Langton Capital – 2016-04-28 – Marriott, share buybacks, UK economy & other:
A Day in the Life:
I was catching up on a couple of TV programmes over the weekend and it brought to mind just how much television has changed over the last couple of decades or so.
Because, and I’m not sure that our 10yr old really believes this is true, at one time you had to sit down at a certain time of night on a certain day to watch a particular programme. And if you wanted to put the kettle on or pop to the loo or take a phone call then you missed a chunk of what was going on and the idea of binge-watching some series on a hooky internet site? Well that was la-la-land.
And you even had to get off your bum to change channels. And if you wanted to record something then you had to use one of those clunky, shoe-box-sized cassette things, all long-since consigned to a skip, of course, along with many of the companies that operated in that area, remember Parkfield Group?
But change was only gathering pace. I mean first there was C4. Then Rupert Murdoch with Sky (and BSB, remember them?) and then the digital revolution got a hold, memory and storage ceased to be a problem and programmes could be had on demand and then the Internet tossed the whole industry up in the air once more.
HBO and cable hit the scene and then Netflix and things changed forever meaning that, whilst Back to the Future (along with Tomorrow’s World etc.) may have been overoptimistic on the hover-board front, personal communications etc. have changed more than we might ever have imagined. Come back Arthur C Clarke, all is forgiven. On to the news:
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• Panera Bread reports Q1 numbers, says LfL sales +6.2% (versus estimates of 5.3%) leading to share rise in extended trading. Co says it has increased its focus on healthier ingredients. It raised its forecast for LfL sales this year to between 4% and 5% for the year as a whole.
• Buybacks. Enterprise Inns announced that it yesterday bought back 104k shares for cancellation at around 93p.
• Association of Licensed Retailers reports it added members last year in what was ‘a very successful 12 months for the ALMR’. CEO Kate Nicholls reports ‘the past twelve months have been a period of fantastic progress for the ALMR as we look to cement ourselves as the leading voice for all of licensed hospitality. We have been hard at work with our primary aim which is to fight for a fairer, more flexible deal for pubs and bars and we have seen some significant gains.’ She adds ‘the ALMR has been at the forefront of the campaign to reform business rates and this year we have seen the Government take notice, saving an average of £600 per pub. We have successfully campaigned for cuts to National Insurance Contributions, new planning guidance for live music venues and successfully pushed back on EU proposals for menu labelling, restaurant charges and
• Luke Johnson has become a major shareholder in three-strong chain Lussmann’s Fish & Grill
• The eminently quotable Tim Martin believes JD Wetherspoons is a ‘groovy company’ as it is maintaining staff perks and bonuses despite added National Living Wage costs.
• The Coaching Inn Group continues its £20m expansion plan with the purchase of The Golden Lion in St. Ives, Cambridgeshire, in a deal worth £2m. The group has acquired five units in the past 12 months. The Coaching Inn Group Founder and Managing Director, Kevin Charity, said: ‘The Golden Lion is a great example of the kind of property we want; great market town locations and businesses that will draw in locals and visitors from further afield alike. Victoria and the team have obviously done a fantastic job over the past decade and we look forward to continuing to work with them to build on the business’s fantastic reputation.’
• Greggs has revealed details of its new Balanced Choice menu of products with 400 calories or less.
• Asda is changing its price promotions after being singled out by the CMA in a probe into supermarket pricing practices.
• Marriott reports Q1 numbers, worldwide REVPAR +2.6%, US REVPAR +2.4%. EPS 87c, up 19% on last year.
• Marriott now has 275k rooms in its development pipeline worldwide. Group added 10k rooms to its system during Q1.
• Marriott says the acquisition of Starwood Hotels & Resorts Worldwide is on track to close mid-2016. CEO Arne M. Sorenson reports ‘we were pleased with our results for the first quarter with adjusted diluted EPS meaningfully ahead of expectations. Worldwide system-wide comparable RevPAR rose 2.6 percent in constant dollars in the quarter. For the remainder of the year, our North American managed full-service group revenue pace is up 7 percent, with particular strength in the second and third quarters.’ Mr Sorenson continues ‘demand for our brands remains strong.’ Re Starwood, Mr Sorenson reports ‘our planned acquisition of Starwood Hotels & Resorts is on track. Shareholders of both companies overwhelmingly approved proposals relating to the merger and we continue to look forward to a mid-2016 closing. Toward that end, integration teams from
• VisitBritain is teaming up with the British Council, UKTI, FCO, and the GREAT campaign to celebrate the 400th anniversary of Shakespeare’s death. The campaign will aim to drive visitor numbers to Shakespeare destinations.
