Debts, indoor reopening, staff & stock, market recovery, BOWL & other:

A DAY IN THE LIFE:

Well, I finally got my hair cut professionally last week.

I’d done the last two cuts myself (with an enthusiastic, ‘mirror, who needs a mirror?’ approach) and, as you can’t stick it back on and have to average shorter with every sweep of the razor, I’d ended up with every hair on my head the same, very short, length and, as it grew out, I was increasingly looking like a cross between Bully Beef from the old Dandy comics and Lord Sumption.

And I finally had to admit that, though Lord Sumption can get away with the mad old man look better than most as he’s recognised as a legal heavyweight, I didn’t have the same gravitas and was beginning to look, well, just mad.

Still, that’s a few quid saved over the last fifteen months and, as the pubs are finally open again, I know just the place to spend it. On to the news:

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THE ELEPHANTS IN THE ROOM:

Introduction:

• In the UK, if not in large parts of the wider world, Covid may be past its worst (in the absence of malign variants, that is).

• There are justifiable caveats, but it makes sense to look to the future, ask what the new normal will look like, etc.

• On the balance of probabilities:

o There is some pent up demand.

o Supply (the number of outlets) will be reduced and,

o There will be limited overseas travel this year meaning that it should be a good year for staycations.

• Which is great. But there are some elephants in the room. We’ll consider over the next few days (and not in any particular order of importance):

a) Labour shortages,

b) Cost and price inflation

c) Accrued debt (banks, bonds, landlord, VAT, supplier etc) and,

d) Other issues (supply chain problems etc)

Accrued debt:

Debt comes in several forms, only some of them traditional in the sense that they are interest bearing. See premium email.

PUBS & RESTAURANTS – REOPEN FOR INDOOR TRADE:

Hospitality reopened:

• Despite last minute fears concerning the Indian variant, England entered stage three of its reopening today and there may now be some customers have been in the pub for seven hours already.

• The BBPA reported ahead of the date that 45,000 pubs would reopen ‘serving 3 million pints on Monday, but 2,000 pubs will remain closed.’ It says all restrictions must be removed on June 21st for all pubs to reopen and be given a chance of survival.’ The BBPA points out that ‘pubs and other parts of the hospitality sector will still face heavy restrictions compared to normal. They will be required to ensure 1 metre plus social distancing is in place, operate by table service only and ensure that face masks are worn other than when sat at a table inside or if outdoors.’ It estimates beer sales will be ‘65% – some 1.6 million pints – lower than a normal Monday pre-pandemic. This is below the break-even point for the majority of pubs, who cannot trade profitably whilst the current restrictions remain in place.’

The Indian variant:

• This caused some last-minute concerns but did not prevent reopening indoors. What it may do, however, is push back 21 June or lead to reduction in the number of restrictions being dropped from ‘all’ to ‘some more’. The variant is said to be more transmissible but no more harmful than the Kent variant. Covid had an initial R rate of 3.0, The Kent variant was markedly more transmissible and the Indian variant adds further to this. We might be looking at an R of 5 or so but, as always, changes in human behaviour (hopefully not including further lockdowns) will bring this down.

• Langton comment: See premium email

More help needed:

• The BBPA and others have said that more help is needed. UKH’s CEO Kate Nicholls tells the Telegraph ‘the vaccines seem to be doing their job and there is no evidence to suggest the Government should waver from its stated intent of removing all restrictions on 21st June.’ She says ‘the Government must be conscious that anything other than a full removal of restrictions on 21st June leaves our sector trading at a loss. With social distancing, enforced table service, face coverings, capacity caps on weddings and the like, we have dramatically reduced capacity and suppressed demand.’

• UKH adds ‘the decision to reintroduce business rates payments from 1st July already feels premature and must surely be revised if restrictions remain in place.’ It adds ‘it is now imperative that Government extends commercial rent protections to prevent evictions and the potentially irreversible scarring of Britain’s high streets. There may also be the need for a change to the future of furlough.’

