Langton Capital – 2020-10-01 – Confidence, City Pub Group, footfall, DGE, Tasty, jobs etc.:
Confidence, City Pub Group, footfall, DGE, Tasty, jobs etc.:
A DAY IN THE LIFE:
As Langton continues to recover from Covid-19, it’s facing that inescapable question: ‘does it need another hour in bed, or does it just fancy one?’
Of course, the answer, for as long as one can get away with it, is that you need your rest but the question remains, are you tired or just lazy?
And, on that subject, we ran into the admin hell that is witching hour yesterday as it was the month-end and the quarter-end and those appliance bills, wages, rent rolls and VAT returns that had been so easy to put off when it was just 29 September, became all that more urgent.
A massive essay crisis that kept us busy for a while. Indeed, it’s not all done yet so we’d better move on to the news. Autumn is upon us. Follow us for real time developments on Twitter at @brumbymark:
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THE POSSIBILITY OF A HARD-STOP AT HALF TERM: It might sound catchy, a hard-stop, a fire-break or a circuit-break, but is that a good enough reason to slam on the brakes in a couple of weeks? 1 Oct 2020:
• We suggested yesterday that some policies were being chosen because they sounded good and could be ‘sold’ rather than because they were sound practise. See Premium Email
PRIVATE COMPANY ACCOUNTS: BTC HOSPITALITY INVESTMENTS: BTC owns the Apostrophe Restaurants, Euphorium Bakery & Soho Coffee Shops chains. It has reported results to end-Jan 2020 to Companies House. 1 Oct 2020:
See Premium Email
PUBS & RESTAURANTS:
Confidence takes a tumble:
• CGA & Fourth’s latest Business Confidence Survey reveals ‘widespread concerns about trading conditions.’
• Smaller traders more concerned than groups and, as always, operators were more upbeat about their own prospects than they were those of the market as a whole.
• It says: ‘fewer than 10% of business leaders in the out-of-home sector are confident about market prospects over the next 12 months’ but, it says, ‘restaurant and pub group bosses are less pessimistic than independent operators.’
• The survey was conducted over the first 3wks of September. It says only 9% of business leaders were confident. This compares with the June number of 16%.
• CGA and Fourth say that larger groups were more upbeat. They say ‘the proportion of multi-site businesses feeling confident about the next 12 months for their own business has climbed five percentage points to 37% since June.’ Pre the pandemic, as many as 83% of groups’ leaders were optimistic.
• The compilers of the report conclude that ‘confidence has been lifted by the popularity of the Eat Out to Help Out scheme, which led to better than forecast trading for many multi-site groups in August.’ This confidence has subsequently been ‘dented by new measures on group sizes, curfews and table service since the survey was conducted. Nine in ten leaders think fragile consumer confidence will have a negative impact on the market, and nearly as many (79%) are concerned about a squeeze on disposable incomes.’
• Growth plans changing, capex swinging out of town.
• The report finds that 83% of leaders ‘say they will be avoiding city centre locations in their growth plans following a collapse in footfall in big cities including London, while three quarters (73%) plan to adapt to the widespread switch to working from home.’
• CGA says ‘the last six months have been the most challenging that the out-of-home eating and drinking sector has ever known, and the government’s latest restrictions mean conditions are likely to remain very tough for the rest of 2020. The Eat Out to Help scheme has been a springboard to recovery for some multi-site groups, and the green shoots of confidence among leaders are very welcome, but it is clear that many independents face a battle for survival.’
• Fourth says ‘the wider COVID-19 narrative across the nation has taken an unfortunate turn in recent weeks, with the government introducing further restrictive measures on our industry. Naturally, this will have a less than positive impact on the confidence of business leaders across the sector.’
• The Morning Advertiser points out that some observers take a different view. It quotes a survey by Streetbees as saying that 29% of Brits claimed they are less likely to go to a pub, bar or restaurant with the 10pm curfew in place, but 67% said their appetite for eating and drinking out remained undiminished.
• Streetbees remains optimistic saying that the requirement for bar and restaurant customers to wear face masks “except when seated at a table to eat or drink” from 28 September hasn’t diminished the desire to visit pubs.
Recovery – stop, start, stop again?
• Commercial real estate advisors Avison Young have introduced a UK Cities Recovery Index. This ‘monitors the diversity of market activity and the speed and trajectory of the recovery following the ongoing impact experienced across our cities as a result of Covid-19.’
• Avison Young says ‘the rate of recovery across the UK has significantly slowed after reaching a peak on September 4th. Despite early encouraging signs, a combination of new government guidance and general concern among the public has seen recovery level off, and in some cases begin to decline, having a direct impact on all areas of city life.’
