Langton Capital – 2018-07-13 – DP Eurasia, White Paper, McDonald’s, hol. bookings etc.:
DP Eurasia, White Paper, McDonald’s, hol. bookings etc.:
A DAY IN THE LIFE:
Having achieved an age where I’m meant to have some experience, I do sometimes wonder what that means because, and this is the rub, I’m not altogether sure that knowledge is cumulative.
I mean do you really have 30yrs worth of ‘experience’ or do you have one years’ worth, accumulated 30 times?
Does one bit of information push something else out of your brain or, even worse, does whatever potential you had burn itself out early on leaving you during your remaining 20 or 30yrs in business pretty much repeating yourself?
Well, though it would sometimes be much less stressful to be hopelessly naïve and vacuous, to have a ‘read-only’ character where nothing made a scratch, hopefully not. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• DP Eurasia has seen strong growth continue in the six months to 30 June 2018, with Turkey like-for-likes up 15.6%, Russian like-for-likes up 68.8% and Azerbaijane & Georgia like-for-likes up 56.8%. This makes for total like-for-like growth of 28.1% in the period. Some 79 stores were added over the last 12 months, bringing DPEU’s total to 672 sites. The group expects full year adjusted EBITDA to be in line with expectations.
• Commenting on the update, Chief Executive Officer, Aslan Saranga said: ‘We are very pleased with our performance for the first half of 2018. We were able to record double-digit like-for like growth in both of our main markets, despite the election period in Turkey. The growing franchisee base and pipeline are encouraging in both markets. In the first half of 2018, which is historically a slower period for store openings, we have added 29 stores – 21 in Russia, seven in Turkey and one in Azerbaijan, which was in line with our expectations as our geographic expansion outside of Greater Moscow in Russia continues, where we have added Voronezh, Kazan, and Nizhny Novgorod among other cities.
• ‘We are happy to see that our advertising spend and capital expenditures on the digital front are paying off as the online portion of our business is continuing to increase. We are continuing with the deployment of the GPS Tracker in Turkey to optimize delivery effectiveness and expect to finish it in the second half of the year. Our project to unify the online ordering back-end systems across the Group is also on track to finish by the end of 2018.’
• UKHospitality has welcomed the Government’s acknowledgement of the importance and prioritisation of the food and drinks industry in its Brexit White Paper. Chief executive Kate Nicholls added: ‘We are also pleased that there appears to be no major deviation from previously stated positions, particularly the ability EU citizens to be able to work in the UK.’
• Sticking to the reality edge of the tight-rope seems to have angered some whose priorities do not seem to include keeping the economy going.
• John Schnatter, founder and chairman of Papa John’s International, has resigned following reports that he made a racial slur during a meeting in May with the pizza chain’s media agency.
• McDonald’s shares fell on Thursday after two states said they were investigating a possible connection between the fast-food giant and dozens of cases of foodborne illness. The Illinois Department of Public Health said it had confirmed about 90 cases of cyclosporiasis — an intestinal illness caused by a microscopic parasite known as Cyclospora — across the state starting in mid-May. About a quarter of those cases involved individuals who said they had eaten a McDonald’s salad before falling ill, the state agency said. Public health officials in Iowa also said they were probing an uptick in Cyclospora infections, and had identified 15 people who ate McDonald’s salads before becoming sick.
• The BBPA said it is ‘encouraging’ that the government is progressing with its proposals for Brexit in response to the white paper ‘The Future Relationship Between the United Kingdom and the European Union’. However, CEO Brigid Simmonds noted: ‘it’s still vital that the Government continue to work with us and the industry at every opportunity, so they understand what we need for a future outside of the EU. These proposals mark a positive step, but there remains much work to be done.’
• In the USA, year-on-year chain restaurant sales grew 1.1% in June, making for the fourth month in a row of positive or flat comp sales and adding weight to the hope that the US restaurant industry is reaching a turning point. Performance began to improve in the fourth quarter of 2017 and the industry has reported monthly sales increases in six of the past nine months, per NRN. The comp sales numbers are encouraging but come against a backdrop of continued, if perhaps moderating, softness in guest counts. Store traffic declined 1.7% in June.
• Four Corners Brewing Co. has been acquired by Constellation Brands. The management team will remain involved with the brand following the acquisition.
HOLIDAYS & LEISURE TRAVEL:
• Holiday booking boom likely to commence post England exit from World Cup. Some die-hards holding out until Saturday (or even Sunday) but bookings (and holiday prices) will firm up materially.
• Tour operator share prices up only marginally yesterday in a strong market.
• Gatwick is set for its busiest summer on record, with 8.8 million passengers set to use the airport during the school holidays. The busiest summer days at Gatwick are forecast to be: Friday, July 20 for departures (86,000 passengers), Sunday, September 2 for arrivals (88,400 passengers), and Sunday, August 12 overall (167,200 passengers). Orlando remains the most popular long-haul destination and Barcelona stays at the top for short-haul.
• An Ipsos Mori commissioned by Drum Cussac reveals more than 64% of travel security professionals believe the risks their travellers face have increased over the last year. Nicaragua, Cambodia and Yemen were the destinations with the biggest increase in security rating whereas the rise of populist policies are affecting travel security in Europe.
