Langton Capital – 2020-06-05 – Revolution, Young & Co, lost causes, holidays, quarantine etc.
Revolution, Young & Co, lost causes, holidays, quarantine etc.
A DAY IN THE LIFE:
It’s been raining and ten to twelve degrees up North and the lawn is in shock.
It’s had a good dousing and, when it gets its wits back together, I’m sure the grass will start growing like a demented rabbit on crack meaning that, yes I’m sure, I prefer a brown lawn to a green one.
That because it takes little effort and, if accused of being lazy, you can hopefully point to all the other ignored gardens around you because, well, who’s got the time to water them through a drought?
Added to which, the logistics are a bit fearsome. I mean a centimetre of rain is, in a 30’ by 60’ garden, some 2,000 litres of water or 400 watering can’s worth. And who’s got the time or let’s be frank the inclination, to spend that long pouring water onto mud?
Anyway, time for the news. Have a good weekend everybody.
LANGTON PREMIUM EMAIL:
Corporate Offer: Premium email just £295 (plus VAT) for a single subscriber or £495 (plus VAT) for multiple subscribers. Drop us a line to get involved. Retail Offer: Easy in, easy out. £30 per month (inclusive of VAT, £25 net) via PayPal.
ADVERTISE WITH US:
Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.
SEE PREMIUM EMAIL.
• Young & Co updates on its reopening plans. The group yesterday hosted a webcast to analysts.
• Comments on the third of outlets that it might be difficult (or impossible) to save.
• ASK & Zizzi considering sale of business. More to say, so little time in which to say it.
YOUNG & CO – FULL YEAR ANALYST’S WEBINAR: The company commented on reopening plans, the 2m vs 1m argument, rival early openings, sales prices, margins and other.
• See below for more detail but among the key points were 1) the company is not going to rush to reopen units on 4 July, 2) it’s plans are based on a 1m distancing rule being in place by early August, 3) it has not reopened units to sell beer from hatches and open doors – there are toilet issues etc., 4) it does not intend to jack up prices, 5) its freehold estate has been useful in sourcing debt and it means that a larger proportion of costs are variable if demand is sluggish, 6) it expects to be completely back to normal for the year from 1 April 2021. See Premium Email.
COMMENTS ON REOPENING FROM LONDON UNION. Boss Jonathan Downey has been at the forefront when it comes to making proposals to government. Here he comments on the outlook for the industry as a whole. 5 June 2020.
• London Union boss Jonathan Downey has said that a large number of hospitality units now will fail – and there is nothing that can be done to save them. See Premium Email
PUB & RESTAURANT NEWS:
Revolution to raise funds & move listing to AIM:
• Revolution Bars Group has announced that it is to raise up to £15m via a share placing. The group is also proposing that it de-list its shares from the main market and have them listed on AIM instead.
• RBG says three will be a placing and an open offer via an accelerated book-building process. It says ‘the proceeds of the Fundraising will be used by the Group to achieve an appropriate level of indebtedness and emerge from the COVID-19 pandemic in a position of strength.’ The fund raise will need to be approved by shareholders.
• RBG says it is proposing the ‘cancellation of the admission of the Company’s Ordinary Shares to listing on the FCA’s Official List and to trading on the London Stock Exchange’s Main Market and the Company’s Enlarged Issued Share Capital being admitted to trading on AIM.’
• A firm placing at 20p will comprise a part of the above. The placing price is a discount of c42% to yesterday’s closing share price. The Board is to put in £132k. RBG says ‘prior to the onset of the COVID-19 pandemic, the Group was demonstrating signs that the turnaround strategy put in place by the Board was successful, with the Group achieving growth in both like-for-like sales and Adjusted EBITDA and making significant progress on debt reduction.’
• It says ‘since the announcement made by the UK Government on 20 March 2020 requiring the closure of all bars, pubs and restaurants in the UK, the Group has taken significant actions to mitigate the impact of the closure of its bars and to preserve cash including the Board voluntarily reducing their salaries by 50 per cent. These measures have reduced the Group’s weekly running costs to approximately £0.4 million.’ The group has cut costs elsewhere and increased its debt facility with Nat West. These will be reduced somewhat post the share placing.
• RBG says when it reopens, under most of its assumptions, it intends to ‘re-commence the Group’s estate refurbishment programme and be in a good position to take advantage of growth opportunities post-COVID-19.’
Running up to reopening:
• The BBPA has called for ‘at least three weeks’ notice for brewers, to ensure fresh beer is available for pub re-openings, as new data shows beer sales fell by 24% in April.’
