Langton Capital – 2021-03-18 – SSP, gig workers, revenge spending, YNGA, GAW, JDW, Punch etc.:
SSP, gig workers, revenge spending, YNGA, GAW, JDW, Punch etc.:
A DAY IN THE LIFE:
There’s no doubt that the coronavirus pandemic has put some of us into a Reggie-Perrin-like rut that it might be hard to climb out of. I mean:
• Alarm, two, three, dog, two, three, tea, two, three, breathe.
• Emails, two, three, Zoom, two, three, emails, two, three, breathe.
• Bread, two, three, fruit, two, three, emails, two, three, breathe.
You get the picture.
Maybe it was ever thus but, when you get to the point that you’re taking the same cups out of the same cupboard at the same time every day, perhaps it’s time to do something different.
Like have a coffee instead of a tea or even go wild and lightly toast your bread.
Aargh. Thank goodness nobody’s said ‘I could set my clock by you’ because, if they did, I wouldn’t be responsible for my actions.
Anyway, not alone in this, I’m sure so, two, three, onto the news, two three…
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SSP RIGHTS ISSUE:
SSP is the third leisure company (alongside JD Wetherspoon & Restaurant Group) to come to the equity market for additional funds twice.
SSP Group yesterday announced the launch of a fully underwritten Rights Issue to raise £475m and our comments thereon are set out below:
• SSP Group is launching a fully underwritten Rights Issue to raise £475m. The issue is 12 shares for 25 held at 184p per share. This is a 37.3% discount to yesterday’s share price. A material discount makes underwriting the issue easier. This has been done. SSP says that extending its bank facilities was dependent on getting the Rights agreed.
• The company says ‘alongside and conditional upon the Rights Issue, the Group has secured the extension of its bank facilities that were previously due to mature in July 2022 to January 2024, and secured waivers and modifications of the existing covenants under those bank facilities and its US private placement notes.’ It says ‘this holistic set of balance sheet measures will significantly strengthen SSP’s financial position and resilience, and will position SSP for the next phase of the pandemic.’
• The company adds ‘these measures will protect the business if the global travel sector experiences a more prolonged recovery from the pandemic, whilst under SSP’s base case scenario, they will strengthen the Group’s balance sheet and provide increased capacity for investment as the travel market recovers.
• SSP says ‘the Board is confident in the medium term outlook for the Group’s end markets, but the profile of the recovery remains uncertain.’ You can say that again. SSP adds ‘notwithstanding the rapid approval of Coronavirus vaccines and the global roll-out of vaccination programmes, new variants of the virus, vaccine supply constraints and various lockdown and travel restrictions mean that the pace of the recovery in 2021 has been delayed relative to the Group’s expectations towards the end of 2020.’
• CEO Simon Smith says ‘over the past year the Group has experienced an unprecedented period of disruption in the travel sector. Early and extensive action has enabled us to protect the business and put ourselves in the best possible position to emerge strongly as the market recovers.’ He adds ‘strengthening the balance sheet now will underpin the business if the recovery in the travel sector is slower than we anticipate and it gives us the capacity to invest in growth opportunities as we emerge from the pandemic.’
• The company adds ‘our current expectation is that the early recovery will be led by domestic and leisure travel from which we are well-placed to benefit.’ It concludes ‘looking further ahead, the actions we’re taking will allow us to capitalise on the recovery as well as future new business opportunities, enabling us to deliver long term sustainable growth for the benefit of all our stakeholders.’
• See premium email.
GIG ECONOMY – UBER RULING ON PAY, CONDITIONS & BENEFITS INCLUDING PENSION PAYMENTS, ACCRUED HOLIDAY PAY. COMMENT ON DELIVEROO ETC.:
• Uber said yesterday that it would guarantee its 70,000 UK drivers a minimum hourly rate alongside holiday pay and pensions. Sky reports that Uber Eats riders will be excluded from the deal but one of the obvious questions is: ‘is there a read across for Deliveroo?’
• The GMB says yes. Mick Rix at the union says ‘other gig economy companies should take note – this is the end of the road for bogus self-employment. Uber had to be dragged kicking and screaming to do the right thing, but finally they’ve agreed to follow the ruling of the courts and treat their drivers as workers.’ The Guardian quotes TUC general secretary, Frances O’Grady, as saying that other private hire companies now needed to recognise trade unions.
A few thoughts:
• Many have questioned whether the gig economy was a real thing. Was it a new innovation that would add value to workers, bosses and customers alike? Or was it exploitation akin to the piece workers of the 18th and early 19th century, who got to ‘spend more time with their families’ but who found themselves working by candlelight from 8am to 10pm every day?
• And what was the difference (other than an exciting new word) between the gig economy and zero hour contracts? The former was deemed new and innovative whilst the latter was deemed exploitative and was ultimately reviled and withdrawn by many operators, despite workers and bosses being broadly happy with the situation?
