Langton Capital – 2016-03-02 – Daily Wrap: Pub trading, hotel cycles, interest rates & 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:
• Take-away points from the Sheps’ H1 numbers:
o London (or at least Kent & the South East of England) is still strong
o Accommodation is a good market – at least for new entrants and pub companies
o There is still some caution re the medium term outlook
• Sheps says ‘managed pubs have again enjoyed an exceptional period with strong like for like growth which has been sustained over several years.’ it says like for like sales grew by +6.5% (2014: +6.8%)
• Accommodation sales were +11.2% on the back of a 14.5% increase last year.
• Re caution, the group says ‘we have every reason to believe that the strong profit performance in the managed houses will continue although the additional cost impact from the National Living Wage and Apprenticeship Levy is estimated at £0.1m in the 2016 financial year and rising to around £1.1m between now and 2020.
• It goes on to say ‘we remain cautious about the outlook for consumer spending as heightened security concerns and risks in the economy may dampen confidence.’
• FT now agrees with Langton. This is past its peak.
• Strange market where higher oil is good, threat of price rises is good etc. But it is what it is. Currently markets going better on the back of higher oil and rising gilt yields. Go figure.
• Interestingly 10yr gilt yields rose by around 10bps yesterday.
• This was as a result of investors edging some capital out of ‘safe-haven’ assets.
• It is consistent with a more ‘risk-on’ attitude and, to some extent, it is what is driving markets.
• Corporate bond spreads have been narrowing after a Feb spike (which coincided with the sell-off in equity markets).
• This indicates that credit conditions are loosening a little and that the fear of recession has abated somewhat.
• Commodity of the day, Wheat: Clearly an important input (both for livestock and for other food-stuffs). It exhibits a feature seen across a number of other soft commodities in that the price had its recent peak in July last year, then proved to be volatile & is now a little less so. Nonetheless, prices are now some 30% lower than they were in the middle of last year.
• Oil price up, gold price down. Deemed to be good for equity markets.
Random information, hopefully not all of it useless:
• More retirement savings needed? Yes, probably. And, when or if it happens, it will shunt spending power into the future but that’s not altogether a bad thing and, for operators targeting the grey pound, it could be helpful.
• FTSE (and most other global markets) seems to have broken out of its trend of lower lows and lower highs. We’re currently trading above recent highs seen in late January.
• FTSE100 now up around 14% on its mid-Feb lows. That’s what happens with serious rallies, they tend to creep up on you, happen when many observers are trying to maintain that they are not underway.
• Nikkei & Shenzen both up 4.1% yesterday. S&P now at 8wk highs. Looks as though the bulls are in charge – at least for the moment.
• Sterling managing something of a rallyette vs $ & €. Nothing to should home about. Is up about half a percent or so after a c12% drop.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Shepherd Neame H1 results. Turnover +0.3% at £73.7m, underlying operating profit +2.9% at £7.2m. LfL sales +6.5%.
a. Sheps H1: Group has seen ‘sustained and strong trading in the pub business’. Accommodation sales LfL +11.2%.
2. Nichols reports FY numbers. Revenues unchanged at £109m, PBT £28.0m vs £25.7m. EPS +9.6% at 60.33p.
3. City Pub Company will list on AIM and has set out its intentions to grow to 35 sites by late 2017 and to 50 independent pubs beyond
4. Greene King head of investor relations Mark Blythman says there are still ‘huge opportunities’ for the business despite the current climate.
5. AB InBev has agreed to sell SABMiller’s 49% stake in China Resources Snow Breweries to 51%-owner China Resources Beer.
6. Starbucks, Costa and Caffé Nero are all selling sandwiches and pastries containing more salt than a McDonald’s Big Mac per study.
7. British food exports have declined for the first time in 11 years, with food and non-alcoholic drinks exports down 4% to £12.3bn in 2015
8. Kona Grill reports Q4 numbers, sales +20.6% at $38.1m. Same store sales +3.2% ‘lapping a 3.1% gain from the prior year’
9. Workers should double the amount they save for retirement concludes Labour Party sponsored Independent Review of Retirement Income.
10. Caffè Nero LfL sales grew by 8.5% to £243.1m and adjusted EBITDA rose by 6.3% to £41.1m in the year to end-May
11. Bella Italia is making its debut in India by opening a restaurant in New Delhi after signing a franchise agreement with Wave Hospitality
12. Papa John’s broke its own UK store openings record by opening 44 sites in 2015, making it one of the fastest growing brands in the sector.
13. Crowdcube reports brewery & pub co Red Squirrel Group has raised some £595k (119% of target) from 504 investors
14. Gruppo Campari, the producer behind Campari, Skyy Vodka and Wild Turkey whiskey, has posted a 36% rise in net profit for 2015
15. EU wine exports reached a record €9.8 billion in 2015 thanks to growing demand from the US and China.
16. FT reports global hotel market cycle may be past its peak. It could be tested by its own success as it laps strong 2015 results
17. Dalata Hotels reports FY numbers, says revenue +185% at €225.7m giving PBT of €28.5m. Says has been ‘transformational year’
18. Eurostar services may face disruption this month due to RMT strike action over lone working and the alleged victimisation of a staff member.
19. 2016 European Hotel Valuation Index (HVI) published by HVS shows that Madrid saw the biggest rise in value in Europe in 2015.
20. UK business travel bookings to China fell 17% YoY in 2015, reflecting ‘international concerns’ about the nation’s economic situation.
21. Lego sales jumped 25% last year as Star Wars fever gripped toy buyers. Star Wars set proving one of Legos best-selling in 2015.
22. Eurozone unemployment has fallen for a 3rd straight month in Jan to stand at 10.3%, down from 10.4% in Dec.
23. UK manufacturing growth fell to a near 3yr low in Feb with a PMI of 50.8. Implies manufacturing is still growing.