Langton Capital – 2017-10-20 – Intercontinental, inflation, OTB, Sportech, costs & other:
Intercontinental, inflation, OTB, Sportech, costs & other:A DAY IN THE LIFE: After tripping over our dog in the dark for the umpteenth time I’ve promised myself to stick to light-coloured beasts in the future. Either that or paint them with some sort of reflective substance because, whilst he patiently lies there waiting to hobble the unwary, particularly those carrying trays of food, he’s pretty much invisible. Anyway, here’s an idea for you. Tories own Brexit. They limp past 2019 or 2021 or 2022 or whenever the exit date is. EU says fine but we’ll still hold the door open for you for 2yrs thereafter, no questions asked. GDP crawling along at 1% (Europe 2.5%, US 3.5%, China 6.5%). Labour hides its fiscal fangs, offers a second referendum, bribes the young with older people’s money & sweeps into power for a generation. Uncle Ho, sorry, Jeremy, in & Tories out for a generation. Job done. On to the news: PUB, RESTAURANT & DRINK PRODUCERS: • Pernod Ricard has reported stronger-than-expected 5.7% increase ($2.71bn) in underlying sales in Q1, with rising demand for Martell cognac and Chivas whisky in China. The spirits group said trading remained uncertain and have forecast a 3-5% rise in FY profits. • The MCA’s Eating Out Panel has indicated that the frequency of diners has decreased at each meal-time for the fourth month in a row. • The ALMR is pleased that the PM has written an open letter to reassure the future status of EU migrants in the UK. Chief Executive of the ALMR, Kate Nicholls said: ‘First and foremost, this will provide peace of mind and stability for EU workers making a valuable contribution to the UK. Many of our teams have been uncertain about their futures and this announcement will allow them to begin planning to remain in the UK with a clear and unambiguous offer that, if they are here when Brexit happens, then they can stay’. • US-based Del Taco Restaurants Inc. has lowered its expectations for restaurant margins this year as a result of cost pressures in its fiscal third quarter due to food inflation. • Retail sales fell by 0.8% in September, reversing a jump in August and bringing third-quarter retail growth down to +1.5% year-on-year, according to the Office for National Statistics. Despite September’s sales fall, Kate Davies, ONS statistician, said: ‘There is a continuation of the underlying trend of steady growth in sales volumes following a weak start to the year, and a background of generally rising prices.’ • UK coffee drinkers spend a whopping £676 each on coffee from shops and cafes. New data has revealed that the average coffee drinker spends £43,264 over their lifetime, ecquating to four cups a day (93,440 cups in a lifetime). • A new strategy aimed at boosting UK beer exports by £100m has been launched by the BBPA, and will span five years • Comptoir Libanais, the 25 strong Lebanese restaurant chain has opened its first site outside of the UK, in the centrally located Dutch city, Utrecht. • Comptoir has announced that it has sold its freehold central processing unit for £2.69m. It says it ‘will use funds raised from the sale for general working capital purposes and to assess further new restaurant opportunities.’ • The value of Australian wine exports rose 13% to AU$2.44bn in the year to September. China takes 30% of Australia’s wine exports by value • Butter prices are +73% over the last year • Dairy UK chairman Paul Vernon has cautioned that a no-deal Brexit would be ‘extremely negative’ • Dermot King, vice-chairman of the BHA and managing director of Butlin’s, has called for tourism to have its own ministry and portfolio to reflect its status as the fourth largest industry in the UK. INFLATION – LANGTON GOES OFF ON ONE: • Everything has consequences. A weaker currency may boost manufacturing & exports but it can lead to imported inflation etc. and, as this is pretty topical, we’re putting a few thoughts down on paper. • Causes (or ongoing sources) of inflation: o A. Weaker currency, imported inflation. o B. Higher commodity prices, imported inflation. o C. Wage rises, tight economy, low levels of unemployment & domestically generated inflation/. • At the moment we have a) and b). What we don’t have is c). This is deemed to be ‘good’ news but, whilst it probably is the lesser of two evils, it does have consequences because it implies that the hit to wealth will be taken by consumers without recourse to pay rises. • And this means that either they will save less, borrow more or spend less. • And we’re seeing all three in a move that, whilst it can support consumer spending in the short term, is finite. • Over the medium term (and whilst it may boost exports, though manufacturing is only a small part of the economy etc. etc.), the currency devaluation will lead to a lower ongoing ability to spend. Tax revenues will come under pressure etc. HOLIDAYS & LEISURE TRAVEL: • Intercontinental Hotels has reported Q3 numbers saying ‘we have delivered a good third quarter performance; RevPAR increased by 2.3% and net rooms growth of 4.1% was our strongest since 20102.’ • Intercon says ‘we also signed hotels into our pipeline at the fastest third quarter rate since 2008, and have made an excellent start with our plans to accelerate the growth of our brands around the world.’ • IHG reports global comparable REVPAR +2.3% in Q3 and up 2.2% in year to date • IHG says ‘the international expansion of our newest brands is gathering pace.’ It says ‘looking ahead, despite macro-economic and geopolitical uncertainties around the world, we remain confident in the outlook for the remainder of the year.’ • IHG says ‘the UK delivered Q3 RevPAR growth of 4.0% with our brands driving outperformance in both London, up 3%, and the provinces, up 5%.’ • The Tourism Society claims that the government could generate an additional £2.2bn in expenditure and 40,000 new jobs by cutting EU red tape. The society claims the new EU Package Travel Directive will be detrimental to the UK’s domestic tourism industry due to a poor definition of ‘package’. • On the Beach yesterday updated on its year to end-September saying it has ‘traded well in the year with adjusted PBT performance expected to be in line with Board expectations.’ OTB says ‘UK revenue growth for the year was 17% on the back of a strong H2 performance with growth of 26%.’ • OTB says it ‘experienced significant growth for the majority of the key summer trading period, despite some softness in the weeks that followed the Barcelona terrorist attack in August and we have exited the financial year with strong forward momentum.’ CEO Simon Cooper reports ‘the Group has traded well in the year with a particularly strong performance in the second half during the key summer trading period. The integration of Sunshine.co.uk Limited, acquired in May 2017, has progressed in line with our expectations.’ He concludes ‘we have continued to increase market share in our international markets and delivered strong revenue growth in the year. As a result of this performance, we are pleased to be launching in our third international market, Denmark, early in 2018.’ • The Board of Millennium & Copthorne Hotels has defended its decision to agree to a takeover by its majority shareholder after some investors criticized the deal. The Board insists that it had ‘taken into account both the potential growth and the risks inherent in the continued execution of M&C’s strategy, as well as the underlying assets of M&C’ as it decided to back the price. • Board of M&C says it had rejected two previous proposals from CDL, one at 510p per share, before the latest bid was announced. The independent directors said ‘whilst an assessment of the underlying assets of M&C is a relevant reference point, it is important to note that M&C has traded, and continues to be valued by the market, primarily on an earnings basis.’ • US hotel industry occupancy grew by 1.4% year-on-year to 69.7% during September, while ADR rose 1% to $128.52 and RevPAR was up 2.4% to $89.54. • STR data for the week ending 14 October shows occupancy rose 2.4% to 72.3% and ADR increased by 5.3% to $130.83, pushing RevPAR up by 7.8% to $94.58. • Increased shuttle and Eurostar passengers using Channel Tunnel services helped boost summer revenues at Eurotunnel, with third-quarter revenues to €286.4m over the same period in 2016. Shuttle revenues rose by 4% to €179.3m while railway network revenue increased by 4% as Eurostar traffic grew by 4% to almost 2.7 million passengers. Chairman and chief executive, Jacques Gounon, said: ‘The group’s strategy to concentrate on leadership in the most dynamic and high contribution sectors of the market, both for freight and passenger services, has enabled us to record a further increase in revenues. We remain confident for the full year.’ • Former Haven MD Mark Harper is to join Parkdean Resorts as COO. • Eurocamp is to cease selling its holidays through agents. • Managing director of Tui UK, Nick Longman, claims the package holiday is not dead, according to Travel Weekly. Instead, Longman claimed there is a ‘third way’ of traveling, one that takes elements from both independent travel and a package holiday, outlining Tui’s vision for its customers. • AMP Capital has agreed to acquire 100% of Leeds Bradford Airport from Bridgepoint Advisers Ltd. The airport has a catchment area population of 5.3m people and primarily offers short-haul flights to its customers. Simon Ellis, head of origination Europe at AMP Capital, said ‘the airport serves the Yorkshire and the Humber region, one of the fastest-growing regions in the UK with a population growth of 6% since 2001 and there is also potential for further route development.’ Michael Davy, partner at Bridgepoint, said ‘Over the past five years of Bridgepoint ownership, passenger numbers have grown by almost 40% to over four million.’ OTHER LEISURE: • Sales at Games Workshop have continued strongly and any movement in sales is directly reflected in profits, according to the company. Sales and profits continue to be well above the same period in the prior year. • Teamsport, a go-karting group, has been acquired by Duke Street Capital, according to Sky News. Teamsport has more than 20 go-karting sites across the UK and represents the first deal struck by the new fund which is backed by Goldman Sachs. • Sportech has updated on its business review saying it ‘has decided to seek offers for the Company. It says it ‘will continue to consider all options to maximise value for shareholders as part of its Strategic Review of the business and the capital structure.’ Sportech says it ‘expects to provide a further update on the Strategic Review along with its trading update on 9 November 2017. Further announcements regarding timetable for the formal sale process will be made when appropriate.’ FINANCE & MARKETS: • Oil down at $57.36 • Sterling lower vs dollar at $1.3103 • Pound down vs Euro at €1.1085 • UK 10yr gilt yield down 4bps at 1.28% • World markets: UK & Europe down yesterday but US markets higher. Asia mostly higher in Friday trade. • Brexit: o Mrs May in Brussels last night heard EU leaders welcome some of her proposals but say that concessions are not enough o Mrs May tells reporters ‘I particularly, for example, want to see an urgency in reaching an agreement on citizens’ rights.’ o Times reports David Davis is drawing up plans for a no-deal Hard Brexit o Goldman’s Lloyd Blankfein says he will be spending more time in Frankfurt from now on o A spokesman for no10 has said that London will remain a leading financial centre post Brexit PRIOR DAY’S LATER TWEETS: • Later tweets: Equity-hungry BrewDog in 5th round of Equity for Punks crowdfunding, aims for £50m. Good return, co says, but last 2 rounds fell short • Rank Group updates for 16wks to 15 Oct 2017 saying that revenues fell 1% in its venues but rose by 19% on its digital platforms. • China booming, retail spend +10.3% in year. Would be nice to get a slice of that. • China said to have used more concrete in 3yrs to 2013 than USA used in total of 20th century. • Travis Perkins says trading mixed, consumer side facing ‘increasingly difficult market environment’. • Games Workshop says sales, profits ‘continue to be well above the same period in the prior year’. START THE DAY WITH A SONG: Yesterday’s song was from the former Velvet Underground songwriter, Lou Reed, with ‘Take a Walk on the Wild Side’. Today’s song: It’s so typical of me to talk about myself I’m sorry, I hope that you’re well, Did you ever make it out of that town where nothing ever happened RETAIL NEWS WITH NICK BUBB: • BDO High Street Sales Tracker: While the debate goes on about how good Retail Sales were last month, after the mixed figures from the Planet ONS yesterday, the real focus has moved on to how bad October has been so far on the High Street and we flagged on Wednesday that John Lewis had another tough time in Fashion last week, as the weather turned warmer. And today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains last week flags that w/e Oct 15th overall saw Fashion Store LFL sales slump by 8.8%, versus a comp of -0.1% LFL a year ago. Including Homewares and Lifestyle chains, total Store LFL sales were down by 5.9% last week (versus +1.9% a year ago), but overall Online sales jumped by as much as 33.9% (against a weak +16% a year ago). • News Flow Next Week: On Tuesday we get the Carpetright pre-close and the opening of the new Westgate centre in Oxford (we are off there today for a preview of the much-awaited new John Lewis store opening, with its focus on customer service), whilst Thursday brings the Debenhams finals and the Inchcape Q3. • Quote of the Day: Having just returned from sunny Venice to some distinctly wild and wet weather in the UK, here’s some helpful advice from the New Zealand rock band Crowded House in 1991: “Everywhere you go, always take the weather with you”. |
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