Langton Capital – 2020-10-09 – Marston’s & Carlsberg JV cleared, RTN, IHG, N of England etc.:
Marston’s & Carlsberg JV cleared, RTN, IHG, N of England etc.:
A DAY IN THE LIFE:
Hofstadter’s Law says that, no matter how much you understand Hofstadter’s Law and know that things always take longer than you imagine, they will still take longer than you imagine.
And the same is kind of true with regard to Covid-19 because, having read Albert Camus novel The Plague earlier this year, I had in mind that these things last longer than you would hope, like or even imagine, the current coronavirus pandemic is stretching out interminably.
Indeed, as we tweeted yesterday, the problem with Covid-19, see, is it’s a virus. It doesn’t know when to get off the stage. You can boo and hiss at it as much as you like but it doesn’t care.
Indeed, it remains inconvenient, harmful, and even deadly, long after it’s become tiresome, boring and tempting to ignore and therein lies a problem.
Because it’s hard to maintain a permanent state of vigilance and, as the WW1 soldiers shot in the head by snipers that they could easily have avoided found out to their cost, occasional slips can have a high price.
Anyway, all that redundant wisdom from a bloke who rolled the dice once to often and caught the disease a month ago. Time to move on to the news & follow us for real time developments on Twitter at @brumbymark:
LANGTON PREMIUM EMAIL:
Langton produces a premium email alongside the free version that you receive. It’s about 100 lines longer than the free version (depending on what’s going on) and includes analysis and opinion.
If you would like an example, please let us know.
Corporate Offer: Annual subscription 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.
THE NORTH OF ENGLAND: At least the government’s Leak Machine is functioning efficiently with more policies, these regarding increased restrictions in the North, being flagged in the Press. 9 Oct 2020:
• See also General Email below.
• The mood music has changed markedly in the last few days. A further tightening, particularly in the North of England, is likely next week. See Premium Email.
PUBS & RESTAURANTS:
The North of England:
• MPs have been warned by the UK’s Chief Medical Advisor Chris Witty that the number of coronavirus patients in intensive care in the north of England could surpass its April peak if infections continue rising at the current rate.
• Given the exponential nature of infection, that is a disturbing truism. Changed behaviour could and should derail the growth before it gets to those sorts of levels.
• As we mentioned in yesterday’s Premium Email ‘looking at our own dear York as an example, infections per 100k, when Langton Capital succumbed personally to the virus, almost exactly a month ago, were around 15.
• In the four weeks since, infections have risen to around 35, then 50, then 70 and most recently 199 per 100k registering a veritable explosion in the last 10dys or so. To put this in context, York is running at around 2.5x Scotland as a whole, almost 2x England as a whole and around 0.5x hotspots such as Leeds, Liverpool & Newcastle.’
• York has seen infections double almost four times in a month. That’s what exponential growth looks like and the game is to knock it (exponential growth) off track. This will involve limiting human to human contact. It’s this sort of private briefing that is energising ministers.
• The mood music is pointing to tighter rather than more relaxed regulations. MPs may be furious that such tightening has been flagged in the press before it has been discussed in parliament – but that may not change what is about to happen.
• The Guardian says the ‘new restrictions [are] expected to be announced next week for millions of people, and likely to hit hospitality venues.’ It says ‘several MPs expressed frustration that they were given no clarity on what measures might be imposed in their areas, or when, following reports that the closure of pubs, bars and restaurants was expected to be announced in some areas on Monday.’
• Whitty and his colleagues have ‘set out the medical rationale for further restrictions in the regions, according to one MP who was present, adding that he was struck by the stark warnings about hospitalisations.’
• The Guardian says ‘in the north-east and Yorkshire, the weekly average of hospital admissions fell to a low of seven on 16 August but had risen to 107 by 2 October.’ It says ‘the weekly average of admissions increased by 51% in the most recent week, from 25 September to 2 October. Patients needing a ventilator bed increased from five on 13 August to 79 on 4 October.’ See our comments on the growth rate of infections in York.
• Sky says it has seen ‘blueprints of the current plans’ that mean ‘pubs, restaurants and leisure facilities are expected to be closed in parts of the North put into the strictest tier [of regulation].’
