Langton Capital – 2021-07-12 – PREMIUM – Young & Co, 19 July, Covid passports, WFH, Pizza Express etc.:
Young & Co, 19 July, Covid passports, WFH, Pizza Express etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
So, with England going ahead, the opposition drawing level, the game going to extra-time and then the home side losing on penalties, it was all horribly familiar as that’s exactly what happened when England were knocked out by Germany (with a younger Langton and 80,000 odd other spectators in the stadium) in 1996.
But there will be enough column inches expended on that this morning so let’s move on to the subject of guinea pig urine because, like a fool, I agreed to house the beast indoors (just for a week or two) three years ago and now find that the cage has leaked and the little monster’s pee has rotted through the wood of the cage, the carpet and much of the floorboards underneath meaning that, in my opinion, costs of looking after it should be amended from ‘just a pound a week’ to ‘just a pound a week with the odd £1,000+ bill chucked in’.
Anyway, with the rain pretty much reflecting the nation’s mood, let’s move 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.
PUBS & RESTAURANTS:
• The PM will update later today on whether 19 July will be going ahead and, hopefully, we will hear with it means.
• Further comment: Our thinking is that the further moves to remove restrictions will take place but that they will be less far-reaching than had previously been hoped and, perhaps promised. We have seen leaks suggesting that the ending of self-isolation after coming into contact with an infected person is likely to be 16 August rather than 19 July and there is now talk of Covid passports, a subject that was thought dropped a few weeks ago.
• We’ll hopefully be given some guidance on masks, distancing, care homes, registering on entry to premises etc. There may be moves to push responsibility onto individuals and companies. This would be consistent with removing support (such as furlough payments, zero business rates and low rates of VAT) and also with asking for loans and deferred VAT payments and the like to be repaid.
Privatising the problem:
• Removing support and leaving individuals and companies to face problems on their own is perhaps inevitable. Companies may be anxiously digging out their insurance policies and having discussions with their legal advisers re potential liability for workplace infections and the like.
Self-isolation changes, NHS pinging & staff shortages:
• The CBI is pressing the government to bring forward changes to self-isolation requirements. In a six-point plan announced yesterday, the employers’ body says that there needs to be some certainty and the next phase of relaxation needs to be a “confident” rather than an “anxious” process. The CBI wants, understandably, staff to be available and it is calling for the bringing forward an end to the self-isolation rules to July 19, rather than 16 August.
• The Guardian reports that ‘staff shortages force restaurants and pubs to face ‘freedom day’ with fear.’ It says many operators do not think they will be in a position to take advantage of any spike in demand because they cannot source staff and adds ‘Covid has only added to the problems caused by Brexit, which has made it tougher to bring in EU workers who make up a high proportion of the hospitality workforce.’ UKH says that up to one third of the industry workforce are off work self-isolating. This number could rise further as, though you can only hopefully have Covid once, you can be pinged countless times.
• A number of sources have suggested that Covid certificates will be needed to go into pubs, bars, restaurants & clubs. This may come in ‘in the autumn’. It isn’t clear whether this is consistent with freedoms being ‘irreversible’ (as promised) or whether mentioning in now (albeit via leaks rather than as a statement of policy) allows it to be introduced later without it being classed as a reversal. This, if it isn’t denied before it has a chance to germinate, will involve a slug of extra cost for venues and will increase the potential for argy-bargy at the door.
• Further comment. The Times reports a Downing St source as saying ‘in autumn vaccine passports could become an important tool that will allow us to keep things open.’ It says another source said ‘if we can show real benefits of getting vaccinated in terms of everyday life then it could be quite a useful tool.’ This is probably true but it does represent a U-turn of sorts . As these are just leaks and briefings, they could be U-turned upon before they have a chance to U-turn themselves.
• On a practical level, what is a vaccine certificate? It’s not on the NHS app and those little slips of paper saying ‘AZN batch #PV46693’ or whatever, could be so easily forged as to make an early-80s Hull Tiffany’s nightclub membership card look positively sophisticated.
• As regards cost, the above could be quite material. Table service at the moment implies meet & greet staff but, pubs in particular, will be keen to get away from this as it costs money and kills spontaneity. Door staff cost money and the potential for disagreements and arguments with customers is substantial.
