Langton Capital – 2021-07-01 – PREMIUM – Confidence, inflation, Revolution, Various Eateries, C&C, Rank & other:
Confidence, inflation, Revolution, Various Eateries, C&C, Rank & other:
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PUBS & RESTAURANTS:
Business confidence (important because business confidence impacts hiring decisions and job security supports spending decisions by consumers.
• Lloyds Bank’s latest Business Barometer shows that confidence among businesses in London has reached its highest level since September 2018. The measure rose by 17 points to 41 per cent in June 2021. Lloyds says ‘despite a challenging year, London’s businesses have remained resilient and their efforts are now paying dividends. Firms have worked hard to make a success of reopening and even though restrictions have now been extended, we can see that there is still a drive to create jobs, which will play a significant role in the UK’s recovery from the pandemic.’
• Further comment: Lloyds says ‘a balance of 23 per cent of businesses in the capital expect to hire more people over the next year, up 16 points on May. Business confidence in the UK as a whole was 33 per cent in June, unchanged on May. Some concerns as to whether or not ‘Freedom Day’ will actually happen on 19 July have begun to creep in. Lloyds says ‘a fifth consecutive monthly increase in trading prospects and employment expectations highlights the resilience of UK businesses as they continue to recover from the challenges presented by the pandemic.’ It concludes ‘although we must now wait slightly longer for the last remaining COVID-19 restrictions to ease, it’s an encouraging sign that firms continue to have strong overall confidence in the outlook for the UK economy, as well as their expectations for their own growth prospects.’
Staffing problems may lead to a ‘lockdown in all but name’:
• With increasing cases of staff having to self isolate, hospitality businesses could be facing a lockdown ‘in all but name’. Situations where restaurants, pubs and bars are having a team member test positive for the virus mean that entire teams have to isolate for up to 10 days as a result of contact tracing. High-profile restaurants that are currently closed because of staff being ordered to isolate include Melanie Arnold and Margot Henderson’s Rochelle Canteen in London’s Shoreditch among many others.
Other Covid news:
• The Covid-19 furlough scheme has been scaled back a little further today in that the government will now pay 70% of wages rather than the 80% that it had paid up until yesterday. The current strong labour market should help to ease people back to work though, as is often the case in market economies, the jobs will not necessarily have been created in the areas or sectors that people would like to work.
• The Welsh government has announced a “final package of emergency support” for businesses still impacted by Covid-19 restrictions. Businesses in the principality will receive up to £25,000 of support, although this may be reviewed if further emergency measures are announced. To qualify for the latest raft of measures, businesses will need to show their turnover has fallen by over 60% versus the same period in 2019. The Welsh government says ‘we’ve provided in excess of £2.5b funding to Welsh businesses, in a package that has been designed to complement and build on the support provided by the UK government. We’ve also extended our 100% business rate relief package until the end of this financial year.’ The government maintains that it has ‘helped protect in excess of 160,000 Welsh jobs which might otherwise have been lost.’
• Bill Addy, CEO of Liverpool BID Company, has called on the Government to provide specific support for independents and small businesses forced to close because of Test and Trace. Restaurant Kala has now chosen to remain closed until 19 July, when all restrictions are meant to be lifted, saying ‘Reopening and closing the restaurants costs so much money, energy and time, and we are just not able to do this again.’
• The Mail reports that large events will not require vaccine passports, instead, event organisers will be able to set up their own Covid check schemes if they choose.
• MSL Solutions and Zapaygo order and pay app have collaborated to allow customers to use the app at Manchester United FC, Manchester City FC, Chester Racecourse, Lord’s Cricket Ground, Engie, The Lanesborough Hotel, The Landmark Hotel as well as others.
• In a further blow t0 the High Street, US chain Gap has said it plans to close all its 81 stores in the UK and Ireland and go online-only. Some 19 stores were already due to close in July as their leases were expiring.
• Outgoing Bank of England chief economist Andy Haldane has warned that the risk of high inflation is “rising fast”.
• Further comment: Haldane says that it could reach nearly 4% this year. The Bank still has a target of 2%. Haldane says ‘overall, inflation expectations and monetary policy credibility feel more fragile at present than at any time since inflation-targeting was introduced in 1992.’ He adds ‘by the end of this year, I expect UK inflation to be nearer 4% than 3%.’ Regarding rising interest rates, Mr Haldane says ‘even if this scenario is a risk rather than a central view, it is a risk that is rising fast and which is best managed ex-ante rather than responded to ex-post.’ He says ‘if this risk were to be realised, everyone would lose – central banks with missed mandates needing to execute an economic handbrake turn, businesses and households facing a higher cost of borrowing and living, and governments facing rising debt-servicing costs.’
