30 Apr 2019

Irish Economy: Bumper retail sales performance in March

Preliminary retail sales data for March from the CSO reveal a bumper performance. On a headline basis, volumes were 4.9% ahead of year-earlier levels, while the value of these sales were +4.5% y/y. Core sales, which exclude the volatile motor trades component, were +8.2% y/y and +6.6% y/y in volume and value terms respectively.



Data for the 13 different segments of the retail sector showcase the breadth of the improvement in consumer spending, with 12 of the 13 seeing an annual increase in volume terms and the same proportion seeing a rise in the value of these sales. Furthermore, a remarkable five segments (Furniture, +34.3%; Electrical Goods, +22.4%; Hardware, +16.4%; Clothing, +15.0%; and Pharmaceuticals, +10.1%), posted double-digit annual growth in volume terms.


Some of the above growth rates are undoubtedly flattered by the inclement weather at the tail end of Q118, but we are unsurprised to see a strong increase in consumer spending given the positive momentum in both employment (+2.3% y/y in Q418) and earnings (+4.1% y/y in Q418). This, in turn, has encouraging read-through for Irish consumer-facing stocks. 


Symrise Strong Q119A

Continuing its policy of reducing the information provided in IMS releases, Symrise issued a short Q119A statement this morning only reporting at the revenue level. Previously details were provided down to the EBIT level. The company reported a 9.3% increase in revenue to €848.8m (INVe €837.3m) with organic growth of 8.2% (INVe 6.0%).


Within divisions, Scent & Care reported a strong 10.7% increase revenue to €367.3m (INVe €357.9m) of which 9.1% was organic (INVe 6.5%) from a combination of strong demand and price increases. The Flavor divisions reported an 8.3% increase in revenue to €315.6m (INVe €317.2m), with organic growth of 6.7% (LFL 6.0%) driven by demand in the beverages and savoury products areas. Nutrition reported a 7.9% increase in sales to €165.9m (INVe €132.1m) with strong LFL growth of 8.8% (INVe 5.0%) driven by the pet food business as demand for food applications grew “at a more moderate pace”.


Management has tweaked full year guidance now stating that top line growth will “significantly” exceed the overall growth rates in relevant markets (3-4% quoted). No EBITDA margin target was provided although previously it was stated at “around 20%”. The company’s longer-term target out to 2025 is to achieve a LFL revenue CAGR of between 5% and 7%, while adding “additional targeted acquisitions”.


While the Q118A revenue numbers are ahead of expectations and top line guidance tweaked upwards, any upward revision of forecasts will be tempered by lack of visibility on margin progression. As such we anticipate that while revenue numbers may tick up, there will be no material changes to consensus expectations following this set of results.


Symrise is trading at 34.1x FY19E P/E and 18.5x EV/EBITDA, a c.8% premium to its European food ingredient peers (ex-Chr Hansen).


Labour to decide on ‘confirmatory’ vote

The U.K.’s opposition Labour Party’s National Executive Council (NEC) will today ready itself for a bruising showdown on whether or not they will adopt a second ‘confirmatory’ referendum as party policy and include it in their manifesto ahead of the May 23rd European elections.


Deputy Labour leader, Tom Watson, openly called on Labour members and supporters to urge the NEC to include the ‘confirmatory’ second people’s vote in their manifesto. In recent days over 100 Labour MPs, MEPs and some 2,000 members/supporters have signed letters and sent emails to the NEC in support of Mr. Watson’s appeal. Labour leader, Jeremy Corbyn is playing his cards close to his chest and keeping reasonably tight lipped, preferring to say that he wants to keep a second ‘confirmatory’ vote as an option rather than a firm policy.


On the Tory side of the pitch, PM May remains on the ropes and is facing yet another confidence vote in the coming weeks after more than 65 chairmen of Tory associations signed a petition opposing her leadership. Andrew Sharpe, chairman of the Conservatives’ national convention is believed to have delivered a letter confirming the ultimatum to Mrs. May during a meeting yesterday.


China: April PMIs slip

Both the official and ‘Caixin’ manufacturing PMIs slipped back in April. The official CFLP manufacturing PMI fell to 50.1 in April, disappointing expectations for it to hold steady at 50.5, while the index produced by IHS Markit declined to 50.2 (consensus 50.9) from 50.8 previously.


Similarly, the official non-manufacturing PMI - which encompasses both the construction and services sectors - dipped half a point to 54.3 (consensus 54.9). IHS Markit will publish its own services PMI on 6 May.


Overall, while the PMIs suggest that the Chinese economic growth slowed in April, we would stress that they remain (albeit marginally) in expansionary territory after a particularly robust March. Indeed, the ‘hard’ industrial production figure grew at its fastest pace since mid-2014 at the end of Q1. As such, we remain of the view that the Chinese economy will see an acceleration in H2 on the back of the fiscal measures announced by the authorities.


GfK UK consumer confidence survey

April’s overall index held steady at -13 in April, in line with consensus expectations (Investec -11). In terms of the components, the major purchases climate balance fell slightly to -1 from +1 in March. This survey has been unusually stable in recent months, maintaining a tight -14 to -13 range since last November. By contrast the official measure of retail sales volumes has been robust so far in 2019.


Economic releases

08:55 EZ German Unemployment change + CPI

10:00 EZ Unemployment rate + GDP

11:00 EZ Italian GDP

14:45 US Chicago PMI                        

15:00 US Consumer Confidence