Langton Capital – 2017-05-15 – TUI H1, Fevertree update, CDG, discounting & other:
TUI H1, Fevertree update, CDG, discounting & other:
A DAY IN THE LIFE:
Hull City. Suffice it to say that it has not been a good season for North Eastern teams in the Premiership. On to the news:
APPS AND THE ON-TRADE:
• Langton has been let loose with a pen again & we’ve written about Apps in the On-Trade. Briefly they’re here, they’re big & they’re getting bigger. The note is here
PUB, RESTAURANT & DRINK PRODUCERS:
• Big week for pub company numbers. Enterprise, M&B and Marston’s will all report. Trading should be steady but new of expected rises in unemployment later this year (see below) may not be helpful.
• Fevertree to update on trading at AGM, chairman Bill Ronald will say ‘2016 was another exceptional year for Fever-Tree which saw the Group continue to gain market share in both the on and off trade across all our markets.’
• Fevertree ahead of expectations. Mr Ronald will continue ‘Fever-Tree remains the pioneer and market leader of the premium mixer category and the momentum seen in 2016 has continued in the first four months of 2017. Given the strong sales in the period to date, the Board anticipates that the results for the full year ending 31 December 2017 will be comfortably ahead of current market expectations.’ The group will announce H1 number in July.
• Casual Dining Group, the owner of the Caffe Rouge & Bella Italia brands, is reported by the Sunday Times to have abandoned a £160m refinancing plan. The article says that investors have become more cautious. CDG has said that the article is speculative and CEO Steve Richards has said that the group is constantly looking at finance options. He reports that the group is growing sales at 3% LfL.
• A report from Cushman & Wakefield suggests that coffee shops and pizza operators are driving growth in spending across food & beverage outlets. The report predicts that spending across these two sub-sectors alone will grow by 17% in the next four years to some £103m.
• Cushman & Wakefield reports that 1,527 new coffee shops have opened in the last 3yrs alongside 1,035 new pizza outlets. C&W also says ‘online retailing has grown rapidly and, as a result, consumers are changing their habits. Food and beverage outlets, which offer an experience that cannot be replaced wholly online, present an opportunity for landlords to increase dwell time and expenditure within their centres.’
• Domino’s Pizza is offering 50% off pizza orders over £20 in Preston and 25% off prices nationwide
• Derby Brewing has extended the timetable for its offer on Crowdcube. The brewer, to date, has received £350k, or 70% of its intended investment. It has extended its offer by 14dys to 31 May.
• Bubble& and Curious Restaurants both failed to hit their funding targets over the last four weeks or so.
• The Sunday Times reported yesterday that crowd investors will lose out at Vulpine Performance, where the company is likely to appoint administrators as soon as today.
• The British Hospitality Association has said that the new government must adopt a ten-year phased approach to reducing EU immigration in order to allow time for the recruitment of replacement UK workers. The recommendation is a central point of a ‘manifesto’ sent to the major political parties, which calls for UK hospitality and tourism to be made a strategic priority. It cites a recent report from KPMG which concluded that at least an extra 60,000 EU workers were required each year to keep just the hospitality business going and growing.
• Aldi has announced its intention to quadruple in size in the UK, where it has the potential to reach 2,600 stores from its current estate of 700. Aldi currently aims to have 1,000 UK stores by 2022.
• Hugh Osmond’s Sun Capital Partners has placed a package of 16 Strada sites on the market and intends to prioritise its Coppa Club brand going forwards. Speaking to MCA, Osmond said: ‘We have put a number of Strada sites up for sale, mainly on the grounds of size. All the sites are in prime trading locations but most are too small for the formats we wish to focus on. So, while selling the smaller units, we are in process of taking on four to five much larger new properties. In terms of the Strada brand, we are retaining a small number of prime sites, which we are modernising and upgrading, both in terms of menu and fit out.’
• Camden Town Brewery will open a new £30m 50,000 sq ft brewery in Enfield this July. The new site will allow the brewer to expand its production to 400,000 hectolitres a year, and will also be open to the public for weekend tours, a beer school and a steel bar in the middle of the brewery.
• Diageo must pay £107m to HMRC as part of Britain’s efforts to make global companies to pay a reasonable amount of tax in relation to their UK operations. The Diverted Profits Tax regime, also known as the ‘Google Tax’, was introduced by ex-Chancellor George Osborne in 2015 and forces a company to pay any tax in question plus a 25% charge, at which point it can then argue the case for a refund.
