Langton Capital – 2021-02-19 – PREMIUM – Hospitality jobs, R-rates, confidence, late-night market, travel etc.:
Hospitality jobs, R-rates, confidence, late-night market, travel etc.:
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A DAY IN THE LIFE:
Have you noticed that the stock photos that sometimes accompany stories about job losses, closures, cut-backs, retrenchment, administrations, stranded holidaymakers, and the like are of happy, smiling CEOs which, one would seriously hope, were taken some time before the news associated with the photo had broken?
Either that or the individuals get their kicks taking food from puppies and knocking iced creams from the hands of infants.
Which is probably not the case though, admittedly, a lot of the snaps are of perfectly coiffured US (or US-style) CEO’s, presidents & chairmen (or women, and the aforementioned rolls are often filled the same person), where one can never be quite sure.
Anyway, a pic of a boarded-up shop or a flat pint would perhaps be more appropriate but that’s enough of that. It’s Friday & we’ve made it to the end of another week. On to the news:
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The Free Email is now written and pre-sent the evening before. It will include much of the news but not any breaking news from that morning such as company releases, nor Langton comment on unlisted companies & other comments.
Friday, for example, we will have the GfK confidence numbers and overnight comment from Texas Roadhouse & Marriott in the US.
UNLISTED COMPANY COMMENT:
Darwin & Wallace reports year to 24 May 2020:
• Imbiba-funded bar-restaurant company D&W reports full year numbers to 24 May 2020 to Companies’ House.
• The numbers include a chunk of the first lockdown.
• In terms of the bald numbers, D&W reports revenues down from £14.1m to £13.1m (down 7%) with a loss before tax of £2.2m (2019: loss £627k).
• The company has retained losses since incorporation of £3.5m (2019: accumulated loss £1.4m) with shareholders’ funds of £4.3m.
• The company says ‘on the 17th March, Darwin and Wallace closed all its sites in compliance with Government instructions. Sites remained closed until end of June 2020 and in July 2020 sites reopened in a phased approach.’
• It says ‘the closure of all sites resulted in almost a quarter of lost revenue during a traditionally a strong sales period when overall capacity is increased as outside spaces are well utilised.’
• The company cut costs and took advantage of the furlough scheme. Directors took a 20% pay cut. D&W says ‘strong landlord relationships minimised our rental costs for the March quarter and into the new financial year.’
• The company took out a CBILS loan and says ‘as a result, of actions taken above and the strong performance the Company since re opening it has built up strong cash reserves to cope with current and changing COVID 19 regulations.’
• The accounts were signed on 14 December, before the current lockdown.
Roosters Brewery reports 16mths to end-March 2020:
• Roosters reports sales in the 16mths (versus 12mths comps) rose to £2.1m from £1.5m.
• Gross profit was up to £707k from £464k.
• The group made a pre-tax loss of £122k against a profit in the prior year of £51k.
• Roosters says that, ‘during the accounting period the company moved its business premises to a much larger site in Harrogate which also incorporates a Taproom retail outlet.’
• Gross profit percentage was higher given the vertical integration.
• The company says ‘the move proved disruptive to the business as the new site had to be developed and a complete new brewing plant installed before the move could be completed in July 2019. This resulted in exceptional costs of £74,592 representing duplicated rent and business rates expenditure which adversely impacted on the results for the period.’
• Roosters says ‘the period was also impacted by the start of the Covid 19 pandemic which resulted in lost sales and also stock destruction / free stock replacement – the cost of which, to the extent it can be quantified, has been borne in these accounts as an exceptional charge of £19,039.’
• It says ‘the directors are confident that, once the effect of the Covid 19 disruption diminishes during 2021 that the company will return to profitability.’
PUBS & RESTAURANTS:
Covid news, extension of relief hopes:
• The FT has reported that chancellor Sunak is to extend business rates relief and furlough. It says the ‘Chancellor plans further tax boost for hospitality, retail and leisure, along with more help for workers.’
• We mentioned yesterday that all of the events associated with the ‘cliff-edge’ were unlikely to happen and that extending business rates and the furlough were perhaps two of the more likely concessions.
• The Telegraph is onto the story, saying ‘Chancellor Rishi Sunak is set to extend two crucial lifelines to companies battered by ongoing Covid restrictions by keeping the furlough scheme going until the summer and prolonging the business rates holiday for the retail, hospitality and leisure sectors.’
Covid news, labour:
• Plenty more spec regarding reopening.
