Langton Capital – 2020-06-23 – Landlords, 2m rule, pub cleaning, Intu, cruise lines, G4M etc.:
Landlords, 2m rule, pub cleaning, Intu, cruise lines, G4M etc.:
A DAY IN THE LIFE:
Bit busy this morning so will have to move on to the news:
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STRUGGLING WITH YOUR LANDLORD? Bad stuff rolls downhill, landlords are an easy target but they have their own problems. 23 June 2020:
• Landlords, as the name suggests, own property. They do not, as a rule, take operational risks. See Premium Email
OPENING UP. This is it, excuses being peeled away. 23 June 2020:
As we stand:
• There is no doubt that Covid-19 will remain a valid excuse for poor trading for some time to come. But some excuses (‘I simply cannot open’) are being stripped away. See Premium Email
PUB & RESTAURANT NEWS:
Covid-19 issues – 2m rule:
• 2m looks likely to be cut to 1m later today. Sky, the BBC, the Press, everyone seems to have been told or heavily hinted to this happening. Some have suggested that the politicians are overruling the scientists as has surely happened in many other countries. Just a few observations.
• It may or may not be on the statute book but it’s virtually unenforceable in either case. Distancing depends on the goodwill of customers, operators etc. lavatories can’t function (doorways are too narrow) so there may be a touch of the Dominic Cummings about it, use your initiative.
• The distancing is more likely to influence the confidence of consumers than it is to be taken at face value, that is as a legal requirement.
• There is no chance of the police getting involved. You know as a parent you shouldn’t impose rules on a child that you can’t enforce. If you’ve ever been busted by a four-year-old, you’ll know what we mean.
• Mitigating actions are going to be mentioned. This is sensible but may work better on paper than in practice. There may be upward of three dozen of them. That’s just a guess although there have been leaks.
• Taking names, addresses and contact numbers is a good idea on paper. But it will be costly in terms of time and will cut spontaneity if would-be customers have to queue up to leave their names.
• And whose (potentially dirty, coughed on) pen do you use?
• Longer term, registering names could help pubs & restaurants with their marketing campaigns further down the line.
• The opening will be a cathartic moment in some ways – but it will be a potentially worrying time for most. It will open the way for the government to gradually remove state aid.
• Pub reopening. Cleaning pipes remains vital. Pubs have not been shut for this period of time during the lifetimes of anybody involved in the industry. Cask Marque and others have issued guidance. Illness and diseases such as Legionnaire’s disease are a risk if this is not handled properly.
• Cask Marque has partnered with Visit Britain to create a Covid-19 compliance accreditation scheme for its 9,500 pubs and the 1,700 pubs listed on the Stay in a Pub website.
• The accreditation idea should ensure that pubs are aware of their responsibilities and should reassure consumers as to the safety of venues. Paul Nunny, Director of Cask Marque said “There is a concern that the Government’s ‘Stay at Home’ campaign has been so successful that consumers will initially be unwilling to go to public places.’
• This is a critically important point. See our various comments on ‘where’s the off-switch for lockdown’ etc.
• Shopping centre operator Intu has updated on its discussions with its lenders saying that it ‘has been in discussions with key stakeholders to progress this standstill strategy ahead of the revolving credit facility covenant waiver deadline of 26 June 2020.’ It says all the terms remain ‘subject to further negotiations, with no certainty as to whether intu will achieve a standstill, or on what terms or for what duration.’
• Time is getting rather tight. Intu says ‘further announcements will be made as appropriate.’ The company says it ‘has also appointed KPMG to contingency plan for administration. In the event that intu properties plc is unable to reach a standstill, it is likely it and certain other central entities will fall into administration. In this situation, all property companies would be required to pre-fund the administrator to provide central services to the shopping centres. If the administrator is not pre-funded then there is a risk that centres may have to close for a period.’
• The BBC references a video from Pret a Manger CEO Pano Christou in which he tells staff that there will be an announcement about the “job situation” on 8 July. Christou says that sales are running at 15% of normal levels.
