Langton Capital – 2020-03-19 – PREMIUM – Trading updates, Young’s, Sheps, ESC, PPHE, Gym Group & others:
Trading updates, Young’s, Sheps, ESC, PPHE, Gym Group & others:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Swamped by updates from Young & Co, Shepherd Neame, Everyman, PPHE, New River, Gym Group, Escape Hunt, Playtech and Sportech. On to the news:
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LONGER TERM CONSEQUENCES OF COVID-19: The current crisis may prove to be a jolt to the psyche of consumers, investors etc. 19 March 2020:
A war-time mentality?
• The ongoing coronavirus pandemic will arguably have several long-term consequences.
• Prime Minister Boris Johnson said the UK government will approach this unprecedented crisis with a ‘war-time’ mentality. But what does this mean?
Borrowing & state intervention in general:
• This will rise and is rising massively. Heaven knows, at this stage, what the numbers will add up to. But you need to make sure there is a tomorrow before you start worrying about how to pay for it.
• The government appears to know that problems roll downhill. Operators are already putting pressure on landlords and banks, banks will be hearing from the above landlords as well and banks turn, in distress, to the government
• It would appear that the latter, quite understandably, is trying to slow or even halt this process, effectively by throwing taxpayers’ money at it. That, whilst not pleasant in terms of borrowings, is probably unavoidable
• Where the bad stuff continues to roll downhill, banks and then ultimately the government, could end up running airlines, hotels, hospitality businesses and the like on a scale unheard of in recent years
• It is generally thought that wars drive innovation, with technology advancing leaps and bounds during desperate times.
• There are early signs that this outbreak is also encouraging scientific innovation at a staggering pace.
• From vaccines, to 3D-printed valves for respirators to open source blueprints for ventilator designs.
• Manufacturers are being pressed to retool machines at a speed they would not normally consider reasonable
• Social ideas are also developing rapidly, with previously obscure phrases such as ‘social distancing’ becoming a common idea.
• The big question, which we look at a little more, is will any of these trends or ideas outlast the Covid-19 outbreak?
The signs from elsewhere:
• Looking over at America, the government there is considering giving every adult $1000 to meet short term needs. Bernie Saunders has upped this to demands for it to be $2000
• In the UK, £10k is being promised to small businesses by way of a grant / bribe not to sack people and other companies may have access to £25k
• This appears to be on a no-questions basis. The government rightly thinks that we need to get through this before we weed out the freeloaders
• In the US, there is a debate over Universal Basic Income (UBI) taking place on the mainstage. Merely months ago, UBI was considered a pipe dream.
Longer term implications:
• There is a possibility that society will come out of the other side of this crisis with a set of new ideas.
• There may be a greater public concern over sanitation going forwards. Perhaps the western populace will adopt mask wearing during the winter months. Sales of hand sanitiser may never look back
• All we can say is that this crisis will leave a lasting mark on our societies.
• On a commercial level, thank goodness that this didn’t coincide with the Financial Crisis because, though they will be under massive pressure, balance sheets are a lot healthier now than they were in 2008
• The trend towards de-gearing, at least for the companies that survive this, is likely to go on. Dividend payments may be reduced
• Will people work from home more? Are the mobile networks of Vodafone and the rest therefore even more valuable than we had previously though?
• City centres may not be as busy (or valuable) as they had been in the past
• We may be pumping inflation into the system
Specific hospitality industry considerations:
• 100-year events don’t turn up very often in 10yr plans. There is rarely enough fat on the corporate body for it to survive shocks such as this one without major damage
• That may have to change
• And good things, as we are seeing, are only good until they are not.
• Lean balance sheets could be a trap and whole industries, such as the airport concessions businesses of a number of our companies, may not be a one-way street to growth
• Travel hubs may be much more risky than they are displayed in models
• No doubt Nassim Taleb would have something to say about it but having Black Swan clauses in contracts might not be a bad idea going forward. Lawyers may say ‘that’s not likely to happen’ but, guest what, sometimes it does.
• Perhaps food retailers are not as boring as we thought?
• Are foreign holidays, which can involve a lot of intricate travel where no one thing can be allowed to go wrong, quite as riskless as we would like?
