Langton Capital – 2020-10-06 – PREMIUM – Restaurant Group, cinemas, footfall, crowd-funding etc.:
Restaurant Group, cinemas, footfall, crowd-funding etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
So, whilst we all wish him well, does Mr Trump have the look of a) a man recovering from Covid-19 having faced his own mortality or b) a person with a lot of (currently and often misplaced) will-power whose doctors dare not stand up to him?
Well, b) of course.
And was it wise to expose Secret Service personnel to Covid-19 bugs in a hermetically sealed tank of a car? Was it a good use of resources to pay for a political jaunt and subsequently need to quarantine various personnel for a fortnight at the taxpayers’ expense in a hotel room somewhere?
Well, perhaps not.
And was it a good idea to not wear a mask, to catch the bug in the first place, to organise a couple of super-spreader events, to hand-shake, rattle and roll all over the place with the guests, to travel in a shoebox of a helicopter with half your Cabinet, etc.?
Anyway, as we tweeted the other day, hypocrisy is alive & well & living in my house.
Langton Capital caught Covid-19 in mid-September. Reason? We bravely rolled the dice once too often trying to save the economy, take advantage of EOTHO, rescue a few cafes etc. But Donald Trump caught the bug in early-October simply because he’s an idiot.
Anyway, after a fair weekend, the weather’s still quite bright and sunny up north. Down south I hear not so much. Follow us for real time developments on Twitter at @brumbymark:
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RESTAURANT GROUP – H1 NUMBERS:
The Restaurant Group has this morning released H1 numbers and our comments thereon are set out below:
• In common with the rest of the restaurant industry, Restaurant Group’s units were closed for the entirety of Q2
• Sales for H1 were £227.2m against £515.9m last year
• The group is reporting adjusted loss before tax of £62.6m under IFRS 16. Last year, the group made a H1 profit (under IFRS 17) of £28.1m
• The adjusted loss per share is 11.2p (a statutory loss of 38.8p) against an adjusted positive earnings per share of 4.5p last year
• RTN says there has been a ‘focus on safeguarding our colleagues and customers during COVID-19
• The group has ‘implemented significant restructuring actions resulting in a higher quality, diversified estate’ – this includes a CVA for the leisure division and the administrations of Chiquito and Food & Fuel
• RTN says it has ‘secured additional funding, covenant waivers and increased tenure from our banking group’
• Net debt is now c.£311m (excl. IFRS 16). The group says this is ‘considerably better than anticipated’
• RTN says that the ‘trading performance post-lockdown (for the 11 weeks from July 4th to 20th September 2020) with c.90% of the retained estate now open has been very encouraging’
• Wagamama: LfL sales are up 11%. This is an ‘outperformance of 5% versus the market’
• Leisure LfL sales growth was of 4%, ‘broadly in line with the market’. RTN says this represents the ‘strongest trading performance in over five years’
• In Pubs, LfL sales growth was 14%. RTN says this is an ‘exceptional outperformance of 20% versus the market’
• In Concessions, a large number of units are under pressure due to low passenger numbers. RTN says a ‘disciplined reopening programme focused on EBITDA delivery’ has seen LfL sales fall 58%. The group says this is 15% ahead of passenger volumes
• RTN says the board will retain its ‘cautious outlook for the short term given ongoing impact of pandemic and government-imposed restrictions’
• It says the ‘restructured business well positioned to adapt to the challenges being faced and deliver long term shareholder value’
• CEO Andy Hornby says ‘it has been an extraordinary and difficult period for the hospitality sector but one in which we have pulled together to achieve a great deal. The priority throughout has been the safety of our colleagues and customers, and we have also accelerated the reshaping of our portfolio, resulting in a higher quality, diversified estate.’
• Hornby continues to say that he is ‘genuinely pleased with the strength of our trading performance’
• He says ‘whilst the sector outlook is uncertain, and we are mindful of recent restrictions across the UK, we are confident that the actions we have taken provide us with strong foundations to emerge as one of the long-term winners.”
