Another of our Key Investments this week reported its latest six months to December 2014 figures and they are up to our highest expectations. It's house building and construction contracts and infrastructure developments sales and profits are all at record levels with a higher level of future work in the pipeline and anticipated improved profit margins.
Sales increased by 35% to £1085m
Profits increased by 21% to£46m
Earnings per share grew 24% to 46p
Interim Dividend is 22p an increase of 47%
Return on assets rose from 17.1% to 20.1%
The next six months is forecast to be even better as the groups unique strategy of House Building with infrastructure development/construction is directed to increasing demand from both the public and private sectors.
Gallifordtry remains one of our most attractive Key Investments for the foreseeable future.
What's in a name?
My first visit to a restaurant – it was really an ice cream parlour/cafe – was when I was about eight years of age and I still remember it! It was to LUCCA on the outskirts of Edinburgh, and it's still there today. Years later I visited LUCCA in Italy and enjoyed some memorable meals in that beautiful old town. Last month on a visit to Colombia I came across a restaurant in Bogota – Da Lucca – and once again I had a superb meal, in fact perhaps the most enjoyable Italian meal ever.Restaurant reviews are not something I would normally do, even after many years of owning them, but on the recent visit to Colombia I had one of the finest meals ever at a waterside location – the Club de Pesca, in the yacht marina in Cartagena, the old capital of the Spanish Main in the 17 th century.I was recently asked about our Key Investments and investing overseas. We don't do so directly but only by indirect holdings.The 13 hotels operated by Intercontinental Hotels Plc in Colombia,where the potential for growth and profits is great, is a good example of how we invest via holdings in KEY British Companies.But what is the attraction of Colombia? It is twice the size of France with a population of 40 million friendly people and one of the emerging and fast growing economies of tomorrow's world.
A great result from Redrow
Redrow is the first of our Key Investments to report figures in 2015, with their half year's accounts to December being even better than we anticipated and reflecting the strong management team created by chairman Steve Morgan
The highlights for the period as compared with the same six months of last year are
Sales increased by 54%. to £560m
Profit increased by 92%. to £91m
Earnings per share now 19.9p ( 10.3 p )
Dividend per share now 2.0p ( 1.0 p )
Dividend covered nearly 10 times
Redrow remains one of the most attractive of our key investments with a product range to attract buyers at all their sites throughout the country and it looks as if the second six months profits may be even better than today's results.
The next few weeks will see figures from some of our other key investments in the building and construction industry: Gallifordtry, Persimmon, TaylorWimpey. All should all produce record profits and increased dividends! Although perhaps not quite as good as Redrow?
Changing rooms
Le Cameleon is a wonderful eco centered hotel on the edge of the rain forest in Costa Rica was a highlight of my January trip and one of the most unique hotels I have ever stayed in. One never ceases to find new Ideas in the hotel industry and this was one of them.
I arrived at reception where everything was coloured white – desk, furniture, walls, floor, lounge tales and chairs except for the orange uniforms of the staff and orange chair cushions. Our bedroom likewise had white walls, curtains, chairs, table, bathroom fittings, bed linen, floor, except for orange cushions, bed and pillow slips, curtain tie backs, chair covers and even orange paintings on the wall. It was an unusual scheme but fantastically vibrant.
Next day, however, at breakfast staff uniforms were green and after servicing the room everything that had been orange the previous day had been replaced with green items and likewise in the reception and lounge.
And the following day everything green was replaced by items in blue and red.
A true chameleon effect which worked brilliantly in the semi tropical climate of Costa Rica – a true delight.
http://www.lecameleonhotel.com/gallery.html
Why we invest in British companies.
Why does Calpe invest only in British companies and not overseas ? A question I was asked this week and one that surprised me for we are major overseas investors but not directly. We invest in UK companies which have extensive interests in other countries – this way we benefit from the detailed knowledge of their management in operating in different markets, while at the same time being able to invest relatively cheaply at minimum risk in companies subject to English law and Stock Exchange financial controls.
Among our investment portfolio we have Intercontinental Hotels with some 4500 hotels in 50 countries, Compass group providing contract catering and services in over 50 countries, TaylorWimpey building houses in Spain, Aviva Insurance with major operations in Europe, Poland, Turkey, China and Asia. These holdings reflect the extent of different trading operations and currencies worldwide and what we consider to be sound long term investments.
To invest directly in foreign companies direct on foreign Stock Exchanges is best left to the large investment groups which have specialised funds.
