Langton Capital – 2021-03-10 – Restaurant Group, Just Eat, consumer spending etc.:
Restaurant Group, Just Eat, consumer spending etc.:
A DAY IN THE LIFE:
Well, we might be cold and miserable, but at least we’re a few pennies richer as the oil for the boiler has run out and we’re consequently not using any.
And it’s my job to get up a ladder and have a peak in the tank every few weeks so I’ll be wearing this one for a while as, when the heating went off and I was despatched into the drizzle to have a look what had happened, the only thing where 2,000 litres of heating oil should have been, was an echo.
So, it’s no heating, no hot water, no showers, no shaving…
Meaning that we’ll look like smelly, bearded hermits within a few days. Only the chaps among us, of course, but our pleas to hurry up with the delivery were met with the response that ‘we’d love to but you didn’t pay your bill for a month last time…’
Also, it has to be said, my job. Oops and on to the news:
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RESTAURANT GROUP – FULL YEAR NUMBERS:
The Restaurant Group has this morning released FY numbers and our comments thereon are set out below:
• RTN is to raise a further £175m via an equity issue
• The company says it has seen encouraging trading when allowed to open with its Wagamama and pubs businesses ‘particularly strong’
• Revenue for the year is £459.8m, down from £1.07bn last year
• Adjusted EBITDA is £53m (2019: £137m) and the adjusted loss for the year is £87.5m, against a profit in 2019 of £74.5m
• The group is reporting a loss before tax of 13.4p on an adjusted basis against a profit per share of 11.9p last year.
• There is no dividend and the group is announcing that it is to raise £175m via a firm placing and placing and open offer
• The group says that its long-term financing has been secured post year-end, with £500m of new debt facilities in place and a flexible covenant package
• The group will host a webinar for analysts at 8am. For further details, see premium email
JUST EAT TAKEAWAY – FULL YEAR NUMBERS:
Just Eat Takeaway has this morning released FY numbers and our comments thereon are set out below:
• Just Eat reports revenue of €2.398bn, up from €1.557bn in the prior year.
• Adjusted EBIDTA is €256m (2019: €217m) and the loss before tax on an IFRS basis is €147m, up from €88m last year
• The company says ‘2020 was an exceptional year for Just Eat Takeaway.com.’ See premium email for more detail
PUBS & RESTAURANTS:
Reopening plans – the consumer:
• It takes two to tango. Fortunately, KAM Media reports 1-in-3 customers will return to hospitality while it is ‘outdoor only.’
• The snap poll found that Generation Z and younger Millennials are least likely to be put off by the prospect of ‘outdoor seating only’ with 43% of 18-34 year olds saying they’ll return, compared with 24% of over 55 year olds.
• KAM’s Katy Moses says ‘it’s positive that such a large proportion of potential customers are happy to dine and drink outside.’ She says ‘this reflects what we saw last July too when hospitality first re-opened. The weather will obviously have a huge impact too.’
• The research found that a further 26% of UK adults intend to wait for pubs and restaurants to re-open with indoor seating and service before they visit them. And a further 33% said they are not planning on visiting pubs or restaurants at all for the foreseeable future due to Covid-19. This figure was 42% for the over 55s
• KAM says ‘most of our research throughout the pandemic has pointed to the fact that older customers are being more cautious, for obvious reasons. It seems that despite the vaccination programme, these customers are still less likely to return to hospitality right away. It is likely that many have also got used to staying at home, helped along by all the fantastic new ‘hospitality at home’ options, operators will not only need to make them feel safe but also remind them what they’ve been missing.’
• KAM says consumers are much more frustrated and bored than they were coming out of Lockdown 1.0, ‘which is a huge opportunity for hospitality to be a saviour in the eyes of its customers and give them something to smile about once lockdown measures lift again.’
The consumer, historic data:
• Barclaycard comments on historic spending saying that consumers spend 13.8% less in February this year than they did last. Barclaycard says ‘spending on essential items grew 5.3 per cent year-on-year as online grocery shopping surged. Food and drink specialist stores, which includes butchers, greengrocers and fresh food box services reached a record high of 63.3 per cent growth.’
• Spending on non-essentials dropped 22.1 per cent, as much of the high-street remained closed. Barclaycard manages to say ‘despite a very challenging environment, it’s inspiring to see many retailers remaining resilient and doing what they can to maximise online sales while physical stores remain closed. In addition, as we all spend more time at home, we’ve seen home subscription services, fresh food boxes and meal-kit services become a popular mainstay of life in lockdown.’
• Barclaycard reports that confidence in the wider UK economy in February rose to its highest point in the past 12 months
• A few features. Food spending is covered above. Spending at discount stores was up 32.3 per cent, takeaway spending was up 30.0 per cent and DIY spend was up 10.3 per cent. Less good news for leisure. Spend on hospitality & leisure was down 68.9 per cent, travel spend was 82.3 per cent lower and spending with airlines was down by 86.3 per cent.
