Langton Capital – 2021-06-01 – News & early Covid pandemic tweets from the archive
Early Covid pandemic tweets from the archive
A DAY IN THE LIFE:
Langton is on half-term hols this week and we’ve organised the weather nicely.
Just Yorkshire but hey, that’ll do. Pubs, walks and more pubs, what’s not to like?
We’ll try to get a stub of an email out and intend to be active on Twitter. Back properly on 7 June.
NEWS & COMMENTS FROM THE FIELD:
• Langton on holiday. Iced creams £16 for four, pie & chips £14.95 (wasn’t it just £9.95 or two for a tenner on offer?) and beer at £4.80 in the north of England.
• UKH reveals ‘the extent of the staffing crisis facing a sector that is already in a hugely fragile state following more than a year of closures and severely restricted trading.’
• UKH also reminds sector businesses in England to ‘fully prepare for new business rates payments that will kick in from 1 July, with new bills expected to land in the coming weeks.’
• Deep analysis alert. There are bumps in the road ahead re rates, VAT hikes & talks with banks & landlords.
• Latest Market Recovery Monitor, from CGA and AlixPartners, shows that one in four – just under 25,000 – of Britain’s licensed premises have yet to reopen, despite the return of inside service. Adds ‘slightly more pubs than restaurants have reopened, but 45% of sports and social clubs remain closed, along with 51% of large venues and 27% of bars.’
• CGA poll finds 51% had been back to the On Premise within ten days of inside service resuming in most of Britain on Monday 17 May.
• BBPA & UKH ‘urging Government to remove all restrictions in pubs on 21 June’ and not to deviate from roadmap. Labour’s Keir Starmer says only PM Boris Johnson’s incompetence threatens the above.
• Caffe Nero. Co has updated on trading saying ‘sales are picking up and the last quarter has given us a lot of positive momentum.’ Telegraph looks at the corporate angle and has the company ‘scrambling to satisfy its lenders and avoid falling into the clutches of the billionaire Issa brothers behind Asda.’
FROM THE ARCHIVE:
Listening to the highlights of Dominic Cummings’ excoriation of everything not Dominic Cummings last week brought back to mind the early days of the pandemic.
Remember the heavily guarded buses of travellers returning from China, the shunned cruise ships and then the ‘don’t go to work but go to work but don’t go to work’ advice?
And then the ‘don’t go to the pub…shut the pubs…stay at home’ series of comments?
Although we poked fun at the overuse of the word ‘unprecedented’, these were unprecedented times.
And then the loo-roll panic, the PPE, testing etc. Weird times & we all lived through them.
Herewith, some of our early Tweets. They’re unedited and hopefully give an idea of the struggle to get through uncharted waters. They’re under a few headings, Questions, Observations, Dilemmas & sundry. We’ve left them in date order as that seems to make more sense. Some more tomorrow.
Thursday 26 March 2020:
• Covid financial side effects. We’ll put a few tweets out highlighting a few. Suggestions gratefully received. We’ve covered a number in our Daily (sign up free www.langtoncapital.co.uk) so these are in no particular order.
• Covid ££ side effects #1. Negative working capital in hospitality. Your customers pay you before you pay your suppliers. Only now, that’s in reverse. Some pub companies will be reluctant to pay suppliers till pubs reopen. This may cause some to collapse.
• Covid ££ side effects #2. It’s about the burn rate, stupid. If you can make most of your problems somebody else’s (and that’s a big if), then you need to be able to hunker down, bleed little cash & basically not go bust. Sound easy? Try it sometime…
• Covid ££ side effects #3. Possession is nine tenths. Have money, keep money. Wherever the cash was in the system when the music stopped, that might be where it stays. Some operators may have the stock and the money, and they’ll be keeping both, for example.
• Covid ££ side effects #4. Poo rolls downhill. It can be slowed, sometimes stopped. But it can’t defy gravity. Operators lean on landlords, the latter moan to banks, banks bleat to government and government is the taxpayer. More shortly…
• Covid ££ side effects #5. Once again, it’s been proven that Black Swans do exist. UK snowstorms bring the country to a halt. They’re rare, so we don’t prepare for them. But will we have the same attitude towards major disruptions going forward?
• Covid ££ side effects #6. Landlords are people too. Sure, we all want to pass this particular parcel. But skipping dividends, rent & interest & defaulting on supply contracts has implications for all of the above. Needs, must. But costs might rise as a result.
• Covid ££ side effects #7. Passed dividends => underfunded pensions. State aid => higher taxes. Skipped rents => higher risk premiums. Jilted staff => higher base wages. Stiffing your suppliers => cash on delivery etc. Needs, must. We get it but action => reaction.
• Covid ££ side effects #8. Asset values will fall. There will be fewer buyers around & they will be poorer. This has implications for funding, tangible net asset values per share etc. The banks won’t be blind to this. Not forever, anyway.
