Langton Capital – 2021-04-16 – Deliveroo, outside trading, R rates, confidence, Entain etc.:
Deliveroo, outside trading, R rates, confidence, Entain etc.:
A DAY IN THE LIFE:
These frosts are getting a bit persistent, aren’t they?
It’s meant to be minus two up here again overnight and the birds and the bees are getting a bit confused though perhaps it’s nothing out of the usual for April, that most schizophrenic of months.
Indeed a lot of bedding plants (I’m reliably informed, I try to stay away from them) say don’t plant out until the end of May in the north of England but surely it’s time for the little beggars to look after themselves rather than sit around expectantly and expect to be fed.
Yes, that’s plants I’m talking about rather than recalcitrant human beings, but I’m thinking a bit of tough love might be called for in the plant department, leaving the greenhouse doors open, changing the locks on the doors, that sort of thing.
Anyway, a big weekend for the pubs and the weather should be OK. Good as far as it goes so, before the weather forecast changes, let’s move on to the news:
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DELIVEROO – Q1 CONFERENCE CALL:
Following its Q1 update, Deliveroo’s shares slid somewhat and were testing new, post IPO lows of around 259p late in Thursday’s session. The company hosted a conference call for analysts and our comments are set out below:
Founder & CEO Will Shu made clear at the outset that the company would discuss sales and orders but not costs or other issues. Nonetheless, the questioning strayed into these areas. See premium email.
PUBS & RESTAURANTS:
Current trading post outdoor reopening:
• Operators only opened their beer gardens and outside spaces on Monday and feedback needs to be interpreted with that in mind. Comparisons with 2020 and not meaningful and comps with 2019 are influenced by the timing of Easter & the novelty value this time around. The weather is also an influence and any pent up demand has to be judged for its length and width, not just for its impact on a sunny Monday. That said, trading has been good and the trade has welcomed reopening with a gentle, fingers-crossed, hurrah. We hope to have something more substantive feedback after the weekend when the weather looks set to be fair.
• CGA has spoken positively about trading – but it was only looking at Monday (when trade was up 60%). One needs to be careful with the maths as many units are closed. A company that has both open and still-closed units could record ‘excellent’ numbers for pubs that are open, but this will not tell the whole story. The Guardian quotes one pub boss as saying that it was ‘like Christmas’. There have been photos of busy outdoor spaces and the like. The BBPA says ‘whilst many have gone back to their local for a pint, it’s not all roses in the pub beer garden. Even though they seem full, the reality is pubs are operating with just 20% of the space they’d usually have.’
• S4Labour says that sales were up 0.5% compared with 2019, with a 5.4% increase in drink sales making up for a 4.75% decline in food. Again, it is unclear whether this is just a measure for open pubs. The MA quotes Young & Co as saying ‘pubs with large outside spaces and gardens were in high demand after the roadmap announcement on the Monday 22 February with many south west London pub gardens booking up with 24 hours for the first weekend.’
• Langton comment: See premium email.
The R Rate:
• The NIESR has once again updated on the R rate saying that this was between 0.80 and 0.95 in the week to 9 April. This is up marginally on the previous week. In Northern Ireland, it was 0.95 to 1.10. These are total disease numbers but, with the over-50s now vaccinated, hospitalisations and deaths are lower than would otherwise be the case – though the potential for mutations is a function of total rather than deadly infections. The NIESR says the data ‘indicates that there has been some upward pressure on cases since the relaxation of the 29th March. Hospital admissions and deaths due to Covid-19 continue their steady decline.’
• CGA has reported that delivery and takeaway sales ‘continued to rise in March as consumers filled the void left by restaurant, pub and bar closures.’ It says its ‘monitor of at-home sales from the UK’s leading hospitality groups shows that orders in March were 9% up on February. As well as deliveries and takeaways, orders include at-home food and drinks kits, which have soared in popularity in lockdown.’ CGA says March’s sales were 346% higher than in the same month in 2019, when the sector was fully operational for eating out. Growth has been fuelled especially by deliveries, accounting for more than 62% of operators’ sales.’
• CGA’s Karl Chessell says ‘consumers who have been kept at home for so long have embraced hospitality at home to make up for lost eating and drinking out experiences, and orders have been a lifeline for many brands while their venues are shut.’ He adds ‘the big question now is the extent to which habits of lockdown have become engrained in consumers’ behaviour, as venues reopen and they start to return to eating and drinking out. For all brands, understanding the balance between out-of-home and at-home preferences, and adjusting marketing and operational activity accordingly, is going to be a key consideration in the months ahead.’
