Langton Capital – 2016-09-28 – TUI update, EasyHotel fund-raise, Snoozebox & other:
TUI update, EasyHotel fund-raise, Snoozebox & other:
A DAY IN THE LIFE:
Bit busy this morning so straight on to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Analysts NPD have identified the ‘top 3 trends’ impacting UK food service as consumer confidence, full service growth & delivery growth.
• NPD says ‘the foodservice market performed very strongly in the second quarter. Indeed, consumer spend grew by 3.2 percent. This means we saw an additional £385 million in consumer spend compared to the same quarter last year.’
• NPD says overall growth was impacted ‘by both traffic gain (+1.5 percent) and average spend per eater increase (+1.7 percent).’
• Re consumer confidence, NPD suggests it has ‘experienced the biggest drop seen in a month in the U.K. for decades’ post Brexit vote. It adds ‘the run-up to the vote already started to raise the level of uncertainty, which was then borne out in May and June with negative consumer confidence levels. However the decision of the British population to quit the European Union was extremely unexpected, and this had a great impact on consumer confidence.’
• NPD says consumer confidence dropped by 8pts in July, the biggest drop in over 20yrs. It says ‘consumer confidence is one of the factors that tend to relate the most to foodservice market performance. It remains to be seen if those results will drop further and what impact it will have on the performance of the out-of-home market in the coming years.’
• On a positive note, NPD points out that full service experienced a particularly strong performance in Q2 16. It goes on to say that delivery is also in growth.
• NPD cautions on possible Q3 slowdown saying ‘it is still uncertain whether the positive performance in Q2 16 will continue over the next quarters, as consumer confidence is likely to hurt the market.’
• The BBPA is ‘delighted’ that ‘longstanding champion of beer and pubs’, Graham Evans MP, has been elected as chairman of the All-Party Parliamentary Beer Group.
• Low and zero-alcohol beers (0-3% ABV) are becoming more popular in West Europe, growing by 1% and 7% respectively in 2015, according to a report from Canadean.
• Marston’s put £10m into the launch of its new Wolverhampton headquarters last week, having ‘completely out-grown’ its old offices.
• Glastonbury, Netflix and Spotify have been named in the top ten coolest brands of the annual CoolBrands list as consumers turn to experiences over material possessions. This marks a pronounced shift away from established ‘elite’ fashion labels that previously dominated the list, such as Chanel, to digital media like Instagram. Apple retains its number one spot.
• Stephen Cheliotis, chairman of the CoolBrands Council, said: ‘People are now less likely to aspire to a flashy car, preferring something more relevant to them and their lifestyle… we have moved away from a society based on what you own or can afford. That is why some of these brands have fallen from grace.’
• Sainsbury’s will revive its delivery-by-bicycle service – not seen in 130 years – in a trial starting from today in central London on an iOS app called Chop Chop.
TUI GROUP – FULL YEAR TRADING UPDATE:
• TUI Group has this morning updated on trading for its full year to end September saying ‘we are continuing to deliver our strategy as a content centric, vertically integrated tourism group.’
• The group says ‘the Summer 2016 season is almost fully sold, with a continued strong performance by the UK, Riu and Cruises, the launch this Summer of two additional cruise ships and the opening of five additional hotels in our core brands.’
• TUI says ‘winter 2016/17 is trading in line with our expectations, with further growth driven by long haul.’
• Strategically, TUI reports ‘we are pleased to have announced the completion of the Hotelbeds Group disposal on 12 September and marketing of Travelopia (formerly part of Specialist Group) has commenced.’
• TUI concludes ‘as we approach our 2015/16 year end, we are therefore confident of delivering between 12% and 13% growth in underlying EBITA. This demonstrates the strength of our integrated business model and the success of our content centric strategy, as well as the continued delivery of our merger synergies.’
• Trading highlights included ‘continuing to deliver our strategy as a content centric, vertically integrated tourism group’ and delivering on strategy.
• TUI reports ‘source market trading remains robust’. It says ‘summer 2016 closing out as we expected, 97% sold to date with revenue and bookings up 1%.’
• Group has seen ‘sustained strong performance by the UK, with revenue and bookings up 5%.’
• TUI is ‘continuing to build on our direct relationship with our customers, with controlled mix up one percentage point to 72% and online mix up two percentage points to 43%.’
• Re winter, this is trading ‘in line with our expectations’. Group sees overall revenue up 11% and bookings are up 5% ‘driven in particular by UK long haul growth which in turn drives an earlier booking profile.’
• TUI is seeing ‘strong growth in Cruises’ and is undertaking a further modernisation of its fleet
• TUI concludes that it will hit numbers & says this ‘demonstrates the strength of our integrated business model and the success of our content centric strategy, as well as the delivery of our merger synergies.’
