Langton Capital – 2020-09-24 – M&B, curfew, Cineworld, Escape Hunt & other:
M&B, curfew, Cineworld, Escape Hunt & other:
A DAY IN THE LIFE:
Hopefully, that wasn’t the curtain coming down on Summer 2020 yesterday but, as time stops for no man and there are a few chilly days with rain to come, we may well have seen the best of it.
Meaning that, with EOTHO firmly in the rear-view mirror and new regulations kicking in today, there is a bit of a devil’s brew of factors coming together and it will be tough or impossible over the coming days to disaggregate the impact of the worsening weather, changes in consumer confidence, the diktat that workers should stay at home (again) and the impact of the new rules, the one from the other.
And it matters a bit because some factors (e.g. the onset of winter) are more predictable (and finite) than others, some are impervious to government action and others can be changed quite quickly – as the myriad government U-turns of recent weeks have made only too clear.
So, we’ll be watching the dials and listening to the tills singing (or not) with particular interest and any feedback will be gratefully received. The tightened regulations will impact this weekend – but then so too with the weather, the more sombre tone emanating from HM Government and the inconveniently timed football matches and the rest.
Anyway, that was a bit heavier than we’d intended when we started writing it. Follow us for real time developments on Twitter at @brumbymark and on to the news:
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MITCHELLS & BUTLERS UPDATES ON FULL YEAR TRADING: M&B has today updated on trading. 24 Sept 2020:
Mitchells & Butlers has this morning updated on the first 51wks trading for its full year (the period to 19 Sept) and our comments are set out below: See Premium Email and below for summary
THE 10pm CURFEW, TABLE ORDERING, CONSUMER CONFIDENCE ETC. New regulations come into force today. Opinion is divided as to what the likely impact will be. 24 Sept 2020:
Introduction: See Premium Email
FORWARD BOOKINGS: These are a good rather than a bad thing as they allow planning, menu prep and bring a degree of certainty, particularly if deposits have been taken. 24 Sept 2020:
Summary: See Premium Email
PUBS & RESTAURANTS:
Curfew, table service etc.:
• Some clarification from the government as to what it wants the trade to do from today.
• Meals and drinks will have to be ordered from (and presumably paid for at) table
• McDonald’s, Pret a Manger and other grab and go outlets without an alcohol licence will not need to serve customers at tables.
• Wales has now moved to 10pm last orders. England is 10pm, everyone must be out of the premises.
• Coffee shops will be exempt from the table service rule
More trade reaction:
• The BII has called ‘for long term support for pubs whilst long term restrictions are in place.’ Given the reported musings of Chancellor Rishi Sunak, they could be pushing on an open door. Reasonableness (of demands) could be the keyword. Sunak is speaking in The House later today.
• The BII says ‘long term sector specific restrictions will need to be matched by long term sector specific Government support’. The trade body says ‘the impact of further restrictions on pubs who have delivered extensive changes to venues to protect their staff and customers has two key impacts; restricting already significantly reduced levels of trade, with the majority of pubs not making a profit, and severely undermining critical consumer confidence.’
• Confidence is currently the great unknown.
• Kate Nicholls, CEO of UKH, has said that support needs to be put in place without delay to avoid additional redundancies and business closures. Ms Nicholls comments ‘unless the government acts really quickly, we’ve got a cliff edge coming at the end of September, which is when the trigger date comes for redundancy consultations, and it’s also when the rents have to be paid.’
• UKH says ‘you cannot close down or severely restrict a whole sector without providing support for the people whose jobs, livelihoods depend upon it. You must make the support packages available to the industry last as long as the restrictions that you impose upon us. In the initial period, we need sector-specific furlough to be continued while we are through this period of closure. You need a real solution on rents because the rent dilemma comes to a head at the end of September and, currently, we don’t have that debt enforcement moratorium extended, and we don’t have any support on rent.’
• Some one fifth of restaurants have yet to reopen reports CGA. They are, in the light of the tightened regulations from today, perhaps less likely to do so. Tasty has said that it may re-close units post the EOTHO scheme.
• Trade bodies the BBPA, UKH and the BII have issued a joint statement saying that ‘23% of their members think their businesses will fail by the end of the year without further Government support.’ The survey found that one in eight hospitality staff have already been made redundant. It says that, on average, businesses believe their workforce will be 25% lower by February 2021 compared to February this year. This will represent 675,000 lost jobs.
