Langton Capital – 2020-07-13 – Pizza Pilgrims, trading levels, JDW, Casual Dining, travel issues etc.:
Pizza Pilgrims, trading levels, JDW, Casual Dining, travel issues etc.:
A DAY IN THE LIFE:
So, I, in common with many would-be consumers, have the same notes in my wallet, lonely and increasingly tattered, that I had in there in mid-March.
The fivers, tenners and the old-style twenty that get carted around on my hip there don’t get out much now. Some would say they’re prisoners due to my Yorkshire heritage at the best of times but now they really are immobile, they don’t get to mix with other money see their friends or travel much.
And, one has to wonder, when or if that will change?
As, with the chippy taking plastic only, busses trying to get you to pay on card and other, larger operators scoffing at the use of cash, the velocity of circulation of our notes and coins in issue must surely have fallen sharply and it may never rise much again.
That was a bit heavy for a Monday but it does accord with views that Covid-19 has accelerated a number of trends already in place. Follow us on Twitter at @brumbymark and let’s move on to the news:
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.
COMPANY ACCOUNTS, PIZZA PILGRIMS: Company No. 08292290. Accounts for the year to end-June 2019. 13 July 2020: See Premium Email.
PUB & RESTAURANT NEWS:
• Feedback re reopening to date. Generally, a tad disappointing. But at least no bother. This weekend was helped by the better weather. Villages & community better than city centres. Some re-openings in towns could shut again. Travel hubs are particularly quiet. Restaurant Group has said that 10% of its units may not open until next year. SSP has made similar noises.
• The transport infrastructure (see below) is not yet fully-working. Convoy theory suggests that business will move at the speed of the slowest – this could be transport or confidence. It is not supply. Some office areas ‘are ghost towns’. Ditto transport hubs. See Daily Mail for photos with sliders of before & after Covid footfall. Some areas don’t want visitors. Many restaurants in tourist hot spots remain closed.
Covid – the new (ab)normal:
• CGA’s Drinks Recovery Tracker has suggested that total drink sales in managed pubs and bars that were open last weekend were 49% down on pre-lockdown levels on Saturday and 52% down on Sunday. A short time period will be distorted by the weather, the novelty factor, the availability of sites etc. But the numbers do give us something to go on.
• CGA says ‘beer sales held up best, but were still down 36% on Saturday and 43% on Sunday on pre-COVID norms.’ It says ‘beer’s relatively better showing highlights the struggle of recreating the draught pint experience at home, which has clearly left consumers thirsting for that first pint.’ Real ale is one of a number of points of difference between pubs and consumers’ houses.
• CGA says ‘spirits performed roughly in line with the market on Saturday, with sales down 50% on pre-lockdown rates, but had a better day on Sunday, down 45%.’ It says soft drinks’ sales were weak (down 58% on Saturday and 55% on Sunday). CGA says this data is ‘broadly in line with the total sales numbers collected by CGA’s Coffer Peach Business Tracker, which saw overall like-for-like trading in the managed pub, bar and restaurant sector down 45% on the same weekend last year.’
• A survey by MCA/HIM has found that 57% of businesses polled opened last weekend with 29% saying they were busy and a very similar 31% saying they were quiet. When asked how confident they were in the future, 57% of the businesses expressed a level of confidence with 11% said they were ‘confident’ about the future, with 42% saying they were only ‘quite confident’ Just 3% said they were ‘very confident’ about the future for their business.’
• Both surveys above were carried out before the government announced it was cutting hospitality VAT (though not on alcohol) to 5% and was to subsidise cheap meals out during weekdays in August.
• Sky has suggested that the government will ease restrictions on the use of public transport. Some have suggested that the lack of transport is holding back city centres. In York, admittedly a sample of one, the busses require an empty seat next to every passenger with an empty row in front and behind. That’s six seats per passenger. Some areas will have been shutting the upstairs on busses for fear of people crossing on the stairs. This reduces capacity by around 90% after which busses carry a ‘bus full’ sign and leave would-be travellers stranded.
