Langton Capital – 2019-05-08 – PREMIUM – JDW, Elegant Hotels, confidence, prices, discounts etc.:
JDW, Elegant Hotels, confidence, prices, discounts etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Whilst we might snigger at Pavlov’s dogs for being such idiots, I did find myself trying to swipe right on the pages of a good old-fashioned paper & cardboard book the other day.
And the bloody thing wouldn’t page-turn when I tapped it, either.
Anyway, it just goes to show that technology is seeping into our lives in many and varied ways. On to the news:
JD WETHERSPOON Q3 UPDATE: Group continues to grow LfL sales but margins remain an issue. 8 May March 2019:
• JD Wetherspoon has this morning updated on trading for the quarter to 28 April. It reports LfL sales +7.6% in Q3 and +6.8% in the year to date.
• JDW reports ‘for the 13 weeks to 28 April 2019 like-for-like sales increased by 7.6% and total sales increased by 8.4%.’
• JDW adds ‘year-to-date like-for-like sales have increased by 6.8% and total sales have increased by 7.6%.’
More on trading.:
• JDW implies a slowdown in sales from 9.6% at w6 of Q3 to 7.6% for the quarter as a whole. The last 7wks grew at a still very good 6.0% or so
Balance sheet, debt etc.:
• JDW reports ‘since the start of the financial year, the Company has opened three new pubs and closed seven. We intend to open two further pubs in the current financial year.’
• The group adds ‘in the current financial year to date, the Company has spent £70.9m on buying the freeholds of pubs of which we were previously tenants.’
• JDW says ‘the Company remains in a sound financial position. The net debt at the end of the quarter was £746m and is expected to be around £740m at the end of the financial year.’
Conclusion, current trading etc.:
• JDW chairman Tim Martin reports ‘we continue to anticipate a trading outcome for this financial year in line with our previous expectations.’
• JD Wetherspoon has reported that trading – at least in terms of LfL sales – has continued to be strong, though there has been something of a slowdown towards the end of Q3.
• There is no comment here on margins. The group had earlier said that comps would become tougher for the remainder of 2018/19.
• There are no comments on Brexit.
• The group is behaving sensibly in buying in its properties.
• We continue to believe that JDW is a good company. It does what it does extremely well, but it is not currently cheap and its low margins could prove to be a point of weakness if sales growth stalls.
GENERAL NEWS – PUBS & RESTAURANTS:
• Domino’s shares fell by more than 10% at one stage yesterday on the back of its Q1 update but they recovered during the day to finish down by less than 2%. Sales fell in Switzerland, Iceland and Norway.
• Barclaycard reports that the warm weather boosted consumer spending by 2.5% last month over the same month a year ago.
• Barclaycard says ‘Brits took advantage of the sunshine last month, resulting in double-digit growth for pubs and restaurants.’ It says ‘the retail sector continued to face challenges, with spending on clothing, electronic stores and department stores contracting.’
• Barclaycard says airline spending ‘also fell into negative territory at -4.8 per cent – the lowest figure recorded since Barclaycard started tracking this data.’
• Barclaycard says ‘consumer confidence in the UK economy rises as Brexit is delayed – yet, consumers remain cautious, as six in ten expect no change to their spending plans in May.’
• Barclaycard, whose data is skewed by the move to payment on plastic & away from cash, reports ‘non-essential spending overall saw more muted growth of just 1.2 per cent. However, one category that did perform very well was pubs and restaurants, which reached double-digit growth of 13.1 and 10.0 per cent respectively – as Brits made the most of the sunny bank holiday by relaxing and dining out.’
• Barclaycard says ‘warmer temperatures, especially over the Easter weekend, led many consumers to spend on experiences and dining out. Overall consumer spending in April has remained relatively modest, with the retail sector continuing to struggle.’ It concludes ‘while the Brexit delay seems to have brought some short-term relief to consumer confidence, it’s clear that many shoppers still remain cautious about making any big-ticket purchases such as holidays, a new car or investing in home improvements.’
