Langton Capital – 2021-04-09 – PREMIUM – Covid passports, R rate, jobs, confidence & reopening plans etc.:
Covid passports, R rate, jobs, confidence & reopening plans etc.:
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A DAY IN THE LIFE:
Although I try to avoid mirrors where possible, I still catch sight of myself reflected in windows from time to time and, as if I didn’t know it, my hair needs cutting.
Of course I have to accept that the last two haircuts have been brave but reckless DIY attempts but, as I suffer from over-optimism mixed with a lack of talent, chronic impatience and a bad memory, I’m wont to do it all again despite the fact that previous attempts have left me looking something like a Kojak who, over time, has matured into Worzel Gummidge.
Apologies there to those too young to know who either character is but a quick Google will set you right and, despite Einstein’s observation that doing the same thing multiple times and expecting a different outcome is a definition of insanity, another attempt is in the offing because, after all, what could really go wrong?
Admittedly you can’t stick it back on but you can always cut it all off so, without further ado, we’ll get this sent out and have a hunt around for the clippers, secure useless promises that they haven’t been used on the dog recently and Bob’s your uncle. On to the news:
A NUMBER OF PRIVATE COMPANY ACCOUNTS:
Mindful that this may not be too useful (if there is limited read across) to an audience perhaps interested in listed shares, we’ll keep it brief.
Coaching Inn Group Ltd:
• The company, which had 17 units at the year-end below, has reported full year numbers to March 2020 to Companies House saying that the end of the period was impacted by Covid but that turnover rose, on the addition of new units, by 4.2% to £25.9m. The company reports that group EBITDA rose by 9.5% to £3.56m. The company reports a loss before tax of £646k compared with a profit of £2.6m in the prior year (which had benefited from a profit on the sale of fixed asset investments).
• Accumulated losses for the company widened to £3.0m from £2.2m and shareholders’ funds slipped from £13.0m to £11.8m. Coaching Inn Group says ‘the end of the financial year was heavily impacted by the effects of the Covid-19 pandemic which ultimately resulted in a nationwide lockdown being imposed in the UK from 23 March 2020. The weeks leading up to that decision also saw trade impacted due to the reduction in corporate and leisure travel. Prior to this, however, the business enjoyed its best trading period to date with the 12 months to the end of January 2020 seeing average weekly turnover within our core estate rising to £33,814, and average site EBITDA rising to £450,660.’
• The company says ‘while the estate performed well across the board, profitability was significantly improved due to the outperformance of our bedroom business which saw high levels of occupancy maintained at 78.6% in conjunction with an 8.4% increase in average room rates to £65.65 as we were able to see the benefits of prior year investments.’
• Re the Going Concern principle, the company says ‘having conducted its review, the directors are not aware of any material uncertainty which may cast doubt about the Company’s ability to continue as a going concern. Based on the circumstances described above, the financial statements are prepared on the assumption the Company is a going concern.’
Vagabond Wines Ltd:
• Vagabond has reported full year numbers to end-March 2020 to Companies’ House saying that revenue rose from £4.9m to £6.4m. It reports that the loss before tax was reduced, on lower interest charges, from £2.1m in the prior year to £1.7m in the year under review. The company, as at March last year, had £5.0m in accumulated losses since incorporation. Shareholders’ funds were a positive £1.8m.
• Vagabond says ‘during the year ended March 2020 the Company successfully opened 3 new venues, taking their total venue count from 5 to 8. Each c these openings contributed to considerable top line growth and are forecast to double the annual revenue of the business. The net venues opened in the last 6 months of the year and, as expected with all new openings, it took them took a number of months to start to contribute to the company profits.’ It says ‘despite the distraction of new site openings the existing estate continued to perform well with a 5% growth in turnover and 12% increase in EBITDA contribution.’
• Re the pandemic, Vagabond says ‘unfortunately the business was forced to close in March 2020 due to the COVID-19 pandemic. This has had a detrimental effect on the hospitality industry and continues to drive uncertainty in the market. The Company started an e-commerce business during this time to help continue to drive sales and maintain brand awareness, this has proved very successful and the Company are now looking to launch a subscription service in 2021.’
• Vagabond adds ‘the Company continues to explore new property opportunities and are due to open a number of new venues in the second half of 202 following the expected relaxation of restrictions.’ It says it has looked at the impact of the pandemic on trade. It says ‘any estimation of this reduction due to the economic climate is incredibly difficult to assess at the sign off date however any impact is not expected to affect going concern.’