• Nielsen has picked up on a number of trends including health-minded buying, ‘pantry preparation’ and ‘quarantined living preparation’. Customers may have to invest in more tins of beans
• Have to cut this short as swamped by updates
PUBS & RESTAURANTS:
The coronavirus crisis:
Government aid, please sir, can we have more?
• A cautious positive response to Sunak I (or is it II post last week’s Budget?) but the industry wants more.
• UKH says the government should ‘announce an employment support plan to help protect livelihoods and the 1 million-plus jobs now at risk in UK pubs, restaurants, bars, hotels and leisure attractions – without delay.’
• UKH says ‘in excess of one million jobs are now on the line.’ Job cuts are ‘happening now – today and tomorrow, and are snowballing.’
• Apart from the human cost, every cut now makes a return to normal (in due course) that bit more difficult.
• UKH says ‘in the two weeks since the impact of the coronavirus was truly felt in the UK…this industry has shorn between 200,000 and 250,000 jobs, with majority of these cuts coming in the past few days.’
• There is no fat in the system. UKH says ‘the speed of change and the severity of the action companies are now having to take is shocking and many, many more will be lost in the coming days, without help.”
• The BBPA has said that the government has just 24hrs to save thousands of pubs from closure. It says ‘despite initial government relief, pubs urgently need liquidity measures in order to pay wages and prevent thousands of pubs from closing, with the subsequent loss of hundreds of thousands of jobs.’
• The BBPA is asking the Government to underwrite ‘at least 75% of wages for all pub and brewing staff, enabling employers to pay staff during this period of uncertainty. It is estimated this would cost the government £1billion.’ It says ‘in addition, the British Beer and Pub Association is asking for the Government to cancel Excise Duty and VAT payments that pubs are due to pay on 25th March and 31st March respectively. This will enable pub operating companies across the country to redirect much needed cash directly into their businesses, helping to prevent closures and save jobs.’
• BBPA CEO, Emma McClarkin, comments ‘pubs are in a crisis today. We need urgent intervention from the Government to prevent a catastrophic number of job losses and the sector damaged beyond repair. We recognise as a sector that we are in unprecedented times.’
• UKH has called on the Welsh Assembly to follow the UK Government’s lead in providing business support. It says that, in the absence of material aid, ‘the hospitality sector in Wales is in very real danger of suffering swift and fatal harm.’
• Oakman Inns CEO, Peter Borg-Neal, has cautiously welcomed the Chancellor’s pledge ‘to do whatever it takes’ to keep businesses and people affected by coronavirus solvent. Mr Borg-Neal said the package is ‘certainly a good start but more support is needed as we will still need to trade to keep our team in employment.’
• UK Hospitality in Scotland ‘has welcomed the Scottish Government announcement of support to help businesses deal with the impact of Covid-19.’
Company communication with the stock Exchange & shareholders.
See elsewhere for today’s announcements.
• Some slight disappointment that there was not a more positive reaction from the shares of hospitality companies yesterday post Mr Sunak’s emergency measures. A flurry of RNSs, however, as we heard from Loungers, Marston’s, M&B (which we cover below), Restaurant Group, Revolution Bar Group and Gear4Music as well as DART Group (see below) later in the day. JDW presents its half-year numbers via conference call on Friday.
• The Restaurant Group bravely tried to put some numbers on the crisis. It is expecting revenues to be down 45% LfL in H1 (nearly all of the damage will be done in Q2) with a ‘bounce’ to only down 5% in H2. It expects a 10wk shutdown and a drop of 92% LfL in its concession sales in Q2. Commenting on the veracity or otherwise of the assumptions is pretty much impossible at this point. The numbers assume a virtual shut-down in Q3 and a somewhat ambitious return to almost-normal in Q3.
• RBG says it is suspending rental payments. Needs must – but landlords may have something to say about that. We hear that landlords are predominantly understanding – but they have their own bills to pay. Some are playing hard ball. One we heard back from reacted to a request to move to monthly payments by saying it would only do so in return for its legal fees being covered, a 5% of rent one-off fee and an increased rental deposit of 3mths. Presumably it wanted the site back.
