Langton Capital – 2016-01-26 – Daily Wrap: Marston’s, drinking habits, Sterling & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
Correlation (nonsense and otherwise) causality etc.:
• CAMRA (via Oxford University research) says drink is good for you.
• Well actually it doesn’t.
• What it says is that people who regularly go to their local pub tend to happier, healthier and more sociable than people who don’t
• It suggests that face-to-face meetings are vital to maintaining friendships
• It doesn’t say that drink is good for you
• It doesn’t comment on causality at all
• And even if it did, it wouldn’t be able to say whether happy people went to the pub or whether people who went to the pub were thereafter happy
• However, whatever the (many, many) errors in such comments, it’s nice to see some pleasant nonsense statistics being bandied around rather than the usual anti-pub nonsense
Marston’s. Steady Eddie coming up with the goods:
• MARS has put the lie to both 1) the idea that LfL sales must be slowing down across the sector and 2) the suggestion that margins, particularly for companies growing their sales, must fall.
• The shares are cheap at 11x to Sept 15 with a 4.8% yield.
• Visibility is relatively good as the group controls the majority of its estate and its new build programme provides it with good pubs in the location of its choice.
• The group reports H1 numbers on 18 May.
• Quite sharply better over the last couple of days. Still around 8% down over last 3mths, however
• Effectively is a bit of US$ weakness coming through. Will come as a relief to dollar-denominated companies such as McDonald’s – see this morning’s email
Random information, hopefully not all of it useless:
• Oil. Not a lot to add other than to say that the traders who suggested we sold it on the bounce at $32 got it right. At least in the short term. We’re told that the CTAs (Commodity Trading Advisors) are still selling oil.
• Cocoa, until recently one of the few stars amongst the soft commodities, has been weak. Is now only +7% on the last 12mths & is moving decisively in the wrong direction.
• Bond spreads widening in the US (corporate over treasury). We believe that should help pension deficits.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Bank of England has ” luxury of a bit more time” before raising rates per policymaker Kristin Forbes
2. Marston’s 16wk update. Destination +3.0% LfL, Taverns +2.7%. Margins higher. Leased profits up 3% + beer volumes, incl. Thwaites, +21%
a. Marston’s new-build on track. Says will ‘open at least 20 new pub-restaurants and five lodges in the current financial year’
b. Marston’s. CEO Ralph Findlay reports ‘once again we traded well over the Christmas period with record sales over key Christmas fortnight’
c. Marston’s LfL sales growth contrasts with downbeat Restaurant Group comments and margins contrast with declines at JDW
d. Marston’s is growing EPS + cutting debt. Shares trade on c11x current year earnings and offer a 4.8% yield. Good value
3. Restaurant Group announces Debbie Hewitt to succeed Alan Jackson as Chairman of the company, assumes role on 12 May
4. Stonegate has posted a 1.2% rise in LfL sales for the full year to 27 September 2015, while LfL gross margin improved by 3%
5. McDonald’s reports Q4 & FY numbers, says ‘we took bold, urgent action in 2015 to reset the business.’
a. McDonald’s Q4. Says global LfLs +5.0% but revenues down 4% (though up 5% in comparable currencies.)
b. McDonald’s Q4: Group says consolidated operating income increased by 7% (16% in constant currencies), EPS 131c, up 16%.
c. McDonald’s full year numbers, diluted earnings per share of $4.80, unchanged on last year but up 10% in constant currencies.
d. McDonald’s US performance strong in Q4, LfL sales +5.7% ‘benefiting from the October launch of All Day Breakfast’ as well as mild weather.
e. McDonald’s saw a strong performance in the U.K. (as well as Canada + Australia) with less good numbers out of France
f. McDonald’s operating income in High Growth markets up 27%, led by Russia, China and a number of other territories
g. McDonald’s is to roll out table service across the UK in an effort to focus on its premium services.
6. New research from the University of Oxford suggests that regularly going to your local pub makes you happier, healthier + more sociable
7. The BBPA has ramped up its campaign for a fourth beer duty cut and is distributing 100,000 related posters
8. Greene King CEO and Morrisons non-executive director, Rooney Anand buys 12.5k shares at 160.36p in Bradford-based food retailer.
9. Pizza Express is in talks with premium pizza delivery chain Firezza as it focuses on developing its delivery concept.
10. The number of UK travellers abroad rose by 9.1% to 22.4 million last summer, with spending up 13.6% to £14.4bn per ONS
11. Thomas Cook has joined Thomson in cancelling its summer 2016 programme to Tunisia.