Langton Capital – 2017-08-10 – TUI, Adnams, Coca Cola HBC, meat sales, Brexit & other:
TUI, Adnams, Coca Cola HBC, meat sales, Brexit & other:
A DAY IN THE LIFE:
Bit behind today after a study trip to Camden in the rain yesterday. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Adnams reports H1 numbers, revenues up to £33.2m from £31.2m but underlying profits down to £177k from £624k last year on the back of some site closures. Loss per share of 13.5p vs (asset-disposal enhanced) profits per share of 79.1p last year. Chairman Jonathan Adnams reports ‘our investment in the Adnams business will reach its highest ever level in 2017, a year in which we are once again seeing very strong growth in our beer and spirits volumes.’
• Adnams says ‘as we indicated in our 2016 accounts and at our AGM, our profits have been reduced as a result of the investment that we are making in transforming the Swan Hotel in Southwold. We are writing-off £721,000 of costs as part of the Swan redevelopment, in particular the costs of removing asbestos. Operating profit before this write-off was £177,000, with an operating loss of £544,000 after these costs, compared to an operating profit £624,000 in 2016. The Swan has been closed since the start of the year and we envisage it reopening in the early Autumn.’
• Adnams says its ‘beer sales have been growing strongly over recent years bucking a market trend that has been largely downwards. That growth continued in the first half of 2017 and again it was led by sales of bottles, cans and kegs.’
• Adnams reports ‘the future is never certain, but businesses benefit from calm conditions that help them to plan and encourage them to invest.’ It says ‘lack of clarity about the way in which the exit from the European Union will be negotiated and the result of the recent general election make this a time of particular uncertainty. Adnams has tried to give itself flexibility in what it does. In our core business of brewing and drinks production we have invested in equipment that has allowed us to meet the needs of our consumers. We think this flexibility will continue to stand us in good stead in future years and we will continue to invest for the long term and seek to grow in the belief that we can provide what our customers want.’
• Coca-Cola HBC reports that it has had an ‘excellent’ first half. Sales +5.7% with volumes +1.4%. Group sees ‘growth in all segments’. EPS is +38.5% at 57.6 Euro cents.
• CCH reports ‘volume in the Established markets increased by 0.8%, with a good second quarter supported by the late Easter and a warm June’. It says it grew by 0.8% in its Developing segment. CEO Dimitris Lois comments ‘we are delighted to report an excellent set of results for the first half of the year, with volume and revenue per case growth in all three market segments. It is also very pleasing to see the revenue growth translating into significant margin expansion. This demonstrates that our strategy to exploit our lean asset base and improve profitability through operating leverage is powerful and delivers well.’
• CCH concludes ‘we are on track for broad-based revenue and margin growth for the full year with the organisation energised by the progress we are making towards our 2020 financial targets.’
• Mintel has suggested that ethical concerns and health trends are leading younger diners to eat less meat. Mintel’s Meat-free Foods UK 2017 report says under-25s are twice as likely to not eat red meat with nearly a fifth saying they do not eat red meat or poultry. Mintel points out that volume sales of red meat fell by 14% between 2012 and 2015.
• Press reaction to Premier Foods’ appointment of Keith Hamill generally positive. FT says he will have some work to do as Premier’s ‘are not selling like hot cakes’. The FT says ‘the first job of a new chairman is to test management and board strength.’ It suggests that there may be changes. The Telegraph says that the appointment was an attempt to ‘reassure investors after a turbulent year’.
• Papa Murphy’s Holdings has said that it will widen its testing of delivery in the US. It reported a 4.3% drop in Q2 LfL sales but says ‘during the quarter, we continued to make progress on several key strategic initiatives designed to drive sales and profitability at the store-level.’ Interim CEO Jean Birch says ‘we expanded our delivery pilot to two additional markets, added a new third-party partner and began executing the transition of our e-commerce platform to Olo.’ The group has 1,550 locations, with 149 of those company-owned. There are 43 international locations outside the US.
• The competition and Markets Authority has begun consulting on the revised plans by Heineken to sell 30 pubs in order to alleviate competition fears over its planned acquisition of 1900 Punch Pubs.
• Peach Pubs have reported LfL sale increases of 4.8% to £25.1m for the year to 8 January. The 18-strong group recorded EBITDA of £2.5m.
• The summer heatwave sweeping through Europe, has led to some of the earliest grape harvests seen in Italy for decades, with temperatures reaching 47 degrees following months of drought. Certain regions of Italy are expecting harvests to be 30% lower than normal, due to the heatwave and ‘bizarre’ weather earlier in the year, that saw spring frosts.
