Langton Capital – 2020-05-20 – PREMIUM – Delivery, re-openings, the battered consumer, W Hill, Playtech etc.:
Delivery, re-openings, the battered consumer, W Hill, Playtech etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
So, here’s a question for you, when did you last split a tenner?
Or use cash in any form for that matter because Langton still has the hundred quid that it took out of a random wall in London somewhere in mid-March and not a penny of it has been spent.
There’s been plenty of spending, of course, but it’s been on plastic, via standing orders and the like and it’s likely that our experience is one that’s been widely shared across the country.
This may go to confirm that wars (and famine and pestilence, it would appear) accelerate social and scientific change. Cash and face-to-face shopping may be doing their own mini headers into the dirt whilst plastic and delivery may have made a permanent stride forward. Such is life.
Anyway, we managed to send a blank email out to some recipients yesterday evening so sorry about that. A wag quipped that we must have been relieved to get one out without mistakes in it and so we were. On to the news:
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SEE PREMIUM EMAIL.
• Book Review. True Believer. Eric Hoffer, 1951. Keen to talk about something, anything other than Covid, here’s a book review.
BOOK REVIEW: TRUE BELIEVER, ERIC HOFFER, 1951. Self-taught author Hoffer opines on the nature of crowds, the tendency to follow and the suspension of common sense.
The book is a polemic rather than a scientific work. He looks at leadership, blind faith and hatred in a timeless way.
His words resound today when looking at religion, political leaders, promised greatness and the like. 20 May 2020.
The appeal of mass movements (to followers):
• Hoffer says people are attracted by the idea of rapid change. Revolutions are thus formed. Rapid change has a ‘money for nothing’ feel about it.
• There should some soul-stirring enthusiasm. This may morph into nationalism, xenophobia and racism. Mass-movements are a ‘refuge from insecuritie’.
• We are pack animals. We want to belong. People are drawn to ‘pile on’ & today, cyber bullies say ‘no one of us is as cruel as all of us’.
• People are ready to blindly follow a zealot when they are a) dissatisfied with the present and b) minded to believe any old poppycock about the future.
And who leads them?
• Mass movements will attract adventurers hoping for fame and fortune. In the beginning, they often simply tag along. Their views may either not be revealed in the early days or they may be manufactured when the movement has gained momentum.
• Hoffer says charlatans will promise the future and steal the present. He says ‘the present ‘is shoved off the stage…and lumped with the detested past’. The mass movement makes the present ‘mean & miserable’. It presents the ‘pursuit of personal happiness as immoral’.
• They know that people are searching for meaning. But there may simply be none.
Features of a mass movement:
• Mass movements often compete with one another. Hoffer may have been thinking of communism and fascism in early-thirties Germany.
• Groups may be characterised by their least attractive members. The have a desire to crush opposition. They are a cuckoo in the nest.
• Discontent is greatest when misery is bearable. People who are intolerably miserable have no time or energy to foment revolution.
• People join a movement to be free from freedom. Robespierre called government the despotism of liberty.
• There could be uniforms, badges, medals, talks of heroism, sacrifice, nationalism etc. The present is deprecated, the future is what it’s all about
• Hoffer says people may crave equality more than they do freedom. Equality without freedom can be very stable.
• Permanent misfits or frustrated artists may be drawn to attempt to lead mass movements. Many have few true beliefs.
• Followers need to be credulous and be ready to believe the impossible. Hoffer says that reaching for the impossible ‘is a device to camouflage their shortcomings.’ It is worse to fail to achieve the possible. The target should be greatness, not mediocrity.
• Hoffer says that all mass-movements try to put a fact-proof screen between faith and reality. There can be no truth but their truth. Forget facts & observation. It must be holy writ.
• Belief requires a lot of unbelief. Believers can shut their eyes and stop their ears. he is impervious to unpleasant realities. Pascal says that a religion (or a mass movement) must be ‘contrary to nature, to common sense and to pleasure’.
