Langton Capital – 2020-11-13 – PREMIUM – Young & Co, London, Oct Tracker, Just Eat, footfall etc.:
Young & Co, London, Oct Tracker, Just Eat, footfall etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
We mentioned a couple of weeks ago that the BBC’s weather app, which uses the Met Office, I believe, had promised an 11dy dry spell from about last Thursday but as expected, their forecast was drowned by the torrential rain that swept in from the west on about Day Three.
Indeed, without a flicker of embarrassment, the forecast for today (which should have been Dry Day Number Eight) is ‘cloudy and windy tonight with heavy rain moving slowly eastwards across the UK.’
Perhaps the fact that neither the optimistic forecast nor the driving rain that followed it came as a surprise says more about us, the Brits as a nation, in our current mindset than it does about the Met Office’s accuracy.
And, as we said when we first wrote on the subject, it’s an approach consistently taken by our politicians when they’re talking about whatever is their latest little world-beating gizmo, be it a self-guiding throat swap, an AI (Absolute Idiot) Track & Trace algorithm right through to the big one, Brexit itself.
Anyway, we’ve made it through to Friday. On to the news:
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YOUNG & CO – COMMENTS ON TRADING, LONDON & OTHER: Young & Co yesterday reported H1 numbers to end-Sept. Below some company comments but also indications on the wider industry, London, etc. 13 Nov 20:
Numbers vs direction of travel:
• The numbers are not very meaningful (down c100% LfL at present) but the direction of travel, arguably, is.
• Secure your finances, lobby against the 10pm curfew on reopening, keep your units well-invested, kit out your outside spaces, negotiate with landlords (if any), pay your bills and keep your fingers crossed for Christmas.
• Closures I and II.
• YNGA says it didn’t waste its time during (either) lockdown. It has raised funds from shareholders & banks, made use of outside space, benefited from EOTHO, passed on the lower VAT to customers (at least until October) and it has been investing in its assets.
• Reopening (July to October)
• The co was ‘pleasantly surprised’ at how strongly it reopened in July. There was pent up demand & customers ‘flocked back’.
• YNGA opened 3wks later than others & says it was able to better prepare as a result.
• Sales as a percentage of normal: July 70%, August 89%, Sept 77%. October, which is in the company’s second half year, will have been markedly worse.
• Co has some rent reductions & has restructured Head Office & looked at other costs.
• London. Only 15% of units are in Central London (City & West End). These are open & included in the above numbers. Central London was down 56% LfL and The City was down by 52%.
• It would have been a big cheat to leave central units out (or to keep them shut to avoid bad comps) and the ‘London Villages’ (where working from home customers live) have been ‘very strong’.
• October was worse, largely due to the 10pm curfew & Tier II and Tier III regulations. The company stopped passing on the VAT cut to customers.
Sundry points from the presentation, Q&A etc:
• The company is only furloughing staff for 3wks (in order to get a flying start in December).
• This should be good for revenues, but it means that cash burn is still £4-5m a month (same as Lockdown 1.0) despite costs being taken out.
• There is a real hope, almost an expectation, that the 10pm curfew will be dropped. CEO Patrick Dardis said YNGA would ‘settle for 10pm becoming last orders rather than kick out time’.
• Outdoors is at a premium. YNGA is investing here & it will not be alone. Young & Co is putting in cabins with seating, terraces, televisions outside for sport etc.
• Weaker competitors? There will be casualties. Companies that have had share placings (or brewery JV cash receipts) and have freehold estates could be in a more flexible position than cash-strapped operators with leasehold units
• Supplier problems? This could be an issue. Smaller suppliers could have exited the market.
• What goes around, comes around. YNGA has created goodwill by paying bills promptly during lockdown (including its rents)
• A lack of pre-bookings will dampen Christmas. January won’t be much fun.
• More permanent changes? Young & Co is London through and through. It says it is not giving up on the Capital but, short term, it will concentrate away from the centre (and indeed away from London itself).
• The co will not sell central London jewels.
We’d welcome any feedback (or whatever the right word is for input ahead of an event rather than after it) on topics we’re considering for the Premium Email. These include:
• What Covid impacts are permanent, semi-permanent & transitory. E.g. will Bubbles persist, will consumers be wary of crowds, will outside space be at a premium etc.
• Will Christmas be super-important this year? It will short (but hopefully not nasty and brutish) and it will need to get us through January and February.
• Will Lockdown 2.0 definitely, definitely end on 2 December? Will the 10pm curfew be ditched thereafter.
• How can we avoid Lockdown 3.0? Nobody wants to forego Christmas – but what will happen to infections in Jan-March and will the vaccine come quickly enough to save Easter?
