Compass Group, Britvic, MARS, Fulham Shore, Adnams, lending & other:

A DAY IN THE LIFE:

I don’t know if I’ve got a bit of dyslexia creeping in but, the other day, I read ‘outstanding’ as ‘custarding’ and I really don’t know where that came from.

Maybe, though I haven’t consciously thought about custard in weeks if not months, it’s been lurking their in my mind just waiting to get out and, when you look at the two words side by side, there isn’t all that much difference and this was the big opportunity.

Or maybe some ghastly Derren Brown-like character has been whispering ‘custard, custard’ into my ear as I’ve been sleeping.

Or maybe there are custard ads on the tube or maybe the local supermarket has made the product more visible, who knows.

However, sometimes, even often, there isn’t a reason for things and they just happen. Let’s move on to the news:

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COMPASS GROUP – H1 RESULTS

Compass Group has reported H1 numbers to end-March 2024 and our comments are set out below:

Revenue, volume growth: Revenue is up by 11.2% at $20.9bn. Operating profit is up 18.7% at $1.47bn and EPS is 59.0c against 50.4c last year. Compass is to pay an interim dividend of 20.7c, up 17.9c. The company reports ‘strong underlying operating profit growth of 18.7%3 delivered through balanced organic revenue growth of 11.2% and underlying operating margin up 50bps year on year to 7.1%.’ The company says it has ‘invested in growth’ and has ‘further refined our portfolio and returned surplus capital to shareholders.’

Strategic priorities: CPG reports its is ‘focusing on our core markets [it has exited four countries in H1 – and is] capitalising on significant structural growth opportunities.’

2024 outlook: Re H2, CPG reports that it ‘now expect underlying operating profit growth towards 15% with organic revenue growth towards 10%.’

Company comment: CEO Dominic Blakemore says CPG has ‘delivered a strong set of results, with balanced double-digit organic revenue growth and good underlying operating margin progression across all regions, leading to underlying operating profit growth of 19% on a constant-currency basis.’

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MARSTON’S H1 RESULTS – ANALYSTS’ MEETING

See also first results flash note. Marston’s has held its H1 analysts’ meeting and our comments thereon are set out below:

Financial performance: MARS reports that H1 LfL sales growth of 7.3% was ahead of the market, split into Q1 LfLs +8.2% driven by strong festive trading and Q2 LfLs +6.6% impacted by ‘extremely wet February and March’. Both volumes and values were up YoY. The company increased its pub operating margin to 12.3% against 10.6% last year. Energy & property cost reductions contributed +1.3 percentage points of this increase, labour contributed +0.5, and food and drink contributed +0.4.

MARS indicated that there is further potential to increase margin through labour efficiencies going forwards. The company highlighted that its seasonality sees it generate a third of its FY profits in H1 and two thirds in H2. The underlying share of CMBC’s profit/(loss) was a loss of £(0.6)m (H1 FY2023: £2.2m) ‘reflecting CMBC’s accelerated investment in brands’. This included large marketing costs associated with CMBC’s relaunch of Kronenbourg 1664 which will not be repeated in H2 and should result in top line growth for CMBC.

Cash, debt & assets:

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PUBS & RESTAURANTS:

Labour market:

The ONS yesterday confirmed that the UK labour market continues to cool. UKH comments, saying ‘there were 107,000 vacancies in hospitality in the quarter to April 2024, according to the Office for National Statistics. This is 15% higher than pre-pandemic levels of 93,000.’ It adds that ‘wages paid in the sector increased by 9.5% in March 2024, driven in part by ongoing wage inflation, the sector’s focus on recruitment and retention, and some business implementing April wage increases early….’

Sector trading:

See OakNorth comments, many of which are applicable to the sector as a whole, under Holidays, Hotels & Leisure Travel below.