• S4Labour reports that ‘hospitality suffers 540,000 job losses in 2020 and is on the verge of losing a significant amount more.’ It says 20% of jobs have gone and more may well follow.
• This because the cliff-edge to which we and others have referred is a) real and b) getting nearer.
• The above seems to be positively correlated with the volume of demands being made of no10 and no11 Downing Street.
• S4Labour says ‘there are many industries that have suffered throughout 2020, but hospitality has been near uniquely placed at the forefront of every conceivable damage the pandemic and social restrictions could throw at it. That’s not to say that other sectors have not had it hard, but few will have to had to navigate the never-ending variations of restrictions and closure hospitality has.’
• Tough though it has been, we would suggest that hospitality (in the shape of pubs & restaurants) is in a less perilous position than are cruise ships, holiday companies, airlines, cinemas, events organisers and a number of other consumer-facing sub-sectors.
• Langton comment: S4Labour says ‘the first spike in job losses occurs in weeks 11-13, in March 2020.’ It says 91,000 jobs were cut. It adds ‘there was another spike of job losses that occurred of 42,000 in one week just as the government announced the November restrictions and all but cancelled Christmas.’
• S4L says there were jobs added at the beginning of August (EOTHO) but it says this only came ‘after two spikes of job losses in July, likely to have been caused by the end of fully supported Furlough, covering NI, holiday pay and pensions.’
• S4L alleges a ‘clear lack of foresight by the government, as has followed for the whole of this crisis; a lack of clear communication with the industry that accounts for 5% of UK GDP and 10% of UK employment.’ The government has had to deal with a new set of circumstances but, with a little forethought, some of this damage could surely have been avoided.
• S4L is calling for a roadmap. Other sub-sectors (see below) are demanding the same and the government has promised some sort of comment on Monday. S4L expects more job losses. It says ‘the lack of foresight and the suggestion of just outside pubs and bars opening, will bring yet another round of job losses to those pubs and bars with no option to serve outside.’
• The industry analyst’s Chief Customer Officer Sam Wignell says ‘it is crystal clear, it is not the viability of these hospitality jobs that is the issue, it is the lack of reasonable communication and clarity. If the government is serious about keeping jobs, when we are on the verge of losing a significant amount more, a clear road map and a stimulus package is required.’
Other Covid news:
• The NIESR (the National Institute for Economic & Social Research – the oldest independent economic research institute in the UK) is modelling the R rate and says that ‘the effects of lockdown were becoming apparent by mid-January.’ It says at that point, it had fallen to between 0.8 – 0.9.
• Langton comment: The NIESR says ‘the reduction in the R number in January occurred somewhat earlier than the analysis by SAGE suggests. The reason is that our model can adapt very quickly to emerging information contained in the data and thus estimates more sensitive to changes in trends.’
• The NIESR says new cases per day should fall below 1,000 cases by 9th April 2021. This is the level at which some government sources have said they would open up hospitality. Boris Johnson said on Wednesday that he would be guided by the data and not dates.
• Justice secretary Robert Buckland has said that a ‘no jab, no job’ policy may be legal for employers. This may apply only to potential new employees.
• Barclays yesterday set aside £4.8bn for potential bad debts.
• Clear Sight reports ‘consumers’ outlook on the crisis shows further significant improvement over last two weeks.’ It says ‘for only the second time since the start of the pandemic, those who believe the worst is now behind us outnumber those who fear the worst is yet to come.’
• Clear Sight says ‘the outlook is discernibly more positive among people who have received the vaccine, suggesting that provided the vaccination programme continues to advance at pace, further improvement can be expected.’
• A Bizimply Survey suggests that ‘hospitality operators expect increased safety measures such as social distancing and wearing masks to be trading requirements for the foreseeable future.’ It says ‘the majority of businesses would also welcome a vaccine passport scheme, in the form of a physical card or a simple online check, to enable them to ensure customers have been inoculated against Covid.’
• The Night Time Industries’ Association reports that 85 per cent of people working in the night time economy are considering leaving the industry and it says that 78 per cent of all employees in the sector had at some point been on furlough. It says ‘in the second half of 2020, businesses in the night time economy traded at an average of 28 per cent of their annualised pre-Covid turnover.’
• Tucked away in the recent Resolution Foundation report is the fact that almost 2 million people in the UK have not worked for more than six months.
• The ICAEW reports that domestic sales across all industries look to be down in Q1 (by perhaps 2.2%), there are hopes for a return to overall sales growth of 5.2% this year.