Forest Holidays Ltd:
• Holiday cabin provider Forest Holidays has reported revenues for the year to February 2020 (now very dated) of £37.5m, up £0.7m on the prior year. The group earned £4.2m pre-interest but financing charges knocked it down to a pre-tax loss of £2.3m (2019: loss £4.1m). The company has accumulated losses of £19.5m (due to its financing structure).
• Forest says ‘the lockdown implemented by the UK Government and the consequential impact on holidays taken in the UK resulted in a marked decline in bookings and therefore revenue for the Company during 2020 and in early 2021.’ It says it has managed costs and, last year ‘following the re-opening of locations in July 2020, the Company experienced a. very strong period of trading performance, with high occupancy across all locations. Furthermore, bookings from April 2021 onwards are significantly ahead of prior years due to increased demand for holidays in the UK and customers choosing to book their holidays earlier.’
• The company says ‘the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the reasons outlined below. The directors have prepared forecasts for a period of at least 12 months from the date of approval of the financial statements, which indicate that the Company will have sufficient funds to meet its liabilities as they fall due.’
Bedlam Brewery Ltd.
• Bedlam has reported Total Exemption Accounts (i.e. those with only a balance sheet) to Companies’ House saying that the retained losses for the year to 31 March 2020 (very historic) rose by £491k to £1.35m. The company issued shares during the year and shareholders’ funds rose from £181k to £397k. It looks as though more equity was issued in June last year.
Kerb Food Ltd:
• Street food venue operator Kerb has reported Total Exemption Accounts (i.e. those with only a balance sheet) to Companies’ House for the year to March 2020 (again, now very historic) saying that retained profits rose from £184k to £353k.
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PUBS & RESTAURANTS:
• Representatives of the wider retail industry have joined hospitality bodies is saying that vaccine passports would damage their operations. The British Retail Consortium has warned that checking documents at the door would not work. The BRC says ‘while Covid status certification may play an important role in certain activities, such as international travel, our members are clear that it would not be appropriate or useful in a retail setting.’ It says ‘high streets and other shopping destinations rely on impulse and ad hoc purchases from customers who visit; this would be badly affected by the additional barriers to trade.’
• Langton comment: This is very much in line with our view that, where intrusion is at a minimum and spontaneity is important (e.g. a small retail purchase or ordering a pint at the bar), covid passports would represent a threat to trade. The silver lining, and there perhaps is one, is that guests (who may be self-selected older customers) might feel safer.
• What constitutes existing intrusion and what is an acceptable addition to it, remains the subject of debate. Booking a flight or a cruise and turning up 2hrs or 3hrs before hand to go through security is one thing, but popping into the newsagents for a paper or a bag of crisps is quite another.
The pandemic on the ground:
• There are concerns that the suggestion of causality between the Astra Zeneca vaccine and blood clots may damage confidence in the UK’s rollout programme. Though such a risk would still be justified on the balance of probabilities given the odds may not stop conspiracy theorists from suggesting otherwise. Meanwhile, the NIESR has looked again at the R rate and says that it has fallen to around 0.8. This is consistent with an increasingly vaccinated population and it suggests that the pandemic, in the UK at least, remains in retreat.
• Langton comment: This is reassuring as it leaves dates, such as 12 April, 17 May and 21 June intact. The NIESR says it expects deaths by the time non-essential retail and pubs (outdoors) are allowed to reopen ‘to stay well below 50.’ It says transmission may pick up post reopening but says ‘at the same time, expansion of the vaccination programme can be expected to reduce transmission. The trajectory that nets out these opposing trends will become evident in the weeks to come.’ The NIESR concludes that ‘hospital admissions and deaths due to Covid-19 continue their steady decline.’
Other Covid news:
• Kantar suggests that independent restaurants will trump the chains when consumers are allowed to visit venues again from next week. Kantar says this is consistent with people staying closer to home and visiting neighbourhood restaurants where they can. Looking back to the first of last year’s reopening days (4 July 2020), Kantar says ‘while not everyone rushed back to restaurants, pubs and cafés in 2020, the number of consumers dining out reached 95% of pre-pandemic levels by September.’ As outside trade will be allowed first, it says ‘this year, business owners and customers will be keeping an eye on the weather. We had both sun and snow over the Easter weekend and changeable conditions will have a big impact on initial sales as dining is limited to outdoor seating.’
