Langton Capital – 2020-05-07 – Intercon, restaurant closures, AB InBev, re-openings etc.:
Intercon, restaurant closures, AB InBev, re-openings etc.:
A DAY IN THE LIFE:
My lockdown culinary skills are coming to the fore.
Namely, big pan, sundry gunk, bit of heat and what could go wrong?
And, whilst you shouldn’t judge a book by its cover, I can call it ‘les bouts du placard aux bouillie curieuse’ rather than what it really is, leftovers in a halfway tasty mush, and job done nobody’s complaining.
Though that might mean we’re running out of food rather than that I’m rising in everyone’s estimation as a cook, who knows?
Anyway, it’s Thursday. And that’s the new Friday. On to the news:
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• Feedback from the industry, hopes and fears
CGA YESTERDAY RELEASED FEEDBACK ON HOSPITALITY INDUSTRY LEADERS’ HOPES AND FEARS: All agree lockdown will end, views as to just ‘how’ are outlined below. 7 May 2020: See Premium Email.
PUB & RESTAURANT NEWS:
The new normal:
• CGA reports that confidence across the UK hospitality market has been “decimated” with London hardest hit. See also Premium Email.
• CGA says it has had to deliver what it believes is ‘probably the most depressing state of the nation presentation’ that it has ever had to give. Confidence in the sector hit a 4yr high in February but collapsed almost completely the following month.
• Only ‘15% of leaders and operators confident in their own business and just 5% [are] confident in the market as a whole.’
• CGA says ‘we know that quarter two will be absolutely devastating in taking our read in terms of what the hospitality market is worth and it feels like quite a journey to get back.’ London is more negative than the market as a whole. It has a more active ‘after-work’ market than most other areas and is (or has been) a tourist hub. It is likely to be so again but nobody is quite sure as to when.
• Most operators are suggesting a phased reopening of the sector.
• Pizza Pilgrims has reported that a ‘frying pan pizza kit’ launched by the company has sold some 60 times the amount expected.
• Starbucks and other operators, busily reopening units in China, are reported to have lost a material number of staff during the period of their closure. Although the furlough scheme should have mitigated this problem, this will likely be an issue in the UK when units are finally allowed to reopen.
• Pubs and bars pubs in Hong Kong are to reopen on Friday this week.
• Sales of Tequila in the US are reported to have spiked up during the shutdown. Ready to Drink beverages have also seen increased demand.
Government and other aid:
• Raise The Bar, which is pushing for payments to be made to operators of units with a rateable value of more than £51,000, says that ‘thousands of London bars, restaurants, cafes and gyms face financial disaster in less than two months because they do not qualify for emergency grants to help them survive the coronavirus crisis.’
• AB InBev – Q1 slipping, April down 32% in volume terms.
• AB InBev has reported Q1 numbers saying that ‘the COVID-19 pandemic presents unprecedented challenges for societies, governments and businesses across the world.’ It says ‘our business started the year with good momentum and delivered volume growth of 1.9% in the first two months of the year excluding China, where the COVID-19 outbreak began in late January.’
• The company goes on to say ‘the impact of COVID-19 on our global results increased significantly toward the end of the quarter. Consequently, in 1Q20 our total volume declined by 9.3% and by 3.6% excluding China. Revenue declined by 5.8% while revenue per hl grew by 3.9%. EBITDA of 3 949 million USD represents a decline of 13.7%, with margin contraction of 331 bps to 35.9%.’
• Unsurprisingly, the company says ‘we expect that the impact on our 2Q20 results will be materially worse than in 1Q20. This has already become evident in our April 2020 global volumes, which declined by approximately 32%, primarily driven by the closure of the on-premise channel in most markets and government restrictions imposed on certain operations of ours in connection with the COVID-19 pandemic.’
• AB InBev says ‘our diverse geographic footprint allows us to apply best practices from our experiences in China and South Korea to the rest of our markets, as they move through different stages of the crisis and into eventual recovery. For context, in China, our volumes declined by approximately 17% in April, an improvement from the 1Q20 decline of 46.5%.’
• Gordon Ramsay has said he expects his business to report ‘substantial losses’ in its next financial year. He maintains that he is optimistic about the future.
• Franco Manca is to open another 6 units this week. That will take to 12 the number that are operating for delivery and collection.