• M&B yesterday updated on the impact of Covid-19 saying sales were up 0.9% in LfL terms in the 24wks to 14 March but, ‘within this recent trading has been severely impacted by COVID-19 and the containment measures taken by the Government, including the recommendation to avoid pubs and restaurants which is now expected to lead to a further significant downturn in sales.’
• M&B says it is ‘impossible to quantify the impact COVID-19 could have on our financial performance. However, we expect a significant reduction in our expected outturn for 2020 and, given this uncertainty, can no longer provide detailed guidance on the expected forward financial performance for the year.’
• M&B says that it is cutting costs, has a strong balance sheet and has headroom, under most circumstances, to meet its covenants. Business rates relief will be a material positive.
• Admiral Taverns, though a private company, says ‘we have been working through the latest Government advice and are putting plans in place wherever we can to support our licensees through these incredibly difficult and unprecedented times.’ Admiral adds ‘in the immediate term, we have taken the decision to defer all rent and associated non-beer charges till April, to give our licensees time to apply for the relevant Government financial assistance that is being promised. We are liaising closely with our relevant trade bodies and will continue to press the Government to support the UK pub industry.’
• Greene King has told its tenants it will delay the collection of rent and associated payments until further notice.
• Loungers yesterday updated on trading saying that LfLs were up by 4.4% for the 47 weeks to 15 March 2020. The company said ‘over the two weeks to 15 March 2020, trade continued to hold up well with like for like sales of +2.5%.’ Loungers went on to say ‘however, as a result of the Government’s advice to avoid hospitality venues, we are beginning to experience a fall-off in sales and anticipate a very challenging trading environment with significantly lower sales in the coming weeks.’
• The group, like all others, is ‘not in a position to quantify the impact of Covid-19’ but says ‘we expect a material reduction in our trading performance for the remainder of FY20 and into FY21.’ CEO Nick Collins says ‘these are clearly challenging times.’ He says ‘the hospitality sector has been hit hard and whilst I welcome the fact that the Government has finally listened, it needs to do more, urgently, particularly in terms of protecting the financial position of the millions of people who work within the country’s pubs, restaurants, clubs, cafes and bars.’
• ASK yesterday announced on Twitter that it was shutting all of its restaurants. It said ‘hard to put into words but we’ve made the difficult decision to temporarily close all ASK Italian restaurants as of today.’ It says ‘please stay safe and be kind.’
• Selfridges is to close from tonight for an unknown period. Seedrs will ‘continue to operate business as usual’. So that’s a relief. Langton was spooked back up North by the fear that the trains might stop running. US retail majors such as Foot Locker, Macy’s and Tapestry are closing temporarily.
• Brasserie Bar Co says ‘it is with great sadness that we let you know we are closed until further notice.’ Mothers’ Day for all of these companies now a complete washout. BBC to suspend filming of East Enders and Casualty.
• Following the prime minister’s comments, a number of pubs, restaurants and hotels have closed to the public for the foreseeable future. Chains include Hawksmoor, Corbin and King, Mowgli, Chez Bruce, Manorview hotels, and D&D London.
Other coronavirus news:
• Data company Tenzo reports that sales across the hospitality companies that it services were down 69% yesterday with 8% of sites closed. This is down from a drop of 51% on Monday and 44% on Sunday.
• CGA says it will be ‘publishing weekly reports to capture the sales impact as well as changes in consumer behaviour across the UK in response to government recommendations such as avoiding large gatherings, travel limitations, closures and social distancing.’ In addition, the Coffer Peach Tracker will be published weekly with the first due out overnight.’
• Misdirected aid? J Sainsbury, whose business is currently benefiting from accelerated consumer spend on essentials, says it will save around the £567m in business rates that it paid in the financial year to 9 March 2019. Morrison’s has made a similar comment and Tesco will benefit even more. The government clearly had to move in a hurry but the £2bn or so going to the major grocers might well have been more accurately targeted.
• All food tech lessons at daughter’s school have been cancelled as the school has not been able to elbow its way past the hoarders to buy the ingredients in local supermarkets.
• Pret offering free coffees and 50% off food to NHS workers.
• Morrison’s has said it will recruit 3,500 new jobs to expand its home delivery service amid the coronavirus pandemic.
• Ocado has shut down its website and app until Saturday.