• We have suggested that brewers cannot operate on rumour, whispers and the like. The brewing process takes as long as it takes. If brewers aren’t relatively sure that pubs will be open on a certain date, they may not invest in the product and processes necessary to supply them with beer. See our various tweets. Pubs will also need to clean up and make sure that staff haven’t drifted off into the furlough fog.
• For pubs, it would be a dreadful shame if cask was not available. They may be able to manage for some time on bottled beers, wines, spirits, soft drinks and food.
• The BBPA says ‘pubs will need a minimum of three weeks – but ideally four weeks – notice to allow them sufficient time to prepare to re-open.’ It would like firm guidance by 13 June as to whether pubs will be opening on 4 July or not.
• Beer sales in the lockdown. The BBPA says ‘overall beer sales in the UK for the month of April fell 24% on the year before. Beer sales in pubs were down 100%. Although off-license beer sales from shops and supermarkets increased by 39% for the month on the year before, this was not enough to make up for the complete shutdown of the pub trade.’
• Lager performed more strongly than ales. The BBPA says a date needs to be firmed up. it says ‘our pubs and breweries are desperately in need of this clarity.’ Only the clearest guidance will ‘save pubs from permanent closure and protect the vital local jobs pubs and breweries support across the UK.’
• UKH has called on the Scottish Government to cut its social distancing guidance from two metres, hopefully to one. Guidance in Germany, Poland and the Netherlands is 1.5 metres. Only the UK, Switzerland and the US are still insisting on two metres.
• GfK has released the third of its COVID-19 flash report records for UK consumer confidence saying that it has dropped across key measures to minus 36, down on its last reading and ‘just three points shy of the historic low of minus 39 in July 2008.’
• GfK says ‘against a backdrop of falling house prices, soaring jobless claims, and with no sign of a rapid V-shaped bounce-back on the cards, consumers remain pessimistic about the state of their finances and the wider economic picture for the year to come. The only bright spark in the numbers is for the Major Purchase Index with a six-point fillip, pointing to latent demand among shoppers across the UK despite most outlets remaining shuttered.’
• This could be, as we have suggested before, that some large ticket purchases are being postponed rather than lost altogether. GfK says ‘as the lockdown eases, it will be interesting to see just how the consumer appetite for spending returns in a world of socially-distanced shopping and the seismic shift to online retailing – alongside worries of a fresh spike in COVID-19 cases as relaxations increase.’
• GfK says its overall measure fell two points over the last two weeks. Of its five measures, four decreased and one rose.
• London Union boss Jonathan Downey has said that a large number of hospitality units now will fail – and there is nothing that can be done to save them – See Premium Email
• A survey carried out by Brasserie Bar Co has found that nearly 90% of people are likely, or very likely, to dine out when restaurants re open. It says around 40% will dine out as soon as they can and around 60% said they would dine out when they feel it would be safe to do so.
• The Brasserie Bar Co survey found that only 13% of would-be customers believed that wearing a face mask would make them feel safer. Raymond Blanc says ‘the hospitality sector has been hit particularly hard and on both a personal and professional level, telling staff that we would have to close our doors indefinitely was very difficult indeed. It now feels like we’re starting to turn a corner with re-opening on the horizon. This survey shows a new confidence about eating out which feels promising. We’re looking forward to welcoming customers back safely as soon as we can.’
• Property agent Fleuret’s says ‘operators are already sitting on depleted working capital, which is being eroded with every passing day of lockdown, and face the significant and expensive task of re-stocking, re-modelling and re-opening sites in a COVID-19 safe environment, with little more than a “fag packet” projection of how trading capacities might look.’
• It says ‘whilst it is easy to see landlord’s as the enemy sitting in their ivory…this is far from the case as most assets have significant leverage or face exposure to the nation’s pension provision or return-hungry shareholders.’
• Fleuret’s reminds operators it Q3’s rents will be due in less than three weeks’ time.
• Fleuret’s says ‘the stark reality is that many tenants in the SME space (i.e. 3-25 sites) are accruing unsustainable debts…and lower levels of turnover could result in a situation later down the line where the tenant has no choice other than default.’
• Langton has commented at some length that optics are politically important and that a material number of the 8.5m workers currently furloughed will not have jobs to go back to.
• The MCA quotes Uber Eats as saying that its operators saw a double digit growth in delivery after volumes recovered.
• Sky News reports that Azzurri Group, the owner of the ASK Italian and Zizzi restaurant brands, ‘is exploring a sale of the company as Britain’s hospitality industry battles to survive the effects of the coronavirus pandemic.’