• There is building pressure for the government to legislate against smoking in areas opened up to drinking and eating outside restaurants.
• The FT reports that the UK events industry could be looking at 30,000 job losses as ‘the government has yet to set a date at which trade shows, exhibitions and conferences will be permitted to restart.’ Even when a date is set, it is unclear just how strong will be demand. The Association of Events Organisers says ‘the industry is devastated. With activity peaking in autumn and spring, many companies have had no revenues since late last year.’
• NPD says ‘the COVID-19 pandemic has brought about a myriad of behavioural changes.’ It says the use of technology has increased sharply.
• UKH says that the confirmation of reopening dates for Wales brings ‘welcome transparency’. Outdoor retailing will be allowed from 13 July with sales and consumption to be allowed indoors from 3 August ‘if conditions allow.’ UKH says ‘this is a vital move and one that the industry has been desperate to hear.’
• Great Portland Estates has reported that it has collected 69% of its rents due at the end of June. This number drops to 28% for retail, hospitality and leisure tenants.
• Amazon Prime Video has announced that its three remaining Premier League fixtures for the 2019/20 season will be made available to pubs via broadcaster BT Sport. It says ‘BT Pubs can watch for free on BT Sport Box Office channel.’
• Michael Gove has said he does not think face coverings should be compulsory in shops in England. He says people should use their common sense. , saying he trusts people’s common sense.
• The Daily Mail carries a list of major employers in the UK to announce redundancies to date. This is a particularly joyless task. Airlines, retail and casual dining restaurants feature heavily.
• JD Wetherspoon announced on Friday that it ‘was informed on 10 July 2020 that Tim Martin, Chairman of J D Wetherspoon plc, sold 510,725 of the Company’s ordinary shares at a price of £9.84 pence per share.’
• Mr Martin has thus raised a little over £5m cash. He still has 1.22m shares or 27.4% of the company. The company raised £141m at 900p per share at the end of April at which time Mr Martin added 20,000 shares to his holding.
• Sky reports that Epiris is in detailed talks to buy Casual Dining Group (CDG), ‘the stricken restaurant operator behind the Cafe Rouge and Las Iguanas chains.’ CDG is currently in administration & has said that it will close 91 restaurants. Epiris is also reported to have made an offer for Azzurri, the owner of the ASK Italian and Zizzi chains of restaurants. It is not thought to be the front runner.
• Companies where we are awaiting news (where advisors have been appointed, where negotiations with landlords are underway etc.) include Azzurri (ASK & Zizzi, Bridgepoint said to be the front runner to buy), Busaba, Byron, Gourmet Burger Kitchen, Itsu, Pizza Express, Pret (talks with landlords), Prezz, Wasabi and there may be others.
• Food Service Equipment Journal has pointed out that ‘a pilgrimage to Pret is a daily routine for tens of thousands of office workers and commuters.’ However, in a comment that will not come as news to those concerned, it says that ‘when hardly anybody is commuting through railway stations, and airports are desperately bare, it is a doomsday scenario.’
• Rosa’s Thai has begun to reopen restaurants for dine in from this week. Franco Manca has tweeted that most of its estate is now open.
• Primark said it will not take the £30m bonus from the government that it is due for taking back on its 30,000 furloughed staff. The BBC says this is ‘potentially putting pressure on other major firms not to take taxpayer money.’ See also Premium Email.
• Despite the boom in bike sales, Halfords is reported to have earmarked up to 60 sites for closure.
• The British Retail Consortium warns that UK consumers could face tariff costs of 20pc on average in the absence of a deal with the EU. The BRC says that beef prices would rise by 48% with cheese up 57% and oranges, if still imported from Spain, up by 12%.
• An Android app entitled Neverspoons has been downloaded 18,000 time in its first week of availability.
HOLIDAYS & LEISURE TRAVEL:
• Government advertising re Brexit will highlight the need for travel insurance as Britons may no longer be entitled to free health care in the EU. It also says that travellers should check their mobile phone roaming policy for fear of them running up huge bills.
