Langton Capital – 2021-02-23 – M&B, un-lockdown, trends, Caffe Nero, delivery, holidays etc.:
M&B, un-lockdown, trends, Caffe Nero, delivery, holidays etc.:
A DAY IN THE LIFE:
I read the other day that you’re meant to carefully trim the inward-growing branches on your fruit trees. You should then clean off the scarred wood, apologise to the tree, serenade it nightly with a song or two, give it a cup of tea and erect a windbreak to stop it getting a chill.
However, as we have several dozen of the blighters lounging around our garden doing not very much other than encourage the wasps every autumn, we thought no, we won’t do that at all. We’ll let them go wild and they can cope for themselves.
Laziness, perhaps but, as a holiday park owner said to us once when he caught us inspecting the weeds growing up through the cracks in his pavement, it’s the green thing to do, and that’s not a half-bad excuse so, there you are. We’re doing it for the bullfinches and the other assorted vermin that plague our garden and hey-presto, job done, we’re amongst the good guys.
Anyway, looking outside just now I can almost feel the sap rising and that awful day, the day that I have to get the lawnmower out, is fast approaching. For the moment, though, let’s move on to the news:
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This in yesterday’s Premium Email
Further to its announcement that it intended to issue £350m worth of equity in order to bolster its finances and secure bank debt, M&B has this morning announced the underwritten offer.
• M&B says that it ‘today announces an underwritten fully pre-emptive open offer (the “Open Offer”) to raise up to £351 million.’
• The group says its ‘liquidity position has deteriorated significantly as a result of the impact of the COVID-19 pandemic and the Open Offer is critical for the continued operation of the Group and its immediate financial stability.’
• The group adds that the cash ‘will also enable the resumption of investment in the Group’s estate to maintain its competitive position, providing the financial stability and strength to emerge from the crisis, allowing previous momentum to be regained.’
• The granting of a new, £150m 3yr bank facility ‘is conditional on completion of the Open Offer.’
• The group also received bond waivers on 14 Feb and says ‘in the event that the Open Offer is not completed, such Amendments and Waivers may be withdrawn.’
• The group is emphasising the necessity of the funding. The Takeover Panel has been convinced and it has not insisted that the concert party of investors, who own more than 50% of M&B, make a bid for the shares that they do not already own
• The terms. New shares will be offered at a price of 210 pence per share on the basis of 7 New Shares for every 18 Existing Shares.’
• Odyzean, the consortium of major shareholders that owns c55% of the company, ‘has entered into an irrevocable undertaking with the Company to take up its entitlements under the Open Offer and to subscribe for any additional shares that become available through, and are allocated to it under, the Excess Application Facility. The Open Offer is therefore fully underwritten.’
• M&B says that all of the Group’s German businesses were closed at the start of November 2020.
• Before that, in the period from 27 September 2020 to 16 January 2021, total managed sales were 69.8 per cent. below the prior year.
• M&B says ‘on a like-for-like basis (for sites when open, excluding periods of closure) trading was 30.1 per cent. down on the prior year across this period.’
• It adds ‘the Group had a cash balance of £113 million as at 16 January 2021 with all facilities drawn.’
• Pension fund payments have been delayed (with the agreement of the fund’s trustees) and ‘cash burn was estimated to be between £30 million and £35 million per four-week period.’
• The group says it ‘has securitised debt servicing costs of £51 million per quarter (comprising interest and amortisation), and all non-essential capital expenditure continues to be suspended.’
• CEO Phil Urban says ‘M&B was a high performing business coming into the pandemic and with the support of our main stakeholders, including the equity injection from this Open Offer, we have every confidence that we can emerge in a strong competitive position once current restrictions are lifted.’
• He says ‘the hospitality industry has done everything that has been asked of it to date and, now that the vaccines are being rolled out and infections are dropping, we are hopeful that pubs and restaurants will soon be allowed to reopen safely so that we can start to serve our customers again.’
• Langton Comment – see Premium Email:
PUBS & RESTAURANTS:
Covid-19 – Prime Minister’s comments on un-lockdown.
• In brief, all much as leaked. Subdued presentation. (8 March, Schools). (12 April, outdoor pubs & restaurants – no curfew, no main meal requirement. Also, self-catered holidays & gyms). (17 May, indoor pubs & restaurants). (21 June, possibly nightclubs).
