Langton Capital – 2016-02-05 – On the Beach, Just Eat, interest rates & other:
A Day in the Life:Follow us on Twitter at either @langtoncapital or @brumbymark. Find previous emails at https://www.langtoncapital.co.uk/daily-notes/ There are some who say that you should concentrate on the dullest areas of the economy as that’s where the money is and I can certainly see that the flip-side, attempting to win the lottery, getting into Premier League Football or winning the X-Factor, is a crowded space. And in the more every-day environment, it’s true that media will attract more bright young things than will, say, funeral directing or sewage management but it’s probably also true to say that many of those who paddle in the shallows in fashionable industries never make it to the big time and, whilst they may get to see celebrities in the corridors of the BBC from time to time, they’re unlikely to appear on the front page of the Radio Times any time soon. Hence it might be right to go into procurement. Or production management or logistics or any one of those areas the explanation of which (even if your host wears a bowtie that screams ‘I have a personality! No, really…’) will send you to sleep before the end of the first sentence. 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. The News:Pub, Restaurant & Drinks Producer News: • Just Eat has announced acquisition of 4 businesses from Rocket Internet in Spain, Italy. It also announces two buys in Brazil and Mexico • Just Eat to pay €125m for four acquisitions to be funded in cash. Says ‘are highly complementary to JUST EAT’s existing businesses’.
• Just Eat says will generate significant volume and scale benefits in the markets in which it is expanding. Says ‘in aggregate, the acquired businesses grew orders by 83% in 2015, and JUST EAT expects the Acquisition, net of one-off exceptional transaction and integration costs, to be accretive to adjusted EPS for the 2016 financial year and to add £5 million to 2017 EBITDA.’ It goes on to say ‘further material synergies and margin improvements are expected as the combined businesses achieve more rapid and profitable growth, with improvements to EBITDA of £10 million per annum expected in 2018.’ CEO David Buttress adds ‘this transaction reflects our ambition to make strategic, value-enhancing acquisitions that consolidate our leadership of the global digital marketplace for takeaway food delivery. JUST EAT has enhanced its market-leading positions in • JDW has bought back another 23k shares at a price of 680p. • North East brewer and pub operator Camerons has confirmed a £30m funding package from HSBC that will allow it to grow its estate by 40 pubs to 110. The capital will also allow the brewer to release six new lines of beer. Tony Leech, HSBC area director for corporate banking in the north east, commented on the bank’s decision to lend: ‘Camerons have reported a 14% increase in profit for 2015 and firmly have their sights set on further growth. They are a great example of an SME which is thriving in the North East, and we look forward to supporting the growth of their estates in the future.’ • Soho House JV Rollout Restaurants is preparing to launch its Chicken Shop and Dirty Burger brands into Europe, with new sites set for Barcelona. • US government health body, The Centres for Disease Control, has said that women shouldn’t drink unless they are on birth control. That would mean some 3.3 million sexually active women in the US should refrain from drinking. • Brewdog is to move into the craft spirits market with the launch of its new distillery, The Lone Wolf. • EasyJet founder Sir Stelios Haji-Ioannou’s 25p-an-item budget food store has closed temporarily after running out of stock due to ‘overwhelming interest’. The retailer, which has the slogan ‘No expensive brands. Just food honestly priced’, says it still plans to sell its items for 25p each throughout February as an introductory offer. Prices will then go up but are expected to remain very low. Leisure Travel: • On the Beach updates on trading ahead of AGM later today, says ‘the Group has performed well in the first 4mths of the financial year.’ • On the Beach: Says ‘our ongoing strategy of investment in technology and directly sourcing supply, combined with our increased investment in both online and offline marketing, has delivered strong growth in bookings and revenues.’ • On the Beach adds that its ‘agile business model allowed the Group to successfully react to rapid changes in consumer demand, which were more prevalent than usual during this four month period. Compared to previous years and driven by recent acts of terrorism, the business responded well to significant volatility in traffic, as well as stronger demand for holidays in the Western Mediterranean which offset weaker demand for Egypt and the Eastern Mediterranean.’ • On the Beach says UK revenue increased 26% year-on-year ‘supported by enhanced personalisation across devices and our industry leading low deposit schemes. Daily unique visitors to site increased by 18.9% year-on-year, and has been delivered alongside an overall reduction in the cost per unique visitor. Mobile visitors reached a record 67% of traffic, an increase of 31% year-on-year.’ • On the Beach CEO Simon Cooper reports ‘the first four months of the new financial year has delivered a solid period of growth for On the Beach.’ He concludes ‘the Board believes that the Group is well positioned to continue generating attractive levels of growth and therefore remains confident in meeting management’s full year expectations.’ • The number of UK visitors to Dubai rose by 11% last year to almost 1.2 million, helping Dubai to remain the fourth most visited city in the world. • Global demand for air travel in 2015 was the strongest in five years and well above the 10-year average annual growth rate of 5.5%, new Iata figures reveal. Lower fares helped boost the 6.5% rise in demand over the previous year despite weaker ‘economic fundamentals’. Air fares globally were about 5% lower than in 2014, after adjusting for distortions caused by the rise of the US dollar. • Jobs in the UK’s tourism industry increased by 12% in the five years to 2014 thanks to strong growth in accommodation and food and beverage. • Iberostar revenue rose by 29% to €1.85bn in 2015 after a strong showing in its Hotels & Resorts division in EMEA and America. • The jump in money spent on Airbnb lodging could affect the rise in average daily rate among the hotel industry, according to a USA Today report. A study from CBRE Hotels’ Americas Research showed that travellers spent $2.4bn on Airbnb accommodations from October 2014 to September 2015. Other Leisure: • US toymakers Mattel (Hot Wheels and Barbie dolls) and Hasbro (Disney and Star Wars figures) are considering a possible merger. The companies’ shares rose 1.6% and 1.3% respectively, pushing their combined market cap up to more than $20bn. • Shares in LinkedIn have fallen by some 26% after the company projected lower than expected profits of $0.55 per share (compared to analyst expectations of $0.74) for Q1 2016. The group also reported a loss of $8m for the year compared with a $3m profit in 2014 after investing heavily in expansion outside the US. Finance & Markets: • B of England votes 9-0 to hold rates at 0.5%, observers say rise unlikely this year. Possibly not even next. The committee also voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion. • Bank of England. Says in December, twelve-month CPI inflation stood at 0.2%, almost 2 percentage points below the inflation target. It says ‘oil prices were more than a third lower, in sterling terms, than a year earlier. Together with muted growth in world prices, the appreciation of sterling since early 2013 has pulled down on import prices more broadly. Overall, these factors can explain the vast majority of the deviation of inflation from the target in December, and to an even greater extent than at the time of the November Inflation Report. The remainder of the undershoot reflects subdued domestic cost growth, particularly unit labour costs.’ • B of England somewhat downbeat on economy, says ‘activity growth in the United Kingdom has slowed to slightly below average rates’. It says ‘the domestic private sector remains resilient. Consumer confidence is robust, supported by a pickup in real income growth’. • Bank sees inflation at below 1% till end of year. At that point the ‘drags from energy and other imported goods’ will unwind • World markets: UK up yesterday but Europe lower. US up in later trade & Far East higher in Friday trading • Oil price down a little at $34.40 per barrel. • Dep. Gov. of Bank of England Ben Broadbent has told the BBC that ‘the fall in oil prices has been a “net good” for the economy. • The European Commission has reduced its global economic growth forecast for the Eurozone this year from 1.8% to 1.7%. The figure is still just above the 1.6% growth recorded in 2015. • UK house prices rose by 9.7% in the year to January and the average price of a house or flat now stands at £212,430 according to Halifax. ‘The imbalance between supply and demand continues to exert significant upward pressure on house prices,’ said Martin Ellis, Halifax’s housing economist. • House prices: ‘This situation looks set to persist over the coming months. Further ahead, increasing affordability issues, as price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease.’ Retail Roundup from Nick Bubb:Car Sales Watch: It’s always hard to know these days whether new car sales reflect consumer confidence or the availability of cheap finance deals, but, for what it’s worth, the latest SMMT new car sales figures yesterday morning reported that the market got off to a positive start in January, with overall registrations climbing 2.9% compared with January 2015, to reach an 11-year high of c170,000 units (despite a small fall in fleet business) . We don’t know whether that justifies the near 30% fall in the share price of the leading motor retailer, Pendragon, in recent weeks, but the final results are coming up, so we shall soon find out… Baby Watch: Mothercare are taking analysts to Cribbs Causeway (near Bristol) this morning to look at their new format store. The new unit of 20,000 sq ft is on a ten-year lease and is situated on an extension of the retail park, where Mothercare trades alongside Next Home & Garden, SportsDirect, Smyths Toys, Currys PC World and Argos. This is the latest in a series of new concept stores launched by CEO Mark Newton-Jones, designed to provide “a calm environment and stress-free shopping experience” through the introduction of an in-store cafe, a soft play area and a new-look Early Learning Centre toy shop. Waitrose Sales Watch: After a disappointing Christmas, Waitrose has reported today that January (and H2) ended badly, with sales 2.4% down overall (excluding petrol) in w/e Jan 30th, which would be nearly 5% down LFL, in what Waitrose call “a challenging week”. Over the last 26 weeks, Waitrose sales were cumulatively 1.3% up in gross terms (c1% down LFL). John Lewis Sales Watch: The final week of the financial year saw subdued trading for John Lewis, “against a backdrop of changeable weather”, with total sales up by only 0.6% (c1% down LFL) in w/e Jan 30th. In sales mix terms, Home sales were