• It says ‘Whitehall sources stressed that nothing has yet been signed off. “There’s still a lot of work to be done.”’
• The Telegraph, on the other hand, reports that a ‘decision to close pubs and restaurants in the north of England now looks inevitable’. It says that the briefing to MPs by Chris Witty was not backed up by the published data although secret slides did show there were major concerns about transmission in the hospitality sector. It is not known why these slides have not been made public although the government had been boosting visits to the sector recently via EOTHO.
The role of hospitality:
• The Guardian has seen slides marked “official – sensitive” which say that the ‘US Centers for Disease Control which found that, compared with Covid-free people, those with coronavirus were twice as likely to report having dined at a restaurant in the 14 days before becoming infected.’
• See Premium Email.
Further leaks re restrictions etc.:
• Sky reports ‘England is expected to be carved into three different lockdown tiers next week, with millions of people facing tougher restrictions as the government tries to get a handle on rising coronavirus cases and hospital admissions.’
• A simplification could at least make the system understandable.
• Some time ago we tweeted re our currently over-complicated patchwork jigsaw of regulations ‘here’s a thought, 6 levels, 0 to 5. Zero = free, 5 = lockdown like March. Between are graded rules re number allowed to meet, indoors or outdoors etc. Put it on Google & hey presto, we might understand it.’
Company reaction re Scotland and, potentially, Northern England:
• Punch Pubs CEO Clive Chesser says re Scotland ‘these are clearly difficult circumstances and we fully understand the severity of the ongoing crisis. As an industry, we have gone to great lengths to ensure our venues remain a safe place to be, fully complying with all of the Government guidelines on operating a ‘Covid safe’ environment for our customers and teams.’
• He says ‘the latest announcement made by the First Minister is bitterly disappointing and once again pubs are being disproportionately targeted. There is a distinct lack of evidence in the paper published that points to the virus being spread in pubs.’
• The BBPA says re the North of England government leaks regarding closures, if enacted, ‘could destroy pubs there. It would be on top of what is already a very challenging period for the sector with the 10pm curfew and rule of six, plus service limited to tables, resulting in a huge reduction in consumer confidence.’
• The BBPA calls for evidence of transmission and for the efficacy of its measures. CEO Emma McClarkin says ‘a local lockdown without immediate additional and adequate support will destroy many pubs.’ She says ‘the Job Support Scheme is not fit for purpose to save jobs in businesses facing a local lockdown. Proper measures need to be taken, as they were in the Job Retention Scheme, if jobs are going to be saved. Grants will also be needed for businesses impacted by local lockdowns to survive this period.’
• Martin Wolstencroft, CEO of Arc Inspirations, has called for sight of evidence to back up the government’s leaked local lockdown plans for the hospitality sector.
• Wireless Social reports that ‘recent footfall from last weekend (3rd Oct) suggests that the footfall is dropping again.’ It says that, across the UK, it is down 46% on February levels.
• Wireless Social says ‘certain towns and cities are faring better and worse than others. Greater Manchester, which is subject to local lockdown restrictions, is currently at minus 55% of the footfall seen in February, which is 10% behind the rest of the UK.’
• It says ‘the same can be said for Liverpool which was also placed under stricter lockdown conditions last week, last Saturday footfall was at minus 60% of the numbers seen on the same Saturday in February, and Sunday at minus 50% of February’s footfall.’
• New West End reports that West End footfall was up 17% week-on-week on Wednesday, 7 October. Such short term numbers will be impacted by the weather. It says ‘compared to the same day last year, footfall was down 55%.’
• A CBI / PwC survey has suggested that 74% of City firms are reviewing how much office space they need in the light of the boom in home working.
• The survey says c71% of firms were now investing in their IT systems to support remote working.
• Marston’s has reported that the Competition and Markets Authority has cleared its proposed joint venture with Carlsberg and that the antitrust condition to Completion has now been satisfied. The group says the transaction will now complete at the end of October 2020.
• The CMA had been ‘considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.’ It has effectively found that there is no case to answer.
• Canadian fast food chain Tim Hortons is reported set to launch a major expansion in the UK creating perhaps 2,000 jobs.
