Langton Capital – 2016-10-28 – AB InBev, Kona Grill, business rates, costs & other:
AB InBev, Kona Grill, business rates, costs & other:
A DAY IN THE LIFE:
Langton is on a beach still paying stupid rates for its Euros. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Anheuser-Busch InBev reports Q3 numbers. Sales +2.8% in Q3 and +3.3% in 9mths to date. Brazil trading tough
• AB Q3: EBITDA down 2% in Q3 on poor Brazil numbers. Margin +178bps to 36.3%. Net profit $1.36bn vs $1.67bn last year
• AB Q3: EPS down to 83c from 102c last year. Dividend 1.6 Euro per share. Cuts guidance for the year. Group says ‘we are amending our guidance for net revenue per hl. Our previous guidance was for net revenue per hl to grow organically ahead of inflation, on a constant geographic basis. Given the weak results in Brazil, we now expect growth in line with inflation. In the US: We expect industry volumes in FY16 to be in line with the year to date trend. We expect our own sales-to-wholesalers (STWs) and sales-to-retailers (STRs) to converge on a full year basis. We expect further improvement in our net revenue per hectoliter performance.’ Says volumes will decline in Brazil & in China ‘we expect industry volumes to remain under pressure in FY16. We expect our own volumes to perform better than the industry, driven by our premium and super premium brands.’
• AB Q3. Says total volumes declined by 0.9% in 3Q16, with our own beer volumes down by 0.2%. Says ‘the decline in own beer volumes was due mainly to a decline of 4.1% in Brazil, as a result of a weak industry and tough 3Q15 comparable, partly offset by good volume growth in Mexico. In 9M16, total volumes declined by 1.4%, with own beer volumes down by 0.7%.’
• AB Q3: Says major global brands (Corona, Stella Artois & Budweiser) up by 8.7% in Q3 with Corona +14.8% & Stella +12.2%. Budweiser was up 4.8% in the quarter.
• AB Q3: Costs +3.9% in the quarter & +4.9% per hectolitre. This ‘driven by unfavourable foreign exchange transactional hedges in Brazil, partly offset by good results in the US.’
• On a constant geographic basis, CoS per hl increased by 5.3% in 3Q16. In 9M16 CoS grew by 2.2% and by 3.7% on a per hl basis. On a constant geographic basis, CoS per hl increased by 3.3% in 9M16
• Kona Grill reports Q3 numbers, says sales +20.7% to $43.4m. LfL sales +0.7% with growth in 24 of last 25 Qs
• Kona Grill reports net loss of $2.6m (24c per share) for Q3 vs loss of $1.5m (13c per share) last year. Group says ‘same-store sales rose 0.7% during the third quarter in the face of a soft casual dining environment’. Group says ‘looking ahead, we are positioning ourselves for an even stronger 2017 and future.’
• The BBPA has supported ‘option 2’ of the government’s consultation on transitional arrangements for business rates but has reservations about the treatment of large pubs. The trade body ‘holds severe concerns about the impact on larger pubs of a hike of up to 45% in business rates in year one… Our proposals for flexible caps at local level, a review of over-trading assessments and the redefinition of large pubs for transitional rate relief would all help mitigate costs for larger pubs. Pubs are already highly taxed, with 34 pence in every pound going to the taxman, and despite a high turnover, remain relatively marginal businesses’
• SSP Group has won a £33m four-year contract to operate eight concepts in the new international Terminal 2 of Thailand’s Phuket International Airport.
• Bibendum profits swung from -£1.5m in 2014 to £6.5m in 2015, with reported group turnover up 21% to £271m in the year to 31 March 2016. The results mark ‘excellent progress’ for the group, which is now owned by Conviviality.
• Conviviality has announced it has established a supply agreement with UK delivery wholesaler Palmer & Harvey McLane. Conviviality reports ‘under the initial two year agreement, Conviviality will supply P&H’s National Distribution Centre with lower volume Beers, Wines & Spirits and P&H will supply Conviviality Retail with tobacco. This is expected to have minimal impact on earnings in the financial year ending 30 April 2017.’ Diana Hunter, CEO, says ‘I am pleased that we have signed this agreement with P&H which demonstrates the significant role Conviviality plays in the UK drinks market. This agreement will help us to maintain and further improve our ability to invest in future initiatives and pricing to provide our customers and Franchisees with more opportunities to strengthen their business. We look forward to working with the P&H team on this exciting
• Amazon’s Q3 figures disappointed analysts and sent its shares down in after-hours trading after total operating expenses grew by 31.5% to $10.94bn. Earnings per share fell far short of the average estimate as a result and, although revenue jumped by 29% in Q3 as net sales rose to $32.71bn, the online giant has given a restrained forecast for fourth quarter revenue of between $42bn and $45.5bn. Amazon said the increased expenses is down to investment in Amazon Web Services, expansion of its Prime programme and content output, and building up its warehouse and delivery infrastructure.