2015: looking good so far
2014 was the first year we became a hotel/leisure investment group and management services company after ceasing to be a hotel owning and operating business at the end of 2013 and we finished the year with a 25.3 per cent return on our investment portfolio with our management clients all having a successful year.
Looking ahead into 2015, last year will be a challenge to beat, but our portfolio remains largely unchanged at this stage and we expect interesting developments with all our holdings.
This week has seen another shareholding move at Intercontinental Hotels Group with a Dutch Travel Industry investor buying 3.2 per cent of the company which will help to counter the holdings of American Hedge Funds in their attempt to destroy the existing IHG business plan and we can expect more record figures from IHG when it reports its final figures in mid February.
February will be interesting with final figures from Redrow, Persimmon and Galliford Try where large profit increases are expected to bring big increases in dividends. February 5th sees the Compass AGM and more good news from the world's top industrial and contract caterer, which will help to keep predators at bay and keep Compass as one of England's foremost companies.
February should also see the resolution of the AVIVA takeover of Friends Life and see the new AVIVA GROUP rapidly expand both in profits and dividends.
Management Services continues to grow with our clients continuing to expand in the leisure industries.
2015 THE YEAR AHEAD looks encouraging.
Why IHG's acquisition of Kimpton is such good news
Great news last week from one of our key hotel investments – Intercontinental Hotels Group plc – is to acquire KIMPTON HOTELS, the largest and most prestigious boutique hotel chain in the States and develop from its American base into Europe and the rest of the world.
This move is particularly interesting as the proceeds of this month's sale of one hotel, The Grand in Paris for over £300 million has provided almost all the funds to acquire KIMPTON and some 71 new hotels. A move which should also help to get rid of any hedge funds which might try to destroy IHG with an unwelcome takeover/merger with a private buyer or an American hotel chain.
The share price reacted well to the news as it is not difficult to foresee a further encouraging improvement in profits in the coming year and the continued growth of IHG as a British hotel group operating in America and throughout the world.
The future for well managed and imaginative boutique hotels is enormous and our holdings in IHG will remain very much a key investment in 2015.
Have a great holiday
How to have a happy and memorable New Year!
It's mid-December and all our friends/clients in the hotel and leisure business are busy and without exception have had a very good year.
As is normal in this business many of us take a vacation after the busy festive season when our own customers and clients have returned to work. I was asked this week for my suggestions on where two of our friends should bring in the New Year, not advice I would normally like to give, but here are some of my most memorable New Year's Eves:
* Bringing in the Millenium in Jerusalem at the wonderful King David's Hotel.
* Joining over 1,000,000 people on Copacabana Beach,Rio De Janiero, for the most spectacular New Years Eve firework display on barges out at sea after the most enjoyable meal and elegant Brazilian party up until midnight in the hotel.
* Vienna, the city of opera and music with its wonderful Opera Balls and its marvellous hotels may be cold but the atmosphere is unique.
* New Delhi in India is hot but a stay at the Imperial Hotel is a wonderful experience at the heart of this great city
* Buenos Aires in Argentina at the Alvear Palace Hotel took us back to an elegant 1950s time warp.
As for Calpe, a well meaning colleague suggested I recover from the busy year by relaxing in January in a monastery! This is almost what I am going to do - my take on that is to visit the Legend Santa Clara, once a 17th century convent now with five star French Management. Part of the Convento was the inspiration for Gabriel Garcia Marquez's fascinating novel Of Love and Other Demons.
Whereever you will be bringing in 2015, have a great New Year's Eve.
I wish you and your families a very Happy Xmas and an enjoyable and prosperous New Year.
Key investment round up
There have been some interesting movements in our key holdings over the last couple of weeks:
INTERCONTINENTAL HOTELS has seen a steady increase in its share price but no info on any financial moves to be acquired and the director responsible for its North America business leaves to join Loewes Hotel chain!
TAYLORWIMPEY continues to build bedrooms at a great rate and today it has become one of UK's top 100 companies and joins the FTSE top 100 list
AVIVA has confirmed its acquisition of FRIENDS life which should lead to a great increase in business. It has announced that as soon as deal is completed in March, it will increase dividend by 30 per cent for starters.
BERKELEY HOMES, our investment in building luxury bedrooms, announced impressive interim results on Friday, ,more than justifying our KEY investment here.