• US chain Which Wich Superior Sandwiches is to open two new virtual restaurant locations in Battersea and Bethnal Green this month.
• Restaurant Group’s Director’s Remuneration Plan was approved at its AGM yesterday, though only by 63% to 37%
• McDonald’s has reported Q3 numbers saying that US LfLs were up 5%. The company says its international markets segment, which includes France and the United Kingdom, saw same-store sales fall 4.4%.
• McDonald’s says ‘while current year business results have been impacted by the Covid-19 pandemic, the pace of recovery paired with the Company’s strong financial position support this increase to the dividend while still giving the Company the ability to invest in the business.’
• Compass Group is to collaborate with street food operator Kerb to bring its traders to stadiums and venues nationwide from 2021.
• Oakman Group has issued a trading update for the 13 weeks ending Sunday 4th October saying that the company increased revenues by 40.6% ‘with the four fledgling Ashmore Inns contributing £1.3m.’
• The company says ‘Oakman Inns’ 24 pubs and restaurants showed a Like-for-Like increase of 25.4%, up £2.7m. Wet Sales were up 12.7% and Dry up 45.5% on Like-for-Like sales. Unsurprisingly, room sales across the estate were down 52.3%.’
• Oakman says ‘even removing the benefit of VAT cuts and the EOTHO scheme, they would still show double digit growth in Like-for-Likes.’
HOTELS & LEISURE TRAVEL:
• UK visitors to Italy will have to show evidence of a negative Covid-19 test on arrival after a clampdown on countries “at a greater risk.” This also includes France and Spain.
• Carnival Corporation yesterday afternoon reported Q3 numbers with a smaller-than-expected loss. It says bookings for H2 next year are higher than anticipated. CEO Arnold Donald says ‘we have come full circle from initiating a suspension in the early days of the pandemic, to transitioning the fleet into a pause status, right sizing our organization and, now, embarking on the phased resumption of guest operations.’
• Carnival has said that booking trends for 2021 indicate long-term potential demand for cruising. It says ‘many of the company’s brands source the majority of their guests from the geographical region in which they operate. In the current environment, the company believes this will benefit it in resuming guest cruise operations.’
• Carnival says ‘the pause in guest operations continues to have a material negative impact on all aspects of the company’s business, including the company’s liquidity, financial position and results of operations.’
• The National Trust is to cut around 1,300 jobs
• Travel Weekly reports travel agents as saying that ‘the unexpected removal of Turkey from the UK’s travel corridor list has left them despairing, with few destinations left to sell and clients questioning whether to book at all this winter.’
• STR reports that US hotel occupancy was down by 30% year on year in the week to 3 October. Room rates were 26% down and REVPAR was some 48% lower.
• Intercontinental Hotels has commented on the hotel industry at an annual hotel conference saying that hoteliers could be beneficiaries if businesses scale back on renting office spaces. CEO Keith Barr says ‘people will be meeting in hotels more as they go to offices less. Shrinking office space, but also leisure will come into play as (staff has) learned to work remotely.’
• Commenting on the leisure sector, Barclays has said that 4.8m Brits or 9% of the population say Health and Wellness is extremely important to them post CV-19. Some 61% of businesses plan to invest more on health and wellbeing over the next 3 years and 22% of consumers are looking at “staycation” in the UK for the foreseeable future
• Private jet rental companies are beginning to market their wares by saying that social distancing is easier to maintain if you rent the whole plane. That’s what swung it for us.
FINANCE & MARKETS:
• The ONS reports that the UK economy grew by 2.1% in August. The economy remained at that point some 9.2% smaller than before the pandemic struck.
• Treasury official Charlie Bean has warned that the second wave risks putting Britain’s economic recovery from the coronavirus pandemic “on hold”
• Sterling higher at $1.2953 and €1.0998. Oil higher at $43.18. UK 10yr gilt yield down 2bps at 0.29%. World markets better yesterday. London due to open up around 7pts.
