Langton Capital – 2021-04-08 – PREMIUM – Reopening plans, passports, rent arrears, Everyman, Carnival etc.:
Reopening plans, passports, rent arrears, Everyman, Carnival etc.:
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A DAY IN THE LIFE:
It’s been cold over the last few days as the wind has shifted around to the north and, as it happens, our house whistles in a very odd way when the air hits it briskly from that direction.
This had me thinking that someone was warbling tunelessly in the kitchen – and indeed in the back bedroom at the same time – for a short while. But I got over my confusion pretty quickly, unlike the dog, who is still convinced that two, three or maybe more, people are stalking around the house making strange noises.
However, the fact that they’re invisible and smell of nothing more worrying that snow on the North York Moors seems to have reassured him that they’re harmless. And, with that in mind, the mystery will be filed away as just another entry on that long, long list of things that he doesn’t understand but, as they don’t threaten his food supply or keep him awake at night, he can safely ignore.
Anyway, we’re pleasantly further through the week than would normally be the case, so let’s move on to the news:
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PUBS & RESTAURANTS:
The road to reopening:
• There are two major variables (and a whole host of minor ones.) We would suggest that the two major variables are dates and details and, whilst the 12 April, 17 May and 21 June dates remain in place, there is some uncertainty as to details. With discussion still swirling around the potential need for vaccine passports (not for 12 April, we are told – no promises beyond that) and just what the complete return to normality on 21 June means (although it almost certainly does not mean exactly what it says).
• Why the delay compared to non-food retail?
• Sacha Lord, who is the night time economy advisor for Greater Manchester, has been told that his legal challenge to ensure that hospitality should be allowed to reopen for indoor service at the same time as non-essential retail, will be expediated through the courts. As outdoor opening will happen on Monday, there are claims that the government is playing for time. The case will next be heard on 19 April.
• Why talk of passports when you don’t need them in shops?
• The Guardian quotes Loungers’ founder Alex Reilley as saying that the government is treating hospitality unfairly in that it is talking about Covid checks above and beyond those that will be taking place elsewhere in the economy. Reilley says ‘this feels like a measure which is unreasonably targeting our sector, they are not proposing this to go into a supermarket.’ He says ‘it is undemocratic, it’s potentially incredibly discriminatory, and it is requiring a sector which has suffered immeasurable financial losses through the last 15 months to have to adhere to yet another nonsense rule in order to operate ‘as normal’’.
• On the same subject, JDW’s Tim Martin says ‘Wetherspoon’s has no faith in this sort of trade-off or in any initiatives dreamt up on a daily or weekly basis, by a small group of ministers, under emergency powers, following discredited and counterproductive curfews, substantial meals, table service, moon-shots and other idiocies.’ There is no shortage of other operators that are of the same view.
• Langton comment: The government has reportedly been thinking about vaccine passports since December. It also has (presumably) access to more data than either UK citizens or the hospitality industry, and its thoughts must be (or should be) a little more focused than the vague comments made about passports suggest. Indeed, there may be a well crafted plan already worked out and, if there is, it would be nice to see it.
• And check that it has been costed, that an undue burden isn’t put on any one part of society (recently that’s been publicans & restaurateurs) and, very importantly, that it’s been sense-checked for unintended consequences. Re the latter we would suggest that there are risks including:
o You may alienate the unvaccinated, the young & future, would-be, customers. The status quo now is that there are no pubs. Everyone has adapted. If we want them to shift back, then additional barriers might be a problem.
o You might shift the dynamics in favour of the settee, Netflix, the park bench, BBQs and the like.
o You could disadvantage certain geographies, e.g. the West End, that depend on tourists, will not be able to serve them as they won’t have the right paperwork.
o Potentially, the cost structure of operators may be shifted (negatively) just as they are having to face up to their landlords and to rises in VAT and the reimposition of business rates.
o That this may be the straw that breaks….This either in the financial sense for the operator or in the ‘I just can’t be bothered’ reaction from customers.
o There are many other issues. You move the dial, things happen. It would be reassuring to be reassured that these things have been considered.
