Langton Capital – 2020-05-22 – Whitbread, On the Beach, Time Out fund raises. DPP numbers & other:
Whitbread, On the Beach, Time Out fund raises. DPP numbers & other:
A DAY IN THE LIFE:
Busy days here in lockdown land because the magpies and squirrels have been attacking the caged bird feeder and, although they can’t get in, they can bat it around and eat whatever falls out.
And this will need to be attended to because it has attracted an amorous pheasant which, between scooping up various spilled seeds, squawks at me through the window, bats his wings and winks suggestively.
Which is rather disconcerting. Indeed, it’s just a matter of time before either the local fox or I get hungry and decide to put him in a pot.
Anyway, another three-day weekend coming up but, at the end of the day, how will be tell? On to the news:
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• Sector fund raises. Whitbread and On the Beach yesterday, Time Out today. We commented last week that there were a number in the pipeline
• Whitbread. More on the company’s £1bn Rights Issue.
• Re-opening. Mixed signals.
SECTOR FUND RAISES:
• We commented three weeks ago that fund raises from SSP £215m, JD Wetherspoon £141m, Restaurant Group £57m, Gym Group £41m and City Pub Group £29m. Money has also been raised by Hotel Chocolat, Everyman, Hollywood Bowl, Loungers and Ten Entertainment totalled around half a billion pounds.
• Since then, Compass has come for £2bn, Whitbread for £1bn and DART Group for £172m with On the Beach yesterday raising £67.3m gross. The total, for the leisure sector alone (excluding Carnival and near-companies such as WH Smith), stands at just short of £4bn.
• Time Out has this morning announced that it wants to place £45m of new shares. See Premium Email.
WHITBREAD £1 BILLION FUND RAISE. Company hosts a conference call, goes through its thinking. 22 May 2020:
Whitbread has yesterday reported full year numbers to end-February and has announced that it intends to raise c£1bn in new equity from shareholders at 1500p per share. It subsequently presented to analysts and our comments are set out below.
Full year numbers:
• The year had been on an improving trend. H2 was better than H1 – but the new financial year has been dominated by Covid-19.
• Revenues last year rose by 1.1% but PBT fell by 8% on an underlying basis post IFRS-16. PBT (underlying & after IFRS16) was £358m vs £390m last year.
• F&B sales were +1.3% with accommodation down 0.1%. The group underperformed the market due to its overweighting in the regions and towards business customers. See Premium Email.
REOPENING NEWS: We have commented for some time that supply of units (i.e. when they are allowed to open) is less than half the story. It’s demand that matters. 22 May 2020.
• We report below on CGA’s comments on the experience across a number of States in the US. Some operators were running at 10% to 20% (see The Economist report) in the early days but CGA suggest this has more than doubled and, in some cases, sales are 25% up week on week.
• They need to be, of course.See Premium Email.
PUB & RESTAURANT NEWS:
Covid-19 & ‘new normal’ news:
• CGA and Alix Partners have produced a Market Recovery Monitor showing that, as at the end of March, there were 115,108 licensed premises in the UK, a 2.4% reduction on March 2019.
• The monitor shows that there were 74,271 independent sites. It says ‘the future of those largely small businesses, alongside almost 41,000 group-owned sites, is now under threat as a result of the COVID crisis.’
• CGA predicts the ‘rate of decline is set to accelerate rapidly once the hospitality sector begins to reopen from July 4.’ CGA has previously said that a third of operators have told it they will not reopen all of their sites – and a further third have yet to make up their minds.
• See Premium Email for more detail.
• UK Hospitality has said that ‘these new figures are a useful starting point as to the state of the hospitality sector as the country moved into lockdown, and paint a picture of a market that, in parts, was already under pressure. Our own data reveals that the sector experienced a sales decline of 21.3% in the first quarter of 2020. Hospitality was hit first, has been hit hardest and will take longer than most to recover.’
• UKH says ‘hospitality is ready, with the right support, to play a leading role in the recovery, can help rebuild shattered consumer confidence and bring the nation back together safely over the coming months.’
• Charlie McVeigh, founder of Draft House, has told The Morning Advertiser that the industry will need to combat FOGO, the Fear of Going Out. He says that the consumer will have to be reassured that pubs and restaurants remain safe spaces in which to go out and socialise.
• McVeigh says ‘we’ve got to get people back out again because there are a huge number of people who are sitting at home, afraid. The evidence is clear – people will not go to hospital when they are seriously ill – A&E admission are down by half – and teachers and parents won’t go back to school so our children are not being educated.’
