Confidence, labour, energy, Time Out, IHG, gambling, supply issues etc.:

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A DAY IN THE LIFE:

Back in London after a week away and, as always, the pavements can be a bit of a challenge.

Firstly, there are the phone zombies. They’re irritating in that they seem to walk without getting anywhere and, if they’re in front of you, that’s a bit of a drag.

However, in the scale of things, they’re often only really dangerous to themselves whilst secondly, the crazy delivery electric-bike riders who seem to think that the faster they cycle on the pavements, the more likely they are to have a clear path, can be positively dangerous.

Indeed, they make you wish you were carrying a Laurel and Hardyesque plank of wood or a backpack stuffed full of tins of beans that could be used to take them out but, whilst that might be applauded by fellow pedestrians and the local dentists, it would likely be frowned upon the powers that be and isn’t really a solution to the problem.

Not an acceptable one, anyway. On to the news:

PUBS & RESTAURANTS:

Hospitality business confidence:

CGA by NielsenIQ and Fourth’s 2023 Business Leaders’ Survey shows that 47% of managed hospitality group leaders feel confident about prospects for their business over the next 12 months, up from 29% three months ago…

• On the flip side, 20% of leaders admitted to feeling pessimistic and 14% said their business was at risk of failure in 2023.

• In terms of calls for government action, 81% of leaders wanted to see a cut in hospitality’s rate of VAT, 61% would welcome help with business rates reform and 46% called for more help with energy bills.

• CGA director for hospitality operators and food EMEA, Karl Chessell, said ‘business confidence still lags well behind pre-COVID levels, and with few signs of respite on costs…businesses need support on tax and bills if they are to ride out these immense challenges.’

• Sebastien Sepierre, managing director – EMEA, Fourth, said ‘Technology plays a vital role in solving these challenges, helping businesses to engage and motivate employees, drive efficiency across the board, and identify and, ultimately, realise cost savings.’

Responding to the survey, UKH CEO Kate Nicholls comments ‘the optimistic attitude on show from leaders in hospitality demonstrates the resilience and positivity of our sector, even in the face of enormous challenges.’ She says further support is needed…

• …adding ‘with the cost of doing business crisis showing no signs of slowing down, there is urgent action needed to tackle the root causes of inflation.’ Ms Nicholls says ‘if the Chancellor acts to extend more energy support, reform the broken business rates system and reduce the sector’s rate of VAT, the Government can harness the spirit of hospitality businesses to see off current challenges, drive economic growth and lift the nation’s economy.’

• Langton. Calls for help, however justified, need to be put in the context of the current economic situation. With calls on the government (i.e. the taxpayers’ i.e. our) purse coming from nurses, firemen, the sick, elderly, the NHS, education and many others, it may not be politically expedient to help – or more importantly to be seen to help – the booze, holiday and gambling industries whilst urging restraint on other parties.

• It never hurts to ask but, for better or often for worse, the hospitality industry is seen as self-healing and, after the material support given during the covid pandemic, we may be on our own.

Re general confidence, a poll commissioned by Barclays for its SME Barometer has suggested that the bosses of small companies are becoming more optimistic about the outlook for their companies…

• Barclays reports that 41% were optimistic, the highest number since Q2 last year. It says that 55% believe they will increase revenues this year. With inflation in double digits, that is perhaps not surprising. Around a third expect to hire more staff in the coming year.

Competition for labour:

Asda has announced a 10% pay increase to £11.11 per hour from July, benefitting more than 115,000 workers across its 633 stores. This follows an 8% pay increase for hourly-paid retail roles during 2022. In addition, the BBC reports ‘Britain’s biggest grocer Tesco has agreed to increase its workers’ wages by 7%, marking their third pay rise in just 10 months….’

• Such moves could intensify competition for labour. Tesco praises its staff but, then again, so does everybody else and in an open market for workers, there are likely to be responses. Despite broadly positive news on earnings and CPI last week, this could give the inflationary wheel another spin.

Energy costs (to the consumer):

Cornwall Insights reports that households could be paying around £500 a year more for their energy post 1 April once energy cap moves and changes in the support provided by government are taken into account. Cornwall says ‘regrettably the forecast for April looks set to leave the price cap above the increased energy price guarantee level.’

Other news:

Springboard reports that footfall in UK retail destinations was boosted last week by the school half term holiday.

The MA reports that Ali Turnham of Make Associates estimates the UK’s night time economy to now be worth £79bn, a sharp fall from its £116bn pre-pandemic valuation. NTIA CEO Michael Kill added that some statistics suggest a 13% contraction of independent SMEs since the beginning of the pandemic.