• The UK equalities watchdog has warned that Covid passports risk discriminating against some groups.
• Confidence. Clear Sight says ‘the last six weeks have seen little lasting change in the nation’s optimism.’ It adds ‘more than half of Brits do not expect normality until next year’ but says ‘a majority of 56% are confident in the Government’s handling of the crisis.’
• The Gig Economy. The ICAEW has considered the Supreme Court’s ruling that Uber’s drivers should be considered as employees and quotes law firm Eversheds Sutherland’s comments thereon. Uber said that it was a platform, simply putting drivers in touch with passengers. But, Uber set the fare, set the contractual terms without negotiation and restricted the communications between the drivers and the customers. This has implications elsewhere for Gig Economy operators.
• Eversheds says Uber also monitored to what extent drivers accepted jobs or cancelled jobs, which impacted the amount of work a driver got. Drivers were also reviewed, which fed back, ultimately, into their ability to use the platform. The solicitor says ‘drawing all that together, you’ve got someone who is subordinated to you and economically dependent on you.’ This ultimately tipped the relationship into an employer / employee situation rather than this being a self-employed relationship. The situation has not extended (so far) to Uber Eats. This will be watched closely by Deliveroo, which also has a very real interest in how the relationship between Gig Economy companies and their riders / drivers or employees, plays out.
• Rockfish and Salcombe Brewery Co. have expanded their existing collaboration and launched a new bar and dining area in Sutton Harbour, Plymouth. This follows a recent announcement by Salcombe Brewery Co. of a major investment at a new additional production site which will house their own bottling, canning and kegging lines and triple their brewing capacity.
• Copper Rivet Distillery in Chatham, Kent is to open a new restaurant beside the River Medway.
COMPANY RESULTS – COVERED IN YESTERDAY’S PREMIUM:
Deliveroo has updated on its Q1 trading to end-March 2021 and our comments are set out below:
• The co says that ‘growth accelerated for the fourth consecutive quarter, with Group orders up 114% year-on-year to 71m and GTV (gross transaction value) up 130% year-on-year to £1.65bn.’ GTV gives an idea as to the size of the company’s operations but it is not the same as company revenue.
• Deliveroo adds that its ‘monthly active consumer base has grown 91% year-on-year to 7.1 million monthly active consumers on average in Q1 2021.’
• It says that its ‘full year guidance for GTV growth and gross margin [is] maintained.’
• CEO Will Shu says ‘we are delighted with the Deliveroo Q1 results. Demand has been strong in both the UK&I and International markets driven by record new consumer growth and sustained engagement from our existing consumers.’
• He says ‘this is our fourth consecutive quarter of accelerating growth, but we are mindful of the uncertain impact of the lifting of COVID-19 restrictions. So while we are confident that our value proposition will continue to attract consumers, restaurants, grocers and riders throughout 2021, we are taking a prudent approach to our full year guidance.’
A bit more detail:
• The company says that it ‘made significant progress during the first quarter, delivering strong year-on-year growth in both orders and GTV.’
• It says ‘the Company has experienced strong progress across the UKI and International segments.’
• In the UK, GTV was up by 142% to £852m in Q1 with orders up 121% to 34m.
• Internationally, GTV was up by 119% to £794m with orders up by 108% to 37m. The company says ‘Deliveroo has executed well against geographic expansion targets.’
• In the UK, ‘the Company set out a goal to expand consumer population coverage from 53% at the beginning of 2021 to reach two thirds of the UK population by the end of the year. As of the end of Q1 2021, Deliveroo has reached over 60% of the UK population, adding over 6m people to its coverage. This increased coverage is laying the foundation for future growth.’
Staff and other issues:
• Deliveroo says that it ‘works with [it doesn’t use the word ‘employs’] over 100,000 riders globally. In the UK, rider satisfaction is at an all-time high of 89% as of the end of Q1 2021.’
• The company also ‘works with over 117,000 restaurants as of the end of Q1 2021, and continues to increase the availability and choice to consumers on a neighbourhood by neighbourhood basis.’
Other areas of expansion:
• Deliveroo Plus is the group’s subscription service. Deliveroo Editions is the kitchen only (no sit down) operation. The company ‘continued to bring partners such as Shake Shack and Dishoom to more Editions sites.’ Deliveroo Signature is the white label operation.