• The BBPA has said that the UK’s 27,000 pubs with beer gardens should be amongst the first to re-open. It says ‘over half of UK’s pubs have beer gardens making them best placed to meet social distancing guidelines and re-open.’ It says that ‘pubs with beer gardens or outside terraces should be best placed to meet social distancing restrictions required for re-opening from July 4th, enabling people to enjoy their local community pub’s beer garden in the summer sun.’
• The BBPA says ‘we want to explore all opportunities for our nations pubs to reopen safely and viably as soon as is possible. We are working with Government to consider all the possible options for re-opening pubs as soon as we can in a safe and viable way whilst meeting the required social distancing restrictions.’ It adds ‘the 27,000 pubs in the UK with beer gardens will be amongst the best placed to re-open under social distancing conditions and so should be amongst the first to reopen. This would let people enjoy their local community pub’s beer garden in the summer sun.’
• The BII has said that ‘working closely together as industry bodies we were keen to ensure that our members had an initial view of the potential requirements for reopening. We have developed the frameworks that will provide our members with an outline on how to safely reopen their venues as soon as they are able, however we would caution against making costly, significant changes to their businesses ahead of the final requirements from Government.’
• CGA has commented on sales across restaurants and bars in the US saying that sales rose 25% week-on-week between May 9 and May 16 as a number of major states reopened for business.
• CGA says that sales within two weeks of opening in Texas are now up to 68% of pre-Covid levels. Florida has also seen substantial week on week growth. Most bars & restaurants remain closed in New York, California and Illinois. In those states, sales are still higher as delivery is gaining traction.
• CGA says ‘the research from the States should provide some encouragement for UK operators waiting to reopen, in that it shows how business can pick up in a relatively short period of time. Trading at around 50% of previous levels is a good start, but also shows work will be needed to maintain momentum and encourage people back out. It’s also worth remembering that even for restaurant, take-out and delivery sales are more developed and helped underpin business during lockdown and will remain an important part of the sales mix.’
• Some bars and restaurants in California are to be allowed to open as long as they can provide outdoor seating.
• The UK’s Global Tariff will see wines from France and Italy become somewhat more expensive. The Wine and Spirit Trade Association says the measures ‘will not increase choice for consumers, but instead will add an unnecessary barrier to trade.’
• UKH has warned the Scottish Government that its plan for restarting the economy in Scotland is likely to result in business failures and lost jobs. It says ‘we are seriously concerned that the Scottish Government’s plan for reopening will do more harm than good. It appears not to be based in any logic and has the potential to create a two-tier sector with many already-hammered businesses being left behind.’
• It says ‘reopening hospitality businesses should be phased according to agreed protocols to ensure healthy, hygienic and safe spaces for staff members and tourists.’
• Black Box Intelligence in the US says that, during the reopening phase, questions remain about whether guests will trust restaurants enough regarding cleanliness etc. Black Box says the risk is that customers ‘may have forever cemented their belief in off-premise.’
• GfK has produced its UK Consumer Confidence Index for May showing that it declined by one point to minus 34. It says ‘Consumer Confidence remains battered and bruised despite efforts at loosening the COVID-19 restrictions. With unemployment claims rising by the highest rate on record and warnings of a severe recession and possible tax hikes, the damage done by the coronavirus pandemic to the UK economic landscape has been laid bare.’
• GfK says ‘the lower scores we have registered on the general economic situation reflect this and the Government is dampening down expectations of an immediate economic bounce back. So, despite plans to get the country up and running, consumers feel we are not out of the woods yet. Confidence will remain fragile for some time and the possibility of another spike in COVID-19 cases as we adapt to the ‘new normal’ is an obvious danger.’
• GfK says that confidence in the general economic situation of the country during the last 12 months has dropped seven points to minus 55. This is 25 points lower than in the same month a year ago.
• The Caterer.com has undertaken a poll that suggests consumers could spend £3.8bn in hospitality in the first week of re-opening. Some 51% of those polled were keen for hospitality to get ‘back to normal’ and 31% said they would visit a pub within a week of the reopening. Some 30% said they would dine out within the first week.
• The Caterer says ‘while this has been an incredibly painful time for the sector, it’s encouraging to see the public have a huge appreciation for what the hospitality sector provides to communities.’ It adds ‘there is strong appetite to support these businesses and workers in getting back on their feet.’ The proof of the pudding, as it were, will come down to the eating. It is perfectly possible that the consumer will tell a pollster one thing and do something slightly different.
