Langton Capital – 2021-06-15 – PREMIUM – Langton ‘in-trade’, 21 June delay, labour, rent, Vianet, OTB etc.:
Langton ‘in-trade’, 21 June delay, labour, rent, Vianet, OTB etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Langton discusses its recent holiday (and its experiences with the Food & Bev industry thereon) below and, by way of introduction, let’s drop into the narrative that we had dinner at Chancellor Rishi Sunak’s table in one of the pubs in the nice little village of Osmotherley, which is to be found in his Richmond constituency.
But perhaps we should qualify that statement.
We did indeed have dinner at ‘his’ table. But only two days after he did and, on the evening that he ate there, we just had a few drinks at the other end of the pub where we were eyed suspiciously by two gents who I thought at the time were a romantically involved couple whose relationship had hit a rocky patch such that they both felt they needed to ogle everyone else in the establishment. They were probably packing shooters.
And, I kid you not, the table next to us had a major swoon (‘I must text my son, he absolutely adores Rishi’) and then doubled up with another table to work themselves into a frenzy that concluded ‘he’s so intelligent and young and rich and good looking’.
We just scowled a bit and ordered another pint before which, naturally, I’d thought they were talking about me. Except for the young bit. And the rich bit. And the rest so not actually me at all. On to the news:
ADVERTISE WITH US:
Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.
CHANGED EMAIL FORMAT:
The Premium Email is unchanged. The Free Email is written and pre-sent the evening before. It may not include breaking stories nor Langton comment. See Twitter for in-day comment. Let us know if you would like an example of the Premium Email.
LANGTON OUT ‘IN TRADE’:
Recently back from its hols, one week in a cottage in Osmotherley, Langton interacted (or tried to interact) with over 40 food, drink, coffee and iced cream vendors’ establishments. Most were open, some weren’t and the service levels were, to say the least, very variable.
• Generally, most operators (though not all) had made an effort. Some much more than others, of course, and we saw the UK’s foodservice issues in microcosm.
• We only saw the ‘public-facing’ side of the industry (not individual issues such as accrued rent, VAT debts etc) but we can comment on what we did see under the headings: Prices, Quality, Competence and Other. The latter category is a catch-all
• A holiday isn’t the time to count the pennies but, having said that, this was a bunch of Yorkshire people on holiday in Yorkshire and prices, let us say with some degree of certainty, have not been going down.
• Pie & chips, modest sized portions, £13.95 in Helmsley, for example. Iced creams, disingenuously described as small (was large) and medium (monstrous) for £4 each near Osmotherley and near Kilburn. Crisps in Staithes £4.95. Admittedly some sort of air-dried ham-flavoured artisanal stuff but drinks £4.80 to £5.00 for pretty standard bitters and lagers etc.
• Very professional unit in Osmotherley (pricey but it knows its market) through to gruff and rude outlets in some other areas. Another unit in the village had patrons effing and blinding on their ways back to their Range Rovers. Very strange. No problem guessing which unit showed the Champions’ League final on Saturday.
• Met ‘Tom’, a local character. Barred from the pubs and with fewer teeth than he has legs. He has two legs.
• Coffee in Helmsley (machine ran out of ‘milk’, vendor poured in a bag of powder) horrible. I mean, why sell horrible coffee? Why?
• Others that ‘did the job’. Fish & Chips in Osmotherley (stressed but competent), Thomas the Baker (Stokesley) and Couplands (various locations).
• Chinese takeaway. Interestingly, wouldn’t take any plastic at all. Needed a four person whip around to rake up the cash. Was OK but found a metal staple in the food. First one in 40+ years of eating such food.
Competence (and politeness / professionalism):
• Just a reminder. Whatever has happened over the last 15mths, it’s not the customers’ fault. The customer isn’t a ‘nuisance’ or an inconvenience.
• Hinderwell. One pub ‘no tables, you haven’t booked’ and the other ‘our oven’s not been switched back on yet, we can only do chips’.
• Rude (kind off). Costa in Yarm. Officious, no sitting inside. Or outside. Left without ordering and visited the Nero next door. Which was fine. I mean, why?
• Italian restaurant in Stokesley. Saw us eyeing the external menu board at 5pm and surreptitiously turned the sign from ‘open’ to ‘closed’. Something we said?
• Italian restaurant in same town. No room but they tried. Felt at least marginally valued.
• Meal in pub outside Thirsk. Waiter tipped full glass of iced-water on my back. Thankfully, not blackcurrant juice but a shock nonetheless. Apologetic. Quipped ‘that’s what five months of furlough will do for you’.
