Langton Capital – 2021-01-06 – PREMIUM – All in this together, financial support, Gregg’s, TUI, Carnival etc.:
All in this together, financial support, Gregg’s, TUI, Carnival etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
As we once again forego our little treats, it worth remembering that those days are here, the tomorrows, the days on which you said you would eat no chocolate, crisps or sweets. You wouldn’t drink beer and you’d take more exercise.
Well tomorrow is today, welcome to January which is, let’s face it, a pretty awful month hence, with the above in mind, Langton was considering launching one of those online, House of Commons petitions requesting that we jigger around with the calendar.
It’s been done before, after all, and we suggest that January be docked 18dys and that the excess be shared out, four to February, one each to the 31dy months and two to the 30dy months meaning that we would have one month of 13dys, hardly an auspicious length, and eleven of thirty-two days.
Nice and neat. Would appeal to those of us on the spectrum. We wouldn’t have to be on the wagon for half as long and, given where my birthday falls, I wouldn’t get any older so what’s not to like? Bad stuff? Easy, say it doesn’t exist and on to the news:
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ALL IN THIS TOGETHER?
Were we? Are we? Talk’s cheap but, with much more of the economy now pretty much locked down, the incentive to find a solution has been increased (or at least levelled somewhat) 6 Jan 2021:
• Lockdown breaches, cronyism and closures of just parts of the economy have meant that the financial & social costs of lockdown have not been equally apportioned.
• This is highly visible and, as we are all human beings, irksome. See HERE for what happens if you treat ‘people’ unfairly
The current situation:
• Some people are doing rather well out of this. There is often a similar backlash against profiteers during wartime
• In a non-wartime economy, out of sight is out of mind.
• With the best will in the world, the distress of the hospitality sector isn’t of much concern to those not directly impacted.
• A fully employed builder or a food-retailer may never have been so well off.
• They still won’t close under Lockdown 3.0 but, as closures have been extended to non-essential retail, to personal service companies (such as hairdressers) and people staying at home will impact transport providers, the pain is being shared more widely
What this means?
• The cost of supporting the economy has risen. There is more urgency injected into the system.
• But that urgency must be translated into something more useful.
• Hence, the speed and competence with which the vaccine is rolled out is now utterly critical.
FEEDBACK FOR REQUEST – THE OUTLOOK FOR 2021:
Please drop us a line & let us know your views. Thanks to contributors to date. In light of what might be a staggered return to work, we are keeping this open for a couple more days. See yesterday or Monday for introductory comments.
PUBS & RESTAURANTS:
Financial support for the industry during Lockdown 3.0:
• The Treasury yesterday said that it would make £4.6 billion of taxpayers’ money available ‘in new lockdown grants to support businesses and protect jobs’
• It says: ‘businesses in the retail, hospitality and leisure sectors are to receive a one-off grant worth up to £9,000.’ The max figure is per property for units with a rateable value of over £51k. Smaller units will receive either £6k or £4k. There will be a further £594m discretionary fund set up to support impacted businesses.
• Chancellor Rishi Sunak says that his boss, Boris Johnson, has ‘acted decisively’.
• The Treasury says ‘the cash is provided on a per-property basis to support businesses through the latest restrictions, and is expected to benefit over 600,000 business properties, worth £4 billion in total across all nations of the UK.’
• Mr Sunak says ‘this will help businesses to get through the months ahead – and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen.’
Industry & trade response:
• UKH says ‘while this announcement is most welcome, make no mistake that this is only a sticking plaster for immediate ills.’ It says ‘it is not enough to even cover the costs of many businesses and certainly will not underpin longer-term business viability for our sector.’
• The British Beer and Pub Association has welcomed the government announcement that pub businesses are to receive a one-off grant worth up to £9k per property to aid them through the latest lockdown. Emma McClarkin, Chief Executive of the BBPA commented: ‘We welcome this much-needed support from the Chancellor, worth £277 million to UK pubs. It is the lifeline we have been campaigning for to save our pubs and help them survive through to the Spring’.
Specific issues re Lockdown 3.0:
• The ban on licensed pubs & restaurants selling takeaway alcohol (whilst supermarkets remain free to do so) is causing some concern. CAMRA has tweeted ‘ask your MP to back our campaign to treat pubs in England fairly and let them sell beer & cider to take-away & drink at home during this new lockdown – just like supermarkets and off-licences can.’
• Chief Executive of SIBA, James Calder has commented on the latest lockdown restrictions: ‘This is a simply the next blow after months of struggle for England’s community pubs and small breweries. For the first time in lockdown the Government intends to ban takeaway alcohol sales which have been a lifeline to these small businesses’.
