Langton Capital – 2021-02-12 – PREMIUM – Marston’s, Jet2, staycations, Pepsi, Disney, MGM & other:
Marston’s, Jet2, staycations, Pepsi, Disney, MGM & other:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Well, we’ve made it to Friday.
Which is a relief because there’s been plenty to do. Move furniture around, make sure the coffee pot stays hot, gaze at the bird feeder for a couple of hours at a time, even get dressed occasionally to make the odd Zoom call etc and, after all of that, we could do with a rest.
And there’s a bit more of it to come. 2020, That was Your Life and the first half of 2021 looks somewhat similar. On to the news:
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See our comments on staycations under Holidays & Leisure Travel below.
PUBS & RESTAURANTS:
• See comments on staycations below.
• The MA reports that many operators ‘have been left disappointed’ after initially hoping that they were eligible for an insurance pay-out due to loss of trade over the Covid-19 pandemic.
• A landmark court ruling had led many to believe that they would be eligible for a payment, but the trial case brought by the Financial Conduct Authority only looked at ambiguous wording and did not seek to impose a liability if policies did not intend there to be one.
• The MA quotes hospitality insurance specialist Steven Swift of Sector Associates as saying the ruling ‘was supposed to have provided a lot of clarity, I think it has provided a little more confusion if I’m being honest. I think in the mainstream media how it was reported led people to believe they were automatically getting paid which was plainly incorrect.’
• The BBC runs a story saying that not everyone has been impacted equally by the coronavirus crisis. That is plainly correct. Though the story concerns BAME citizens and poorer working adults, the same inequality is apparent across sectors. Hospitality has been badly impacted whilst the same cannot be said for most of the public sector (including MPs).
• The BBC quotes a survey saying that a quarter of the UK adult population now have ‘low financial resilience’. Meanwhile, there is evidence that the savings ratio has risen for other consumers.
• The Wine Drinkers UK, a pressure group representing the interests of those who like a glass of wine or two, has called for the Chancellor to help the wine sector and hospitality businesses it supports by cutting taxes. They will not be alone in making that sort of request. Their letter says, ‘there is compelling evidence to suggest that, rather than reducing revenue to the Exchequer, an excise duty cut, and a broader VAT cut maintained for longer could result in higher Government revenues over time.’
• The Number 11 post-box is likely seeing a lot of action ahead of the Budget on 3 March.
Companies & other news:
• After Platinum Equity Advisors yesterday confirmed that they would not make a bid for Marston’s, the latter put out a statement saying ‘the Board continues to believe that Marston’s is well placed to benefit from the opportunities in a post-COVID 19 trading environment, following the completion of the SA Brain transaction and harnessing factors such as a reduction in on-trade industry supply, and increased home-working that will benefit pubs in suburban locations.’
• The company says it ‘has a strengthened balance sheet following the creation of the synergistic joint venture with Carlsberg and significant cash headroom, enabling it to continue to absorb the impact of the temporary Government restrictions.’
• Marston’s concludes ‘we welcome the continued nationwide rollout of the vaccine programme and look forward to rebuilding trading momentum once restrictions are lifted.’ And so say all of us.
• French-owned artisanal bakery group Paul has said that it intends to double the size of its UK estate in the next five years via a mix of both own-managed and franchised expansion. The company currently has 38 units, largely in London. Big Hospitality reports that the company will ‘open regional locations in towns and cities across the UK through a franchise model.’
• The British Institute of Innkeeping reports that 95% of its members responding ‘said they would recommend membership of the BII to other licensed trade professionals, with belonging to a recognised professional trade body being one of the most important elements of membership to many.’
• CEO Steve Alton says ‘the support that the BII gives its members has never been more important than over the last year. Whilst it is great to see that we are on the right track in terms of supporting our members in the present, we are also looking to the future to ensure we continue to build on the foundations created over the last 40 years at the heart of the pub sector.’