• This seems reasonable as the peak in ‘optimism’ was just as the EOTHO scheme was ending and was before the second wave took a hold and new regulations restricted trading times and patterns.
• Avison Young says that some consumers ‘have recently turned to ‘staycations’ rather than travelling abroad, leading the hotel sector to experience a rebound.’ This was true. With so many consumers locked down and with others unsure of what they are allowed and not allowed to do, demand may falter a little.
• The Guardian reports that ‘sales at pub, bar and restaurant chains plunged by more than a third on the same period last year after a 10pm coronavirus curfew was imposed across most of the UK, according to new analysis.’
• It says CGA reported sales slightly above last year on Monday (which was warm) but, the next day, when the upcoming 10pm curfew was announced, sales were down 8%. It says ‘by Friday sales were 37% below the total for the corresponding Friday last year. London and Scotland, where many small city centre pubs have remained closed throughout the pandemic, were 47% and 44% behind 2019 respectively.’
• UKH says the figures were ‘in line with what we are hearing’. Kate Nicholls adds ‘at this rate, many of them are going to be out of business pretty soon. This curfew was brought in without justification and it is quickly killing our sector.’ The BBPA adds ‘if the curfew doesn’t work in reducing infections of the virus, it should be reviewed immediately to give pubs a proper chance of a recovery.’
• Property agent Colliers has said that only 17% of leisure businesses paid UK rent in the last quarter. It says that, over business as a whole, it was 48%. Colliers says ‘tenants have indicated their confidence for the future by paying half their rent on time. … This is very encouraging for landlords when you consider many are now allowing tenants to pay rent monthly rather than quarterly.’
• The M&C says the number of people working from home reached a peak of 60% in Q2. It says this figure then fell but ‘is likely to increase again significantly over the winter.’
Silver lining re staycations:
• See also Avison Young above.
• Stay-in-a-pub has said that ‘the global pandemic has seen the emergence of the ‘staycation’ fuelled originally by the inability to travel abroad and also fears of being stranded and uncertainty over quarantine rules.’
• This offers opportunities for pubs with rooms and for hotels. Research without Barriers recently found that 83% of respondents to a survey would prefer to holiday in the UK this year and 71% are already planning a UK holiday in 2021. Stay in a Pub says it ‘has seen a 24% increase in traffic to its website in August (40,000 unique visitors) versus last year and a 41% increase compared to the previous month demonstrating the rise in the number of people considering staying in a pub.
• Paul Nunny says ‘we have been working hard behind the scenes over the past six months to enhance how we support pubs with rooms. The sector has invested significantly in accommodation provision which has become an important third income stream alongside food and drink.’
The 10pm curfew:
• Industry leaders and a body of MPs have said that the 10pm curfew should be reviewed every 3wks and say that it should be scrapped if it is ineffective.
• S4 Labour commented yesterday on the impact of the curfew (weekend trade down 12.9% over the first weekend) but it is widely accepted that this figure will be buffeted by weather comps. It’s not the weekend but it is tipping it down out there at present.
• Tasty, more debt but strings.
• Tasty, which said that it might have to shut units again after EOTHO ended, updated the stock market yesterday saying that ‘in light of the continued economic uncertainty and the impact of COVID-19 related restrictions, the Company has secured a £1.25 million, four year term loan from its existing bankers, Barclays Bank plc, in order to strengthen its balance sheet and provide additional working capital support.’
• Tasty says ‘the Facility is available to be drawn down until 7 February 2021, however, draw down is restricted until the future of the Company is assured through restaurant closures and creditor arrangements.’
• Tasty says ‘whilst no decision has yet been made, it is continuing to work with its advisers, KPMG, to assess the potential impact of COVID-19 on the business and the various strategic options available to the Company, including a potential company voluntary arrangement.’
• The company ‘will commence consensual negotiations with landlords and other creditors shortly and anticipates that this process will be completed by the end of November 2020.’ It says it will make further announcements as appropriate.
• Diageo has confirmed that it has completed the acquisition of Aviation Gin LLC and Davos Brands LLC. It says ‘this acquisition supports our participation in the super premium gin segment in the United States and is in line with Diageo’s strategy to acquire high growth brands with attractive margins that support premiumisation.’
• DGE says ‘we are confident that Aviation American Gin will continue to shape and drive the growth of super premium gin in North America and we are looking forward to working with Ryan Reynolds and the Davos Brands team to accelerate future growth.’
