Langton Capital – 2021-02-17 – PREMIUM – Major worries, rates, outdoor opening, M&B, summer hols etc.:
Major worries, rates, outdoor opening, M&B, summer hols etc.:
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A DAY IN THE LIFE:
I’m reading another book on cognitive biases, over-confidence, confirmation bias etc., which is somewhat enlightening.
And, though it’s not in the book, it’s interesting to note that ‘pattern recognition’, something that humans are good at, even when the alleged pattern does not exist at all, extends to everyday life where we are very keen to put things into neat little pigeon-holes wherever possible (or, indeed, impossible).
For example, there are idioms to suit both sides of many stories. The early bird certainly did get the worm – but the early worm got eaten. Too many cooks often do spoil the broth – but many hands also make light work. You should look before you leap – but faint hearts never won fair maid etc. etc.
And simply wrapping an anecdote around something or jamming it into an idiom doesn’t make it right. Somebody might be a dreadful leader or organiser, for example, but if he/she ‘moves fast and breaks things’, then that’s OK, isn’t it?
Only it isn’t, really.
But just saying that won’t undo a million years of evolution. Anyway, news a bit light due to what should have been the half term holidays. On to what news there is:
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INSOLVENCY PRACTIONER ASKS ‘WHAT WORRIES YOU MOST?’
• Perhaps the answer should be ‘needing to spend more time with you’ but, for the record, that is not what was said.
• Insolvency Practitioners KSA Group has conducted a survey asking which of the following was the most worrying: ) repaying state supported loans, 2) paying HMRC, 3) paying rates and rents, 4) paying staff or simply 5) not being able to trade at all.
• Spoiler alert. The numbers picking the above survey, with over 200 responses, were 1) 38%, 2) 22%, 3) 7%, 4) 5%, 5) 28%.
A bit of interpretation:
Fear of the unknown?
• Numbers 3 and 4 are known, everyday worries and, perhaps as a result, they are deemed less worrisome.
• State sponsored loans (no 1) and major HMRC liabilities (no 2) are much less common and seem to worry respondents accordingly.
• Similarly, ‘not being able to trade at all’ (no 3) is a function of the Covid-19 shutdowns, and no operators had had any experience of this prior to March last year.
Concern re fixed rather than variable costs?
• No4 (paying wages) is a variable cost & is the least worrisome. Furlough helps.
• But rent and rates (no3) is the second-least worrying problem, and these are fixed costs. But landlords are currently toothless and rates, being government, may be subject to pressure from public opinion.
• Paying back loans and dealing with legacy debts to HMRC are not linked to current trading and seem worrying as a result.
• Not being able to trade at all, no5, isn’t a financial issue but, after three lockdowns, it is a very understandable concern.
Points made by KSA:
• The insolvency practitioner says ‘the worry re paying staff is reduced somewhat when businesses can put them on furlough, and the government will pay the cost. In the same vein, when landlords struggle to take any meaningful action to recover rent, this also reduces the pressure on business owners and directors.’
• With their insolvency hats on, KSA says ‘the ban on winding up petitions and enforcement by landlords has meant that many landlords have received very little rent.’
• Re the loans, KSA says concern here ‘is not surprising, as many loans were taken on at the beginning of the pandemic when most people believed that the pandemic would be over by now, or at least that further lockdowns would be avoided.’
• We have quoted Albert Camus’s novel The Plague on a number of occasions. M Camus said pestilences stay longer than you think, longer than you want and longer than is fashionable.
• KSA says ‘many businesses and companies seem simply to be marking time to see what happens over the coming months. There is no doubt that furloughing staff and taking “rescue loans” has allowed many companies to survive.’ These emergency measures, however, will not last forever.
• Not surprisingly, KSA says contacting specialist turnaround and insolvency practitioners is a good step to take now, not when the critical issues above turn into reality.’
PUBS & RESTAURANTS:
• The Scottish government has confirmed that it will continue to offer 100% business rates relief to the retail, hospitality, leisure, and aviation sectors for the full year ahead rather than 3 months previously announced.
