Langton Capital – 2020-10-21 – C&C, Manchester, Wm Hill, Netflix, regulations etc.:
C&C, Manchester, Wm Hill, Netflix, regulations etc.:
A DAY IN THE LIFE:
Bit pushed this morning, on to the news:
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CURRENT TRADING: New rules have only just been imposed on London, York & other areas. But what are the early signs? 21 Oct 2020:
• Lancashire has just been put in Tier III, Liverpool has been there for a while, London, York & a number of other areas have gone into Tier II. Manchester will be in Tier III from Friday.
• Wales is locking down this week. Scotland was due to end the lockdown in its central belt early next week, but an extension may be announced.
• Early feedback suggests that there is a major hit to trade in moving from Tier I to Tier II. Of course, Tier III would imply closure for wet led pubs – but at least there is some compensation. See Premium Email
PUBS & RESTAURANTS:
General feeling of lack of clarity, direction & competence?
• It’s easier to criticise than construct but, arguably, the government’s three tier system could and should perhaps have been introduced seven months ago.
• It now seems to have wrinkles that could otherwise have been worked out like why, for example, Tier II leaves pubs & restaurants worse off than Tier III.
• The unintended consequences (taxi queues at 10pm, the incentive to carry on the party at home etc) have multiplied.
• Despite numbers U-turns to date, the government says it isn’t for turning. The more ‘advice’ it is given by (typically Labour) regions, mayors and other UK countries, the more entrenched England may become.
Chorus of disapproval:
• The Mayor of London Sadiq Khan has said that the ‘current curfew rule needs to be rapidly reviewed. We saw the worrying consequences of increased social mixing on the streets and on public transport in the capital around 10pm immediately after its introduction.’
• Khan says ‘immediately scrapping the 10pm curfew would allow more sittings of single households in restaurants throughout the evening, helping with cashflow at a time when venues need all the support they can get.’
• Labour mayor Khan says ‘the Government still haven’t got a grip on this virus.’
• The Parliamentary Labour Party is calling for a two week circuit breaker. Wales (Labour) has enacted one and the break in Scotland’s central belt is due to end shortly – but it may be extended.
• UK Hospitality CEO Kate Nichols tweets, re Scotland: ‘Restrictions do to end 6am Monday. Statement tomorrow on current restrictions with publication of strategic framework and next steps.’ Ms Nicholls says ‘my reading – a one week extn coming.’
• The Republic of Ireland is to return to the highest level of coronavirus restrictions from midnight on Wednesday. It hopes to celebrate Christmas “in a meaningful way” if the new lockdown is taken seriously.
• Manchester’s Labour mayor Andy Burnham has said that the failure to agree a £65m package of support will mean a “winter of hardship” for Greater Manchester once tier three measures are imposed.
• The government has announced that, despite having failed to secure the agreement of the local authorities, Greater Manchester will move to England’s highest tier of coronavirus restrictions from Friday at 00:01 BST. Greater Manchester mayor Andy Burnham said the region had not been offered enough to “protect the poorest people in our communities”.
• PM Johnson confirmed discussions are ongoing with leaders in South Yorkshire, West Yorkshire, Nottinghamshire and the North East about the possibility of moving to the very high alert level.
• The BBPA has said that 1,900 pubs and 32,000 jobs will be under threat in Manchester. CEO Emma McClarkin says ‘tier three restrictions will have a devastating impact on pubs, brewers and their wider supply chain in Greater Manchester unless a proper support package is available to all businesses impacted.’
• Ms McClarkin says ‘pubs in Greater Manchester were already struggling with the 10pm curfew, rule of six, lower levels of consumer confidence and a huge drop in domestic and international tourism. These additional tier three measures mean pubs in Greater Manchester can only remain open if they serve substantial meals.’ She says some ‘1,300 pubs who don’t serve substantial meals will be forced to close completely. The survival of all pubs in either of these categories is hanging perilously in the balance.’
• Burnham in Manchester says crippled businesses can’t top up wages & 2/3 of the minimum wage isn’t enough to live on.
• Former Bank of England governor Mervyn King has said that ‘the more stringent the restrictions, the more generous the support needs to be.’ He says that he furlough may have to be kept into next year.
Loopholes, unintended consequences etc.
