Langton Capital – 2018-07-18 – Hotel Choc., Q2 trends, migration, holiday bookings etc.:
Hotel Choc., Q2 trends, migration, holiday bookings etc.:
A DAY IN THE LIFE:
We had a little rain overnight but I’ve told the grass to ignore it because the last thing I want is for it to start growing.
Anyway, we’re a little busy today, believe it or not, so let’s move on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Hotel Chocolat has updated on trading for the 52 weeks to 1 July 2018 saying revenue rose to £116m.
• Hotel Chocolat reports ‘management expects that profit before tax for FY18 will be in line with market expectations.’
• HOT says it ‘opened 15 stores in the year contributing 6 per cent to Group sales year-on-year, added 200,000 new online buyers, and has developed a number of innovative new products for the upcoming autumn-winter season.’
• HOT says ‘trading since FY18 continues to be in line with management’s expectations.’ Founder Angus Thirlwell reports ‘Hotel Chocolat has had another strong year. Whilst there has been considerable recent media coverage of retail generally, we are encouraged by the performance of both our new and existing locations. Customers are continuing to respond well to our luxury brand and lifestyle propositions.’
• HOT says ‘during the recent heatwave in the UK, our new Chilled Chocolat drinks, unique Chocs to Chill, Ice Cream of the Gods and improved Cocoa Beers have been very popular.’ The group concludes ‘the deep knowledge of our School of Chocolate-trained retail teams and our experiential Chocolate Lock-in sessions continue to underpin the allure of our multi-channel model.’
• Fleurets Q2 Leisure Sector report highlights the major events of the last 6mths & says that, whilst CVAs have grabbed the headlines, ‘there has been positive news with Caprice Holdings announcing increased annual turnover by £18.5m to £67.1m and Various Eateries reporting an increase of 6.6% in like-for-like sales (in the second quarter to March) across their brands such as Strada and Coppa Club.’
• Fleurets reports ‘there has been an increase in activity within the leisure resort market. Landal Green Parks opened a fourth site in the Peak District and Leisure Resorts are creating a new development in the Yorkshire.’
• Fleurets reports ‘the gym sector seems to also be thriving with Pure Gym growing EBITDA to £101m (£64m in 2016) and Xercise4Less planning a further 10 sites this year.’ It says that refurbishment across pub chains has become a feature although Langton has seen evidence on the ground of capital spending plans being put on hold in several places.
• Fleurets says we say ‘a strong Easter trade in the pub sector, but a decline in March due to the weather and snowy period saw sales down 3.1% across managed pubs and restaurant groups.’
• Crowd-funding platform Seedrs has reported full year figures to December 2017 to Companies’ House. The group increased revenues from £1.08m to £2.02m but lost £3.8m in the process. Losses are down from £4.1m last year.
• Seedrs accumulated losses are now £11.2m but, having raised new funding from investors, its shareholders’ funds stand at £13.7m, up from £7.4m last year.
• Seedrs says ‘the performance of the group during 2017 has been very encouraging’.
• UKHospitality has stated that there is reason for concern following the news that net EU migration has fallen to 100,000. Chief Executive of the group Kate Nicholls said: ‘Yesterday’s figures are an alarming portent of possible disaster for the hospitality sector. Although net migration from the EU still stands at 100,000, this represents a significant fall on the previous year. Particularly distressful is news that this squeeze is being felt most acutely in lower-skilled labour which makes up the bulk of the workforce’.
• The Business Growth Fund is believed to be in discussions with Mission Mars , the Roy Ellis-led vehicle that operates the Manchester-based Albert Schloss concept, the MCA has reported.
• The Deltic Group has announced LfL sales growth of 4.9% for the full year to 24 February 2018. Total sales for the period was up from £102.2m to £106.5m.
• James Douglas, co-founder of Red’s True Barbecue, has told the MCA that the company is in the best position it has ever been operationally after two years of consolidation. The statement comes after accounts filed at Companies House for the year ending 26 March 2017, displayed losses increasing to £2.5m.
• Liberation Group has announced an increase of 8% in LfL sales for the past 10 weeks. The 44 strong West Country and Channel Island pub group said they had benefited from the warm weather and the World Cup.
