Langton Capital – 2021-03-12 – PREMIUM – R rates & reopening, tech, delivery, jab passports, Hollywood Bowl etc.:
R rates & reopening, tech, delivery, jab passports, Hollywood Bowl etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Since we’ve just had to pay over seven hundred quid for an emergency delivery of the heating oil a certain person forgot to order, I’ve been considering supplementing my income by suing somebody.
I’d sue myself if I thought I was adequately insured but, as that isn’t the case, the hunt is on for a deep-pocketed villain who wouldn’t miss a bob or two and a shiny suited lawyer who’ll not ask too many awkward questions and work on a no-win, no-fee basis.
And, whilst I haven’t found a lawyer, the villain looks like Microsoft.
Because, entirely uninfluenced by its pocket-depth, I’ve decided that its grammar checker is a workplace bully that has been damaging my mental health and has turned me into a grumpy and irascible old curmudgeon.
Not that anyone who knows me has noticed a change on that front but, when the grammar checker tells me to shorten sentences or change my word order, it’s destroying my quality of life, eroding my human capital, and giving me an ulcer.
Must be worth seven hundred quid of anybody’s money. Well, we’ve made it through to Friday so let’s move on to the news:
ADVERTISE WITH US:
Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.
CHANGED EMAIL FORMAT:
The Premium Email is unchanged. The Free Email is now written and pre-sent the evening before. It should include much of the news but not any breaking stories from the morning that it is sent such as company releases, nor Langton comment. See Twitter for in-day comment.
PUBS & RESTAURANTS:
Covid & the path to reopening:
• The NIESR has opined on the R rate & various other Covid stats, and suggests that the path to a 12 April reopening for non-essential retail and for pubs & restaurants out of doors looks to be clear (at least, at the moment).
• The NIESR says the R rate looks to have risen to 0.9 by 8 March from 0.8 a week before, this as a result of schools returning (probably).
• Nonetheless, it says ‘based on our model, by 12th April when non-essential retail is scheduled to reopen, we expect trend daily cases to be around 900, admissions around 100 and deaths below 50.’
• These numbers would seem to be in line with government modelling and would allow the journey towards reopening to continue.
• Langton comment: We have a race on our hands between vaccinations and the slackening of restrictions.
• The return to school can only increase infections but, as the more vulnerable in society are inoculated, the impact on national health should be reduced. The NIESR says ‘to the extent that the re-opening [of schools] increases transmission these numbers are likely to increase. On the other hand, these numbers could decrease to the extent that the vaccination programme reduces transmission. It will be interesting to see which of these effects dominate in the subsequent data.’
• Right, well that doesn’t conclude much, either way, but it does leave us broadly on target for a partial reopening of hospitality in just over four weeks’ time.
• The NIESR says ‘in the period ahead, contacts and hence transmission can be expected to increase and our forecasts for daily cases is likely to pick up the effects of school reopening in about one to two weeks. Looking back, in combination with the prevailing lock down our forecasts for admissions and deaths have adapted to factor in the efficacy of the vaccine in limiting admissions and deaths. Looking forward, the key will be the trade-off between increases in transmission due to schools reopening and the continued reduction in admissions and deaths to be expected as the vaccination roll out proceeds at pace.’
• Lumina Intelligence says ‘there’s been a shift in older consumers’ behaviour over the past few months due to the ongoing lockdown, but the big question is whether these change will stick with their new found freedom.’
• It says older consumers are becoming heavier users of technology. Specifically, Lumina says ‘for the 4-weeks commencing 2 November 2020, 22% of foodservice participants aged 55 or above ordered their food or drink online or via a delivery app, as opposed to visiting a physical site. Comparing this to the latest 4-week period commencing 25 January 2021, delivery share has jumped to 30%.’
• Lumina concludes, to the extent that a conclusion is possible, that ‘the latest lockdown accelerated a pace of change within digital ordering not seen before in this age group. Reluctant to leave their houses during the winter pandemic-peak, and bored of home cooking, these consumers were forced into a route to market they may not have considered before.’
• Langton comment: How much will stick is, indeed, the £7bn question as far as Deliveroo is concerned. Lumina says the ‘route to market’ (i.e., may we visit restaurants or, if we don’t want to cook, do we have to order takeaway) will change when lockdown ends.
• It says ‘we do not expect complete reversal. With nearly one quarter ordering their delivery via Deliveroo or Uber Eats, we can assume that these apps are on their smartphones and will remain on their smartphones going forward – ready for them to tap into in the future, when they never had been before.’
• The question here is how much value is there in the supply chain and what is sustainable. The price paid by the delivery customer has to cover the food, its preparation, its delivery and profits for all three or maybe two companies involved (and a living wage for the delivery person). Without a consolidated and vertically integrated supply chain, this may be a stretch.
• A new Tracker service from CGA reveals that sales of deliveries and takeaways from the UK’s leading hospitality groups have more than tripled over the last 12 months. The Hospitality at Home Tracker indicates that the combined value of delivery and takeaway in February 2021 was 317% more than in the same month in 2020. The volume of orders was 19.6 million—well over double the total of 9.1 million in February 2020. With the value of sales growing significantly faster than volume, it demonstrates a big uplift in average spend.