• CGA says ‘most of the public will heed the Prime Minister’s advice and stop going out to pubs and restaurants.’ Though apparently not his father, Stanley. CGA says ‘most younger adults say they will cut-down [on going out] but not stop.’
• Only 14% of respondents believe that the ‘decision taken by the Government to discourage social gatherings’ is ‘overly drastic and unnecessary at this stage.’
• Pubs, restaurants and hotels will not require planning permission to be able to offer hot food takeaways during the coronavirus outbreak.
• Per NRN, US restaurants are either being forced to close due to local city and state ordinances or are dealing with empty dining rooms as consumer confidence falls. 41% of Americans are nervous or worried to go out to eat, with 27% are avoiding going out to restaurants altogether.
• Per NRN, Black Box Intelligence has found almost 70% of the restaurant companies it surveys had seen traffic decline as a result of the coronavirus pandemic.
• The UK’s major supermarkets have effectively introduced rationing to no more than a couple of the same item in order to cope with panic buying (what the Americans call ‘pantry preparation’). PM Boris Johnson’s claims that the population did not need to rush out to buy toilet paper and rice has left some people caught short or hungry or both.
• Scotland has halted its tourism tax plans.
• Would-be commuters working at home are behind a 30% surge in Vodafone’s internet traffic.
• A little more discrimination crept into share price movements yesterday as at least seven of our companies updated on trading but the share price of only one, Marston’s, was up on the day.
• Major movements yesterday included Marston’s, up 44%, albeit from a low base on its trading update and Cineworld up 152% on director’s buying – though these were swamped by falling share prices. Notable were Carnival, down 34%, Dart Group, down 19%, Hostelworld, down 22%, Hotel Chocolat, down 17%, Loungers, down 13%, M^B, down 19%, New River, down 14%, On the Beach, down 16%, PPHE, down 17%, Restaurant Group, down 19%, Revolution Bar Group, down 32%, Saga, down 14%, SSP, down 29%, Time Out, down 17%, JD Wetherspoon, down 10% and William Hill, down 24%. The food retailers’ shares rose on the day.
• The FT says that the Covid-19 pandemic has triggered a move back to processed, tinned & frozen foods.
Other pub & restaurant news:
• Young & Co has updated saying ‘it is too early at this stage to quantify the impact on earnings for the remainder of the current financial year without knowing how long our pubs will be affected. We do expect closure of some or all of our pubs, at some time, but hopefully only for a short period.’
• It says ‘our intention at the moment is to continue to trade our pubs, as we feel they offer local communities a place of sanctuary in these uncertain and worrying times. We have introduced very clear guidelines on ‘social-distancing’ and are upholding the strictest health and hygiene measures to protect our customers and our teams.’
• Young & Co does not give numbers. It says it has a strong balance sheet with low gearing. CEO Patrick Dardis says ‘these are challenging and uncertain times and we must all come together to do the right thing during the peak period of Covid-19. We have a resilient business underpinned by great people who we will support through this crisis. However, let’s be in no doubt that with pub closures imminent, albeit hopefully for only a short period, all businesses in our sector will be severely impacted.’
• Shepherd Neame has updated and cancelled its H1 dividend. It says ‘events have moved extremely rapidly since we reported our interim results on 11th March culminating in the Government’s advice on Monday 16th March to the general public to “avoid pubs, theatres and other hospitality venues” in order to contain the spread of the COVID-19 virus.’
• This has impacted trade saying ‘it is inevitable that trading will deteriorate rapidly’ and it adds ‘until a semblance of clarity returns it remains impossible to gauge the impact on the years’ results.’ The company is cutting costs and says ‘the brewery will continue to produce beer under new and strict access and hygiene controls.’
• Shepherd Neame says it will cancel the interim dividend of 6p per share which was announced on 11th March and would have been payable on 2nd April 2020. It says it has taken on new debt facilities adding this is ‘precautionary at this stage and will be reviewed on a weekly basis to preserve maximum headroom on our facilities and in the hope that we can return to normal business in the near future.’
• Property Co NewRiver has updated saying ‘the Company’s focus is on managing cash resources very carefully and maintaining liquidity in the business.’ It says ‘NewRiver’s retail portfolio of shopping centres and retail parks represents more than 70% of our total portfolio valuation and net property income. These assets are typically anchored by major food and grocery brands and serve the everyday shopping needs of their local communities.’
