks to 3 February 2018 and the prior comparative period delivered like-for-like sales growth of 6.8%, aided by a particularly strong performance from beer sales. ‘
• In its Commercial Properties division, EIG reports ‘we expect to grow the number of such sites from 331 as at 30 September 2017 to between 375 and 400 by September 2018.’ The group says ‘pubs that traded as commercial properties throughout both the 18 weeks to 3 February 2018 and the prior comparative period delivered like-for-like net income growth of 4.6%.’
• EIG CEO Simon Townsend says ‘the year has started in line with our expectations, with growth being maintained across all three of our operating businesses. Market conditions for pubs are challenging but, despite these headwinds, we remain confident that the execution of our strategic plan is the best route to shareholder value creation and we are on track to deliver our plans for the year as a whole.’
PUB, RESTAURANT & DRINK PRODUCERS:
• Revolution Bars Group has announced the appointment of Rob Pitcher as CEO. Mr Pitcher will join the group ‘in due course.’ Revolution reports ‘Rob has over 25 years’ experience within the hospitality sector, most recently as a member of the Executive Committee of Mitchells & Butlers as Divisional Director Restaurants responsible for the Harvester, Toby Carvery and Stonehouse brands.’ Chairman Keith Edelman comments ‘Rob Pitcher’s proven operational experience and leadership qualities with considerably bigger companies will enhance the ongoing development of the Revolution and Revolucion de Cuba brands’.
• Compass Group has updated on trading saying its ‘organic revenue for the first three months to 31 December 2017 grew by 5.9% driven by strong levels of new business wins, excellent retention and good like for like revenues.’
• Compass says ‘we continue to generate efficiencies through our management and performance (MAP) programme. We are also taking actions to offset above average cost pressures in the UK, the benefits of which will come through in our operating margin in the second half of the year.’
• Compass concludes ‘we had a strong quarter and our outlook for 2018 is positive.’ It suggests that H2 margins will improve and says ‘in the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth.’
• According to Sky, Toys R Us is seeking offers for its loss-making UK arm, putting more than 3,000 jobs on the line. Both the UK and European businesses are up the sale separately.
• Carlsberg has reported net profits for 2017 of DKr1.3bn, down from DKr4.5bn in the prior year on the back of a DKr4.8bn write-down in Russia. The group’s shares fell by 5%. Russia has banned the sale of beer in certain sizes of plastic bottles.
• FT reports Carlsberg as saying it had done well in the areas it was able to influence. The group is saving costs. The group says ‘there are always questions about Russia because of the past. Russia remains a bit of a volatile market. We expect no new regulations this year.’ CEO Mr Cees ‘t Hart says the group remains on the lookout for acquisitions. He adds the World Cup in Russia in the summer should be good for business. Russia once generated almost half of Carlsberg’s operating profits.
• Vaping poses only a fraction of the risk of smoking Public Health England has heard. It believes there are ‘substantial health benefits over continued smoking’. Around 95% of the harmful effects of smoking could be removed.
• Report suggests vaping is responsible for a rise in the rate successful smoking quits last year. PHE hears that the evidence does not support a conclusion that e-cigs are a route into smoking regular cigarettes for young people. PHE concludes ‘our new review reinforces the finding that vaping is a fraction of the risk of smoking, at least 95% less harmful, and of negligible risk to bystanders. Yet over half of smokers either falsely believe that vaping is as harmful as smoking or just don’t know. It would be tragic if thousands of smokers who could quit with the help of an e-cig are being put off due to false fears about their safety.’
• Global food prices have fallen due to a slump in the price of sugar. Prestige Purchasing has reported that food price inflation in the UK, however, has actually picked up.
• Coldpress drinks, which is backed by Marechale Capital, has unveiled a new range of drinks
• CEO of ALMR Kate Nicholls has commented following the fall in on trade beer sales ‘the continued downturn of beer sale in pubs only emphasises the urgent need for Government action to address the other prong of our campaigning – business rates. The inequitable skew of the current business rates system favours digital enterprises and punishes pubs. It’s just not compatible with successful high streets and pubs’.