• One rule for England, four reviews, five steps and the rule of six
• PM says the Pfizer vaccine reduces hospitalisations and deaths by 75%. Astra-Zeneca vaccine is ‘too early to tell’.
• Cases should fall, a ‘zero-Covid’ solution is not possible, it’s all a matter of balance.
• PM promises this exit from lockdown, the third, will be the last. He says it must be ‘cautious and irreversible’.
• He says we are ‘on the road to freedom’ adding government will be driven by ‘data not dates’.
• All areas of England are similar, there will be no Tiers.
• The authorities will look at a) vaccine rollout, b) the evidence of its effect, c) they will check there are no infection surges after each stage of un-lockdown and d) will watch out for the risks from variants.
The five steps (impacting hospitality):
• First, schools on 8 March. Then second, non-essential retail can open & pubs / restaurants can trade outdoors. There will be no 10pm curfew and no need for a substantive meal. Holiday lets can also open, as can zoos & outdoor cinemas (if there are any).
• Third, no earlier than 15 May, pubs & restaurants can open indoors. Concert halls & theatres can reopen. Fourth, limits may be withdrawn from 21 June. Fifth, nightclubs may be allowed to reopen.
• One, a review into distancing & facemasks. No date.
• Two a review on restarting travel to take place by 12 April.
• Three, vaccine certificates to be considered.
• Four, consider allowing ‘major events’
• The PM says the chancellor will not ‘pull the rug out’. The Budget is 3 March. The government will ‘protect jobs & livelihoods’.
Blurb & boosterism:
• Not much in evidence (other than dates vs data, road to freedom etc.) But PM says the future will be ‘incomparably better’ than the recent past.
Trade response (broadly underwhelmed):
• SIBA says ‘under the Prime Minister’s roadmap published today, many small breweries and community pubs are now destined to fail, just as the vaccination programme should be providing hope and optimism.’
• SIBA adds ‘although it is welcome that nonsense restrictions like 10pm curfew and substantial meal have been dropped as part of steps 2 and 3 of the plan, the vast majority of pubs simply do not have the outdoor space or facilities needed to operate viably and profitably in April.’
• It adds ‘the 17th May when pubs might be allowed to welcome indoor patrons is 84 days away.’
• Loungers’ chairman Alex Reilley says the announcement ‘condemned thousands of hospitality businesses to death. Hopes & dreams crushed, livelihoods destroyed, & jobs lost. Seemingly it’s an acceptable sacrifice of a sector.’
• Oakman’s Peter Borg-Neal comments along the same lines tweeting that the PM’s comment that ‘the end is in sight’ could relate to the viability of hospitality businesses rather than to lockdown.
• Looking forward to next week’s Budget, UKH says ‘hospitality urgently needs support. We hope that MPs of all parties will continue to support the key asks of the sector at this time, including a continuation of the VAT reduction, business rates holiday & targeted extension of furlough that are vital to businesses across the UK.’
• The BBPA says the ‘cautious’ reopening will cost pubs £1.5 Billion.’ It says ‘today we were looking for a clear roadmap out of lockdown for our sector and an indication of the dates when we could fully reopen and operate viably, again.’ CEO Emma McClarkin says ‘our sector will continue to face severe restrictions that limit their business and stop them from being viable. The reality is debt is mounting and many pubs simply won’t be able to hold out to April or May and will close for good before any door gets open.’
• Ms McClarkin says outdoor only opening ‘will likely mean that 3 in 5 pubs across the UK will remain closed. That’s 29,000 pubs still not able to open either because they don’t have any outdoor space or simply because they will not be commercially sustainable. Because of this, the majority of pubs will not reopen until May 17th at the earliest, meaning that they will have been closed for almost 8 months.’
• The BBPA is calling on the government to ‘plug that £1.5 billion hole for our sector with vital support in the Budget next week if thousands of pubs are now to survive.’
Langton Comment. See Premium Email
Other Covid-19 news:
• Alix Partners suggests that ‘throughout the pandemic we have seen the acceleration of a number of existing trends.’ It says omni-channel strategies, digitalisation, experiential offers and the move to ‘authenticity’ could be here to stay.
