Langton Capital – 2020-11-04 – PREMIUM – Shepherd Neame, cheap beer & wasted food, Escape Hunt etc.:
Shepherd Neame, cheap beer & wasted food, Escape Hunt etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Doing your tax involves preparing accounts which means doing the books which involves dealing with all those massive heaps of paper that you’ve been ignoring for months.
And, though we got much of the above done last week, stirring up all those dusty heaps of bills led to other issues, chief amongst them the question as to ‘just how stupid do I feel for not swapping utility contracts and being punished for being loyal (a.k.a. lazy) all these years?’
The answer, as the thought has been gnawing away at me, turns out to be ‘very.’
Meaning that a chunk of yesterday was spent ringing up British Gas, Npower, Virgin Media, Sky and a couple of other service providers, interminable elevator music, saccharine smiles, sugary sales pitches and all.
Hence, notes to self.
1) ring the number headed ‘if you are leaving us’ because that saves you being treated like a muppet and you can get straight to the nitty gritty,
2) threaten Sky with Virgin, Virgin with Sky and the same goes for BG, Eon and Npower etc.
3) if asked what you’re paying already, halve it. They’ll a) know you’re lying but b) it saves time.
4) check that reminders will be sent out at contract-end, don’t go for more than 18mths and promise yourself you’d be more diligent next year.
Fat chance of that. On to the news:
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AN EARLIER LOCKDOWN: LESS MIGHT HAVE ACHIEVED MORE? Opinion is split with some saying the lockdown is too feeble & others saying it shouldn’t be happening at all. 4 Nov 2020:
• The latest lockdown will be upon us tomorrow. Presumably, there is a plan. This hasn’t been shared with us and we don’t know how the success or otherwise of the lockdown will be measured.
• Of course, giving targets invites criticism if they are not met.
• In the worst of cases, infections lead to hospitalisations, then ICU usage and then death and there are material lags.
• They lag by perhaps 10dys (infection to hospitalisation) then 1wk and 1wk (meaning the thick end of a month before all measures turn better, even if infections drop from midnight tonight).
• In Lockdown 1.0, deaths peaked 18dys after the lockdown was imposed.
• The virus was spreading more aggressively in March than it is now but it is worth remembering that 56 people died on the day the lockdown started (23 March) but rose to 980 on 10 April
Lockdown 2.0: How effective will it be?
• Some scientists have suggested that the rate of infection halved every week during Lockdown 1.0
• This seems a little aggressive as it means that a month of lockdown would see infections fall by 93%. Deaths would fall, but with a lag. Indeed, daily deaths averaged less than 10 in August
• However, Lockdown 2.0 differs from Lockdown 1.0 in that schools and universities are still open and some of the meeting rules are a little more relaxed.
• Former chief scientific adviser Sir Mark Walport told Sky the lockdown ‘is not as severe as it was first time round, so the only way to know is to see how quickly the new cases start dropping.’
• He says the rate of infection is ‘unlikely this time to come down quite as fast as it did during the first lockdown.’
Could less (earlier) have achieved more?
• SAGE suggested a lockdown on 21 September. Daily deaths in that week averaged 30 per day. They were 260 a day last week.
• A lockdown over an extended, two or three week half term, could perhaps have achieved more at less economic cost
SOURCES OF INFECTION? Distressed sellers of assets often sell what they can, not what they should. It could be that the sections of the economy shuttered in the past have been similarly sourced. 4 Nov 2020:
• PHE’s infamous pie chart regularly shows hospitality as the source of maybe only 2% or 3% of infections.
• But, as hospitals, care homes, workplaces, schools, universities, prisons and the like will not be shut down, hospitality has borne the brunt.
Can we be more accurate?
• We tweeted a few days ago ‘to prove a theory, you can remove a variable & retest, remove another variable & retest.’
• We said ‘with hospitality closed & schools & universities open, we can see what happens to the R rate. If it falls, the finger will point one way. If it doesn’t, it points the other.’
• This is too simplistic but, if the R rate does not fall, then shutting hospitality will not have achieved much.