• Barclaycard reports that confidence in household finances held up at 68 per cent, with more than two fifths (42 per cent) of consumers saying they have saved more money than usual since the pandemic began.’ See comments on saving below.
• Langton comment. See premium email.
The consumer’s ability to spend:
• Former Bank of England deputy governor Charlie Bean has said that there may not be a spending boom once lockdown measures have been removed.
• Mr Bean says that much of the £180bn in extra savings has been accumulated mainly by retirees and higher-paid workers during the crisis – and these demographics may not be amongst the most keen to spend.
• Langton comment: See premium email.
• The opposite view has been put by the Bank’s Andy Haldane, who said last month that there may be a benefit from the ‘enormous amounts of pent-up financial energy waiting to be released, like a coiled spring’. That does seem a little optimistic.
• Bean concedes that ‘there may be a sort of euphoric post-pandemic effect for people… pleased to get out the other side and treat themselves whether to special holiday or more expensive meals or some fancy car or whatever it is, there may be a bit of that. But it’s reasonable to assume that the bulk of it will be saved.’ Although it might not benefit the hospitality industry in the short term, this does seem to be intuitively reasonable.
The consumer – where will they be (physically):
• BP has told 25,000 office-based staff that it expects them to work from home for two days a week post-pandemic.
• Langton comment. See premium email.
• BP says it hopes the hybrid approach will offer staff a “flexible, engaging and dynamic” way of working. This it may well do, but, for the coffee and sandwich shops, for the railway station newsagents, for the lunchtime pubs and for the after-work bars, the implications are not entirely positive.
• Peter Backman earlier this week said that the three groups that combine to make urban demand what it is, locals, commuters and tourists, are absent in many cases at present and the latter two groups may be slow to return.
• Brewdog President & COO, David McDowall, talks to Casual Dining saying that ‘there has been more change and challenge over the past 12 months, than at any point in our history. Just like most businesses, our strategy became very simple – survive, and protect livelihoods.’
• Regarding changes to the industry, Brewdog’s McDowall says ‘there will be a raft of M&A activity for sure, but for me the biggest opportunity is that this past year has reminded consumers how deep a connection they have with their favourite hospitality spaces.’ He says ‘we are not anywhere near out of the woods yet. Without the correct medium to long term business support, we are unfortunately facing many more business failures, and countless hospitality jobs lost.
• Hawthorn reports that it has teamed up with Vianet ‘to gain estate-wide insight.’ Vianet’s iDraught system ‘enables pub companies to intelligently monitor all aspects of their bars to ensure the very best in returns.’
• The Oakman Group has confirmed that it has acquired ‘six high quality public houses from the administrators of Seafood Pub Company Holdings Limited. In addition to the restoration of some 150 jobs the deal provides good news for suppliers including the UK’s sustainable fishing industry. The new acquisitions will strengthen Oakman’s aspirations to have 40 pubs in their portfolio by the end of 2021.’
DOMINO’S PIZZA GROUP F.Y. NUMBERS:
• This a part of the story in yesterday’s premium email.
• Domino’s Pizza Group has reported full year results for the 52 weeks ended 27 December 2020 saying that it has seen ‘strong trading through Covid-19’ and a ‘growth in system sales, profit and cash.’ System sales are £1.348bn, up from £1.211bn in 2019. The company reports underlying PBT of £101.2m, compared with £98.8m in the prior year. Underlying EPS is up at 18.2p vs 17.6p last year. The proposed final dividend is 9.1p. There was no interim dividend.
• DOM says it has seen a ‘strong UK & Ireland performance, with system sales of £1,348.4m, up 11.4% with like-for-like system sales, excluding splits, up 10.3% (9.3% including splits).’
• DOM comments on its relationship with its franchisees saying that it has ‘maintained constructive engagement with our franchisees and have made an attractive offer to the Domino’s franchisees in an attempt to reset relationship.’
• The group says its disposal of discontinued International operations is progressing. The group disposed of its Norway operation in May 2020 and contracts have been exchanged on the disposal of Sweden, completion expected in May 2021, with Iceland and Switzerland disposal processes ongoing.
• Re current trading, the company says ‘trading in the current financial year has started strongly with exceptional trading over the new year period as we recorded our highest ever sales week. Our delivery business continues to perform very well, and collection remains at around 60% of 2019 levels.’
• The company concludes ‘as the economy begins to reopen, we have invested in our capabilities to enable us to capitalise on the substantial opportunities ahead. I am confident that we can achieve our vision of being the UK and Ireland’s favourite food delivery and collection brand, and deliver great results for our colleagues, our customers, our shareholders and our franchisees.’
HOTELS & LEISURE TRAVEL:
• TUI has suggested that there will be aircraft overcapacity in the wake of the Covid-19 pandemic. CEO Fritz Joussen told a Berlin event ‘we have used the crisis to massively scale down our aviation capacity.’ He says ‘we should serve the essential and strategic routes but not all the routes available. We can purchase air capacity in the market.’
