Langton Capital – 2021-02-24 – PREMIUM – Scot. reopening, home working, vaccine passports, holidays, Wm Hill etc.
Scot. reopening, home working, vaccine passports, holidays, Wm Hill etc.
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A DAY IN THE LIFE:
Bit busy today but here’s an observation; the OJ Simpson trial reportedly added $200m to US GDP in the year that it took place.
And, just a guess, but it could be running up to 5x that now, what with the mini-series, the books, the endless journalism, the bumph re his later Las Vegas trial, the costs of his incarceration etc. etc. and that does suggest that you sometimes can’t be sure that what you measure as a ‘good thing’, like GDP growth is, in fact, a good thing.
Not really going anywhere with that so, without further ado, let’s move on to the news:
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WHEN IS A HOLIDAY NOT A HOLIDAY?
• Domestic holidays will be legal from 12 April – self contained cottages will be available to let (but only to one family). Center Parcs and the cottage companies will be breathing a sigh of relief
• Overseas holidays are under review. A comment is expected by 12 April at the latest.
Demand – Bookings:
• Operators report a surge in bookings and the share prices of London-quoted TUI, Jet2 and On the Beach have been strong
• But the comps are against the same days in Feb last year and they don’t tell us too much
• It isn’t clear yet what kind of volume of demand there may be overall. Customers may be happy to sit on packed planes, especially if vaccine passports are introduced, but that remains to be seen
• Some bookings may be open to cancellation if would-be holidaymakers have second thoughts
Considerations (no2 is ‘supply’):
• First, it is not yet certain when or even if foreign holidays will be legal. The government has said that the dates proposed are ‘the earliest’ and it has said it will be keeping an eye on the level of infections and on variants
• Second, the inbound countries, Greece, Spain, Portugal etc., will clearly have a say in the matter. They will no doubt welcome the revenue, but they may have some concerns about inbound travellers moving about their countries
• This might be ameliorated somewhat on island destinations, the Canaries, the Balearics, the Greek islands etc.
• Third, when is a holiday not a holiday? It isn’t known whether or when beaches, restaurants, pools etc will reopen in resort. Some travellers may be confined to a hot hotel in an overseas resort rather than have some freedom in a cool one in the UK
PUBS & RESTAURANTS:
Scotland’s road out of lockdown:
• First minister Nicola Sturgeon has outlined the SNP’s plans for taking Scotland out of lockdown. There are fewer dates mentioned than was the case in England. The SNP says the reopening should commence in the last week of April but there will be a “progressive easing” of restrictions before then.
• It is hoped to lift the stay-at-home restriction in Scotland on 5 April. The ‘levels’ system will be retained north of the border. Ms Sturgeon says she expects to see a ‘phased but significant re-opening of the economy, including non essential retail, hospitality and services like gyms and hairdressers’ from the end of April. Scots Conservative leader Ruth Davidson said the statement “fell short of public expectations”. There have been suggestions that the proposals lack clarity.
• SIBA CEO James Calder comments ‘while it is welcome that pubs may be able to start to reopen in Scotland from the end of April, the tier system made it impossible for businesses to trade, with alcohol sales banned in level 3 and restrictions with a meal at level 2 along with curfews. Indicatively it looks like all of Scotland will move into level 3 from April 26th, making it impossible for any brewery to trade with pubs. If these restrictions remain as they are, then most pubs will have been unable to trade in Scotland for 8 months.’
• Mr Calder says ‘we need urgent clarity on what the content of the tiers are when we get more information in March. If no changes are apparent then Scottish brewers will need another round of the hugely beneficial Brewers Support Fund to get them through this crisis as the current funding can only help them through the next few weeks or so, with an average cash burn of £5,000 per month, per brewery.’
• The Scottish Beer & Pub Association comments that the announcement ‘raises more questions than it answers.’ It says ‘pub businesses across Scotland now have a lengthy and uncertain wait until mid March when details of the tier system will be announced. While we welcome the news that the government intends to provide additional support for business for four weeks after opening and a tapered support for businesses facing tiered restrictions, it is essential they strip out the complexity of the tiers introduced last year and make them easier to interpret and work with.’