• The poll suggests that 41% of would-be customers would pay a premium for enhanced cleaning & other measures. As a number of customers may have lost or be about to lose their jobs, this inclination may be tested in the real world. Staff wearing masks, digital ordering of food, fewer buffets, no more shared salt and pepper pots and disposable menus may be likely going forward.
• Consumer polls have also found that 67% of respondents believe the government should provide more support to the hospitality sector.
• Time Out has this morning launched a placing and an open offer to raise up to £49m via the issue of new shares. The placing will take place via an accelerated book build. Time Out says that it has also ‘entered into the amendment and restatement of the terms of the Group’s €22.6 million (approximately £20.2 million) outstanding debt facilities from Incus Capital Advisers.’
• Time Out points out that its markets are temporarily closed but says that it has cut costs. Advertising revenues have also slowed. The company is issuing paper to give itself liquidity headroom. The funds will ‘support general working capital requirements given the significant impact of the COVID-19 outbreak on trading, which is expected to continue in the near-term’ and ‘strengthen the Company’s balance sheet in the wake of the impact of COVID-19 in order to be prepared for the Company’s downside scenario.’
• Time Out says it will ‘emerge stronger’. It says ‘the Board believes that, following a successful Equity Fundraising and Incus Loan Restructuring, a cost reduction programme and further strategic initiatives, the Company will emerge, following the immediate impact of COVID-19, with a stronger brand, a larger audience and a higher operating margin and will be well positioned to continue the successful Time Out Markets roll-out which transformed the Group in 2019.’
• DP Poland has reported full year numbers to end-December 2019 saying that, in the pre-Covid year, system sales were up 13% with pre-IFRS 16 Revenue up 16%. It says that LfL System Sales were up 3% for the year and were up 6% in H2.
• DPP says ‘delivery sales ordered online [were] up 6%’ with the number of stores up 10%. As at December, the group had cash at bank of £3.6m. The company says the group performance was in line with management expectations for 2019.
• DPP CEO Iwona Olbryś says ‘the Coronavirus crisis presents our industry – and business in general in Poland and around the world – with some major obstacles. Nevertheless, I believe that the Domino’s brand, and its reputation for quality of product and service, put us in a good position.’
• Ms Olbrys says ‘while dine-in restaurants in Poland are permitted to reopen this week, we continue to deliver to our customers delicious, hot pizzas, typically within 25 minutes from order. Our focus on delivery/collection and online ordering positions DP Poland well in the current environment. However, with so much uncertainty prevailing, at the present time we can give no guidance on the outlook for DP Poland in the current financial year.’
• The company says ‘our customers order their pizzas increasingly on our digital platforms, and pay for their orders on that platform too. In Poland we believe we are ‘best in class’ on this front. In light of the Coronavirus concerns, we now offer contact free delivery and contact free carry out. We continue to create new initiatives and seek to adapt to the ‘new world’. Meanwhile, one consequence of the crisis has been to bring about some reduction in our food and labour costs.’
• DPP concludes ‘whilst the macro outlook remains uncertain, in this new world I believe that DP Poland holds an important position in the Polish F&B industry and good prospects.’
• Greene King is to give a 90% rent reduction to its tied tenants. It is not clear whether tenants outside of the tie will get the same deal.
• Costa Coffee opened 75 of its drive through units yesterday. The remaining 58 will open next week. The company says that ‘customers are telling us that they feel safe when visiting and are delighted that we’re open.’
• The Coaching Inn Group has secured additional funding under the Government-backed Coronavirus Business Interruption Loan Scheme
• New York restaurateur Danny Meyer has said his units may not reopen properly until there I a vaccine for Covid-19
• British shoemaker Clarks is to cut 900 jobs.
• Italian coffee producer Massimo Zanetti has reported full year revenues down by 1% LfL in Q1 this year. In absolute terms, revenues rose by 2.3%.
• Starbucks now pulled its way back to between 60% and 65% of pre-Covid 19 sales levels globally. China is at about 80%.
• Mars is reported to be suing JAB Holdings over allegations that a former executive handed over business secrets
• The latest CGA Prestige Foodservice Price Index has recorded deflation for the first time in its history in March 2020. It says ‘the COVID-19 pandemic is set to create significant instability in pricing in the months ahead.’ Deflation in the year to March was around 2.9%. The Index says ‘multiple impacts and pressures from the pandemic fully emerged in April, with the Federation of Wholesale Distribution indicating an 80% drop in members’ sales and fresh produce supplier Reynolds reporting a 95% drop in business almost overnight.’
• Prestige says ‘the COVID-19 pandemic is now having a marked effect on supply chains and food pricing. The wholesale suppliers that service our sector have had much the same experience as operators, with demand falling off a cliff in mid-March.’ It says ‘price fluctuations are to be expected, and collaboration with suppliers will be key over this difficult time.’