Restaurant Group – A Tumultuous Few Years:
Even before Covid-19 struck, Restaurant Group had had a tumultuous few years.
The group had already warned on profits four times, had four CEOs, three CFOs and two chairmen in little more than five years. It has announced the largest acquisition in its history and has cut its dividend.
• Aug 2014 – CEO departs – Andrew Page retires
• Aug 2014 – CEO appointed – Danny Breithaupt
• Jan 2016 – Profit warning
• Mar 2016 – Profit warning
• Apr 2016 – Profit warning
• Apr 2016 – CFO departs, Stephen Critoph steps down
• May 2016 – Chairman departs, Alan Jackson retires
• May 2016 – Chairman appointed, Debbie Hewitt joins the group
• Jun 2016 – CFO appointed – Barry Nightingale
• Aug 2016 – CEO departs – Danny Breithaupt leaves
• Aug 2016 – CEO appointed – Andy McCue joins
• Jan 2017 – Profit warning
• Apr 2017 – CFO departs – Barry Nightingale leaves
• May 2017 – Trading update re ‘transitional year’
• Aug 2017 – CFO appointed – Kirk Davis
• Oct 2018 – Acquisition of Wagamama, Rights Issue & dividend cut
• Dec 2018 – Rights Issue completed
• Feb 2019 – CEO departs – Andy McCue resigns
• May 2019 – Co announces Andy Hornby as new CEO
• Sep 2019 – Group announces another £115.7m of write downs
• Feb 2020 – Co ‘temporarily’ suspends dividend payments to shareholders
• Mar 2020 – Group shuts its units leading to the administration of Chiquito and Food & Fuel
• Apr 2020 – Share placing
• Jun 2020 – CVA for Leisure Division
• Restaurant Group reports that, though concessions remain weak, trading since reopening has been good.
• Wagamama is performing well and pubs are outperforming the wider market.
• The company will have been relatively insulated from the impact of 10pm closing. Food (at pubs) is currently outperforming drink.
• The group says ‘the outlook for the sector remains extremely challenging.’
• However, supply should be reduced and RTN says it has a ‘much higher quality diversified estate’ and it has seen ‘very encouraging trading since reopening.’
• The group, along perhaps with the industry, has seen several years’ worth of evolution crammed into a number of months.
• The shares will continue to be impacted by Covid-19 news, both good and bad, but, as the company says, it is in a much better position to cope than it would have been in the past and than many of its peers are at present.
PUBS & RESTAURANTS:
Internal political tensions re 10pm curfew, potential second lockdown etc.:
• Rishi Sunak has denied he is ‘on manoeuvres’ or that he has any interest in becoming PM. But don’t they all.
• Sunak is allying himself with the ‘no-second-lockdown’ wing of his party.
• This may be welcome news to some in the hospitality industry. The Sun says Sunak has defended his Eat Out To Help Out scheme, which was said to have spread Cocvid-19 by PM Boris Johnson yesterday. Sunak says that the scheme helped to save 2m jobs and to ‘kickstart’ the economy.
• Sunak has also ‘revealed his frustration at the 10pm pub curfew.’ He ‘warned that a further lockdown would cripple not just the economy but society, too.’
• There would appear to be internal tensions within the Conservative Party. A U-turn on the 10pm may, ironically, be less likely if it would now be seen as one wing of the party caving in to the other.
• Nightclub G-A-Y is launching a legal challenge against the government’s 10pm hospitality curfew. The club is seeking a judicial review and says the curfew “makes absolutely no sense” and does “the opposite of protecting people”.
• Foodservice analyst Peter Backman has questioned whether the current 10pm curfew could change habits either permanently or for a sustained period of time. He poses the question ‘will pubgoers spring back to their old pub going habits when the curfew is lifted again? Or will the new behaviour become embedded?’ There are no clear answers at this stage.
