Langton Capital – 2021-01-26 – PREMIUM – Grants, re-opening spec, footfall, CPC, BAG, DPEU, SAGA, Yo! etc.:
Grants, re-opening spec, footfall, CPC, BAG, DPEU, SAGA, Yo! etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Officious scare tactics. Aka cut and pasted legalese nonsense stuck into emails for the purposes of intimidation. See also under ‘officious Council correspondence when trying to get a grant’ in Premium Content below.
Langton lost a cottage holiday to Lockdown 2.0 in November.
We offered to roll it to November 2021.
This was accepted.
But we were asked, by the agency that would, by November 2021, have had hold of our money for nearly 20 months, for an extra £42. It was at this point that we began to have doubts.
‘Why the extra forty-two quid?’ we asked.
‘Cleaning costs, blah, blah,’ was the response.
But that’s a 10% surcharge, we pointed out. For holding onto our money for nearly two years. And it takes the price of a weekend to almost five hundred quid. Give us our money back.
No, the agency said. It added ‘you are not entitled to anything according to The Law Reform (frustrated contracts) Act 1943. However, as a gesture of good will we are offering everyone a change of dates so that they do not lose their money.’
Right. Well. That was clipped and pasted from Google if anything ever was and, after a bit of argy-bargy, we got the money back. Still, it left all parties feeling a little deflated. But I suppose deflated with five hundred quid is better than deflated without. On to the news:
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REAL WORLD COMMENTS. HAVE MONEY, KEEP MONEY:
Below something of a case study. Please feel free to let us know your experiences re grant and insurance claims, reopening issues etc.
• In the real world, money is like Velcro, it sticks wherever it first touches and struggles to move onto the next man (or woman).
• But bills are coated in Teflon. They scoot straight onto the next person as quickly as possible.
• So, it’s no real surprise that councils, who have been supplied with cash in order to help struggling businesses are, where possible, keeping a hold of it for as long as possible.
• A company with a number of outlets in several Midlands city centres has seen footfall drop materially.
• Though not forced to close by legislation, the decision to remain open (and sell product to, well, virtually nobody) may not be the right one.
• The operator says ‘although the Councils are meant to be conduits for these Grant programs, many of the councils – and possibly a majority – are holding back or stalling.’
• Charlie Munger said: ‘show me the incentives [in this case the chance to hold onto some money for a protracted period] and I’ll show you the outcome.’
• The operator says ‘of course, this is entirely contrary to the spirit and intent of the COVID Grant programs.’
Naming a few names:
• Solihull has, reportedly, been good.
• Nottingham has let go of £500. There are no big figures missing there. Yes, £500.
• Don’t spend it all at once, they might have added.
• Peterborough City Council has been pretty ghastly. It writes: ‘as the unit in Queensgate shopping Centre is a takeaway establishment, you are not entitled to the grant, as takeaway services have not been ordered to close.’
• It adds ’there is no statutory route of appeal [do they mean ‘right of appeal’?] in respect of this decision, this means your only recourse…is by way of an application to the High Court for Judicial Review’.
• This is no doubt meant to sound official, officious and expensive. And, in that if not in customer relations management, the email succeeds splendidly.
• It does open the council up to the accusation that its feather bedded, secure jobsworths are determining the future of entrepreneurial job creators.
• And indeed, they are. The Peterborough Telegraph points out that ‘businesses FORCED to close can apply for local restrictions grant funding’ and other relief whilst ‘businesses which have CHOSEN to close can apply for discretionary funding’ only.
• Similarly, ‘businesses which have STAYED OPEN, but have suffered a reduced income can apply for discretionary Funding.’
• This is likely to be legally correct. But it makes a mockery of legislation if an empty business that wasn’t forced to close finds itself in a worse position than one that was told officially to shut.
• Semi-official largesse is ‘available on a ‘first come, first served’ basis in two phases. Phase one is for November 2020 to March 2021 and phase two from April 2021 to March 2022.’
• We are where we are but the council, which is having its moment in the sun, might just as well be holding a handkerchief to its nose whilst throwing crusts to the poor.
PUBS & RESTAURANTS:
Speculation on un-lockdown:
• PM Boris Johnson has fuelled speculation regarding the lifting of restrictions saying that some easing of the rules may be possible as soon as the middle of February. That’s only three weeks away.
• Premium comment. The $64,000 question is whether this is policy or whether it is the PM, perhaps understandably, simply saying things that will cheer people up. Mr Johnson says ‘the one to four groups are going to be vaccinated by 15 February, before then we will be looking at the potential of relaxing some measures.’
Other Covid news:
• Research from Springboard has found that the number of shoppers heading to retail destinations across the UK has increased by 9% on last week. Insights director, Diane Wehrle commented: ‘Despite rain and snow last week across much of the UK, footfall rose in retail destinations last week from the week before for the first time in five weeks; perhaps providing the first indications of lockdown fatigue emerging once again’.
• Online clothes retailer, Boohoo, has bought the Debenhams brands and website for £55m, avoiding the purchase of the firm’s remaining 118 High Street stores.