• Farmers are still reported to be 40,000 workers short of getting in this year’s fruit & veg harvest.
HOLIDAYS & LEISURE TRAVEL:
• On the Beach announced last night that it was to issue shares totalling 19.9% of its existing shares in issue via an accelerated book build. The directors and executive management team intend to put in £1.08m in aggregate.
• The group this morning announced that 26.1m shares were placed at a price of 257.5p to raise £67.3m gross.
• OTB updates on the COVID-19 situation saying that growth had been good between the collapse of Thomas Cook and the impact of the coronavirus in the UK. It says sales were up 29%. However, from late February, it says ‘the industry witnessed a dramatic fall in holiday booking volumes and airspace subsequently closed in mid-March.’
• It says ‘the length of this airspace closure remains unknown and the Board is of the view that the vast majority of bookings taken in H1 will not travel as planned in H2.’ It will put through a charge of approximately £35m, to reverse the revenues related to these bookings. The Group’s H2 results are also expected to be impacted, dependent upon how long travel restrictions remain in place.
• The group has cut costs, revised its banking facilities and is now placing equity. The cash and the revised facilities will ‘provide OTB with even greater resilience, flexibility and firepower through the current downturn’ and ‘ensure that, in the event of a recovery scenario involving accelerated demand, OTB will have sufficient funding available to increase marketing spend and to support the necessary short-term investment in working capital to meet that demand.’
• On the Beach says it ‘believes that the mitigating actions taken by OTB management, combined with the net proceeds proposed to be raised from the Placing and the revised banking facilities, will enable OTB to protect and preserve the Group’s strong market position; ensuring a high level of preparedness for market recovery over time.’ CEO Simon Cooper says ‘the fundraising and banking facilities announced today will provide On the Beach with greater flexibility and firepower to ensure the Group is ready to take advantage of the multiple opportunities that are likely to arise across the travel industry, as and when the world emerges from the ongoing crisis.’
• Mr Cooper says ‘there is no doubt that the Group’s asset light and flexible model, combined with its ring-fenced trust account for customer funds, helps to differentiate On the Beach from its competitors and has stood us apart when providing customers the refunds they are entitled to in these difficult times.’
• Greek tourism minister Haris Theoharis has told ITV News that the UK’s record on the virus is currently not good enough for British holidaymakers to visit when direct flights restart.
• Coach tour operator Shearings has paused new bookings “until further notice”. It says ‘due to the significant impact of Covid-19 on the company and the uncertainty around government imposed travel restrictions and deliverability, no new bookings for future travel will be taken until further notice.’
• Ryanair has suggested that tourism flights could recommence within the EU in July and August.
• Irish hotelier Dalata Hotel Group has said that 2021 will now be a year of ‘rebuilding’.
• STR reports that RevPAR in the US was down 73.6% for week ending 16 May. Occupancy was 54.1% down with rates down by 42.4%.
• easyJet reports that it is to commence some flights in mid-June.
• Hotel Owner Has reported that the world’s 50 largest hotel chains could lose up to $14bn worth of brand value as a result of Covid-19. They may be more interested in the cash position at present but, if brand write-downs become necessary, balance sheet valuations may be reduced.
• International travellers are being told they could face fines of £1,000 if they do not self-isolate for 14 days under new UK proposals.
• Manchester United has said coronavirus pandemic has cost it c£28m so far. The final figure will be materially higher.
• Facebook has said that around 50% of its staff could work from home going forward.
FINANCE & ECONOMICS:
• HIS Markit has produced flash PMIs for the UK for May showing that the composite PMI is at a two month high of 28.9 (up from 13.8 in April). Services is at 27.8m, up from 13.4 in April.
• Markit says ‘the UK economy remains firmly locked in an unprecedented downturn, with business activity and employment continuing to slump at alarming rates in May. Although the pace of decline has eased since April’s record collapse, May saw the second largest monthly falls in output and jobs seen over the survey’s 22-year history, the rates of decline continuing to far exceed anything seen previously.’
• It says ‘travel and tourism firms, hotels, restaurants and producers of consumer goods such as clothing were again the hardest hit, reflecting virus containment measures, but this remains a shockingly broad-based downturn with very few companies left unscathed by the COVID-19 pandemic.’
• It says the ‘improvement in business confidence about the year ahead for a second successive month is welcome news, and the easing of restrictions in coming months should help boost activity in some sectors as we head into the summer.’
