Langton Capital – 2020-12-01 – Covid response, EOTHO, Wales, supply chain, Caffe Nero etc.:
Covid response, EOTHO, Wales, supply chain, Caffe Nero etc.:
A DAY IN THE LIFE:
Our dog is irredeemably thick.
And that’s a fact but, after laughing at him for chasing behind a mirror to get at the dog that he was sure was there, I found myself tapping a book because, in this age of Kindles, I was sure that that was the way to turn the page.
And then I realised that I tend to tilt the screen on my laptop when I’m on Zoom calls and somebody has got a half of their heads cut off.
That’s a completely useless waste of time, of course and, when I was sure that I noticed the dog sniggering at me, I had to concede that hypocrisy, as so often, is alive and well and living in my house. On to the news:
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IN TODAY’S PREMIUM EMAIL:
Here we consider the hot topics & hope to analyse as well as report.
WOULD YOU DO IT ALL AGAIN? Given what it knows now, what could, should and would the government have done?
THE IMPACT OF THE EAT OUT TO HELP OUT SCHEME:
PUBS & RESTAURANTS:
Wales kicks over the apple cart:
• Having ‘emerged’ from lockdown ahead of the rest of the UK, the Welsh first minister Mark Drakeford now says that Wales could suffer 1,700 avoidable deaths over the winter “unless we act”.
• He says pubs and restaurants across the principality will be not be allowed to sell alcohol and will be forced to close at 6pm every evening – starting Friday this week, the first Friday in December.
• With Christmas around that corner, that is a bit of a buzz kill.
• Wales holds that cinemas, bowling alleys, bingo halls and other indoor entertainment venues must also shut from the same date.
• Drakeford says cases are rising in the over-60s and says ‘the measures we are taking are based on what the UK SAGE group of experts tells us has worked best elsewhere.’
• The first minister says ‘to support businesses affected by these new restrictions into the New Year, we will provide the most generous package of financial assistance anywhere in the UK.’
• The trade feels victimised and not, some would say, without reason.
• UKH Cymru welcomes ‘the swift response by the Welsh Government to provide immediate substantial support for businesses that are being forced to endure devastating new restrictions and closures over the holiday period.’
• But it says ‘at this time of year, when businesses can trade up to 25 per cent of annual turnover- and above- the new restrictions are a massive blow to hospitality in Wales as well as our loyal customers and workforce as we head towards Christmas and the New Year.’
• It says ‘we feel isolated and feel we are unjustly bearing the brunt of Government actions when retail and other areas are allowed to trade relatively unhindered.’ It adds ‘we are still waiting for the full information on the restrictions and package [of support] and there is still a long way to do before the sector is anywhere near to being out of the woods.’
• The BBPA says the ruling ‘means that all 3,227 pubs in Wales will be severely hit throughout December, the most important trading time of the year. 2,151 community pubs that are drinks led will be forced to close whilst 1,076 pubs that are more food led will be rendered unviable by the ban on alcohol sales and 6pm curfew. Possible takeaway sales will not go anywhere near compensating for this huge loss of business.
• CEO Emma McClarkin says this ‘will destroy the sector. Evenings are the key trading period for pubs and enjoying a beer, with or without a meal, is one of life’s simple pleasures – forcing pubs to close at 6pm and banning alcohol sales all but closes them down in reality.’
• The BBPA welcomes the support in England & says in England ‘the Prime Minister needs to now deliver significantly enhanced financial support to pubs and the wider supply chain in England, if they are going to survive the dire impact of the new tighter tiering restrictions coming into place this week.’
• Representing the beer suppliers side of the trade, SIBA says ‘the decision to ban the sale of alcohol in hospitality from Friday will be the final blow for small breweries and pubs in Wales who rely on the Christmas trading period for a substantial percentage of their annual income. There is no evidence to justify these new targeted restrictions.’
• It says ‘pubs represent more than 80% of all sales for Welsh small breweries and we have seen throughout the Covid crisis that these small businesses have been left out in the cold and not had access to the level of financial support they need. Without real, targeted support many small breweries will not survive the winter period.’