• Loungers’ chairman Alex Reilley says ‘there is a very worrying agenda being worked up that goes way beyond Covid. We are sleepwalking into a new world where the state & the scientists control our freedoms and decide what ‘normal’ is.’
• The FCA says that over a quarter of UK adults have been struggling financially in the wake of the coronavirus pandemic.
• Constellation brands has advised shareholders to ignore a “mini-tender” offer by TRC Capital Investment Corporation to buy up to 500,000 shares, or approximately 0.29 percent, of Constellation’s outstanding Class A common stock at a price of $210.00 per share in cash.
• PepsiCo Inc yesterday reported Q4 numbers and said that it expects pre-pandemic sales growth as lifestyles return to more normal patterns. The company said its Q4 revenue rose 8.8% to $22.46 billion. CFO Hugh Johnson says ‘we have figured how to do well in this environment.’
• The Telegraph reports that port sales are ‘soaring’.
JET2 IN MAJOR SHARE PLACING:
• Jet plc yesterday evening announced an accelerated bookbuild to assess demand for a placing. The group said that the placing would not exceed 20% of the existing ordinary share capital.
• The group this morning reports that it has raised total gross proceeds of approximately £422 million through the Fundraise, comprising 35,166,654 Placing Shares and subscriptions for 593,561 Retail Shares, in each case at a price of 1180 pence per Ordinary Share, representing a discount of approximately 9.1 per cent. to the closing price on 11 February 2021.
• It says ‘the Fundraise was significantly oversubscribed.’ The Fundraise Shares being issued represent 20 per cent. of the existing issued ordinary share capital of Jet2 immediately prior to the Fundraise.
• Philip Meeson, Executive Chairman of the Group, says ‘the Board is grateful to both existing shareholders and new investors for their significant support of this equity issue. Based on the indicative scenario planning undertaken by management, the Board believes that the proceeds will provide sufficient liquidity on an extended and likely unpredictable shutdown basis to deal with this continually challenging trading environment.’
• Meeson continues ‘the Directors believe the Fundraise will enable management to continue to adopt a decisive, but prudent, responsible financial management approach; take longer-term strategic decisions to support sustainable long term profit growth; and improve the ability for Jet2 to exit the pandemic in a stable commercial position so that it is well positioned to capitalise on the upturn opportunity when it arrives.’
• He says ‘the Board remains of the belief that once able to do so, our Customers will be determined to enjoy the wonderful experience of a well-deserved Jet2 holiday and that Jet2.com and Jet2holidays will continue to have a thriving future, taking millions of UK holidaymakers annually to the Mediterranean, the Canary Islands and to European Leisure Cities.’
• The company also updated on trading, the outlook and financing arrangements saying that it had preserved its cash position but that ‘since 30 September 2020, the amount of flying that Jet2.com has undertaken has further reduced due to continually changing UK Government travel guidance.’ All air corridors were suspended from 18 January 2021.
• The UK Government is continuing to advise against all non-essential travel, official guidance ‘remains changeable’ and ‘as a result, the Company continues its cautious approach to Summer 2021, with seat capacity continually being refined as UK and EU travel guidance evolves. Jet2.com flights are cancelled until 15 April 2021 and are subsequently scheduled to operate with a reduced flying programme.’
• Jet2 is ‘currently in a review process with HMT to ascertain whether it remains eligible for the CCFF.’ It says its ‘banking group remains supportive’, with semi-annual covenant waivers for March 2021 and September 2021, conditional upon a minimum gross equity raise of £100 million and £250 million, respectively.
• The group says ‘whilst the continued positive news about vaccines is welcome, the Group retains its cautious approach to Summer 2021 with seat capacity being refined as travel guidance evolves. Encouragingly, bookings for Summer 2022 are already very positive when compared against Summer 2019, with strong margins and an increased mix of higher margin package holidays bookings.’
• Jet2 says it ‘believes that the proceeds from the proposed Fundraise will provide sufficient liquidity on an extended and likely unpredictable shutdown basis to deal with this continually challenging trading environment.’