• City Pub Group yesterday confirmed that ‘the business has undergone much change since the outbreak of Covid-19. The work and actions which have been implemented have made us an even better business and positioned the Group well to endure through these challenging times and to emerge strongly once the pandemic passes. Looking forward, our focus is on having an ever improving and compelling retail offer, an efficient cost base together with improved systems, so that our existing business not only comes out the other side of Covid-19 stronger, but we are also able to expand the trading estate once again.’
• City adds ‘notwithstanding this, the Group is not in a position to provide financial guidance at this stage.’ It says ‘the next 6 months will throw up more challenges, but I remain confident we can face up to them. During this period, it is important that we continue to develop the Group and continue to establish ourselves as a premium collection of pubs, with its own brand and culture. It is in times like these that it is important to challenge your business model and make enhancements where necessary.’
• EI Group has announced that it is rolling out its ‘Here’s to the Pub’ Campaign offering free drinks across its estate throughout October. EI has partnered with Budweiser Brewing Group, Britvic, Diageo, Heineken, Molson Coors, and Sharp’s Brewery, to offer customers up to 100,000 free drinks, across more than 1,250 participating pubs in October.
• Britvic has announced it ‘is pleased to confirm that following approval by the French Competition Authority in July, Britvic has now completed the sale of its juice assets in France to Refresco. The sale includes the three juice manufacturing sites, related private label juice business and the Fruité brand.’
• Britvic says ‘this transaction supports our stated strategic priority to improve operating margins in our Western European markets, while also enables our teams to focus on growing our soft drinks portfolio of local favourite and global premium brands.’
• Various Eateries yesterday said that it sees the potential for up to 100 Tavolino sites across the country.
• Fuller’s CEO Simon Emeny has told the BBC he may have to lay off up to 10% of his workforce. He says ‘we are doing everything possible to minimise that, but sadly it is inevitable.’ Central London is currently a tough market.
• Fuller’s says ‘the biggest challenge we have around job losses is in central London, because the current Prime Minister’s announcement last week to discourage people from going back to the office is having a big impact on city centres and in particular Central London.’
• Fuller’s Emeny says re Boris Johnson ‘there are significant elements where he has made continual mistakes and we have seen the government do U-turns on five or six key decisions.’ He says ‘in a business environment, his style of leadership wouldn’t work.’
• Molson Coors is to launch hard seltzers, made by Coca Cola, in the US.
• A delayed ban on plastic straws, stirrers and cotton buds to customers comes into force today in England today.
HOTELS & LEISURE TRAVEL:
• TUI has been granted a second tranche of state aid from the German government in order to see it through the winter. TUI says ‘the package ensures sufficient liquidity to cover the seasonal fluctuations over winter 20/21 and also strengthens the group’s position in the current volatile market environment.’
• TUI says ‘there are still significant restrictions on worldwide travel through Covid-19 and on our business. This makes planning more difficult and requires enormous flexibility from tour operators.’
• The BBC reports that thousands of would-be travellers are still waiting for holiday refunds ‘months’ after they cancelled their original trips.
• Caesars Entertainment yesterday formally launched its 272p a share cash bid for William Hill.
FINANCE & MARKETS:
• Bank of England economist Andy Haldane has said that negative forecasters could damage the economy. He says ‘my concern at present is that good news on the economy is being crowded out by fears about the future.’ He says ‘collective anxiety is as contagious, and could be as damaging to our well-being, as this terrible disease.’
• Nationwide reports that house prices in the UK rose by 5% in the year to September.
• Royal Dutch Shell, TSB and Fuller’s announced actual or likely redundancies yesterday.
• Boris Johnson has said the UK is at a ‘perilous turning point’.
• Sterling higher at $1.2937 and €1.1015. Oil higher at $42.37. UK 10yr gilt yield up 4bps at 0.22. World markets mixed with London set to open up around 25pts.
RETAIL WITH NICK BUBB:
• Today’s News: After the flurry of news over the last couple of days, today has gone quiet in terms of scheduled news, but Halfords has stepped into the breach to flag that September trading was so good that it has hiked its first half profit forecast from just £35m-40m a few weeks ago to as much as £55m! Group LFL sales growth in the last five weeks has been a heady 22%, driven by 46% growth in Cycling, but helped by 7.5% growth in Motoring, whilst the separate Autocentres business continued to grow strongly, up by 18% LFL, helped by “exceptional demand” for the Mobile Expert van service. Halfords remain cautious about H2 prospects, but there is no sign of the wheels coming off ahead of the interims on Nov 18th. And Kingfisher has announced that it has completed the sale of Castorama Russia to DIY rival Maxidom for a relatively modest £73m (albeit it has been trying to sell the