• Tryanuary, the volunteer-led online community that encourages consumers to continue supporting small, independent beer businesses during January, has extended its operations until the end of the current lockdown.
• Following the announcement of the new lockdown UK consumers flooded supermarkets online, causing some problems and queues. Ocado instituted a virtual queuing system, which had more than 5,300 people in the queue at one stage.
Company & other news:
• Gregg’s has updated on full year and Q4 trading saying that is should report total sales of around £811m (2019: £1,168m). It says that ‘fourth quarter company-managed shop like-for-like sales averaged 81.1% of the equivalent 2019 level.’ Delivery sales made up 5.5% of the total.
• Gregg’s opened 28 net new shops in the financial year 2020 and had 2,078 shops in the estate as at 2 January 2021. The group had year-end net cash of £37m. The loss for the year is ‘expected to be up to £15m.’
• Gregg’s CEO Roger Whiteside comments ‘whilst the impact of COVID-19 has been enormous, we have established working practices that allow us to provide takeaway food services under the different levels of restrictions we have experienced. The breadth of Greggs’ customer base provides ongoing demand for our services which, combined with our diverse geographical spread, has demonstrated the resilience of our business.’
• Mr Whiteside says ‘with customers spending more time at home we have successfully developed our partnership with Just Eat to offer delivery services and have also seen strong sales through our longstanding partnership with Iceland, offering our products for home baking. We have resumed opening new shops where we see good opportunities, with those sites accessed by car performing particularly well.’
• The company adds ‘we have taken action to position Greggs to withstand further short-term shocks and are optimistic about our prospects for growth once social restrictions are lifted.’ It says ‘looking ahead, the significant uncertainty over the duration of social restrictions, along with the impact of higher unemployment levels, makes it difficult to predict performance. However, we do not expect that profits will return to pre-COVID levels until 2022 at the earliest.’
• ITV has reported that the future of Brain’s beers is ‘in doubt.’ It says ‘no buyer has yet been found for the brewery and a consultation on redundancies is due to begin on Tuesday. It is understood 80 jobs are under threat.’
• It seems clear that discretionary income is flooding away from traditional retailers and hospitality units and into the coffers of the supermarkets, Amazon, Netflix, Zoom and other tech companies not heavily represented on any list of UK tax payers.
• German-owned Aldi UK stated that sales increased 10.6% y-o-y during the four weeks to Dec 24.
• Financial advisory firm Sapient has pointed out that it advised Marston’s PLC on its recently announced transaction involving 156 pubs owned by SA Brain & Co. It says ‘in order to address Brains’ immediate funding requirements, Marston’s entered into collaborative discussions with the company with a view to preserving the freehold capital value for its stakeholders, protecting Brains’ strong, heritage brand name and, importantly, safeguarding the jobs of the pub teams within the business.’
• Sapient points out ‘the [capital light] acquisition is in line with Marston’s stated strategy to be a focused pub operator following its disposal of its brewing assets earlier last year.’ It adds that ‘Marston’s sees opportunities to grow earnings in the medium term through conversion to franchise and additional investment opportunities in the estate.’
• Business Travel News (BTN) opines that ‘coronavirus mutations have made 2021 dawn as chaotically and dismally for business travel as 2020 ended.’ On a more positive note, it says ‘at least there is light at the end of the tunnel now that vaccination is under way.’
• BTN says the hurdles to growth and the re-emergence of business travel ‘may prove greater and slower respectively than many would hope. Unfettered travel will depend not only on when travellers themselves get vaccinated but when the rest of the world is willing to welcome them again.’
Langton comment on Pub & Restaurant news:
• Well, this is all Langton comment to some extent, but we would add a few bits & pieces for inclusion in the premium email:
• The industry is:
o A) angry and upset that it is seen as both culpable in the spread of Covid-19 and expendable in terms of who makes how big a financial sacrifice.
o B) grateful for financial support but frustrated that it is being drip fed on a month-by-month basis. This makes planning very hard.
• Sore points.
• The idea that ‘we are all in this together’ has become somewhat ragged in the light of lockdown breaches, allegations of cronyism and the massive financial windfalls apparently handed to largely overseas online retailers, streaming companies and delivery operators
• Behind the headlines:
• Don’t forget the supply chain. How will real-ale brewers cope? The product doesn’t keep & can’t be instantly produced. Ditto lettuce growers. Admittedly, they’re in Holland but still…
• And how about the distributors? They can’t instantly switch to the off-trade.
• And what about staff retention? Though the mindset may be different, staff may decide Lidl offers them more certainty of income and career progression than does M&B, JDW or even Whitbread.
HOTELS & LEISURE TRAVEL:
• Tui and Thomas Cook have cancelled holidays due to the new national lockdown, with both companies announcing plans to reach out to customers to discuss options.