• NewRiver will not be paying a Q4 dividend. It says ‘our community pub portfolio, which includes a number of Co-op convenience stores, represented 23% of our portfolio by valuation and 30% of our net property income.’ It says ‘the majority of our ‘Operator Managed’ pubs remain open and trading, although we are currently assessing UK Government advice and will take all necessary steps to ensure occupier and customer safety.’
• Per licensing solicitors Poppleston Allen; ‘The London Borough of Redbridge will not be considering the proposal to adopt the Late Night Levy as had been planned later this month.’
• CGA says the ‘delivery sector appears to be in for a boost.’ It says ‘35% of respondents suggested that they will get food delivered as a result of Government advice, rising to 40% for 21-24 year olds and 38% for 25-34 year olds.’ It says ‘similarly, 12% of respondents suggested that they would use click and collect for eating and drinking out, which may prove another revenue stream for outlets impacted.’
• Sky news reports Deliveroo couriers are being forced back to work when they should be self-isolating, because they are unable to access the support promised by the company. Workers require documentation from the NHS to be able to access a multi-million pound ‘hardship fund’ for riders and drivers.
• The Habit Restaurants shareholders have agreed to be acquired by Yum! Brands for $375m.
• In the US, Union Square Hospitality is cutting 2,000 jobs, 80% of its staff, with CEO Danny Meyer set to completely forego his salary and the executive taking a ‘significant’ pay cut.
• Yesterday’s tweets: 1) No business rates should be worth c5% of revenues to pub & restaurant companies. But the food retailers, whose businesses are robust, are the accidental winners here. 2) Morrison’s £308m windfall, Sainsbury £567m windfall & Tesco even more. Yet their businesses are booming (at least at present)?! 3) Sterling has been terrible lately, down around 11% in a week. Currency markets have given a thumbs down to Britain’s earlier outlier C19 response & recent U-turn. 4) Going concern conundrum is going to be a biggie for auditors. March y/e companies may be tempted to delay their figures. I know I would…5) Some pressure on directors etc to forego salaries or take cuts in solidarity w. laid off workers. Many’ve been battered by stock option losses though. They might not be keen. 6) Parents w. kids at school are really going to cop it. Are we the canaries in
HOLIDAYS & LEISURE TRAVEL:
• DART Group yesterday updated on trading again (after updating on 11 March) saying that ‘unprecedented and unforeseen levels of travel restrictions have been imposed by governments across Europe’ and ‘this has resulted in Jet2.com having to suspend its flying programme until at least 1 May 2020.’
• DART says it is concerned about bad debts as it has placed deposits with hoteliers for next season’s accommodation. It says ‘given the current situation and the wide range of intangibles with which we are now faced, including concern for our hotel partners with whom we have placed deposits to secure hotel rooms for the Summer 2020 season, we now have reduced visibility on the financial implications for our Company.’
• DART has withdrawn its profit guidance for the year ended March (which is nearly over) and says that it has no clarity over March 2021. It says it has a strong balance sheet. However, it has also introduced ‘a reduced flying programme beyond 1 May 2020, freezing recruitment and discretionary spending and deferring all non-regulatory capital expenditure.’ DART says ‘in addition, we are in ongoing discussions with existing liquidity providers who recognise the strength of our business model.’
• PPHE Hotels has updated saying ‘several countries have announced further extraordinary measures to slow the spread of the virus.’ It says ‘these measures have led to an immediate and significant deterioration in the hospitality market, with a high number of cancellations and no shows and very few new bookings.’ PPHE says ‘the Group is in the process of adopting a set of exceptional operational measures in order to significantly reduce its costs and help it navigate through these challenging and unprecedented times.’ It isn’t giving numbers at this stage but has withdrawn its proposed final dividend of 20p.
• PPHE CEO Boris Ivesha says ‘these are unprecedented and highly uncertain times for all’ and says ‘our Group has a strong track record spanning 30 years and our well-maintained property portfolio includes iconic flagship hotels in resilient cities such as Amsterdam and London.’