• Grill manufacturer Synergy Grill Technology reports that it has signed an exclusive partnership with Welbilt company, Garland, which will see the Cambridge-based brand’s patented technology become available in Garland’s new XHP chargrills.
• Synergy Grill says that it has been considering expanding its partnerships abroad for some time and reports that international demand has been increasing. Synergy Grill says ‘’we are delighted to be supplying Synergy’s award-winning technology to Garland, which is part of Welbilt, have a blue-chip reputation and deep-rooted passion for the very best catering technologies.’ From August 2020, Garland Synergy Grills will be available in the North American market.
• Papa John’s in the US has reported a 26.9% increase in LfL sales in Q1 this year. So called ‘pantry hoarding’ initially proved to be negative on sales but as the operator moved further into the lockdown, sales rose sharply.
• CEO Rob Lynch says ‘I think what this challenging, unprecedented situation has shown is that the pizza delivery business is the kind of business that can persevere through these types of challenges.’ He maintains ‘the majority of the growth we’ve seen is from new customers.’
• Debenhams has said it will another five stores will not re-open when lockdown is lifted.
• Hot Dinners has run a survey of 1,500 readers asking them where they would most like to eat when the lockdown is lifted. Hawksmoor in Spitalfields came out top. It says The Ivy came up no2 and Dishoom, which has sites in King’s Cross, Covent Garden, Soho, Knightsbridge and Shoreditch came number three.
• Adam Howitt of Howitt Hospitality Consultants maintains that there are gaps that the CJRS has yet to fill. He says ‘we can all agree that it was an amazing feat to get CJRS up and running in such a short space of time and our thanks go out to all involved. An estimated 80-90% of businesses were able to claim through the portal with little to no issues.’
• Howitt continues ‘sadly, this is not the case for the remining 10-20% of claims. Where some businesses have already received funds for both March and April, others are yet to finalise their first claim. There may be significant delays if your claim had errors, missing information or if you have TUPE staff over. These claims have to be escalated to the HMRC tier three team; it is stated you will receive a call back within 72 hours. Due to the high volume of escalations, many are waiting in excess of a week just to discuss their claim. Some have been waiting over 2 weeks to even start submitting their claims. If you are experiencing significant delays, you can get in touch for advice and support via firstname.lastname@example.org’
• The BBPA has said that April this year ‘could have been the best for the beer and pub trade in a decade, if it weren’t for COVID-19 and the lockdown caused by it.’ The weather was unusually warm, dry and sunny. The fall of the Bank Holidays was helpful – but it was not to be.
• The BBPA says ‘the current lockdown is devastating pubs and brewers more than ever and the risk of permanent closure has never been higher. Pubs were the first businesses to be ordered to shut down and they could be amongst the last businesses to re-open as lockdown restrictions are lifted. The BBPA is therefore calling on the Government to ‘fill the significant gaps in financial support’ that pubs and brewers need to help see them through the crisis.’
• The planned 2021 revaluation of commercial properties for rating purposes will not now go ahead. MP Robert Jenrick says ‘we have listened to businesses and their concerns about the timing of the 2021 business rates revaluation and have acted to end that uncertainty by postponing the change.’
• The Food and Drink Federation alongside unions, Unite, Usdaw, BFAWU and GMB, have joined together to commend the efforts of all those working in food and drink manufacturing. The workers and companies involved are keeping the nation fed.
• The FDF says ‘if you can’t feed a country, you don’t have a country.’
• Accountant Deloitte is reported to be considering reducing sharply the pension payments it makes into workers’ schemes. Over time, this could prove to be part of a wider trend.
HOLIDAYS & LEISURE TRAVEL:
• InterContinental Hotels Group has reported Q1 numbers saying that Q1 REVPAR was down by 24.9% with March down 55%.
• The group says that around 15% of its estate was closed at the end of April. Some 10% of hotels in The Americas are shut and 50% in EMEAA. Only 2% of units are now shut in China.
• Occupancy levels in open hotels is running around 20% and 0% in shut units. The company is cutting costs and conserving cash. CEO Keith Barr says ‘Covid-19 represents the most significant challenge both IHG and our industry have ever faced.’ He says ‘we have been working closely with our owners to help keep hotels open, including advising on adjusting operations, providing fee relief and payment flexibility, and collaborating to secure broader government support for the industry.’