• In this case the finger would point at schools and universities as being one of the major sources of infection
• Interestingly, NEU General Secretary Kevin Courtney has said that halving school rolls (half children at home, half in school & rotating) would have ‘the same impact as shutting down all of hospitality.’
• A nice thought but we’re not sure where his data came from
If the R rate falls…
• If the R rate does fall, maybe the target was correct. Many observers suggest that non-food retail is not a major spreader so hospitality might come under suspicion
• But the R rate almost certainly will fall
• This partly due to the fact that the behaviour of individuals is likely to have been changed in other ways. It will not be possible to disaggregate this from the effect that shutting down hospitality has had
• A question. Do we think that the reimposition of personal liability risk for knowingly insolvent (or recklessly insolvent) trading will lead to more administrations during or after this shutdown?
• We are aware of at least one resignation of a director due to such concerns and will comment on this further tomorrow. Comments welcome.
PUBS & RESTAURANTS:
Lockdown 2.0. Feedback & comment:
• Beer and perishables are being sold cheap (95p per pint for beer at Stonegate pubs, 99p at Wetherspoon, £2 at Fuller’s units.
• SIBA has responded to news that takeaway beer can be sold during second lockdown, providing it is pre-ordered, saying ‘it comes as very welcome news that Government have now clarified their stance on takeaway beer and published guidance which shows England’s pubs and independent brewery taprooms can sell beer for takeaway providing it is pre-ordered via phone, web or post.’
• SIBA adds ‘government have also made clear in the guidance that brewery shops can remain open and operate as off-licenses, meaning bottled and canned beer from small breweries can be sold via on-site shops without pre-order.’ It says ‘pubs and small breweries are intrinsically linked, with 80% of beer from small independent brewers heading to pubs, and we would like to thank the Government for their flexibility in allowing pubs to sell takeaway beer in a Covid safe and practical manner via pre-orders.’
• Operators, where possible, dusting off their delivery, takeaway & collection models from earlier in the year.
• Job support is great, but it is ‘an administrative nightmare.’ Pressure on the government to extend the business rates holiday beyond next March.
• There will be requests, before long, to extend the 5% VAT period (also due to end in March next year).
• Some worries that, yes, November is being thrown under the bus to save Christmas – but will the stats look good enough by early-December to reopen the economy?
• November is a much, much quieter month than December.
• Many operators believe they cannot go much further with their cost cutting without actually shutting units and sacking staff.
• Debts are racking up. The wrongful trading rules, by which directors may be personally liable for continuing to trade busted companies, are back in force. See Premium Email.
Other Covid news:
• The Telegraph reports that data from King’s College suggests that the R rate in England is now about One.
• Regions vary. York, for example, was c10 per 100,000 in early September. This rose to 307 on 21 October but, by the end of October, it had fallen to 184.
• Professor Carl Heneghan says cases in Liverpool have halved.
• Warwick University maintains that there were sharp increases in Covid clusters about a week after EOTHO began. It says between 8% and 17% of newly detected infection clusters could be linked to the scheme. It says this was particularly noticeable in areas that had benefited from good weather.
• Warwick says the spread ‘may have substantially contributed to accelerating the second wave of the pandemic.’
• Wireless Social says that footfall on 31 October (Halloween) was up 3% in the UK versus the prior Saturday. Footfall was still down 54% on levels seen in February.
Company & other news:
• Shepherd Neame has reported full year numbers to 27 June saying that the group has turned in a ‘resilient performance’ and saying that it is ‘well placed for when normal trading resumes.’
• The company says it traded well up to the outbreak of COVID-19 and ‘the first 8 month period of the financial year to 29 February 2020 saw turnover up +4.6% and underlying profit before tax1 up +6.1%.’ The company says that turnover for the year decreased to £123.6m (2019: £145.8m) ‘demonstrating the impact of 3 months’ closure’ with underlying operating profit of £0.9m (2019: £15.3m) and an underlying loss before tax of £2.9m (2019: profit £11.4m).