Outlook and guidance:
• Deliveroo says ‘growth across monthly active consumers, orders and GTV was very strong. It is difficult to say how much of this growth has been driven by the special circumstances of the current lockdown restrictions in some of our markets.’
• Some, we would suggest. And not an insignificant amount. Deliveroo says it ‘continues to operate in an uncertain environment given that the timing and impact of these restrictions being lifted in the coming weeks and months remain unknown.’
• It says it ‘expects the rate of growth to decelerate as lockdowns ease, but the extent of the deceleration remains uncertain.’
• It says it ‘is being prudent and maintaining the guidance set out in its Prospectus for full year annual GTV growth of between 30% to 40% and gross profit margins (as a % of GTV) of 7.5-8.0%.’
ENTAIN Q1 UPDATE:
• Entain updated yesterday on Q1 trading saying it has made a ‘strong start to the year with growth across major Online markets.’ The company CEO Jette Nygaard-Andersen says ‘this has been another very successful and productive quarter with Entain making excellent progress across a number of our strategic priorities.’ The CEO says ‘we saw excellent growth across all our major markets other than Germany where regulatory changes have impacted the market.’
• The company says ‘with some easing of Covid restrictions, we are delighted to be welcoming customers back into our shops’ and adds ‘in line with our expectations, the momentum from the end of 2020 has carried into 2021. Although Covid creates some near-term uncertainty, by maintaining our focus on the customer, providing them with great products and services, we remain confident and excited in our long-term prospects.’
HOTELS & LEISURE TRAVEL:
Travel but don’t travel. But travel. Clear?
• The government has been accused of opening the door whilst holding it shut. Vaccine passports, six hour queues, quarantine and traffic lights stuck on red might allow freedom without allowing travellers to exercise it. At least that is the allegation. Heathrow reports travellers are facing six hour queues for Covid checks and officials are warning this may be the case for returning holidaymakers later this year. Volumes are currently a fraction of normal levels.
• STR reports that Europe is the only world region showing increased hotel construction activity in comparison with the end of Q1 last year. It says that Germany (51,785 rooms) and the U.K. (36,919 rooms) lead Europe in total rooms in construction. STR comments on the US market saying that the hotel industry there ‘posted its highest demand and occupancy levels since the beginning of the pandemic’ in the week to 10 April with occupancy now back up to 58.7% and daily rates of $112.22. REVPAR was $66.99.
• Uber has been told to reinstate five British drivers who were struck off its rosta by robot technology. The Guardian reports that one of the drivers had worked in London for the company for six years and had completed more than 7,000 trips for the company before being summarily dismissed in September.
• Sky reports that Music Magpie will announce its intention to float this morning. Sky quotes city sources as saying the IPO could value the company at around £200m• MSC Cruises is to base at least 10 ships across Europe this summer.
• Firehouse Fitness is to open its third site in Sheffield.
FINANCE & MARKETS:
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RETAIL WITH NICK BUBB:
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 15 Apr 21 Deliveroo Q1 numbers
• 15 Apr 21 Entain Q1 update
• 15 Apr 21 Pepsi Q1 numbers
• 15 Apr 21 Naked Wines FY trading update
• 15 Apr 21 Heavitree Brewery AGM
• 22 Apr 21 Domino’s Pizza PLC AGM
• 23 Apr 21 Gear4Music results
• 27 Apr 21 Starbucks Q1 numbers
• 28 Apr 21 Carlsberg Q1 numbers
• 28 Apr 21 YUM Brands Q1 results
• 29 Apr 21 Molson Coors Q1 numbers
• 29 Apr 21 Texas Roadhouse Q1 numbers
• 30 Apr 21 Safestay General Meeting
• 4 May 21 Campari Q1 numbers
• 5 May 21 Ten Entertainment AGM
• 6 May 21 Bank of England MPC meeting
• 7 May 21 Intercontinental Hotels Q1 numbers
• Est 9 May 21 Barclaycard Consumer Spending (Apr)
• 10 May 21 Marriott Q1 numbers
• 12 May 21 Compass Group H1 numbers
• 12 May 21 Stock Spirits H1 numbers
• 12 May 21 TUI H1 numbers
• 12 May 21 Just Eat AGM
• 18 May 21 Britvic H1 numbers
• 19 May 21 Marston’s H1 numbers
• 25 May 21 Shaftesbury H1 numbers
• 26 May 21 C&C FY numbers
• 3 Jun 21 New River full year numbers
• 15 Jun 21 Vianet full year 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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