Langton Capital – 2017-02-08 – DP Poland, YUM China, Punch bid, costs & other:
DP Poland, YUM China, Punch bid, costs & other:
A DAY IN THE LIFE:
Being self-employed has its ups and downs.
You’ve got nobody looking over your shoulder (except the taxman, regulators, clients, employees and hungry members of your family) but, at the same time, you have to wash your own dishes because, if you don’t, nobody else is going to do it and you’ll be catching rabies or the plague after the office mice have finished having a disco amongst left-over food and a slumber party sprawled across the dirty crockery.
Which means that paper plates have a lot to be said for them & the whole thing brings back that intra-office memo of yesteryear, you know the one: ‘Could colleagues please put their dirty cups in the dishwasher’?
I mean what’s a dishwasher? On to the news:
• Langton has produced a piece of research on the outlook for 2017. It’s free & can be found here http://www.langtoncapital.co.uk/?p=1638
• We look at the macro trends etc. out there & comment on current developments. If you would like to advertise in these documents going forward, please let us know.
• See latest 60 seconds piece here – http://tinyurl.com/hq4apjz
PUNCH TAVERNS’ BID SITUATION:
• Some 10 million Punch shares were purchased at 181.5p yesterday.
• That’s a large number changing hands at a premium to the 180p Heineken bid.
• We still believe that a counter-bid, at this late stage, is unlikely.
• This leaves us, CFD closing to one side, somewhat bemused as to why an investor would buy shares at a lower price than they will be bought back off him by Heineken in 4-5mths time.
DP POLAND FULL YEAR UPDATE. LFL SALES 27% AHEAD:
• DP Poland updates on FY trading, says LfL system sales +27% with total system sales +62%. Opens 16 stores in year. DPP has moved into 10 more towns over the last 13mths.
• DP Poland reports now has 39 stores operating in 14 towns & cities. Some 16 are corporately owned, 23 sub-franchised
• DPP reports has achieved ‘17 consecutive quarters of double digit like-for-like system sales growth’
• DPP. Group has opened 4 new stores opened in 4 more towns since 1 Jan with healthy pipeline for rest of year. Co says a number of these are currently under construction.
• DPP. Group brought on board 6 new sub-franchisees in 2016 who now operate 23 stores between them. Says 71% of delivery sales are now ordered online
• DPP will open second commissary in mid-year ‘to support this rapid growth in system sales’. CEO Peter Shaw reports ‘in 2016 12 new Domino’s Pizza stores were opened and we welcomed 6 new sub-franchisees on board. In the first 5 weeks of 2017 we opened 4 further stores. Of the 39 stores operating today 23 are operated by our 8 sub-franchise partners. We are now operating in 14 towns and cities and will see more added through the year.’
• DPP CEO says 2016’s ‘step change in store roll-out and system sales growth is set to continue through 2017 as we invest in real estate development, store operations, dough production capacity and food warehousing.’ The co concludes that it ‘continues to trade in line with management expectations and will release its full year results for 2016 on 27 March 2017.’
PUB, RESTAURANT & DRINKS PRODUCERS:
• The MCA reports that Fulham Shore is to open both a Franco Manca pizzeria and a Real Greek outlet in Bournemouth this year
• IFS reports tax in 2017 will take its highest share of income in the UK since 1986. Chancellor Philip Hammond said post the 23 June Brexit vote that he would not be rushing to balance the nation’s books. This suggests, says the IFS, that spending cuts, though shallower, will last into the 2020s.
• Chris Chambers will resign as chief financial officer of Revolution Bar Group for family reasons once a successor has been found.
• YUM China has reported EPS ahead of expectations but has said that same-store sales were flat over Q4. The company is reporting its first quarterly earnings since it began trading independently on the New York Stock Exchange late last year.
• YUM China revenues for Q4 $1.98bn, a little behind the $2.05bn forecast by analysts. Same store sales were flat. KFC was up by 1% but Pizza Hut sales were some 3% lower. Analysts had been looking for a figure overall up by c1.6%.
• Mondelez, the third largest food company in the world & the owner of Cadbury in the UK, has reported an 8.1% drop in revenues in Q4 on the back of the strong US$. The group has cautioned against what it has called a ‘backlash against globalisation’. It mentions Brexit & says that the protectionist leanings of President Trump may not work to its advantage.
• New Look has described conditions in the UK retail market as ‘extremely challenging’.