Working from home:
• Chancellor Rishi Sunak says younger workers should return to the office as pandemic restrictions fall away. The Telegraph quotes Sunak as saying that face to face meetings are “really important” for younger staff. This is true. In terms of economics, if it is able to move the dial (and it might not), it could come as some relief for town-centre operators such as Pret & other sandwich shops, coffee outlets, train and bus station bars & cafes etc. Also SSP, Compass, workplace service companies, TfL, trains and the like. Landlords will also be broadly in favour.
• Further comment. This is akin to a David Cameron era ‘nudge’. Comments such as those above a) do not cost anything and b) they might work, even if only at the margin. Given the zero cost, there is, arguably, only upside. It’s easy to imagine some focus group or other being asked ‘did it influence your decision?’ and, if the answer is yes, we could see more of the same. One thing that we would be reasonably sure of, nothing will move quickly.
• The Telegraph carries an interview with Pret and Itsu founder Julian Metcalfe, saying that only the fittest will survive the present high street cull. Metcalfe says The City is still a ‘desert’ but says that coffee shops could find the going even more challenging. In a statement that is hard to disagree with, Metcalfe says ‘companies with multiple shops all opposite each other in heavy dense office worker places probably will suffer.’ Metcalfe says ‘only the fittest will survive.’ Problems are being caused by ‘a mixture of “rocketing” food costs, high business rates and rent for restaurants, and a “severely perilous” staffing situation have made it almost impossible for many businesses to cope’ says the Telegraph.
• CGA reports that ‘England’s progress to the final of the Euros football tournament has given some pubs’ drinks sales a much-needed lift—but total On Premise revenue remains well below pre-COVID-19 trading.’ It says its Drinks Recovery Tracker shows that ‘England’s semi-final with Denmark on Wednesday (7 July) generated an average sales uplift of 13% against the equivalent day in 2019. It follows a 31% increase on the day of England’s last-16 game with Germany (Tuesday 29 June).’ It continues, saying ‘the boost to trading has largely been limited to outlets that have screened games live. Outlets showing sport saw average like-for-like drinks sales jump 39% on the day of England’s semi-final, while others recorded a 21% drop.’
• CGA says ‘the spikes in sales on matchdays have soon fallen back on other days’. It says ‘across the week to last Saturday (3 July), average sales were 25% below the same week in 2019, though that was a slight improvement on the previous seven days. The days before and after England’s game with Germany saw sales fall back 23% and 34% respectively on 2019’s levels. The quarter-final against Ukraine on Saturday (3 July) failed to match the impact of other game days, with drinks sales down 24%—continuing the post-lockdown pattern of tough weekend trading.’ JDW, which is not showing the football in many of its pubs, noted that its LfL sales deteriorated when the tournament started.
• Further comment. CGA says ‘big sporting occasions tend to be good news for pubs but tougher for restaurants, and that pattern has continued during the Euros.’ This extends to other, indoor leisure operations, which will find sporting occasions hard to compete with. CGA says ‘many drink-led pubs with big screens will have enjoyed their best week of post-lockdown trading yet, and Sunday’s final should deliver another bumper day. But with all venues still severely restricted and many consumers opting to watch games at home instead, the drinks sales uplift across the tournament is way below what we might expect in normal times. The four-week delay to the easing of COVID-19 restrictions has wrecked what should have been a catalyst for recovery in the drinking-out sector.’
• The Night Time Industries Association’s CEO, Michael Kill, has said ‘we have been encouraged by much of what the Prime Minister said today about what Government restrictions will look like in the next phase of reopening. The end of social distancing; the end of the rule of six and table service for indoor mixing; no ban on mass events; the removal of the need to scan a QR code to enter venues; and the decision not to introduce COVID status certification – these are all very important steps that we have been campaigning for, because they are the restrictions which have decimated the night time economy over the last sixteen months.’
• The Times reports that yesterday could have been the busiest night for ordering pizza since New Year’s Eve. There was some football on.