• The Telegraph quotes industry leaders as saying the industry has been ‘singled out’ for harsh treatment in the run up to Christmas.
Supply chain issues:
• CGA and Prestige Purchasing have conducted research that suggests that Covid-19-related disruption has caused supply difficulties for more than nine in ten hospitality operators since they reopened in July.
• The survey ‘shows that just 8% of operators have escaped supply challenges since the end of the first national lockdown, while only 9% have not encountered any delays. Nearly three quarters (73%) think service levels have decreased since July, while only 5% think they have improved. The findings reflect the complex challenges faced throughout the hospitality supply chain, including widely fluctuating demand as a result of local lockdowns and new restrictions.’
• Prestige says ‘we should not view these problems as a failure within our supply community. They simply highlight the enormous challenges that the pandemic has brought to the whole value chain. The frequent and sudden changes to social restrictions and the complexity of regionality have reduced demand planning to educated guesswork.’
• CGA adds ‘these figures show the massive impact of the pandemic and lockdowns across the hospitality supply chain. Suppliers are working in exceptionally difficult circumstances, and many operators have been grateful for their support and hard work in responding to issues that are completely beyond their control.’
• The Commons votes today on the PM’s proposals to put England into Tiers tomorrow.
• UKH has called on MPs to support the hospitality industry.
• S4labour reports that through lockdown 2.0, hospitality sales in sites that were trading in England were 80% down on pre lockdown levels and 96.5% down year on year. It says ‘it should be noted that on top of these figures, 32% of sites did not trade at all, so the actual cost to hospitality during the lockdown was 94% of revenue.’
• November isn’t a big month, but that’s a large hit. S4labour reports ‘takeaway sales were low during lockdown, indicating that for most sites it was not feasible or profitable to pivot business models.’
• On a brighter note, it says ‘sales figures from the few days before lockdown indicate that consumer confidence in hospitality is high, and pent up demand will mean that the few days coming out of lockdown are likely to be busy.’
• S4labour CEO Alastair Scott says ‘most operators do not have the infrastructure or the business models to run takeaway sales at a profit and the government cannot expect the industry to rely on such sales for survival. As lockdown-esque restrictions linger further into December, it is not looking promising for an industry that relies on Christmas trading to get through the next year.’
• Industry analyst Peter Backman asks of the EOTHO scheme ‘did it meet its objectives?”. The aim was to ‘boost spending in restaurants, and the Chancellor enhanced that by saying that its objective was to boost the sector back into long-term growth.’
• Sales did rise in August, but subsequent restrictions cumulated through September, October and November and culminated in a lockdown and closure. A long term boost is far from proven. It did not extend to alcohol.
• Pernod Ricard CEO Alexandre Ricard has said that the group has beaten sales expectations because of its “agility, resilience and determination.”
• DoorDash could raise up to $2.8bn in new money via its IPO. The company is being valued at around $27bn.
• Shops will be able to open for 24hrs solid in the run up to Christmas says communities secretary Robert Jenrick. Pubs & restaurants, not so much.
• Vegan pitta restaurant chain What the Pitta is to open a site in Manchester early next year.
• Arcadia Group yesterday collapsed into administration.
Approach to Caffe Nero:
• The Issa brothers, who recently purchased ASDA, are reported to have made a bid for Caffe Nero. Sky reports that they made the offer to the founder and controlling shareholder, Gerry Ford, over the weekend. Caffè Nero commented late yesterday to confirm the approach.
• It says it had indeed received an ‘unsolicited non-binding offer for the shares of The Nero Group Limited’. It adds ‘it is the Directors view that this party’s clear intention is to disrupt the CVA process currently underway as a precursor to opportunistically acquiring the Company at a later date. The highly conditional proposal purports to provide for payment in full of landlord rent arrears but otherwise the terms of the CVA would remain as originally proposed.’