• Langton comment: See premium email

• The BBC reports ‘leisure firms say they need more support after a year of “haemorrhaging cash” and mounting debts due to the pandemic.’ It points out that social distancing means reduced capacity. Business minister Kwasi Kwarteng told the BBC he did not want rent arrears to “cripple” firms. Right.

Practical issues:

• Operators will need to get their staff back from furlough, plug gaps in staffing and secure product. Young’s Patrick Dardis told The Telegraph that he has lobbied major brewers, including Heineken and InBev, to step up beer production. Supply bottlenecks were evident in late April, despite the fact that only 40 percent of British pubs were open at the time.

• CGA and Alix Partners suggest that there are now 9.7% fewer restaurants in the UK compared to the number pre-pandemic. Sites may change hands and new tenants could bring some of this capacity back into the market.

PUBS & RESTAURANTS:

• CGA & Alix Partners have released their latest Market Recovery Monitor which ‘reveals a solid return for pubs, managed groups and big city centres ahead of hospitality’s indoor reopening.’ The monitor says only 33% of sites traded during the period of outdoor opening. It adds ‘operators will be hoping for a release of pent-up demand from consumers for pub, bar and restaurant experiences.’ The report says just over 35,000 sites traded outdoors (pubs & restaurants combined). It says 49% of all food pubs and more than a third of community pubs (38.7%) and high street pubs (36.0%) traded in the first phase of re-opening, compared to three in 10 (29.2%) casual dining restaurants and one in six (16.6%) other restaurants.’

• Karl Chessell, CGA’s director for hospitality operators and food, EMEA, said: “Pubs, bars and restaurants with the space to trade have returned confidently since mid-April. Consumers’ enthusiasm, decent April weather and the opening up of street-side space by some enlightened local authorities have all worked in their favour, and encouraged more venues to open up in the weeks since.’ He adds that most sites remained closed and says ‘as we enter the second phase of hospitality’s reboot, the landscape of eating and drinking out is going to be much changed from pre-COVID.” Alix Partners adds ‘the big test will be to see how many sites open their doors from Monday 17 May as we expect all those who will reopen to do so on that date, other than some city centre sites reliant on office workers. This may provide the best indication as to the level of permanent closures caused by the lockdown
restrictions.’

• Working from home. The Bank of England is considering flexible working. The Telegraph smells either hypocrisy or a U-turn when it says ‘the Bank of England is testing ways to let staff spend more time at home after the pandemic despite its Governor, Andrew Bailey, telling MPs last summer that workers must get back to offices to support local businesses.’

Company & other news:

• Moody’s has reported that Diageo’s decision to restart its share repurchases scheme and pay out up to £1.0 billion to shareholders by the end of fiscal 2022, ending June 2022, is a credit negative. Langton comment – see premium email.

• ROKiT Drinks has signed an exclusive international distribution deal of Castle Eden Beers across both the UK and the US. It says ‘this deal sees ROKiT Drinks responsible for the on-trade, off-trade and online sales.’

• The Times reports that Rooney Anand is ‘said to be running the rule over a group of 700 pubs worth £200 million.’ These being the Hawthorn Leisure sites that New River has said it wishes to sell.

• Patisserie Valerie. The Times reports that ‘Grant Thornton has rejected responsibility for the collapse of Patisserie Valerie, arguing that the chain’s directors were reckless and that it did not have a duty to detect fraud.’ Grant Thornton is being sued by the firm’s liquidators.

• Wendy’s (in the US) has said that 30% of its new units will be ‘non-traditional.’ It means they will be ghost kitchens. The company says it thinks ‘customers are telling us that they like that convenience. And as customer behaviours change, we need to change and evolve our designs.’ It says ‘we want to enhance our drive-thru experience, but also importantly, how do we enhance our delivery experience?’

• Door Dash increased revenue in Q1 this year by 198% to $1.1bn compared with the same quarter last year.

• McDonald’s workers in 15 cities in the US are reported still set to strike over pay this week.

• Alibaba in the US has posted its first quarterly loss as a public company as a result of a massive anti-trust fine.