• Alix Partners says ‘it’s hard to imagine an immediate return to business as usual for the sector but, then again, when consumers do finally come back, they will find comfort in the familiar and a new-found appreciation of eating and drinking out. While elements of the hospitality industry will have changed forever, in many cases this will make for a more efficient and more resilient industry for years to come.’
• The Telegraph has reported that the Issa brothers, who own ASDA, are making an attempt to buy around £180m of Caffe Nero’s reported £350m debt.
• Pragma Consulting considers whether food delivery services will become more common in airport terminals. Possible, of course, but physical delivery would not be possible air-side (i.e. through security) and, to be honest, there isn’t much shortage of restaurants of coffee shops evident in airport terminals in any case.
Langton Comment. See Premium Email
• The Sun reported a poll as suggesting yesterday that ‘Brits are willing to carry a vaccine passport if it means pubs and restaurants can reopen sooner.’ It says ‘some 62 per cent say they would be happy to carry one for all circumstances – with a further 22 per cent willing to have one for foreign travel.’
• Drinks Business is questioning whether there could be a boom in demand in the on-trade once operations are allowed to recommence. It says ‘after a year of lockdown, there is huge pent up demand for socialising.’
• A survey conducted by Wine Paris and Vinexpo Paris has suggested that 55% of wine merchants reported an increase in sales last year.
• Ireland’s pubs may not reopen until the summer says PM Micheal Martin.
Company & other news:
• Foodservice analyst Peter Backman points out that ‘virtual brands are getting a lot of exposure at the moment.’ He says these operations, which do not have bricks and mortar exposure, come in two main shapes. First, existing physical operators who wish to offer a different food type or brand and second, operators who only have a virtual brand. The motivations for both of these groups are similar, i.e., to drive more revenue from existing assets.
• Restaurant chain German Doner Kebab has said it intends to expand and add up to 1,800 jobs in the UK.
• Fuller’s is offering a Home Sunday Roast box for Mothers’ Day. It says ‘each box also comes with a complementary bottle of English sparkling wine from Laverstoke Park Farm – one of Fuller’s favourite suppliers – for the Mum in your life.’ The box costs £120 for four people or £155 for six.
• The NIESR has produced work for Channel 4 suggesting that the number of ‘destitute’ households rose from 0.7% in 2019 to 1.5% in 2020. The NIESR reports ‘as a result of lockdowns, levels of destitution seem to be rising across the country. But what’s terribly worrying is that in certain regions – in the North West in particular – we might see some 4, 5 or 6 per cent of the population living in destitution.’
HOTELS & LEISURE TRAVEL:
• See comments on un-lockdown above. The government is to report on when international travel could resume. A report is due by 12 April
• Travel company shares sharply higher. TUI and Jet2 both up over 8%. Hostelworld up 7%, On the Beach up only 2%.
• The Telegraph reports that MPs have been told that the UK economy could lose £18 billion if the current restrictions on international travel last into summer
• Royal Caribbean has reported full year 2020 numbers saying ‘the COVID-19 pandemic is having a painful and profound impact on our world and our business; unquestionably, this crisis is the most difficult in the Company’s history.’
• It says the group lost $5.8bn in 2020 or $27.05 per share. This compares to a net profit of $1.9bn in the prior year. The Q4 loss was $1.4bn. CFO Jason Liberty says ‘these results reflect the staggering impact that the pandemic brought to our Company and the whole industry during 2020.’
• RCL says it ‘estimates its cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations.’ The company says ‘we remain focused on improving our liquidity position, managing our operating expenditures and ensuring that our family of brands is ready for the return to service.’
• Re 2021 outlook, RCL says it ‘cannot reasonably estimate its financial or operational results. Notwithstanding the foregoing, the Company expects to incur a net loss on both a US GAAP and adjusted basis for its first quarter and the 2021 fiscal year, the extent of which will depend on many factors including the timing and extent of the return to service.’
Langton Comment. See Premium Email
• Boeing 777s with the same engine as the one that caught fire and partially fell to bits over Denver will be temporarily banned from entering UK airspace says Grant Shapps.
• Orders for new aircraft virtually dried up in January reports trade organisation ADS. Some four orders were received, down from 296 in January 2020.
• Pure Gym has told the BBC ‘we are burning about £500,000 a day and that’s the average over eight months of closure.’
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