• More on passports:
• The CRG is on the case with potentially as many as 70 rebels. Labour is keeping its powder dry. The Lib Dems are anti and it is hard to see the Scot Nats doing much to help Mr Johnson out. So the potential for a Commons defeat is very much there but, and here’s the question for lawyers, would such a move actually require Commons approval or is it covered by the emergency powers that the government has granted itself and recently renewed.
• Langton comment. The CRG has said it can’t tolerate allowing us to slip into a ‘miserable dystopia of Checkpoint Britain’. Labour says passports would be ‘discriminatory’ but, of course, that’s the whole point of passports. The trade is anti (if possible) but can also see some silver linings if passports are imposed upon us. Confidence should be higher although the pool from which customers would be drawn would diminish.
• And that’s a sad and long term worrying thing. Old people could go to the pub and, if they could be bothered to get tests, so could younger people but, in reality, when changing the channel on the TV is often too much for them, would they be bothered? Thinking about it, passports are perhaps unlikely for day to day venues or for those requiring spontaneity. Where there is already a great deal of intrusion (cruises, flights etc) then they may be accepted.
• A side-issue. Passports have grabbed the headlines and occupied us all. Not to be too conspiratorial about it but we have to be alive to the possibility that it’s some kind of misdirect. We’ve heard that deaths from the Astra vaccine are ‘consistent with causality’ (but de minimis in the scale of things – and the vaccine is still a no-brainer statistically for most age groups) and we know that vaccination numbers are about to take a (hopefully temporary) nose dive. This may be nothing but we’re just raising it as a possibility as politicians have previously been advised that the noisiest of days are the best on which to bury bad news.
• Hopes for 21 June:
• The Morning Advertiser carries a number of comments from operators saying that ‘trading restrictions must be lifted this summer.’ At the moment, that is still the plan but, in reality, what did the PM mean, if anything, when he said that all restrictions would be lifted by 21 June?
• Langton comment. He almost certainly didn’t mean what the words suggest in their most literal sense. We know that social distancing is likely to persist, that masks may last for months if not longer and that passports are a possibility. There will be tweaks such as allowing ordering from the bar, legalising vertical drinking and putting sport back in pubs (even with a bit of shouting and singing from time to time) but it is beyond the gift of politicians to promise normality. However, we’ve been well and truly softened up by three lockdowns, by tiers and rules of six and the like so any little moves in the direction of normality would naturally be welcomed.
• The Times has suggested that the one metre rule could be dropped if customers provide proof of immunity or vaccination. This puts passports back on the agenda. Admiral Taverns’ Chris Jowsey says he is ‘very nervous’ about this as a possibility. Oakman’s Peter Borg-Neal says they would be ‘impractical, discriminatory and unnecessary.’
• Consumer demand:
• KAM Media has produced research suggesting that ‘2021 looks set to be the summer of socialising for many UK consumers, with 36% saying they intend to have friends and family over to their homes more often than pre-pandemic.’ The poll, conducted last week, finds ‘there will be a significant amount of socialising going on in homes if and when restrictions are completely lifted this summer. 39% of UK adults said they will have friends or family over for a BBQ. 32% will have people over for a dinner party.’ In addition ‘the research showed that 41% intend to have a picnic in a public place. 60% intend to visit a pub or restaurant. People are also open to visiting the cinema (27%), the theatre (16%) and also music festivals (12%.).’
• KAM’s Katy Moses says ‘there’s a definite buzz in the air as consumers begin to let themselves dream that the lifting of restrictions may be a reality this summer. It’s no surprise that the enthusiasm to get out and socialise is led by the younger generations but interesting when we look at social and leisure activities outside of pubs and restaurants, we start to see a difference in the sexes too! Women are much keener to go on picnics, have people round for BBQs and dinner parties than men. But both sexes are equally keen to get back to the pub this summer!’