• EasyJet has put its summer 2022 flights on sale early and has increased the range of package holidays on offer
• Domestic cruises may be allowed to recommence from 17 May says MP Robert Courts.
• Greece is reported set to reopen its tourist facilities from 14 May. The country’s tourism minister says ‘all tourists will be subject to random testing similar to last year. We can use rapid testing and isolation will take place immediately without the hassle of moving 24 hours after you have settled in your room.’
• Audley Travel reports that the use of expert travel advisors has risen in popularity compared with peer reviews over the last year.
• The NBER in the US says that the average workday has got 48 minutes longer over the last year, with 13 per cent more meetings. The need for holidays may have likewise increased.
MORE LEISURE SNIPPETS:
• Hull based sandwich shop Relish is to offer product nationwide.
• PayPal is to buy Curv, a cryptocurrency startup based in Tel Aviv.
FINANCE & MARKETS:
• The OECD has increased its forecasts for economic growth both for the UK and globally. The OECD expects world growth of 5.6% with 5.1% in the UK.
• DOM. Says transformed management, in talks with franchisees, disposing of geographies, looking for 200 more stores, medium term system sales target £1.6bn to £1.9bn. Quite a few tasks to be getting on with there. Aim to ‘turbo-charge’ collection etc.
• WH Smith update. Bank facilities extended, cash burn reduced. Sales last month, High Street down 16%, Travel down 67%. Arguably, both numbers less bad than might be expected. But a visit to the High Street; you’re not exactly spoiled for choice, are you?
• Nick on ‘embattled West End landlord CapCo’ this morning. Brave face. Co says ‘we are optimistic about the enduring appeal of Covent Garden & London’s West End.’ Right. But when? Oxygen to a drowning man in 2hrs time isn’t much use. Just saying.
• Domino’s (strong trading, profits) & Deliveroo (£1.1bn of accumulated losses). Compare & contrast business models. Single prod vs one-stop shop, high vs variable margins (for the restaurant), engaged suppliers vs resentful ‘partners’. Are both models sustainable?
RETAIL WITH NICK BUBB:
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 4 Mar 21 William Hill FY numbers
• 4 Mar 21 Entain FY numbers
• 5 Mar 21 Marston’s SA Brains transaction webinar
• 9 Mar 21 Domino’s Pizza FY numbers
• 9 Mar 21 Barclaycard Consumer Spending Report (Feb)
• 10 Mar 21 Restaurant Group full year numbers
• 10 Mar 21 Just Eat FY numbers
• 11 Mar 21 Playtech FY numbers
• 11 Mar 21 Morrison’s FY numbers
• 15 Mar 21 Carlsberg AGM
• 16 Mar 21 Gregg’s FY numbers
• 16 Mar 21 C&C pre-close trading update
• 17 Mar 21 Hostelworld H1 numbers
• 18 Mar 21 Fever Tree FY numbers
• 18 Mar 21 Gym Group FY numbers
• 19 Mar 21 JD Wetherspoon H1 numbers
• 23 Mar 21 DP Eurasia FY numbers
• 24 Mar 21 M&B AGM
• 25 Mar 21 Compass Group H1 update
• 25 Mar 21 TUI AGM
• 29 Mar 21 Ten Entertainment FY numbers
• 30 Mar 21 AG Barr FY numbers
• 31 Mar 21 Various Eateries AGM
• 7 Apr 21 Saga FY numbers
• 8 Apr 21 Sportech FY numbers
• 8 Apr 21 Constellation Brands FY numbers
• Est. 9 Apr 21 Barclaycard Consumer Spending (March)
• 13 Apr 21 Just Eat Q1 numbers
• 15 Apr 21 Pepsi Q1 numbers
• 22 Apr 21 Domino’s Pizza PLC AGM
• 23 Apr 21 Gear4Music results
• 28 Apr 21 Carlsberg Q1 numbers
• 4 May 21 Campari Q1 numbers
• 7 May 21 Intercontinental Hotels Q1 numbers
• Est 9 May 21 Barclaycard Consumer Spending (Apr)
• 12 May 21 Compass Group H1 numbers
• 12 May 21 Stock Spirits H1 numbers
• 12 May 21 TUI H1 numbers
• 18 May 21 Britvic H1 numbers
• Est 19 May 21 Marston’s H1 numbers
• 27 Jul 21 Campari H1 numbers
• 10 Aug 21 Intercontinental Hotels H1 numbers
• 12 Aug 21 TUI Q3 numbers
• 18 Aug 21 Carlsberg H1 numbers
• 22 Oct 21 Intercontinental Hotels Q3 numbers
• 26 Oct 21 Campari Q3 numbers
• 8 Dec 21 TUI FY numbers
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