• Langton analysis & comment: It would appear that the pendulum is swinging and this has implications for operators and new-tech companies that have built their models around structures whose legality had not been established. See premium email for further detail.
PUBS & RESTAURANTS:
Covid developments – revenge spending:
• The Centre for Economics & Business Research and Scottish Friendly have suggested that around £50bn of the savings built up by British consumers over the last year could be spent in a spree between now and Christmas. Scottish Friendly says ‘the extra cash that many Brits have been fortunate enough to save over the past 12 months has been sat idle in bank accounts while people wait for restrictions to be lifted.’
• Scottish Friendly adds ‘a large proportion of Brits clearly intend to enjoy the opportunity to finally spend some of that cash over the comings months on holidays, meals out and in the shops. This will provide a welcome boost for many businesses, but it could lead to a sharp spike in prices during the remainder of 2021, which risks hurting many savers.’
• Research undertaken by Airship, Toggle and Sheffield Hallam University has concluded that 39% of consumers are ‘intending to eat and drink out more often when the lockdown restrictions are lifted, compared to before the pandemic.’ The study suggests 66% of 18-24-year-olds and 55% of 25-34-year-olds will spend more. Regionally, the North East and Yorkshire head the list of would-be high spenders.
• Airship’s Dan Brookman says ‘of all the industries that have been affected by Covid-19, the hospitality sector has been one of the hardest hit.’ He says ‘valuable relationships with even the most loyal of customers have, in most, cases been put on hold.’ Sheffield Hallam says ‘the findings of this report highlight how customers are keen to return to eating and drinking within hospitality businesses, once restrictions are eased. This gives operators a great opportunity to regain much-needed customer patronage and secure their loyalty.’
• Langton comment. See premium email.
Covid – Scotland:
• The MA says that ‘pubs in Scotland have been served a “bitter blow” after it was announced they can reopen from the end of April but cannot serve alcohol indoors.’ One of the main asks was a date. That has now been delivered (26 April). This is half way between the opening outside and inside dates in the UK and, in that light, it does seem to make some sense. The MA quotes the Scottish Licensed Trade Association as saying ‘with restrictions set to continue into the summer, businesses will still be worried about rising debt.’
Covid – deserted city centres:
• The All Parliamentary Group for Hospitality and Tourism is launching a consultation into the impact of and possible remedies for the decline in town and city centre business activity that has been accelerated by the Covid-19 pandemic. The consultation will solicit comments on the ‘hollowing out’ that has been happening across the country.
Covid – the death of cash:
• ATM oversight company Link has reported that withdrawals from cash machines has fallen by 43% over the period of the Covid pandemic, or by £37bn. The average withdrawal has increased from £67 to £84.
Covid – events:
• Events have been hit harder than most hospitality businesses and the BBC warns that some wedding plans between mid-April and mid-May may end up being cancelled. The Weddings Taskforce, an industry representative body, says ‘the roadmap [to reopening] indicated weddings and receptions could resume on 12th April. We have now discovered, not by being offered the information but by analysing the small print and repeatedly seeking clarity, that this is not the case.’
Company & other news:
• Fevertree reports that it ‘maintained position as number one brand in the UK retail mixer category, with 40.1% value share.’ It says it achieved ‘significant momentum in the US as the brand continues to gain traction with retailers and consumers.’ The group had a ‘very strong second half performance in Europe, driven by strong Off-Trade sales, importer restocking and GDP portfolio brand revenue.’
• Fevertree reports group revenues of £252.1m, down 3% on the year. Adjusted EBITDA is £57m, down from £77m and diluted EPS is down by 29% at 35.8p. Re 2021, the company says ‘whilst there remains continuing uncertainty relating to COVID-19, especially regarding the pace of both vaccine deployment globally and the lifting of restrictions that continue to impact the On-Trade across our regions, we believe it is appropriate to reintroduce guidance for 2021.’ It says ‘the first months of the year have seen a continuation of very positive trading in the Off-Trade across all our regions.’ It adds ‘we remain well placed across our regions and across channels as the recovery occurs and we expect the Group to deliver revenue growth of between 12% to 16% in 2021, with gross and EBITDA margins consistent with FY20.’
• JD Wetherspoon has announced that it is to open 60 of its pubs in Scotland from April 26. The company says ‘in accordance with Scottish government rules the pubs will serve food and non-alcoholic drinks inside the pubs and the pubs will also be able to serve alcohol (without the requirement for a meal) in external areas. It adds ‘we are looking forward to welcoming both customers and staff back to our pubs. Our pubs play an important part in the social life of their respective towns and cities and it is great news that they will be able to reopen soon.’