• Are LfLs meaningful right now? Clearly not when they’re down 100% but, even when open, if LfLs are minus 10% (but you only have 60% of your estate open), won’t total sales be down 64% and isn’t that the figure that the P&L will focus on and that the bank will look at?
PUBS & RESTAURANTS:
Coffer Peach Tracker:
• 10pm closing & Tier II and Tier III do the damage.
• The Coffer Peach Tracker for October has reported that tougher restrictions drove ‘pub and restaurant group sales into reverse’ for the month. It says that total sales across managed pubs & restaurants were down 28.9% in the month compared to the same period a year ago. Sales were only down by 14.7% in September.
• Lockdown II has obviously exacerbated the above.
• The Tracker says 83% of units were open (down from 88% in September). It says that, as a result, total sales (including closed units) for managed pubs & restaurants across the country were down by 33.9% on last year. In September, they were down by 20.3%.
• CGA notes ‘the roll-out of more regional COVID restrictions further depressed sales in Britain’s managed pub, restaurant and bar groups in October.’
• 10pm closure:
• CGA says ‘drink-led pubs and bars have been particularly badly hit, and with England now in full-lockdown, you can only wonder how may will re-emerge in their current state, how many will have to revamp their trading styles, including switching their emphasis to food?’
• It says ‘what’s crystal clear is that even before total lockdown in England, the imposition of Tier 2 and 3 restrictions across large swathes of northern England, as well as the tough restrictions in Scotland and Wales, had a massive negative impact on sales performance.’
• Drink-led pubs ‘saw total sales down 37.6% and like-for-likes down 35.3% on October last year.’
• Food-led pubs and pub restaurants ‘fared a little better, but still performed markedly worse than in September, with total sales down 28.9% and like-for-likes down 27.8%. Across all managed pubs food sales were down 24.5% with drink sales dropping 37.6% on the same time last year.’
• Restaurant group are still being buoyed (or were being, before they closed again) by the cut in VAT on food and delivery sales. They still ‘saw total sales down 29.6%, and like-for-likes 19.5% below October 2019.’
• Delivery accounted for 12.3% of sales across restaurants (September 10.4% and a pre-Covid Feb number of 5.9%).
• London underperformed the country. The Tracker says total London sales (including shut units) were down 39.5% compared with down 31.9% outside the M25. LfL sales were down 35.0% in London and down 26.8% outside the M25. Bar groups were down 56.9% in total sales and down 52.6% LfL.
• Contributor comment:
• RSM says ‘it is impossible to put a positive gloss on such depressing results in the last full month of trading prior to England’s second lockdown. This week’s news about an imminent vaccine is just the fillip the sector needs as operators turn their focus to the operational challenges of successfully re-opening their businesses on 3 December for the truncated, but ever more crucial, festive trading period.’
• Coffer Group takes a slightly more optimistic view on October saying ‘if anything, October’s figures were better than many feared. The pressures on the hospitality sector to keep businesses going during lockdown is immense and the industry has been as creative as possible.’
• Coffer says ‘we will be concerned about how the public will react to the lifting of the restrictions in December – will their eating and drinking habits have culturally changed? The post lockdown figures especially over Christmas are sadly or joyfully going to be the acid test for the Industry. We expect it will be a truly seismic period with far reaching effects.’
Covid news, sites, footfall:
• Sky reports that chancellor ‘Rishi Sunak has declined to rule out further measures similar to the Eat Out To Help Out scheme when the economy reopens after the latest lockdown.’
• Sunak is looking at a “range of things” to “get consumers spending again and people out and about”. Warwick University says that EOTHO 1.0 was responsible for a “significant” rise in coronavirus infections. This is contested elsewhere.
• S4labour says only 25% of sites have stayed open after lockdown, with 75% closing during the first week of lockdown. It says ‘of those sites who have remained open, sales are on average 24% of pre-lockdown for the first week of trading, with food being 27% and drink being 23%, which shows a significant adjustment of the industry to the new environment.’
• S4labour CEO Alastair Scott says ‘I am really impressed with how fast operators have adjusted their business to cope with the new environment, particularly as the rules were changing right up to the last minute.’
• Wireless Social says footfall on Saturday 7th was down 72% on levels seen in February and down 33% on the same day the previous week.
• The Telegraph reports scientists as suggesting that a ‘rush to the pub’ before the second lockdown could have led to the recent record rise in Covid cases. Covid positive test numbers rose by almost 50% yesterday on Wednesday.
• CNN reports that Chicago ‘has issued a 30-day stay-at-home advisory as coronavirus cases rise, encouraging residents to stay home and only leave for school, work or other essential needs’
• The SBPA says it hopes that it would not like to see a Pubs Code bill in Scotland. It says a proposal to create one was ‘an attempt to replicate Westminster legislation, despite the huge differences in the Scottish pub market. It simply wouldn’t have worked and would have seen Scottish pubs lose out on millions of pounds of investment at a time when the industry needs it most.’