Superb Sacher
Elizabeth Gurtler CEO of the SACHER HOTEL in VIENNA has just won the Top Independent Hotelier in the World Award, an achievement well earned from my experience of visits to this great hotel.
The SACHER, privately owned for three generations, is a superb hotel in all respects, but I particularly remember my first visit there. Barbara and I decided to take a break in Vienna and experience the world famous opera. We booked our flights and a stay at the SACHER Hotel which is next to the Opera House, but then found the opera was fully booked that weekend and there was no possibility of any tickets (this was before online bookings) but we still decided to go as Vienna is a beautiful city.
On checking in at the SACHER the concierge in conversation asked what we had planned to do during our visit and I mentioned that we had intended to enjoy the opera but had not realised how difficult it was to reserve seats. His response was Would you like two seats in the front stalls or a Private Box? Fifteen minutes later tickets arrived in our room and two hours later we were enjoying a performance of The Marriage of Figaro from a private box. There was no surcharge for the tickets which came to us with a suggestion of a restaurant for dinner after the performance-which was an excellent choice and our note from the SACHER gave us an excellent table.
THe SACHER is also the home of the SACHER Torte, to be enjoyed in the ground floor Viennese Cafe which is part of Vienna's reputation for pastries and its cafe society.
For film buffs -THE ThIRD MAN - director Carol Reed's post war drama set in Vienna in 1946 starring Orson Welles and Alida Valli with screenplay by Graham Greene, is a film noir partly shot in the SACHER hotel while the streets around the hotel formed the background for this classic film. A film which ranks as one of the all time great movies.
Compass Group: the right direction
For those of you following our investment strategy after the sale of our freehold hotel properties, an update on one of our key holdings this week from Compass Group the UK's largest contract catering organisation operating in 50 countries.
Compass has delivered another good performance in the fourth quarter of the financial year with further strong growth in its North America & emerging regions and a continued improvement in Europe and Japan. Organic revenue growth in the year has been driven by strong levels of new business gains, good retention rates and inflationary price increases. For the full year,organic revenue growth at constant currency is 4 per cent and the operating profit margin increased by 10 basis points. The result this year in financial terms is an increase in dividends from 24p per share to 26.5p per share, a 10 percent rise after profits reached £1,159,000 million and the share price has risen in the past two years from 874p to 1074p.
The potential for Compass which is based in Chertsey in Surrey, continues to grow at a healthy rate and justifies our increased investment in the past six months. With its world wide operations it gives a solid base for future profits and increasing dividends.
Key Aviva Insurance investment pays off
Before we sold our hotel properties we insured much of our business with AVIVA formerly Norwich Union. As you may recollect we resolved to reinvest in shares in companies operating hotels, catering contracts and those which build bedrooms, but there was one exception to this plan for our future KEY investments. It was our former insurance company which was suffering from several years of management problems ,it had poorly performing subsidiaries in some countries and it urgently needed and was expected to make major changes to its Board of Directors.
The investment we made less than two years ago at £3.65 per share was justified yesterday after two years of new management with the proposed acquisition of Friends Life Insurance by Aviva and the Aviva share price rising to £5.15 per share, giving us a profit of 40 percent to date. The likelihood is that things will continue to improve from now on as Aviva regains the high reputation it had some 10 years ago, for with the acquisition of Friends Life the combined group will be the biggest in the UK in terms of number of customers viz. 16,000,000 policy holders.
When one looks back seven years the share price was about £8.00 per share!
4 reasons why we invest in Redrow
Several enquiries recently on why choose Redrow as one of our KEY investments.
The financial reasons are there -- a strong balance sheet, rapidly rising sales and profits, a dividend nearly 10 times covered, a PE ratio of about 10. All good financial reasons.
But if you have any doubts on the future of this business, get a copy of the REDROW HOMES magazine, one of the most stylish and impressive sales and marketing publications I have seen which incorporates the products and services offered and the choices of homes and sites available throughout England and Wales
The Redrow magazine is available to download from www.redrow.co.uk
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Great trading from TaylorWimpey
TaylorWimpey Plc one of our KEY investments issued its 9 months trading update this week. It makes great reading with sales steadily increasing, profit margins rising faster than expected, sales prices rising and a forecast of further improvements and a very substantial rise in dividends for next year.