RETAIL WITH NICK BUBB:
• Today’s News: Apart from the publication of the Dunelm Annual Accounts, there is no Retail company news out today, but the big property company British Land has issued an operational update, announcing that it is resuming dividend payments, given better than expected September quester rent collection. Interestingly, in terms of its Retail portfolio, British Land highlight that its out-of-town Retail Parks are driving its outperformance of the national benchmarks, eg with Store sales in September only down 7% LFL (with footfall only 11% down). British Land give a shout-out to the particularly strong performances from the Giltbrook retail park in Nottingham, Mayflower in Basildon and Nugent in Orpington.
• Trade Press: The front cover of Retail Week magazine today is a photo of an Asda distribution lorry on a motorway with the headline “Asda’s new direction”, after the planned sale to the Issa brothers, to flag up the main feature on “Asda’s £1bn question: where to splash the cash?”. RW also have features on M&S’s Food Marketing Director Sherry Cramond, “The stores that Retail bosses love to spend in” and “How Dave Lewis saw Tesco through turbulent times”. In his column, the Editor looks at the recent trading updates from Greggs, Hotel Chocolat, Card Factory, Boohoo and ScS and thunders “Whisper it, but retail is on the road to recovery”, noting that “The headlines do not even begin to paint the full picture of an industry that is battling back”.
• BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that in w/e Sunday Oct 4th, BDO Fashion LFL sales were down by 11.1% (with Store Fashion sales down c38%), whilst Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were down by 4.4% (down c30% in Store sales, but up c69% in Online sales).
• News Flow Next Week: A busy week kicks off first thing on Tuesday with the BRC-KPMG Retail Sales figures for September, quickly followed by the French Connection interims and the latest monthly Kantar/Nielsen grocery sales figures. Wednesday then brings the ASOS finals, the Just Eat Q3 update and the Watches of Switzerland AGM. The Dunelm Q1 update is on Thursday and then we get the much-awaited JLP Strategy review on Friday.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 8 Oct 20 Restaurant Group General Meeting
• 8 Oct 20 Carnival business update
• 15 Oct 20 Fulham Shore FY numbers
• 16 Oct 20 JD Wetherspoon FY numbers
• 20 Oct 20 Marston’s / Carlsberg CMA backstop date
• 21 Oct 20 Marston’s FY trading update
• 21 Oct 20 William Hill Q3 trading update
• 22 Oct 20 Gear 4 Music trading update
• 27 Oct 20 Whitbread H1 numbers
• 28 Oct 20 Texas Roadhouse Q3 numbers
• 29 Oct 20 YUM Q3 earnings update
• By 31 Oct 20 DP Poland H1 numbers
• 3 Nov 20 DART Group AGM
• 4 Nov 20 Shepherd Neame FY numbers
• 10 Nov 20 Premier Foods H1 numbers
• 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
• 2 Dec 20 Shepherd Neame AGM
Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year.
• Government’s Leak Machine still working well as Sky reports ‘Johnson expected to order pubs to shut in north of England’. Helpful, that. Mood music done a 180 from the talk days (minutes?) ago that the 10pm curfew could be eased…
• Scotland & possible N of England shutdowns. Well, not helpful. What about the staff? The furlough is still on for a short while but there are tens of thousands of people impacted & what about the stock? Not just lettuces but real ale etc now worthless.
• Donald Trump excellent and great and tremendous. Many people feel able to partially agree with the US President that it was a blessing from God that he caught Covid-19. And that he recovered.
• Are regulations quick-on and slow-off? They may be imposed immediately but ‘eased’ off. Some areas of the North are in Hotel California. They have checked into enhanced measures but can’t leave. Hopefully Scotland, where there is at least an exit-date, won’t be like that
• Problem with Covid-19, see, is it’s a virus. It doesn’t know when to get off the stage. You can boo or hiss at it. Doesn’t care. It remains inconvenient, even deadly, long after it’s become tiresome, boring and tempting to ignore
• More draconian rules in Scotland described as ‘devastating’, a ‘death sentence’, a ‘knockout blow’ and a ‘catastrophe’. Say what you mean, why don’t you? See daily email (free signup on www.langtoncapital.co.uk) for detail.
• Shepherd Neame says ‘we anticipate that trading during the winter months will be challenging as the new restrictions, such as the rule of six and 10pm curfew, impact business and consumer confidence.’ True, that.
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.