• The Bank of International Settlements has warned there are “daunting” issues confronting politicians as they deal with debt and with the legacy issues of Covid-19. It says inflation could spike this year, the danger being that it could become ingrained unless one section of society, in the game of ‘pass the price rise’, takes a hit.
• Revolution Bars Group has updated on trading saying that ‘our bars traded extremely well within the restrictions in place from 12 April, when trading outdoors was permitted. This strong performance has continued since 17 May when indoor trading was permitted and all of our bars have been able to trade, albeit with continuing significant restrictions such as seated table service and the wearing of masks when guests are not at table.’
• The company says ‘seated capacity in our bars represented only 28% of total capacity’ but says ‘trading since that date has improved to 86% against the same period in 2019 when there were no Covid restrictions, with revenue for the year therefore expected to be ahead of management’s previous expectations.’
• Further comment: The company says it is ‘confident that significant further pent up demand exists and therefore further strong trading is anticipated in the coming months as restrictions fall away and we fully open up the estate. However, we remain cautious about the coming financial year as the continuing impact of Covid-19 remains unclear and we call upon the Government to adhere to the revised Roadmap to allow clarity for all consumer facing businesses.’
• RBG concludes ‘we now expect that our full year performance for the year ending 3 July 2021 will be ahead of previous management expectations with an EBITDA loss pre IFRS16 adjustments of c£12.5m, with net bank debt significantly improved to c£5m following this period of trading and after our recent equity raise.. CEO Rob Pitcher says ‘as predicted we have continued to see huge pent up demand and a rapid recovery across the nation in our bars following indoors reopening.’
• Mr Pitcher says ‘we were disappointed to see that the much anticipated ‘Freedom Day’ of 21 June was delayed but the new date of 19 July, when our bars will be able to trade without restrictions, looks more certain than ever.’ He adds ‘following sixteen months of government-imposed restrictions on our business our customers are very keen to take advantage of our full guest experience. Whilst we anticipate strong demand for our late night offering, we continue to be cautious about possible restrictions on our business during the winter period.’
C&C trading update:
• C&C has updated on trading saying that ‘while still in the early stage of reopening in our core markets, we have been encouraged by the way in which trade has recovered in the UK since the gradual reopening from April 2021 and in Ireland from 7 June 2021 as outdoor hospitality reopened. However, restrictions in both markets remain, with the timing and nature of further easing still uncertain. The full reopening of hospitality in the UK was recently delayed by four weeks and is now anticipated over July and August 2021, whilst the reopening of indoor hospitality in Ireland has also recently been delayed, with a revised date yet to be announced.’
• C&C says ‘in the week ending Sunday 27 June 2021, C&C is pleased to have delivered to 82% of the outlets in the comparative week in 2019’ and adds ‘we are encouraged by trading in recent weeks, with good weather aiding outdoor trading over the period.’ The company says ‘following the progressive easing of restrictions since April and the partial recovery in the on-trade, C&C recorded a modest trading profit in May, with this improving further in June.’
• Further comment: CEO David Forde says ‘despite restrictions still in place and confirmed delays to full reopening, we remain cautiously optimistic about the gradual recovery of the hospitality sector in our core markets of the UK and Ireland, and we look forward to continuing to support our customers as restrictions are removed.’ He concludes ‘our recent successful capital raise has strengthened the balance sheet and positions the Group to take advantage of opportunities to strengthen and grow our business as we return to a more normalised trading environment.’
Company and other news:
• Various Eateries plc has announced it is ‘collaborating with Allianz, its insurer, to seek judicial determination over a number of issues affecting Various Eateries’ business interruption claim for Covid-19-related losses under a Marsh Resilience policy (known in the FCA test case as RSA4) which were left unresolved by the court following the FCA test case.’
• Leicestershire brewer and pub owner Everards has reported numbers for the year to September 2020. It says ‘the COVID-19 restrictions imposed from March 2020 have naturally resulted in a reduction in both the turnover and profitability of the business, arising from both a reduction in the volume of drinks supplied to the pub estate but also significant reductions in rental income’. Revenue is down by 38% ‘and the business recorded an operating loss of (£1.2m) for the same period.’