• It says ‘for much of 2020 pubs in Scotland had to contend with onerous and unjustified restrictions which made it unviable to trade’ and says the Scottish government must ‘remove the arbitrary, and frankly, bizarre restrictions previously imposed such as curfew, no music and banning of the sale of alcohol. This is continued closure for pubs in all but name.’
More reaction to England’s unlocking plans:
• The Morning Advertiser quotes contacts as saying they are not ‘jumping for joy’ with some others saying the further delay represents a ‘huge blow’. Operators without outside space are particularly poorly placed. Vertically integrated brewers & pub operators (typically running pubs with beer gardens) are in a better position.
• Big Hospitality quotes sources as saying that hospitality businesses have said they are ‘paying the price for the Government’s mistakes.’
• Pressure is shifting from the PM to the Chancellor. Mr Sunak will present his first Budget (but by no means his first comment on Budget matters) on 3 March.
• The Daily Mail quotes Corbin & King co-founder Jeremy King as accusing the government of ‘gambling with the health of the hospitality sector’. He says ‘significant numbers of the businesses currently drawing down furlough money will never actually reopen because they are holed below the financial waterline.’
Other Covid-19 issues:
• PM Boris Johnson has said that city centres will ‘roar back into life’ when Covid is in retreat. He says there will not be a permanent abandonment of the office as face to face communication remains critical. The desire may be father to that thought.
• The PM says the home working revolution will not be permanent. He says ‘I don’t believe that this is going to mean a fundamental change to the way life in our big cities really works. The better remote communication gets, and the more people can see other talk on mobile devices, there’s a paradox – the more actually they want to see other face to face. I think London and our great cities will be full of the buzz and life and excitement again, provided people have confidence about coming back into those city centres.’
• Langton Comment. There is more to this than just office working. There likely will be a ‘return to work’ but it is all about scale. And then there are the shops to think about. Much travel into city centres is to shop and, if there are fewer shops, then there will be less traffic.
• The Telegraph reports that ‘trampolines, go-karts and crazy golf fill the gaps left by department stores.’ This is good as far as it goes but it is unlikely that such venues will have the drawing power as an anchor tenant that department stores did.
• They may be faddy and could be gone tomorrow. A comment thereon would be possible if we could see what rental deals had been arranged with landlords. We would consider it unlikely that a go-kart or crazy golf operator would sign up to a 25yr lease in the way that a shop may have done.
• Any experiential operator is likely to insist on break clauses as they will not know for certain whether their product has legs. Landlords may not be able to insist on long lease terms in the way that they once did. But they will be incentivised to fill void as the tenant will be responsible for maintenance and insurance and, when they are brought back, business rates.
• The Telegraph reports ‘landlords are increasingly seeking out “experiential” leisure operators similar to Gravity to fill shops and restaurants left empty by failed operators during the pandemic.’ And we would bet they are. But an experiential operator may fill a void in the same sort of way that a 5-a-side football operator fills a gap ahead of a landowner finding an alternative use for the space.
• All of this is interesting in and of itself – but it also has an impact on the cafes, coffee and sandwich shops in the vicinity. The volume of people pulled in may be reduced and, if they can buy food in the experiential venue, those that are drawn in may be less likely to spend in the surrounding F&B outlets.
• The Telegraph quotes contributors as saying ‘landlords are witnessing demand from smaller start-ups and fledgling brands keen to take advantage of the better rental terms on offer during the crisis.’ This is a recipe for hard work on the part of the landlord. Churn will likely be high, covenants not so good and lease terms will be lower. It is what it is.
• The Night Time Industries Association is calling on interested parties to write to their MPs in support of late-night operators. As it stands, nightclubs should be allowed to reopen from 21 June after 15mths of closure. The NTIA would like to see more support offered in next week’s Budget.
• There is to be a review into whether customers should need to show a ‘vaccine passport’ before entering pubs, theatres, restaurants etc. This would add cost for the operators – but it would also raise the price of refusing vaccinations and, if moves like this and the possibility that employers may be able to enforce ‘no jab, no job’ rules, the take-up rate for vaccinations may rise.