• The Airports Operators Association has repeated a warning that 20,000 jobs are at risk across its industry. It is calling for ‘robust action’ including a further suspension in business rates for the next financial year.
• Disney World Florida has reopened with mandatory masks and social distancing. Case numbers in Florida have been rising rapidly. There will be no fireworks or parades.
• Carnival has updated on trading for its Q2 saying it will recommence cruises ‘in a phased manner.’ AIDA, its German business, will resume cruise operations in August. Capacity elsewhere will be ‘reduced by ship delivery deferrals and 13 expected ship dispositions.’
• Carnival says that it is maximising liquidity with Chief Financial Officer David Bernstein saying ‘quickly recognizing the financial situation, we took swift action to improve our liquidity by reducing expenses and leveraging our strong balance sheet to complete several capital transactions’.
• Carnival says it is seeing demand for 2021 sailings. It says ‘despite substantially reduced marketing and selling spend, the company continues to see demand from new bookings for 2021. For the most recent booking period, the first three weeks in June 2020, almost 60 percent of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their FCCs to specific future cruises.’
• The UK Foreign Office’s advice against cruising could last until October per MP Caroline Dinenage. She is quoted in The Telegraph as saying ‘we have at the moment dissuaded people from going on cruises, probably until October.’
• The landlords of up to 40 Travelodges could move management contracts to a serviced apartment firm per reports.
• STR has said that UK hotel occupancy rose slightly in the week to 5 July with room rates and REVPAR static
• YouGov reports that French, Spanish, Italian & German consumers are more likely to oppose the admission of British holidaymakers than they are those from other countries. They would, reportedly, oppose the arrival of tourists from the US even more.
• The YouGov survey finds just 11% of UK adults ‘intend to go on a summer holiday abroad.’
• The European Travel Commission has warned against travel picking up ‘too fast’.
• TUI will open all of its retail travel agents in the UK over time. Around 100 will be open from Monday.
• Trade press suggesting that a Virgin Atlantic rescue could be announced tomorrow.
• easyJet has denied using staff sickness records when deciding who to make redundant.
• Australia has plans to cut the number of overseas arrivals by 50% reports Forbes.
• International flights have resumed from London City Airport.
• Hoseasons reports that UK holiday bookings have boomed since it was announced that the firm would be able to reopen facilities such as swimming pools and gyms. It says that it saw an immediate 274% spike year on year bookings.
• The CMA has reportedly written to over 100 travel companies telling them to get their house in order regarding refunds. The CMA has received more than 17,500 complaints from consumers.
• Macdonald Hotels has sold The Loch Rannoch Hotel
• Gym Group reports that 178,000 people cancelled their gym membership during lockdown.
• The number of hours spent online has rocketed during the Covid-19 lockdown with app downloads also booming. App Annie, which provides data on app usage, says that downloads in Q2 this year were up by 40% on the same period last year.
• Gfinity has announced that its Gfinity Plus rewards programme will go live for Company’s millions of website visitors on Wednesday. CEO John Clarke says ‘every month millions of gamers engage with our content and the launch of Gfinity Plus will provide the opportunity for even greater engagement across our sites.’
FINANCE & ECONOMICS:
• Moody’s reports the UK will see GDP fall by 10.1% this year. It says this is the largest drop of any major economy. It says GDP will rebound by 7.1% next year.
• The IFS says that UK government will borrow half a trillion pounds over two years. The deficit this year could be around £350bn with a further £150bn borrowed next year.
• Trade secretary Liz Truss says the UK will not cave in on food standards to achieve trade deals. A leaked letter from Ms Truss to Downing Street suggests there are concerns that border checks will not be ready for 1 January.