• Debenhams may have closed the last of its sites for good but Amazon is reported set to hire 10,000 staff in the UK.

HOTELS & LEISURE TRAVEL:

Green List:

• Boris Johnson has suggested that the government is unlikely to add to the green list of travel destinations soon. He conceded the list was ‘tiny’.

• British tourists will be allowed to enter Portugal from today per the Portuguese authorities.

Other news:

• The first package holiday flights are reported to have flights off to Portugal at around 6.30am this morning.

• Health Secretary Matt Hancock has advised against trips to amber list countries. He told Times Radio ‘people should not travel to amber or red list countries unless it’s absolutely necessary, and certainly not for holiday purposes.’

• Dubai airport, the busiest in the world, has said that Covid passports may be necessary to restart mass foreign travel.

• Airbnb has reported Q1 numbers and says ‘our business improved without the recovery of two of our strongest historical segments: urban travel and cross-border travel.’ It says ‘our urban travel growth rate has increased every month this year and continues to do so through April and early May.’

OTHER LEISURE:

• Cinemas will be showing their first films for over a year later today. Meanwhile, Cineworld confirms ‘that judgement has been received in respect of the claim by dissenting shareholders of Regal Entertainment Group arising out of its acquisition by Cineworld in 2018.’ Langton comment – see premium email.

• Hollywood Bowl Group has reported H1 numbers to 31 March saying it expects strong consumer demand when it reopens and says it is ‘well positioned to recover to [its] pre-pandemic performance’. The company reports revenue down to £12m from over £69m in the same period last year. The loss before tax of £14.5m compares with a PBT of £15.2m last year. The company points out that it was closed for 75% of the period under review and says it saw ‘profitable trading after the first lockdown with [a] solid performance in October.’ Langton comment – see premium email.

• The Telegraph reports that video games publisher Devolver Digital is eying a £1bn London listing

• Disney last week reported a further drop in revenues as falls in its theme parks and travel businesses outweighed online sales growth. Q1 revenues were $15.61 billion, down from $18.03 billion in the prior year.

FINANCE & MARKETS:

• Inflation remains on the radar for many market watchers. Warren Buffett has said ‘it’s hard for me to see that if you toss money from helicopters, there isn’t inflation.’ He also said ‘every company that employs an economist has one employee too many.’

• Bank of England economist Andy Haldane has reiterated his view that the UK economy is set to grow at its fastest pace since the Second World War. This would be consistent with better employment levels and inflationary pressures. Interest rates could be pushed up.

RETAIL WITH NICK BUBB:

• See premium email

TRADING STATEMENTS & EVENTS:

Upcoming results are set out below:

• 17 May 21 Hollywood Bowl H1 numbers

• 18 May 21 Britvic H1 numbers

• 18 May 21 Escape Hunt FY numbers

• 18 May 21 DP Eurasia trading update

• 19 May 21 Marston’s H1 numbers

• 19 May 21 Premier Foods FY numbers

• Est 19 May 21 M&B H1 numbers

• 20 May 21 Young & Co FY numbers

• 20 May 21 Fevertree AGM

• 20 May 21 888 AGM

• 21 May 21 GfK consumer confidence numbers

• 25 May 21 Restaurant Group AGM

• 25 May 21 Shaftesbury H1 numbers

• 26 May 21 C&C FY numbers

• 26 May 21 Playtech AGM

• 3 Jun 21 New River full year numbers

• 8 Jun 21 DP Eurasia AGM

• Est 13 Jun 21 Barclaycard Consumer Spending report

• 15 Jun 21 Vianet full year numbers

• 24 Jun 21 Bank of England MPC meeting

• 13 Jul 21 Pepsi Q2 numbers

• 23 Jul 21 Premier Foods Q1 update

• 27 Jul 21 Campari H1 numbers

• 3 Aug 21 Domino’s Pizza 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

• 19 Aug 21 Rank FY numbers

• 22 Oct 21 Intercontinental Hotels Q3 numbers

• 26 Oct 21 Campari Q3 numbers

• 8 Dec 21 TUI FY numbers

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