• Britons pay over one quarter of all the tax on spirits collected in Europe in part due to a domestic tax level far more than the European average. The Scotch Whisky Association is calling for a 2% cut to support consumers and producers suffering from the UK’s duty burden. SWA acting chief-executive Julie Hesketh-Laird said: ‘British people pay more tax on their Scotch than is fair. This is shown very clearly when compared to other European countries.
• ‘The Chancellor is in a strong position. He can reduce tax on Scotch Whisky, help consumers as the threat of inflation grows and take the opportunity to boost one of the UK’s flagship industries. At the same time, as past experience has shown, this should lead to increased Government revenue.’
• The BBPA has dismissed the WSTA’s calls for a cut in wine and spirit duty and argues that a beer duty cut would be ‘the most effective option’ to support pubs. BBPA chief Brigid Simmonds went on: ‘When it comes to UK production, 82% of UK beer sales are made in Britain, compared with less than 1% of wine. As a home-grown product, and with so much sold in the labour-intensive pub trade as opposed to supermarkets, this means that beer continues to have a much bigger positive impact on the UK economy, on UK jobs, and on pubs, than any other drink.’
• Ei Managed Investments’ Dirty Liquor (the partnership between Enterprise Inns and operators Hugh O’Boyle and Caroline Jones, is preparing to launch its first venue in Walthamstow. The Dog and Duck will be the second site in Walthamstow run by the operators and will include an open-plan kitchen with a ‘Sourdough Saloon’ pizza offer, a bar providing drinks including whiskies, rum, gin, locally sourced ales, craft beers and cocktails, and a large cinema-style screen for sporting events and film nights.
• Asahi is planning to sell its 20% stake in Tsingtao beer, valued at $1.1bn, eight years after it first made its investment.
• Northern grocery chain Booths has posted a 4.3% uplift in wine sales following a revamp of its own label last year.
• Restaurant chain Bill’s saw turnover increase 20.5% to £110.5m in the year ending July 2016. The Richard Caring-backed group reported EBITDA growth of 8.9% to £13.5m. The chain currently operates 76 units throughout the country.
• More than 50% of diners expect money off their bill if they must make a complaint, reports the MCA in a review of a survey conducted by OpenTable. Only 22% of customers said they would be happy with just an apology.
• Vegetable supplies are ‘on the brink’ and a ‘salad black market’ is now flourishing, with some vendors setting prices as high as £4 per lettuce. Meanwhile, a shortage of courgettes has cost supermarkets £2m in lost sales.
• Starbucks and Costa have set up coffee cup recycling schemes. Whitbread’s Costa Coffee has said that it will recycle both its own plastic lined cardboard cups and those of its competitors. The group is offering a 25p discount to those using reusable cups
LEISURE TRAVEL & HOTELS:
• HVS’s Hotel Bulletin suggests that a reliance on corporate business for some hotels is leading to a divergence in performance
• HVS/Alix Partners says hotels ‘in cities with a more developed tourism industry performed noticeably better in Q4 2016’. This was ‘as a result of the weaker pound attracting foreign tourists and Brits choosing staycations.’ London REVPAR growth, however, has been modest.
• HVS says London occupancy now slightly up after 7 quarters of declines. It says ‘London may see a further decline in corporate bookings because of depressed GDP growth, particularly if threats made by several large companies to move staff out of the country come to fruition.’
• HVS points to growth of branded budget hotel segment saying ‘budget brands now account for 25% of all hotel bedrooms in the UK’. It says ‘the main casualties have been the two- and three-star properties.’
• Hotelbeds Group is taking over US-based Tourico Holidays.
• China’s budget hotels are reported to be looking to expand overseas. Some of them are huge.
• The travel sector faces ‘years of uncertainty’ as Britain exits the EU, Travlaw senior partner Stephen Mason said at a recent event.
• The Q4 2016 Hotel Bulletin from AlixPartners, HVS and AM:PM suggests that the weaker pound has attracted foreign visitors and staycationers to the UK.
• Hotels in Paris saw a 40.2% year-on-year decline in profit per room last year as the market suffered from persistent security threats. For year-end 2016, hotels in Paris recorded a 19.9% drop in RevPAR, driven by an 11.3% drop in occupancy and a 5.9% fall in achieved average room rate, to €314.27.