• Azzurri is owned by PE house Bridgepoint. Sky says the process is ‘at an early stage, and is said to be only one of the options.’ See also Premium Email.
• Adnam’s yesterday reported at its virtual AGM that these are ‘hugely challenging circumstances’ and it says ‘our half year result will inevitably show a substantial loss.’
• Gregg’s is to open all of its shops on 18 June.
• Gap in the US reported a c$1bn loss on the back of Covid-19 closures.
• E-Bay has raised its current-quarter revenue and profit forecasts on the back of booming sales. Sales volumes are up by between 23% and 26% across a number of categories.
• No10 is reported to have ‘left open the door to Britain allowing imports of US chlorine-dipped chicken to secure a trade deal with Washington.’
• Molson Coors has signed an exclusive distribution partnership with Bodega Bay to support further roll-out in UK stores from June of the company’s hard seltzer product.
• OrderPay has said the more major restaurant and pub groups are signing onto its platform in order to ‘reopen safely amid huge social distancing challenge.’
• Germany is to give families €300 for every child in order to boost spending.
• Cheesecake Factory in the US is to expand its dine-in operation to a quarter of its units.
• Debenhams is to commence reopening shops in Northern Ireland next Monday and in the UK the week after. The company collapsed into administration in April.
• New Look is reported to have begun discussions with landlords in an attempt to have at least some properties moved to a turnover-based rent.
HOLIDAYS & LEISURE TRAVEL:
• The government has confirmed that it will review the 14dy quarantine rule, due in on 8 June, on 29 June.
• This plays to the belief it will be softened by month end. A degree of what is going on may be political optics. Travel Weekly quotes industry leaders as saying there is still a risk that the quarantine requirement will put more than 1.2 million UK travel and tourism jobs at risk.
• Republic of Ireland ski operator Highlife has ceased trading. A note on its website says ‘notice to all customers of Highlife Adventures Limited, trading as Highlife Ski & Snowboard. Highlife has ceased to trade from the 29th May 2020.’
• Incite points to Cabinbookers research saying 90% of holidaymakers want to take a UK holiday this year. The Economist says that demand for UK product is picking up. It is not clear where all of these new holidaymakers will stay.
• Spain has said it wants to let UK holidaymakers, and their money, into the country as soon as possible.
• Travel Weekly quotes Business Travel Association boss Clive Warren as saying that, if the quarantine won’t be lifted, the UK needs ‘air corridors’ agreeing with some countries immediately.
• Whitbread has announced the reopening of 35 construction sites for new hotels across England and Wales
• STR reports that the US hotel industry improved slightly in the week to 30 May. It says REVPAR was nonetheless down by 62% on the same week a year ago.
• Rocco Forte is to reopen a number of its hotels this summer.
• City Airport is to reopen from the end of June. British Airways has told staff unions that it is burning £178m per week and that redundancies are inescapable. Virgin Atlantic is to resume flying on 20 July.
• The US is to bar Chinese airlines from flying to the United States from 16 June
• The Telegraph reports that ‘the owner of Odeon cinemas has issued a stark warning over its future as the firm’s finances come under massive pressure from closures around the world.’ AMC Entertainment has said any delays to reopening cinemas or slippage in film releases would raise “substantial doubt” about its future.
• AMC says ‘if we do not recommence operations within our estimated timeline, we will require additional capital and may also require additional financing if, for example, our operations do not generate the expected revenues or a recurrence of Covid-19 were to cause another suspension of operations.’
• Warner Music shares rose 8% on their US stock market debut.
• Ticket specialist 365 Tickets has ceased trading
• UK zoos have been told they must stay closed even after other leisure operators have been allowed to reopen. Chester Zoo says that it is spending £465k per month keeping its animals fed.
FINANCE & ECONOMICS:
• The Guardian quotes three former Chancellors of the Exchequer, Alistair Darling, George Osborne and Philip Hammond, as saying that major job losses are to be expected over the coming months.
• Sterling higher vs dollar at $1.2613 but down vs Euro at €1.1113. Oil higher at $40.19. UK 10yr gilt yield up 2bps at 0.31%. World markets mixed yesterday but Far East higher in Friday trade. London set to open up around 37pts.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Consumer Confidence Watch: Ahead of today’s latest “flash” GFK Consumer Confidence report, we flagged yesterday that the record -39 index low seen in July 2008 has not been tested so far in the current crisis, but it is getting closer…The overall index slipped to -36 in the second half of May, from -34 in the first two weeks, and that is the lowest since January 2009. GfK’s Client Strategy Director Joe Staton said: “With no sign of a rapid V-shaped bounce-back on the cards, consumers remain pessimistic about the state of their finances and the wider economic picture for the year to come”. The one positive note from the survey came from an odd six-point rise in the measure of how willing consumers are to make major purchases, pointing to some latent demand amongst shoppers.
• BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that in w/e Sunday May 31st, Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were down by c21% (down c92% in Store sales, but up by c126% in Online sales).
• Trade Press (1): Retail Week magazine has been published this week and the front cover is a photo of the former Sainsbury’s boss Mike Coupe, to flag up his final interview (“Leaving in lockdown”). RW also have features on the outlook for Ted Baker, Seven Tech innovations to help run stores in a post-coronavirus world, the outlook for M&S and the Death of the Retail Head Office. In his column, the Editor looks back at Mike Coupe’s time at Sainsbury’s and looks ahead to the re-opening of non-food stores on June 15th, noting that “June 15th merely marks the end of the beginning for retailers as they navigate the coronavirus crisis” and thundering that “The months ahead will define retailers’ future”.
• Trade Press (2): Drapers magazine has also been published today and the front cover, a graphic of a crystal ball called “The Future of Sourcing”, flags up an investigation into the future of the fashion retail supply chain, which appears to have been broken by the coronavirus pandemic: to overcome sourcing problems, many brands and retailers are looking to UK manufacturing, with “Making in Britain” in fashion again. The main News story is that fashion retailers will shun reopening Sales on June 15th for fear of causing “stampedes” of customers. Drapers also flag that Debenhams is in disarray after the CEO exited and HQ jobs were cut. And it has a feature on the Cost of Reopening Retail, noting that Covid-security compliance is estimated to cost as much as £75,000 a year per store and that some retailers are wondering how they will cover their operating costs with reduced footfall under
• News Flow Next Week: First thing on Tuesday we get the BRC-KPMG Retail Sales survey for May, followed later by the Signet Q1 results in the US. Wednesday brings the interims from the West End landlord Shaftesbury, whilst on Thursday we get the B&M finals, as well as the Morrisons AGM and the Dignity AGM.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 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
• 4 Jun 20 Fevertree AGM
• 4 Jun 20 Covid-19 updates: PPHE, Fevertree, Carnival, SSP (placing)
• 5 Jun 20 Covid-19 update, Revolution Bar Group (share placing)
• 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
• 25 Jun 20 Fuller’s FY numbers
• 26 Jun 20 Comptoir AGM
• By end-June 20 Premier Foods FY numbers
• 1 Jul 20 Constellation Brands Q1
• 7 Jul 20 Whitbread AGM
• 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
• Adnams says waives rent for tenants. These are ‘hugely challenging’ times. Says H1 will ‘inevitably show a substantial loss.’
• Getting pubs & restaurants open isn’t just flicking a switch. Clearing out dead beer is a big job, brewers need time to supply draft, staff may have floated off, perishables need sourcing. Young & Co won’t open everything immediately, Loungers same. This just today’s news-flow.
• Known unknowns. Will customers come back? Commuters have saved twenty quid a week on coffee, another £25 or £30 on lunches, perhaps fifty quid on travel, twenty quid on 3 beers after work… Remote working likely to be more of a thing?
• The most valuable comments are those made without the benefit of hindsight. Check out this 80yr old comment on human frailties, entitlement etc & see if you can spot 1 or 2 of our current politicos & their advisers. https://harpers.org/archive/1941/08/who-goes-nazi/.
• Young & Co will open all their pubs on 3 August. Later than some competitors. A lot could happen over that period. They hope and believe that the social distancing gap can be reduced from 2m to 1m. The UK government will have evidence back from Italy, France & Denmark by then.
• Young’s says year to March 2021 could fall into 3 periods of 4mths. In terms of revenue, no1 is down 100%, no2 may be 50% of normal revenues and no3 could be around 70% of normal. YNGA hopes that the risks are on the upside.
• Q at Young & Co conference call. Will customers’ behaviour change? Yes, a little. They may work from home a bit more. This could have some impact on the after-work trade. For Young & Co, it could gain business in suburbs and maybe lose some in the city centre
• Will rival pubs that have reopened early steal market share permanently? The co doesn’t think so. Rivals, usually independents, have had issues with neighbours, the police, toilet facilities etc. Toilets actually quite a big issue.
LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line.