William Hill, IHG, Greggs, Brexit pessimism & other:
A Day in the Life:
Langton, still roaming the USA, has just been to Las Vegas (New Mexico, not Nevada), filming location for No Country for Old Men and Wyatt Earp. Very interesting. Still plenty of bars & restaurants to visit, makes it a research trip in my opinion, but what’s all this 6.8% craft beer all about? Drink four or five pints of that and you might regret it.
Anyway, a shortened email – with perhaps some delay – will be going out for a little while. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Greggs has reported H1 numbers. Total sales rose by 6% to £422m. Operating profit rose by 6.7% to £27.2m. PBT came in at £25.4m and diluted EPS was 22.3p vs 19.5p last year. CEO Roger Whiteside reports ‘in the first half of 2016 we delivered good like-for-like growth by reinforcing the freshness and value of our offer in line with changing trends in the food-on-the-go market. We added to our “Balanced Choice” range with sales growing strongly as more and more of our customers recognise the quality, range and value we offer in these healthier food choices.’ Mr Whiteside continues ‘we have made an encouraging start to the second half of the year and are alert to any change in consumer demand that may result from the current economic uncertainty. Overall, we expect to deliver full-year growth in line with our previous expectations as well as further progress against
• Irn-Bru maker A.G. Barr has reported a 0.4% fall in volume and a 0.8% drop in value for the six months to 19 June in what was a ‘challenging’ UK soft drinks market. The group added that poor weather in June and July has further impacted trading and it now expects revenue in the period of £125m (-2.9% like-for-like).
• Asian cuisine brand Itsu saw EBITDA for the year to the end of 2015 increase 7.2% to £7.33m as like-for-like sales grew 2.3%.
• The Treasury has delayed a consultation over the proposed sugar levy on soft drinks until September, insiders have admitted to the Grocer.
• HMRC has foiled a tax avoidance scheme marketed by EY and used by Greene King and others to protect around £30m in tax. A Greene King spokesman said: ‘We accept the Court of Appeal’s decision on this long-running case. Greene King is a British business with a 217-year heritage and a major contributor to the Treasury with over a quarter of our turnover paid to HMRC. We are proud of the significant contribution we make to the UK and the Treasury and in the last financial year alone we paid £570m in taxes.’
• Loungers has appointed Chris Guy, currently strategic finance director at Casual Dining Group, to the role of finance director. Nick Collins, Loungers CEO said: ‘In Chris Guy I am confident we have the right person to steer the financial side of the business through the continued roll-out of both the Lounge and Cosy Club brands and a future sale process.’
• Morrisons has reduced prices by 18% to counter consumer concerns following Brexit, joining Asda and others in a fresh round of price cuts.
• Just Eat has agreed the sale of its business in Benelux (Belgium and the Netherlands) for €22.5 million payable in cash. David Buttress, CEO, commented: ‘The disposal of our Benelux business, where we are number two, delivers on that strategy and comes at the right time for JUST EAT. We are the clear leader in our remaining 12 markets and it is appropriate that our time and resources are focused on building on the strong growth we are seeing across those businesses in future.’
LEISURE TRAVEL & HOTELS:
• InterContinental Hotels Group has reported H1 numbers. Revenues fell by 8% to $838m – partly driven by currency movements – and the group reported that it had turned in ‘a good performance driven by proven strategy for high quality growth.’
• IHG reports EPS +2% at 89c. Interim dividend per share up 9% at 30c. CEO Richard Solomons reports ‘we continue to execute our well-established strategy as we deliver consistent, high-quality growth and generate significant operating cash flows. We have had a good first half, delivering a 10% increase in underlying operating profit and an 11% increase in underlying EPS, underpinning our decision to increase the interim dividend by 9%.’ Regarding the outlook, Mr Solomons comments ’the fundamentals for our industry, and particularly for IHG as one of the largest branded players, remain compelling. This backdrop, combined with our winning strategy and the strength of our business model, will enable us to deliver sustainable growth into the future. Despite the uncertain environment in some markets, we remain confident in the outlook for the remainder of the
• Emirates, Etihad Airways and Qatar Airways have seen bookings jump by as much as 67% between Europe and Asia Pacific, according to booking data from Amadeus.
• Eurostar has noted a drop in business travel following a ‘challenging’ second quarter affected by Brexit and Brussels terrorist attacks. Business demand softened in the run-up to the EU with passenger numbers down 3% to 2.7 million year-on-year, while revenues fell 10%, falling from £232m to £208m.
• Royal Caribbean has posted an over-25% jump in quarterly adjusted earnings, while currency and fuel-related hits mean FY adjusted earnings will be between $6 and $6.10.
• William Hill has bought software maker Grand Parade Ltd for £13.6m.
FINANCE & MARKETS:
• Property funds have shed £1.4bn since the 23 June Brexit vote.
• Travis Perkins has warned about “considerable uncertainty” in the housing market post the 23 June Brexit vote.