• IHG says ‘following a solid performance in the first two months of 2020, occupancy levels dropped to historic lows in March and April, as social distancing measures and travel restrictions came into effect around the world. Global RevPAR in the first quarter declined by 25%, including a 55% decline in March, and we anticipate April to be down by around 80%. In the US, our biggest market, our franchise portfolio of 3,750 mainstream hotels has seen lower levels of RevPAR decline than the industry, and as at the end of April we had ~90% of our estate open. Our business is also weighted towards non-urban markets that are less reliant on international inbound travel and large group meetings and events, which provides a level of resilience during this difficult period.’
• The company says ‘we anticipate continued disruption to travel in the months ahead, and forward visibility on the timing and shape of improvements in demand remains very limited.’ It concludes ‘IHG’s response to Covid-19 is centred on remaining true to our purpose and values, and we are taking all necessary actions to manage through the uncertainties and challenges facing our industry. Our strategy is unchanged, and we will look to continue building on the resilience of our business model relative to the industry.’
• ABTA says that, if the government does not move in to suspend the need for travel companies to refund holiday payments in cash, a lot of them will go bust. ABTA says ‘if people lose confidence in refund credit notes and there is a drive for cash you will see a lot of travel companies fail.’
• Airlines UK chief executive Tim Alderslade has told Parliament’s Transport Select Committee ‘it has never been this hard. There are travel restrictions. Demand has completely stopped. We don’t know when this will be lifted. We don’t know about the recovery.’ He says ‘we are going to have a much smaller, much leaner aviation sector for the next few years. We will probably see lower frequencies and lower capacity for some time.’
• Norwegian Cruise Lines says that, after its fund-raising, it is well-positioned’ to deal with the coronavirus crisis
• The Advantage Travel Partnership has surveyed would-be holidaymakers and says that 80% are still hoping to travel this year if restrictions are lifted.
• The Daily Mail reports that a court has been told ‘Sir Frederick Barclay’s nephews sold the Ritz hotel for ‘half the market price of £1.3billion’ after ‘commercial espionage on a vast scale’ when they secretly recorded his conversations with a Saudi investor.’
• Travelopia is reported to be consolidating some of its operations resulting in the dropping of the Hayes & Jarvis brand and the loss of around 100 jobs.
• IATA has said that it supports the wearing of face masks on airplanes.
• Gatwick has said it is ‘very saddened’ to hear that Virgin Atlantic is to drop the airport. It says ‘Virgin Atlantic will always be welcome at Gatwick and we will continue our efforts to explore ways to re-start the airline’s operations as soon as possible, in the knowledge that they intend to retain their slot portfolio at Gatwick for when demand returns.’
• Uber is cutting 3,700 jobs.
• US airline Frontier Airlines is to charge passengers an a fee to ensure they sit next to an empty middle seat.
• Heathrow is to trial passenger temperature screening technology
• RCL is promising passengers the flexibility to cancel cruises with just 48hrs notice and still get full credits against a future cruise up to April 2022.
• UKinbound has said that the domestic tourism industry will be damaged if it does not receive long term financial support.
• Carnival Brand Princess Cruises has confirmed that it has abandoned sailings for the rest of the summer season.
• Travel Weekly says that ‘air travel will not resume if governments impose social distancing restrictions and quarantine arrivals’. It quotes a number of aviation industry leaders.Spain is to extend its state of emergency for two more weeks.
• Cineworld has joined Vue in saying that it is hopeful that cinemas will be up and running by mid-July. That seems somewhat optimistic.
• The Hollywood majors may be under pressure to bypass the big screen and go straight to streaming.
• Vue told the FT it was ‘highly confident’ it could open by 17 July and Cineworld said such a timetable was ‘very realistic’.
• Licensing solicitor Poppleston Allen reports that ‘the Parliamentary All-Party Betting & Gaming Group has launched its own review of the Gambling Act 2005.’ It says ‘the Group’s review is focusing on the current gambling legislative framework, attempting to gather evidence to support what, if any, future changes may be required to keep the current legislation relevant to the technical and social changes that have occurred since the Gambling Act 2005’s inception.’
• The German Bundesliga is to play matches behind closed doors from as early as the second half of this month.
FINANCE & ECONOMICS:
• IHS Markit reports that the April Construction PMI for the UK fell to just 8.1. It says ‘the rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors.’
