Langton Capital – 2021-06-25 – PREMIUM – Unlocking concerns, ads, Deliveroo & delivery, GfK, Brighton Pier etc.:
Unlocking concerns, ads, Deliveroo & delivery, GfK, Brighton Pier etc.:
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A DAY IN THE LIFE:
The corporate Disney machine might have a different view but nature is, I’m beginning to suspect, ruthless, unemotional and cruel because, though our bird feeders are absolutely awash with newly-fledged juvenile birds at the moment, this never seems to last.
Perhaps it’s because they go to play in someone else’s garden?
I’d like to think so but, as we’ve got at least one pair of fat and happy sparrow hawks checking their patch every couple of days, perhaps not. On to the news:
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PUBS & RESTAURANTS:
Working from home:
• Per the BBC, Citigroup plans for staff to work from the office for three days a week, with boss James Bardrick saying ‘business works best from being together…what we are saying is that, yes, use greater flexibility, but to do your job well, to develop as an employee, to get the best out of yourself and for the team, we need to be together.’
The outlook for 19 July:
• 19 July has been billed as a firm end-date. However, with an R rate of 1.4 and a large section of the population (including all children) still unvaccinated, the numbers could look ‘worse’ on 19 July than they did on 21 June. Some 16,000 new confirmed Covid cases were reported in the UK on Wednesday, the highest daily figure since early February and, though the number of hospitalisations and deaths is lower as a percentage of infections due to the younger unvaccinated population, deaths are running at around a ten week high. Although the race between vaccine rollouts and the virus may be tight, there is much political capital that has been expended on 19 July being a backstop date. Any vague hopes re 5 July are unlikely to be fulfilled.
• The government is set to announce a ban on junk food advertising online and before 9pm on TV from 2023, as part of an election pledge to tackle the UK’s growing obesity crisis. The online ad ban would affect all paid-for forms of digital marketing, from ads on Facebook to paid-search results on Google, text message promotions, and paid activity on sites such as Instagram and Twitter.
• The proposed ban on advertising foods high in fat, sugar and salt pre-9pm on TV will impact the UK’s large fast-food restaurants. However, ‘small’ companies (which probably can’t afford to advertise on TV anyway) are excluded and online advertising will still be allowed. The children that the legislation is intended to protect are not likely to be big consumers of TV with ads.
• Further comment. Children will be more active online or on streaming services which, ex-C4 and ITV, do not carry ads. Public Health Minister, Jo Churchill says ‘the content youngsters see can have an impact on the choices they make and habits they form. With children spending more time online it is vital we act to protect them from unhealthy advertising.’ The online bit is pertinent but the legislation may not have much of an impact on this media. UKH says ‘it’s positive that the Government has heeded many of the sector’s concerns, such as exempting smaller businesses and limiting the scope to paid-for advertising.’ It adds ‘such concessions are appreciated at a time when hospitality is trying to get back on its feet following the huge impacts of the pandemic.’
• Interestingly, San Francisco’s Board of Supervisors has approved a resolution to permanently cap food delivery fees charged to restaurants at 15%.
• Further comment: Restaurant Dive reports ‘while the resolution only includes a cap on delivery fees, amendments under consideration include allowing restaurants and delivery companies to work out marketing fees in a separate contract and a 3% cap on credit card processing fees.’ Original legislation was passed last year on an emergency basis and was due to expire on 15 August.
• Interesting to see (an albeit liberal geography within) such a market oriented economy take steps to frustrate the workings of the market. Perhaps unsurprisingly, DoorDash is anti-fee caps, which are presumably designed to protect restaurants at a vulnerable moment from the market power of the delivery companies. A spokesperson for the ‘Protect App-based Drivers & Services Coalition’ (which sounds like a stooge for the delivery companies) says ‘experience with fee caps proves that they are bad for drivers, bad for restaurants and bad for consumers.’ Quite how a fee cap would work against consumers isn’t clear at first though the ‘Coalition’ says ‘in cities with temporary fee caps, customers experienced price increases between $1.50 to $3.00 per order, which led to significantly reduced customer demand hurting the very restaurants they were intended to help.’
• There are a number of points to take issue with here. We won’t do so here other than to say that the flip-side of the above comment is perhaps that a (hopefully) unique set of circumstances (the pandemic) had conspired to force flat-on-their-back restaurants to provide services and create a market where there may not have been enough revenue in the supply chain to sustain all parties other than in the very short term.
• Anything that puts pressure on delivery revenues may not be welcomed by companies this side of the Atlantic. Restaurant Dive points out that, in the US, ‘DoorDash earlier this year created a tiered commission structure to provide more flexibility and allow restaurants to choose the level of marketing support they want.’ A cap at 15% may be what they want even more than a number of tiers.