• Belief is more important than understanding. A doctrine that is unintelligible – or at least vague (e.g. make (insert name) Great again). It has to be unverifiable.
• The fanatic needs a support mechanism. Reality is not good enough.
• Leaders may pick a worthy enemy. The ideal devil is a foreigner. Hatred and distrust are cementing agents.
• Hoffer says we are more likely to hate those we have some admiration for. We may even imitate those we ‘hate’.
• He says the ‘self’ has to be blurred. It springs from weakness and a lack of self-belief. He says that conquest and conversion may go hand in hand. Converts are ‘fleeing from the unwanted self’.
More on ‘the Leader’:
• Even the best of leaders needs the conditions to be right. He or she may have few true beliefs themselves
• The leader will grasp the opportunity, any opportunity. He/she needs to be able to bewitch rational people. They need to ‘tap into resentment’
• Hoffer says the quality of ideas is relatively unimportant. What counts is the arrogant gesture. He says charlatanism is…indispensable to effective leadership. There can be no mass movement without some deliberate misrepresentation of facts.
• Action is a unifier. Leaders will always be keen to do something. Many leaders, religious or political, would not have followed themselves.
• Such leaders are unoriginal eternal misfits. They do not succession plan. They may not plan at all. The world is a stage for their play. Others are bit part players. Such leaders can be ruthless, self-righteous, petty, vindictive and rude.
• They seek a nebulous cause, a recognisable enemy and no end date. They promise the future but destroy the present and, with it, any future that they offer to their followers.
PUB & RESTAURANT NEWS:
Covid-19 & ‘new normal’ news:
• Wireless Social has updated on UK retail footfall saying that ‘we’re certainly starting to see what appears to be early signs of people making their way back out a little more.’ As people have been encouraged to take ‘unlimited’ exercise, that might not be a surprise.
• Wireless Social still reports that footfall is tracking broadly 80% below long run average levels, with a slight upturn towards the end of last week.
• The British Beer & Pub Association has welcomed the extension of the maximum loan size available through the Coronavirus Business Interruption Loan Scheme from £50 million to £200 million.
• The BBPA is ‘continuing to press the Government to speed up the delivery of finance to smaller pub businesses and individual publicans. It is also continuing to campaign for the Government to provide additional support to Britain’s pubs and brewers who are amongst those most affected by the COVID-19 lockdown.’
• The outlook for City (and city) bars may be changed over the longer term. The Telegraph has reported that ‘the cranes that rise up over London’s skyline have fallen quiet in recent weeks.’ Not surprising. Demand for offices may weaken as employers consider the benefits of continued working from home.
• Deutsche Bank suggests almost two thirds of fund managers and traders think that they will work from home for at least one day a week after the pandemic. Some 57% thought they would work from home between one and three days a week once the crisis had ended, up from 39% in April.
• It’s the little things. Disposable menus, no shared salt, pepper or ketchup bottles and no ordering at the bar may be the order of things when the industry reopens.
• Things will be changed for a while. Cambridge Uni has said it will have no face-to-face lectures until at least summer next year.
• The FT reports that the UK government is to urge British people to holiday at home this summer due to persistent uncertainty re international travel. This could and should provide something of a boost for the UK industry. Capacity may be an issue. Tourism minister Nigel Huddleston says the government wants ‘people to have a British holiday as soon as it is safe to do so. The government has set early July as a target date for the reopening of large swaths of the tourism, hospitality and leisure sectors — albeit still with social distancing constraints still in place.’
• Just Eat-Takeaway has told the Competitions and Market Authority in the UK that it should reconsider its provisional approval of the Amazon and Deliveroo deal as it raises ‘doubts over the credibility of the exiting firm scenario put forward by Deliveroo.’