• PM Boris Johnson points out that there are potential privacy and discriminations issues to be considered. He says ‘we haven’t had stuff like this before, we’ve never thought in terms of having something that you have to show to go to a pub or theatre. So there are deep and complex issues that we need to explore, ethical issues about what the role is for government in mandating people to have such a thing or, indeed, banning people from doing such a thing.’
• Michael Gove will report on the issue on 21 June. Mr Johnson says ‘I know the fervent libertarians will object but other people will think there is a case for it.’ Opposition is likely to come from the right wing of his own party.
• CAMRA is ‘urging Chancellor Rishi Sunak to provide vital ongoing financial support for pubs, social clubs and breweries to help them cope with months of restrictions announced in the roadmap for England this week.’
• CAMRA National Chairman Nik Antona says ‘whilst offering some light at the end of the tunnel, yesterday’s roadmap confirmed several more months of lockdown for pubs and the breweries that serve them. Many locals won’t be able to turn a profit with many not being viable to open at all whilst restrictions like outdoor-only space and the table service requirement are in place in the coming months.’
• The chairman says ‘that’s why CAMRA are urging the Chancellor to make sure next week’s Budget commits to long-term, dedicated financial support for pubs, clubs and their supply chains as long as they aren’t operating at full capacity. As well as extending furlough and business rates holidays, our locals desperately need VAT to be reduced for both food and alcoholic drinks, with a cut in duty for beer served on tap to help our pubs compete with supermarkets.’
Company & other news:
• Caffe Nero. Sources have assured Langton that ASDA owners, the Issa brothers, have not purchased any debt in coffee chain Caffe Nero. Despite weekend press comment, the sources go on to say that no discussions re a transfer of debt ownership have taken place.
• Celebrity chef Gordon Ramsay has told The Sun that he lost £55m (in terms of turnover) during the coronavirus pandemic as his 35 restaurants nationwide leaked cash. He says ‘in December we had £10m worth of reservations wiped out overnight’ and he adds ‘as of 19th March to 3rd February this year we’ve suffered £57.5million worth of turnover down.’
• Ramsay says ‘lockdowns have caused utter devastation.’ He adds ‘having been through so much with the 2008 financial crash, then terrorist attacks and 9/11, when Covid first hit, we all thought it would be over and done with in a couple of weeks. But it’s been long-haul.’
• US operator Cracker Barrel Old Country Store has reported same-store sales fell by 21.9% for the second quarter ended Jan. 29. It says that off-premise sales grew 78% and now make up nearly a third of total sales. The company is to continue investing in its first ghost kitchen in Indianapolis.
• Swedish plant-based milk company Oatly is said to be considering a $10bn float. Oatly raised $200m last year from a group including a number of celebrities, actors and Starbucks founder Howard Schultz.
• Campari maintains that the Covid-19 pandemic could create acquisition opportunities for the company. Campari tells Reuters ‘there are a whole series of companies and brands that are suffering from on-premise closures … You never know, they might be interested in considering alliances with a player like us to reduce the risk.’
• Unilever and Just East have established the Kebab Alliance – a trade body to represent the sector’s interests. Founder of the British Kebab Awards Ibrahim Dogus says ‘kebabs are the fourth most popular takeaway in Britain, but this major food sector has never before benefitted from a collective voice.’
• Indian food delivery start-up Zomato is reported to have raised a further $250m, two months after closing a $660m funding round. The new investment gives Zomato a post-money valuation of $5.4 billion, up from $3.9 billion in December.
• Airship and Toggle are offering free online training for hospitality staff. Furloughed workers could benefit. The webinars will take place every Thursday at 1pm. Dan Brookman, CEO at Airship and Toggle, said ‘we know that lots of hospitality staff have been on furlough for a long time now, and are keen to help engage and motivate them through opportunities for learning.’
HOTELS & LEISURE TRAVEL:
• Travel companies turned in a more mixed stock market performance yesterday after their big gains on Monday. Just before the close, On the Beach was up 11%, TUI gained 2% and Jet2 was marginally lower.
• Business Travel News has reported a mixed reaction to England’s proposed plans re exiting lockdown. The clarity has been welcomed but there have been calls for the creation of a global travel taskforce.
