Langton Capital – 2017-09-14 – Thomas Cook, jobs growth, MRW, BOK & other:
Thomas Cook, jobs growth, MRW, BOK & other:
A DAY IN THE LIFE:
It’s that time of year again.
The evenings are drawing in, there’s mist in the morning, the grass doesn’t ever get really dry and we’re kept awake by the steady thrum of apples falling and hitting the extension roof meaning that autumn is here again and we’d better get used to it.
Indeed the shops would have us buying Halloween gear today, bonfire products tomorrow and Christmas presents over the weekend but, as usual, I’m dragging my feet and what’s the panic, anyway?
I can lock the kids in a spooky shed, burn filthy garden rubbish on 5 November and I’ve always thought that petrol station flowers, hazard warning triangles and torch / whistle / keyring combos have always been badly underrated for Christmas. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Coaching Inn Group has reiterated its aim to double its 13-strong estate in the next two years and believes it has been outperforming the market. Speaking to MCA, founder and CEO Kevin Charity said that total like-for-like sales were up 3.3% for the 20 weeks to the end of August, driven by its premium positioning.
• Zizzi has unveiled new packaging for its pizzas and starters as it looks to crack the takeaway market.
• Employment levels are still rising but wage growth remains below level of inflation (see finance & markets below).
• Cracker Barrel has reported Q4 & full year numbers showing Q4 LfL traffic fell by 1.7% and LfL sales fell by 0.8%. Cracker Barrel reports that these numbers represent an outperformance vs the casual dining sector.
• Cracker Barrel reports Q4 earnings +5.2% at $2.23 per share. Operating margins rose by 80bps to 11.2%.
• Cracker Barrel President and Chief Executive Officer Sandra B. Cochran comments ‘we ended fiscal 2017 with solid operating income margin and earnings growth. Since fiscal 2014, when we laid out our three-year strategic plan, we have grown earnings per share by nearly fifty percent, well above our target growth. As we enter the new fiscal year, we anticipate the environment to remain challenged, yet are confident in our plans to invest in the long-term growth of the Company.’
• A survey by wine industry knowledge specialist Brill Ideas suggests that wine tasting is one of the best ways for building client relationships. According to a new survey of 362 businesses in the Berkshire and Bucks region 100% of respondents agree that developing a relationship with clients is the main purpose of their marketing events. And a further 61% say that Marketing Events are ‘important’ or ‘very important’ for their organisations.
• The BBC reports that last year’s Brexit vote led to a 12% drop in the amount of wine drunk from the government’s official cellars.
• The UK wine and spirit industry is under-appreciated and over-taxed by government, according to the CEO of the WSTA, Mile Beale. Speaking at the recent WSTA conference, Beale warned: ‘It’s all too easy to see how a bungled Brexit would preclude any chance of taking advantage of the more distant opportunities of enhanced international free trade.’
• MEATliquor has opened its second delivery-only site in partnership with Deliveroo, in Battersea, London, following the success of its Canary Wharf unit. Co-founder and managing director Scott Collins said: ‘MEATliquor was an early adopter of the Deliveroo model in the UK and one of the first Deliveroo editions. Having seen the benefits of the delivery-only model, both for us and the wider restaurant category, the move to Battersea was a no-brainer as we felt it was something that could easily be replicated for customers living in south west London where there is clearly demand.’
• Laine Pub Co has stopped serving plastic straws with drinks at all 55 sites in a bid to minimise environmental damage to beaches. Laine operates across London and Brighton and estimates this will stop more than 2m straws from entering the ecosystem.
• Sky reports that Molson Coors hopes to acquire British company Aspall Cider. There are a number of suitors for the company and a sale is expected by the end of the year. The UK cider market is worth £2.88bn according to the Westons Cider Report. A source suggested Aspall had an enterprise value of £40m.
• MPs have been told that staff shortages caused by Brexit are causing ‘a further blow to the Great British pub’. Labour’s Daniel Zeichner said ‘The Cambridge News reports that pubs in the area won’t be able to serve food because they can’t find the skilled staff to do it.’ Theresa May dismissed the concerns at PMQs.
• Morrison reports H1 numbers saying LfL sales +3% ex-fuel. Q2 LfL sales were +2.6% to give 2yrs Q2 increase of 4.7%.
• Morrison’s sales positive, broadly in line with inflation now over last 2yrs. Group chairman Andrew Higginson reports ‘this is another good performance from Morrisons. Our seventh consecutive quarter of positive like for like means that we are able to report profit growth on growth for the first time in the turnaround.’ He continues ‘with good trading momentum and a strategy to build a broader, stronger Morrisons, the business is well set to continue to deliver consistent and sustainable growth for its stakeholders.’
• Booker updates on Q2 saying it traded well with group sales +1.1% and non-tobacco sales +5.8%. The January-announced proposed merger with Tesco is going through the review process with the Competition and Markets Authority.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Thomas Cook & Expedia. No whispers (to date) that the latter may buy the former but, with today’s announcement, it’s surely not out of the question.