• The BBC reports ‘hospitality chiefs are scrambling to work out whether working lunches in English pubs and restaurants could be exempt from new Covid restrictions.’
• Individuals are allowed to conduct business indoors. That may include lunches with work contacts in the pub.
• Re Covid and Brexit preparedness, the BBC’s Simon Jack tweets that business leaders had a disastrous conference call with PM Johnson and Michael Gove.
• Jack says ‘biz leaders describe “terrible call” with PM & Gove. “Unbelievable disrespectful to concerns of business”. PM said COVID had created “too much apathy in business” to get ready. No update on state of talks. Gove [who may have run a bath but he has never run a business] described process as “like moving house”.
• Jack continues quoting Gove ‘..a bit of disruption but soon get used to bigger better house”. Another said -“more of a lecture”. Small business groups pressed for transition vouchers to pay for extra prep which Gove agreed to take up with HMT. Another “Felt like a box being ticked – “yes we’ve spoken to biz”
• Some feedback from operators to suggest that the big drop off in trade is between Level I and Level II restrictions.
C&C H1 numbers:
• C&C has reported H1 numbers to 31 August saying that ‘driven by strong demand in the off-trade and the gradual reopening of the on-trade in our core markets, the business returned to profit generation in July through to September.’
• C&C says ‘the outbreak of COVID-19 coincided with our financial year end and has meant that the entire six month performance being reported today, was impacted. Although we expect the pace of recovery will continue to vary, as the largest independent alcohol distributor across the UK and Ireland, our business is structurally integral to the markets we serve. Our near term focus is securing our position and enhancing the performance of the business, while positioning C&C to deliver for customers and shareholders over the long term.’
• C&C reports revenues of €386.7m (2019: €866.1m) with adjusted EBITDA of €4.9m, down from €79.9m in the prior year. Adjusted EPS was a loss of 10.4 Euro cents versus a profit per share of 15.5 cents in the prior year.
• The company reports exceptional charges of €6.8m saying these reflect financing costs relating to COVID-19 covenant waivers, operational costs incurred relating to uplifting stock from customers and our share of Admiral Taverns’ exceptional COVID-19 provisions. It says that ‘available liquidity at the end of August 2020 has been maintained flat in line with our 3rd June update, with cash on hand/RCF headroom of €415m excluding our unutilised Debtor Securitisation Facility and any available short-term funding through the Covid Corporate Financing Facility ‘
• C&C says that it has provided ‘extensive support for the hospitality sector including measures to facilitate re-opening, increased flexibility in delivery days and times, ‘new for old keg’ replacement process, availability of key lines secured with supply partners, and assistance with hygiene measures.’ Re current trading, the company adds that ‘September continued the return to profitability for the Group, however October is challenged by further on-trade restrictions in both the UK and Ireland.’ It says the ‘near term outlook for the on-trade sector remains challenging and uncertain, with the key Christmas trading period likely to be impacted by continuing restrictions across the hospitality industry.’
• Executive chairman Stewart Gilliland says ‘it is encouraging to see the business return to profit alongside the reopening of the on-trade in July.’ He adds ‘we expect to see reduced volumes in the on-trade continue for the near term partially offset by increases in the off-trade’ and concludes ‘we remain confident in the inherent strength of our local brands, our unparalleled route to market and the medium to long term prospects for C&C.’
• The Government is to require mandatory independent scrutiny of pre-pack administration sales where connected parties are involved in the purchase.
• Champagne sales have bounced back over the summer. Year to date totals are still down given the Q2 lockdown.
• Panther Partners, which trades as D&D Restaurants, has announced that Giles Thorley ceased to be a director on 15 October.
• Polpo is reported to have filed for administration. The company underwent a CVA last year.
• Megan’s is to open a 9th site, in Surbiton.
HOTELS & LEISURE TRAVEL:
• Rapid Covid tests costing £80 are to be introduced at Heathrow.
• ABTA travel agency BTY Ltd has ceased trading. Travel Weekly also reports that South American specialist The Independent Traveller has collapsed. ABTA has separately confirmed that seven-branch travel agency Toucan Travel has ceased trading.
• Premier Inn is to develop 3 sites in the UK’s National Parks.
• STR reports that occupancy fell by 28% year on year across US hotels in the month of September. Rates were down by 25% and REVPAR was 46% down.