• Unemployment is expected to rise as due to slower growth in jobs, the EY Item Club has reported. The report predicted the jobless rate to increase to 5.4% from 4.7% in 2019.
• PizzaExpress is expected to open its first motorway service station restaurant on the M40 near Oxford this September.
TUI REPORTS H1 NUMBERS
• TUI reports H1, says it is ‘delivering our transformation as the world’s leading integrated tourism business’
• TUI reports ‘good overall performance in the first half driven by growth in Hotels & Resorts and Cruises, as well as delivery of merger synergies.’
• TUI says ‘current trading for Summer 2017 remains in line with our expectations.’ Travelopia should be sold during H2.
• TUI reports an underlying H1 EBITA loss of €206m from continuing operations. Group has seen a 3% increase in customer numbers.
• TUI says winter ‘closed out in line with our expectations’. It goes on to say that summer 2017 is also in line. The group reports ‘subdued demand for Turkey and North Africa continue to be offset by the popularity of other destinations including Spain and Canaries, Greece, Cyprus, Cape Verde and Caribbean.’
• TUI reports ‘in the UK, despite the backdrop of Brexit, demand for our holidays remains resilient with the percentage of the programme sold in line with prior year. As previously outlined, revenue and selling price reflects to an extent the impact of currency cost inflation for Euro based destinations this Summer.’
• Re the outlook, TUI says it should manage ‘at least a 10% growth in underlying EBITA for the year as a whole. The co says it has ‘delivered a good H1 overall and Summer 2017 continues to trade in line with our expectations. We therefore reiterate our guidance of at least 10 % growth in underlying EBITA in 2016 / 17 (at constant foreign exchange rates applied in the current and prior period, and based on the current group structure.)’
HOLIDAYS, LEISURE TRAVEL & HOTEL
• The European Union is demanding urgent talks over news of a possible extension of the US ban on laptops being carried in aircraft cabins. The ban, which currently applies to flights from ten airports including the UAE, Saudi Arabia, Qatar and Turkey, has been enforced due to fears that a concealed bomb could be installed in electronic devices taken onto aircraft.
• The Foreign Office warning over fake holiday illness claims by management companies to British holidaymakers in Portugal has been extended. The FCO said ‘If you make a false or fraudulent claim, you may face legal proceedings in the UK or Portugal.’
• Ryanair has teamed up with online booking specialists eviivo to source accommodation across the latter’s 6,200-strong customer base ‘of boutique independent hosts and hoteliers’. Eviivo reports ‘we’re delighted to be bringing the best of independent accommodation to Ryanair’s customer base’ adding ‘this new partnership will enable even the smallest of B&Bs to sell their rooms directly to Ryanair’s extensive international customer base for the first time.’
• Tui Group has announced it is to extend its joint venture with the Chinese CTS Group for an additional 15 years to 2033. The operator plans to add an extra €1 billion in revenue by 2022 and an extra one million customers as the group focuses on China.
• Preliminary data from STR reports that U.S. hotel occupancy saw a change of between -4% to 1% for April 2017 yoy. Upscale chain segments were affected the most with occupancy down by up to 4% while the economy segment had a range of -1% to 1% for occupancy yoy. Meanwhile average daily rent was up across the board.
• Escape Hunt is reported set to open in Birmingham. The Birmingham Post quotes CEO Richard Harpham as saying ‘ Birmingham continues to thrive as a business centre and as one of the UK’s premier retail destinations.’ He adds ‘Birmingham’s bustling city centre makes it a perfect place for us to launch one of our first sites and we are confident that our immersive entertainment offer will be well-suited to the city’s families, students and office workers.’ Mr Harpham concludes ‘we look forward to expanding our owner-operated network right across the UK and, as part of that, we are confident that locations such as Birmingham will have a huge part to play as we continue to grow.’
• Spotify will be the first major company to carry out a direct listing on the New York Stock Exchange when it goes public either this year or next. The music streaming service, most recently valued at $13bn, intends to list shares without raising capital, thus bypassing the need for a Wall Street bank or broker to underwrite an initial public offering (IPO) along with many associated fees. Spotify will do so by not raising money by offering new shares for sale, but instead makes existing shares immediately available to the public, meaning employees and investors can buy and sell as they wish.