LEISURE TRAVEL & HOTELS:
• The US hotel industry posted a 2.6% rise in occupancy to 72.3% during the week to 22 October, with average daily rate up 3.2% to $129.03 and RevPAR up 5.8% to $93.26.
• The US Senate Judiciary Committee’s antitrust subcommittee will hold a hearing on 7 December on the potential merger of AT&T and Time Warner.
• Alphabet has surpassed expectations by reporting a 20.2% rise in revenue in its third quarter to $22.5bn (£18.5bn), helped by sales of advertising on mobiles and YouTube. Net income for the quarter jumped from $4bn to $5bn, as total ad revenue powered ahead by 18.1% to $19.82bn, taking a larger proportion of total revenue. Chief financial officer Ruth Porat commented: ‘Mobile search and video are powering our core advertising business and we’re excited about the progress of newer businesses in Google and Other Bets.’
• Twitter is reducing its workforce by 9% (c350 jobs) as a result of a sharp slowdown in revenue growth of 8%, down from 20% in the previous quarter.
FINANCE & MARKETS:
• British 10yr gilt yields hit a post-Brexit high on Thursday of 1.27%, dragging other European government bond yields higher.
• Britain’s economy slowed by less than expected to +0.5% in the three months to September, reducing the likelihood of the Bank of England reducing interest rates further.
• NIESR says ONS estimates of growth in the UK are based on services growth and, whilst GDP is now 8.2% above its pre-recession peak (in Q1 of 2008), it is only 1.6% on a per capita basis. Manufacturing is still 5.6% below and the construction sector is 1.3% below. Nonetheless, the NIESR says ‘this is the first official estimate of GDP growth for the post-referendum period. It suggests reasonable economic momentum continued into the third quarter of this year, driven by robust consumer spending. We expect the economy to slow over the coming year, but it is unlikely that we will see further macroeconomic policy stimulus in the near term.’
• IMF says it could have decided upon a new Greek loan programme by the end of the year.
• ECB governor Luis Maria Linde has said that it is important that any reduction in QE is done slowly and not abruptly
• World markets: UK mixed yesterday with financials up. Europe up, USA down and Far East mostly lower in Friday trade
• Oil around $50.50.
• Sterling little changed at around $1.218 per US$
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• C&C reports H1 numbers to end-August, says made ‘significant progress against operational priorities for FY2017’
• C&C H1. Says aim is to ‘stabilise trading in Ireland and Scotland’. Reports Bulmers volumes up +6% ‘
• C&C H1 reports Tennent’s volumes up +2% in the Scottish IFT. Says it is ‘regaining share’. Magners’ brand volumes +11% with share up
• C&C reports will deliver €15m of cost savings and efficiency gains with a consolidation of production by end of calendar year.
• C&C says ‘fall in the value of sterling particularly following the Brexit vote had an adverse impact on reported revenues’
• C&C reports ‘we are seeing some volatility in consumer behaviour across our industry as a result of the heightened economic uncertainty’
• Drake & Morgan has confirmed that it is to re-brand two of its recently-acquired Corney & Barrow sites into D&M units
• EasyGroup has announced that its holding in EasyHotel has fallen to 34.6% following the latter’s recent share placing
• A report has suggested that around 20% of Britons would support an airline & airport alcohol ban. Some 80%, presumably, would not
• BBA reports mortgage approvals in UK in Sept rose to 38,250 against around 37,240 in the prior month
RETAIL NEWS WITH NICK BUBB:
• Economics Watch: The CBI Distributive Trades survey for “October” came out yesterday morning and was headlined, rather inelegantly, “Retail sales report strong growth in year to October”. With all the usual caveats that we make (a pathetically small sample of 60 retailers, it’s a non-quantitative snapshot of mid-month sentiment etc etc), October probably has been a better month on the High Street, in Non-Food at least. For what it’s worth, 40% of retailers said that sales volumes were up in October on a year ago, while 19% said they were down, giving a balance of +21%. This was above expectations (of +7%), and an improvement on the previous month’s balance (of -8%). The oddly named Rain Newton-Smith, the CBI’s Chief Economist, said: “With our Indian Summer now a distant memory, shoppers have been pounding the high street, with sales of clothing and other retailers outpacing
• News Flow Next Week: As the clocks go back and we move into November, the big event next week is the Next Q3 update on Wednesday, but the Howden IMS and the Morrisons Q3 update on Thursday will also be worth looking out for.