• Langton comment: CGA says its Tracker ‘is an important new source of data and insight for the sector, providing monthly reports on the value and volume of sales with year-on-year comparisons. It will also set out splits between delivery and takeaway sales, and between food and drink revenue.’
• It says ‘once the current lockdown is lifted, the Tracker will reveal the balance between eat-in, delivery and takeaway sales. It complements CGA’s Coffer Peach Business Tracker, which has monitored total sales across more than 10,000 sites of leading restaurant and pub groups since 2009.’
• This is certainly an important area with many operators keen to know how much of the shift to delivery will stick after lockdown. Restaurant Group earlier this week said that it was investing in delivery-only assests.
• CGA says ‘deliveries, takeaways and at-home meal kits have been a lifeline for hospitality in an immensely challenging market, and our new Hospitality at Home Tracker will provide the best insights yet into their sales. Delivery and takeaway was already a fast-growing trend before 2020, but we are seeing more and more consumers embracing it and the movement is very likely to continue, albeit without the ferocity of the past 12 months.’
• There has been a debate as to whether consumers are a ‘coiled spring’ waiting to spend or whether much of the money ‘saved’ during the pandemic, hasn’t gone into the pockets of the middle and upper middle classes, where it might be saved or spent on a holiday in Tuscany.
• And there will be a lot of competition for share of wallet. Propping up the housing market soaks up cash that might otherwise be spent and there is news below (in Finance & Markets) that 40yr mortgages are making an appearance.
• Langton comment: We’re not here to speculate on house prices but, when Tokyo introduced multi-generational mortgages, where children & grandchildren would take over the mortgage debts of their forebears in the late 1980s, the property market had gone too far.
• Looking at 40yr mortgages and stamp duty suspensions etc from the consumption point of view, they are encouraging money into the property market where it may rise in value or fall in value but, what is certain, is that it is locked up.
• M&B has announced this morning that, after its placing last month, 166.9m new shares will be admitted to the market this morning.
• Synergy Grill is to introduce a new range of grills at the Specifi Virtual Next trade show. It is offering outdoor grills that could be useful given outdoor opening next month.
• Stonegate has announced it has ‘been donating dozens of laptops to its team members, who have been home schooling children, that do not have access to a computer.’
• Gordon Ramsay is to launch his own range of California wines, which will be sold in his restaurants and online.
• John Lewis has said it does not expect to reopen all its department stores once it is permitted to do so. Eight stores could remain shut.
• Vegan Business Tribe is fund raising on Crowdfunder.
• Of course, it is just a function of the calendar, but comps are about to get a lot easier. This will be the case for almost all leisure operators. At the moment, however, there are no sales at all, for many pubs & restaurants.
• Camden Market to launch its first-ever neighbourhood pub and restaurant, The Farrier. The 90-cover pub and restaurant will have a modern rustic theme.
HOTELS & LEISURE TRAVEL:
• Transport secretary Grant Shapps says the government “will introduce” a form of travel certification. The Global Travel Taskforce’s report, that is currently taking place, will be made public on April 12.
• A poll conducted by Euronews has found significant differences in attitudes towards ‘vaccine passports’ across various European countries. Some 69% support the idea in Great Britain, alongside 65% in Italy and 53% in Germany. Only 39% of French citizens polled were in favour of the idea.
• Some 32% of those asked in France either oppose or strongly oppose the idea – compared to only 12% of those asked in GB.
• IATA has found that 72% of those polled believe they will travel less on business post the Covid pandemic.
• In line with out comments yesterday, IATA says ‘people want to get back to travel, but quarantine is the showstopper. As testing capacity and technology improves and the vaccinated population grows, the conditions for removing quarantine measures are being created. And this points us again towards working with governments for a well-planned re-opening as soon as conditions allow.’
• France is to row back on its Covid border restrictions for a number of countries, including the UK. Visitors will still need to test negative for Covid-19 before they travel to the country reports Sky.
• Singapore-based ride-hailing company Grab is reported to be in talks about a stock market listing in the US that could value the company at $40bn.
• TUI-owned Marella Cruises is to extend the cancellation of sailings into the summer, until at least June 30. The company says this is due to the “ongoing uncertainty” regarding leisure travel restrictions
Capacity & making the best of it:
• Ryanair is putting on capacity from UK airports to Greece this summer
• Cunard, which is owned by Carnival, is to announce a series of UK voyages. Cunard president Simon Palethorpe says ‘with the UK Government confirming that domestic travel is close on the horizon, we are introducing a series of exciting, shorter duration holidays for Brits looking for the perfect staycation in Cunard luxury this summer.’
• Langton comment: Ships, as we know, move. So do aircraft – but hotels, pubs & restaurants do not.
• Hence the news that Carnival is to move a ship or two to the UK, where the vaccination programme is amongst the most advance in the world, is not a surprise. There are no signs yet of European airlines crowding the UK market but such a move may happen.
• Heathrow announced yesterday that passenger numbers fell by 91% in February to below 500,000 – the lowest since 1966.