• Meanwhile, 70% of 16-34 year olds now feel comfortable visiting the centre of town, as do 62 per cent of Londoners as a whole. Confidence has also increased about the capital’s economic rebound, with Londoners feeling more optimistic about their job prospects.
• The number of workers furloughed fell to its lowest since the start of the pandemic with 6% of workers (1.5m people) on the scheme in early June.
GfK Confidence measures:
• GfK reports that its ‘long-running Consumer Confidence Index stayed at minus 9 in June. Four measures were up in comparison to the May 21st announcement and one measure was down.’ GfK says ‘while the shifting sands of an end to lockdown might be the closest most of us get to a summer beach holiday, consumer confidence remains stable at minus 9 after 16 months of a COVID-induced roller-coaster.’
• Interpreting the data, GfK says ‘a repetition of last month’s score doesn’t mean confidence is about to nose-dive. The upwards trajectory for the Index since the dark days at the start of the pandemic is currently still on track. However, forecasts for rising retail price inflation could weaken consumer confidence quickly and that may account for the six-point dip in June in our measure for the wider economy in the coming year.’
• GfK says ‘on a more positive note, we have strong numbers for our personal financial situation, both for the past year and the year to come. In addition, this month’s further improvement in the Major Purchase Index – the third month in a row – could see shoppers spending in anticipation of a staycation summer.’
Companies & other news:
• Deliveroo. The UK Court of Appeal has confirmed that Deliveroo riders are self-employed. It dismissed a union appeal against past judgments on their status. This was the fourth court judgment in Britain which had determined its riders were self-employed, reports Deliveroo. The company says ‘UK courts have now tested and upheld the self-employed status of Deliveroo riders four times. Deliveroo’s model offers the genuine flexibility that is only compatible with self-employment, providing riders with the work they tell us they value.’
• Heavitree Brewery has reported H1 numbers to end-April showing that the company made an operating loss of £647k and a loss before tax of £76k. The group chairman says ‘turnover has reduced by 67.77% to £846,000 (2020: £2,623,000). This turnover figure is predominantly comprised of a discounted rental income from our licensed properties for December 2020 only and some income from tied products from the trading under restrictions before Christmas.’ There is no dividend. The chairman says ‘as disruption and uncertainty within our sector continues, the Board will not consider the payment of a dividend during the current financial year. When trading does return to some sort of normality, the Board will be able to review future dividend payments.’
• Heavitree says ‘the reopening of the garden areas and, in turn the reopening of indoor trading areas under restrictions is an early step on the road to a recovery. We have tenants in all our pubs and the feedback from our houses and the support from our customers shows great promise for the summer months and for future trading.’ It says ‘the Company’s cashflow forecasts continue to show that we are able to trade within our banking facility’ and says Barclays Bank has waived the testing of our banking covenants until April 2022.
• Burger Kind is to open a unit in Parkdean Resorts Trecco Bay holiday park.
• Brighton Palace Pier has charged customers the date in reverse order accidentally instead of the cost of their transaction. The Guardian says a woman was charged £2,104.18 after visiting the pier on 18 April 21. Brighton Pier blamed its systames saying ‘we understand from Worldpay that the error meant that one batch of payments used the figures of the date of the transaction as the amount spent, resulting in serious over-charging.’ It would have been good news for anyone spending over c£2,100.00. Both Worldpay and Brighton Pier say that this was an isolated incident.
• Darden Restaurants in the US has reported that delivery sales are ‘stickier’ than it had expected. The company says ‘guest demand for off-premises has been stickier than we originally thought, and this is driven by the focus of our restaurant teams and the investments we made to improve our digital platform throughout the year.’
• Vegan fast food brand Ready Burger has exceeded its £1.5m crowdfunding target within hours. With 29 days left on its Crowdcube campaign, Ready Burger has raised £1.76m from 369 investors.
• On Trade Consultancy is welcoming a new client in Hospitality Services this week, Bupp. Bupp is a reward points exchange that gives points earners ways to do more with their points because they can redeem them on more things, from product purchases, points auction to good causes. The company says it is ‘delighted to be partnering with On-Trade Consultancy’ and adds ‘we are thoroughly looking forward to working with them and gaining access to their incredible network and connections within the hospitality industry.’
• Hawksmoor will open its biggest restaurant yet at a site in Wood Wharf, Canary Wharf. The three-floor restaurant will include a 150-cover dining room and 120-cover bar.
• Heineken has acquired control of United Breweries Ltd, the largest brewer in India, after buying an additional 39.6 million shares in UBL to push its holding to 61.5%, up from 46.5%. UBL is the maker of India’s top-selling Kingfisher lager.
• Pernod Ricard forecasts organic profit growth of about 16% for its 2020/2021 fiscal year, up from a previous April forecast of 10%. The drinks group said off-trade continues to be resilient, while on-trade demand is accelerating as restrictions are progressively lifted.