• Data from IGD has shown that specialist food-to-go stores (e.g. Greggs, Subway and Pret) are likely to overtake quick service restaurants as the largest subsector to the foodservice industry. Gavin Rothwell, senior insight manager at IGD said ‘Food-to-go specialists are really setting the pace on product innovation and range development, as well as expanding quite rapidly outside London, which is why we’re forecasting them to become the biggest part of the food-to-go market by the end of 2022’.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• TUI has reported Q3 numbers saying turnover rose by 12.6% to €4.8bn with underlying EBITDA of €221.6m against €160.9m last year. The group says it has delivered a ‘strong performance in Q3 with 19 % growth in like for like underlying EBITA (38 % growth including Easter and foreign exchange translation).’
• TUI reports on current trading saying ‘summer 2017 remains in line with our expectations, with good demand for our hotels, cruises and holidays.’ It says ‘in Hotels & Resorts, demand remains strong for Spain (including Canaries), Greece, Cape Verde, Italy, Cyprus and the Caribbean.’ It adds ‘demand has also improved for North Africa and (in recent weeks) Turkey. We added two new TUI Blue properties in Tuscany and Croatia for this Summer, which are performing in line with our expectations.’
• TUI says ‘in the UK, as we expected, demand for our holidays remains resilient. Bookings have remained at the same high level as prior year, despite the impact on pricing from cost inflation, in particular due to the weaker Pound Sterling. We believe that this is testament to the popularity of our holidays and to the high level of priority our customers place on them. We will continue to offer good value for money with a range of products and destinations, and remain the clear market leader.’
• Snoozebox yesterday reported H1 numbers. Revenues were down from £2.2m to £0.9m with a loss before tax of £1.0m vs £2.1m last year. The loss per share was 0.34p versus a loss of 0.73p last year. The group says ‘in the Semi-Permanent market, we are making good progress towards securing opportunities for 2017 and 2018 deployment and our key focus is to now close out qualified sales opportunities.’ The group adds ‘in June, we secured a small new opportunity in the Events market, which has since been successfully completed, and we are looking for opportunities to repeat this success.’
• Snoozebox says ‘the Board is currently continuing its discussions with its primary lender concerning amendments to the Group’s capital structure and funding.’ Chairman Chris Errington says ‘we have made progress with improvements to trading in the first half of 2017, achieving improved contributions from both Semi-Permanent and Event deployments and benefitting from a significantly reduced cost base and more stable operations. We are making good progress towards securing opportunities for 2017 and 2018 deployment.’ The group has negative shareholders’ funds of £3.6m with an accumulated loss of nearly £48m.
• STR has suggested that the New York room-rates slump might ease up. It says ‘hotel supply growth in New York saw an average rise of 4.8% annually from 2014 to 2016, while room rates in the city have slumped for about two years.’ It says ‘however, with supply rate growth expected to taper off, New York hotels may be able to gain some pricing power.’
• Wendy Wu Tours has launched an expanded Japan brochure for 2018-19 & has doubled the number of holidays available to the destination
• The Spanish Balearic Islands have announced that they will crack down on the growing private holiday rental sector as anti-tourist sentiment rises. Anti-tourist groups have attacked a bus carrying British tourists and have threatened more attacks in the lead up to a planned demonstration on August 17th.
• Official industry data from GfK has shown some signs of a Turkey recovery, as the last four weeks have seen UK passengers traveling to country increase by 29%. Overall UK holidaymakers visiting Turkey has fallen 9.8% year-on-year. The recent uptick in traveler numbers has prompted Jet2holidays to nearly-double its capacity to Turkey by 2018, a move that some have labeled ‘brave’.
• The parent company to Booking.com, Priceline Group, has warned of two challenging quarters coming up, as the group beat trading expectation in Q2 2017. The foreboding statement sent the group’s share prices down 7%. Q2 profit had increased 21% to $3bn on the same period last year.
• TripAdvisor disappointed analysts with its latest results, despite reporting $33m increase in revenue to $424m. Shares in the group fell 6% as hotel revenue dropped 20% to $84m from $105m.
• Record levels of new room openings (7500) in H1 2017 has led strong results for the UK hotel sector. Branded hotels performed well, however, there has been a notable increase in popularity of independents. Chairman of HVS, Russell Kett stated ‘Whilst there will always be a strong demand for branded hotels, we are certainly seeing a growing appetite amongst hotel guests, primarily those in London, for something a little different. Boutique hotels in quirky buildings with a strong stamp of personality and an more unusual proposition are becoming very fashionable amongst discerning customers’.