• Counting backwards from when staff have to be partially paid for (i.e. when the furlough scheme begins to taper), companies may have to start consulting with their workers about redundancies (if they don’t wish to partially pay them under CJRS II) in the coming few days.
• Pret in particular has seen its stores, which are allowed to open without seating, badly hit due to many office workers currently working from home.
• The company may feel that former customers, who have been saving money on sandwiches, coffees, commuting and after-office beers whilst at home, could spend a little less even when they do return to the office.
• As we mentioned in the premium email yesterday, Pret is one of a number of operators that currently have advisors it to help them assess their options. Pret says ‘at the end of May we appointed advisers to help Pret develop a comprehensive transformation plan to adapt to the new retail environment.’ It says ‘transparency is very important in our business and we will make sure that Pret’s team members are the first to hear about any changes. We will update our team members in early July once the plan has been finalised.’
• Pret indicated that it would need sales to rise to around 60% of former levels in order to hit break even.
• Naked Wines has said that it will not be releasing full year numbers today as previously announced. The company says ‘the date was subject to completion of the final accounts preparation and routine audit procedures. In common with the wider market, these were taking additional time due to COVID-19 restrictions and abnormal working arrangements and therefore the announcement date remained subject to change.’
• It says ‘the audit process continues to progress well, with no material issues identified, but additional time is required to complete the final routine procedures and accordingly, while Naked Wines still expects to announce its Full Year Results this week, final confirmation of timing will be provided the day prior to announcement.’
• Amazon has gained approval to deliver alcohol in West Bengal.
• Morrison’s is to offer hot food to go in all of its 402 of its cafés nationwide.
• Asahi yesterday launched ‘Beer Pronto’, a new online and next day delivery service for beer and cider nationwide. Asahi UK says supermarket online delivery slots are hard to come by and adds ‘we wanted to ensure fans of our most popular brands weren’t kept waiting and could still enjoy their favourite premium lager and cider, at home, delivered with speed.’
• The Rick Stein Group has announced that two of its restaurants, its units in Marlborough, Wiltshire, and in Porthleven, Cornwall, will not reopen post lockdown.
• Shoe retailer Hotter is preparing to launch a CVA. It proposes keeping only 15 of its current 80 stores.
• Hog Back Brewery is to launch East Coast IPA, available in keg and 330ml cans.
• Camden Town Brewery is to brew a double dry-hopped American Pale Ale to be named To The Pub. It will give away 260,000 pints to the on-trade when it is in a position to reopen.
• Industry analyst Peter Martin says that Covid-19 closures and now the reopening processes, have put operators at a crossroads not of their own making. Some operators, such as le Caprice, have taken the decision to close their existing site and seek to locate elsewhere.
• The various CVAs (either enacted or proposed) are the result of similar decision making processes – though often driven by the need to change rather than the desire to undertake it.
• Certainly Covid-19, for better though usually for worse, is a natural pivot point.
• The government is reported to have dropped plans to change Sunday opening hours after a backbench rebellion.
HOLIDAYS & LEISURE TRAVEL:
• Carnival Cruise Line yesterday confirmed that it has extended its operational pause in North America through Sept. 30, 2020. It says ‘during this unprecedented pause in our business, we have continued to assess the operating environment and confer with public health, government and industry officials.’
• The UNWTO says there will be between 850m and 1.1bn fewer international trips globally this year.
• TUI is to begin reopening its UK shops on 6 July.
• Pierre & Vacances has opened most of its 165 French holiday destinations.
• Disneyland Paris is to commence reopening from July 15.
• Hope for staycations. The FT, for example, says that hotel bookings in Blackpool were up 200 per cent week on week in the first week of June.
• Fred Olsen Cruise Lines is reported to have confirmed that it has begun consulting about job losses at its head office
• STR reports that the hotel industry in the UK ‘lags the rest of Europe in large part because it is slower in reopening from the COVID-19 shutdown.’ STR reports that UK hotels are still running down between 81% and 89% in REVPAR terms against the same period last year.
• Teeside International airport has resumed flights.
• RCL has confirmed that its 49% stake in Pullmantur, the Spanish cruise line, has been written down in its Q1 impairment charge. RCL says ‘the headwinds caused by the pandemic are too strong for Pullmantur to overcome without a reorganization.’