• Nero says its directors are ‘fully aware of their responsibility to maximise recovery to creditors’ but says the uncertainty attached to the approach means they do not believe that it would help creditors ‘or…be in the long term interests of the Group.’ It says the approach ‘has been made without any understanding of Caffe Nero’s financial and trading position’ and adds that, if pursued, the approach would lead to delays in the current process.
• Nero says it ‘has committed to modify the CVA proposal so that in the event of a sale of the Group to this third party within the next six months, compromised landlords will have their arrears as of today’s date paid in full.’
HOTELS & LEISURE TRAVEL:
• The Canary Islands are reported set to accept (much cheaper) antigen tests to prove visitors do not have Covid-19.
• EasyJet is partnering with two testing firms to offer cut-price Covid tests ahead of travel.
• Unite union members at Heathrow are due to strike today.
• Travelodge is reported to have kept hotels generating more than 98% of its 2019 U.K. hotel EBITDA post its CVA.
• STR reports that US hotels saw occupancy down 33% year on year in the week to 21 November. Rate is down 29% and REVPAR is 52% lower.
• Hostelworld has confirmed that TJ Kelly, Chief Financial Officer, will resign from the roles of Executive Director and Chief Financial Officer effective today. He will remain with the Company until 31st December 2020 to ensure an orderly handover.
• Sportech has announced that it has entered into a conditional agreement to sell its Global Tote business to Betmakers Technology Group for a total cash consideration of £30.9 million, subject to an adjustment to reflect the level of working capital in and the valuation of the US defined benefit pension liability attributable to the Global Tote business at completion of the Disposal.
• Sportech says ‘we previously set out that one of the Group’s transformation objectives included evaluating and executing material corporate opportunities which deliver tangible investor returns. The Board believe this transaction very much achieves that objective.’
• Q3 smartphone sales are said to be 5.7% down year on year.
• Newcastle game company Silent Games has been acquired by Swedish company Amplifier Game for an undisclosed sum.
FINANCE & MARKETS:
• Job search company Indeed has reported that London has seen the biggest fall in job opportunities among Europe’s largest cities.
• Sterling higher at $1.3365 and €1.1174. Oil up at $47.47. UK 10yr gilt yield up 2bps at 0.31%. World markets down yesterday but steady today. London set to open around level.
RETAIL WITH NICK BUBB:
Today’s News: The trading update with today’s Topps Tiles finals (for y/e Sept) is very strong, with LFL sales just under 20% up over the last 8 weeks and the statement is headlined “A year of challenge and change – emerging stronger and refreshed”, notwithstanding the big £10m loss for the year. The update from the small Online womenswear retailer Sosandar with its interims is less clear, with sales over the last 3 months apparently only 17% up on last year, albeit with a big reduction in marketing spend. We can’t see anything more yet on Frasers’ interest in the bankrupt Arcadia or JD Sports’ waning interest in the bankrupt Debenhams, but, bizarrely, there has been another Pets at Home announcement, this time to flag the disposal of the 5 specialist referral vet practices to the Linnaeus Group for a useful £100m.
News Flow This Week: As we move on into December, the latest quarterly FTSE index review is announced tomorrow evening. The B&M EGM is on Thursday, along with the Signet Q3 and the Kroger Q3 results in the US, whilst the ABF/Primark AGM update is on Friday.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 24 Nov 20 Compass Group FY numbers
• 26 Nov 20 Fuller’s H1 numbers
• 26 Nov 20 Britvic FY numbers
• 26 Nov 20 New River H1 numbers
• 2 Dec 20 Loungers H1 results
• 2 Dec 20 Stock Spirits FY numbers
• 4 Dec 20 Shepherd Neame AGM
• 8 Dec 20 Vianet H1 numbers
• 10 Dec 20 Marston’s FY results
• 10 Dec 20 On the Beach FY results
• Est 15 Dec 20 Fulham Shore H1 numbers
• 17 Dec 20 Revolution FY numbers
• 17 Dec 20 JD Wetherspoon AGM
• 22 Dec 20 Revolution AGM
• 12 Jan 21 Nichols FY trading update
• 20 Jan 21 JD Wetherspoon H1 update
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