• Pubs Staithes. One busy but outside solution left what looked like obvious gaps. Another ‘no room inside’ (we could see there was) and no real desire to hook us to come back later.
• Pub in Osmotherley. One bitter on and 5 or 6 lagers. Then no bitter at all. Then bitter’s just settling. Next night, ‘it’s run out’. Next night, ‘we’ve just got bottles of Wainwright’ (which we all know costs £1.49 from the Aldi in Yarm).
• Pub in Stokesley ‘we don’t do food on Tuesdays’. ‘But it’s Wednesday.’ With a smirk ‘or Wednesdays’.
• Publicans are a robust bunch but this has been a stressful and worrying period. Not just financially but in terms of one’s health, as well. There may be mental damage sustained beneath the waterline.
• One pub in Osmotherley opened on Friday (pre-Bank Hols) but chased out customers at 9p,. On Saturday, we blinked and missed it as the pub ‘shut at 8pm’. On Sunday, Bank Holiday Monday (glorious weather) and for the rest of the week, it didn’t open.
• The ‘posh’ pub in the village shut at 9.30pm midweek. Or whatever other hour made sense.
• On pub said ‘we’re busy (it didn’t look it) but we can’t get the staff’. In another, the waitress apologised as she’d only started that day. Small sample size, admittedly,
• Location, location, location. Riverside pub in Eaglescliffe, perhaps 30yds from Yarm (the width of the River Tees) selling food at much lower prices than those ‘in North Yorkshire’.
• We’ll keep these brief as we know the above is a small and geographically limited sample taken over a short period of time.
• But, though we know ‘affirmation bias’ is a thing, our experiences suggest that demand, supply and service quality levels are all patchy.
• The big issues (the elephants in the room) are pretty much those we have commented on previously.
PUBS & RESTAURANTS:
21 June delay:
• As widely expected (the Speaker of the House, Sir Lindsay Hoyle, complained that the House is being bypassed in favour of the Press), PM Boris Johnson has delayed the removal of further restrictions due on 21 June. Restrictions will be lifted on 19 July. Mr Johnson said the first date was a ‘not-before’ date and the 19 July is a ‘terminus’ date. The limit on wedding guest numbers will be removed – but venues will still have to adhere to other rules – and 40,000 people will be allowed into Wembley to watch the Euro 2020 semi-finals and final. Wimbledon will go ahead with full capacity crowds for both finals. Mr Johnson says “We’re not going backwards. To businesses being asked to wait another four weeks I would say the June 21 date was always a not-before date. I’m confident July 19 will be a terminus date.”
• The trade has responded with frustration and disappointment. UKH says ‘the decision to delay is hugely disappointing but the Government has judged the evidence and acted as it sees fit. It does, however, jeopardise the return on investment that the Government has afforded hospitality and it’s crucial that further support is announced to push us over the line.’ It calls for more support. The British Beer & Pub Association sayd that the ‘delay in the roadmap for full reopening will cost pubs £400 million for this period alone. £100 million per week of closure.’ It adds that ‘a full package of Government support is now critical for our sector until it is guaranteed to open fully without any restrictions.’
• On a similar note, the BII says that ‘every day of critical summer trading lost for pubs is a step closer to business failure.’ It says that ‘the Prime Minister’s announcement today has delivered yet another devastating blow for our nations’ fragile and debt-laden pubs.’ The BII is calling for ‘full business rate cancellation until April 22 for England, in line with the other devolved nations, further extension of the VAT cut at 5% until next year, a targeted duty cut on draught beer served in pubs, and formal postponement of any form of Government debt, including Bounce Back & CBILS loans, as well as VAT payments.’
• Amy Lamé, London’s Night Czar comments ‘the delay to restrictions being eased is a real blow to many businesses and London’s night time economy.’ She adds ‘we are in danger of losing countless businesses, jobs and livelihoods so it’s absolutely essential that the Government provides urgent comprehensive financial support to help them through this further period of uncertainty. The sector needs to be supported so that they will be able to open their doors again when it is safe to do so.’ The BBC points out that indoor dancing is once again prohibited. It quotes one club owner as saying ‘he had been closed since March last year and had a full diary of events planned over the next few weeks, which he’ll now have to cancel, losing thousands of pounds in revenue.’
• Yesterday, ahead of the formal announcement, the Society of Independent Brewers’ (SIBA) National Chairman, Roy Allkin, said ‘It is important to be guided by ‘data and not dates’ – and the data shows the roadmap to reopening can safely continue as planned and the hospitality industry has consistently shown it can operate safely for the protection of both customers and staff.’ Industry groups claim that delaying lockdown could cost the wider UK hospitality industry £3bn as capacity limits will remain in pubs and cinemas and nightclubs will stay shut.