• Jeff Bezos, the boss of Amazon, is the richest man in modern history with a net worth of $150bn, placing him $55bn ahead of second place Bill Gates.
• UKHospitality stated it was pleased by the publication of a report by the All-Party Parliamentary Group for Entrepreneurship that called for reform of the UK’s tax system. UKHospitality Chief Executive Kate Nicholls said: ‘The report identifies considerable flaws in the current tax system and calls for a complete overhaul; something that we have consistently called for. The current system of business tax is completely out-of-date and totally unsuitable for the realities of doing business in the 21st Century’.
• Poundworld has announced that it will close a further 40 stores with 531 jobs at risk.
• Amazon workers in Germany went on strike yesterday, causing the group difficulties on its biggest annual promotional even, Amazon Prime Day. Between 2,500 and 3,000 workers refused to work out of its 16,000 German workforce.
• Premier Foods, which holds its somewhat contested AGM later today, has updated on trading for Q1 to 30 June saying ‘we are pleased to report another quarter of growth, with sales up +1.7% compared to last year.’
• PFD says ‘our biggest brand, Mr Kipling, led the charge with an excellent performance on the back of its recent brand relaunch with sales up +14% in the UK. Over the last six months, we have delivered sales growth of +4.5% which goes to show that our strategy of product innovation and working closely with our strategic partnerships is delivering results. With further exciting innovation across our branded portfolio to come in the months ahead, our expectations for progress in the year remain unchanged.’
• PFD reports international sales grew nearly 20% in Q1. The group says that Batchelors, which shareholder Oasis maintains that the company should sell, ‘continued to display the excellent growth trends it has delivered over the last year, with further demonstration that its innovation strategy, aligned to key consumer trends is working.’ The sale of Nissin noodles are up nearly 80%.
• PFD says ‘the Group’s expectations for progress in its key priorities in the full year remains unchanged, and as previously communicated, weighted to the second half of the year.’ The shareholder vote, where Oasis is opposing the reappointment of CEO Gavin Darby, takes place at 11am. Contact us if you would like to discuss further.
HOLIDAYS & LEISURE TRAVEL:
• Immediately after England were knocked out of the World Cup interest in travel picked up, research from Sojern has shown. Travel searches had declined 19% y-o-y during the tournament, after England lost to Croatia searches increased 19%.
• The busiest single day for UK airport departures is set to be July 27 with 8,841 flights as Summer enters peak season. Holidaymakers without Atol protection are at risk of losing out if a company providing a part of their holiday goes bust, according to the Civil Aviation Authority. CAA director Paul Smith said: ‘The idea of grabbing a last-minute deal is of course very appealing, but it is worth spending some time to check your holiday bargain is Atol protected.’
• UK holidaymakers are to be collectively charged £1bn a year by their banks for paying by credit or debit card abroad.
• Marsha de Cordova, Labour’s shadow minister for disabled people, visited striking workers at Luton airport yesterday. Staff responsible for helping disabled passengers are in dispute with employer Clece Care Services, set to last until Thursday morning.
• Balearic island tourism officials are considering banning free drinks as part of all-inclusive holidays in a bid to reduce anti-social behaviour, particularly in Magaluf.
• HNN’s Terence Baker says that in the hospitality sector private equity is on its way out but capital seeking yield is moving in at a UKHospitality conference. Philip Richardson, industry director of hospitality and leisure at Barclays, said ‘Of the more than £6 billion ($7.9 billion) we have invested, more than 30% is in the hospitality sector’.
• Anti-tourist protesters have graffitied hotels in Majorca and protested the island’s airport claiming the industry was responsible for ‘the destruction of the social fabric’. The mayor of Palma, the capital city, called the protestors’ actions ‘reprehensible’.
• Football giant Barcelona reports record revenues of €914m in the 2017-18 season, with the club on track to achieve €1bn in revenues by 2021. Operating profits at the club were €32m, while the net profit was €13m.
• MGM Resorts is counter-suing the victims of the October 2017 mass shooting in Las Vegas who are suing the company for negligence. MGM cites the ‘Safety Act’ saying it is not liable for the deaths and injuries at the festival.
FINANCE & MARKETS:
• UK wage growth slowed in May to 2.7% from 2.8%. The rate is still ahead of inflation.