• Premium comment: Springboard is alluding, perhaps, to lockdown fatigue and the desire, even the need, for people to get out of the house.
• This would be helpful if cafes, sandwich shops, pubs & restaurants were open. But the latter two categories are not and they will not benefit from an uptick in footfall. Where takeaway operators are allowed to open, they will struggle to get their staff levels right if footfall comes and goes.
• The Debenhams news, though not unexpected, is negative in that Boohoo will keep the online customers and try to migrate other customers, who would have ventured onto the High Street and into Debenhams’ shops, online too. This is not helpful for footfall going forward.
• The government has increased English council’s powers to close hospitality outlets not following Covid-19 regulations, until 17 July.
Company & other news:
• City Pub Group points to opportunities.
• The City Pub Group has updated on trading for the 52-week period to 27 December 2020 saying that ‘actions to enhance and improve the business during the pandemic will enable the Group to rapidly take advantage of pent-up consumer demand and opportunities that will undoubtedly emerge.’
• It says its cash burn has been reduced to c.£300k per month (excluding all Government grants, with the exception of furlough) and it is ‘ready for reopening.’ The company says it has ‘ample liquidity into 2022 with £5m of further liquidity credit approved from the Group’s bankers under CLBILS.’
• Group revenue in 2020 was £25.7m in 2020, compared to £60.0m in 2019, representing a 57% decrease. The group says ‘considerable progress has been made with our landlords and, on the whole, they have been willing to reach sensible compromises.’ The company is pursuing insurance claims and ‘the Board will update shareholders with progress once settlement has been reached.’
• City says it has streamlined its supply chain and cut costs. Clive Watson, Chairman, says ‘2020 has been a very challenging year, but decisions made since March 2020 with regards to the fundraising, cost control, streamlining of the business, and strengthening of the Board has resulted in a very strong balance sheet, good levels of liquidity, a strengthening of our business model, a more focussed proposition and most importantly, pure determination to go out there and do the business once the pubs reopen.’
• DP Eurasia N.V. has updated on full year trading to end-December saying that the number of stores rose by 6 to 771 and the company generated revenue of 1,570m TRY, up by 14.6% on last year. CEO Aslan Saranga comments ‘the strong trading environment continued in Turkey through the last two months of the year.’
• He says ‘there has also been a Covid-19 inspired shift to home delivery across all consumer sectors, which has brought us new customers. Provided that we give a good service and provide an appealing product, we hope to grow customer loyalty in a post Covid-19 market.’
• Saranga says ‘the recovery in Russia has also been continuing where our November/December like-for-like growth rate has been -1.9%, in line with our October performance.’ The CEO adds ‘the strong trading in Turkey has resulted in very encouraging interest from both existing and new franchisees. In 2020, we successfully opened 33 new stores in total, more than offsetting the 27 Covid-19 related store closures across Turkey and Russia.’
• The company concludes ‘whilst the Board is conscious of the risks posed by the on-going uncertainty due to the pandemic, these trading results give us confidence regarding our market positioning and the prospects for our business in the long term.’ The group is considering a joint listing. It could list its shares in Turkey as well as in London.
• AG Barr. Trading got tougher in December.
• A.G. BARR has updated on full year trading (to 24 January 2021) saying that ‘revenue for the year is expected to be c. £227m (2019/20: £255.7m), marginally ahead of the revised guidance issued in July 2020 and reconfirmed in the interim results announced in September 2020.’
• Barr says the ‘operating margin before exceptional items across the full financial year is expected to be in line with the prior year leading to a profit before tax and exceptional items performance ahead of market expectations.’ It says ‘in the first 4 months of the second half trading was at the upper end of our scenario plans. However, COVID-19 developments since early December 2020, in particular increased social restrictions across the UK and the entry into full lockdown in January 2021, are now having an impact, most notably in the hospitality and “drink now” categories.’
• CEO Roger White says ‘within a volatile environment our sites have remained safe and operational.’ He says ‘I am pleased with the performance we have delivered against a very difficult backdrop which further demonstrates the underlying resilience of our people, business and brands.’ Barr concludes ‘we expect the months ahead to be challenging for everyone however I remain confident in our ability to navigate these very uncertain times.’
• YO! Sushi has raised £13m in order to see it through the pandemic. CEO of YO! Sushi, Richard Hodgson commented: ‘When lots of restaurants and kiosks are closed and your revenue has all but disappeared, there is still a cost base and liabilities to pay so we needed to inject that money’.
• The hospitality charity Only A Pavement Away has entered into a partnership with Zonal, with the founder of Only a Pavement Away commenting: ‘For over forty years Zonal has been a true pioneer within hospitality and a real asset to all those they have worked alongside. As we have celebrated a significant number of achievements over the past year at Only A Pavement Away –including facilitating over £80,000 worth of food donations since Christmas – partnering with Zonal felt like a no brainer and we couldn’t think of anyone better suited to help us as we expand our support for hospitality into Scotland’.
• The BBC has reported that Mastercard is set to raise the fees it charges merchants when UK cardholders buy goods and services from the EU by fivefold.
