Langton Capital – 2016-02-25 – Merlin, Playtech, grab-and-go sales, pie week & other:
A Day in the Life:Follow us on Twitter at either @langtoncapital or @brumbymark. Find previous emails on our website at www.langtoncapital.co.uk So the nights are shortening, mornings are getting lighter now and, whilst that has to be a good thing overall, it does mean that you get an impression that things are busier because your fellow pedestrians, who had been nothing more than a smudge in the gloom, are now becoming all too real and recognisable and the pavements therefore seem more congested. So maybe you walk a little faster. That ‘spring in your step’ that people talk about may be based in actual observations and maybe you get more done. Or maybe not. One would hope not but it could just be a case of being miserable in the light rather than miserable in the dark besides which there’s no sign of the sun yet this morning, maybe the whole thing’s an illusion, the earth has is tipping back the other way on its access and we’re in for a 200yr long winter? On to the news: The News:Pub, Restaurant & Drinks Producer News: • The chief executive officers of Whitbread, Greene King and Diageo have all voiced their support for the UK remaining in the EU. • The latest M&C Allegra Foodservice data shows Greggs and McDonald’s grew their share of food to go visits at lunch and dinner respectively. Gareth Nash, head of consumer insight at M&C Allegra, said: ‘Despite strong competition in the Food To Go market from a wide variety of smaller, emerging and independent players, not least from the fast growing number of niche street food vendors, the big branded operators and retailers still lead the way. • Market shares: ‘The likes of Greggs, McDonald’s and the big c-store retailers are well suited to this growing consumer need, although many of the larger operators could be doing more to maximise food to go sales, providing the fast, convenient, but also quality offerings that customers increasingly demand.’ • Carluccio’s could double in size and grow to perhaps 200 sites in the UK reports its co-founder & chairman Simon Kossoff. Mr Kossoff told the Casual Dining that tha latest innovation is a grab and go ‘Via’ Carluccio’s, which is launching on Tottenham Court Road this Friday tomorrow. Mr Kosoff said ‘there’s clearly potential for multiple stores. If it’s successful then we’ll push it out as hard as we can, but the plan at the moment is to test it.’ Kosoff said that the market had evolved since Carluccio launched in 1999. He said ‘the biggest changes are in the quality of delivery and intensity of competition’ adding ‘there are so many plenty of people delivering really great quality in food and service now.’ • Fuller’s is to support British Pie Week from 7-13 March. It will be ‘engaging customers and showcasing the finest collection of hand-crafted pastry treats’. Paul Dickinson, Fuller’s Head of Food, reports ‘the pie is a British Institution and when crafted to perfection is the highlight of any menu. We are delighted to back British Pie Week as it gives us another opportunity to showcase our excellent pies’. • Rapidly-expanding online restaurant delivery platform, Deliveroo, has started a trial with BrewDog to deliver beer from a number of the operator’s London bars. The M&C writes that consumers will be able to order single cans and bottles, plus four packs of BrewDog’s own-brand beers, from its Shoreditch, Clapham, and Clerkenwell sites. The move could signal Deliveroo’s intention to expand into delivering alcohol. Leisure Travel: • Merlin reports FY numbers, says has turned in ‘robust financial results despite some challenging trading conditions’ • Merlin FY: Visitor numbers up 0.3% at 62.9m, revenues +3.9% at £1.3bn, PBT+0.3% at £250m, EPS +0.4% at 17.8p and dividends +4.8% at 6.5p • Merlin FY: Says it has seen ‘continued strong performance in the LEGOLAND Parks Operating Group’. LfL revenues +8.2% • Merlin FY: Midway Attractions LfL sales +2.3% but Resort Theme Parks down 12.4% ‘despite strong start’ in wake of Alton Towers’ crash • Merlin FY: Group has seen ‘continued strong contribution from New Business Development’. Seven Midway attractions opened in year in addition to 277 new rooms across the theme park estate • Merlin FY: Says making ‘further progress towards the opening of LEGOLAND Dubai (2016), Japan (2017) and South Korea (2018)’ • Merlin FY: Group sets out 2020 milestones. Wants 2k more rooms, 40 new Midway attractions and 4 new LEGOLAND parks • Merlin FY: Group separately announces formation of a strategic partnership with Big Bus Tours, leading global owner-operator of Hop On Hop Off city tours. Will allow ‘further cooperation across many of our key city centre markets’. Group is making an investment of $34.4 million (£24.6 million) in the company. Merlin says ‘we are delighted to announce this investment and partnership with Big Bus Tours. We see significant revenue synergies from this business with our own city centre attractions and there is already a clear overlap in 8 cities, including London, Hong Kong and San Francisco. This investment will facilitate a closer working relationship on the ground while enabling us to learn about a highly complementary business.’