• UKH Cymru has called on the Welsh Government to lift restrictions. It says ‘it’s time to lift remaining restrictions on the hospitality industry and give visitors to Wales simple and clear messages about staying safe.’ It says ‘on July 19th we’re expecting England to fully open up and from that moment we need to make sure visitors to Wales are welcomed with a set of simple directions about how to stay safe and enjoy their holiday while they are here. Welsh Government Ministers are suggesting we have to now learn to live with the virus; it’s time to make it simple and easy for those looking to take their first restriction-free break in eighteen months.’
Company & other news:
• Young’s, tenanted disposal. Young & Co reports that it has agreed ‘to sell most of its tenanted estate, the Ram Pub Company.’ It will ‘sell 56 of the 63 pubs in the Ram Pub Company to Punch Pubs & Co. for a total consideration of £53M in cash, having generated EBITDA of £4.7M for the year ended 31 March 2019. Young’s will retain the remaining seven pubs for the long term.’
• Further comment: YNGA says ‘as part of its strategy to create long-term sustainable shareholder value, Young’s regularly reviews its capital allocation priorities.’ It adds that this drove the decision to sell saying ‘the Disposal is consistent with Young’s strategy to target growth through investment in higher turnover managed pub and hotels.’ It says the ‘net proceeds from the sale will be used to strengthen the Company’s balance sheet and provide additional capacity for investment in its managed estate’ and adds that ‘Young’s will look to acquire predominantly freehold managed pubs.’ It says head office costs will reduce.
• The company expects the completion to occur on 9 August. CEO Patrick Dardis says ‘Young’s sole focus will now be on operating well-invested and premium managed pubs and hotels. We have a proven history of making attractive returns from investing in high-quality pubs and this disposal will provide us with additional firepower to upgrade our existing pubs and capitalise on attractive acquisition opportunities that may come to the market.’ He says ‘we are delighted to be welcoming back our customers and are already seeing encouraging trading, despite some restrictions remaining. The Board is confident Young’s will emerge from the pandemic in a stronger position and is excited about the future of the business.’
• Pizza Express reports that it has finalised a long-term refinancing of the company. CEO David Campbell says ‘we are delighted to announce that we have finalised a successful long-term refinancing of PizzaExpress with £335m Senior Secured 5 Year Bonds at 6.75%. The last year has been a transformational one for PizzaExpress – marked by the change of ownership last November. Moody’s, S&P and Fitch all recognised that this new PizzaExpress, with its new management team and ownership, is not the old PizzaExpress and have all assigned B Flat (B/B2) Stable Ratings. The debt levels are now more than half what they were under prior ownership.’
• Mr Campbell says ‘we took the opportunity during lockdown to focus on improving parts of our business which were still open – specifically dine-out and retail – and our teams have done a brilliant job.’ He adds ‘since re-opening dine-in on 17th May 2021, we have seen both good and consistent trade in our pizzerias, we have hired over 1,000 new team members, and alongside our existing restaurant teams, we are delivering a new level of service to deliver a best-in-class restaurant experience.’ Campbell concludes ‘as we look forward to the end of restricted trading on 19th July 2021, we have a much fitter Company. We are very excited about the future on the back of strong results in the first half of 2021, the elimination of third party discounting, and an exciting pipeline of initiatives for the rest of 2021 and beyond.’
• The Daily Mail reports that Fuller’s has told staff to switch off NHS app in case they get pinged and are forced to self-isolate. The paper says ‘in a text message, a manager at London-based Fuller’s brewery, which operates more than 380 pubs, said they should ‘pause or delete the app to avoid being pinged to isolate’.’ Further in the article, it reports that ‘a Fuller’s spokesman said: ‘We have shared guidance provided by our trade association, UK Hospitality, regarding the NHS app and the confirmation that notifications are advisory only. This guidance also recommends that team members turn off contact tracing at work or when phones are in lockers. We have not told anyone to delete the app.’’
• Brew Dog is opening a 15th bar in London; BrewDog Chancery. James Watt says ‘since we rolled down Camden High Street in a tank a decade ago, London has been at the core of everything we do.’
• Talk of a Bank Holiday if England win Euro 2020 has been overtaken by events.
• Danish firm Royal Unibrew has bought MC Energy, the owner of the Crazy Tiger brand.