up 2.9% gross and Electricals were up 1.7% gross, but Fashion sales were down 2.3%, despite good Beauty sales. Online sales were unusually sluggish, up by just 7.6%, but Store LFL sales were also weak, with Oxford Street down 6.6% and Bluewater down 6.8% (see note below). Over the last 26 weeks, John Lewis was cumulatively 4.8% up (just under 3% up LFL), with Online 17.5% up. JLP Sales Watch: Intriguingly, at the top of the John Lewis and Waitrose weekly sales pages today on the JLP website it says that from now on the figures will come out on a Tuesday not a Friday (good news), but that “our weekly reports are changing to reflect the omnichannel nature of our business and will report on overall sales rather than individual shops, regions and sales channels” (bad news). BDO High Street Sales Tracker: Like John Lewis, the weekly High Street sales index of medium-sized Non-Food chains organised by the accountants BDO paints an uninspiring picture of underlying Fashion store trading momentum last week. Overall Fashion store LFL sales were up by just 0.2% on last year in w/e Jan 31st (“the continuing poor weather is suppressing sales of new spring lines”) and Total store LFL sales were up only 0.1% (including some Lifestyle and Homewares retailers), whilst overall Non-Store/Online sales were up by c18%. Trade Press (1): The front cover of Retail Week magazine today is headlined “Sainsbury’s pops Argos in its trolley for £1.3bn”. Other features include a look at Oasis’ new format store on Tottenham Court Road and an overview of the Christmas winners and losers by the consultants, OC&C. And the Editor-in-Chief has an interesting column headlined “Retailers must confront rising costs and flat growth”, noting that “one topic far less glamorous than any digital buzzword is quickly coming to define the new-year, and that is productivity” and that the merger of Sainsbury and Argos will “help both businesses overcome the quandary of our time: how do retailers meet the unstoppable rise of digital commerce without destroying profitability?”.
Trade Press (2): News Flow Next Week: it will be interesting on Tuesday morning to find out how good the BRC-KPMG Retail Sales figures for January are, after the strong start to the month. And after the focus this week on Non-Food expansion, it will be interesting to find out a bit later on Tuesday morning how the Sainsbury core business is doing, via the latest monthly Kantar and Nielsen Grocery market share figures (for the 4 weeks and the 12 weeks to Jan 31st). And the Dunelm interims on Wednesday will be the first public outing for the new CEO, John Browett. Nick Bubb – nicholas_bubb@hotmail.com Thursday Wrap:This was produced for distribution yesterday afternoon: 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: Big Ticket Spending: • Early last year we were told that consumers, though better off on the back of cheaper oil, petrol etc. and rising real incomes, were spending their money on big-ticket items • That remained the story through most of 2015 but Sainsbury and others had suggested earlier in the year that the process should have worked its way through by year end • That message got a little lost as we approached Christmas. • The mild weather, flooding and the like took over as the main stories and spending over Xmas, at least in pubs & restaurants, was good • But here we are now in a new year & we decided to dust off the ‘big-ticket’ story. • Today DFS furniture said that it had grown gross sales in the H1 to end-Jan by 7%. • This followed on the back of rival ScS saying that it had increased sales by 8.8% over broadly the same period. • DFS says that its sales were ‘reflecting a healthy furniture market environment’. • As regards smaller ticket spending, MARS, JDW and others have suggested that volumes remain good – whilst that is not meant to belittle the efforts of the companies involved to keep the plates spinning (groan), it does suggest that operators have been pushing on an open door • The phenomenon hasn’t perhaps ended as cleanly as we might have expected but smaller-ticket retailers (and even the large grocers) look to be making progress of a type • Greene King updates on Q3 trading next Wednesday and Enterprise and Thomas Cook (the latter big ticket) update the following day Emerging markets: • What goes on in emerging markets (EMs) is perhaps only of passing interest to operators such as MARS, JDW, GNK, ETI, PUB, RTN etc. • But it is much more important to the spirits groups, the hoteliers, food manufacturers and the like • With that in mind, it is worth noting (alongside movements in commodity prices, the US$ etc.) that a slightly chillier wind seems to be blowing through the markets in question • Britvic last week reported ‘as anticipated, market conditions in Brazil remained very tough’ and today we have cautionary comments from Mondelez and, to a lesser extent, from Compass Group and from YUM! • It is likely that SAB, ABInbev, Heineken, Carlsberg and the like will be facing some similarly less-buoyant markets Random information, hopefully not all of it useless: • Economic stats yesterday suggested a modest uptick in rate of UK GDP growth. With the markets in something of a schizophrenic mood (and mindful of the fact that it’s hard for the UK market to break out of its lock-step moves with global trends) that was perhaps enough to persuade some that we won’t be entering another recession in 2016. • Risk on day today. Miners & oils up, health care etc. down. • Commodities. Oil and gold up (they haven’t often been moving in tandem) and cocoa, coffee, soybeans & now sugar, moving down. • Sterling down a bit vs both US$ and Euro. |
|