HOTELS & LEISURE TRAVEL:
Holiday confusion re staycations & overseas holidays.
• Boris Johnson says it is too early to make holiday plans, Grant Shapps says the same thing but Matt Hancock announces that he has gone ahead and booked a holiday in Cornwall in anticipation of a ‘Great British Summer’.
Langton Comment. Who has done what? The politicians.
• Shapps and Hancock are saying different things. This is not an academic issue but is rather of critical importance to hotel & holiday operators – and it is of more than passing interest to the nation’s pub, bar & restaurant operators.
• Mixed messages have left the holiday industry confused. Travel Weekly goes with ‘travel bosses fear this summer season could be at risk after the prime minister Boris Johnson said it is “too early” to plan holidays.’
• Labour’s shadow health secretary Jonathan Ashworth says people just want clarity. Or at least to be told outright that there can be no clarity. Labour’s shadow transport secretary Jim McMahon says ‘the government must speak with one voice, not add greater confusion, and in the end frustration.’
Travel companies, industry bodies & unions:
• Maybe money speaks louder than words.
• The holiday companies are optimistic people (almost to a fault) but there is plenty of comment suggesting UK holiday providers are seeing strong demand. UK cottage holidays are selling strongly with Travel Weekly pointing to some indie websites up 100% on this time last year. It quotes Cornwall’s Eden Project as saying ‘people have been booking and they should book with confidence.’
• That’s rather a bold statement.
• The trade press quotes coach operators as being upbeat. TW has one saying ‘there’s a lot of confidence, particularly the over-60s, all of which will have had a vaccine fairly soon.’ The operator says ‘our demographic is an older customer base and we’ve got big family products that are really popular with the trade. Once people have had a vaccine, everything changes.’
• That’s possibly true within the UK but it does not hold if consumers wish to cross borders and perhaps come into contact with other, as yet unknown, variants.
• TSSA general secretary Manuel Cortes, TSSA general secretary, says ‘government’s mixed messages are sinking the travel trade.’ He adds ‘companies, jobs and whole swathes of the industry will be lost forever.’
• Flight union BALPA says ‘government policies on borders, quarantine, testing and lockdown, followed by statement from the transport secretary, that people should not book any holidays, means the aviation industry is essentially shut down.’
• EasyJet is putting money down as it has introduced 10 new services from Luton, Bristol, Gatwick, Belfast and Birmingham for this summer. These are just paper commitments at present – but real money will need to be spent at some point if the capacity is to be firmed up.
Where does this leave pub, bar & restaurant operators?
• The domestic hospitality industry will reopen as soon as it can.
• It will reopen whether or not the 2021 staycation market is a bumper one or not so, to that extent, it does not have to bet on a particular outcome in the way that a holiday company does when it is putting on flights & committing to hotel room & villa beds.
• That said, a good domestic 2021, which has to look likelier than a massive return to overseas flying, would be very helpful indeed.
• Many pub operators, Marston’s, JDW and M&B and others, have accommodation and, even when their units do not offer beds, they should benefit if UK consumers stay in the country rather than take their holiday money abroad.
Other holiday news:
• The European Travel Commission has said that UK quarantine rules will hurt trade. That’s for sure since nobody coming into the UK will welcome a £1,750, 10-day stay in a budget hotel when all they wanted was a weekend break in London.
• Business Travel News quotes the Focus Travel Partnership as saying ‘this is literally going to hit our industry like a wrecking ball. The government can’t impose actions such as this without having a supporting structure for our industry to see it through this period.’
• The hunt for superlatives is on.
• The World Travel & Tourism Council says that travel restrictions have led to greater GDP losses in the UK than in many European neighbours. Using data from Oxford Economics, it says the UK is facing a GDP loss of 10% in 2020, while Germany will see a loss of 5.3%.
• Arguably, this isn’t altogether – or even primarily – due to the government’s attitude to travel. Indeed, in the earlier months of the pandemic, very little was done to restrict cross border travel.