• The BBPA’s Emma McClarkin says ‘this research shows pub businesses were already teetering on the edge. Now the Prime Minister has announced even more restrictions for them, it is clear much more support will be needed from the Government to ensure they survive.’ She adds ‘an immediate stimulus package is required for our sector in the form of an extension to the furlough scheme and business rates relief, plus continuation of the VAT cut to food and soft drinks and a significant cut to the UK’s excessively high beer duty.’
• Founder of Pret a Manger Julian Metcalfe has criticised Boris Johnson for ‘sitting down with his Union Jack talking utter nonsense’ rather than getting on and dealing with the Coronavirus pandemic. Metcalfe says ‘to turn to an entire nation and to say ‘stay at home for six months’ and spout off some Churchillian nonsense about ‘we’ll make it though’ is terribly unhelpful.’
• Metcalfe says ‘the talk of six months is criminal. We’re losing thousands upon thousands of jobs. How long can this continue.’
• The bald fact is that the political pendulum has swung decisively away from encouraging customers to eat and drink out. Asking for additional support in light of this is perhaps not unreasonable. See Premium Email for more comment.
With disintermediation negate the impact of earlier closing?
• It’s possible that 9.30pm will be the new 2am. Maybe it won’t be that stark in practise but, if drinkers want to have 4, 6 or 8 drinks, it is not beyond their wit to still do so.
• A snap poll carried out by KAM Media has found ‘that a significant proportion of the English public remain unconvinced that the new 10pm hospitality curfew will deliver on its promise to help curb the spread of Covid-19.’ KAM says ‘47% of adults interviewed think the 10pm curfew to be introduced on Thursday will make no significant difference to the spread of the virus. A further 34% think it will ‘somewhat’ help the situation, but not significantly.’
The impact on confidence:
• KAM’s research also ‘found that the introduction of the curfew means that 13% of adults in England are now more nervous about visiting a pub or restaurant. And 14% said they will visit pubs and restaurants less frequently as a direct result of the curfew.’
• After actively encouraging the UK public to go out and about via EOTHO and telling workers to return to their offices, there is some mixed messaging going on.
Other Covid-19 news:
• IGD has reported that the Covid-19 outbreak has created ‘significant challenges’ for the food-to-go market in 2020 and it says it ‘will continue to be impacted by COVID-19 over the next three years.’
• IGD says the sector will decline by 43% to £10.8bn in 2020 – a decrease of £8.1bn on 2019. It says ‘unsurprisingly, since the UK went into lockdown, almost all food-to-go shopping trips experienced significant declines.’ It says ‘footfall in cities and transport hubs – on which many food-to-go businesses depend – has so far been slow to return. The shift to more homeworking in particular has had massive implications for food-to-go.’
• IGD says any recovery ‘will be gradual and may be subject to reversal; trends may differ by geographic area subject to local lock-downs. It is reasonable to assume that a degree of homeworking will form a part of the new normal in the short and long term, which may mean food-to-go businesses will adapt to fit in with their customers’ work patterns rather than wait for old habits to resume.’
• The BBC reports that chancellor Rishi Sunak is ‘understood to be looking at options to replace the furlough scheme when it expires at the end of October.’ This could include a salary top-up scheme similar to that operating in France and Germany. The hospitality industry, where perhaps a million workers remain furloughed, will be watching developments with interest.
• The CBI, the TUC and the Labour Party are pushing this. Examples on the Continent provide a framework that could be followed.
• New West End reports that West End footfall was flat week-on-week on Tuesday, 22 September. It says ‘compared to the same day last year, footfall was down 52%’.
• The BCC has said, re the call for workers to once again work from home, that ‘these measures will impact business and consumer confidence at a delicate time for the economy.’ It calls for a clearer road map. Presumably this would lead first away from and hopefully longer term back to, normality.
• Nielsen reports that off-trade sales of champagne in the UK rose by 25% over the summer compared with last year.
• John Dunham Associates in the US reports that more than half a million jobs will likely be lost this year in the US brewing industry
• Mitchells & Butlers has this morning updated on the first 51wks trading for its full year (the period to 19 Sept) and our comments are set out below:
• M&B says that ‘following enforced closure in response to the Covid-19 pandemic in March we were able to reopen the vast majority of our estate on 4 July.’