• The ICAEW says ‘rising confidence among businesses is an encouraging sign of things to come and a predicted growth in employment is good news for people who have lost their jobs over the past year.’
• Ultimately, this will impact on demand for consumer-facing sectors.
• The ICAEW finds that confidence is highest in the South East. It says ‘business confidence is weakest in Yorkshire & Humber. The region reports the steepest falls in exports and employee numbers over the 12 months to Q1 2021.’ It adds ‘confidence is also subdued in Northern England.’ Companies are finding that potential bad debts and late payments may be a problem. It says: ‘one in three businesses cited late payments as a rising difficulty, a reflection of the pressure placed on company cashflows by the pandemic.’
• The ICAEW does not want fireworks. It says ‘2021 is not the right time for major changes to taxes: business is coping with COVID-19 and changes to our international trading relationships – it just can’t afford further disruption at such a precarious time in the economy.’ It does accept that the public finances will need to be ‘fixed’ at some point, however.
• GfK has reported on an ‘uptick in consumer confidence boosted by hopes for UK economy.’ It says the five-point recovery to minus 23 is, however, ‘not enough for [its] Index to spring back to life.’
• GfK says that four of its five measures increased in comparison to the January 22nd announcement and one measure was flat. GfK says ‘with the headline confidence score up by five points this month, driven by an energetic 14-point jump in how we view the economy for the coming year, it would be tempting to talk of a return to ‘normality’. But would it be more realistic to talk of ‘challenges’?’
• It says ‘we need to be cautious because the positive tailwinds of the vaccination roll-out are being met by the very strong headwinds of unemployment, the threat of inflation and the difficulty that many face in affording day-to-day living costs – all serious issues that can dampen consumer confidence. Perhaps the key lies in the healthier score for how we see our personal finances going forward as this will impact our spending plans that in turn will fuel the post-pandemic economy. That measure is up two points and is reinforced by an encouraging five-point boost for major purchase intentions. But will that confidence in our wallets continue through the balance of the lockdown and beyond?’
• Nestle is to sell its North American water business to One Rock Capital for $3.4bn.
• Campari yesterday reported a 4.1% fall in like-for-like sales in 2020. Q4 sales were down by 7% after growth in Q3.
• Plant & Bean, a meat-free food company, is setting up on the York Biotech Campus.
• James Watt at Brewdog reports that the company is currently looking at 42 new sites including venues in Belfast, London, Paris, Vegas, Bath, Exeter, Mumbai, Sydney, Amsterdam, Berlin, Frankfurt, Gurgaon, Lyon, Milan, Chester, Durham, Hyderabad & Cleveland.
• Next boss Simon Wolfson has called for a sharp rise in business rates on warehouses, a cut in the tax on shops and has said that an online sales tax would not achieve its intended purpose. The suggestion fits in well with Next’s business model (compared, say, with Amazon), but that does not mean it is wrong.
• Pizza Hut Delivery has said it will expand its operations via a new Starboard Dining partnership, which will see 27 existing Pizza Hut delivery and takeaway sites move to Starboard Dining under a franchise agreement.
• Texas Roadhouse has reported Q4 & FY results in the US saying that revenues were down 12% at $639m in Q4 and down by 13% for the year as a whole. The company says ‘total revenue was negatively impacted by lapping the $59.5 million benefit of the 14th week in 2019, which represented 7.9% of the decrease in total revenue for the quarter.’
• Texas says ‘for the October, November, and December periods, comparable restaurant sales at domestic company restaurants increased 0.8%, decreased 6.3%, and decreased 18.2%, respectively. Sales during the period were negatively impacted by dining room closures and capacity restrictions throughout the country. For the quarter, comparable restaurant sales decreased 8.9% at domestic company restaurants and decreased 11.2% at domestic franchise restaurants.’
• Re the outlook, Texas says ‘as previously announced, due to the uncertainty surrounding the pandemic, the Company had not yet provided a financial outlook for the fiscal year ending December 28, 2021.’ It says ‘to the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, the Company could pull back on development and reduce capital spend accordingly.’
HOTELS & LEISURE TRAVEL:
• YouGov reports that there is 90% adult support for the quarantine of international arrivals in hotels. If anything, UK adults do not think the rules go far enough.
• The Telegraph reports that the government is considering adding the US and Spain to the list of 33 Covid hot spots.
• Hotelplan UK, which owns a number of ski brands, has axed the remainder of its 2020/21 season.
• Real Business Rescue reports some 4,554 UK SME travel and tourism companies are now in “significant financial distress”
• IATA is calling for a Strategic Pathway to re-opening International Aviation. The heads of easyJet, Virgin Atlantic, Jet2 and TUI have similarly demanded a roadmap.