• Sky reports that around a third of people who have managed to save money during the coronavirus pandemic are planning not to spend it, even as restrictions ease. It says ‘a survey found that 56% of people have managed to save during the UK’s lockdowns but 33% plan to sit on the money they have put aside.’
Company & other news:
• Loungers has this morning announced that it has extended its banking facility and has additionally given details as to its reopening plans. The company says it has ‘further strengthened its financial and liquidity position and that its lending banks…[which] have approved a 12 month extension to the incremental £15.0m revolving credit facility that was put in place in April 2020.’ The company says ‘this additional facility now runs to October 2022 and provides the Company with total RCF facilities of £25.0m. Covenant tests at 18 April 2021 have been waived and subsequent quarterly tests until 26 December 2021 have been re-set to provide appropriate headroom to enable a full resumption of the Company’s new site roll-out programme.’
• Regarding reopening, Loungers says ‘we intend to take a phased approach to reopening and will initially open 47 sites in England on 12 April for takeaway and external trading, and five sites in Wales on 26 April on the same basis, in line with the respective governments’ suggested roadmaps. Assuming no changes to the roadmap, we plan to re-open all of our English sites by 17 May and our sites in Wales later in May subject to confirmation from the Welsh government.’ The company says ‘we are approaching re-opening with enthusiasm and optimism, encouraged by how strongly the business traded last Summer and Autumn.’ As for the medium term, Loungers says ‘we anticipate – and are ready to return to – a run-rate of 25 new site openings per year during the course of the year ending April 2022, assuming no further Covid interruptions. The pipeline of new sites is exceptionally
• Loungers CEO Nick Collins says ‘it is really exciting to be back in some of the sites, preparing to open our terraces to customers on Monday. Whilst it is frustrating that we have to wait until 17 May to re-open more fully given the steps we have taken to ensure our business is Covid-safe, it does allow us to re-open gradually, bring our teams back from furlough and get the supply chain back up and running.’ He says ‘we expect to trade well once the estate is fully re-opened’ and adds ‘our suburban and market town locations, combined with our flexible, all-day model, mean we are well-positioned as we look to the future.’
• Markit has reported a sharp rebound in service sector activity, even before non-essential venues have been allowed to reopen. Its Purchasing Managers’ Index hit 56.3 in March, up from 49.5 in February and it says ‘around 66% of the survey panel forecast an increase in activity over this period, while only 8% predict a fall. This signalled the strongest optimism since December 2006.’
• Sky reports that Soho House ‘has taken a big step towards a stock exchange listing after kicking off a formal registration process in the US.’ It says the company this week submitted a confidential filing for an initial public offering in New York that will value it at more than $3bn. Sky points out that the company considered an IPO two years ago but did not pull the trigger. Whilst nobody from the comment would comment, Sky feels sure that ‘JP Morgan and Morgan Stanley are leading the Soho House IPO’.
• Constellation Brands in the US yesterday came out with full year numbers ahead of reduced expectations but the shares nonetheless fell by around 5% in early trading.
• 081 Pizzeria is to launch in Streatham. The company says ‘it’s such an exciting time to open a pizza restaurant despite the challenges posed by the lockdown – pizza has never been so loved in the UK as it is today.’
• We effectively comment on supply every time we talk about reopening plans, units that will remain permanently shuttered etc. But demand is also important. Business confidence leads to investment, which leads to jobs which boosts consumer confidence which drives spending decisions and here the outlook is arguably improving. Accountant KPMG reports ‘the UK job market is starting to rebound off the back of the Government’s plan to ease national lockdown measures over the coming months, with the highest rise in permanent placements in six years and a sharp increase in temporary billings.’
• Langton comment: KPMG continues ‘this is good news for businesses, job seekers and the UK economy, but employers are still identifying a big skills gap across sectors including IT, construction and retail, with demand and supply not matching up. That’s why as we start to look beyond the pandemic, businesses will be even more crucial in making sure prospective and current employees are adaptable, productive and ready for new challenges.’ Skills shortages are a problem in the medium and longer term but, in the short term, they help to drive wages higher. This could be exacerbated further if, as reported, a material number of would-be staff from the EU have returned permanently to their own countries.