• It says ‘we have now been trading for 11 weeks and at the date of this announcement the number of sites which have reopened has increased to over 95% of the estate.’
• M&B says ‘during the period since reopening we have, as before, continued to outperform the market, benefiting in particular from the breadth of our estate and the balanced exposure we have both regionally and across offerings.’
• It says ‘in July like-for-like sales declined by 32.4% impacted by reduced capacity as a result of enforcement of social distancing measures and by consumers’ caution to visit restaurants and pubs.’
• However, ‘during August, the well-publicised government funded Eat Out to Help Out scheme plus a temporary reduction in the rate of VAT on certain supplies combined to help return the business to like-for-like sales growth, of 1.4%.’
• M&B says that ‘subsequent trading in the first three weeks of September has settled slightly below this at a like-for-like sales decline of 6.4% prior to the introduction of additional trading restrictions this week.’ See Premium Email for more detail.
• Stonegate Pub Company is to feature Doom Bar during Cask Ale Week, which starts today, Thursday 24 September.
• Greggs reports that a “small number” of the 300 workers at the chain’s production hub north of Newcastle have tested positive for Covid-19
HOTELS & LEISURE TRAVEL:
• HVS London reports ‘there is no doubt that the COVID-19 pandemic has had a most dramatic effect on the hotel business throughout Europe and words like ‘unprecedented’ and ‘unique’ are used liberally to describe the situation.’ It says
• HVS says that ‘supply growth has always been a factor in the performance of individual hotels to the extent that new hotels entering a market area can result in a dilution of the available demand. One outcome of the current pandemic is the likelihood that the pipeline of new hotels will come under increasing scrutiny by developers, investors and lenders.’
• Under HVS’s ‘Best Case’ scenario, UK hotel EBITDA recovers to 2019 levels by 2024. It says that under its ‘Worst Case’ scenario, ‘EBITDA recovers to 2019 levels by 2025, although in some cases this could be longer.’
• Jet2holidays has continued the suspension of its programme to Paris, Budapest and Prague until November 23.
• Research by Panache Cruises says that 26.5% of customers contacted indicated that they would book a cruise as soon as they were able to. However, 31.4% were not sure when they would resume cruising.
• STR reports that occupancy across European hotels fell 44.6% to 43% in August. It says ADR dipped 13% to €103.95 and RevPAR decreased 51.8% to €44.69 ($52.18) for the month.
• Cineworld has reported H1 numbers saying that ‘the COVID-19 global pandemic has adversely affected the Group’s results for the period, with all sites across the Group closed between mid-March to late June/August 2020.’
• Cineworld CEO Mooky Greidinger says ‘despite the difficult events of the last few months, we have been delighted by the return of global audiences to our cinemas toward the end of the first half, as well as by the positive customer feedback we have received from those that have waited patiently to see a movie on the big screen again.’
• The CEO says ‘current trading has been encouraging considering the circumstances.’ He says ‘while there continues to be a lot of uncertainty, we have a dedicated and experienced team that is focused on managing business continuity while taking advantage of the strong slate currently planned for the months ahead.”
• Escape Hunt has updated on trading for its AGM saying ‘trading in our UK owner-operated sites has been encouraging since we re-opened on 12 July 2020.’ The company says ‘in the first eight weeks after re-opening to 6 September 2020, sales grew from an initial level of around 25% of the 7-day week’s sales in the equivalent week in 2019 to over 90% of sales in the equivalent week in 2019 in each of the last two weeks of the eight-week period.’
• ESC says ‘since then September has, as expected, seen the pace of recovery slow, although sales in the six weeks to 20 September were nevertheless an encouraging 72% of the same period in 2019.’ It says ‘we will provide a further update in our interim results which are due to be released on 29 September 2020.’
FINANCE & MARKETS:
• Chancellor Rishi Sunak will address parliament today at 12.30. The Autumn Budget, at which the chancellor would have addressed funding his various spending plans, has been cancelled.
• Flash PMI readings for September have indicated something of a fall back from August’s buoyant levels.
• Looking back at yesterday’s comment by Michael Gove that 7,000 lorries may end up queueing for two days to get across the channel led us to do a small calculation. If an 18-wheeler is 80 feet long, which it is, 7,000 lorries implies a 106-mile tailback. That’s if there are no gaps between vehicles whatsoever.