• There are a lot of IPOs in the pipeline, some of them very large. Dr Marten, great for ‘fill your boots’ and ‘stomps to the market’ puns, is said to be valued at over £3bn. Hard to believe that Moonpig is worth over a billion and heaven knows what Deliveroo is going to value itself at.
• Premium comment: Permira recons to have six-times its money in the period since 2013. Really? These things, IPOs that is, have a habit of getting away but some seem to struggle. You can, as we remember telling clients in the past, price these things low, and they never look back, or high, and they can never look forward.
• It’s tempting to take every penny but, if the vendors are staying on the share register, it would arguably be more sensible to leave some value on the table for tomorrow. We know, however, that these sorts of comments fall of deaf ears.
HOTELS & LEISURE TRAVEL:
• Quarantine hotels are likely to be announced this week as a part of the government’s plans to limit the spread of Covid-10. Travellers will have to pay the costs. This will be a bit of a dampener on travel.
• Business Travel News suggests that ‘even stricter measures are under consideration, including a blanket ban on arrivals and departures.’
• Saga has updated on trading saying that the group will ‘report full-year underlying profit before tax, despite COVID-19 challenges.’ It says it is in a ‘secure financial position as a result of actions taken over the last 12 months.’
• Re the holiday side of the business, Saga says its ‘travel business [is] well positioned to resume operations, focused on customer retention and controlling costs.’ It says ‘the Travel business has remained suspended and we have focused on customer retention, keeping costs under control and ensuring that both our businesses are ready for return to service.’ The company concludes ‘despite the impact of the pandemic, we remain confident that we will unlock the potential of Saga, creating significant long-term value for all our investors.’
• STR reports that Europe’s hotel industry reported all-time lows in occupancy and revenue per available room (RevPAR), in the year to end-December. It says occupancy was 33% (down 54% on last year), room rates were down 18% and REVPAR was some 63% down on last year.
• STR says that 2020 UK hotel occupancy was down 48% on last year with room rates down by 24%. REVPAR was off by 60%. It says ‘amid continued COVID-19 lockdowns around the country, December performance was down from the prior month, and the country’s 26.1% occupancy level was its lowest since May.’
• New York Governor Andrew Cuomo is considering a new tax on vacation rental properties that could hit Airbnb reports the Wall St Journal.
• STR reports that extended-stay hotels in the U.S. have performed better than the hotel industry overall in 2020 ‘giving hotel brands the confidence to increase that product offering in their portfolios.’
• Hays Travel is to close 89 shops as a part of its store consolidation measures.
• Carnival Cruise Line has pushed back the date for a number of its ships first sailings. The operator is planning a phased return to operations in 2021.
• Travel agency Skylink Travel & Tours has ceased trading.
• The Telegraph reports that the UK government will face an £80m bill to support Eurostar.
• Playtech yesterday confirmed that it is ‘in exclusive discussions regarding the possible sale of its Financials division (Finalto) to a management consortium backed by Barinboim Group, Leumi Partners Limited, The Phoenix Insurance Company Limited and Menora Mivtachim Insurance Limited.’ It says ‘the cash offer from the Consortium is up to US$200 million, of which US$170 million is payable on completion. Approximately US$110 million of capital required to run the business will be transferred with the business upon any sale.’
• Playtech says as it ‘has announced previously, including in its trading update on 12 January 2021, it is a strategic focus of the Company to simplify its business and dispose of non-core assets, and as such it has been continuing to evaluate all options for Finalto. Whilst discussions are progressing, there can be no certainty that any transaction will be forthcoming nor on what terms it would occur.’ It says ‘a further announcement will be made if and when appropriate.’
FINANCE & MARKETS:
• The Telegraph reports that half of the trucks crossing the Channel are empty as they have not been able to load up for one side of the journey or the other. This will put upward pressure on prices.
• Sterling lower at $1.3642 and €1.1249. Oil little changed at $55.46. UK 10yr gilt yield off 4bps at 0.26%. World markets mostly lower yesterday with London set to open up around 5pts.
RETAIL WITH NICK BUBB:
Today’s News: We were just musing about how the busy JD Sports boss Peter Cowgill finds the time to also act as the non-exec Chairman of the troubled fashion retailer QUIZ (which has announced a grim-looking set of interims today), when up popped a brief statement from JD Sports, in “response to recent press speculation”, confirming that “it is exploring additional funding options with a view to increasing its flexibility to invest in future strategic opportunities and that this may involve a non pre-emptive equity placing”. It turns out that the aforementioned press speculation came from none other than the notoriously well-informed Mark Kleinman of Sky News, who has flagged that JD is looking at raising up to £400m to rebuild the cash resources run down by its recent US acquisition of Shoe Palace. The irony is that the deals that JD has been working on, ranging from looking at
This Week’s News: As January draws inexorably to a close, there are still a few retailers left to hear from this week: tomorrow brings the ScS update, whilst the Joules interims are on Thursday. Over in the US, Apple report their Q1 results after hours tomorrow night.