• British couples spent nearly £130m on Valentine’s Day dinners in 2017, with overall sales in the romantic season reaching £620m.
• A shift in employment from from sectors such as mining to food and drinks services has resulted in a downturn in productivity, according to a study by the Office for National Statistics.
• The Government is reported to be asking the Low Pay Commission to consider higher minimum wage rates for workers on zero-hour contracts.
• UK shoppers are paying 42% more than the European average for alcohol, the Office for National Statistics has reported.
• Celebrity chef Tom Aikens is relaunching his flagship Tom’s Kitchen restaurant in Chelsea with a renewed focus on seasonal British sharing plates.
• Starbucks is teaming up with Chase and Visa to launch its Starbucks Rewards Visa Card in the US. The card has an annual fee of $49. New card holders get 2,500 Stars if they spend $500 on the card in the first three months, allowing them 20 free food or beverage items.
• The Inn Collection Group has appointed Sean Donkin as its new managing director. The North East hospitality and leisure specialist is preparing for further expansion.
• Tesco is facing a record £4bn bill for back pay, with up to 200,000 mainly female store assistants in line for possible payouts of around £20,000 each. Asda and Sainsbury’s face similar claims involving thousands of staff.
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook updates on Q1 saying it has delivered an ‘encouraging start to the year’ with Q1 sales +7%. Underlying Q1 losses are £10m lower and the full year outlook remains in line with current expectations.
• Thomas Cook CEO Peter Fankhauser comments ‘while it remains early in our sales cycle, we’ve got the year off to a good start. A particularly strong performance from our Group Airline.’ Mr Fankhauser continues ‘from all that we see so far, customers’ appetite for a summer holiday abroad shows no sign of slowing down.’
• Thomas Cook concludes ‘this remains a highly competitive – and, at times, unpredictable – market, as the disruption in the airlines sector in recent months demonstrates. However, based on current trading and the continued progress we are making on implementing our customer-focused strategy for profitable growth, we expect to deliver a performance in line with current expectations for the full year.’
• On the Beach has updated on Q1 trading saying ‘the Group has continued to perform well in the first four months of the financial year.’ OTB says ‘the reduction in overall capacity in the market following the Monarch failure led to significant year on year seat price increases for winter departures.’
• OTB says ‘strong bookings growth for summer 2018 departures [are] more than offsetting any weakness in the market for late winter departures.’ Simon Cooper, CEO, comments ‘the first four months of the new financial year has delivered another solid period of growth for the On the Beach, Sunshine and ebeach brands.’ Mr Cooper concludes ‘the Board remains confident in the Group’s outlook and will continue to evaluate opportunities to enhance its market share position.’
• Millennium & Copthorne reports FY numbers to end-Dec saying revenue rose 8.9% to £1.008bn with basic EPS up 58.8% at 38.1p.
• M&C reports group RevPAR for 2017 increased by 7.9% to £82.78 (2016: £76.71). In constant currency, RevPAR increased by 3.2%.
• M&C cuts its final dividend from 5.66p to 4.42p ‘in the light of anticipated capital spending requirements’.
• M&C Chairman Mr Kwek Leng Beng comments ‘underlying hotel performance was flat last year.’ He says ‘performance was impacted by industry-wide factors.’ Mr Kwek says ‘the Group expects to make significant capital investment for a needed transformation to the repositioning of our hotels so as to keep pace with guest expectations.’ He continues ‘increased expenditure on both maintenance and product improvement will therefore be necessary for the group to stay relevant and competitive.’ Mr Kwek adds ‘we respect the decision by shareholders in the recent lapsed offer by City Developments Limited.’