• Everards says ‘nine months later at the start of July 2021, we now start to emerge from prolonged trading restrictions and reduced revenue, with all pubs let and trading and expectant of all restrictions being lifted from 19 July.’ There is no dividend for the year to end-September 2020. The company has cancelled rents for many of its tenants and says in the 12 months to March 2021, 73% of the pub estate rent roll has been cancelled.’ The company says it has undertaken ‘a review of our pub estate to position itself for future investment in pubs, property, and Everards Meadows – the businesses 90-acre Leisure and Tourism site in Leicestershire.’ It says ‘as a result, on 28 May 2021, the business completed the sale of 14 pubs for an undisclosed sum to Hawthorn the community pubs business within New River Retail PLC.’ The accounts have been prepared on a going concern basis.
• Thwaites has reported full year numbers to 31 March 2021. Chairman Richard Bailey says ‘the darkest days of the past year are now behind us and whilst the whole COVID-19 episode has been most unwelcome the Company is emerging from closure, lockdowns and restrictions intact, with its pubs, inns and hotels ready to make the most of the situation as a wave of pent-up demand is released once our personal liberty is restored.’
• Mr Bailey says ‘Thwaites entered the COVID-19 pandemic in excellent shape, with well invested assets, a strong balance sheet and businesses orientated to attractive parts of the market. The company faced a year of accumulating losses, worrying uncertainty and immense challenge. However, the decisive actions that we took to control our cost base and safeguard the financial strength of the business ensured that we reopened on the front foot and were able to welcome back our customers, new and old, help them to feel at ease and enjoy themselves once more.’
• Thwaites reports that turnover fell by 67% to £32.2m with an operating loss reported of £9.4m (2020: operating profit of £12.6m). The company says ‘these results would have been significantly worse were it not for the financial support the government and the treasury have provided during the recent crisis.’ The company defends the tenanted model, which has seen it support its business partners and, re the outlook, Thwaites says ‘the first rays of light are breaking through the clouds and the early signs of trading as we have reopened have been most encouraging.
• Camden Town brewery has opened a Bavarian-style beer hall on its original north London site below the arches of Kentish Town West station.
• AB InBev has announced that Michel Doukeris has today assumed the role of Chief Executive Officer of Anheuser-Busch InBev succeeding Carlos Brito, who has stepped down after 15 years as CEO. The company says ‘Michel brings cultural and operational continuity along with a fresh perspective focused on driving long-term organic growth. He is a global leader who has consistently delivered top- and bottom-line growth in markets across the globe. Michel’s demonstrated consumer-focus and brand-building capabilities will accelerate the company’s momentum and transformation.’ Doukeris says ‘my focus will be on ensuring we continue to meet the moment in 2021, while continuing to invest and accelerate what is already working: category development, premiumization, Beyond Beer and our digital transformation with direct to consumer and our B2B Bees initiative. I am excited about our future and our
• Paytronix in the US has reported that 47% of diners now use at least one loyalty program and says that this reflects the wider use of such programs in the restaurant market.
HOTELS & LEISURE TRAVEL:
• Transport secretary Grant Shapps would not give a timetable for the implementation of quarantine-free travel from amber countries for people who have been fully vaccinated against Covid-19. Shapps said ‘First, the Joint Committee on Vaccination and Immunisation has yet to opine on whether children should be part of a vaccination programme.’
• Per the TTG, travel agents report that enquiries have increased in the two weeks from 12-25 June, up 11% on the fortnight prior. However, this has yet to translate into a rise in bookings as customers remain nervous about committing to a holiday in an environment of ever changing restrictions, with the number of average bookings falling from 13 to 11 over the same timescale.
• The Telegraph reports health secretary Sajid Javid will reportedly update the NHS app to ‘pave the way’ for a wider return of travel to Europe this summer. The app has been remodelled to serve as a Covid passport that will enable British travellers to prove they are fully vaccinated, show a negative pre-departure test or demonstrate they have had the virus in the past 180 days. The app is reportedly ready to be integrated into the EU’s digital ‘green pass’ system.