• Merlin CEO Nick Varney says ‘despite a challenging year, the business delivered a robust performance in 2015.’ He adds ‘we continued to see a strong trading performance in LEGOLAND Parks and a positive contribution from New Business Development, opening seven new Midway attractions and expanding our accommodation offering with the addition of 277 new rooms.’ Mr Varney says ‘however, 2015 was a difficult year for Merlin following the accident at Alton Towers early in the summer season. The safety of our guests and employees must always come first and we have sought to learn every possible lesson to help ensure there is no repeat of what happened on 2 June.’ However ‘Merlin has a clear strategy, with clear competitive advantages leaving us well positioned in a dynamic marketplace.’ The group concludes ‘whilst we remain mindful of • Merlin FY: Current trading says ‘at this seasonally quiet point in the year is in line with expectations’. It adds ‘planned investments and new developments [are] on track.’ • More than 25% of Thomas Cook shareholders have voted against its pay policy at the company’s AGM, with regards to bonuses and incentives. In a statement the tour operator said it recognises the ‘significant number of votes opposing the resolution,’ adding: ‘We acknowledge these concerns and plan to engage further with shareholders during 2016 on a number of matters as part of a planned review of our remuneration policy.’ • Monarch Group CEO Andrew Swaffield and Tui Group chief exec Fritz Joussen have joined other airline and leisure bosses in criticising Brexit plans. The pound fell to a seven-year low against the dollar on Monday as campaigns on either side of the debate gather steam. • Rumours that Aim-listed Minoan Group has moved closer to gaining full approval for its resort project in Crete have sent the group’s shares higher. Minoan is currently negotiating a series of bureaucratic obstacles in its bid to start building on the Cavo Sidero peninsula, but now has the four signatures required for the presidential decree. • Minoan: Christopher Egleton, Minoan chairman, explained: ‘The importance of the presidential decree cannot be overstated. If the rumours and the verbal confirmation are indeed correct, then I am delighted that after such an extended time we now have the signatures of every required member of the government.’ • Speaking at the Business Travel Show in London, commercial director of Cabfind, Debbie Thompson, said Uber is not currently a threat to ground transportation companies. • Business travel clients have increased their risk assessments of work trips in the aftermath of the Paris attacks last November. • Crown Resorts, the biggest casino company in Australia, has reported a 22% fall in net profits to AUD$205m in the six months to December. Overall gaming revenue in Macau slumped by 30%, contributing to a c5% drop in the company’s share price. • At the Americas Lodging Investment Summit, Choice Hotels CEO Steve Joyce revealed that the group is moving into the ‘sharing economy’. Speaking in a news release, Joyce said that Choice will ‘become the first hotel brand to partner with local vacation rental management companies to help ease the uncertainty and inconsistency associated with the vacation rental industry.’ • The Japanese government has released new guidelines for home-sharing practices in the country, creating a potential obstacle to Airbnb et al. These laws will only go into effect if local governments choose to ratify them, however. Other Leisure: • Playtech FY: Says has seen ‘another year of double-digit underlying revenue growth’. Revenues +38% at €630m. • Playtech FY: Net profits +8% at €206m. Group says ‘our operational performance was stronger than ever, delivering reported revenues up 38% and up 26% on an underlying basis.’ Chairman Alan Jackson says ‘the Gaming division continues to lead the industry and drive our growth.’ The group concludes ‘we have many opportunities for further growth, both organically and through M&A, with active discussions on a number of potential acquisitions in the Gaming division. Should suitable acquisitions not be available, consideration will be given to returning cash to shareholders as we look to maintain an efficient capital structure.’ Chairman Jackson concludes ‘taken together, we are confident in strong growth in 2016 and beyond.’ • Yorkshire-based budget gym chain, Xercise4Less, has secured a £7.6m investment from the Business Growth Fund. The group recently posted an 83% jump in sales to £21.9m across its 35 locations for the year to July 2015. Finance & Markets: • B of England Deputy Governor Jon Cunliffe has said that the UK central bank was ready to provide more stimulus if needed. He told students in London ‘I think there is still mileage in the slow healing story’ adding ‘my central projection remains that the UK economy will continue to grow solidly and that inflation will return to target over the next few years’ and saying ‘we have a range of tools at our disposal and should be ready to use them whichever risk materialises. If economic growth falters and pay and productivity remain stuck at current levels, then the healing story will become increasingly less convincing.’ • IMF tells G20 that it should be prepared to implement more stimulus measures should the global economy threaten to stall. It said in a report ‘the G20 must plan now for coordinated demand support using available fiscal space to boost public investment.’ It said ‘growth in advanced economies is modest already under the baseline, as low demand in some countries and a broad-based weakening of potential growth continue to hold back the recovery.’ • World markets: UK and Europe down yesterday but US up later in the day. Far East higher in Thurs trading • Oil price up over 24hrs but down this morning. Rose to around $34.50 but now trading at around $34.15 per barrel Retail Roundup from Nick Bubb:Howden Joinery: As the estimable CEO, Matthew Ingle, says today, modestly, “Howdens delivered another good set of results in 2015”, with UK depot revenue up nearly 12% to £1.2bn (up 9.2% on a same depot basis) and group PBT up from £188.8m to £219.6m. And shareholders will be pleased to hear that the trading conditions seen in 2015 have continued into the early part of the year, with underlying UK depot revenue in the first two periods of 2016 up by 7.1%1, in line with Howden’s expectations. And with the net cash mountain increasing further, to £226m at year-end (despite a £45m share buy-back), shareholders will also be pleased to hear that the cash return is being stepped up to £55m this year and that there is another chunky increase in the final dividend. Ticker Watch: Majestic Wine has announced that it is changing its ticker tomorrow from the familiar “MJW”” (which has always been very similar to the “MRW” of Morrisons) to the very apt “WINE”.
CBI Watch: Wednesday 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: Restaurant Group shares weak: • RTN shares were down by over 5% yesterday. • The group updated on trading on 14 Jan at which time it said ‘it has become apparent from much of the recent data from the retail sector and the wider economy that the trading environment for many consumer facing businesses has been tougher in recent months than it was earlier in 2015.’ • It went on to say ‘this has caused like-for-like sales growth to trend lower and accordingly we are more cautious than previously on the outlook for 2016.’ • Since that time, both the EPS forecasts and the group’s rating have come under downward pressure • Though yesterday’s move does not take the stock to new recent lows, it serves to remind would-be buyers that the jury may be out on the stock for a little while. • At least until it can update more fully on current trading. The group reports full year numbers on 9 March. Evolution of the leisure offer: • This remains an ongoing theme. See today’s tweets highlighted below. • Today we comment briefly on organic foods (Soil Association), own-label coffee (Mitchells & Butlers), burger deliveries (Burger King) and coffee-by-post (Pact & Crowdcube). • It would appear that change is still the only constant and that, whilst not every innovation is guaranteed to succeed, in many cases offers must be evolved in order for them to remain relevant to operators’ customers Sterling weakness: • Sterling lost 3% vs US$ in 3dys • Brexit being blamed but also Governor Carney’s dovish comments to the Treasury Select Committee didn’t do much to strengthen the currency • Certainly Mr Carney doesn’t necessarily want to box himself into a corner by guaranteeing that the next rate move will be upwards – but could it really be down? • And having said the ‘boxing into a corner’ bit above, isn’t that exactly what Mr Carney had said he was going to introduce, fresh and shiny new, from Canada when he became governor. • It was known at the time as forward guidance • Anyway, the pound is weak and, with the vote on EU membership not due to take place until the end of June, traders will be able to play with the uncertainty that that creates for many months to come • As mentioned yesterday, this will impact import costs (brewers) and holiday companies (oil, insurance, bed costs etc.) Random information, hopefully not all of it useless: • Oil price still driving equities. Down yesterday so equities down. Travel stocks among the few winners with Intercontinental Hotels, IAG and Carnival all in the FTSE100’s top ten yesterday. • Oil price production level cuts ruled out by Saudis and, apparently, by Iran. • Oil price now getting back towards recent lows hit around a week ago. That is the rally that buoyed equity markets for most of last week has now been virtually undone • Gold price still acting as the flip-side of oil. Traders saying it’s bumping against its recent resistane level of around $1232 per ounce. They threaten that, if it moves through that level, it could move markedly higher. Short term chart shows where it has been over last day or so. • Longer term gold chart suggests that, though this is a lump of intrinsically worthless yellow metal that we are talking about, it could move quite a bit better if oil price worries persist • Soft commodities still weak but some signs of life in Cocoa and, to a lesser extent, in sugar |
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