• Heathrow has said the UK’s borders are ‘effectively closed’. It might have been simpler simply to close them rather than make them unworkable.
• More talk about vaccine passports. They kind of miss the point if the intention is to keep out new variants.
• Wyndham Hotels & Resorts has updated on earnings saying its systemwide room count declined 4% year over year — to approximately 796,000 rooms in more than 8,900 hotels. Wyndham says ‘we are highly optimistic about what lies ahead.’
• Hilton CEO Chris Nassetta has told HNN that the hotel industry is ‘close to the road to recovery’. Let’s hope so.
• STR reports that Berlin hotel occupancy was down 81% in January this year compared to the same month in 2020. Room rate is down 25% and REVPAR is some 86% lower.
• The BBC reports it has seen docs suggesting that quarantine rules will be softer than initially expected. They will allow limited mixing (with distancing).
• MGM Resorts International has reported Q4 numbers saying that revenue on the Las Vegas Strip was $480 million, roughly flat from the third quarter but well down on the same quarter from last year. Hotel occupancy in Las Vegas was 46% in October, making it the strongest month since the start of the pandemic.
• MGM says ‘while the return of the larger groups will ultimately depend on the easing of gathering guidelines and other factors, we remain bullish on the long-term demand.’ It adds ‘we still have significant rooms on the books in the third quarter and have more on the fourth quarter than we had at this time last year. Both 2022 and 2023 are approximately on pace.’
• Walt Disney Co reported Q4 numbers yesterday saying that it had returned to profit. It’s film & streaming operations performed strongly but the parks were weak (or closed). Park revenue in the quarter was down by 53% but Disney+ streaming reaching 94.9 million subscribers. The group’s shares rose 3.1% to $194 after they closed at an all-time high in regular trade.
FINANCE & MARKETS:
• The BCC says half of British exporters to the EU are suffering from increased red tape and border disruption, reports The Guardian.
• The Telegraph says MPs have been warned that trade with Europe will get worse before it gets better. It says ‘members of the International Trade Committee taking evidence from food industry experts as they launched an inquiry into the UK-EU trade relationship were given the stark warning as they highlighted Brexit’s impact.’ There are currently no inbound procedures in place.
• The Food and Drink Federation has said that’s food exports to the European Union fell by around 60% in January. Imports have mostly held up as they are not being checked at the border. The government says trade is at 95% of normal levels. The RHA says it is including empty lorries.
• The RICS says the UK housing market is cooling. It is confirming comments made by both The Halifax and The Nationwide building societies.
• Bank of England economics Andy Haldane has said the UK economy is like a “coiled spring.” In the meantime, the ONS has estimated that the economy shrank by 9.9% last year, the largest decline since 1708.
• Sterling lower at $1.3798 and €1.1377. Oil lower at $60.70. UK 10yr gilt yield down 2bps at 0.47%. World markets mixed yesterday & London set to open around 20pts down.
RETAIL WITH NICK BUBB:
• BDO High Street Sales Tracker: Given the impact of the lockdown on non-essential stores and the impact of the colder weather on Fashion sales, the BDO High Street Sales Tracker for medium-sized Non-Food chains painted another gloomy picture for w/e Feb 7th…BDO Fashion LFL sales were down by 15.5%, with Store Fashion sales down by as much as 92%…Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as the Fashion retailers) were down by 7.5% (down 81% in Store sales and up an impressive 180% in Online sales). As usual, please note that the BDO index is just an unweighted average of percentage changes in the sales of their reporting retailers, so it shouldn’t be taken too literally.
• Next Week’s News: A quiet week lies ahead, but Monday brings the Tesco share capital consolidation (ahead of the special dividend payout) and the Applegreen EGM (to approve the go-private deal) is on Wednesday. Thursday brings the Asda Walmart Q4 update and on Friday we get the monthly GFK Consumer Confidence survey and the ONS Retail Sales figures for January.