Footfall and sales post curfew imposition:
• S4Labour says that sales last week were down 21.2% compared to the week before the curfew (2 weeks prior). It says sales of food down 19.1% and drink sales down 23.2% on two weeks before.
• S4Labour says ‘like-for-like sales are down 13.5% when comparing last week with the same week in 2019, with London suffering a 38.4% decrease in sales when compared to last year, versus a 5.2% decrease in the rest of the country.’
• It says, worryingly, that ‘the figures suggest that London is adjusting to a new decreased level of trading, and that may take a while to recover. It is also worth noting that roughly 10% of sites are still yet to open after lockdown measures were introduced.’
• S4Labour says ‘this level of decline is unprecedented and worrying for the industry, although the weather may have played a part. As the curfew has been introduced, diners and drinkers will start to head out earlier, as a closer look at sales shows that a larger proportion of sales came in earlier. Behaviours may continue to change as we adjust to the new timings.’
• New West End reports that West End footfall was down 4% week-on-week in Week 40 as a whole. As S4Labour points out above, the weather could have played a part. New West End says that, although it is up 62% from its lockdown lows, ‘compared to the same week last year, footfall was down 58%.’ That’s a pretty big number.
• Changes to proposed duty free retailing could impact both airports and city-centre, particularly London, traders. It is proposed that duty free will be widened at airports but the option to sell goods net of VAT to tourists in city centres will be removed, unless the goods are being posted to the overseas visitor’s home address
• New West End says ‘instead of gaining £2.1bn in sales from the UK’s departure from the EU, this change will instead result in a loss of £3.5bn in tax-free sales.’ Although certain hubs like Bicester Village in Oxfordshire will be impacted, the West End could also suffer a reduction in retail footfall (and therefore F&B spend) going forward.
• These are changes that could and probably will outlive any Covid-19 impact.
Other Covid-19 issues:
• KAM Media and OrderPay have conducted research that concludes consumer demand for ‘a tech-led hospitality experience’ has increased over recent months. Mobile phone ordering has increased. OrderPay says ‘there is no doubt that the past few months has accelerated the need for technology solutions and it’s become vital that hospitality businesses respond to consumer demand.’
• Paris is once again to close its bars, this time for two weeks from today as the city has raised its Covid-19 alert level is raised to ‘maximum’.
• The BBC reports that there have been 498,000 redundancies announced by employers since the Covid-19 crisis began.
• Foodservice analyst Peter Backman maintains that the link between eating in restaurants and obesity is not clear. He suggests that to target restaurants, which are popular in ‘thinner’ countries like France & Italy, may not be addressing the problem correctly.
• Backman says ‘I would suggest that first of all the government needs to have in place a comprehensive, credible, coordinated plan for reducing obesity – and to my mind this should focus on educating consumers – a huge and long term task.’
• Best Bar None has appointed BBPA CEO Emma McClarkin and Steve Alton of the BII to its Management Board
• Seedrs and Crowdcube are to merge. Seedrs writes ‘by joining forces, we’ll be able to harness the strengths of both businesses as we accelerate our shared mission to create the world’s largest private equity marketplace. Together, we will help fund thousands of ambitious, fast-growth businesses and deliver exceptional returns to the investors who support them.’
• It says ‘before the merger is formally completed, we will need to go through an approval process with shareholders, the Competition & Markets Authority (CMA) and the Financial Conduct Authority (FCA), in addition to seeking shareholder approval.’
• Seedrs says ‘the Seedrs and Crowdcube platforms will continue to operate independently through completion and likely for some time thereafter. You can still invest and raise capital, and buy and sell shares in the secondary market, in the same way as you have before. Once the merger has been formally completed, we will come together to define how the two businesses will combine our teams, customers, brands, services and technology.’
HOTELS & LEISURE TRAVEL:
• Cruise operator Royal Caribbean has suggested that its plans for new ships and opening more private islands have been pushed back six to 12 months because of the Covid-19 pandemic.