• CGA Prestige has reported that food inflation dropped in March from a record high of 9.8% in February. Prestige Purchasing Chief Executive Shaun Allen commented: ‘Whilst inflation, after a period of unprecedented increase, is now falling, we still remain in a period where each month sees further price increases in most categories’.
• Research from CGA has found that festival-goers could contribute over £100m in alcohol sales this year.
• AB InBev has reported it is considering listing its Asian business on the Hong Kong Stock Exchange.
• UKHospitality has called for the current exemptions for hospitality businesses from the Consumer Contract Regulations to remain in place. UKHospitality Chief Executive Kate Nicholls said: ‘We are fully supportive of the intention of the Consumer Contract Regulations and the aim to provide fair balance of responsibilities between business and consumers. We do, however, believe that the current exemption for hospitality businesses should remain as these businesses face a significant risk’.
• Pizza Express offering 25% off food, Whitbread’s Bar & Block 2-4-1.
• Meal kit provider Hello Fresh has reported a 42 per cent rise in Q1 sales yet but that losses have widened. Sales rose to €420.1m in the three months to March.
• Hello Fresh reports an EBITDA loss of €26.1m, compared to €21.7m last year but says it has a ‘strong cash position’ with €189.1m available. The company says ‘we have had a very successful Q1 2019, with strong customer growth and consistent margin expansion.’ It continues ‘given the seasonal importance of the first quarter to bring new customers to our service, we are very happy about the great start we had for the year.’ The group says ‘based on our first quarter we can confidently reconfirm our full-year guidance.’
• Propel has reported that Pod has been put up for sale after it has seen a continuation of a negative sales trend. The group has sent a letter to shareholders saying ‘we have appointed advisor RSM to run a sales process for the company. This decision has been driven by a continuation of the negative sales trend we experienced in the final quarter of last year.’
• Pod says ‘management believes this trend is caused by a combination of a very tired looking underinvested estate and a very tough trading environment and therefore they need significant development capital to get the business back on track. We have not been able to raise this capital despite a number of attempts and hence concluded the best option for all stakeholders is to run a sales process to find new owners/investors to take the business forward.’
• Carling has solved the age-old problem of carrying four pints back to the table, with its new innovative interlocking glasses. The pint glasses are fitted with vertical grooves to stop them slipping when held together.
• Crussh is the first food outlet on the high street to offer CBD oil boosters in its coffee for £1.50, as of 7 May.
• Poland’s number one vodka, Żubrówka Biała, announces plans to launch in the UK, available in 20cl and 70cl.
• Hakkasan and MGM Resorts complete management agreements which will see MGM manage various buildings in Las Vegas with Hakkasan managing the night clubs.
• John Allan, head of the CBI, warns that the current business rates system is ‘entrenching regional unfairness’ by hitting areas that are ‘on the way up’. Mr Allan said that rate revaluations any longer than one year meant rates ‘lagged far behind economic cycles and property prices’.
• A Nescafé Azera report shows 78% of Generation Z believe pubs & bars need to appeal to non-drinkers. However, 77% said they already visit their favourite pub more than once a month.
HOLIDAYS & LEISURE TRAVEL:
• Elegant Hotels has reported H1 numbers saying it has turned in ‘a solid performance in a competitive market, with good visibility of bookings for the remainder of the year.’
• Elegant says revenue rose 3% to $43.7m with REVPAR up 1%. Adjusted EBITDA is +7% at $16.4m with adjusted PBT of $12.0m (up 5%) and EPS of 13.3c (up 27%). The group is declaring an unchanged 1.33p dividend.
• Elegant CEO Sunil Chatrani comments ‘Elegant Hotels continues to perform well in the context of a competitive market and against a backdrop of ongoing uncertainty in its core visitor market of the UK. We are particularly pleased with the contribution during the period of our most recently acquired property, Treasure Beach, and are constantly assessing a range of opportunities for further expansion, whilst ensuring our balance sheet remains robust.’