• The Restaurant Collective, which says that its ‘ethos is to provide independent operators with a louder voice’, says that it is on a mission currently to ‘build awareness of the new initiative among the restaurant community and help to recruit experienced founder members’. CEO Paul Shaw says ‘the pandemic has shone a light on the importance of supporting local businesses and we’ve seen a shift in how people value and connect with their local independent restaurant, takeaway or pub. But these businesses are far from out the woods.’
• Nestle Waters in the US is to rebrand as Blue Triton Brands.
• TipJar and Trilo have allied to ‘help hospitality and leisure workers keep more of their hard-earned tips.’
• Morrison’s is to remove all plastic carrier bags from its stores over the next year, even bags for life.
HOTELS & LEISURE TRAVEL:
• Amadeus has undertaken a poll and finds that 91% of respondents would be comfortable using a digital health passport for trips but that 93% had some concerns around data storage. Some 42% said an app could improve their overall travel experience. Amadeus says ‘there is no doubt that Covid-19 will continue to shape the way we travel for the months ahead, just as it influences so many other areas of our lives.’ The responses vary across geographies. Some 45% of UK respondents were receptive whilst on 335 welcomed the idea in France.
• The Travel Trade Gazette reports that PM Boris Johnson is under pressure from a number of his own MPs not to let the cost of testing materially drive up the price of holidays. It later reports that ‘the UK government has pledged to bring down the cost of Covid testing for leisure travellers ahead of the likely resumption of international travel this summer.’
• TUI has announced that it is offering €350m of convertible bonds to investors. The company says it ‘intends to use the proceeds from the Offering to further improve its liquidity position as the Covid-19 crisis continues and subsequently for the repayment of existing financing instruments.’ It says ‘the final terms of the Bonds are expected to be determined and announced through a separate press release later today. Settlement is expected to take place on or around 16 April 2021. TUI intends to apply for the Convertible Bonds to be included to trading on the unregulated Open Market Segment of the Frankfurt Stock Exchange.
• The government has confirmed that a traffic-light system will categorise countries according to risk when international travel resumes. There is no word yet on dates or which countries will be in which category. People travelling overseas will have to take a test beforehand. Transport Secretary Grant Shapps says the rules are aimed at making trips safe and sustainable.
• IATA reports that the demand for air travel fell by 74.7% in February this year compared with February last. Not that it will be much consolation but the comps, clearly, are about to get much easier.
• Royal Caribbean Group has announced that it is extending the suspension of sailings from the US until June 30.
• Travel Weekly reports that Norwegian Cruise Line has no plans to operate UK sailings this summer, despite competitors doing so.
• CoStar Group in the US has reported that the US hotel industry last year saw a major shift from business to leisure travel. It suggests that this year could see more of the same.
• STR reports that U.S. hotel occupancy remained flat from the previous week in the week to 3 April. Comps are now much easier. Occupancy was 58% with room rates of $113 and REVPAR of $65.
• The Playhive at Stockeld Park near Wetherby promises to be one of Europe’s largest indoor play areas. The site is being created by the owners of the park with a £3.5m investment.
FINANCE & MARKETS:
• Markit reports that the UK Composite Output PMI rose to 56.4, up from 49.6 in February ‘and above the neutral 50.0 threshold for the first time in 2021 to date.’ Markit says that this was driven by the services sector. It says ‘UK service providers were back in expansion mode in March as confidence in the roadmap for easing lockdown restrictions provided a strong uplift to new orders. Total business activity increased at the fastest rate since August 2020 and this return to growth ended a four-month sequence of decline.’
• Markit also reports that the ‘recovery in UK construction output gained considerable momentum in March, supported by robust rises in house building, commercial work and civil engineering.’ The PMI rose to 61.7 from 53.3 in February. This is important for hospitality as construction is one of the areas where jobs can be put on (or working hours increased) most rapidly. This should feed through to spending power – and, crucially, to the inclination to spend. The IEA says that house-building in the UK is still at internationally low levels.
• The RICS says the decision to extend the stamp duty holiday lifted property sales and prices in March.
• Sterling weaker at $1.3733 and €1.1535. Oil up at $63.16. UK 10yr gilt yield down 3bps at 0.75%. World markets better yesterday and London set to open up around 9pts as a t6.30am.
RETAIL WITH NICK BUBB:
• Nick is taking a well-earned break and is back on 12 April.