Langton Capital – 2016-01-27 – Britvic, leisure spending, Marriott, confidence & other:
A Day in the Life:
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Find previous emails at http://www.langtoncapital.co.uk/daily-notes/
So what did the Roman’s ever do for us?
I know, anyone who’s had an inquisitive child, let alone five of the little and now not-so-little blighters, will have been asked on numerous occasions simple yet tricky questions such as ‘do rabbits go to heaven?’ and ‘did Romans wear underpants?’ and, if you answer too quickly, then you’ve fallen into that favourite of traps, the one the springing of which begins with the words ‘well teacher says…’
With the answers at the very foot of this email and with relatively ancient history in mind, did the Romans have?
1. Underpants (the question had to be there)
6. Window glass
Anyway, it’s time for the news but if you would like to spread the love and add a colleague or acquaintance to this email list then just let me know. On the other hand, you could just forward it to them & suggest that they hit the ‘subscribe’ button at the bottom and then, via the miracles of modern science, it will bung them on the list.
Pub, Restaurant & Drinks Producer News:
• Tracker headlines: In Dec, average British household spent £220 on out of home leisure, up 5% on last year. It says ‘growing spend year on year reflects largely upbeat consumer sentiment during 2015’.
• GfK consumer confidence tracker recorded 12mths of positive scores in 2015 for the first time since it began in 1974.
• Tracker: Eating out unchanged y-o-y in Dec (at £84.80), drinking out also unchanged (£48.14) with Other Leisure +13% (£87.22).
• January Greene King Leisure Spend Tracker says ‘figures provide a welcome boost for the leisure sector, with the festive period proving a strong one for Other Leisure and a robust one for both Eating Out and Drinking Out across Great Britain.’
• Tracker says ‘particularly encouraging is that the overall leisure pound appears to be growing’. It adds ‘in a desire to do more this Christmas, consumers feeling more secure than they have in recent years decided to spend more, rather than take money out of one leisure activity to fund another. Those in our sector should see the festive season as a good foundation on which to build, and a positive sign that 2016 can be a year of good cheer.’
• Tracker says ‘as the dust settles on the festive period we see the continued impact of economic recovery expressed through a 5% increase year-on-year in spending on leisure.
• Tracker: ‘unemployment has reached its lowest rate since 2005 and though it has slowed, strong wage growth throughout 2015 means that families of all shapes and sizes across the country have been better able to enjoy leisure activities during the holidays.’
• Tracker says shift to grocery discounters left more money in people’s pockets.
• Tracker: Other Leisure was the star (+13%) with cinemas doing well & the mild weather encouraging people to spend outdoors. The rise in London spend was more in line with that in the provinces
• JDW announces that it yesterday bought back 25k of its own shares for cancellation at 649.6p. Has now spent c£4m in buying back 650k shares over the last week.
• Rosa’s Thai Café is to open three new central London sites after securing £1.8m from Santander and aim to create 100 jobs over the next two years. Co-founder Alex Moore commented: ‘The success of Rosa’s remains Saiphin’s traditional cooking: we still offer many of her original dishes. We’re really pleased to have partnered with Santander’s Growth Capital team to help us accelerate the growth of our business without the need to dilute ourselves or our existing shareholders. This is a great opportunity for us to take Rosa’s to its next level.’
• Britvic has reported a 4.8% rise in revenue to £311.6m for the Q2 to 20 December, although organic revenue was down 2.4% to £290.1m. The branded soft drinks company reaffirms its FY2016 EBITA guidance of £180m-£190m. The group says that its integration of recently-acquired of EBBA is on track and trading is in line, with revenue from the Brazilian business hitting £21.5m in the period. However, management goes on to admit that: ‘as anticipated, market conditions in Brazil remained very tough,’ as the country wrestles with global growth risks and the Petrobas corruption scandal.