• JETA questions whether the decline in the financial position of Deliveroo is due to COVID-19 or ‘because of the quality of its business model and decision-making relating to its pricing.’ It says that Deliveroo could have looked at a range of other funding options. It says ‘Deliveroo chose not to pursue other funding options. This should not allow a ‘free pass’ to now state that Amazon is the only viable investment option.’
• Jamie Oliver Restaurant Group has notified Companies’ House that it is moving from an administration to dissolution.
• Restaurant Group owned Wagamama is to open 67 units across the UK for delivery by the end of June. It has not named the sites.
• ASDA says it received a sales boost due to customers’ stocking up in Q1 this year. Owner Walmart has reported its Q1 numbers. ASDA says that 90% of its customers now fear an economic depression.
• NRN in the US has followed up on the FT’s comments a day earlier that Jacobs Douwe Egberts & Peet’s Coffee & Tea are to list perhaps €700m worth of shares on the Amsterdam market. JDW Peet’s says ‘we believe the launch of JDE Peet’s into the public markets will provide additional opportunities for growth and shareholder value creation.’ In 2019, the combined company generated total revenues of €6.9 billion across 50 brands in over 100 countries.
• Darden Restaurants in the US says that it should have 65% of its units open for some sort of dine-in service by the end of this month. It says ‘beginning April 27, we began reopening dining rooms limited to between 25%-50% capacity, depending on local or state regulations.’ It adds ‘as of May 17, we had 49% of our dining rooms open in limited capacity, and based on information we have available today, we expect to have more than 65% of our dining rooms open with limited capacity by the end of May.’ Darden owns the Olive Garden chain of restaurant. It says ‘early signs show that our loyal guests are grateful for the opportunity to dine-in with us, and they appreciate the added safety measures we have implemented.’
• Boparan still seems to be poised to buy (about a half of) Carluccio. But it hasn’t done so yet.
• See comment on unemployment under Finance & Markets.
• The NIESR says many businesses will struggle to retain staff when or if the furlough scheme ends. It says ‘it is very likely that we will see falls in pay in the months ahead.’
• Claims for universal credit were running at record levels, even 6wks ago. Up to 9 April, the most recent figures available, there were 1.5m people making claims.
• There could be some question as to just how strong any bounce-back in demand might be.
• The government’s immigration bill has passed its first hurdles in the Commons. It could cut off access to labour for some hospitality businesses.
• The Food & Drink Federation has said that it welcomes the announcement of the UK’s global tariff. The Government is to retain tariffs on agricultural products. It sayd the new plans are ‘a sensible step back from the temporary tariffs set out in March 2019.’
• The ONS has said, re the jobs market, that ‘vacancies were sharply down too, with hospitality again falling steepest.’ See Finance & Markets below.
HOLIDAYS & LEISURE TRAVEL:
• Visit Britain has said that the establishment of ‘air bridges’ between countries with low Covid-19 disease levels, could help UK tourism.
• Visit Britain goes on to warn that the industry will have a ‘real job’ on its hands to persuade the British public that it is safe to travel around the UK.
• There may be a new Bank Holiday introduced in October. Tourism professionals have said it could help to ‘extend the season’. It might help spending. It won’t do much for firms that may see it as another small transfer of value from them to their workers at the government’s behest.
• See comments on holidaying in the UK under Pubs & Restaurants above.
• Travel Weekly sources Kuoni in saying some long-haul destinations may not open up to international visitors until February 2021. Spain has indicated that it would like to open up to tourism by late June. But there are issues as more than a half of hotels in the Balearics have said they do not intend to open by then and getting a flight could be tough. Kuoni does go on to say that ‘the majority have probably landed around about September, October time [as the month in which they will reopen]’.
• Portugal has joined Spain in saying that it hopes to open its beaches to tourists at some point in June. It is not clear if flights and hotels will also be available. Poland also intends to open up to tourism next month.
• EasyJet has said it is still ‘reviewing a number of different scenarios’ when it comes to recommencing flights as ‘normal’. Many operators are calling for more clarity on the UK government’s intentions with regard to its proposed 14dy quarantine period.