Other news:

Accountancy group UHY Hacker Young has reported that the number of active distilleries in the UK is now some 42.8% ahead of pre-pandemic figures. It says there were some 387 distilleries registered as at 2023 compared with 356 a year earlier…

COMPANY NEWS:

Britvic has reported H1 numbers to end-March saying that the company has had ‘an excellent first half’ and it remains ‘confident of continued sustainable growth’. The company reports revenue increased 11.2% to £880.3m with an ‘adjusted EBIT increased 17.7% to £100.4m.’ The company reports that its adjusted EBIT margin increased 60bps to 11.4% and profit after tax increased 10.1% to £59.9m.

Britvic reports adjusted earnings per share of 27.0p, up 18.5% and it is to pay an interim dividend of 9.5p, up 15.9%. The company reports that adjusted net debt/EBITDA is now 2.3x, up 0.1x due to the company’s Brazil acquisition. It reports a new, third share buyback programme of up to £75m to be executed over the next 12 months…

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Fulham Shore reported revenue up 21% YoY to £99.9m for the year ended 26 March 2023 despite having to navigate a challenging economic environment and periodic disruptions to public transport. However, headline EBITDA decreased by 7% to £18.8m with the company recognising impairment charges of £4.7m over property, plant, and equipment for six restaurants….

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Adnams plc reported positive Q1 trading, with total sales up by 11% YoY,  driven by growth in beer and spirits sales both on-trade and off-trade. The company is exploring funding options for future growth, including raising additional capital or selling freehold assets, with a preference for the former.

Yum-owned Pizza Hut is reported set to move into the burger business after introducing it Cheeseburger Melt to its menus nationwide in the US on Tuesday. The various bits, save the bread, are inside a folded over pizza crust instead of a bun, and the beef comes in smaller pieces…

Richard Caring will relaunch Le Caprice at The Chancery Rosewood in Mayfair next year, aiming for a June 2025 opening. The restaurant is situated in the luxury hotel and leisure redevelopment of the former US Embassy.

Uber announced a $1.25bn deal to acquire Delivery Hero’s foodpanda business in Taiwan and purchase new shares in Delivery Hero, aiming to boost liquidity amid rising competition in Asia. The agreement will see Uber take over foodpanda in Taiwan for $900m whilst also acquiring $300m in newly issued Delivery Hero shares.

HOLIDAYS, HOTELS & LEISURE TRAVEL:

Sector trading:

OakNorth Sector Pulse reports the hospitality and leisure industry has shown resilience despite challenges like labour shortages and inflationary pressures. In the hotel sector, while operational performance remains steady, new supply and subdued demand may affect occupancy levels in the short term….

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The HSBC tower in London’s Canary Wharf may undergo conversion into a hotel or flats after the global bank vacates its headquarters in 2027. Landlord Canary Wharf Group has explored proposals from architectural firms for the 42-storey building, with options including repurposing it for hospitality or residential use.

OTHER LEISURE:

Barclays’ data forecasts that Taylor Swift’s Eras Tour will inject £997m into the UK economy, with fans spending an average of £848 per ticket. This spending surpasses the average UK night out by over 12 times, reflecting a significant boost to entertainment spending. Accommodation, travel, and merchandise are among the top expenses for attendees.

FINANCE & MARKETS:

The ONS yesterday reported that real pay is rising at its fastest rate in more than two years despite a cooling of the labour market…

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Unemployment. The ONS yesterday reported that unemployment rose by 166,000 between the final three months of 2023 and the first three months of 2024. This took the unemployment rate up from 3.8% to 4.3%….

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Charity The Trussell Trust has said that a record 3.1 million emergency food parcels have been handed out through its network of 1,300 food banks in the year to the end of March. The number of first-time users this year, at 655,000, is a slight fall on last year but is still up some 40% compared with five years ago.

Sterling up at $1.2589 and €1.1641. Oil lower at $82.88. UK 10 year gilt yield down 1 basis point at 4.16%. World markets mixed to better yesterday and London set to open up some 37 points as at 6.30am.

RETAIL WITH NICK BUBB:

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