• IHS Markit says ‘the prospect of severe disruption across the supply chain will continue over the longer-term and widespread use of the government job retention scheme has been needed to cushion the impact on employment.’
• The EU’s Commission is forecasting a deep but uneven recession across the group of countries.
• US employment is reported to have dropped by 20.2 million in the month of April.
• EU Trade Commissioner Phil Hogan has said that the UK’s potential trade partners, including the US, may wait until the UK has settled trade issues with the EU before progressing talks.
• Sterling lower at $1.2324 and €1.141. Oil down at $29.76. UK 10yr gilt yield up 3bps. World markets mixed yesterday with Far East undecided in Thursday trade. UK market set to open around 10pts higher.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Today’s News: There is no sign of a Howden AGM update, but Superdry and The Works have issued reasonably confident pre-close updates (both flagging that Online sales have been strong and that they have sufficient liquidity to get them through the crisis) and we missed a similar update from Card Factory yesterday morning. In Europe we note that the Zalando Q1 highlighted that the Next brand Lipsy has joined the Zalando Partner Programme. But the big news is from Next in the UK, via the announcement that it has agreed a deal with Hammerson to take over the Beauty Hall space in the 5 Debenhams department stores which are to be permanently closed in their shopping centres, following a failure to agree new rent deals, to create a concept called The Beauty Hall from Next
• News Flow This Week: GFK will be issuing a “flash” UK Consumer Confidence survey first thing tomorrow, which is also the rescheduled Bank Holiday (aka VE Day), with the record -39 index low seen in July 2008 likely to be tested…
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 7 May 20 AB InBev Q1 numbers
• 8 May 20 Marriott Q1 numbers
• 11 May 20 Marriott Q1 results
• 12 May 20 Morrison’s Q1 IMS
• 13 May 20 Ten Entertainment FY numbers
• 27 May 20 Britvic H1 numbers
• 30 May 20 Minoan AGM
• 7 May 20 Intercontinental Hotels Q1 numbers
• 7 May 20 Coca Cola HBC Q1 numbers
• 13 May 20 Stock Spirits H1
• 13 May 20 Compass Group H1
• 14 May 20 Flutter AGM
• 21 May 20 Young & Co full year numbers
• 27 May 20 Gym Group AGM
• 3 Jun 20 SSP H1 numbers
• 3 Jun 20 DP Eurasia AGM
• 3 Jun 20 C&C FY numbers
• 11 Jun 20 Fuller’s FY numbers
• 23 Jun 20 Gear4Music full year numbers
• 23 Jun 20 – Cranswick FY numbers
• 30 Jun 20 On the Beach H1
• By end-June 20 Premier Foods FY numbers
• 23 Jul 20 C&C AGM
Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year.
2019 COMPARATIVE RESULTS:
• 30 Apr 19 Whitbread FY numbers, 8 May 19 Elegant Hotels H1 numbers, 8 May 19 JD Wetherspoon Q3 update, 10 May 19 Millennium & Copthorne Q1 numbers, 14 May 19 Stock Spirits H1 numbers, 14 May 19 On the Beach H1 numbers, 15 May 19 SSP H1 numbers, 15 May 19 TUI H1 numbers, 22 May 19 Britvic H1 numbers, 22 May 19 C&C FY numbers, 22 May 19 Britvic H1 numbers, 23 May 19 M&B H1 results, 23 May 19 Young & Co FY numbers, 29 May 19 EasyHotel H1 numbers, 11 Jul 19 Dart Group FY numbers, 16 Jul 19 Fulham Shore FY numbers, 17 Jul 19 Nichols H1 numbers, 24 Jul 19 Marston’s Q3 trading update, 25 Jul 19 Fuller’s FY numbers, 25 Jul 19 Compass Group Q3 update, 25 Jul 19 Diageo FY numbers, 30 Jul 19 Gregg’s H1 numbers, 31 Jul 19 M&B Q3 update
• Covid ££ side effects #63. Is the impact of Covid-19 like that of a neutron bomb from the bad old Cold War days? Airline usage down 97% to 99%. But, weirdly, the planes, the airports & the people are still there, its just the equity value might disappear?
• Covid ££ side effects #64. Will the length of the lockdown and the mental capacity to work be inversely linked? It could be pretty difficult scrubbing the rust off. Working practises could be changed (some better, some less so) for years to come.
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