• London-based virtual reality company, Importable, has received a $500m investment from Softbank. The japanese firm’s investment is the largest in an early stage European technology business.
• Moody’s reports that Crown Resorts’ sale of its remaining stake in Melco Resorts is Credit Positive.
FINANCE & MARKETS:
• The New Car finance deals market is said to be booming. The Finance & Leasing Association has reported that £3.6bn was committed in March, up 13% on the same month last year. The majority of such deals were via called Personal Contract Purchases (PCPs), which seem similar to what used to be called HP. The FLA denied that it was financing a bubble & insisted that ‘lending is responsible. This is a sustainable model going forwards.’ GDP is currently rising by less than 2% and real incomes are flat.
• German growth exceeded on the upside in Q3. Europe’s largest economy grew by 0.6% in the 3mths to end-March
• Oil up 75c or so to $51.58
• Sterling better vs $ at $1.2908
• Pound down vs Euro at €1.1809
• UK 10yr gilt yield on the slide. Down 6bps at 1.10%
• World markets: UK & Europe higher on Friday. US down but Far East mostly up in Monday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Damned if you do, etc. Bank hopes wages will rise by nearly 4% next year (good news) but cautions that may lead to interest rate rises (not so much)
• Bank of England data presupposes smooth Brexit. And no Labour victory? And few world events. And 60m fingers crossed, letters to Santa etc.
• US restaurant LfL sales down for 3rd straight month. LfL sales down 1% on traffic down 3.3%. Perils of overbuilding. Lessons to be learned??
• Toby Carvery discounting (two meals plus drinks < £15) raises prospect of further price cuts. Could impact margins if demand falls
• EU visa costs to come? No joke as c50% of adults believe they will have to pay to visit Spain etc. from 2019.
• Fosun up to 11% at Thomas Cook. Budget hotels could squeeze out three-star operators says Hotel Bulletin. No kidding?
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The front pages of the Saturday papers were full of the serious cyber-attack that hit large parts of the NHS on Friday. In terms of Retail stories, the news in the Tesco Annual Report that the bonus of Tesco boss Dave Lewis fell slightly last year drew the attention of the Times and the Daily Mail, but the bigger story was in the Telegraph, highlighting that at an event in the City (as reported by the Evening Standard) the former Tesco boss Terry Leahy backed the planned Booker takeover by Tesco (“what I like about it is that it’s a front-foot deal”). The rather startling headline of an article in the Guardian was “Which? names Richer Sounds and Toolstation as UK’s best-rated shops”, flagging that the hi-fi specialist and the DIY retailer beat Apple and John Lewis in a poll of 10,000 middle-class shoppers by Which? magazine (based on the likeliness to be recommended),
• Sunday Press: The Sunday Telegraph highlighted that Asda is shunning the City this week as it prepares to admit being the worst supermarket performer for the second year in a row, flagging that Sean Clarke, the new CEO of Asda, has scrapped plans for any briefings on the back of the Q1 results on Thursday, “in a move to duck questions about the group’s future strategy and level of support from Walmart”. The Sunday Telegraph also flagged that rival Chinese mattress manufacturers are circling the bed retailer Dreams and it had a big feature interview on the wholesale group Conviviality and its transformation under CEO Diana Hunter. The Mail on Sunday had a feature interview with Nick Wheeler, the Brexit-supporting founder of the shirt retailer Charles Tyrwhitt and it also flagged that Marks & Spencer’s full-year profits will fall, notwithstanding the well-received recent management
• Today’s Press and News: The latest footfall figures from Springboard (which show a rise of 1.6% last month, driven by the increase in Overseas tourists in London and more “staycations” at Easter) get a few snippets in today’s papers, whilst the FT highlights that Tesco has committed to cut its carbon emissions and use more solar panels. Otherwise things are a bit thin, although the Telegraph flags that Booker will use its finals on Thursday to present the case for its merger with Tesco and the Daily Mail highlights the ambitious plans of Aldi to expand in the US and take on Wal-Mart.
• News Flow This Week: We have another mini-“Super Thursday” this week as that day brings the Burberry finals, the Mothercare finals, the Greggs trading update, the Booker finals, the ONS Retail Sales for April and the Asda Wal-Mart Q1, as well as the Land Securities finals. Before that, Wednesday brings the British Land finals (in the world of Retail property), whilst the Moss Bros AGM is on Friday.