• Nanias, a vineyard based in Bristol, has started a crowdfunding campaign to gauge potential interest in three new still wines; the first of which, will be England’s first orange wine in a can.
• In the US, IWSR Drinks Market Analysis figures show that alcohol consumption in the US was up by 2% in 2020. The IWSR has predicted that by the end of the year, alcohol volume sales in the US will be up by 3.8% year on year, while value sales will be up by 5.5%.
HOTELS & LEISURE TRAVEL:
Green List expansion:
• The government has increased its green list to 16 destinations including Spain’s Balearic Islands and Malta. The trade has said that it is underwhelmed with easyJet saying the move ‘simply isn’t ambitious enough.’ The government has also said that it will exempt VIPs who want to visit amber list countries to watch (or to be seen watching) the Euro football.
• Travel Weekly says ‘travel firms face a summer of uncertainty as mainstream destinations such as the Balearics and Madeira were placed on the government’s new ‘green watch’ list.’ Portugal, of course, was previously placed on the list and then taken off again. Flight Centre says ‘we fully expect that those people who had trips booked to Portugal last month will be looking to change their holidays to Mallorca, Barbados, and Malta which is great news.’
• Meanwhile, Jet2holidays has moved to put flights and packages on sale to Ibiza, Majorca, Menorca, Madeira and Malta from July 1, reports the trade press. Jet2 told Travel Weekly ‘we have been urging the UK government to stay true to their word and follow the scientific evidence when it comes to making decisions about international travel, so today’s announcement is an overdue but welcome step in the right direction. We believe other destinations should still be added to the green list, however what this demonstrates is that the government is firmly committed to reopening international travel and we commend that approach.’
Trading & outlook:
• Boris Johnson said there is a ‘real opportunity’ to open up overseas leisure travel for those who have received both jabs. Johnson said ‘I’m not going to claim that this summer, for travel purposes, is going to be like any other summer. I don’t want to cast a pall over things but, as I said the other day, it will be different.’
• It takes two to tango. It’s one thing the UK saying that travellers returning from certain countries needn’t self-isolate, but it’s another to assume that destination countries will grant them access. German Chancellor Angela Merkel has said travellers from the UK should be quarantined wherever they arrive in the EU, in a move to slow the growth of the Delta variant on the continent. Merkel has criticised Portugal in recent days, where the entry of British tourists is permitted without quarantine.
• Travel Supermarket reports that the majority of new holiday interest, and bookings, is for December and beyond due to the ongoing ‘lack of clarity’ around international travel. Only 21% of this year’s bookings were made for June, July and August combined, whereas 53% of bookings on the site where made for holidays in 2022.
• Proposals have been submitted for 24 luxury holiday lodges, a reception building, and new landscaping on a site northwest of Beamish Hall, County Durham. The development is also expected to sustain a host of local businesses.
• STR reports that U.S. weekly hotel occupancy hit its highest level in 85 weeks in the week to 19 June. Occupancy was 68% (down 10% on 2019) and room rates were down 4.4% to give REVPAR some 13.8% lower than two years ago.
• Carnival Corporation yesterday updated on Q2 trading saying that it made a net loss of $(2.1) billion and adjusted net loss of $(2.0) billion over the 3mth period. The group says it ended Q2 ‘with $9.3 billion of cash and short-term investments, which the company believes is sufficient liquidity to return to full cruise operations.’ It adds that ‘customer deposits increased in the second quarter of 2021 compared to the previous quarter’ and says ‘cash burn rate in the first half of 2021 was better than forecasted primarily due to the timing of proceeds from ship sales and working capital changes.’
• Chief Executive Officer Arnold Donald says ‘we are working aggressively on our path to return our full fleet to operations by next spring. So far, we have announced that 42 ships, representing over half of our capacity, have been scheduled to return to serving guests by this fiscal year end.’ The company says it ‘is uniquely positioned for its phased resumption in cruise travel given its multiple brands which are being restarted independently and tailored to the environment of their respective source market. Eight of the company’s nine brands either have resumed or have announced they plan to resume guest cruise operations by the company’s fiscal year end, November 30, 2021.’
• Carnival says ‘despite our minimal advertising spend, we continue to experience an acceleration in booking trends globally, including capturing significant latent demand for our new sailings this summer. This strong demand affirms confidence in our future. In addition, customer deposits grew this past quarter, a significant milestone on our path to resumption.’ The group says ‘booking volumes for all future cruises during the second quarter of 2021 were 45% higher than booking volumes during the first quarter of 2021. Cumulative advanced bookings for full year 2022 are ahead of a very strong 2019 as of May 31, 2021.’