• The group concludes ‘we continue to execute our strategy in a measured and consistent manner, and we have good visibility of bookings for the remainder of the financial year. As a result, we remain comfortable with the FY19 outlook versus market expectations and confident in the Group’s longer-term prospects.’
• Thomas Cook’s shares recovered marginally yesterday (to 23p) as shareholders await the outcome of the group’s discussions re securing more capital to see it through next winter’s cash outswing.
• Park Hotels & Resorts acquires Chesapeake Lodging Trust for $2.7bn, with the overall merged company to be valued at $12bn.
• Travelodge targets students to fill 2,200 vacancies for full-time jobs and 800 summer jobs after Brexit stunts recruitment.
• Tui adds Marsa Alam in Egypt to its summer 2020 programme from Manchester airport, and Enfidha in Tunisia from Bristol.
• Uber drivers in London, Birmingham, Nottingham and Glasgow will go on strike 24 hours before the company’s IPO.
• The still-only-on-paper £5bn London Resort adds a Thunderbirds attraction to its plans but loses Star Trek. The park, financed by Kuwait’s Al-Humaidi family, who own Ebbsfleet United, was set to open in 2019 but has now been delayed to 2024,
• Brussels is preparing a formal antitrust investigation into Apple after Spotify accused it of anti-competitive behaviour.
FINANCE & ECONOMICS:
• The ICAEW has reported that business confidence fell to a new 10yr low of minus 16.6 in Q1 this year from minus 16.4 in Q4 last year. The ICAEW reports ‘there is evidence of Brexit-related precautionary stock-building, which probably temporarily boosted GDP.’ It says ‘companies report slow and steady sales growth, with no major improvement expected in the year ahead. Costs are rising slightly above selling prices, thus companies are relying on sales growth to generate increases in profit.’
• Sterling down at $1.3073 and €1.1667. Oil down a dollar at $70.27. UK 10yr gilt yield down 6bps at 1.16%. World markets all sharply lower yesterday as President Trump ramped up his anti-China rhetoric.
• Brexit, politics etc.:
o Government crosses another red line as it confirms the UK will contest the EU elections on 23 May. UK PM Mrs May says that she regrets the move,
o Tory & Labour reps picked up negotiations on Brexit yesterday. Any pact would require a commitment to membership of Europe’s customs union, another red line breached.
o Guardian reports 150-180 Labour MPs would refuse to back a deal that did not have a confirmatory democratic vote attached.
START THE DAY WITH A SONG:
Yesterday’s song was Lips Like Sugar by Echo & The Bunnymen. Today, who sang:
I am tired, I am weary,
I could sleep for a thousand years
A thousand dreams that would awake me
RETAIL NEWS WITH NICK BUBB:
• BRC-KPMG Retail Sales survey for April (the 4 weeks to April 27th): We flagged yesterday that at least 2% LFL growth was likely, given the late Easter and fine Easter weather, but the outcome was as good as +3.7% LFL, reversing the Easter-driven fall a year ago in April. The key Food/Non-Food LFL sales split is buried in the 3-month moving averages of +1.7% and -1.8% respectively, but it looks like Food was over 7.5% up LFL in April, with Non-Food broadly flat LFL overall (Electricals and Footwear were poor, but Furniture was strong).
• Travis Perkins: Today’s Q1 update from the builder’s merchant giant Travis Perkins (for the period to March 31st) hardly mentions the calendar shift of Easter, but in a way it doesn’t need to, because the outcome is surprisingly strong, with total LFL sales up by 7.3% and Retail LFL sales (mainly Wickes) up by as much as 10.0%, with the separately-disclosed Toolstation (the main rival to Screwfix) up by a heady 19.1% LFL. At this early stage of the year, full-year expectations haven’t been upgraded, but the Q1 outcome is all the more noteworthy given the “uncertain market conditions”.