• G4M looking like a rare winner.
• Gear 4 Music has reported full year numbers to end-March saying that revenues rose by 2% to £120.3m with EBITDA of £7.8m versus £2.3m last year. The group achieved a net profit of £2.6m against a loss of £0.2m in the prior year.
• CEO Andrew Wass says that profits for the year are ahead of the board’s expectations. He says ‘as previously announced, the commitment and hard work of our employees has enabled us to continue operating safely, whilst successfully serving our customers throughout the COVID-19 crisis.’
• G4M says ‘positive sales trends with improved margins have continued into June, and we have also incurred lower marketing costs than we would typically expect. The improvements we have made during FY20, and the exceptionally strong trading we have experienced during the lockdown period, mean we are financially stronger and better placed than ever to make the most of future growth opportunities within our market.’
• G4M concludes ‘therefore, whilst still early in the current financial year, the Board is confident of continued financial improvements during FY21 and look forward to the year ahead with optimism.’
FINANCE & ECONOMICS:
• The CBI has reported that UK industrial output registered its largest quarterly fall on record in Q2 this year.
• The UK car industry says it might have to cut one in six jobs.
• VAT may be cut and former Chancellor, Sajid Javid, is saying cut National Insurance. Most agree that taxes will need to go up shortly.
• Sterling up at $1.2466 and €1.1069. Oil higher at $43.01. UK 10yr gilt yield down 5bps at 0.19%. World markets. UK & Europe down yesterday but US up and Far East higher in Tuesday trade. London set to open up around 25 pts.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Today’s News: We were expecting the Naked Wines finals (for y/e March) today, but the company announced yesterday afternoon that, although “the audit process continues to progress well, with no material issues identified”, it needed a bit more time to finalise things. Shoe Zone has, however, announced its interim results (for the six months to April 4th), which bear the scars of a poor March. There is no trading update for the post-lockdown period, although the company highlights a boom in Online sales driven by an aggressive “BOGOF” deal. And the embattled shopping centre business Intu Properties has confirmed that if it cannot soon agree a standstill with its creditors it will appoint KPMG as administrators and that the centres may have to close. The latest monthly Kantar/Nielsen grocery sales figures should be out at c8am today.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 23 Jun 20 Gear4Music full year numbers
• 23 Jun 20 Naked Wines FY numbers
• 23 Jun 20 – Cranswick FY numbers
• 24 Jun 20 Premier Foods FY numbers
• 25 Jun 20 Fuller’s FY numbers
• 26 Jun 20 Marston’s H1 numbers
• 26 Jun 20 Comptoir AGM
• 29 Jun 20 Restaurant Group CVA creditors’ meeting
• 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
• 28 Jul 20 Gregg’s H1 numbers
• 4 Aug 20 Diageo FY numbers
• 11 Aug 20 Domino’s Pizza Group H1 numbers
Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year.
2019 COMPARATIVE RESULTS:
• 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
• Re CVAs, discussions with landlords, considering our options etc ‘it’s all gone quiet over there’. Of course, banks, landlords etc have a lot of fish to fry. But the CVA conveyor belt grinds on. See email.
• Government support is great, but it’s just that, support, not a solution. Remember Trigger’s broom? If you have to support a business with its wages, its rent, its rates, it’s VAT payments etc., then you have to start to ask if you really have a business there at all.
• Government by opinion poll. Unattributable leaks then wheel out a dweeb to float an idea then, if the GB public think it’s good (and remember the Birdie Song & Boaty McBoatface), PM Johnson will grab the reins & announce it as policy.
• Hence, as sure as eggs is eggs, 2m will go to 1m tomorrow, pub announcement for 4 July likely, VAT cut may be mentioned etc. (all Mr Johnson). Tax rises next year will be mumbled by somebody else or hidden in a footnote.
• The Cruise Line Industry Association, which in March said any moves to discourage cruising were ‘unwarranted’, says cruises from the US to remain suspended till mid-Sept. Says it’s ‘clear that more time will be needed to resolve barriers.’ Ya think?
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