We believe the sales cycle of the past four decades is finally over with a sound base of house building and construction companies continuing to build properties at an increasing rate into the foreseeable future. Nothing is certain in business but the growth of TaylorWimpey is impressive and we may see it in the FTSE 100 in the not too distant future. No reason to sell this investment as both its dividends and share price is rising
Population growth is a major factor in our thinking and can only contribute to increasing demand for more bedrooms. An interesting trend now is for builders to include restaurant and hotel units in their major schemes as part of the development of lifestyle and sustainability features for the future.
Looking forward some three months we can I think be very optimistic for TW as one of our long term KEY investments and to prove to be a safe and profitable haven for funds from our recent hotel property disposals.
Will IHG's eventual home be Chinese?
Part of our hotel property sale reinvestment went into Intercontinental Hotels Plc. It was one of our KEY investments for two reasons:
1. It is the world's biggest hotel group and one of the best, as has been our experience in the past two years, with increasing profits and substantial dividend payments. It continues to grow its business with some 1200 new hotels in its growth pipeline.
2. As an English company with its base in Windsor, now transferred to Denham, it was bound to attract predators from overseas as do so many of our great companies. Sure enough a few evenings ago an American Hedge Fund turned up as a major shareholder with a scheme which will transform IHG but not I think for the best and the end product will probably see another UK group lose its independence.
The eventual home of IHG is unknown but a good guess could be a Chinese or Middle Eastern buyer. For us it will be an anticipated substantial profit on one of our KEY investments but for now we just have to wait and see!
Will keep you advised as the battle develops.
Compass: the right direction
For those of you following our investment strategy after the sale of our freehold hotel properties, an update on one of our key holdings last week from Compass Group the UK's largest catering organisation operating in 50 countries
Compass has delivered another good performance in the fourth quarter of the financial year with further strong growth in its North America & emerging regions and a continued improvement in Europe and Japan. Organic revenue growth in the year has been driven by strong levels of new business gains, good retention rates and inflationary price increases. For the full year, organic revenue growth at constant currency is expected to be 4 per cent and the operating profit margin is expected to increase by 10 basis points.
Compass continues to grow at a healthy rate and justifies our increased investment in the past six months. With its world wide operations it gives a solid base for future profits and increasing dividends.
The potential for this successful food and support services company, with its base in Chertsey, Surrey remains excellent in all of its activities.
The Black British Business Awards
Last week I was honoured to attend the inaugural Black British Business Awards. It was a great occasion – perfect organisation with a beautiful meal in the Grange City Hotel, but above all one of the most inspiring afternoons I have enjoyed due to the talented business people that were shortlisted for the awards – a cross section from the arts, media, finance and STEM. I was delighted to applaud four winners sitting on my table: Darcus Beese OBE, President Island records, Trevor Williams, Chief Economist Lloyds Bank Commercial Banking, Margaret Casely-Hayford, chairman Action Aid and Dr Maggie Aderin-Pocock. Aderin-Pocock is a space scientist and communicator and her career to date includes:
Designing handheld land mine detectors.
Working on the Gemini Telescope in Chile
Roles at the MOD, UCL and Asterism
Public engagements worldwide, lecturing to over 150,000 people
Giving talks to some 25000 inner city children on the exciting careers that science can offer
Appearing in BBC science documentaries and has just produced her first film, Space in the UK
She brought her eight year old daughter to the lunch and up on stage to collect her award, dedicating the award to her daughter, 'her inspiration'.
Ken Olisa, founder of ethical investment company Restoration Partners, gave a great closing speech - both humorous and humbling - and finished by urging us all to be philanthropic. It was a fantastic day. Congratulations to the founders Melanie Eusebe and Sophie Chandauka on a wonderful event - and good luck for 2015.
Why building companies are a good investment
Our decision last year to dispose of our freehold hotel investments and reinvest in hotel and catering management companies, and in building companies which build hotels, hostels and houses is now being reflected in a level of profits which any traditional hotel company will find near impossible to equal
Last week one of our key investments in the building and construction industry, Galliford Try plc, produced a 28 per cent rise in profits and a 43 per cent increase in dividends with a further increase again forecast for next year. Looking into the immediate future and the recent raft of hotel construction plans by Travelodge, Premier Inns, Hilton in its various brands and more provincial boutique hotels, it is obvious the building /construction business can only benefit. The future turnover in construction is guaranteed to grow on the housing demand and added orders from the hotel industry can only boost profits, thus for those of you involved in our current investment programme, we continue to increase our holdings.
More of our new investments made from the disposal of our owned/managed properties will be reporting results shortly and we will continue to update you on their progress and the expectant increased profits and dividends.