• The BBPA says ‘we welcome the news today that the Scottish Government has heeded our calls for further fiscal support for our sector. This news gives relief to the thousands of pub businesses in Scotland who have now been closed for several months and remain unclear when they will be able to open their doors again. Our industry is teetering on the precipice and we now urgently need a clear roadmap to reopening from the First Minister when she unveils her Framework next week – hospitality cannot be at the end of the queue.’
• Chancellor Rishi Sunak, who is not short of advice on how to spend taxpayers’ money, is to present his first Budget to the House of Commons on 3 March.
• Minister Nadhim Zahawi says rapid testing and the vaccination programme will help entertainment venues to reopen (over an unspecified period of time).
• The City of London has extended for six months the period over which restaurants will not be charged in order to provide outdoor seating areas via pavement areas. The City says ‘issuing these free of charge pavement licences will mean the City can once again be enjoyed by all as the weather improves.’ It adds ‘the majority of establishments which wanted to take up the offer to reinstate their pavement licences have been able to do so and it remains vitally important that these outdoor dining options are retained wherever it is appropriate.’
Outdoor opening not nearly enough.
• The BBPA reports that ‘29,000 pubs will stay closed even if outdoor service is allowed in April.’ It says pubs should by ‘fully re-open pubs – inside and outside [along with] non-essential retail.’
• The British Beer & Pub Association says 60% of all pubs in the UK would not reopen if they were only allowed to trade outdoors. It says ‘this is because the majority of pubs in the UK do not have a big enough garden or outdoor space to re-open and serve customers without opening indoors too.’
• Langton comment. The average high temperature in York in April (per Wiki) is 12 degrees and the average low is 3 degrees. This may allow one to drink the odd pint – but it is not conducive to sitting around for any length of time.
• The UK Health & Safety Executive says that workplace temperatures for sedentary occupations should be at least 16 degrees. As low as 13 degrees is allowed for jobs that involve ‘rigorous physical effort’. That presumably does not include the occasional lifting of a pint glass to one’s mouth.
• There is no obvious mention of lavatories which, without too much in depth analysis, one would see as pretty critical to the serving and consuming of drink. Whilst not a complete non-starter, this may be another instance where a policy has been pulled up the flagpole to see how many people salute it.
• The BBPA says that ‘around 75% of UK pubs have a beer garden or outdoor space, but that only 40% of pubs are likely to have a beer garden or outdoor space big enough [presumably for full service provision]. Even then, if many with big enough outdoor spaces did open, they could still struggle to break even.’
• BBPA CEO Emma McClarkin says outdoor provision ‘is not the same as properly opening pubs both inside and outside and is not commercially viable.’ Ms MCLarkin points out that ‘even if some pubs did try and open outdoors only in April, all it would take is some heavy rain and they would find it has all been for nothing.’ She says ‘we question the Government’s thinking behind this and suggest they consult with us as a sector on it.’
• The reopening discussion is all about supply. Demand will also have a role to play.
• The Resolution Foundation says that almost half a million people are now in arrears on rent or mortgage payments as a result of the coronavirus pandemic & its impact on the ability to pay. The Foundation says there is a ‘mounting arrears crisis’ and it calls on the government to intervene.
• The Resolution Foundation says 22% of renters went into the pandemic with no savings.
• M&B has updated on its relationship with 3Sixty company shareholders to ‘vary certain of the arrangements relating to their joint venture for the development of the Ego Restaurants business.’ M&B owns 20% of 3Sixty (at an initial cash consideration of approx. £4m), which has a JV arrangement with the other 3Sixty for the development of the Ego Business.
• M&B says it’s direct subsidiary will extend the period over which it will be able to acquire the remaining 60% interest in 3Sixty. The deal is not large, in the scale of things. M&B says ‘the value of 3Sixty’s gross assets as at 31 March 2019 was £9m. For the year ended 31 March 2019, 3Sixty made an operating loss of £750k.’ it adds ‘as at the date of this announcement, 13 sites were leased to 3Sixty pursuant to the joint venture arrangements.’
• Red Oak Taverns has acquired a package of pubs to take its estate to 190 units. The acquisition comprises ten leased and tenanted pubs from regional family brewer, Wells & Co. The outlets are based in the Bedfordshire, Buckinghamshire and Northamptonshire.
• Red Oak says ‘we are delighted to secure a further portfolio of quality pubs to join our business. These pubs are a mix of rural destination food venues and community pubs which are a perfect match for our business, and we look forward to welcoming the tenants and their teams to Red Oak Taverns.’