• Sterling little changed at $1.2707 and €1.0896. Oil little changed also at $41.54. UK 10yr gilt yield up 2bps at 0.23%. World markets mixed. London set to open down around 65pts.
RETAIL WITH NICK BUBB:
• Today’s News: The DFS finals for y/e June are pretty ugly, given the impact of the lockdown on furniture deliveries and underlying loss is as much as £57m, before the exceptional write-offs on the small Sofa Workshop and Dwell businesses. However, since then trading has bounced back very well and the CEO says “in the absence of further lockdown impacts, we therefore look forward to reporting a strong first half sales and profit performance”. The scheduled interims today from the embattled Motor dealer Pendragon have been delayed for audit reasons (notwithstanding the importance of the key “plate change” month of September to the second half outlook), but there has been an unscheduled update from Pets at Home to flag that the last 8 weeks have seen double-digit LFL sales growth and that it now expects full year profits for y/e March to be above expectations.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 24 Sept 20 Mitchells & Butlers FY trading update
• 24 Sept 20 Safestay H1 numbers
• 28 Sept 20 Diageo AGM
• 28 Sept 20 Time Out AGM
• 29 Sept 20 Gregg’s Q3 update
• 29 Sept 20 Escape Hunt H1 results
• 30 Sept 20 Compass Group FY update
• 30 Sept 20 Everyman Media H1 numbers
• 30 Sept 20 888 Holdings H1 numbers
• 1 Oct 20 Pepsi Q3 numbers
• 1 Oct 20 Constellation Brands Q2 numbers
• 6 Oct 20 Restaurant Group H1 numbers
• 8 Oct 20 Restaurant Group General Meeting
• 9 Oct 20 JD Wetherspoon FY numbers
• 20 Oct 20 Marston / Carlsberg CMA backstop date
• 22 Oct 20 Gear 4 Music trading update
• 27 Oct 20 Whitbread H1 numbers
• 29 Oct 20 YUM Q3 earnings update
• By 31 Oct 20 DP Poland H1 numbers
• 3 Nov 20 DART Group AGM
• 17 Nov 20 Gear 4 Music H1 numbers
• 19 Nov 20 Dart Group H1 numbers
• 24 Nov 20 Compass Group 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:
28 Aug 19 Fulham Shore AGM, 30 Aug 19 Gear 4 Music AGM, 6 Sep 19 Greene King AGM, 10 Sep 19 888 Holdings H1, 12 Sep 19 Comptoir H1, 19 Sep 19 Diageo AGM, 19 Sep 19 City Pub Group H1, 19 Sep 19 Saga H1, 23 Sep 19 Brighton Pier Group FY, 24 Sep 19 TUI Group FY trading update, 24 Sep 19 DP Poland H1, 24 Sep 19 Ten Entertainment H1, 24 Sep 19 Hotel Chocolat FY, 24 Sep 19 AG Barr trading update, 24 Sep 19 Tasty H1, 25 Sep 19 Shepherd Neame FY, 26 Sep 19 Time Out H1, 26 Sep 19 M&B FY trading update, 26 Sep 19 SSP FY update. 27 Sep 19 Escape Hunt H1
• Redundancies picking up as corporates count back from the end of furlough (which may be changing) and make their plans accordingly. Whitbread & JDW yesterday and M&B comments tomorrow. Recent tightening of restrictions will move the dial towards bigger cuts
• Tricky one for HM Government. Tread the wobbly middle path. No ‘fire-breaks’ or two-week shutdowns. More a tinkering at the edges. Should help but, with only 4% of drink / food sold after 10pm, is it a gesture rather than a bold move?
• U-turn on working from home, office, home again. Matt Lucas could have a job for life. Perhaps another U-turn coming on the furlough. Might have to call it something else but a rose by any other name etc
• Tough gig. R rate & level of economic activity are positively correlated. No getting away from it. Rules that don’t change behaviour won’t impact the virus. It’s deaf, dumb & blind – but very efficient. You simply can’t please everyone economically & keep them all alive as well
• SSP says revenue running at 24% of normal. Shut down transport & that’ll happen. JDW on the same page as it cuts up to 450 airport pub jobs. Whitbread (Premier Inn) ditto with 6,000 roles to get the chop
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