Chocolate Film's 1000 Londoners at the V & A
In 2002 , UCL arts graduate Mark Currie and Bristol university law graduate Rachel Wang founded Chocolate Films, initially to produce educational and social enterprise films for charities and arts organisations.
Four years later, with a unique reputation for talented film making, the company expanded. Calpe Leisure was able to assist with administrative advice and help as increased staff levels, new offices and post production abilities were acquired to assist with increased demand for promotional, event, corporate and documentary video productions.
The past seven years has justified this expansion with almost 400 productions and the launch in April of the ambitious and innovative 1000 LONDONERS – a series of 1000 short films being produced one every week for 5 years. Sponsored by people who love London including the City of London Trust, it reflects all aspects of modern life in the city – artistic, social and business. Fourteen of the new films can be viewed at the reopened Imperial War Museum with 10 more being screened today (September 19) at the V & A. Each film is released weekly on You Tube – it's an amazing archive in the making.
Today Chocolate Films is a successful SME with over 100 customers and a talented production team making films for some of Britain' s best organisations. Calpe is delighted to have been able to assist this talented team of British film makers.
www.1000londonders.com
Www.chocolatefilms.com
An enjoyable and informative summer
All our clients and investments are having their best trading results this summer since 2008 which gave me a welcome opportunity in August to enjoy what others in the hotel and leisure industry have to offer.
A visit to the annual Festpiele (opera festival) in Bregenze in Austria was a unique experience (Bregenze opera was featured in the James Bond film, Quantum of Solace). The stage is built out on to Lake Constance facing an auditorium with a 7000 capacity audience and the production of The Magic Flute by David Poultney was brilliant. However what was exceptional was the catering. The catering at Glyndebourne is good but it was not until I enjoyed a superb a la carte meal before the opera in the auditorium's restaurant did I realise it was the best dinner I have had in a restaurant with 500 covers, all a la carte served by the most organised and efficient staff I have encountered. The catering was by EvenTZ a local Austrian company. It truly was an evening to remember.
Next stop was Switzerland and its great hotels.
A short stay in Berne at the Schweitzerhof where this great hotel had the most elegant, efficient and friendly welcome on arrival from its reception team and General Manager Iris Fluckiger. Then on to Gstaad and the famed Palace Hotel which is one of the finest hotels in the world. Everything was perfect – accommodation, restaurants, service and a choice of sporting and cultural activities to cater for the most fastidious of guests, yet in a completely laid back traditional setting. It is always a country to visit to enjoy the best the hotel business can offer.Guaranteed sunshine was next on my schedule and a visit to Greece, this time to see a relatively new development in the Peleponese where two Starwood Hotels – the Luxury Collection Romanos and a Westin Operation – make one great resort with seven restaurants, luxury spa, leisure activities for all ages during the day and evening. Several evenings I chose to visit local restaurants which I had visited over 10 years ago and found the choice and quality of these local family eateries had improved tremendously.
One such restaurant set out its story on the place setting mats:
THE FAMILY RESTAURANT
Everyone was inventing excuses to visit our home and taste all those dishes my mother was cooking. My father was always on the grill. They kept saying: 'Why do you not open a restaurant then we can come whenever we want without making up excuses to come and visit you?' So we did. It was September 1999 when we decided to make it happen. All the odds were against us for it took almost a year to find and rebuild this place as our first restaurant, the only acceptable building being a half demolished warehouse in which someone was keeping his livestock.The front was a dirt track with no lighting.
When our friends saw the place they said 'You are doomed and going to throw away your money for nothing.' But we could see the potential then in this tiny village of Gialova by the sea.
Finally in June 2000 and into the new Millenium the restaurant was ready to open its doors. None of us had any experience on how to serve professionally 200 customers all at once. We were so stressed that we did not tell anyone the date of our opening as we wanted to build up slowly while we learned the business. But when we opened the doors on the first night we found a queue outside and we were on panic. After a crazy day and then the first of many such days, we made it through and have learned through the years how a restaurant works and we are still here today after 14 years to offer you just the best. FROM THE FAMILY
With fresh fish, fresh vegetables and a delightful local wine I can assure you of a great meal to complement the choice of restaurants in the nearby Starwoods Resort when you visit. Note down Gialovas Family Restaurant
With the summer over we are now back to planning our development and marketing strategies for 2015 and 2016 with our clients investors and friends.
Gordon Currie at Calpe Hotels and Leisure Consultancy Group