• UK hotels faced a tough Q4 2017 but the industry still has an optimistic long-term outlook, according to the HVS Alix Partners Hotel Bulletin. Belfast and Edinburgh were the best performing UK cities whereas London posted a 1% decline in RevPAR after five consecutive months of growth. Over the longer term, performance across UK hotels has steadily improved. Annual occupancy in London’s hotels has remained at around 82% over the past five years, with average room rates rising from £136 to £146 and RevPAR growing 9%, from £113 to £122.
• According to Sky News, US-based Platinum Equity is negotiating the details of a takeover of Wyndham Worldwide’s European vacation rentals business. The deal is estimated to be worth around $1bn and would see the equity firm take over brands such as Hoseasons, James Villas and Cottages.com. Platinum, which owns businesses such as the British outdoor advertising group Exterion Media, is said to have seen off a rival bid for the Wyndham assets from CVC Capital Partners.
• A Deloitte review claims that consumers are not cutting back on leisure spend in the comping year, with holiday spending forecast to go up compared to 2017. Deloitte said ‘Despite pressures from rising inflation and lower wage growth squeezing disposable income, consumers are not cutting back on leisure spending in the same way as they are on other discretionary purchases.’
• The resumption of flights to Tunisia has been confirmed to start next week by Thomas Cook. The decision was taken following the government changing its advice regarding Tunisia. Latest Foreign and Commonwealth Office travel advice states that the Tunisian government has improved protective security in major cities and tourist resorts but adds ‘terrorists are still very likely to try to carry out attacks in Tunisia’.
• Global Travel Group reports a 30% increase in bookings in January with forward bookings for summer 2018 up 20% and winter 2018/19 up 70%. Heavy snowfall in the Alps saw a 50% increase in bookings while the Spanish mainland was up 30%.
• Goals has announced the appointment of Andrew Edward Anson as Chief Executive with effect from 23 April 2018. Chairman Nick Basing comments ‘we are delighted that Andy is joining the board to lead the business in its next phase of development. ‘ regarding his own position, Mr Basing says ‘I am also delighted to be continuing on the plc Board to see through the Company’s recovery strategy, put in place in 2016, which has already delivered significant improvements.’
• Snapchat Q4 saw the service add 8.9m more daily active users to reach 187m in total. Revenue grew 5.05% QoQ to $285.7m, up 72% YoY.
• The group’s shares soared yesterday on the back of improved trading and a service revamp. Snapchat said ‘updates as big as this one can take a little getting used to, but we hope the community will enjoy it once they settle in.’
• Average ticket prices for arena concerts have risen by 27% since 1999, according to the BBC. In 1999 the average price was £22.58 (£37 adjusting for inflation) compared to £45.49 in 2016 (£47.14 adjusting for inflation.
• Following the release of the Apple Watch Series 3, sales of the watch have grown 54% YoY to 18m.
• Tesla reports its biggest quarterly loss yet of $675.4m in the three months to December 31, compared to a loss of $121.3m a year earlier. The company claims it ‘learned many lessons from its Model 3 production plans. On the other hand, revenues rose to $3.29bn, up from $2.28bn.
FINANCE & MARKETS:
• Halifax has reported that house prices in the UK fell by 0.5% in Jan after having fallen by 0.8% in December. House prices are up 2.2% on an annual basis, the slowest annual rate since summer last year. Halifax says ‘although employment levels grew by 102,000 in the three months to November, household finances are still under pressure as consumer prices continue to grow faster than wages.’
• Sterling down vs dollar at $1.3903
• Pound up vs Euro at €1.1325
• Oil down two bucks at $65.42
• UK 10yr gilt yield up 3bps at 1.55%
• World markets: UK & Europe up yesterday but US down. Far East up in Thursday trading.
• Brexit, politics etc.:
o Cabinet’s inner Brexit Cabinet will continue its two-day series of meetings today. Yesterday was Northern Ireland and immigration, today will be trade.
o Leaked report shows government believes all parts of UK will be worse off under any Brexit scenario
o Wales & NE of England (both ironically Leave areas) will be worst off under Brexit scenarios. NE England may be 16% worse off, under a no-deal scenario.
o Eurosceptic MP says figures above are ‘complete nonsense’ though he/she doesn’t say why
o London will be the least badly hit area
o A government spokesman said ‘we are seeking an unprecedented, comprehensive and ambitious economic partnership – one that works for all parts of the UK. We are not expecting a no-deal scenario.’