• The group reports that the statutory loss before tax was £12.1m (2019: profit £3.5m) and that the underlying basic loss per share was 17.8p (2019: earnings per share 60.9p). Basic loss per share was 79.8p (2019: earnings per share 17.6p).
• Shepherd Neame says ‘net debt held steady’ and reports that, since reopening its ‘pubs continued to outperform the market to 31 October with managed like-for-like sales4 at 66% of last year’s levels and managed like-for-like sales for open sites -13.4%.’ It says that tenanted like-for-like pub income was at 75% of prior year and own brand beer and cider volumes were at 98% of the prior year level. Total own beer volumes were at 92% of the prior year level.
• CEO Jonathan Neame says ‘this has been the most challenging period any of us in the hospitality industry have ever faced.’ He says ‘trading during the summer months was encouraging, highlighting the strength of our offer and people’s undiminished desire to go out and socialise in a safe environment with family and friends.’ Neame says ‘Shepherd Neame has weathered many crises in its long history and I am determined that we emerge from this crisis in a position of strength, ready to seize the opportunities that lie ahead.’
• The company says ‘we have traded as well as could be expected since re-opening in the summer, but the rest of the winter presents further risks and fresh uncertainties. The new restrictions are of great concern, and we hope can be lifted in due course.’ He says ‘the Company has liquidity for the foreseeable future within its financing structure, and our clear objective, when conditions allow, is to resume our growth trajectory, re-start our investment programme and the payment of a dividend as soon as possible.’
• Stonegate Pub Company has announced further business support within its leased and tenanted business, Ei Publican Partnerships. It will give rent credits of 90% for rent, tie release fees and fixtures and fittings rental charges for all tied publicans operating substantive agreements in England, during the four-week lockdown period.
• Stonegate says ‘this financial support has created an overall package from the Company worth in excess of £42.5 million.’
• EI Publican Partnerships says ‘we continue to stand by our publicans, and we are taking the responsibility of supporting our businesses very seriously as the trading landscape continues to change. Once again, the hospitality industry is being told to bear the financial brunt of further regulations in the Government’s response to COVID-19.’
• M&B brands Toby and Harvester offering 50% off mains. Tomorrow, they will not be open for sit-down meals.
• Pret tweets ‘this lockdown, we’re not going anywhere. From Thursday, our shops will be open for takeaway & delivery of your freshly made morning pick-me-ups, WFH lunches, endless coffees and everything in between.’
• Oakman Inns says ‘let’s start with the positives. If the hospitality industry was to choose a month to be shut down, in terms of turnover and profit generated November would come a close second to January.’ Most other implications of an enforced shutdown are negative.
• Hogs Back Brewery is ‘set to once again offer customers fresh beer, including its best-selling TEA (Traditional English Ale).’ The company says it ‘is now selling its draught beers in reusable glass Snorters, or flagons, so drinkers can choose an environmentally-friendly tipple.’
• The AA has announced UK Hospitality CEO Kate Nicholls has won its Outstanding Contribution to the Industry Award ‘recognizing her work supporting the industry and lobbying on its behalf to Government throughout the pandemic.’
• Fuller’s tweets ‘two days until Lockdown means £2 pints! We don’t want to see any of our delicious beer going to waste. And hurry because once it’s gone, it’s gone! This offer is available on cask and Guinness across all of our managed pubs.’
• Gousto, which provides recipe boxes, has raised £25m of new equity from existing investors, valuing the company in excess of $1bn (£770m).
• Camino is reported to have been bought out of administration by its co-founders Nigel Foster and Richard Bigg, who launched the business in 2007.
• Remarkable Pub Company CEO Elton Mouna has created a four part podcast ‘to positively steer people in the hospitality sector through the choppiest waters the business has ever seen.’ The podcasts can be found by searching for Elton Mouna on Apple Podcast, Spotify and other podcast platforms.
• The Local Data Company says that independent retail and leisure market operators have been ‘much more resilient than chains/multiples (brands with five or more stores) in H1 2020.’ LDC says ‘the net change in the number of occupied units was less than a third (-1,833) of the figure for chains (-6,001).’