• Re summer 2017, TUI says ‘trading for the Source Markets is at a very early stage. In line with the usual Summer season launch dates for each Source Market, only the UK is more than 10% sold.’ Here it says ‘UK revenue is up 14% and bookings are up 7%, with growth again driven by long haul and cruise.’
EASYHOTEL TO RAISE £36.7M TO FUND FURTHER GROWTH:
• Easyhotel announces placing of 38m shares at £1 to raise £36.7m net. Group will use cash primarily to fund its owned hotel roll-out strategy.
• Easyhotel sees opportunity to become ‘a leader in the super budget market in Europe and the Middle East.’
• Group says it ‘expects the investment of new capital in the hotel pipeline to be materially earnings per share enhancing in the medium term.’
• Easyhotel CEO Guy Parsons comments ‘since IPO easyHotel has made significant progress in line with its strategy to speed up owned hotel development and accelerate the roll-out of franchise hotels to drive high EBITDA returns on investment.’
• CEO Guy Parsons continues ‘with more opportunities available than had been expected, and over 4,500 rooms committed or identified in the owned and franchise development pipeline, the proceeds of the Placing will primarily be used to fund the continuation of our owned hotel roll-out to deliver enhanced financial returns, whilst consolidating easyHotel’s position as a leader in the super budget hotel market in Europe and the Middle East.’
LEISURE TRAVEL & HOTELS:
• Snoozebox reports H1 numbers to end-June, revenue down to £2.2m from £2.4m, loss before tax £2.1m (2015: loss £3.1m)
• Snoozebox reports H1 loss per share of 0.73p (2015: loss 1.44p). Chairman Chris Errington reports ‘the Group has made some good progress in the period towards financial, operational and cost base stabilisation. The key focus for H2 16 and into 2017 is on securing new customers for longer term Semi-Permanent deployments set alongside a significantly more efficient cost base.’
• Gatwick has submitted a summary of ‘substantial new analysis’ to the government in the long-running campaign for a second runway. The Airport Commission originally said Gatwick would not serve 42 million passengers a year until 2030, or fly to 50 long haul destinations until 2050, whereas both were achieved this year.
• A study by the CEBR consultancy for Saga indicates the over-50s are spending more on holidays, while younger people are travelling less. The older age group has increased spending on travel by 23% over the past five years, meaning its total 2015 spend of £39bn represented more than half the UK’s total spending on holidays.
• Hotel in Europe reported mostly negative year-on-year results in August 2016, with occupancy down 1.5% to 75.8%, ADR flat at €115.94, and RevPAR down 1.5% to €87.88.
• Data from ContentSquare shows that travellers spent 38% more in the UK, and online searches for UK destinations rose by 10%, following the EU referendum.
• The sharing economy of disruptive businesses including Airbnb and Uber is being used by less than one in three UK business travellers, according to Egencia.
• Accorhotels has launched a new brand named Jo and Joe, which appeals to the younger traveller by blending ‘the best of private-rental, hostel and hotel formats.’ The brand aims to have 50 properties by 2020, with locations ‘including Paris and Bordeaux (2018) as well as Warsaw, Budapest, Rio and São Paulo.’
• Senior figures at a Travel Weekly debate have said that terrorism is a bigger concern to travel industry mergers and acquisitions than Britain’s decision to leave the EU.
• Merlin has been fined £5m for the crash on the Smiler rollercoaster after Judge Michael Chambers QC accepted the defendant had taken full and extensive steps to remedy its issues. However, the judge added that the crash was a ‘catastrophic failure’ and a ‘needless and avoidable accident’ brought about by human error.
• Pinewood has announced that the High Court of Justice in England and Wales has sanctioned the scheme of arrangement by which the recommended cash offer made by Picture Holdco Limited for the entire issued share capital of Pinewood is being implemented.
FINANCE & MARKETS:
• The North South divide is getting worse per stats on workless households produced by the ONS. Data shows that all top ten workless areas are north of a line from the Severn to the Wash. The ten areas with the fewest workless households are all south of Oxfordshire.
• Former chancellor George Osborne has told Bloomberg TV that monetary policy was making ‘life difficult for ordinary savers’. Rates have not actually risen for almost 10yrs. Osborne said ‘we need to offset the very necessary loose monetary policy, and the distributional consequences that is having. Essentially it makes the rich richer and makes life difficult for ordinary savers.’
• The World Trade Organisation has cut its estimate for global trade growth this year from 2.8% to 1.7%. It is the first time in 15yrs that trade has grown more slowly than the global economy as a whole.