• CEO of Airlines UK Tim Alderslade says ‘we’re grateful to the Prime Minister and Department for Transport for providing the clarity the whole sector was looking for that international travel can reopen this summer’ and the Airport Operators’ Association says ‘the Prime Minister’s recognition of aviation’s important economic role, in particular for businesses that rely on access to international markets or visitors to the UK, was welcome.’
• An inconvenient truth. World Bank chief David Malpass has said that all countries must be vaccinated to end the Covid-19 pandemic.
• Langton Comment: An interim solution, such as freeing an individual country of the disease, has to be greatly welcomed – but it may not allow a return to travel in the pre-2020 sense. Malpass says ‘let’s look ahead. We both need to resolve this crisis and that takes urgency and capacity, but we also need to make the investments that will pay off over the next decade and the next 50 years.’
• The UK government is to consider ‘Covid-status certification’ (vaccine passports) despite having ruled this out earlier in February. The government says ‘any such system will take time to implement. It will be heavily dependent on improved scientific understanding about the role vaccination plays in reducing transmission.’ That sounds like a kick into the long grass.
• Carnival has launched a public offering of $1 billion of ordinary shares saying that it will use the net proceeds from the offering for “general corporate purposes”.
• Marriott International has announced that Anthony Capuano has been appointed Chief Executive Officer and has joined the company’s Board of Directors, effective immediately. He succeeds deceased CEO Arne Sorenson. Mr Capuano was previously Group President, Global Development, Design and Operations Services.
• Domestic holiday company Center Parcs has announced that it will have all its sites open on April 12 when the second phase of major lockdown is scheduled to begin. The company has five villages across the UK and Ireland. It will be able to reopen lodges but not hotels or apartments and there will be a limit of one household per lodge, and restaurants will be open only for delivery service and outdoor drinks. The company cannot yet confirm if its Subtropical Swimming Paradise pools will be open.
• Spotify has announced plans to roll out a new high-end subscription service, called Spotify HiFi.
• UK competition watchdog the CMA has suggested that tech giants Google and Facebook have too great a share of the UK online advertising market. The two companies have a share of up to 80% of the online ad market in the country. The CMA says ‘we think it would be good if we got to a situation where others had a bigger share of the market.’
FINANCE & MARKETS:
• The UK unemployment rate rose to its highest level in c5yrs at 5.1% in the three months to December.
• Average pay excluding bonuses was 4.1% higher in the period than it was a year earlier. Pay including bonuses was up 4.7%, the fastest rate of increase since 2008.
• The NIESR says there was a ‘sharp drop in the first half and a strong rebound in the second half.’ It says H2 was ‘partly driven by the compositional effect of a fall in the number and proportion of lower-paid jobs in the private sector.’
• The NIESR says 5-6m workers are currently furloughed. It comments ‘to reduce the long-term scarring effects of the pandemic on the labour market, it is crucial that the vaccination programme continues to be rolled out at pace and fiscal support measures are not prematurely withdrawn.’
• The stamp duty holiday on some houses could be extended to June.
• Sterling higher at $1.4163 and €1.1659. Oil lower at $65.19. UK 10yr gilt yield up 4bps at 0.73%. World markets mixed on Tuesday with London set to open down around 50pts.
RETAIL WITH NICK BUBB:
• Today’s News: Fishing is not everyone’s cup of tea, as it were, but Angling Direct (which has a market cap of £60m) is doing well Online, notwithstanding the closure of non-essential stores and it has announced today that it expects to see 27% revenue growth in y/e Jan and is well placed “to benefit from the heightened interest in angling as customers seek to take advantage of its numerous wellbeing benefit”. And the high-flying Moonpig, which will get promoted to the FTSE 250 index in next week’s quarterly review, has announced that out of the five investment banks that worked on its recent IPO, it has chosen just one, JP Morgan, to be its corporate broker (leaving HSBC, Jefferies and Numis, inter alia, free to provide independent research on the business).
• This Week’s News: Tomorrow brings the ABF (Primark) pre-close update, the Howden finals, the Inchcape finals and the Shaftesbury AGM and, with February rapidly coming to an end, the embattled Card Factory is due soon to provide a “liquidity update”.