• Safestay has announced that the disposal of its Edinburgh Hostel to a&o Hotels and Hostels for a cash consideration of £16 million, representing a 22% premium to the £13.4 million book value has completed. The company says ‘part of the proceeds of the disposal will be used to reduce debt by 35% whilst providing the Group with sufficient cash reserves as the business moves back out of lockdown towards positive cash generation over the coming months.’ Chairman Larry Lipman says ‘this transaction has facilitated a 35% reduction in Group borrowings as well as providing us with the cash to reset our hostels and re-engage as restrictions lift. It is a very positive solution both for the restart, which is underway, but also to have the option to invest at a time when many of our competitors will not.’
• A report jointly presented by the UN World Tourism Organisation and the UN Conference on Trade and Development shows that the halting of international tourism due to the Covid-19 pandemic could cost the global economy $4 trillion. International tourism and its ‘closely linked sectors’ suffered an estimated loss of $2.4 trillion in 2020, with a loss of between $1.7 trillion and $2.4 trillion expected in 2021.
• Will Wei Cheng is set to list the company he founded, Didi Global, on the New York Stock Exchange in a $4.4bn float. Didi, China’s biggest ride-hailing firm will be valued at $67.5bn with the company tasked with stemming losses that widened last year due to the pandemic and tackle regulatory scrutiny amid an antitrust crackdown in China.
• Trainline Partner Solutions reports that three out of five business travellers say they are more likely to consider using rail for their business trips compared to before the pandemic. The biggest factor putting business travellers off flying are concerns over Covid health and safety, at 41% of respondents.
• A tribunal has decided that over 900 people who lost their jobs at coach holiday company Shearings when their employer went into administration last year were not properly consulted in the redundancy process.
• Carnival Corporation brands Princess Cruises and P&O have delayed their return to cruising in the Australian market until December. The company says ‘we look forward to the opportunity to agree a pathway for starting cruises that carry Australian residents on Australian itineraries. This is about the livelihoods of the thousands of individuals and small businesses, many family-owned businesses, who rely on the cruise sector.’ The company adds ‘more than one million Australians cruised in Australia prior to the pandemic – and more than half of these guests sailed with P&O Cruises Australia.’
• Hotelier and ex-president Donald Trump’s company and its finance chief are expected to be charged with alleged tax-related crimes reports the Wall St Journal.
• US hotel management company Valor Hospitality Partners is to expand in the UK via the addition of 17 properties.
• Rank has updated on trading saying ‘trading in the first six weeks following the reopening of the Group’s venues has been in line with management’s expectations. The Group’s venues are trading above cash breakeven and we expect trading to continue to improve as social distancing and international travel restrictions are eased.’
• Zoom has announced its intention to acquire German machine-learning translation startup Karlsruhe Information Technology Solutions (Kites). Zoom hopes to improve meeting productivity and efficiency by providing multi language translation capabilities for Zoom users.
FINANCE & MARKETS:
• The ONS has reported that UK households increased their savings sharply at the beginning of this year as the third lockdown closed pubs, restaurants and non-essential shops. The savings rate rose to 19.9 per cent from 16.1 per cent in the fourth quarter of 2020. It had touched 25.9 per cent in Q2 last year.
• UK Q1 GDP estimates were revised slightly down yesterday.
• The Guardian reports that ‘Britain’s economic recovery from Covid-19 is coming under pressure amid worker shortages and lengthier pandemic restrictions, as the Delta variant of coronavirus drives up infection rates.’
• The UK jobs market remains firm with unemployment down to 4.7%.
• Sterling mixed at $1.3817 and €1.1656. Oil price down at $74.66. UK 10yr gilt yield down 2bps at 0.72%. World markets mixed to down yesterday but London set to open up around 7pts.
RETAIL WITH NICK BUBB:
Today’s News: After the Dixons Carphone (aka Currys) results yesterday, its Online-only rival, AO.com, has reported its finals (for y/e March) today and boasts of “A year of significant strategic, operational and dealer Lookers, but there is also an unexpected trading update from JD Sports ahead of its AGM, financial progress” (it made a modest £20m profit on sales of £1.66bn, up 62%). Despite the rumours of new market launches in Europe, there is nothing specific to report and on current trading the statement is fairly bland: “We have started the new financial year well and remain prudently optimistic that we will be able to deliver double digit growth as we lap the strong Covid performance comparatives”. In other news, there is an ABF (Primark) trading update, plus the much-delayed finals from the Motor which provides a double-whammy of good news: guidance for underlying PBT for