HOTELS & LEISURE TRAVEL NEWS:
• Travel chiefs are urging Scotland’s first minister Nicola Sturgeon to allow double vaccinated passengers to be allowed to come back from amber list countries without the need for quarantine (in line with England on July 19).
• Travel Counsellors says that Spain has overtaken the UK as its top-selling summer 2021 destination.
• The Foreign Office has relaxed its travel guidance for the US saying it ‘no longer advises against all but essential travel to the US, based on the current assessment of Covid-19 risks.’
• EasyJet has reported a 400% increase in bookings for amber list destinations.
• There is talk of six-hour queues at the UK border.
• Malta is to require proof of full vaccination before allowing travellers into the country.
• STR reports that extended-stay hotels are continuing ‘to outpace other hotel types in their recovery from the pandemic.’
FINANCE & MARKETS:
• The ONS reported on Friday that GDP growth had slowed slightly. The Resolution Foundation says that the recovery is incomplete. It says ‘with the economy still 3.1 per cent weaker than pre-crisis – a gap larger than at any point during the 90s recession – and more timely measures of economic activity such as footfall and spending suggesting that progress has plateaued in recent weeks, the recovery is far from complete.’
• The economy grew by 0.8% in May. The NIESR says ‘May’s month-on-month growth of 0.8% disappointed, with little sign of momentum in either April or May outside the sectors which grew due to the lifting of Covid-19 restrictions.’ It says ‘underlying growth is moderate outside the sectors being unlocked, with supply constraints contributing to the continuing recent stagnation in manufacturing. It remains to be seen whether the lifting of further restrictions in July contributes to a continuation of strong growth in the third quarter or – if cases of Covid-19 continue to rise – increased caution among consumers and even another national lockdown.’
• Sterling higher at $1.3884 and €1.17. Oil price up at $75.15. UK 10yr gilt yield up 6bps at 0.66%. World markets better on Friday but London set to open down around 14pts as at 7.15am.
RETAIL WITH NICK BUBB:
• Saturday’s Press and News (1): The Daily Mail and the Telegraph went with the football as their front page leads on Saturday: the Daily Mail screamed “Let’s bring it home Harry!”, in a reference to “England’s biggest sporting event since 1966”, whilst, embarrassingly, the Telegraph went with a photo of a pensive-looking Gareth Southgate set against the flag of St George and the headline “Southgate summons the warrior spirit of generations past”. The Guardian went with the news that a police officer has been convicted for the murder of Sarah Everard, but it also noted the huge £90m fine imposed on Southern Water for polluting the sea off the Kent and Hampshire coasts. The Times and the FT went with the Covid pandemic: the Times flagged “Covid passports for pubs” and the FT ran with “NHS workers set to be spared Covid isolation amid staff crisis”.
• Saturday’s Press and News (2): In terms of Retailing stories, the big news was the Telegraph story that the Tesco veteran, Tony Hoggett, has been poached by Amazon to run its fledgeling “bricks and mortar” retail business. The Times went big on the news that the fund manager JO Hambro that publicly called on bidders for Morrisons to pay at least 270p has been selling shares below that level, reducing its stake from c3% to 2.3%, prompting the Business editorial to thunder that it’s “nice to see the City’s short-termist hypocrites making private equity look long-term”. Morrison’s rival, Sainsbury, was also in the news after its AGM on Friday, with the Daily Mail stockmarket report flagging as its main story that the Chairman shrugged aside bid rumours (even though the Sainsbury share price barely moved on Friday). The Times had a snippet about the news that the shareholder rebellion
• Sunday’s Press and News (1): The front pages of the Sunday papers were dominated by full-on patriotism about tonight’s England match with Italy in the Final of the Euros: the main section of the Sunday Times was wrapped around a supplement with a picture of Harry Kane and the flag of St George on the front, whilst the Mail on Sunday screamed “Queen and William: come on England!” and the Sunday Telegraph went with a photo of an exultant Harry Kane and a headline of the Queen’s message: “I hope history records not only your success but also the spirit, commitment and pride with which you conduct yourselves”. The actual News headline in the Sunday Times was about the faltering vaccination drive (“Gap between jabs “to be cut to four weeks””), whilst the Observer went with “Public alarm grows at PM’s plan for Covid “freedom day””.