• Grapevine Local is providing a free app and website ‘to help business owners reach a much wider group of people and enables everyone with common interests to stay better connected.’
• Pub Aid says that ‘pubs across the country have stepped up to help their local communities through the second national lockdown.’ Co-founder Des O’Flanagan says ‘this second national lockdown, coming hot on the heels of other restrictions, is hitting pubs hard – though this time, licensees and their customers are better prepared. Many pubs have continued to offer the takeaways and deliveries they started in the first lockdown, so they’re already up and running for this one.’
• He says ‘pubs’ support for their communities is both physical, as they provide food and other vital supplies, and, just as importantly, emotional, with many pubs offering a friendly face and a chat to elderly and vulnerable people who would otherwise feel very isolated.’
• AI sales forecasting platform Tenzo reports that it has spent the last 6 months supporting the pub industry by making resources available to help restaurants adapt to the fast evolving situation as well as extending services for free if restaurants are closed.
• Just Eat has updated on trading saying that it has widened the gap in market share terms between itself and its competition. The company now has over 205,000 connected restaurants. It says it ‘mainly collaborates with delivery restaurants. In addition, Just Eat Takeaway.com provides its proprietary restaurant delivery services for restaurants that do not deliver themselves.’
• Just Eat reports ‘the combination of Just Eat and Takeaway.com has rapidly grown to become a leading online food delivery marketplace with operations in the United Kingdom, Germany, the Netherlands, Canada, Australia, Austria, Belgium, Bulgaria, Denmark, France, Ireland, Israel, Italy, Luxembourg, New Zealand, Norway, Poland, Portugal, Romania, Spain and Switzerland, as well as through partnerships in Mexico, Colombia and Brazil.’
• Caffe Nero has announced a CVA. Founder Gerry Ford says this has been caused by the second lockdown which has further limited footfall. The company is working with KPMG to negotiate with landlords. The company employs more than 6,000 people across its 800 UK stores.
• Inner City Music Limited in Manchester, the owner and operator of the Band on the Wall in the city, is reported to have appointed City Build as the main contractor to the £3.5m project intended to expand its music venue
• The Drinks Business reports that AB InBev may ‘snap up fast-growing low alcohol beer labels over the next five years to meet consumers’ demands.’ AB InBev itself says ‘when you represent over 30% of the world’s beer you have responsibility to offer a range of products.’
• Propel reports that Individual Restaurants, which operates circa 30 sites under the Piccolino and Restaurant Bar & Grill brands, is undergoing an accelerated sales process, after appointing advisers at Deloitte to explore its options.
• Chinese giant Alibaba made sales for its post-COVID-19 Singles’ Day shopping extravaganza of $74 billion.
• A 4-day weekend in February 2022 has been announced to celebrate the Queen’s 70yrs on the throne.
HOTELS & LEISURE TRAVEL:
• Spain is to require international travellers from ‘risk countries’ to have a negative Covid-19 PCR test taken within 72 hours of arrival to enter the country. That sounds like an admin nightmare. Spain is the UK’s largest outbound market.
• ABTA says the rate of job losses in travel has doubled in the last quarter. Travel Weekly says ‘firms expect bookings from October to the end of 2020 to be 93% down compared to the same time last year.’
• Dnata’s travel division has reported a 95% fall in sales in the six months to September 30
• STR reports US hotel occupancy was down 36% in the week to 7 November with rates down 31%. The resultant REVPAR was down 56% on the same week last year.
• London-based esports company Fnatic has launched a new fundraise on Crowdcube after raising $10m internationally.
FINANCE & MARKETS:
• Commenting on ONS Q3 GDP numbers yesterday, the NIESR says its ‘outlook for the fourth quarter is for 2.2 per cent decline in growth.’ It says ‘we expect growth to be 0.3 per cent in October. The second lockdown is expected to bring a monthly fall of about 12 per cent in November.’
• The NIESR says ‘there are downside risks if the lockdown is extended or does not succeed in bringing down infection rates, while upside risks would come from a smaller than anticipated fall in November as households switch to online consumption ahead of the holiday season.’ It says it expects ‘a quick rebound in December provided that the lockdown succeeds in getting infection rates under control without the need for a further extension. The UK economy is likely to contract by 11.5 per cent in 2020.’
• The RICS says it is likely that the property market will soften once stamp duty relief is withdrawn.
• Sterling lower at $1.3124 and €1.1115. Oil down at $43.07. UK 10yr gilt yield down 6bps at 0.36%. World markets lower yesterday and London set to open down around 65pts today.
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