• Thomas Cook has announced that it has entered into a strategic alliance with Expedia. The latter will ‘become the preferred provider of hotels for Thomas Cook’s complementary city and domestic holiday business and will provide its booking platform to support all city break and hotel-only sales across Thomas Cook distribution channels in Europe.’
• TCG says Expedia multi-year agreement ‘will provide Thomas Cook customers with over 60,000 more hotels in global city and European domestic locations than currently on offer, all of which will meet Thomas Cook’s standards for quality and value, as well as health and safety. The agreement will also enable Thomas Cook to significantly reduce the cost and complexity of its city breaks and hotel-only business.’
• TCG CEO Peter Fankhauser comments ‘the combination of Expedia’s portfolio of hotels and best-in-class online technology will transform Thomas Cook’s city breaks and hotel-only offer for customers while helping the business take an important step forward in delivering our strategy for profitable growth.’ He concludes ‘I am confident this marks the first step in a long-term and mutually beneficial relationship with Expedia.’
• TCG says the Expedia deal is ‘a major step forward in Thomas Cook’s Group-wide transformation programme’. It says ‘the agreement with Expedia will also help to reduce the complexity of Thomas Cook’s business, acting as a catalyst to significantly simplify and streamline operations across its 16 source markets.’
• Per Sky, Center Parcs is considering acquiring Forest Holidays in a move to capitilise on growing demand for staycations. Forest Holidays is jointly owned by the Forest Commission and LDC, the private equity arm of Lloyds Banking Group. Centerparcs said recently that in the 12 weeks to July 13, it recorded a 5% rise in group revenue to £99m, with earnings before tax, interest, depreciation and amortisation up 4.6% to £45.2m.
• Staycity Aparthotels will open its second Wilde concept in Edinburgh’s King’s Stables Road. The centrepiece of Wilde Aparthotels Edinburgh will be an art gallery and exhibition space. Barry Hickey, group development director, said ‘With the brand’s strong link to cultural icon Oscar Wilde we hope the arts facility element of the scheme will become a destination in its own right’.
• David Dingle, vice chairman of Clia Europe, has called media reports about the environmental impact of the cruise industry unfair. Dingle said the sector was ‘playing its part’ in creating eco-friendly ships and said the cruise industry is in fact only ‘a small part of the problem’ in terms of damage to the environment.
• STR reports the European hotel pipeline for August consisted of 75,755 rooms in 488 hotel projects, a 17.5% increase in rooms yoy.
• STR reports the US hotel pipeline consists of 192,132 rooms in 1,463 hotel projects during August. This represents a 12.9% increase in rooms yoy.
• Ancestry, the family history website, has delayed its IPO after CEO Tim Sullivan steps down. CFO Howard Hochhauser becomes interim CEO.
FINANCE & MARKETS:
• Bank of England’s MPC rate decision at lunch time. The chance of a rate increase is small but not non-existent.
• The UK added more jobs in August with the ONS saying that the rate of unemployment fell from 4.4% to 4.3%. The rate is at its lowest since 1975. The government could come under renewed pressure to increase public sector pay.
• Wages in the UK rose by 2.1% in the year to end-August. As the CPI is 2.9%, real wages are still falling.
• Two thirds of surveyors report the belief that more buy to rent landlords will exit the housing market over the next year. Landlords have to pay a 3% stamp duty surcharge on second and subsequent properties.
• Oil up at $55.02
• Sterling down vs dollar at $1.3199
• Pound up a shade vs Euro at €1.1111
• UK 10yr gilt yields unchanged at 1.14%
• World markets: UK down again yesterday but Europe & US closed higher. Asia mostly up in Thursday trade
o Philip Hammond has said that the government wants a “bespoke” deal with the EU to protect the City of London
YESTERDAY’S LATER TWEETS:
• Later tweets: McDonald’s shares fall on same-store sales decline concerns. US restaurant stocks have had a torrid time this year.
• Weather. Pretty average over July / August. Weather not to blame for profit warnings. Is something deeper
• Weather. This could have an impact in September. The hottest day of 2016 was in this month last year. Today we’ve got Storm Aileen
RETAIL NEWS WITH NICK BUBB:
• Next: Today’s interims from Next contain a very long section on the role of Stores in an Online world (which will repay further study, when there’s more time), but although interim PBT was nearly 10% down the main interest will be in the comment from the estimable CEO Simon Wolfson that the company’s prospects appear “somewhat less challenging than they did six months ago”, despite a continuing tough retail environment. This reflects the improvement in the product range and a more benign outlook for product price inflation, plus the growth of LABEL and Directory Overseas, as well as the more helpful weather of late, and the upshot is a modest upgrade to full year sales and profit guidance. That will please the City, as well as the statement that Next is likely to return to the share buyback trail at some point in the second half…
• John Lewis Partnership: That other great Retail bellwether, JLP, is less bullish than Next about the profit outlook for the business, after announcing a 17% fall in interim PBT (ex-property), with Chairman Charlie Mayfield saying “We are well set for our all-important seasonal peak, but we expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year. In addition, we will incur higher pension accounting charges in the second half year, as a result of low market interest rates. These will all impact our full year profits.”