• Ahead of the formal announcement yesterday, the Night Time Industries Association said that half of the operators it surveyed would not survive if they had to be closed for a further two months and 20% said they will lose more than £10,000 a week in revenue either open with restrictions in place for closed as a result of the delay to ‘freedom day’ on Monday 21 June. The NTIA said ‘night-time economy businesses have waited patiently for their opportunity to open for more than 15 months, many have not survived, some are on a financial cliff edge, hundreds of thousands of jobs have been lost, a huge pool of talent has been swept away and others have been left to suffer extreme financial hardship.’
• Langton comment: All of the above is in line with expectations. It would be unfair to call the protests stale or jaded as they are no doubt heart-felt. But operators have known for some time that this was coming and, at some point, the trade bodies may risk losing public support.
• Certainly some parts of the wider industry, events and nightclubs, for example, are completely shut. But other operators, at least the better ones amongst them, are trading relatively well and are looking to the future, where staffing problems (availability and cost) and inflation could be major issues. In the near term, a strong summer staycations market should be positive.
• The risk, surely, is of a rolling lockdown. The R rate is 1.4 or whatever it is at the current stage of un-lockdown. The vaccine rollout will bring this down – but not as rapidly as we might hope – and the number of infections is likely to be higher on 19 July than it will be on 21 June. At some point, as Vallance, Whitty and the PM have pointed out, the industry will surely have to be unlocked as Covid-19 will simply be a fact of life. The timing as to this binary shift, as always, is critical.
Staffing & labour:
• The Caterer reports ‘some restaurants are still unable to open and others are having to reduce opening hours and menu sizes due to a lack of staff.’
• Langton comment: Foodservice analyst Peter Backman comments on the staffing problems being faced by operators when he says that some are shutting at certain hours and ‘another solution is to ramp up levels of pay with the long-term implications of changing the cost structure with a consequent potential long term hit to the P&L.’ Backman says that other operators are offering cash rewards to employees who introduce new workers to the business. He asks ‘how long before someone builds the app that puts employees in touch with people who are ready to become their “friend”, so they both benefit from the reward?’ He says that the uncertainty caused by staffing shortages ‘provides a rocky basis for decision taking.’
• The Telegraph reports that ministers are weighing up some sort of hospitality rescue ‘over billions in unpaid rent’. Langton comment. The moratorium on commercial evictions is meant to end this month. If the 21 June lifting-of-restrictions date is pushed back, then this may be extended. The Telegraph goes further and says ‘officials are considering proposals to ring-fencing historic debt built up by pubs and restaurants during Covid-19, in a move which would allow hospitality companies to continue negotiations with their landlords rather than immediately diverting large sums of cash to pay off bills.’
• The devil here will be how to avoid punishing operators that have coped with the crisis relatively well relative to those that have run up rental debts. Furthermore, some operators will be up-to-date with their rents and it seems unfair that their competitors, who are not, should be helped by the taxpayer.
• However, needs must and politics (where jobs can be saved) may win out. The Telegraph says ‘one source said discussions had included what is termed an “Australian” model, which would require both landlords and tenants in commercial properties to share the rent burden for the period where restrictions were in place.’ This seems to some extent sensible, but it would perhaps unfairly burden companies that had paid their rents as they came due. A government spokesman said: “We understand these are extremely challenging circumstances for the hospitality industry,’ reports The Telegraph. The spokesman continued ‘we are committed to supporting jobs and businesses as we build back better from the pandemic, which is why we continue to provide an extensive package of support.’
Other Covid news:
• UKHospitality Scotland says the Scottish govt must consider further financial support for the industry if it does not stick to its Strategic Framework in moving to Level 0 by 28 June. Executive Director of UKHospitality Scotland Leon Thompson said ‘Hospitality businesses may look busy, but most continue to trade at a loss adding to the debt burden built up over 15 months of closure and restricted opening.’
Company & other news:
• Vianet Group has reported full year numbers saying that it has turned in a ‘resilient financial performance in a challenging period with a solid platform to support growth.’ The group saw revenue in the year to end-March fall by 48% to £8.4m resulting in an adjusted operating loss, pre-exceptional costs, amortisation and share based payments, of £0.69m (FY2020: £4.03m profit) ‘reflecting proactive response to severe impact of C19 on the Group’s markets.’ Chairman James Dickson comments ‘the pandemic has provided Vianet with an opportunity to re-energise the organisation, underline our credentials and worth to customers, re-set our technology roadmap, and exit the storm in a strong position.’ Dickson says ‘as a business dependent on the hospitality and leisure sectors, the pandemic has been a challenging period for the Company.’ He says unattended smart machines have been operating
• Sushi chain Yo! Sushi is to change its name to The Snowfox Group to reflect the growing dominance of its US operation, reports Sky News. Sky says the group is considering an IPO.