• Co-founder Mark Grunnell says ‘following this acquisition we are finalising terms for additional capital of £35 million to take advantage of immediate investment opportunities. The pandemic has in some part slowed our plans but with the additional funding and an established and focused team, we are ready to take our business through the next phase of its evolution.’
• The MCA reports restaurant chain ‘Coqfighter is launching two new dark kitchens later this month, in Notting Hill and Chiswick, ahead of a regional launch in Birmingham in April.’
• The Mission Hill Family Estate is to offer luxury wines from its private cellars in the UK for the first time in partnership with Bibendum Wine.
• Virgin Wines is to IPO. CEO Jay Wright says the company is ‘a distinctive, fast-growing direct-to-consumer retail business with a unique wine sourcing model and a loyal customer base.’ He adds ‘we have enjoyed strong, consistent growth recently resulting in the group delivering more than one million cases of wine to consumers during 2020. Underpinned by the strength of our customer proposition as well as the benefit of many positive consumer trends, we have a clear strategy to continue this growth over the coming years.’
• InBev is taking legal action against Constellation Brands for using the Corona brand name on its hard seltzer.
• Imbiba has invested £1.4m in retro-arcade bar NQ64 to support expansion
• TiPJAR has received clearance from HM Revenue & Customs. It says ‘the stamp of approval makes TiPJAR the only system of its kind in the UK through which staff can collect and pool ‘digital’, or cashless, tips; doing away with the need for teams, venues and companies to organise and run complex and costly ‘tronc’ systems.’
• Peruvian restaurant concept Ceviche is to open a new flagship site in London, in Redchurch Street, once pandemic restrictions lift.
HOTELS & LEISURE TRAVEL:
• Matt Hancock has told Times Radio that the quarantine system in the UK is working “smoothly”. Incoming travellers who need to quarantine must land in Heathrow, Gatwick, London City, Birmingham or Farnborough airport. Travelling back to Wales, the North of England or Scotland could be a bit of an expensive faff.
• Scottish first minister Nicola Sturgeon has advised against booking Easter breaks (even domestic breaks) and has gone on to say that overseas holidays this summer are highly unlikely. She says “our situation is very fragile” and adds “caution will be necessary.” The government warns that holidays are currently illegal – but booking future holidays is not.
• Cancellations mounting.
o Crystal Ski Holidays has binned its whole 20/21 winter season.
o Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises have extended their cruise suspensions until at least 31 May
o German cruise operator Aida has extended its suspension unto at least 20 March.
• Operator Seasonal Businesses in Travel has said that Brexit work-permit requirements could cause major difficulties when sending staff overseas.
• BALPA has appealed for a roadmap out of lockdown. The pilots’ union is not alone. It says ‘government policy has effectively shut down UK aviation. We understand the reasoning behind those decisions, but the effects have already been disastrous.’
• EasyHotel is to open a second hotel in Barcelona towards the end of next year.
• Marriott International has announced that CEO Arne M. Sorenson has died. The CEO had been diagnosed with pancreatic cancer. On February 2, 2021, the company said that Mr Sorenson ‘would temporarily reduce his schedule to facilitate more demanding treatment.’ The Marriott Board says it expects to appoint a new CEO within the next two weeks.
FINANCE & MARKETS:
• Sterling mixed at £1.3883 and €1.1483. Oil unchanged at $63.53. UK 10yr gilt yield up 5bps at 0.62%. World markets broadly better yesterday and London set to open up around 17pts.
RETAIL WITH NICK BUBB:
Today’s Press: In terms of Retailing stories, ahead of tomorrow’s Asda Walmart Q4 update it is widely reported that the controversial Issa brothers have completed their highly leveraged purchase of Asda, even though the deal hasn’t yet received CMA approval. It is also reported that Adidas has confirmed plans to sell the ailing Reebok brand and there is plenty of coverage of the IPO plan for Virgin Wines, with a £100m valuation mooted.
This Week’s News: Tomorrow lunchtime brings the much-awaited Asda Walmart Q4 update and first thing on Friday we get the widely followed monthly GFK Consumer Confidence survey and the ONS Retail Sales figures for January.