• Sunday’s Press and News (2): In terms of Retailing stories, the Business section of the Sunday Times was also wrapped around a supplement (this time to advertise the absurd new name of the Standard Life Aberdeen fund management group: abrdn), but its main story was about Morrisons, flagging that the top three Directors of the business stand to take up to £35m from the planned sale of the business, via their share awards (“Morrisons’ bosses set for millions”). The Sunday Times also had a follow-up feature headlined “Morrisons’ holy trinity and the trolleys of lolly”, focusing on how Andy Higginson, Dave Potts and Trevor Strain “revived the retailer but divided the Boardroom” and noting that Trevor Strain’s “imposing frame and bruising style earned him the nickname Trevor Soprano among senior staff”. The Sunday Telegraph Business section also had a front-page story about Morrisons
• Sunday’s Press and News (3): In other news, the Sunday Telegraph seized the fashion model photo opportunity provided by the news expected in the upcoming trading update that Burberry is rebounding strongly in Asia. The Observer also had a feature preview of the Burberry AGM and Q1 update, highlighting that investors have been shaken by the news about the departure of CEO Marco Gobbetti (“Change of leadership at Burberry is not the right time to change the whole fashion wardrobe”). M&S was also in focus after its AGM last week, with the Mail on Sunday noting that the Chairman Archie Norman hinted that the M&S dividend may be paid again as soon as next year and the Sunday Telegraph highlighting that he also admitted that Ocado is struggling to meet the demand for M&S Food. The Questor investment column in the Sunday Telegraph looked in detail at Dunelm, noting that Dunelm is
• Sunday’s Press and News (4): In terms of all the Economics comments and columns in the Sunday papers, we would, as usual, highlight the column by the Sunday Times Economics correspondent David Smith (“A hefty bill to achieve net zero – who will pick it up?”), in which he noted the high cost of addressing climate change and noted that “the public will need big incentives to bear the costs of decarbonisation”. The Sunday Times also had a feature about how labour shortages and rising raw material costs are undermining the confidence of businesses (“All roads lead to a bumpy recovery”). The column in the Observer by the veteran Economics commentator William Keegan was headlined “The PM is no Machiavelli: his ruthless streak serves only himself” and the column by the Political correspondent of the Observer Andrew Rawnsley was headlined “This England aren’t playing for the Tories’ version of
• Today’s News: There was no Retail news expected today, but the big news today is that ASOS (market cap £4.8bn) has got into bed with the leading US department store chain Nordstrom (which has a market cap of $5.7bn), via a joint venture (on unspecified terms) on the Top Shop brands and a wider commercial collaboration. There has also been a trading update from the struggling fashion chain QUIZ, which has announced a big sales recovery in the last 3 months, against very soft comps, without giving any indication of performance against 2019 sales, although it does say that the outcome was “consistent with the Board’s expectations”.
• Today’s Press: According to the invaluable Guardian press summary email, the Guardian’s poster-style front page features a picture of the once highly respected Gareth Southgate consoling Bukayo Saka after his penalty miss ended England’s Euro 2020 dream. “So close” reads the headline, while the Telegraph has a similar picture and the headline “The ultimate agony…penalties heartbreak again”. The Daily Mirror and the i both go with a simple “Heartbreak”, while the Daily Mail has “It all ends in tears”. The Times headline says “Penalty curse denies England their dream” while the Daily Express and the Sun both emphasise the positive with, respectively, “It hurts…but we’re so proud of you” and “Pride of lions”. The Scotsman splashes with “Aviation bosses issue plea for quarantine-free travel” and the FT has “Brussels targets aviation fuel tax in drive to cut carbon emissions”.
• This Week’s News: Tomorrow brings the BRC-KPMG Retail Sales for June (with another month of strong growth likely). On Wednesday we get the Dunelm Q4 update and the Burberry AGM, with the ASOS Q1 update and the French Connection AGM following on Thursday. Friday brings the Burberry Q1 update and possibly the Frasers finals, along with the Homeserve AGM.