• French air traffic controllers have been criticised for staging the third strike in a month, leading to hundreds of flights being cancelled. The Airlines for Europe lobby group calculated that ATC strikes in Greece, Italy, Belgium and France in March and April caused more than 2,000 flight cancellations among members. This will now hit the one million minutes delay mark – more than 16,000 hours – following the latest strike.
• DreamWorks Animation’s shares jumped almost 18% on reports that US cable giant Comcast is in talks to buy the Hollywood studio for $3bn. The FT describes the talks as ‘serious’, although there is no certainty of an offer.
• Facebook bucked the disappointing tech trend by reporting a 195% jump in Q1 profits, causing shares in the group to rise over 9% in after-hours trading.
• Tesla and SpaceX leader Elon Musk is targeting a trip to Mars with the Dragon spacecraft as early as 2018 and wants people on the planet by 2026. SpaceX is currently planning ‘Red Dragon’ missions to Mars to test technology for later missions.
FINANCE & MARKETS:
• Economic growth in the UK in the first quarter of 2016 was held back by a drop in manufacturing and construction output, according to ONS figures. GDP increased 0.4% in the three months to the end of March, down from 0.6% in the final quarter of 2015.
• The European Central Bank ultra-low interest rates could exacerbate problems for already weak banks in Europe, according to Angela Merkel. The German Chancellor is calling for a tightening of monetary policy after the ECB’s unveiling of another large stimulus package in March attracted fresh criticism from German politicians. Opponents of the ECB’s strategy believe easy monetary policy is eroding the savings of frugal citizens and hurting bank margins.
• UK inflation expectations are reported to be at their highest level since July last year at 1.6% per YouGov
• Fed leaves interest rates unchanged. Was expected given slight US slowdown but leaves door open for July rise. Fed reports ‘the committee continues to closely monitor inflation indicators and global economic and financial developments.’ US dollar was little-changed on the news.
• Japanese shares slid yesterday as the Bank of Japan held rates unchanged despite coming under pressure to take further action. The central bank had cut interest rates to negative in January but the economy has failed to respond to the monetary stimulus.
Retail Roundup from Nick Bubb:
Howden: The UK economy may be slowing, but good old Howden Joinery is still delivering the goods and today’s trading update for the first four periods of the year (16 weeks to 16 April)flags that performance so far this year has been in line with management expectations. Howden Joinery UK revenue was up 8.7% on the corresponding period last year, increasing by 6.4% on a same depot basis. Howden say “along with the evidence we have of trading prospects, this would indicate that market conditions are stable, albeit we remain watchful”.
Recent News Flow:
Yester-tweet – Wednesday in a nutshell:
• Buybacks. JDW Monday bought back 25k shares at 695.5p. Enterprise bought back 105k at around 91p.
• Buybacks: JDW Tuesday bought back 25k shares at 697p. Enterprise bought back 102k at around 93p
• Spend at breakfast and lunch hit a 12-month high in March, although participation levels remained flat year-on-year at 93.1% per MCA
• Risk Capital Partners has sold its flagship Red Hot World Buffet site in Nottingham to Framemill
• Keith Knowles, CEO and founder of Beds and Bars, has criticised Enterprise Inns as ‘totally self-interested’ in an open letter
• China is reported to have overtaken the US as the largest travel market in the world reports the GBTA Foundation
• PE firm Caledonia Investments is reportedly exploring options for Park Holidays, the UK’s 4th largest caravan holiday operator
• Greece-focussed Sunvil Holidays has acquired assets from failed Turkey specialist Jewel in the Crown
• European hotel industry reported a 0.8% increase in occupancy to 61.1% in Q1 2016 with rate +2.3%, REVPAR +3.1%
• BP shares higher yesterday on Q1 numbers. Belief that big-oil may get through this cycle without dividend cuts
• Sterling at/near 10wk highs. Will be a lag but could put a dampener on overseas visitors to London – though at the moment, that’s booming
• US tech stocks drop the ball. Apple & Twitter disappointed last night. Baton handed to Facebook & Paypal. Both report earnings tonight
• Soybean prices rocketing. Boring? Well, yes, but it’s an important input. Prices +17% since early March
• WTB press largely supportive, bit grudging in parts. Growth ‘just enough’ to support shares. Some still want Costa IPO sooner vs later
• Oil price just tested $47. Looks like the uptrend is intact, move back to ‘sensible’ prices, i.e. perhaps >$50, may be upon us
• Commodity prices. Soybeans up in price but red meat going in the opposite direction. Feeder cattle down 32% over 12mths
• Gold/Oil (no. barrels needed to buy ounce) sharply lower at 26.63. Indicates appetite for risk up markedly this month