Other Covid issues:
• Customers will be allowed inside pubs & restaurants to use the loos and to pay their bills.
• Lumina Intelligence says the ‘food to go market contracted by 46% in 2020.’ It says it will recover to ‘72% of its 2019 market value in 2021.’ Given that it’s April now, it had better get a move on.
• Rent negotiations .The Government has launched a call for evidence to monitor how commercial rent negotiations are going. This is one of several elephants in the room. The current Lease Forfeiture Moratorium expires at the end of June. Jonathan Downe of London Union quotes the government as saying ‘if there is evidence that productive discussions between landlords and tenants are not taking place, and that this represents a substantial and ongoing threat to jobs and livelihoods, the Government will not hesitate to intervene further.’ Downey refers to his own business when he says ‘four of the landlords of my five London sites refused any reductions in rent and expected full payment of arrears. Two of the sites, Dinerama and Hawker House, closed permanently, with 90 job losses. Milk & Honey + Model Market will be gone when the forfeiture moratorium ends.’
• Working from home. Mixed messages. Goldman is going back, Google is telling staff they will need to ask permission to work from home from September and accountant Grant Thornton has said the majority of its UK employees want to spend less than half of the working week in the office after the pandemic. Rival accountancy group PwC says it will adopt a hybrid model with staff in the office perhaps 2 or 3 days a week. JP Morgan boss Jamie Dimon has said that it will need “significantly” less office space in the coming years, implying that some staff will work at home on a permanent basis. The bank says it will need just 60 desks per 100 members of staff.
Company & other news:
• Deliveroo shares rose 5p or so yesterday as its riders threatened strike action and the FT reported that ‘Goldman Sachs bought about £75m in Deliveroo shares to prop up trading in the UK food delivery group after investors shunned its market debut.’ Deliveroo staff waved flags and set off red flares as they rode through the streets of central London near to the company’s offices. A spokesperson for the company said: ‘this small self-appointed union does not represent the vast majority of riders who tell us they value the total flexibility they enjoy while working with Deliveroo alongside the ability to earn over £13 an hour.’ The company adds ‘we are proud that rider satisfaction is at an all-time high and that thousands of people are applying to be Deliveroo riders each and every week.’
• Wendy’s is to open a site in Croydon, its first in London since it announced its return to the UK market.
• Papa John’s is to serve pizza from Staffordshire pub the Saracen’s Head. The pub says ‘Papa John’s pizza will be available for both collection and delivery orders.’
• Shake Shack has announced it is partnering with Chef Neil Rankin to Introduce a Vegan Crispy Shallot Burger
• Starbucks has announced that it is to scale up testing of its reusable cup rental service, Borrow a Cup, at five stores in Seattle this spring.
• Earnest Research has suggested that the $1.9 trillion American Rescue Plan stimulus package could raise restaurant sales by as much as 20% to 30% during the next several weeks.
HOTELS & LEISURE TRAVEL:
• Carnival Corporation yesterday reported Q1 numbers saying it had made an adjusted net loss of $(2.0) billion for the first quarter of 2021. The group in January reported a loss for calendar 2020 of $10.2bn. The company says it ended the quarter with $11.5 billion of cash and short-term investments. It says ‘cash burn rate in the first quarter of 2021 was better than expected as the company has identified and implemented opportunities to optimize its monthly spend.’ There is no trading comment as there is no trading. CCL does say ‘booking volumes for all future cruises during the first quarter of 2021 were approximately 90% higher than booking volumes during the fourth quarter of 2020.’ It says ‘cumulative advanced bookings for full year 2022 are ahead of a very strong 2019, despite minimal advertising or marketing.’
• CCL CEO Arnold Donald says ‘we are focused on resuming operations as quickly as practical, while at the same time demonstrating prudent stewardship of capital and doing so in a way that serves the best interests of public health.’ Mr Donald says ‘we have been positioning Carnival Corporation to return to serving guests an operationally stronger company than we were before. With an exciting roster of six new, more efficient ships by December and with lower capacity from the exit of 19 less efficient ships, we expect to capitalize on pent-up demand and achieve significant cost improvement from the greater efficiency of our fleet, along with ongoing streamlining of shoreside operations.’
