Langton Capital – 2020-05-27 – Vertical integration, Britvic, High Street, tentative re-openings etc.
Vertical integration, Britvic, High Street, tentative re-openings etc.
A DAY IN THE LIFE:
MS Office is good enough to correct my often-bad spelling but, I’ve been struggling recently to let it know that, when I write IHS Markit, I really mean IHS Markit and not HIS Markit.
Now, admittedly, IHS is not a word.
And I’m not sure what it stands for but that’s the name of the company that’s been expending buckets of red ink recently producing the monthly PMI statistics and I’d like to be allowed to refer to it as such without being auto-corrected a word or two after I’ve written it and subsequently have eagle-eyed readers point out, quite rightly, that the name has come out wrong.
But, I suppose, you can’t have everything. I’ve tried turning the auto-correct off and, it must be said, the outcome seems to be much worse. On to the news:
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• Large brewers and distribution. Same as it ever was?
• The post Covid-19 High Street. Mixed signals. And why aren’t beer gardens allowed to open?
LARGE BREWERS AND DISTRIBUTION. More than 30yrs after the beer orders, it’s interesting to see who now owns or supplies beers to the nation’s pubs. 27 May 2020:
• This 1) makes economic sense but 2) can lead to intended or unintended market abuse and less choice. See Premium Email
THE POST COVID-19 HIGH STREET: The coronavirus outbreak is past its current peak but it has not gone away. Its impact will be felt for some time. 27 May 2020.
Non-essential shops to reopen 15 June: See Premium Email
PUB & RESTAURANT NEWS:
Covid-19 & ‘new normal’ news:
• Speaking on LBC, Michael Gove has said that it was ‘going to be more difficult’ for pubs, restaurants and bars to reopen, even after most other shops have been given the all clear. Gove told LBC’s Nick Ferrari that people ‘would be able to have outdoor hospitality, so that you can enjoy a drink in the garden of a pub, or that you could eat outdoors in a cafe.’
• Pragma Consulting has reported that ‘while nightclubs and bars may be a fair way off opening in the UK, restaurants and pubs may be able to open on the 4th July, however, the challenge will be to provide that experience and social interaction that is craved, whilst abiding by government guidelines.’
• Well, quite.
• Pragma says ‘the effect on atmosphere, and reduced covers means that many restaurants fear their businesses will not be viable.’ Some 75,000 properties in Italy are reported to have handed their keys back to local mayors in protest.
• Pragma says that delivery demand remains high. The use of apps will rise.
• Wireless Social has reported that the London retail scene shows ‘early signs of awakening’. Footfall, overall, is still tracking down by around 80%.
• Stay In A Pub reports that 80% of customers would be ‘pretty comfortable’ to return to pubs post lockdown. It says 44% of over-65s would be ‘completely comfortable’. Perhaps counter-intuitively, only 28% of those aged between 36-45 said the same thing.
• Some 41% of respondents felt ‘totally comfortable’ about staying overnight in a pub. This rose to at 80% for those that would feel at least ‘pretty comfortable’. Stay In A Pub reports that there are 7,897 pubs with rooms in the UK. Founder Paul Nunny says ‘support for our pubs continues with 69% of respondents saying that they would be willing to book and pay now to secure future stays if these included totally flexible cancellations, date changes and refund policies. With the general feeling of uncertainty around when lock-down will ease and the likelihood of a ‘ultra-last minute’ demand this consumer confidence and commitment to future stays presents an opportunity for pubs to promote now through online booking offers and listings on accommodation sites.’
• CEO of the British Retail Consortium Helen Dickinson has told Sky News that, following the lifting of restrictions on non-essential retailers on 15 June, she expected demand to remain subdued.
• The Bank of England has said that there is likely to be a period of ‘prolonged caution’.
• Britvic has reported full year numbers saying it has made a ‘robust start to the year’ and saying that it is ‘well-placed to navigate the challenges of Covid-19’. Re the first half to 31 March 2020, the group says that revenues rose 1.4% on an adjusted basis (26wks are being compared with 28wks) and adjusted EBIT was up by 9.4% at £75.7m.
• Britvic says profit after tax was up 11.5% at £38.9m with EPS up 2.7% at 19.0p. The board is deferring its H1 dividend to later in the year. It says it is still ‘confident of liquidity.’ Britvic says that stress testing has underpinned its ‘confidence in liquidity position and covenant compliance for the next 18 months.’
• Britvic says Covid-19 is currently costing it around £12m to £18m per month. CEO Simon Litherland says ‘the world is a very different place from the one it was a few months ago.’ He says ‘we entered the Covid-19 crisis with strong momentum, having delivered a robust first half performance, which continues our track record of consistent delivery since 2013. As a business and as a team, we have repeatedly demonstrated our agility as well as our ability to successfully navigate tough headwinds.’
• Britvic concludes ‘while these times are clearly unparalleled, soft drinks has proven itself to be a resilient category time and time again. As consumers increasingly turn to trusted brands, we are confident that our long-term strategy will continue to create value for all our stakeholders.’
• TGI Fridays is said to be drawing up plans to operate at 55% capacity.
• Nando’s is to reopen 40 more stores across the UK for delivery from today.
• Companies with beer gardens should, during the summer at least, be able to make use of ‘the biggest room in the pub’.
• Chinese delivery company Meituan’s shares hit a record high on Tuesday, taking its market capitalisation to over $100 billion. Meituan has become the third Chinese company, behind Tencent and Alibaba, to pass this milestone.
• Synergy Grill Technology has launched a scheme allowing customers to purchase new cooking equipment and pay for it in a “similar way to a monthly mobile phone contract”. Chairman & CEO Justin Cadbury says ‘the special element of this scheme is that whilst the customer receives their grill upfront, installed and their old grill taken away, they are not having to increase their spend as the savings on the fuel will outweigh the cost of the monthly payments.’