Supply issues. Tomatoes are reported to be short supply due to bad weather in Europe and Africa. The UK imports from Morocco and Spain…

• The BRC says ‘difficult weather conditions in the south of Europe and northern Africa have disrupted harvest for some fruit and vegetables including tomatoes.’ It adds ‘however, supermarkets are adept at managing supply chain issues and are working with farmers to ensure that customers are able to access a wide range of fresh produce.’

COMPANY NEWS:

Time Out Group has confirmed that it has scrapped plans to open a London Time Out Market in Spitalfields. This follows a 6yr planning battle…

• Time Out says it ‘confirms that it no longer intends to proceed with the development of Time Out Market at 106 Commercial Street.’ It adds ‘this is disappointing as we were looking forward to bringing our food and cultural market with its positive contribution – including new jobs, opportunities for local talent and benefits to the local economy – to this London borough.’

• Time Out adds ‘it is regrettable that, although recommended for approval by planning officers, the Tower Hamlets Development Committee chose to defer its decision on our application in 2022 after a process which has already taken several years and during which we addressed all prior concerns.’

• The group adds ‘with an expectation of the process being drawn out by further delays we have decided to no longer proceed with our application but focus our resources on other opportunities. We are grateful to everyone who has supported us throughout this process, in particular the landlord, Truman Brewery.’

• Time Out also pulled plans to open a market in Waterloo, reports the Evening Standard. Time Out says ‘we are excited about the success of our seven existing Markets and the eight new locations in the pipeline in cities such as Barcelona, Cape Town, and Vancouver – we are looking forward to opening here and in other cities which embrace having a Time Out Market as an addition to their city’s culinary and cultural offerings.’

The Times reports that Mexican fast-food chain Zambrero, which is ‘owned by an entrepreneur doctor has received £143 million in equity financing to open more restaurants in Britain and Ireland…’

• Zambrero, an Australian restaurant franchise that serves burritos, nachos and tacos, has opened about 20 sites in the British Isles in the past six years and will add a further 25 by the end of this year, reports The Times.

Heineken reports revenue up 19% excluding acquisitions to €34.6bn, but warns that margin pressure will result in more price increases in 2023…

• Adjusted net profit rose 31% to €2.8bn despite the mention of margin pressure. Heineken expects costs (especially ingredients and energy) to rise by a further 16 to 19 % per hectolitre during the year.

HOLIDAYS & LEISURE TRAVEL:

Intercontinental Hotel Group has reported Q4 and full year numbers to end-December, saying that revenue for the full year rose by 33% to $1.84bn with underlying revenue up by 39%. The company says that operating profit was up by 55% at $828m with adjusted EPS up 92% at 282.3c.

IHG says net debt is little changed at $1.85bn. It reports that it has seen a ‘further significant improvement in trading: sequential improvement each quarter in global RevPAR vs 2019.’ The strongest recovery came in the ‘Americas, with RevPAR +3.3% vs 2019 (Q4 +9.0%); EMEAA improving to (7.5)% (Q4 +8.8%); Greater China (38)% (Q4 (42)%) due to the scale of travel restrictions that were still in place…’

• IHG reports that its network grew +5.6% YOY and says it ‘opened and added 49.4k rooms (269 hotels); global estate now at 912k rooms (6,164 hotels).’ A final dividend of 94.5¢ is proposed, +10% vs 2021, resulting in a total dividend for the year of 138.4¢. The group’s share buyback programme will ‘return an additional $750m of surplus capital in 2023.’

• CEO Keith Barr says ‘in 2022 we saw demand return strongly in most of our markets, pushing Group RevPAR back close to 2019 levels and fee margin ahead. It’s particularly pleasing that in the second half of the year we exceeded 2019 levels for both RevPAR and profitability. Looking to 2023, while there are economic uncertainties, we expect continued strong leisure demand in many markets, alongside further return of business and group travel and the ongoing reopening of China.’

• The CEO adds ‘our recent agreement with Iberostar adds our 18th brand and substantially increases our resort and all-inclusive presence, and we continue to explore further new opportunities like this for additional growth through exclusive partners. Meanwhile, the other six brands we have added since 2017 already contribute more than 10% of our pipeline, and our Luxury & Lifestyle portfolio is now 13% of our system size and 20% of our pipeline as we increase our exposure to higher fee income segments.’