• Britvic: The group has had to navigate choppy performances across its businesses, with GB revenue falling 1.2% and volume slightly down following tough trading in the grocery channel as supermarkets continue to evaluate and rationalise their ranges. The group comments that its carbonates and stills portfolios were affected, although it continued to take value share thanks to a strong performance from Pepsi Max.
• Britvic: Meanwhile revenue in France was down 5.5% due to lower margin private label sales and pricing pressure, although its branded division continued to do well. Comparable International revenue fell some 13.8% due to a stock build in the Netherlands and ‘weaker trading conditions’.
• Britvic: Simon Litherland, Chief Executive, commented that Christmas trading showed signs of improvement: ‘As anticipated, our first quarter performance reflected both the prevailing challenging trading conditions and a slow start in October. However, trading over the entire Christmas period in our core markets was encouraging, with revenue ahead of last year, and in the quarter, we grew or held market value share in each of these markets.’
• Britvic: Trading on a PE ratio of 14.6 falling to 14.4 and on a yield of 3.4% covered 2 times, shares are arguably not overpriced, although the group faces headwinds in its UK market and conditions in Brazil are turbulent. The group also has issues to address in its more established International businesses and, while there is potential long-term value in the drinks company, we also see short-term execution risks that must be handled by its management.
• With 10dys left, alcoholic ice tea co Harry Brompton’s has raised £80k of an intended £300k in its offer to date.
• The introduction of a Late Night Levy in the London borough of Camden has been approved despite submissions from various operators and the ALMR. The move will mean an additional cost to operators in the area whose premises operate beyond midnight, although members of Business Improvement Districts will have a 30% reduction in the amount of Levy payable.
• The ALMR has expressed its disappointment at the Late Night Levy and will push for a one-year review of the measure. Chief executive Kate Nicholls said: ‘Every representation made at the hearing, including one from ALMR, was from businesses opposed to the levy, now faced with shouldering an additional financial burden. The Council heard that businesses will now struggle to invest in their staff, lose apprentices and will have no option but to cut hours. Clearly this development will have a knock –on effect for businesses, their employees and the area at large. We are also fearful that the additional costs may jeopardise the future of voluntary partnership schemes which have been successful in significantly reducing crime and anti-social behaviour.’
• Research from Wine Intelligence has identified 10 key trends influencing millennial’s buying decisions, including a desire to be able to do things instantly. The ten trends identified in the report are: instant, play, devotion, upgrade, custom, trust, transparency, wellbeing, mini and fusion. These one word concepts can arguably be found in areas such as the surging popularity of contactless payments and ever greater smartphone data coverage. In restaurants, trends towards simpler, better value menus and high quality sourcing are being driven by similar sentiments.
• LDC-backed premium mixer brand Fever-Tree has seen sales jump by 71% in the full year after 77% growth in its second half. Full year revenue is expected to be c65% up on 2014.
• The Grocery Code Adjudicator has condemned Tesco’s past practice of ‘not paying back money owed’ to suppliers in a 60-page report. The GCA criticised Tesco’s ‘unacceptable and unreasonable’ culture of obstruction and misinformation in dealing with suppliers and said that some suppliers had to wait as long as two years to receive money owed to them. The grocery was even found to have made ‘unilateral decisions’ to deduct money from suppliers without consultation.
• Holidays to Spain and Greece could be sold out ‘within weeks’, according to Travelzoo, as other destinations such as Tunisia struggle with security fears. Stephen Dunk, Travelzoo’s European operations director, commented: ‘With airlines unable to fly to Sharm or Tunisia, they are re-routing to destinations such as the Canaries. As a result, we are seeing return flights priced from £69 return – the lowest we have seen in years. This sounds like great news, however the issue is there simply aren’t enough hotel rooms in the Canaries, so we are hearing reports of half-empty planes flying in and out of the destination – a remarkable and unprecedented situation has emerged for the travel industry.’
• Ryanair has branded the latest air traffic controllers’ strike in France ‘disgraceful’ and is again calling on the European Commission and Parliament to take action. The budget carrier has launched a ‘Keep Europe’s Skies Open’ petition.