• Travel Weekly quotes holiday insurance company Schofield as saying that the greatest concern of would be travellers is the financial viability of the travel companies that they choose to holiday with. Some 51% are concerned that the company may fail beneath them whilst 35% are concerned about health and safety.
• Qantas has become the latest airline to suggest that social distancing on aircraft is impractical.
• William Hill has said that it will not appeal the Upper Tier Tribunal ruling in the Rank/Done Brothers (Betfred) claim that VAT was incorrectly applied to revenues earned from certain gaming machines prior to 2013.
• Playtech has updated on trading saying it performed strongly in Q1 and ‘took early and decisive action in response to COVID-19 and has performed better than envisaged in its update on 19 March 2020.’ CEO Mor Weizer says ‘so far this year, alongside actions taken to protect our people and our business, Playtech demonstrated remarkable operational resilience – demonstrating the strength and flexibility of our technology and our position in the industry.’
• Gfinity has signed a multi-year agreement with Formula 1 to deliver F1 Esports Series Virtual Grand Prix extended to June of this year
• YouGov has suggested that gambling addiction rates are potentially much higher than previously estimated. It says that up to 2.7% of adults in Great Britain (c1.4m people), are ‘problem gamblers’. The Gambling Commission has previously estimated 0.7%. Gamble Aware has said that the YouGov survey was flawed. It believes the true rate is nearer the Gambling Commission’s 0.7% figure.
FINANCE & ECONOMICS:
• The number of people claiming unemployment benefit in the UK rose by 856,500 in April, its largest-ever increase. Analysts had been looking for an increase of perhaps 670,000. Some 2.1m people are now claiming unemployment benefit. We have cautioned that a number of the 7m jobs being protected by the current furlough scheme may in fact also have disappeared.
• Job vacancies are, unsurprisingly, sharply lower. The rate of unemployment for the smoothed three months to end-March fell to 3.9% from 4.0% in the three months to end-February. The situation is now much changed.
• The Resolution Foundation suggests that young people are most likely to have lost work or seen their income drop due to the coronavirus pandemic.
• The NIESR says ‘we can reasonably expect unemployment to rise very quickly to something over 10% – something we haven’t seen since the early 1990s.’
• The Institute of Directors comments ‘it’s clear that without the government’s furlough scheme, the picture would have rapidly deteriorated even further.’
• Sterling up at $1.226 and €1.1202. Oil a shade lower at $34.95. UK 10yr gilt yield down 1bp at 0.25%. World markets mixed. London should open down c25pts.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
Marks & Spencer: Today’s disappointing M&S finals for y/e March are headlined “Securing the future…accelerating change”, although the much-mocked new slogan “Never the Same Again” gets plenty of air-time in the section of the statement about the impact of the pandemic crisis. As far as the outlook is concerned, M&S say they have modelled a hefty £2.1bn reduction in sales for the new year relative to budget and have cut £500m off the cost base in mitigation, but recent trading hasn’t been as bad as expected. Over the 6 weeks to May 9th Clothing & Home sales were down 74%, in line with the model (with Online sales only 6% up…), but Food was only 5% down ex-hospitality (compared to the model assumption of -20%) and has been level for the last 3 weeks. M&S is also adding a lot of Clothing & Home ranges to its offer with Ocado for the autumn. The M&S share price
Asda Watch: We flagged yesterday that the Walmart Q1 results only included the calendar Q1 outcome in the case of Asda and it announced that the pandemic stock-piling surge in March lifted overall LFL sales for the quarter by a useful 3.5% LFL. However, in the presentation to analysts, Walmart said that Asda’s gross margin was down because of a mix switch to lower-margin categories and that operating costs grew faster than sales because of COVID-19 incremental costs, so that Asda’s Q1 profits were down. And on the analyst’s conference call, Walmart said that April had been a “challenging” month for Asda, albeit the fall in sales was mainly related to petrol sales.