Langton Capital – 2020-09-17 – Covid-19 update
A FEW DAYS IN THE COVID-19 LIFE…
Thanks to those sending best wishes & sorry have not been able to reply individually to everyone.
We got dozens, hundreds of positive messages. And an email from American Express reminding me that I owe them £1,760.62. We were getting quite damp-eyed at one point. It must have been the Lemsips
Anyway, we can officially report that Covid-19 isn’t much fun but, thankfully, we’re recovering more or less in line with (but hopefully faster than) UK GDP. That’s to say the V-shaped bit of the recovery was good for about half the drop and the rest may take a bit longer.
Still, if this was the ‘one-chili’ version of this particular coronavirus, we certainly wouldn’t like to try anything hotter.
Not a word of criticism intended here but the current situation, when testing works, is to tell you ‘yes, you have Covid-19. Your quarantine started on the first day of your symptoms. There isn’t any cure or treatment. Try Paracetamol. Good luck. Drop us a line if you get near to dropping off your perch.’
And that’s rather a sobering thought. This note has been pre-written as getting out of bed at the hour required to write it in real time is still a bit beyond us. Follow us on Twitter at @brumbymark.
PUB & RESTAURANT NEWS:
• Politicians look set to lock down various bits of the economy/geographies before they shut schools. This may be the ‘right’ thing to do. But it could be painful.
• The British Beer and Pub Association says that the more stringent restrictions being imposed on pubs in the North East of England represented a ‘significant blow’ to the industry.
• The BBPA says ‘our pubs will continue to adhere strictly to Government guidance ensuring that they remain a safe and welcoming place for socialising.’ This may not be enough when the political scales come out and some things have to be jettisoned if the R rate is to be pushed back below 1.0
• The BBPA understandably says that some operators are on the brink. It says it is calling on the government ‘to immediately put in place a sector specific furlough scheme beyond October, extend the VAT cut and business rates holiday and make a substantial cut to the punitively high rate of beer duty in the Autumn Budget.’
• It is probably right to ask for compensation for measures that the sector may be unable to prevent in any case.
• It is ‘good news’ that, per reports, commercial tenants will not be evicted this side of Christmas.
• But, if some of the operators are simply increasing their liabilities without a clear idea as to how they will survive in a reduced-demand world, this may be delaying a problem rather than solving it.
• UKH and others have warned of a bloodbath if the rental situation is not resolved. Just how that will happen is still unclear.
• The British Property Federation says ‘responsible property owners do no want empty stores – they want thriving businesses and communities, and they will continue to support businesses in genuine distress as a result of Covid-19.’
• It’s good that many operators and their landlords are facing in the same direction, but the discussion, at some point, will have to turn to money.
The level of re-openings:
• Alix Partners has reported that 76.3% of all licensed premises across Britain were open again by the end of August.
• It says the food-led sector led the way ‘in large part due to the government’s ‘Eat Out to Help Out’ scheme and a reduction in VAT.’
• Re-openings in the food-led sector rose by 21% throughout the month. Open pub numbers rose by only 6-7% ‘reflecting the fact that a much higher proportion (over 80%) opened during July.’
• The lowest level of re-openings were seen in the bar sector (67.2% of venues are open) and nightclubs
• Alix says ‘site numbers across the industry will clearly remain well below pre-pandemic levels for a long time to come. As we move into the autumn months, venues will face the next rent quarter due at the end of September…and the end of the furlough scheme.’
• It says ‘in addition, the Government’s restriction of gatherings to six people presents a further challenge to operators. For businesses that rely on larger groups gathering socially, such as wet-led and late-night venues, this creates an additional headwind.’
• Regionally, ‘Central London in particular faces an ongoing struggle for footfall, largely due to a significant reduction in the number of office workers and tourists.’
• Langton has just had to cancel its own trips to London to support Pret and City-located bars & restaurants this week and next.
• Alix says ‘many operators may continue to delay re-opening or be forced into making difficult decisions on where they are able to operate profitably.’ It concludes ‘the next few weeks will prove critical and highlight those businesses strong enough to ride out the storm.’
• The Royal College of Psychiatrists has warned that the number of people abusing alcohol has ‘soared’ since lockdown. Lockdown could have been a stressor for some but, overall, beer volumes, admittedly not a perfect proxy of alcohol, have fallen during lockdown.
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Tues 15 Sep 20:
• Anyone still hankering after herd immunity, I’m doing my bit. I didn’t mean to, mind. But we are where we are. All in all, I would rather have had a vaccine.
• Recovering from Covid-19. Hopefully, the Fitbit doesn’t lie: Mon – 12,851, Tues – 5,677, Weds – 4,550, Thurs – 2,716, Fri – 2,013, Sat – 2,108, Sun – 3,604, Mon – 4,715. Good indicator of ‘feeling of crapness’. Statistician might say normality in about c10 days. Can now add Tues 5,793 and Weds 6,003.
• S4labour says LfL sales last week down 9.0% on same week last year, albeit 10.4% up on the last week of July. Trend hopeful & impact of EOTHO lingers. Says it ‘is highly encouraging to see that food sales are still in growth.’
• Noticing some tech and other disruptor companies raising new equity. This will have been a bruising time for cash flows. Roofoods (Deliveroo), Crowdcube and Stockopedia all told Companies’ House about an allotment of shares in recent days
Weds 16 Sept20:
• Covid-19 recovery. Sick accountant suspected of getting better when he’s drinking coffee and saying he’s thinking of ‘catching up on admin’.
• Anti-eviction measures extended to end of year. But this doesn’t stop liabilities racking up. At the micro-level, individual lease, longer-term agreements with landlords will be needed.
• Delayed VAT payments, accrued rents, EOTHO and cost support via furlough could be said to equate to delaying measures with pain relief. None of any of that does much to solve any deeper problems.
Thurs 17 Sept 20:
• Alix Partners says 76.3% of licensed premises across UK were open again by the end of Aug. EOTHO boosted re-openings, as did the reduction in VAT. Bars have been slower to reopen, particularly nightclubs.
• Alix Partner: ‘Central London in particular faces an ongoing struggle for footfall.’ True that. It says ‘difficult decisions’ re profitability will need to be made.
• Delaying debt, rent, VAT & duty payments is helpful, but there will need to be a profitable business model on which to build. This depends in large part on demand, a big unknown. Alix Partners says site numbers will remain ‘well below pre-pandemic levels for a long time to come’
• Covid-19 recovery. Boredom is a good sign, right? It’s a luxury afforded only to the well. That and thinking about cutting the grass, planning a trip to the tip, checking when your quarantine expires, not coughing so much etc?