• William Hill has updated on Q3 trading saying that it has seen a ‘robust Group-wide performance as the return of live sport accelerated and Retail estate reopened.’ It has registered ‘continued good performance in International Online with gaming growing double digits, partially offset by unfavourable sports results.’
• William Hill CEO Ulrik Bengtsson says ‘we are very pleased with the trading performance of the Group, which has been borne out of the commitment, resilience and hard work of our teams across the business.’ The company adds little re the agreed takeover by Caesars Entertainment saying ‘the recommended cash offer is proposed to be effected by way of a scheme of arrangement under Part 26 of the Companies Act 2006. Further details of that scheme of arrangement will be released by the Group in due course.’
• Netflix has reported slower sales in Q3, presumably having maxed out the available customer pool during lockdown in Q2, at least for the short term. The company added 2.2 million new subscribers in the three months to 30 September – significantly lower than the 3.4 million predicted by analysts. The company says ‘we continue to view quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service.’
• Comic bookstore, gaming cafe and events hub chain Geek Retreat, is reportedly set to open 100 high street stores across the UK before the end of next year.
• London-based Gamesys Group has seen revenues up 31% in Q3. CEO Lee Fenton says ‘we have performed extremely well during Q3, with strong organic revenue growth, an increasing active customer base, and solid progress made across both our core and growth markets globally. Despite the challenges of COVID-19, our workforce is providing seamless business continuity as most of them continue to function remotely in line with guidance.’
FINANCE & MARKETS:
• The Bank of England’s MPC member Gertjan Vlieghe has said that unemployment could rise above the Bank’s predicted peak of 7.5%. He says not all of the current two million furloughed workers would return to their jobs. He says previous figures look like an underestimate.
• The BBC reports that PM Boris Johnson has said there will be no more trade talks with the European Union unless the bloc fundamentally changes its stance on the discussions.
• Re EU exit preparations, see Simon Jack comments under Pubs & Restaurants above.
• Sterling mixed at $1.2977 and €1.0954. Oil higher at $42.77 with the UK 10yr gilt yield up 1bp at 0.19%. World markets broadly higher yesterday and London set to open up around 5pts.
RETAIL WITH NICK BUBB:
• Today’s News: There is again no new Retail company news today, but the Boohoo saga is still worth following, as the bears have been having a field day of late, and the shares continued to slump first thing yesterday, with the price touching 233p before rallying to close only slightly down at 250p. And after hours it was announced that some Directors had been in the market to show some support, with “billionaire Boohoo boss” Mahmud Kamani picking up 300,000 shares at c243p. More interestingly, perhaps, FD Neil Catto’s wife hoovered up c6,000 shares at c258p and the non-exec Deputy Chairman Brian Small (the well-respected former JD Sports FD) bought 10,000 shares at c250p. Follow the bulls?
• News Flow This Week: Tomorrow brings the Superdry AGM and then we get the much-awaited GFK Consumer Confidence index for October first thing on Friday, shortly followed by the belated ONS Retail Sales figures for September.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 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
• 29 Oct 20 Starbucks Q4 results
• 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
• 11 Nov 20 JD Wetherspoon Q1 update
• 12 Nov 20 Young & Co 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
• 2 Dec 20 Stock Spirits FY numbers
• 10 Dec 20 Marston’s FY results
• We’ve a 12yr old Skoda with 80k miles on its clock & c80,000 dents on its bodywork. Some salmon or haddock has now leaked on the way back from the shops meaning it’s all of the above & it stinks of fish. Lovely. But nothing a month on the drive with the windows open won’t sort
• The smell of politics? Wales is locked down, most of Scotland likewise. Yet Wales has the lowest infection rate in the UK, Scotland the 2nd lowest. England is notably worse but is hamstrung by libertarians & a fear of being a follower.
• It must be a skill. To upset everyone at the same time. Libertarians to the right of you, socialists to the left. And the medics shaking the tightrope that you’re trying to tread. Good job the government is so sublimely competent & doesn’t have anything else to worry about
• Government doing a lot of ‘walking away’ from talks. Walked away from talks with Andy Burnham today, walked away from talks with EU re trade over the weekend. But Michael Gove says all is well & lorry parks will provide jobs from 1 Jan.
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