• It points to a ‘frustratingly slow recovery, given the likely slower pace of opening up the economy relative to other countries which have seen fewer COVID-19 cases.’ Chancellor Rishi Sunak has said that the ‘economic recovery will take time’.
• Another 2.4m Americans signed on for unemployment benefit this week. That takes the total for the last two months to around 38.6m.
• Bloomberg reports that ‘tensions between the U.K. and European Union have been simmering for some weeks, but they are now bursting into the open.’ It says there has been very little progress on trade talks.
• The World Trade Organisation has said that the Covid-19 epidemic has caused world trade to fall to its lowest level in four years. The WTO’s trade barometer is pointing to a sharper downturn ongoing in Q2.
• PM Boris Johnson will not face a criminal probe over his relationship with US business woman Jennifer Arcuri.
• China is not now setting an economic growth target for this year. This is the first time in 30yrs that a target has not been set.
• Sterling up at $1.221 and €1.117. Oil lower at $34.01. UK 10yr gilt yield sharply down at 0.18%. World markets lower yesterday. FTSE100 set to open down around 75pts.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Burberry: The delayed Burberry finals for y/e March are “ancient history” (to use M&S’s phrase), but the decision to pass the final dividend may raise some eyebrows. Otherwise, the focus is on the current trading news: “we are encouraged by the recovery we are experiencing in Mainland China and Korea with cumulative sales in both markets since the beginning of April ahead of the prior year, albeit it is likely there is a benefit from some repatriation of spending in Mainland China. However, as government restrictions ease across the globe, consumers in different markets are likely to respond in distinct ways, with the travelling consumer likely to take longer to return. As a result, it could take some time for the luxury industry to recover to pre-crisis levels”.
• Planet ONS Watch: In the real world, as per the BRC-KPMG figures for April (the 4 weeks to May 2nd), underlying Retail Sales were extraordinarily weak last month overall, as the coronavirus lockdown shut down all non-essential stores, but “seasonally adjusted” life was surprisingly similar on the High Street on that bizarre parallel world, the Planet ONS (aka the Office of National Statistics in Newport), via the belated official Retail Sales figures for April, which were released at 7am this morning…City economists (who still treat the ONS figures as the gospel truth) will be disappointed with the 18.1% dip in month-on-month seasonally adjusted sales volume, whilst the ONS reports a drop of 23.7% in non-seasonally adjusted sales value year-on-year, but these figures are depressed by very weak sales of petrol (down c66% in value terms)…Ex-petrol, overall value sales were only down by
• BDO High Street Sales Tracker: Despite a record spike in Online sales, the BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that in w/e Sunday May 17th, Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were down by 22% (down c87% in Store sales, but up by c160% in Online sales).
• News Flow Next Week: After the Bank Holiday on Monday, things are quiet on the company news front, but the latest monthly Kantar/Nielsen grocery sales figures (for the 4/12 weeks to May 16th/17th) on Wednesday will be revealing and the British Land finals the same day will shed some light on the outlook for retail and office property. The delayed Ted Baker finals are also due next week, but there is no confirmed date and another delay would not be surprising. With the end of the month coming up quickly now, Tuesday brings the CBI Distributive Trades survey for “May”, for what it’s worth, and Friday brings the widely followed monthly GFK Consumer Confidence survey.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 20 May 20 Playtech Covid-19 update
• 20 May 20 M&S FY numbers
• 20 May 20 Royal Caribbean Q1 numbers
• 20 May 20 DART Group Covid-19 update & placing
• 21 May 20 Whitbread FY numbers, £1bn Rights Issue, Covid-19 update
• 27 May 20 Britvic H1 numbers
• 27 May 20 Gym Group AGM
• 30 May 20 Minoan AGM
• 1 Jun 20 Hollywood Bowl H1 numbers
• 3 Jun 20 SSP H1 numbers
• 3 Jun 20 DP Eurasia AGM
• 3 Jun 20 C&C FY numbers
• 3 Jun 20 AB InBev AG
• 4 Jun 20 Young & Co FY numbers
• 11 Jun 20 Fuller’s FY numbers
• 16 Jun 20 Coca Cola HBC AGM
• 22 Jun 20 Saga AGM
• 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
• Extending standstills is great. But, viewed in a less charitable light, it could just be giving entrepreneurs, who are optimistic by nature, a longer piece of rope. The exit from lockdown isn’t simple. It will need a great deal of thought.
• Entrepreneurs are great. By and large, that is. And they need supporting. Without them, you don’t get growth, taxes, public spending & all that good stuff. They will need a long, long, long glide path out of furlough. A cliff-edge, even a small one, just won’t hack it.
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