• Young & Co has updated on reopening saying it ‘Young’s expects to reopen about 140 of its managed pubs with outdoor spaces on or around 12 April. Assuming the Roadmap timetable is followed, the rest of the Company’s managed estate should open on or around 17 May with restricted indoor trading, ultimately leading to the Company operating under more normal trading conditions from 21 June. If this reopening schedule proceeds as planned, the Company expects to deliver a positive cash flow in May.’
• Young & Co says it ‘will not be paying any dividend for the current financial year.’ Regarding financing, the company says ‘the noteholders and the Company’s banks have agreed to extend the Company’s monthly available liquidity test up to and including March 2022, with a headroom requirement of £25 million.’ As a result of this and other moves, YNGA ‘will have committed available facilities of £255 million (inclusive of the £25 million required to meet the available liquidity test referred to above).’
• Punch Pubs has announced that it is investing £1m in Outdoor Spaces to help make the outdoors, indoors. It says ‘the success of the scheme will allow many pubs to open outdoors on the 12th of April, including plenty that previously would have not had the capacity. This has contributed to a fantastic total of 662 (72%) Punch pubs in England set to welcome guests back to their local on 12th April.’
• Shake Shack is teaming with Uber Eats to launch delivery nationwide via its ordering app for a 99c flat fee. There can’t be a lot of margin in that.
• Sky reports that McDonald’s is investigating claims Covid safety rules are being ignored in restaurants “as a matter of urgency”. The company says ‘we continue to work hard with our franchisees and third-party safety experts to ensure robust safety measures are in place and being followed, to help protect our people and customers. We have regularly reviewed and updated these procedures since the start of the pandemic.’
• Other: The All-Party Parliamentary Beer Group has launched an inquiry into the future of cask beer in the UK. Gordon Ramsay has acquired a second site for his burger brand Street Burger. Vinitaly has been cancelled for the second year running.
HOTELS & LEISURE TRAVEL:
• The EU is reported likely to OK vaccine passports.
• TUI says the recovery in the long-haul market could be ‘patchy’.
• Some 62,000 aviation and aviation-related jobs have been lost in the last year.
• STR reports that all-inclusive resorts are seeing increased demand.
• Top Hotel News says >100 new hotels, c20k new rooms, are due to open in London over the next few years.
• The Gym Group has announced full year numbers saying that revenue for the year fell by 47.4% to £80.5m. the loss before tax was £46.5m (2019: profit £14.0m) and the loss per share was 22.9p (2019: profit per share 7.7p). There is no dividend. CEO Richard Darwin says ‘during 2020 we demonstrated the resilience of our business and its culture even in the most challenging of times.’ He says the company froze subscriptions when closed. He concludes ‘we are ready to start rebuilding our memberships levels and growing our estate from 12 April, extending affordable fitness at a time when health and fitness has never been more important.’
• 888 has reported full year 2021 numbers saying that the group increased revenues by 52% to $849.7m with adjusted profit before tax of $116.0 million (2019: $53.2 million). Adjusted basic earnings per share was 27.3c (2019: 13.5c). The total dividend for the year is 18c (2019: 6c). CEO Itai Pazner says ‘2020 was a landmark year for 888.’ He says ‘we are pleased with our continued progress in the U.S.’ and says ‘we enter 2021 with strong momentum, with a record level of customers, and with a positive reaction to our suite of new products and innovations. As a result, as well as the Group’s strengths as a product-centric, responsible, and diversified operator, the Board believes that 888 has an outstanding platform to deliver continued strategic progress during 2021 and beyond.’
• Games Workshop Group yesterday announced that its Board had ‘declared a dividend of 45 pence per share, in line with the Company’s policy of distributing truly surplus cash. This will be paid on 30 April 2021 for shareholders on the register at 26 March 2021, with an ex-dividend date of 25 March 2021.’ GAW says ‘trading in the three months to the end of February 2021 has been in line with expectations, notwithstanding the majority of our UK and European retail stores were subject to Covid-19 closures and distribution disruption during the period.’
FINANCE & MARKETS:
• A poll of fund managers polled by Bank of America now sees inflation and a possible rise in interest rates as more of a threat to global markets than Covid-19.
• Sky reports trade friction between GB and Northern Ireland is adding costs and complexity to businesses
• The Guardian reports pressure is building for a formal enquiry into the government’s response to the Covid-19 pandemic. It says ‘senior doctors, government scientific advisers and a former head of the civil service have spoken out in favour of a public inquiry.’
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 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
• 18 Mar 21 Bank of England MPC meeting
• 19 Mar 21 JD Wetherspoon H1 numbers
• 19 Mar 21 GfK UK Consumer Confidence 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
• 15 Apr 21 Naked Wines FY trading update
• 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
• 6 May 21 Bank of England MPC meeting
• 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
• 26 May 21 C&C FY numbers
• 24 Jun 21 Bank of England MPC meeting
• 27 Jul 21 Campari H1 numbers
• 5 Aug 21 Bank of England MPC meeting
• 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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