• Sterling up at $1.2654 and €1.1174. Oil higher at $42.92, UK 10yr gilt yield down 1bp at 0.15%. World markets stronger Friday, London set to open up over 70pts.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Today’s News: There have been no announcements yet from the embattled Boohoo this morning, eg about company shareholding changes, but the struggling fashion chain QUIZ has been drawn into the Leicester sweat-shop scandal, admitting that one of its suppliers in the area has broken NLW regulations etc. And Heathrow Airport has announced that flights in June were 82% down on last year and passenger numbers 95% down…
• News Flow This Week: A busy week kicks off first thing tomorrow with the BRC-KPMG Retail Sales survey for June, quickly followed by the Ocado interims, the AO.com finals and the Motorpoint finals. Wednesday then brings the Dixons Carphone finals, the Dunelm Q1 update and the Burberry AGM. On Thursday we get the Frasers Group finals and the Marshall Motors AGM, with the Homeserve AGM on Friday.
• Saturday’s Press and News (1): The headlines on the front pages of the Saturday papers were generally about the news that the Government is likely to make the wearing of face masks compulsory in indoor public places, eg “Face masks to be compulsory in shops” in the Telegraph, whilst both the Telegraph and the Times had front page photos of the PM wearing a mask on a visit to his Uxbridge constituency. The FT, however, went with the boom conditions in the gilt market: “Borrowing costs hit fresh lows as Sunak stimulus sparks demand”, whilst the Guardian led with the PM’s plans to increase Government control over the NHS: “Johnson gambles on radical NHS overhaul”.
• Saturday’s Press and News (2): In terms of Retailing stories, the focus returned to the embattled Boohoo after one of its major shareholders, Standard Life Aberdeen, announced that it had sold most of its stake because of ethical concerns over its supply chain practices, with fund manager Lesley Duncan widely quoted as saying that the response of the company was “inadequate in scope, timeliness and gravity”. This was a front page story in the FT (“Leading Boohoo investor pulls plug over tepid response to worker abuse claims”) and the FT also had a detailed follow-up article on how Boohoo’s image has been tarnished by the revelations about the poor conditions in its UK clothing manufacturing base, with the headline “Crying shame behind Boohoo’s Leicester suppliers”. The Guardian had a whole Business page on the Boohoo story, highlighting that one of the Leicester clothing factories in
• Saturday’s Press and News (3): In other news, the Business editorial in the Times stuck the boot in on JD Sports, noting “how unsporting” its treatment of small private landlords had been, in not paying store rents. The Telegraph flagged that the cosmetics chain Lush has been hard hit by the crisis, with sales in June alone down by 60%. The Telegraph also had a hard-hitting column about the slump in the Hugh Street (“No need for tears as golden age of retail heads for the checkout”), highlighting that Daunts bookshop in Marylebone is “an example of a store that has barely changed since Victorian times” and thundering that the UK has been too reliant on retailing (“it mostly creates lots of low-paid, low-productivity jobs”). The Times had a feature interview with the new Kingfisher boss Thierry Garnier, in the big B&Q store in New Malden, noting that the pandemic has enabled him to
• Sunday’s Press and News (1): There were some mixed headlines on the front pages of the Sunday papers: the Sunday Times led again with its recent investigation into clothing factories in Leicester (“”Racism fears” let sweatshops go unchecked”). On a different tack, the Observer went with the news that the Government has drawn up a list of 20 councils (including Bradford, Sheffield and Kirklees) where the virus is flaring up (“Revealed: 20 areas at most risk of local lockdowns”), whilst the Sunday Telegraph flagged that the Government is planning “a post-Brexit economic revolution” next year with the introduction of 10 “freeports” (“Sunak plans Brexit tax cuts to save economy”) and the Mail on Sunday ran with “Ministers fear China will blitz UK with “Cyber 9/11””.