• South African company Famous Brands, which owns GBK in the UK, has held its final dividend after reporting that the Covid-19 outbreak has severely impacted its earnings and means that it is likely there will be a ‘breach of the currently agreed debt covenant requirements’ for this year.
• Famous Brands has some 2,898 restaurants across Africa, the Middle East and the UK. It has said that it will put no more cash into its UK GBK business.
• JAB is reported to be looking for a valuation of up to €16bn for its coffee business. The prospectus is being published today.
• UK Hospitality has said that the reported fall in the number of licensed premises in the country (down by 2.4% in the year to the introduction of the current coronavirus-related shutdown) was a ‘useful starting point’ when considering the position of the industry.
• The South African government it to lift its ban on alcohol sales for at-home consumption next month.
HOLIDAYS & LEISURE TRAVEL:
• Travel Weekly reports that the cruise industry could see the capacity of its ships ‘cut by as much as 40% if lines follow a new social distancing template created by a US company.’ Bahamas Paradise Cruise Line, a relatively small player, has said that spacing, one way systems and the closure of some decks would lead to a material cut in passenger numbers. In resort, tour bus numbers would also be cut.
• A part of Co-op Travel has reported that 39% of would-be customers would like to travel ‘as soon as possible’ after the current lockdown restrictions are lifted. At the other end of the spectrum, some 29% intend to wait until 2021. Some 62% of respondents said they would next like to holiday in Europe with 10% saying they would holiday in the UK.
• Travel stocks were extremely strong yesterday on news that Spain is to lift quarantine restrictions. TUI shares finished up by more than 50%. Dart Group was 17% higher and On the Beach was up 11%. Whitbread’s shares, on the other hand, were down by around 6%.
• Airports in the Canary Islands are reported to be considering running flights via ‘safe corridors’ from countries at low risk of Covid-19. It is not clear if 1) the UK is in that list of countries and 2) if returning UK citizens would then have to self-isolate for 14dys under UK rules.
• Portugal is reported to be in talks with the UK re the creation of an ‘air bridge’ between the two countries.
• Germany is to allow European travel from mid-June.
• Universal Parks & Resorts is to open its Universal Orlando Resort from June 5th.
• STR has reported that the European hotel industry saw occupancy fall by 84.6% in April versus the same month last year. Average rate was down by 30.1% and REVPAR was some 89.2% lower.
• The FT reports that the UK’s caravan manufacturers are at risk of collapse. It says holiday parks have held back payments and cut future orders. The FT quotes Willerby Caravans as saying ‘all the furloughing in the world won’t save this business. Holiday park operators won’t make any money this year and so they won’t be able to afford next year’s caravans. We will almost go through three winters.’ The caravan industry is a major employer in Hull and East Yorkshire.
• Warner Music Group could rais around $1.82bn in an initial public offering that would value the whole company at up to $13.26bn
FINANCE & ECONOMICS:
• Economists have warned that the UK faces a government deficit of 5% of national income by the time of the next election in 2024.
• Sterling higher at $1.2313 and €1.1239. Oil lower at $36.07. UK 10yr gilt yield up 4bps at 0.22%. World markets mixed yesterday. UK higher and London set to open up around 30pts.
• Johnson said to be ‘struggling to draw a line under the Cummings row’.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• British Land: The finals today from one of the best run property groups, British Land, shed some light on the troubled outlook for both retail and London office property. Inevitably, although BL own the Meadowhall shopping centre, they are also big in retail parks and therefore claim to be “well positioned”. Because of hefty valuation declines in Retail, the target of only having 30-35% in the portfolio in Retail has now been reached, but BL have said that “over time we expect to make further selective retail sales. Our revised plan is for retail to comprise 25-30% of the portfolio”. As for the London office market, BL say “near term, we are expecting the offices market to be more cautious, but we continue to conduct virtual viewings and are encouraged by negotiations we are having”.
• Today’s News: There have been no more announcements from Motor dealers about being allowed by the Government to reopen on June 1st, but the CFO of Frasers (aka Sports Direct), Chris Wootton, was moaning on ITV News last night that other “non-essential” retailers won’t be reopening until June 15th . Otherwise there is no Retail news, although on the day that its rival British Land has confirmed that the retirement of their CEO Chris Grigg has been delayed because of the crisis, the embattled shopping centre operator Hammerson has announced that their under-pressure CEO David Atkins “has decided to step down” and that a search is underway for his successor
• News Flow This Week: There is no more company news scheduled for this week, although there are bound to be updates on June 15th store re-opening plans, as well as an announcement from the embattled Ted Baker on when its delayed finals will appear. The latest monthly Kantar grocery market share figures (for the 4/12 weeks to May 16th/17th) come out at c8am this morning.
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
• 22 May 20 Time Out Covid-19 update, fund raise
• 22 May 20 DP Poland FY numbers
• 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
• 13 Jul 20 Pepsi Q2 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
• Is it just me or is the pub & brewing industry re-forming itself in the image of its pre-Beer Orders self? I mean Heineken & Punch, Stonegate’s hoovering up exercise & then Enterprise Inns, Marston’s & Carlsberg. Maybe, check notes, the previous structure made sense??
• Again, is it just me, or is the prospect of queueing to enter one shop after the other on the High Street, only to be told not to touch anything, not to linger and not to breath too much and to get your coffee and clear off from 16 June not, well, not really very appealing at all?
• Supermarkets could be the winners. Put on more non-food & they’re one-stop shopping could look appealing if the High Street has manage queues, put one-out, one-in bouncers on their doors & charge higher prices to pay for it all. New normal = not old normal.
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