• Ryanair’s head of marketing Kenny Jacobs, said: ‘It’s disgraceful that Europe’s consumers repeatedly have their travel plans disrupted or cancelled by the selfish actions of ATC unions, who use strikes as a first weapon rather than a last resort. French ATC unions plan to strike from tonight until Wednesday morning – their 40th strike since 2009 – which will impact hundreds of thousands of European consumers and throw their travel plans into chaos.’
• Norwegian Cruise Line will have a ship leaving from Southampton next year for the first time in seven years.
• Hilton Worldwide is launching a new midscale brand called Tru by Hilton, which the group describes as ‘forward-thinking and innovative’. The new brand has been created to be ‘easily scalable to fit urban, suburban, highway and airport adjacent locations’ and has already signed up 102 properties, with another 30 hotels in various stages of approval in the US and Canada.
• Choice Hotels International has launched its upmarket Ascend Hotel Collection of independent hotels in the UK with two sites in Edinburgh. Choice plans to roll out Ascend across the UK and Europe.
• Marriott has told an American lodging conference that 2015 was an outstanding year for new hotel signings and openings. It says ‘the contracts we signed in 2015 encompass more than $15 billion of investment by our owners, and represent a tremendous vote of confidence in Marriott’s brands’. CEO Arne Sorenson adds ‘Marriott’s new signings reflect broadly distributed growth across the company’s global hotel portfolio, and demonstrate the extraordinary appeal of Marriott’s brands to customers, industry-leading innovation, significant scale, highly effective systems, and the best associates in the business – all of which attract hotel owners and lenders to our portfolio.’
• Marriott opened 300 hotels with nearly 52,000 rooms (incl. 9,600 rooms via purchase of Delta Hotels) in 2015
• Paddy Power updates on trading says it ‘was good and accordingly the Board expects to report operating profit before exceptional items, for the year ended 31 December 2015 of approximately €180 million. This would result in fully diluted earnings per share of approximately €3.33, before costs relating to the Merger.’
• Paddy Power confirms completion of the merger is expected to occur on 2 February 2016. It says it is expected that preliminary results for the year ended 31 December 2015 will be released on 8 March 2016.
• Facebook shares are trading at near record lows and is down 7% so far in 2016, as it gears up for its Q4 trading update. The digital giant is forecast to post revenues up 39% and net income up 35%, in line with recent quarters, and trades on a PE ratio of 32 from a high of 58 in February 2014 (with Alphabet trading on 21 times and Twitter on 29 times).
Finance & Markets:
• World markets: UK & Europe up yesterday, driven by commodities. US higher later in the day & Asia up on Weds trade
• US consumer confidence said by CB index to have slipped in January to 98.1 from 98.3 in December
Retail Roundup from Nick Bubb:
Today’s Press and News: With Dixons Carphone, Carpetright and Card Factory all in focus on the retail beat yesterday there was plenty for the papers to get their teeth into today, but the main coverage is of the news that Tesco has been heavily criticised by the Groceries Code Adjudicator. A couple of papers pick up on the surprising news that Bargain Booze owner Conviviality has hired the Chief Operating Officer of Argos, David Robinson, and the late news that Apple has reported the slowest iPhone sales growth since the product’s 2007 launch, whilst the Times reports that Sainsbury’s is close to securing the support of the Qatar Investment Authority (QIA) for a renewed bid for Home Retail. Nick Bubb – firstname.lastname@example.org
This was produced for distribution yesterday: 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:
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.
1. Yes, but only if you wear raggedy bits of cloth as underpants.
2. No. Too butch (or Continental).
3. Yes, Nero, apparently. A pane of bent glass to be looked through.
4. No. Papyrus, lamb skin.
5. Yes. But they didn’t mine it. If it was lying around, they burnt it.
6. Yes (but very expensive).
7. Yes. It’s how they built underwater.
8. Yes. Swords etc.
9. No. Columbus.
10. No. Slightly more surprising.
11. Yes. Unleavened & otherwise.