• Cineworld reports H1 numbers, says revenues +12.4% (constant currency) to £420.2m with profits of £50.2m against £41.0m last year. CEO Mooky Greidinger comments ‘we are very pleased to report our results for the first half of 2017 – showing strong growth in admissions, revenues, EBITDA and profit after tax.’ He says ‘the film release programme for the second half of the year includes a number of strong titles’ and concludes ‘we remain confident of delivering a performance for the year as a whole in line with current market expectations’.
• The Stars Group (formerly Amaya Inc) yesterday reported Q2 numbers saying ‘our evolution and transformation into The Stars Group continued as we completed our name change and head office move, while our second quarter saw the strengthening of our core senior management team and continued solid revenue growth led by our real money online casino offering.’
• Stars Group ‘total revenues for Q2 increased c6.8% year-over-year. For the full year, the group expects revenues of $1,200m to $1,260m. This ‘remains unchanged, with revenues currently expected to fall at the upper end of the range.’
FINANCE & MARKETS:
• Markets rattled by N Korea suggestion that it may be prepared to hit the US territory of Guam. Mr Trump had previously said that any threat to the United States would be met with “fire and fury”.
o Leavers outwardly sanguine but former David Davis Chief of Staff James Chapman has said that Brexit ‘is the biggest calamity for our country since WW2’. He said it is ‘past time for sensible MPs in all parties to admit Brexit is a catastrophe, come together in new party if need be, and reverse it.’
o Bank of England warns that Brexit may make it more difficult to regulate City firms.
• House price slowdown extends other regions within the South East reports RICS. The RICS reports ‘sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come.’
• Oil up at $52.74
• Sterling little changed at $1.2986 and €1.1065
• UK 10yr gilt yield 1.11% (down 5bps)
• World markets: UK, Europe & US down yesterday with Far East mostly lower in Thursday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Barclaycard says: ‘confidence on several measures…are at some of the lowest levels we’ve ever seen.’
• Tasty trading below (reduced) expectations. Will close, sell units. Oops. Relevant, authentic & innovative operators still do well
• Cambridge News says readers will not miss ‘overpriced & not particularly good’ Giraffe restaurant that closed in the city
• Can mediocrity work? Well, unfortunately, sometimes. If you pay enough rent, you may be able to sell enough poor food poorly to survive
• Premier Foods reports that it has appointed Keith Hamill, OBE, as non-executive Chairman of the Company.
• Former Chancellor Lord Darling has said that regulators must remain “very, very” vigilant about the risks to the economy
• Landlords will (hopefully) come under pressure re rents as mediocre units are now falling over in larger numbers
RETAIL NEWS WITH NICK BUBB:
• DFS: After the trading update from its sofa retailing rival ScS yesterday, DFS has come out with its own update today (for y/e July) and the news is not great either, although DFS warned a couple of months ago that things were not going well, blaming Election uncertainty and the warm weather. It sounds like July was more satisfactory, but overall revenues for the second half were still down by 4% and DFS has warned that EBITDA for the year will be at the low end of the £82-£87m range previously given. Investors may be little comforted to hear DFS trumpet that “strategic progress has been maintained”, in “a very challenging market”.
• Card Factory: There is better news in today’s pre-close update from the discount card chain Card Factory (for the six months to end July), as LFL store sales growth was 3.0%, “continuing to track positively following the improving trend seen in the first quarter”. DFS remains on track to deliver c50 new UK stores in the current financial year including an increased number of retail park stores, which are said to be performing well and the Board’s expectations for the full financial year remain unchanged, with the key Xmas period to come.
• New Look: Having mocked New Look’s dismal failure to beat very soft comps in terms of Q1 LFL sales (in Marks & Spencer-like fashion),we thought we’d check out how the comps unfold from now on. And in the short term, they get even easier, because a year ago, after reporting that in Q1 UK LFL sales fell by 7.0%, for H1 overall (to end September) New Look saw UK LFL sales slump by as much as 8.8% (implying that Q2 was over 10% down LFL). But Q3 was only 4.7% down LFL and the year as whole was down by only 6.8% LFL, so the H2 comps get a bit easier. Whether the embattled Danish CEO Anders Kristiansen will still be in charge in H2 remains to be seen, but, for the record, he was appointed back in Dec 2012, to make New Look a global player. Before that he had been the boss of the big Chinese business of the Danish fashion group Bestseller for 18 months. After joining New Look, he saw