Friday 27 Mar 2020:
• Covid ££ side effects #9. The ‘Going Concern’ question. It may seem like arcane accountancy mumbo jumbo but auditors, by law, have to opine on whether a company is a ‘Going Concern’ or not. How? Many, truly, are probably not. Reporting delays just postpone the decision.
• Covid ££ side effects #10. Rising Bad Debts. Your ‘money husbanding’ is your suppliers’ Bad Debt. Ask pub co suppliers, many of whom are small companies. This pass the sh1t parcel could sour relations in the future (if companies in question have a future)
• Covid ££ side effects #11. Decency is (or can be) its own reward. Heineken is helping its good customers, HMRC is helping workers on the books. Landlords should favour good covenants. Shysters & black economy gets little help & even less sympathy.
• Covid ££ side effects #12. We need to talk about covenants. They’re there for a reason but, if the whole economy goes into cardiac arrest, should we just put a line through them? And how can this be organised in real time?
• Covid ££ side effects #13. Bonds & securitisation. You might put your arm in a tiger’s cage a hundred times, and nothing happens. And then it rips your arm off. Bond deeds need looking at. The gov might have to stop bondholders from exercising some of their ‘rights’.
• Covid ££ side effects #14. Their dash for your cash. Three leisure co’s have had placings. Why? Equity is bombed out, isn’t debt cheaper? Is this a) a dash for cash while the market’s not too jaded, b) a sign of worry, c) a sign debt’s not there? Or all three?
• Covid ££ side effects #15. Worker behaviour is changing or will change. Getting back into first gear will be tough. This is a lazy summer holiday times 5 or 6. Show me the man who says he’s getting up earlier & working harder than he did last week & I’ll show you a liar?
• Covid ££ side effects #16. The ‘wealth effect’ could dampen spending. Nobody will feel richer after this, most of us will feel poorer. As a result, we’re likely to spend less, seek out discounts, vouchers and the like. ‘Upselling’ & ‘premiumisation’ could be for the birds.
• COVID QUESTIONS #1. Where is the road back? Putting the economy into an induced coma is one thing. Waking it up without disease flare-ups is quite another. But it needs to happen. Money is an illusion. Wealth is work, not stuff. And there is no work going on…
• COVID QUESTIONS #2. What does ‘back to normal’ mean? Until there’s a vaccine, we’ll be open to reinfection. So, what does that mean for pubs & restaurants specifically & face-to-face socialising in general? Will everything be different? More Netflix, less pubs??
Mon 30 Mar 2020:
• Covid ££ side effects #17. The crisis is an accelerant. Struggling companies will go under rapidly. Gov. is saying ‘pay your workers’ and ‘we’ll stand behind you’ but when? And how? Collapses expected this week.
• Covid ££ side effects #18. Our mental health is going to take a kicking. This is doing none of us any good and a lot of us physical and mental harm. Nest eggs have gone, work ethic not far behind it?
• Covid ££ side effects #19. Hospitality will be a less-crowded market when this is over. Many, many, many restaurants, coffee shops, grab n go outlets & a smaller number of pubs will never re-open. Demand will be muted but supply will certainly be diminished.
• Co-morbidity, now there’s an ominous word. For corporates, add the coronavirus shutdown to any 2 or 3 of a) high debt, b) overrented properties, c) lazy, me-too products, d) an over-expanded estate & e) complacent management, and its goodnight, Vienna
Tues 31 March 2020:
• Covid ££ side effects #20. (non-life-threatening) food shortages. Not so much those caused by supply chain issues (loo roll, baked beans) but rather the food rotting in the fields, the fresh fruit & veg that won’t make it to the UK from the Netherlands etc.
• Covid ££ side effects #21. Short term business boost for advisors. Panicky stock issues, renegotiated bank terms, administrations etc. All before it goes very quiet. Grant Thornton already asking for volunteers to take 40% pay cuts.
• Covid ££ side effects #22. Cars taken off the road. Two car families should / will be taking at least one off the road. A SORN, along with cancelled insurance, should save around £100 to £150 a month. Just hope a tree doesn’t fall on it / it spontaneously combusts before June…
• COVID QUESTIONS #3. Are we all in the same mess? Directionally, yes. But some people’s messes are much bigger that others. What is a major irritant or a 1yr setback for some will be terminal for others.
• COVID QUESTIONS #4. Are any of these administrations ‘tactical?’ To the extent that a ‘controlled’ tumble down a steep hill is ‘controlled’, then yes. That means, in layman’s language, no.
• COVID QUESTIONS #5. Are some companies making a virtue out of a necessity? Shutting takeaways & delivery is being framed as ‘for the public good / health of workers’ etc. Could it be there are simply no customers? AKA ‘virtue signalling’.