• TUI shareholders have approved a package of financial support measures worth €1.8 billion. The measures will see Germany’s Economic Support Fund (WSF) to take a ‘blocking stake’ of 25% plus one share in the group. This was the third aid package put in place since the coronavirus pandemic struck the industry.
• Visitors to the UK from abroad could soon be required to prove Covid negativity per the Dept for Transport. Sensible though this is, it could put a further dampener on the inbound tourism market. The Dept says ‘additional measures, including testing before departure, will help keep the importation of new cases to an absolute minimum.’
• Carnival has announced that it is extending its ‘rolling pause in operations in New Zealand to departures on and before 25 April, 2021 as the cruise line and the wider industry continue to work with government and public health authorities on the appropriate time to restart sailing.’ The company says ‘we know that much better days lie ahead and we remain positive about the resumption of cruising. While we’ve paused operations, P&O Cruises together with the wider industry has been using the time wisely to plan for cruising’s return.’
• Travel Industry associations have called on the government to support the sector during the national lockdown. Although travel is permitted under the new rules, restrictions due to the new variant of the Covid virus means business travel is very limited, particularly in Europe.
• Best Western has offered to turn its hotels into ‘cottage hospitals’ which could be used for assessments, scans or post-Covid recovery.
• The former ‘luxury boutique’ hotel at 41-43 Beaufort Gardens near Harrods has been converted into a new £91m residential development, comprising nine lateral apartments.
• Train services are expected to be reduced by around 50-60% of normal services during the national lockdown.
• MPs have been told that a decision may be made on the future of music festivals later this month. These events are “rapidly approaching the determination point.” The betting is that they will be cancelled as there are logistical and organisational problems such as how can they source insurance and what certainty would there be re sales and bookings. Social distancing would not work at a festival.
• Alibaba shuts down Xiami, its 12-year-old music streaming app, as Tencent now dominates the market, controlling as much as 75% of China’s music streaming market.
• Twitter has acquired social broadcasting app Breaker, with Breaker’s team set to join Twitter to help ‘improve the health of the public conversation’.
FINANCE & MARKETS:
• Honda has temporarily halted production in Swindon due to “global supply delays”.
• New car registrations fell to their lowest level in almost 30yrs last year per the SMMT.
• The BCC says a double-dip recession is now likely.
• Sterling mixed at $1.3614 and €1.1066. Oil higher at $53.95. UK 10yr gilt yield up 4bps at 0.21%. World markets mixed to better with London set to open up around 74pts.
RETAIL WITH NICK BUBB:
Greggs: A year ago, Greggs was riding high, but the pandemic swept away much of its business and it has reported today that it will suffer a £15m loss over the 53 weeks to Jan 2nd, compared to a hefty £114m profit in 2019. The hopes of a strong trading recovery in 2021, on the back of the vaccine roll-out, has seen its share price recover strongly in Q4, but there is little sign of hope in today’s update, with LFL sales over the last 5 weeks down by 14% (and down by 19% over Q4). Looking ahead, all the company can say is that “the significant uncertainty over the duration of social restrictions, along with the impact of higher unemployment levels, makes it difficult to predict performance. However, we do not expect that profits will return to pre-COVID levels until 2022 at the earliest”.
Topps Tiles: The Q4 update from Topps Tiles today is much brighter, with LFL sales nearly 20% up, thanks to customer interest in home-improvement projects, but there is a sting in the tail, with the company flagging that, although its stores remain open during the lockdown “under the current lockdown rules for England we are currently being advised to close our tile aisles in stores to prevent browsing. Customers can transact at the trade counter or through our online channel with direct delivery or click & collect”.
Grocery Market Share Watch: The latest monthly Nielsen grocery market share figures (for the 4 weeks to Dec 26th) come out at c8am and will cover broadly the same period as the rival survey from Kantar yesterday. The Kantar grocery sales figures (for the 4 weeks to Dec 27th) were up by 10.8% on an overall “Till Roll” basis, lower than the 13.8% growth in the previous period, albeit the growth was still flattered by the collapse in both the “on-the-go” food market and in the “food away from the home” market. The food price inflation rate edged down from 1.4% to 1.3%. On a pure “Grocery” basis (excluding Non-Food), overall Kantar sales were as much as 13.6% up, with Aldi/Lidl still lagging a bit with growth of “only” 11.6% combined (although Lidl massively outperformed Aldi…). Morrisons saw 14.1% gross sales growth on this basis, whilst Sainsbury was up 13.8%, Tesco was 14.3% up and Asda
This Week’s News: Tomorrow brings the B&M Q3 update, along with the Walgreen Boots Q1 in the US, whilst the M&S Q3 update is on Friday.