• Around 150 UK bookshops are reported to have signed up to serve customers through Bookshop.org in order to rival Amazon.
HOTELS & LEISURE TRAVEL:
• Which? Says that travel companies have held back £1 billion in refunds due to customers for cancelled holidays. It says 21% of customers who have requested a refund have yet to receive their cash. The Competition and Markets Authority launched an investigation into the management of cancellations earlier this year.
• Escape Hunt has updated on trading saying it ‘has exchanged contracts for a site at the previous Intu centre in Watford.’ The company says ‘revenue over the week beginning 26 October 2020 which coincided with schools’ half term week, including the sales from new sites and digital products, was 25% ahead of the same period last year. On a like-for-like basis, the Company’s eight mature UK sites traded at 96% of the 2019 level, despite four of the sites being adversely affected by either the Government’s tier 2, tier 3 or the Scottish COVID-related restrictions.’
• ESC says ‘Basingstoke opened to the public on 29 October 2020 and initial trading has been the strongest in any of the Company’s new sites to date. The other recently opened site in Norwich delivered sales usually associated with a fully mature site, despite it being only five weeks old. In all the Company’s UK owner-operated sites, the EBITDA conversion ratios have been substantially better than in prior periods, assisted by more efficient labour usage and benefitting from the flexible furlough scheme and VAT reductions.’
• The company says ‘it is particularly frustrating that under the new restrictions expected to come into effect on Thursday 5 November, Escape Hunt’s UK owner-operated sites will be required to close during the Lockdown which is currently anticipated to end on 2 December 2020.’
• CEO Richard Harpham says ‘recent trading gives us cause for optimism in relation to our UK owner-operated site strategy and our ability to recover once lockdown restrictions are lifted.’ He adds ‘whilst it is hugely disappointing to be forced to close once again, we enter the second lockdown with a suite of digital and remote play options that did not exist six months ago, that are beginning to contribute, and to which we will shift our focus during this period of closure.’
• The Gambling Commission yesterday launched a consultation on remote customer interaction. It is soliciting feedback as it is proposing stronger requirements on operators to identify customers who may be harmed by gambling.
FINANCE & MARKETS:
• Few willing to predict with any degree of certainty the outcome of the US presidential election overnight.
• The NIESR says that ‘the second wave of the virus, and newly announced November lockdown, are likely to further increase the fall in 2020 GDP to around 11-12 per cent. This includes a fall of around 3 per cent in the fourth quarter of 2020.’ It expects global GDP to fall by around 4.5%.
• The NIESR also reports that ‘the end of the Brexit transition period and the prospect of a No Deal Brexit represent significant threats to the UK’s economic recovery, whether in the middle of a ‘second wave’ or after the recovery is underway.’ It says ‘the economic outlook is extremely uncertain and depends critically on whether we win the fight against Covid-19.’
• The Telegraph reports that ‘thousands of businesses are braced for a “truly devastating” blow from Boris Johnson’s second lockdown’.
• Labour has urged Chancellor Rishi Sunak to produce a 6mth plan to get the economy working again.
• Sterling stronger at $1.2988 and €1.1147. Oil higher at $40.46. UK 10yr gilt yield up 5bps at 0.28%. World markets up yesterday but London set to open down around 25pts today.
RETAIL WITH NICK BUBB:
Today’s News: While US voters went to the polls yesterday, M&S were putting the finishing touches to this morning’s interims statement and, although the P&L shows the expected loss, they have called it “a robust performance in the face of Covid”. The business performed better than expected during the first half with overall revenue down only c16%, usefully outperforming the Covid-19 planning scenario. Trading in the first four weeks of the second half has continued at similar rates to the end of Q2, with Food revenue up 3% and Clothing & Home revenue down 21.5%.
News Flow This Week: Tomorrow brings the Sainsbury interims, the N Brown interims, the Superdry pre-close and The Works’ pre-close (plus the latest MPC pronouncement on interest rates/QE)…and the closure of all non-essential shops in England.