• UK jobless rate held steady at 4.2% in the three months to May. Some 12k claimants were removed from the jobless count.
• The OBR says taxes will have to rise or spending be cut in other areas to fund the government’s promises to the NHS. It adds Brexit ‘is more likely to weaken the public finances than strengthen them’.
• Car sales in Western Europe rose 5.1% in June. The German, French and Spanish markets were strong with weakness in the UK and Italy.
• UK business confidence has risen per Lloyds Bank. It says confidence is up to its highest point since before Brexit kicked off.
• Sterling down at $1.3103 and €1.1253
• Oil down at $71.91
• UK 10yr gilt yield down 2bps at 1.26%
• World markets all up yesterday. Far East higher in Wednesday trade.
• Brexit etc.:
o Japan has signed a free trade deal with he EU covering a third of the global economy.
o Bank governor Mark Carney has says there will be ‘big’ consequences for the economy if no deal can be struck with the EU.
o Liam Fox has said that the Chequers deal is not dead.
o Sir Nicholas Soames has tweeted ‘I don’t think in my 35 years as an MP that I have ever known such a truly unpleasant and deeply uncertain time in the House.’
o Airbus has said that Brexit risks destroying 40yrs of success.
PRIOR DAY TWEETS:
• Later tweets: Nightclub operator Deltic considering IPO in order to provide liquidity to shareholders. Failed to buy Revolution last year
• British lenders expect consumer borrowing to rise in Q3. GDP only 1% or so, so where’s this demand coming from?
• IMF cuts 2018 growth forecast for UK from 1.6% to 1.4% & Eurozone from 2.4% to 2.2%. Mini boom over, UK lagging by 100bps or so
• Tory civil war, maybe unfit to govern, the other lot even worse so where do you start. Not from here is perhaps the best advice…
• British Land says retail market tough, CVAs etc hitting properties. Overall (inclusive of incentives) 96.4% of retail properties tenanted
• Netflix down. Growing but blue sky stocks need to hit their targets, must generate free cash flow at some point, market warns
START THE DAY WITH A SONG:
Yesterday’s song was I fought the Law by the Clash, today who sang:
Goin’ faster than a roller coaster,
Love like yours will surely come my way
A-hey, a-hey hey
RETAIL NEWS WITH NICK BUBB:
Hotel Chocolat: Ahead of today’s Hotel Chocolat pre-close update the share price has been notably weak, dropping back from just over 400p to just under 350p, as if the City feared that its chocolate sales have melted in the hot weather (as happened to its hapless rival Thorntons in the past). But Hotel Chocolat also sell ice cream…and today’s statement from CEO Angus Thirlwell highlights that “During the recent heatwave in the UK, our new Chilled Chocolat drinks, unique Chocs to Chill, Ice Cream of the Gods and improved Cocoa Beers have been very popular”. And the year to July 1st saw 12% revenue growth (6% of which came from new store openings), with PBT to be in line with expectations. The company also says that trading since the year-end has been in line with management expectations, so all that news should reassure investors.
John Lewis Watch: Trade wilted again as the heatwave continued last week and World Cup distractions mounted…Yesterday’s weekly sales overview from JLP flagged that w/e July 14th saw gross sales tumble by 6.2% up (nearly 8% down on a LFL basis, on our calculations). Home sales were down by 11.0% gross, Fashion sales were down by 3.5% gross and Electricals were down by 4.6% gross (despite TV sales continuing to be good). Over the last 24 weeks, John Lewis is now running up cumulatively by only 0.4% gross (nearly 1.5% down LFL), which is disappointing, given the pounding that gross margins have been taking (through price-matching rival’s Sale promotions).
Waitrose Watch: Over at Waitrose, conditions remained highly favourable for sales of picnic and barbecue fare last week, as the heatwave continued, but gross sales were only 3.2% up in w/e July 14th (c3% up LFL). The cumulative sales picture for the last 24 weeks is still +2.1% gross for Waitrose (c2% up LFL), which is not bad and the business remains a lot more confident about recovering gross margin after last year’s slump.
News Flow This Week: Tomorrow brings first dealings in The Works IPO, the Sports Direct finals, the Mothercare AGM, the AO.com Q1 update/AGM and the ONS Retail Sales figures for June.