• Markit has reported that the British construction industry has recorded its sharpest setback in 7yrs post the 23 June Brexit vote. The result came in at 45.9 in July and 46.0 in June.
• US consumer spending rose more than expected in June.
• Australia’s central bank has cut rates to a record low of 1.5%.
RETAIL NEWS WITH NICK BUBB:
• Travis Perkins: The interims and outlook statement from the builder’s merchant Travis Perkins today provide a valuable barometer on trading conditions for the building and construction trade. And “white van man” appears to be alive and kicking (after all, he probably voted to Leave the EU!). CEO John Carter says “we did experience weaker demand in the run up to and immediately following the Referendum. Our two-year like-for-like sales growth in July was below the levels we experienced in the second quarter, however we saw a gradual improvement through the course of the month”. And Travis Perkins go on to say “The decision to leave the European Union has created significant uncertainty and the effects on the group’s two key leading indicators, secondary housing transactions and consumer confidence, remain unclear though they are unlikely to be
• Greggs: And white van man is still eating pies and sausage rolls (as well as nutrious new sandwiches and fruit drinks!), if the Greggs interims today are any guide. LFL sales rose by 3.8% in the 26 weeks to July 2nd and underlying operating profits rose by c7%. CEO Roger Whiteside says “We have made an encouraging start to the second half of the year and are alert to any change in consumer demand that may result from the current economic uncertainty. Overall, we expect to deliver full-year growth in line with our previous expectations as well as further progress against our strategic plan”.
• Pendragon: The share price of the car and white van dealer Pendragon has been under pressure since “Brexit”, but today’s interims show some modest progress (total sales up 1.5% and operating profits up by 4%) and the veteran CEO Trevor Finn says “Whilst the UK’s decision to exit the EU has caused some uncertainty, to date we have not experienced any noticeable change in our customers’ behaviour and, based on discussions with our franchise partners, we do not anticipate any material effect on new vehicle pricing as a result of exchange rates. We anticipate our performance for 2016 will be in line with expectations”.
• Sports Direct: The much-feared £90m share buyback (5% of the company’s share capital) looks increasingly like a feeble affair, for those used to the robust interventions of “Mr Share Buyback Man at Next. Sports Direct announced this morning that only c162,000 shares were bought yesterday, at c286p, which is even less than on Thursday and Friday, which will further encourage the bears…First thing today the price is trading at about 281.5p.
• Yesterday’s Press and News: With the Retail news cupboard pretty bare again, apart from the news that Burberry is buying out the 15% minority in its Chinese retail operation (as noted by the Times and CityAM), the main focus yesterday was on two interesting people moves: the Drapers website flagged that Harrods’ MD Michael Ward has decided to stay on indefinitely (and not retire) to help the business deal with “changes to the UK economy”, whilst the Retail Week website revealed that Tesco’s Chief Customer Officer and multichannel guru Robin Terrell is stepping down after three years in order to pursue a portfolio career (as noted by the Telegraph and Times). There is, however, plenty more about Philip Green in today’s papers, with the Daily Mail picking up yesterday’s FT story that Goldman Sachs has been urged to come clean on its business
• John Lewis Partnership Sales Watch: As we flagged a week ago, the slump in sales at the great Retail bellwether John Lewis in w/e July 23rd was just down to the impact of the very hot weather on store footfall. Trade recovered last week, w/e July 30th, with sales up by 3.4% (c2% up LFL). It was a good week for Fashion and Electricals, with sales up by 7.9% and 10.5% respectively, in gross terms, but the hot weather continued to hit the Home department, which was down by 7.2%. Over the last 26 weeks, ie the first half of the financial year, John Lewis sales were up by 4.7% (a shade over 3% up LFL), with Electricals up by 8.4%. The continuing warm weather last week was good for picnic trade for John Lewis’s sister company, Waitrose, which saw overall gross sales up by 4.3% (c2% up LFL). Waitrose sales over the last 26 weeks were up by 2.6% gross (marginally up LFL).
• Retail Sales Watch: We noted back on Friday July 22nd that the ONS Retail Sales figures for June were weak, but, what with one thing and another, we haven’t got round to looking at the ONS figures in any great detail. There is, however, a new consultancy group to do that for us, namely Retail Economics, which is run by the estimable Richard Lim, who used to be in charge of the BRC-KPMG Retail sales survey. And the Retail Economics overview is that gross Retail sales rose by only 0.7% in June (down from the 2.6% seen in May) year-on-year (non-seasonally adjusted), which is again roughly half-way between the rival BRC and ONS measures of the June outcome, suggesting that consumers did rein back ahead of the EU Referendum (particularly in Clothing). We will have to see whether July saw a recovery, given the more helpful weather noted by Next, but for more detail on how Retail
• News Flow This Week: The Next Q2 trading update this morning is the big event, but tomorrow’s MPC interest rate announcement at mid-day is also going to be interesting, whilst tomorrow also brings the SMMT new car sales figures for July and the Pets at Home Q1 trading update. And Friday night then sees the Opening Ceremony of the Olympics in Rio.