• Sunday’s Press and News (2): In terms of Retail stories, the Sunday Times followed up its investigation into the poor working practices in the clothing factories in Leicester with a double-page News spread on “The week that shook fast fashion”, highlighting the role played by social influencers in advancing Boohoo’s cause, as well as looking at the wealth of the founders of Boohoo (“Boohoo’s founders weave a fortune factory workers could only dream of”) and the news that 25 workers in Boohoo’s Sheffield warehouse were infected with the coronavirus. Boohoo was also the subject of a detailed “Business Leader” column in the Observer, headlined “Investors are selling Boohoo shares now, but they could have intervened far earlier”, whilst the Mail on Sunday flagged that a hedge fund called PSquared has opened up a c0.6% short interest in Boohoo.
• Sunday’s Press and News (3): In other news, the Sunday Times flagged that Tesco is bullying suppliers again (“Back to the future for suppliers as resurgent Tesco demands discounts”), highlighting that one anonymous supplier has called the Tesco move “a straightforward money grab”. The Sunday Times also had an article about the row over the closure of the John Lewis store in Birmingham, with the local Mayor, the former John Lewis boss Andy Street, calling it “a dreadful mistake” and one insider saying that “the dreadful mistake was the one he made 5 years ago” (in opening in such a bad location). The Sunday Times also noted that Ted Baker faces an investor revolt over executive pay plans at its upcoming AGM. The Sunday Telegraph had a feature on Ocado ahead of its upcoming interims, flagging that the company is at last poised to turn a profit (“Time is ripe to finally deliver, says
• Sunday’s Press and News (4): In terms of all the Economics columns in the Sunday papers analysing the mini-Budget on Wednesday, we would as usual highlight the column by the Sunday Times Economics correspondent David Smith (“Rishi to the rescue, but we’ll have to live with the debt”), in which he said that in war you do whatever it takes to win and think about how to pay for it afterwards, as well as the column by the veteran Observer Economics correspondent William Keegan (“Johnson is mad if he thinks he can afford a hard Brexit”), in which he said that the PM will go down in history as having run “the most disastrous Government most of us can ever remember”.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 13 Jul 20 Pepsi Q2 numbers
• 21 Jul 20 DP Eurasia H1 trading update
• 22 Jul 20 Britvic Q3
• 23 Jul 20 C&C AGM
• 27 Jul 20 Gregg’s H1 numbers
• 28 Jul 20 Gregg’s H1 numbers
• 28 Jul 20 AG Barr trading update
• 29 Jul 20 Wizz Air June quarter numbers
• 5 Aug 20 Rank H1 numbers
• 6 Aug 20 Naked Wines AGM
• 7 Aug 20 Diageo FY numbers
• 11 Aug 20 Domino’s Pizza Group H1 numbers
• 19 Aug 20 Rank FY numbers
• 2 Sept 20 Gym Group H1 numbers
• 11 Sept 20 JDW full year results
• 6 Oct 20 Restaurant Group H1 numbers
• 9 Oct 20 JD Wetherspoon FY numbers
• 26 Nov 20 Britvic FY 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
• Coffer Peach Tracker has last weekend pub & restaurant LfL sales down 45%. Pubs down c45%, restaurants down c41%. But fewer restaurants than bars are currently reopened. CGA says sales did grow from base levels in US. M&B said same re Germany.
• Tracker says only 12% of UK restaurants tracked were open last weekend. Fits in with TRG comments this morning re a measured re-opening. Restricted supply could be helping those that are open. And they’re hardly shooting the lights out. Tough road ahead. #hospitality.
• Sunak accused of using a blunderbuss rather than a targeted rifle shot. True. But he used what he had. Needs must etc. HMRC says his measures may not be value for money & won’t stem job losses. #hospitality.
• Reality check. Shape of recovery. V, L or what? We’ll get part of the upward V. The Q is, how much? Take jobless as a measure. Currently 9.4m CJRS + 2m self-employed + 1.6m officially jobless = 13.0m then guesstimate is we get that down to 2m to 3m.
• That’s a V of sorts. No picnic. Even a ‘recovery’ to 4m or 5m unemployed could be passed off as nearly V-shaped. Truth is, we don’t know yet. A targeted £5,000 jobs bribe would have equated to 50% of furlough cash for 6mths. That might have moved the dial.
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.