• The president of Brown-Forman, Lawson Whiting, estimates that the 25% EU tariff on American whiskies is costing the Jack Daniel’s producer $70m a year in lost sales.
• Big Hospitality reports that the former Dinerama site in Shoreditch is to be reopened as LALALAND – a ‘lush garden of food, drink and rendezvous set in the urban scape of East London’. The site says it will offer one of London’s most ‘versatile and vibrant’ private event spaces.
• Meatless Farm, a plant-based burger and sausage maker, has launched a £5m crowdfunding programme. Morten Toft Bech, founder of Meatless Farm, said ‘We could reduce around 8% of the UK’s total emissions if we all ate just one less meat meal per week.’
• The New Zealand wine vintage is down by 19% yoy, but the quality has been described as ‘exceptional’.
HOTELS & LEISURE TRAVEL:
• On the Beach Group has reported H1 numbers to end-March saying that the group is ‘well-placed to capitalise on structural changes in the online travel market post covid-19.’ In the meantime, the numbers for the six months are heavily-impacted, of course, and the group reports adjusted revenues of £12m, down by 77% with a loss before tax of £9.5m versus a profit in the previous year of £2.3m. the loss per share is 5p against a profit per share of 1.4p last year. CEO Simon Cooper says ‘the Group has experienced continued disruption through the first half and this has remained as we head into the summer.’ He adds that it has been fast to return customer cash and says ‘the Board believes that On the Beach is well-positioned to grow market share as demand for holidays recovers. Whilst this recovery is likely to take some time and the consumer environment will continue to be challenging, the
• Per TTG, Tui has increased its UK offering this summer by adding hundreds of excursions, activities and attraction tickets to its domestic experiences programme.
• Due to ‘ongoing uncertainty’ Tui has cancelled a range of holidays until July 11, with the company saying ‘We are constantly reviewing our holiday programme and cancellations in line with the government updates every three weeks, with the next update expected on 24 June.’
• PE house CVC Capital Partners is reported to have taken a £250m majority stake in UK holiday park operator Away Resorts. The company runs nine parks in UK holiday destinations.
• The EU has signed off on a proposal for a digital Covid certificate, which will show the holder’s vaccination record, test result or immunity from prior infection.
• The Airport Operators Association (AOA) claims that UK airports look set to lose £2.6bn this summer due to an ‘overly cautious approach to reopening international travel’.
• Pragma Consulting examines how train stations will need to adapt their commercial space, stating that commuters are likely to become a smaller proportion of overall passenger numbers, while leisure passengers become more important.
• US data from ‘Destination Analyst’ shows that 43.5% of American travellers personally feel that the pandemic is effectively over and a pandemic record high of 82.8% say that they are in a travel ready state-of-mind. Nearly three-in-ten Americans expect to change their lifestyles, finding a healthier work/life balance, spending more time with family, being more mindful of self-care and spending more time with friends.
FINANCE & MARKETS:
• Sterling mixed at $1.411 and €1.1634. Oil higher at $73.11. UK 10yr gilt yield up 3bps at 0.74%. World markets mixed but London set to open around 13pts higher.
RETAIL WITH NICK BUBB:
• Today’s News: The Boohoo Q1 update today (ahead of the Boohoo AGM on Friday) covers the 3 months to end May and is strong, given the tough comps, with total sales up by no less than 32% (driven by the UK and US), but the company, predictably, has not raised its conservative full-year guidance of 25% sales growth at this stage. The CEO John Lyttle says that “I am delighted with our performance in the first quarter, particularly as it was always going to be challenging to produce strong growth rates on last year, when lockdowns around the globe drove such high traffic to online retailers”. Boohoo has also published separately today a further progress report from Sir Brian Leveson on the group’s Agenda for Change programme, which highlights the excellent progress that the group continues to make in its supply chain, which should reassure investors ahead of the 9am analyst conference
• This Week’s News: The newly floated Music Magpie is holding a “virtual” analysts teach-in this afternoon. The AO.com finals are out tomorrow, along with the Motorpoint finals. Thursday brings the Halfords finals, the Dr Martens finals and the Sainsbury ESG event/presentation to investors and analysts. Then on Friday we get the ONS Retail Sales for May and the Tesco Q1 update. There should also be more news this week on the progress of the IPO’s of two more Online retailers, Made.com and Victorian Plumbing…