• Croatia is reported set ready to welcome British travellers back to the country if they have proof of vaccination, a negative Covid-19 test or confirmation they have had the virus. This is a blanket concession as the country’s tourism minister Nikolina Brnjac says ‘EU citizens, as well as non-EU citizens, who have either recovered or been vaccinated or have a negative PCR or EU-approved antigen test, will be able to enter Croatia for tourist reasons.’
• The CDC in the US has said that cruising from the US could resume by mid-summer with sailing restrictions.
• Business Travel News has suggested that many businesses are taking a fresh look at their business travel needs. It says that combined pressure from the need to cut costs and the desire to reduce carbon footprints (and the fact that Zoom has done the heavy lifting recently), could lead to business trips being examined more closely to ensure that they are really necessary.
• Bloomberg has reported that travel in China is up to 95% of pre-pandemic levels.
• Everyman Media Group has reported full year numbers for the 52 weeks ended 31 December 2020 saying that ‘the year included 10 weeks of normal trading conditions, 25 weeks of full closure, and 17 weeks of disrupted trading due to COVID-19 restrictions.’ It says revenue fell from £65m to £24m with a loss before tax for the year of £22.2m versus a profit of £2.3m in the prior year. The company is reporting a loss per share of 24p versus a prior year profit of 2.4p.
• Everyman says it has a ‘strong balance sheet boosted by £16.9m fundraise in April 2020 and increased available banking facility to £40m.’ it says ‘new covenants [have been] agreed covering the period from year end to June 2022.’ Re the outlook, Everyman says ‘if the vaccine roll out continues as planned, we plan to reopen all our venues. We are highly optimistic for the coming year post-lockdown and continue to be confident in people’s appetite to safely socialise and be entertained; we believe we will be in a strong position once it is safe to welcome back our customers and teams.’ It says ‘we have made light refurbishments in a number of venues and upskilled staff by offering training during lockdown. Whilst uncertainty does of course remain around the future, we are eager to welcome back customers and look forward to providing them with an exceptional experience out, so deserved
• Everyman CEO Alex Scrimgeour says its teams have ‘minimised all costs during periods of closure, strengthened the Group’s balance sheet, worked with our landlords to achieve rent concession and not least, remained actively engaged with our people and customers throughout.’ The CEO says that, post opening, the company ‘will be in a strong position to bounce back, with a great opportunity to return to expansion once more when it is safe to welcome back our customers and our staff in just over a month’s time.’
• The longest and fastest zip wire in England, Skywire, is set to open next month at Bluewater.
• Claire Murdoch, national mental health director for NHS England, has suggested that gambling firms have profited during the pandemic but are leaving the NHS to “pick up the pieces” reports The Guardian.
• Virgin Media’s CEO Lutz Schuler is reported set to the enlarged firm that results from the merger with Telefonica’s O2.
FINANCE & MARKETS:
• The ICAEW reports Smith & Williamson as saying it expects to see ‘waves of insolvency this year as sector by sector, businesses feel the pinch.’ Government measures have been ‘hugely supportive’ but this has meant that a number of firms are being kept ‘artificially afloat.’ The ICAEW says ‘so far, hospitality, healthcare, and the charity sector have been among the worst-hit industries.’
• The IMF has suggested that global governments should raise taxes on the wealthy to help pay for the cost of Covid.
• Beijing now has more billionaires than any other city in the world per Forbes.
• Sterling weaker at $1.3761 and €1.1586. Oil a shade lower at $62.82. UK 10yr gilt yield down 1bp at 0.78%. World markets broadly better yesterday with London set to open up around 22pts.
RETAIL WITH NICK BUBB:
• Nick is taking a well-earned break and is back on 12 April.