• Langton is between offices. Please communicate via email. MIFID II is now in operation.
PRIOR DAY LATER TWEETS:
• Later tweets: Eat said to be latest PE backed operator considering closing ‘substantial’ number of sites via prepack or CVA (Creditors Very Arm-twisted)
• Ugly discounting ugly. 50% off (simply half price or 2-4-1). PE owned companies a feature but also M&B, Greene King, Restaurant Group
• CGA Prestige reports food price inflation blipped up to 5.1% in year to Dec from 3.4% in Nov. Life in the old dog yet. Keep eye on Sterling
• Mrs (I’m not a Zombie PM) May’s Brexit sub-committee meets today & tomorrow. Wants cake, will eat it etc. Expect major leaks later
• Brexit has capacity to split Tories. Either Soubry, Ken Clarke etc. join Libs or swivel-eyed loons join UKIP. Likely neither will happen
• Longer term thought but will MIFID II push out maturity companies need prior to IPO? Will need track record, profits etc.? Market won’t fund start ups
• Swivel-eyed loons vs remoaners with Mrs (actually, maybe I am a Zombie PM after all) May in the middle. You couldn’t make it up
START THE DAY WITH A SONG:
Yesterday’s song was Can’t Stand Me Now by The Libertines. Today, who sang:
Be ignored by the stiff and the bored because I’m gonna,
Spit and retrieve ’cause I give and receive
Because I want to
RETAIL NEWS WITH NICK BUBB:
• DFS Furniture: After the surprisingly upbeat trading update from their rival ScS last week, DFS has also issued a solid pre-close trading update today, with the headline “Performance on track”. However, this reflects the boost from acquisitions like Sofology, with underlying sales 3.5% down over the 26 weeks to 27 Jan, despite good growth Online and from the Dwell business. DFS decline to give a proper LFL sales figure, other than to say that LFL trading momentum for the group “strengthened” during the half year. Overall, DFS say “we recognise that the living room furniture retail market is likely to remain challenging in 2018, given current consumer confidence levels. However, with the benefits of strategic investments feeding through, our expectations for the full year are unchanged. We continue to expect modest growth in EBITDA in y/e July (excluding the impact of
• New Look: Just to spell out the awful Q3 trading reported by the embattled New Look on Tuesday… Alistair McGeorge, the new Executive Chairman, said: “As we expected, Q3 trading remained challenging, with sales and margins impacted by the high level of discounts”. Over the 39 weeks to Dec 23rd, Retail LFL sales slumped by 10.7%, but that means that, after the -8.4% in H1, in Q3 itself LFL sales must have been as much as 15% down, which is why New Look’s profits have absolutely collapsed, with the cumulative operating loss for the 39 weeks running at £5.1m, versus as much as a £111.5m operating profit for the same period a year ago…Nevertheless, Alistair McGeorge had the front to say “I am confident that we are now making the necessary changes to get the company back on track and we continue to have sufficient liquidity to deliver our plans”.
• Retail Park Watch: Yesterday’s visit to ScS in Chelmsford took us to the new Clock Tower retail park that opened on Boxing Day and the tenant mix is unusual…The meat in the sandwich, as it were, is the Furniture/Furnishings block of Furniture Village, ScS, DFS, Tapi and a big/posh Dunelm, but at either end of the “L” shape of the park is an M&S Food Hall and an Aldi! The latter opens on March 8th and it will be interesting to see how the car park copes, as it is quite busy already…And moving on after that to the Retail Park at Lakeside we noticed that the ill-fated/high-profile/empty/big standalone store site near the entrance that used to be a Courts, then a Best Buy, then a Kiddicare…is now to be a Sports Direct (which may be why the big Decathlon store nearby is in the middle of a major store revamp).a