• Travel shut down gathers pace. Quantas has cut its international flights by around 90%. Vail, France & Italy remain closed to skiers. Air Malta is grounding flights after Maltese health authorities banned all commercial travel to the island from Friday. The EU has shut its borders to non-members. Presumably that now includes UK citizens. The Cypriot government has instructed all hotel and tourist accommodation to close from the weekend. Nobody could get there anyway. The FCO has told Brits not to travel overseas unless they really have to.
• EasyJet has launched its winter schedule early, perhaps hoping to pick up on disappointed consumers who have seen their summer holidays cancelled. In order for this ploy to come off, we will need flying to be back to normal for the start of the winter season, which hopefully it will be.
• Hotel Management journal reports that more than 500 signatories have supported calls for wage support, tax relief and financial aid for the hospitality sector. HVS in London says ‘failure to take such action will have catastrophic repercussions for the millions of employees working in the sector in every country, along with the owners, investors and operators of each establishment. Hundreds, if not thousands, of businesses will be made bankrupt, millions will be thrown out of work, and the sector will take years to recover, if at all.’
• Liverpool John Lennon has warned of staff redundancies due to the collapse in air traffic. The Merseyside airport revealed that ‘all cost reduction opportunities are being pursued’.
• Uber and Lyft began suspending shared rides on their apps in the US and Canada on Tuesday. Uber has extended this measure to London and Paris as well.
• Marriott cautioned on profits yesterday saying ‘the travel industry is being impacted in unprecedented ways by COVID-19. As the virus and efforts to contain it have spread around the world, demand at our hotels has dropped significantly.’
• Marriott says ‘the situation is changing by the day and there is still tremendous uncertainty, but we feel it is important to share an update on some of what we have seen to date and describe key measures we are executing to mitigate the impact of COVID-19.’ The group goes on to say that ‘there are very early signs of improvement in Greater China, as workers return to their jobs.’ It says ‘in the rest of the world, where the crisis is much more recent, the trend lines are still negative. North America and Europe have seen occupancy levels below 25 percent over the last few days, compared to around 70 percent a year ago. The company could see further erosion in performance in the weeks ahead and does not expect to see material improvement until there is a sense that the spread of the virus has moderated.’
• Willie Walsh at IAG is reported set to take a pay cut as the airline moves towards a government bailout.
• Taxpayers are reported to be facing a £156m bill from the collapse of Thomas Cook. If the government had moved in to rescue the company, the cost would now be much higher.
• The Institute for Travel and Tourism (ITT) says the government must do more to support travel staff facing redundancy or reduced hours.
• Butlin’s will close its three resorts until the 16th of April.
• Hotels and short-stay accommodation in Spain must close by 24 March. The Foreign Office is advising UK nationals in spain who wish to return to the UK to start making plans to do so as soon as possible.
• Railway timetables could be reduced in the coming days as staff shortages create difficulties within the transport system.
• Everyman Media has reported full year numbers for 2019 saying that revenues rose 25%. The numbers are overshadowed by C19 and the company says ‘we therefore expect to see a significant pause in business and are taking all appropriate measures to reduce the financial impact of this on the Group.’
• Everyman CEO Crispin Lilly says ‘we are facing an unprecedented global situation, and are now concentrating all our resources on tackling the challenge at hand. We will be focussed on preparing the business to be in the best possible position in the future. Everyman has proven itself to be a strong business with good growth fundamentals, which the Board is confident will stand the Company in a good position once the current market challenges have been overcome.’’
• Playtech has updated saying it ‘is working to protect its cash flow by pro-actively managing its capital expenditure and working capital as well as identifying opportunities for cost savings that will not impact the long-term success of the Company.’
• Escape Hunt has updated saying that trading was strong until end-February 2020 but it adds ‘COVID-19 will prove to be a huge challenge for us all.’ It has seen a spike in cancellations and says ‘at a site level, we have implemented a more stringent cleaning regime and have taken other steps to protect staff and customers and for the moment, sites remain open for business.’ It says ‘we anticipate further sales reductions and it is possible that the UK Government will follow other European countries and force the closure of all leisure facilities, which would directly impact Escape Hunt.’