• Mr Barr adds ‘IHG’s overarching ambition is to deliver industry-leading growth in our scale, enterprise platform and performance, doing so sustainably for all stakeholders including our hotel owners, guests and society as a whole. We are a stronger and more resilient company than ever before, and we are proud of the advancements made in each of our strategic priorities.’

• The CEO concludes ‘reflecting the confidence we have in continued growth and the highly cash generative nature of our business, the Board is pleased to be recommending a 10% increase in the final dividend in respect of 2022 and to announce a further share buyback programme to return an additional $750m to shareholders in 2023.’

A poll by travel money firm eurochange has found that 96% of people plan to travel overseas in the next year with the remaining minority intending to at some stage before 2025. In order to help with costs, 40% said they are considering self-catering, with 21% opting for all inclusive holidays.

Fattal Group has expanded into the UK luxury hotel market with its acquisition of the 159-year-old Grand Hotel in Brighton…

• The Israeli-based company said it planned to ‘invest significantly’ in the 201-room Victorian property to retain its ‘iconic status’. The hotel, where the IRA attempted to assassinate then-PM Margaret Thatcher in 1984, has been a major feature of the Brighton skyline from the moment it was built. It featured in the 1979 film Quadrophenia. The Caterer understands the sale price to be £50m – £60m, a similar level to when it last changed hands in 2014 for £50m.

OTHER LEISURE:

The BBC reports that it expects gambling regulations to be tightened. It says ‘intense lobbying behind the scenes has gone on in recent months, to shape what will be the first significant piece of legislation on gambling in nearly 20 years and since the invention of smartphones…’

• The BBC reports ‘this white paper has already been pushed back at least four times, with delays caused by changes in prime ministers and the revolving door of the secretary of state for culture (there have been eight in five years).’

FINANCE & MARKETS:

Global Entrepreneurship Monitor’s (GEM) NECI rankings put the UK in 25th place out of 51 countries on the quality of entrepreneurship ecosystem economies. The UK ranked 18th last year, meaning it has fallen 7 places as a result of Brexit and other political & economic disruption…

• The UK’s ranking worsened due to poor performance in categories such as ‘Physical Infrastructure’ and ‘Ease of Entry: Burdens and Regulation’, both directly related to the post-Brexit, post-pandemic turmoil. Professor Mark Hart, Lead of the GEM UK team said ‘It is not surprising that framework scores worsened over the year given chaotic trading conditions and supply chain blockages, as the implications of Brexit continued to be multiplied by the aftermath of the pandemic and compounded by rising energy prices.’

Rightmove reports that house prices increased by just £14 MoM in February, as prices remained flat despite high inflation.

• The company said that more sellers are ‘heeding their agents’ advice to price right the first time’. On an annual basis, asking prices were 3.9% higher than a year ago in February, down from 9.3%/year in July.

Figures from the country’s statistics agency suggest that the Russian economy shrank by only 2.1% last year. There had been suggestions of a fall of up to 12%.

Sterling mixed at $1.2029 and €1.1268. Oil lower at $83.05. UK 10yr gilt yield up 19bps at 3.49%. World markets mixed yesterday. London set to open down around 9pts.

RETAIL WITH NICK BUBB:

Today’s News: There is little company news out so far this morning, apart from the news that Frasers re-started its share buyback programme yesterday, but the embattled Revolution Beauty has announced that it continues to work closely with BDO to complete the audit of the group’s FY22 accounts and is now working to publish the much-delayed accounts for y/e Feb 2022 on or around 30 March and hopes to lift the suspension of trading in its shares as soon as possible after that.

Today’s Press: According to the invaluable Guardian morning email briefing, the Guardian leads with the outcome of an inquest jury which found that “‘Catastrophic failures’ led to Plymouth shootings”. The Financial Times reports “Biden vows ‘unwavering support’ for Ukraine on surprise visit to Kyiv”. The Telegraph covers an intervention from two former Prime Ministers with “Send jets to Ukraine, Truss and Johnson tell PM”. The i says, “Nicola Bulley’s family accuse ‘shameful’ TV crews and social media” after police confirmed that the body of the missing dogwalker had been found at last yesterday. And the Times leads with the latest on the Tory Party unease with the amended Northern Ireland protocol: “Brexit deal may trigger resignations, Sunak told”.

News Flow This Week: The Walmart and Home Depot Q4 results in the US will be out at lunchtime today. Tomorrow should bring the Coffer CGA Tracker of pub and restaurant sales for last month. Thursday morning brings the Howden finals, whilst on Thursday evening the John Lewis Partnership management team are holding a drinks event for journos and analysts. The widely followed monthly GFK Consumer Confidence index is out first thing on Friday morning.