• It maintains that nothing has changed “strategically.”
• Lenders to Cineworld Group are reported to have ‘parachuted in advisers for urgent talks on the company’s $8bn (£6.2bn) debt mountain as it mothballs hundreds of cinemas on both sides of the Atlantic.’
• Sky says ‘a syndicate of banks has appointed FTI Consulting to negotiate with the stricken multiplex operator following a pitch process last week.’ It says ‘the survival of Cineworld and other cinema operators has been cast into doubt by the duration and intensity of the coronavirus crisis, with the delay to key film releases seen as a tipping point for the industry’s finances.’
• It is likely that landlords to the company will also be keen to have talks regarding their own position.
• Cineworld shares closed yesterday down 36% at 25p.
• On the back of the above story, worth noting that rival Odeon is cutting the opening hours for some of its cinemas in the UK and Ireland to weekends only.
FINANCE & MARKETS:
• The IHS Markit Services PMI for the UK in September has come in at 56.1. This is down on August’s 58.8 but still suggests a strong rebound. Markit says ‘the near-term outlook remains unusually uncertain and firms continued to take an extremely cautious approach to cost management and hiring.’
• The IHS Markit UK Composite Output Index for September was 56.5. Again, down from August’s 59.1, the number indicates substantial growth.
• Markit says ‘private sector employment [is] continuing to fall at a steep rate. September marked a seventh successive month of job losses, with the greater decline again seen in services.’
• Markit says ‘the UK service sector showed encouraging resilience in September, with business activity continuing to grow solidly despite the government’s Eat Out to Help Out scheme being withdrawn. Unsurprisingly, spending in the restaurant sector slumped after spiking higher in August, and many other consumer services activities showed a similar slide back into contraction as renewed lockdown measures were introduced, causing the overall rate of expansion to moderate.’
• It says ‘optimism about the year ahead has meanwhile cooled somewhat, hinting that risks for coming months lie skewed to the downside. Companies grew increasingly worried about the impact of a second wave of virus infections and the gradual withdrawal of government support, especially the furlough scheme. Brexit worries are also rising again, causing hesitancy in spending and investment decisions.’
• Chancellor Rishi Sunak has warned there will be no “easy cost-free answer” when it comes to getting debt levels down
• New car registrations in the UK were down 4.4% in September reports the SMMT.
• Sterling mixed at $1.2985 and €1.1014. Oil higher a $41.42. UK 10yr gilt yield up 4bps at 0.29%. World markets higher yesterday. London set to open up a handful of points.
RETAIL WITH NICK BUBB:
• Today’s News: Today has brought an unscheduled trading update from the luxury retailer Watches of Switzerland, flagging that the last 10 weeks of Q2 have been stronger than expected, with constant currency sales up by c20% (up 13% in the UK, despite lower tourist traffic, and up as much as 43% in the US) and upgrading full-year profit guidance (even though the key Christmas period is still to come).
• Weather Watch: It has turned very wet and autumnal recently, but memories about “the weather” are always notoriously short-term and often too London-centric…so, ahead of the BRC-KPMG Retail Sales survey for September next Tuesday, we turned to the Retail weather consultants Planalytics to check on how last month’s weather “should” have affected trading on the High Street (and Online) across the country…And their overview for the calendar month of September was headlined “Slightly Cooler and Dry” (“Strong Warming mid-month Followed by Strong Cooling to end the month”), as September was a highly variable month for the UK, with a heatwave in the middle of the month followed by a cool end. Overall, however, the monthly mean temperature of 13.9C was 0.6C below last year, but in line with “normal”. Across the country, in terms of the sales of key seasonal products, Planalytics estimate
• News Flow This Week: Tomorrow brings the Tesco interims and the Frasers AGM, together with the Just Eat EGM on its acquisition of Grubhub in the US, whilst Thursday brings an update from the second-hand car supermarket Motorpoint.