• World markets: UK & Europe down yesterday but US markets higher. Asian markets mostly down in Weds trade
• Oil price rising but down over last 24hrs. Brent Crude changing hands at around $46.15 per barrel
• CBI distributive trade survey’s retail sales balance registered a drop to 8.00% in the UK in September
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• AG Barr cautious saying ‘market conditions remain volatile and somewhat unpredictable’
• Franco Manca operator Fulham Shore has announced the appointment of D&D London co-founder Des Gunewardena as NED
• TCG FY update, says ‘summer 2016 closing out as expected, with strong demand for most destinations apart from Turkey’.
• TCG says ‘winter 2016/17 bookings are in line with last year’. It adds ‘full year underlying EBIT guidance unchanged’
• TCG CEO Fankhauser: ‘Customers’ desire to go abroad on holiday has remained strong with the exception of Turkey’.
• EasyHotel has confirmed that the acquisition of the freehold of 3-5 Northgate Street in Ipswich has completed
• Carnival reports Q3 numbers, net revenue yields +2.7% (guidance 2% to 3%) & costs +5.5%, better than guidance of around 6.5%.
• Carnival outlook: Says ‘cumulative advance bookings for H1 next year are ahead of the prior year at considerably higher prices’.
• Monarch has denied it is in financial trouble but admits it needs a ‘significant investment’ to be made within days
• Merlin is to blame for the Smiler rollercoaster crash at Alton Towers that resulted in life-changing injuries to 5 passengers
• Number of mortgages granted in August at lowest level for 19mths reports BBA. Some 37k loans approved.
• Other Tweets: So the Mexican Peso is now the bellwether for the state of the US electoral race, is it? Hillary deemed have ‘won’ & Peso rises
• Monarch not in trouble but wants cash quick. Brinkmanship in request for cash from Greybull? Possibly but ‘troubled’ moniker not helpful
• Confidence & the consumer. Is labelling Monarch troubled & in need of cash more or less likely to entice customers? Hint: It’s not ‘more’
• Capacity & tour operators. Monarch collapse unlikely, Greybull ‘too much to lose’ per Telegraph. If happened, would help other operators
• Boohoo doing well, main takeaway? Is it ‘buy Boohoo’ or ‘do not buy MKS, NXT etc. till online buying trends become more clear?
• T Cook update. No profit warning: check. Sales ex-Turkey good: check. China still on track: check. PER <7x: check. What’s not to like?
• T Cook survived 2 W Wars, recessions, dismantling of B Empire, terrorism, oil price spikes etc. Says we have good B Sheet. Shares cheap?
RETAIL NEWS WITH NICK BUBB:
• Sainsbury: Today’s Q2 update from Sainsbury covers the 16 weeks to Sept 24th, so it is “bang up to date, as ex-CEO Justin King used to say, and although LFL sales are down, by 1.1% (ex-fuel) that is not quite as bad as expected and the news about the recently acquired Argos is reasonably good with LFL sales up by 2.3% (in the 13 weeks to Aug 27th). Focusing on the growth in customer transactions and volume, CEO Mike Coupe says: “We expect the market to remain competitive and the effect of the devaluation of sterling remains unclear. However, Sainsbury’s is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers”. There is an 8.30am conf call with analysts.
• Moss Bros: The interims from Moss Bros today (for the 6 months to end July) are headlined “Continued Strong Progress” and this is borne out by the results, with profits up by 30% on the back of decent 5.3% LFL Retail sales growth and gross margin growth. And trading in the 8 weeks to 24 September has been “encouraging”, given the Indian Summer, with overall LFL sales up by 3.7%, as early responses to the recently launched Autumn/Winter 2016 ranges have been positive. So the company says “The Group’s trading performance continues positively, in line with the Board’s expectations and the business is well placed to make further good progress during the second half”.
• John Lewis Partnership Sales Watch: The impact of the continued hot weather on John Lewis last week was again striking, with Fashion sales as much as 9.1% down gross (over 10% down LFL), not helped by a lower level of price promotions via the Debenhams Sale. And this time Electricals couldn’t make up for it, with gross sales 5.5% down year-on-year. Fortunately , the other Home category was up, by 2.1% gross, so overall sales were only down by 4.7% gross in w/e Sept 24th (down over 5.5% down LFL). Over the last 8 weeks, gross sales at John Lewis are cumulatively now up by 0.9% (flat LFL), with Fashion sales running down by 2.5% gross. Over at Waitrose, ice cream sales were again boosted by the balmy weather, but tough comps (the later fall of the Half-Price Sale event last year) worked against the business and so gross sales were down by 0.2% (nearly 4% down LFL) in w/e Sept
• Essex Watch: The first ever John Lewis store in Essex opens tomorrow morning, in sunny Chelmsford, and, as we are going to be in the area, we hope to pop in for a sneak preview this afternoon. Before then, this morning we are heading off to McColl’s HQ in nearby Brentwood, to hear more about the transformational Co-op convenience store deal.