• The Save Our Summer campaign has polled travel companies and says that two thirds of companies expect to lay off more than 20% of their staff unless there is a clear roadmap to reopening post the end of April.
• Loganair boss Jonathan Hinkles has told the Aviation Club of the UK that working from home and videoconferencing may mean the post-pandemic business travel market will be smaller than before Covid. The corporate travel industry could be ‘changed for good’.
• Accor has launched a new hybrid meetings format alongside Microsoft. There will be a mix of Accor conference space and MS Teams.
• Marriott International, which this week announced the death of its CEO Arne Sorenson, has reported Q4 & full year numbers saying ‘fourth quarter 2020 comparable systemwide constant dollar RevPAR declined 64.1 percent worldwide, 64.6 percent in the U.S. & Canada, and 62.7 percent in international markets, compared to the 2019 fourth quarter.’
• STR has reported that US hotel occupancy rose in the week to 13 Feb, but it was still down by 29% on last year. Room rates were down 26% and REVPAR was 47% down on a year earlier.
• Choice Hotels International has said that it was optimistic on how its brands had continued to outperform the wider market (particularly in the US). The operator says ‘since the onset of the pandemic in mid-March, our performance has achieved sequential quarter-over-quarter improvement with our fourth quarter domestic systemwide RevPAR declining 25.1% from the same quarter in 2019.’
• Choice says that Extended-Stay has performed well. It says this ‘portfolio achieved average weekly occupancy rates of over 70% since the onset of the pandemic in mid-March through Dec. 31, 2020 — exceeding the industry weekly average by 30 percentage points.’
FINANCE & MARKETS:
• Sterling up at $1.3974 and €1.1550. Oil lower at $63.18. UK 10yr gilt yield up 6bps at 0.63%. World markets lower yesterday with London set to open flat.
RETAIL WITH NICK BUBB:
RETAIL WITH NICK BUBB:
• Consumer Confidence Watch: After today’s latest survey from the widely followed monthly GFK Consumer Confidence index, it’s again worth highlighting that that the record -39 index low seen in July 2008, during the financial crisis, was not tested in the current crisis…The overall index improved to -23, from the -28 level that was seen in the report for last month (versus the -36 low seen in the early June 2020 “flash” report), thanks to the successful COVID vaccine roll-out driving greater optimism about the general economy over the next 12 months. A Reuters poll of economists had pointed to a much smaller improvement in the overall index to -27. GfK’s Client Strategy Director Joe Staton says in the press release, however, that “We need to be cautious because the positive tailwinds of the vaccination roll-out are being met by the very strong headwinds of unemployment, the threat of
• Planet ONS Watch: We noted yesterday that, in the real world, as per the BRC-KPMG figures for January (the 4 weeks to Jan 30th), underlying Retail Sales were a bit weak, as the “lockdown” of “non-essential” Non-Food shops more than offset the continuing strong Food and Online Non-Food sales growth, but “seasonally adjusted” life was much worse on the High Street on that bizarre parallel world, the Planet ONS (aka the Office of National Statistics in Newport), via the official Retail Sales figures for January, which were released at 7am this morning…City economists (who treat the ONS figures as the gospel truth) will be very depressed by the shock slump of 8.2% in month-on-month seasonally adjusted sales volume (inc fuel), but only fools (and City economists) look at seasonally adjusted volume moves between December and January…Year-on-year volume was down 5.9% or down 3.8%
• BDO High Street Sales Tracker: Given the impact of the lockdown on “non-essential” stores, the BDO High Street Sales Tracker for medium-sized Non-Food chains paints a surprisingly decent picture for w/e Feb 14th, albeit stormy weather a year ago meant that the comps were quite soft…BDO Fashion LFL sales were actually up by 8.8% (even though Store Fashion sales were down by c90%)…Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as the Fashion retailers) were up by just under 1% (down c80% in Store sales and up an impressive 170% in Online sales). As usual, it should be noted that the BDO index is just an unweighted average of percentage changes in the sales of their reporting retailers, so we don’t think it should be taken too literally.
• Next Week’s News: A quiet week lies ahead, with most of the focus likely to be on the Prime Minister’s much-awaited lockdown exit plan on Monday. Thursday brings the Howden finals, the Inchcape finals and the Shaftesbury AGM and by Friday, with February rapidly coming to an end, the embattled Card Factory is due to provide a “liquidity update”, to keep its banks happy…