• ESC is cutting costs. It says ‘as at close of business on 17 March 2020, the Company had approximately £1.8m cash in the bank. A level of expenditure will need to be maintained throughout any hibernation period to enable the business to re-open as conditions permit, but the measures being taken are expected to be sufficient to sustain the business for several months.’
• The Gym Group reports the outbreak has ‘ begun to have an impact on the business: daily gym usage has started to decrease, new joiner numbers are marginally lower than expected, cancellations are higher and the number of members freezing their membership has increased’
• The Gym Group reports revenue of £153.1m, an increase of 23.6% yoy for the year ended 31 December 2019. Group Adjusted EBITDA of £48.5 million, an increase of 24.0% yoy.
• Regarding the Covid-19 outbreak the Gym Group said ‘Financially, we have taken a number of actions to reduce cash outgoings, including pausing our pipeline rollout, as we operate through what we anticipate to be a period of significant disruption.’
• Sportech has reported full year numbers saying revenue rose to £64.8m with a loss from continuing operations of £8.4m (2018: loss £2.7m). CEO Richard McGuire says ‘we continue to progress our strategic agenda focused on driving further development of our Group platforms following 2019 growth opportunity investments, whilst managing the inherent cost base.’ It says that Covid-19 makes forecasting very difficult. It says ‘notwithstanding the uncertain short-term outlook, we remain focused on maintaining the Group’s financial strength with £11.0 million net cash and no debt as of the end of February 2020.’
• The FT reports, not surprisingly, that the cinema industry is in a mess. Cineworld shares, however, rose sharply yesterday on director’s buying.
FINANCE & ECONOMICS:
• Helicopter money seems to be coming into fashion. But money is an illusion. It relies on confidence.
• Markets were weak yesterday as bond markets buckled. Rishi Sunak’s 5pm stimulus package from the day before had already faded in memories by the time the market opened. UK bond yields have been moving sharply higher for several days now.
• Car manufacturers are planning to 3D-print parts for ventilators. They won’t be making many cars at the moment.
• Sterling yesterday touched a 35yr low on fears that the UK’s outlier stance on Covid-19, which has now been reversed, will leave the country less prepared than other developed countries to deal with the crisis.
• Sterling much lower at $1.1501 and €1.0548. It is now at 35yr lows. Oil lower at $26.28. UK 10yr gilt yield sharply higher up 29bps at 0.87% on fears that the Budget deficit could be very large. Markets all lower yesterday with Far East lower in Thursday trade. UK set to open around 70pts lower.
START THE DAY WITH A SONG:
Yesterday’s song was A Punk by Vampire Weekend. Today, who sang:
“Where the haircuts smile
And the meaning of style
Is a night out with the boss
Where you win or you lose”
RETAIL WITH NICK BUBB:
• Today’s Market: The FTSE 100 index is expected to fall again this morning (according to the Proactive private investor website), after Wall Street ended 6.3% down). In Asia overnight, the Nikkei finished only 1.0% down, but with bond yields climbing in response to the splurge in Government spending around the world, the spread-betting firms expect the FTSE 100 to open c90 points down at around the 5000 mark, depending on the response to today’s gloomy corporate news…
• Today’s Retail News: As the much-awaited Next finals and the words of wisdom from CEO Simon Wolfson, plus the Ocado Q1 update, there is a profit warning from Burberry (flagging that it expects a 30% fall in LFL sales in Q4, the current quarter) and a gloomy update from the embattled Joules (whose share price has collapsed in recent days). The Ocado update obviously focuses on current trading, given the surge in demand that forced the company to suspend its website yesterday, and the surprise is that the previous guidance of 10%-15% sales growth for the year is unchanged, “as we assume there has been a large element of forward buying of ambient items and there may be further disruptions ahead”. As for the Next guidance, it is as sensible and rational as you would expect, highlighting that even Online sales are being affected, as people don’t buy a new outfit if they’re working at
• Today’s Press and News: Most of the papers lead their front pages today with the skool closures belatedly announced by the Government last night, in a further desperate escalation of the coronavirus suppression strategy, eg with the Guardian running with the headline “Now it’s the schools: PM scraps exams and shuts down classes”, but the FT front page headline is even more ominous (“Sterling hammered as London prepares to go into lockdown”), as sterling plunged to $1.16 and rumours spread of an imminent lockdown of London…