• Landal GreenParks, which was recently sold by previous owner Hoseasons to Roompot, has added three new UK destinations to its portfolio. It says it has seen a “surge in demand” for domestic holidays this summer and Landal now has 10 parks in the UK.
• Marriott has said it will not require its employees to be vaccinated against COVID-19 to work at its units.
• Nielsen reports that streaming of programmes in the US, which received a major boost because of the lockdowns that accompanied the Covid-19 pandemic, is now responsible for 26% of all time spent on TV. Nielsen says ‘the past year has categorically shifted the television viewing landscape. Even as people begin to dive back into their pre-pandemic activities, based on the changes many made to enable streaming coupled with the variety of newly introduced services, we expect people to keep sampling and exploring their options. Maybe just as importantly, as production ramps back up, new content will enter the space, driving additional traction.’
• EA has announced that it is acquiring Warner Bros. Games’ mobile gaming studio Playdemic for $1.4bn all-cash. Playdemic is a Manchester based studio best known for its release ‘Golf Clash’.
FINANCE & MARKETS:
• Bank of England. As expected, the Bank changed nothing yesterday. It reports ‘at its meeting ending on 22 June 2021, the Committee judged that the existing stance of monetary policy remained appropriate.’ It voted unanimously to maintain Bank Rate at 0.1% and also voted unanimously to maintain the stock of bond purchases at £20 billion. It voted 8-1 ‘to continue with its existing programme of UK government bond purchases, financed by the issuance of central bank reserves, maintaining the target for the stock of these government bond purchases at £875 billion and so the total target stock of asset purchases at £895 billion.’
• The Bank said it expected inflation to go above 3% “for a temporary period”. It says ‘the near-term strength in inflation is expected to be transitory.’
• The Bank of England said it now expected the UK economy to recover faster than it had previously predicted. Outgoing MPC member Andy Haldane had said that now was the time to wind down the stimulus to the economy via QE.
• The business confidence tracker produced by the Institute of Directors rose to 27 points in June, up from 14 points at the end of Q1. The IoD says this is the highest level of business optimism since it began recording its members confidence in July 2016, in the wake of the Brexit referendum.
• Sterling down at $1.3921 and €1.166. Oil price up at $75.67. UK 10yr gilt yield down 3bps at 0.75%. World markets better yesterday and London set to open around flat.
RETAIL WITH NICK BUBB:
• Today’s News: Over in the US the Nike Q4 results last night smashed expectations and the shares jumped by as much as 14% in after-hours trading, so that should encourage JD Sports fans this morning. There has been another bullish unscheduled trading update from one of the big UK Motor dealers today, with Marshall Motors flagging significant upgrades to both first half and full year expectations for 2021, as “The market has continued to benefit from positive tailwinds, including a recent unprecedented used vehicle value appreciation and favourable demand-to-supply conditions for both new and used vehicles. In addition, the group has continued its strong outperformance of the wider new and used vehicle markets”. There has also been a cheerful update from the Retailing landlord Capital & Regional, highlighting letting progress with the three Debenhams units which are now vacant: “We
• Consumer Confidence Watch: After today’s latest survey from the widely followed monthly GFK Consumer Confidence index, it’s worth noting again that the record -39 index low seen in July 2008, during the financial crisis, was not tested during the pandemic crisis…The overall June 2021 index stayed at -9 (versus the -36 low seen in the early June 2020 “flash” report), despite a poll of economists by Reuters forecasting a small rise to -7. In the press release, GfK’s Client Strategy Director Joe Staton highlighted the worries about rising inflation, but said that “A repetition of last month’s score doesn’t mean confidence is about to nose-dive. The upwards trajectory for the Index since the dark days at the start of the pandemic is currently still on track”.
• BDO High Street Sales Tracker: Given the end of the first lockdown on “non-essential” stores a year ago, today’s BDO High Street Sales Tracker for medium-sized Non-Food chains paints a more subdued picture than of late for w/e June 20th, as the comps were tougher. We would, however, still caution that the BDO index is just an unweighted average of the percentage changes in the sales of their reporting retailers (and it is skewed to Fashion)…so it shouldn’t be taken too literally. BDO Fashion LFL sales were up c54%, whilst Total BDO LFL sales (including some Homewares and Lifestyle retailers, plus the Fashion retailers) were up by c42% (up by c130% in Store sales and up by c12% in Online sales, which is still surprisingly good, given how strong Online sales were a year ago)…
• Next Week’s News: Tuesday brings the latest Nielsen grocery figures, the Lookers finals and Victorian Plumbing analysts teach-in. On Wednesday we get the Dixons Carphone finals, the Topps Tiles Q3, the Studio Retail finals, the Kingfisher AGM and the Lookers AGM. Then July kicks off on Thursday with the AO.com finals, the ABF (Primark) trading update and the JD Sports AGM.