• Research from Knight Frank shows a 37% rise in new build hotels in the UK in 2017, with Inverness, Brighton, Edinburgh, Cardiff and Liverpool as the UK’s five most attractive cities for hotel investment and development. Hotel supply was up 2.4% – or 15,200 rooms – with budget hotels accounting for 69% of all new build hotel stock. London hotel supply grew 4% and is forecast to increase by over 5% in 2018.
• STR reports US hotel occupancy down 3.1% to 63.5%, ADR up 1.1% to $123.59 and RevPAR down 2% to $78.47 for the week ending 7 July.
• The Israeli Ministry of Tourism reports a record 2.1m visitors in the first half of the year, up 19% yoy and bringing $3.3bn into the country’s economy.
• Betting companies amongst the winners as England exits World Cup.
FINANCE & MARKETS:
• EU growth forecast cut from 2.3% to 2.1% for this year by Economic Commission. Blames impact of trade tensions
• Sterling down at $1.317 and €1.1296
• Oil down a fraction at $74.26
• UK 10yr gilt yield unchanged at 1.29%
• World markets: All up yesterday, Far East up today.
• Brexit, politics etc.:
o Government publishes proposals for trade deal with EU. Upsets everyone. Rees Mogg says is a ‘bad deal for Britain’.
o Donald Trump warns Mrs May the White Paper will ‘kill’ any chances of trade deal with US post Brexit. The Sun reports the president as saying ‘if they do a deal like that, we would be dealing with the European Union instead of dealing with the UK, so it will probably kill the deal.’
o Trump says he would have handled Brexit ‘much differently’. He said ‘I told Theresa May how to do it but she didn’t agree, she didn’t listen to me… Deals that take too long are never good ones.’
o Trump says Boris is ‘a great representative for your country.’ Adds ‘he has got the right attitude to be a great prime minister.’
o Rees Mogg says re trade proposals ‘the government has been pretending that its document doesn’t make trade deals any harder, and Donald Trump has just cut through that, and says it does.’
o City of London Corporation says ‘today’s Brexit white paper is a real blow for the UK’s financial and related professional services sector.’
o Lloyds of London has said the proposals in the White Paper do not cater for the professional and financial services sector
o Food & Drink Federation says, however, that ‘it is extremely encouraging’ to see proposals to protect its supply chain.
o India has suggested its food producers would not be able to export more to the UK if the latter keeps EU rules against the levels of toxins in spices.
PRIOR DAY TWEETS:
• Later tweets: World Cup impact. Worth sorting delayed spending from lost spending. See email. Also net, net. It isn’t a positive the economy as a whole
• Brexit clarity needed as Raab presents plans as a Hard Brexiter he probably doesn’t agree with.
• Dunelm & guides down, DFS points to weather for ‘significantly lower than expected order intake’. Both companies are W Cup & weather losers
START THE DAY WITH A SONG:
Yesterday’s song was Summertime, duetted by Ella Fitzgerald & Louis Armstrong. Today, who sang:
Everbody wants me to be,
What they want me to be
I’m not happy when I try to fake it!
RETAIL NEWS WITH NICK BUBB:
The Works IPO: Back at Easter, the private equity owned discount books and gifts chain The Works was said to be gearing up for a summer IPO, but it had all gone quiet since then, so we had assumed the IPO dream had died, in the face of the gloom about the High Street and the demise of Poundworld etc. However, it has been announced this morning that Investec have placed c£65m of shares at 160p (capitalising the group at £100m or just over 8x EBITDA) and that dealings start on July 19th! Kevin Keaney, Chief Executive Officer of The Works, gushes: “Today represents a significant milestone for The Works and we’re extremely pleased with the level of interest we’ve received from investors in our business”.
Halfords: The latest FD to step through the revolving door at Halfords HQ is none other than our old friend Loraine Woodhouse, the FD of Waitrose. On Nov 1st, Loraine succeeds Jonny Mason who, as previously announced, leaves Halfords on July 31st, to go off to try his luck at Dixons Carphone. Graham Stapleton, the new Chief Executive, says: “I am delighted that Loraine will be joining Halfords as CFO and look forward to working with her. She has extensive finance leadership within service-based retail and will be a great addition to the senior team”.
BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis held up a bit better in the continuing heatwave last week and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday July 8th, is also reasonably solid, reflecting its relatively low exposure to “indoor”/household goods. BDO Fashion Store LFL sales were up by 1.0%, but including weak Homewares and Lifestyle sales, total Store LFL sales were down by 2.2%. Overall Online sales (which are separately reported by BDO) were up by a healthy 21.6%, on top of 17.8% growth a year ago (with Online Fashion sales alone up by as much as 30.9%).
News Flow Next Week: With Wimbledon and the World Cup over, next week is free of distractions, in theory, and there is a fair bit going on. The Hotel Chocolat pre-close update is on Wednesday, then Thursday brings the Sports Direct finals (and an update on England football shirt sales…), the Mothercare Q1 update, the AO.com Q1 update/AGM and the ONS Retail Sales figures for June