• A positive trading update for Hornby, the model train, Airfix and Scalextric maker, has seen its shares jump up 12%. Although it is still expected to be loss-making this year, current trading has been ‘robust’. After a disastrous last few years Hornby has been reshaping itself and CEO Steve Cooke says the turnaround is ‘progressing as expected’.
• Disney’s overall sales decreased by 3% on the same time last year to $14.8bn (£11.8bn) in the three months to the end of December. The media and entertainment conglomerate blamed a 7% drop in movie revenues and a fall in advertising earnings at its cable network ESPN for the results. Shares dropped 2% in after-hours trading.
FINANCE & MARKETS:
• Halifax reports annual growth in house prices moderated to 5.7% in January vs 6.5% in December. It expects a further slowdown. The annual rate of house price growth peaked at 10% last March.
• Innovate Finance has said that investment in UK financial technology start-ups has dropped by c33% since 23 June Brexit vote. It says ‘our members tell us Brexit has had a chilling effect on investment.’
• The IMF has warned that Greece could be forced out of the Euro, despite years of austerity, due to the nation’s debts
• Brent lower at around $54.60 per barrel
• Sterling down a shade vs US$ at $1.25. A little higher vs Euro at 117c
• UK 10yr gilt yield drops to 1.29% from 1.31% yesterday. US 30yr bond yield down 3bps to 3.02%
• World markets: UK & Europe up yesterday with US also higher. Far East mostly down in Wednesday trade
TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS:
• Some 10 million Punch shares were purchased at 181.5p yesterday. That’s a large number changing hands at a premium to 180p bid.
• DP Poland updates on FY trading, says LfL system sales +27% with total system sales +62%. Opens 16 stores in year.
• DPP reports has achieved ‘17 consecutive quarters of double digit like-for-like system sales growth’. Healthy pipeline of new stores
• DPP CEO says 2016’s ‘step change in store roll-out and system sales growth is set to continue through 2017
• MCA reports Fulham Shore is to open both a Franco Manca pizzeria and a Real Greek outlet in Bournemouth this year
• IFS reports tax in 2017 will take its highest share of income in the UK since 1986. And we still can’t (or don’t want to) balance the books
• YUM China has reported EPS ahead of expectations but has said that same-store sales were flat over Q4
• Mondelez cautions against what it has called a ‘backlash against globalisation’. Trump isn’t helping
• Vegetable supplies are ‘on the brink’ and a ‘salad black market’ is now flourishing. Some vendors setting prices at £4 per lettuce
• HVS/Alix Partners says hotels ‘in cities with a more developed tourism industry performed noticeably better in Q4 2016’
• The travel sector faces ‘years of uncertainty’ as Britain exits the EU, Travlaw senior partner Stephen Mason has cautioned
• Later tweets: Germany turns in strong numbers, industrial production +5.2% m-o-m. Not much of a collapse going on there
• Eurozone interest rates. Turning into the Draghi vs Schauble show. The former wants slack policy, the latter, not so much
• BRC: Sales numbers, though soft, were ‘helped along by a small amount of inflation’. Online sales up, non-food store sales down perhaps 3.5%
• Car sales +2.9% in Jan. Are people a) earning more or b) borrowing more? It’s not a). Borrowing capacity must be finite
RETAIL NEWS WITH NICK BUBB:
• Dunelm: The headline of today’s interims from Dunelm (for the 26 weeks to Dec 31st) is “Increasing market share in a challenging environment”, which sounds a bit ominous, as does the comment from CEO John Browett that “This is a transitional year for Dunelm”. Interim profits were nearly 14% down, on an underlying basis, with LFL sales just over 3% down: “trading was slightly softer than expected due to a weaker market and some short term supply chain disruption”. Homewares shoppers in London will be pleased to hear that three new Dunelm stores will open within the M25 in the second half of the year, in Becton, Friern Barnet and Staples Corner. But there are no reassuring noises about current trading, despite the bullish vibes about furnishings sales in January in the BRC-KPMG Retail Sales survey, and the City may be unsympathetic today, despite the 8% increase in the interim
• John Lewis Watch: Interestingly enough, the Home department was the best performer for John Lewis last week, as they kicked off the new 2017/18 year on a solid note, with gross sales up by 5.4% (c4% up LFL) in w/e Feb 4th. Home sales were up by 8.8%, but John Lewis say that growth was focused on ‘big ticket’ products such as furniture, with beds and fitted furniture particularly strong