• Trainline has reported that its revenues fell by nearly 75 per cent last year. Given that January and February would have been about normal, virtually all of the fall would have come in the last 10mths. Arithmetically, that suggests revenues in the last 10mths of the year could have been down by 85% to 90%. Trainline says with a straight face ‘the last twelve months have clearly been challenging for the industry.’
• Travel Weekly reports ferry operators as claiming that bookings have more than doubled since the government’s Covid exit roadmap was revealed.
• PE houses Apollo and Reverence are to sell timeshare company Diamond Resorts International for $1.4bn
• Netflix is reported to be considering a crackdown on password sharing. The BBC reports the company as saying ‘this test [of a password-sharing banning system] is designed to help ensure that people using Netflix accounts are authorised to do so.’ The company has yet to decide whether to roll this out across its network.
• Hollywood Bowl Group announced last night that it was to place £30m of new equity shares in order to ‘allow the Company to invest in new centre opening opportunities, resume its planned revenue generating and cost saving capex programme in existing centres and to strengthen the balance sheet.’ The placing was conducted through an accelerated book-building process.
• BOWL says it ‘saw strong customer demand and better than expected performance in August 2020 and September 2020 upon reopening, despite capacity and trading restrictions. Trading in August represented 69% of prior year revenues, with centres permitted only to have 50% of lanes in use at all times.’
• BOWL says that ‘whilst spend per game was impacted by the increased restrictions including: maximum groups of six, 10pm curfew, table service for food and drink and overall centre capacity restriction levels, games volumes increased and over the half term period, trading reached 86% of prior year revenues’ by October half term.
• The company says ‘supported by the performance recorded when the business was able to trade, the Group expects strong customer demand upon reopening. The Board is confident that the Group can recover to pre-pandemic performance levels and, with the net proceeds of the Placing, can accelerate its profitable and highly cash-generative investment plans.’
• BOWL has announced this morning that the placing was successful with 13.04m new shares (8.3% of the company’s existing shares in issue) were placed at 230p per share to raise £30m gross. The discount was 8% to yesterday’s closing price.
• Shares in virtual gaming world company Roblox rose by up to 60% on their first day’s trade in the US. The company is valued at nearly $50bn (billion). The operator is a pandemic winner. Some 56% of its users are reported to be under the age of 13.
• Langton comment: Gaming is now a bigger market than music and film. It is only likely to get bigger and observers report that Roblox has increased its daily users by 85% in the last year with players spending 30bn hours on the company’s games annually. A funding round early in 2020 valued the company at $4bn.
• The idea of the valuation being $4bn at the beginning of a year and 12x that level just over a year later does seem a little extreme but, as small adjustments to growth projections can have a large impact on the net present value of a company, they are not entirely fanciful. The company, it has to be said, only has revenues of a short $1bn. This will likely grow rapidly.
FINANCE & MARKETS:
• The UK has further delayed border checks on some EU goods coming into the country in order to head off trade disruption. MP Michael Gove has suggested this is down to Covid saying the disruption has ‘lasted longer and has been deeper than we anticipated’.
• Lender Habito is offering 40yr fixed rate mortgages. Knight Frank has said that the Budget should deliver a strong boost to house prices.
• Sterling a shade better at $1.3965 and €1.1678. Oil higher at $59.22. UK 10yr gilt yield up 2bps at 0.73%. World markets broadly better yesterday but London set to open down around 11pts as at 7am.
• The RICS has said that the shortage in the number of homes coming up for sale could stymie a housing market recovery. It says ‘the measures announced last week by the Chancellor should help support the housing market over the coming months, with concerns around a cliff edge end to the stamp duty break eased.’
RETAIL WITH NICK BUBB:
Today’s News: There is plenty of other news out this morning, on top of the Hammerson finals and Mothercare’s move of listing to AIM. including the surprise news that the acquisitive JD Sports has shifted its focus from the US to Eastern Europe, via the acquisition of a 60% stake in the Polish sports footwear chain MIG, which has 410 stores trading as Sizeer and 50 Style. And Burberry has issued a surprise trading update for y/e March to flag that “since December, we have continued to see a strong rebound and now expect revenue and adjusted operating profit to be ahead of consensus expectations”, with LFL store Retail sales in Q4 expected to be in the range of +28% to +32%!
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 brighter picture for w/e March 7th…BDO Fashion LFL sales were over 4% down (with Store Fashion sales down by c91%), but Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as the Fashion retailers) were c4.5% up (down c81% in Store sales, but up 155% in Online sales). As usual, however, it should be remembered that the BDO index is simply an unweighted average of percentage changes in the sales of their reporting retailers, so it shouldn’t be taken too seriously, with, for example, the reported c56% jump in Homewares sales stretching credibility.
Next Week’s News: A slightly less busy week kicks off on Monday with the Dignity finals and the In The Style IPO first dealings. Tuesday then brings the Greggs finals and the ScS interims, whilst on Thursday we get the Ocado Q1 update, the MPC meeting news and the Nike Q3 and the Signet Q4 out in the US. Friday then brings the widely followed monthly GFK Consumer Confidence survey.