Langton Capital – 2020-07-01 – SSP job cuts & cuts elsewhere, reopening, Pizza Express etc.:
SSP job cuts & cuts elsewhere, reopening, Pizza Express etc.:
A DAY IN THE LIFE:
I get to visit a pub today, which is very exciting and, though I’ll stop short of having a beer, it will be good just to be inside one of the buildings again as chunks of the trade prepare to come out of lockdown this coming Saturday.
And, as I can get the cash for the parking in town back if I spend some money in the supermarket, I’ll pop in but, as I’ve been presented with a shopping list with lots of asterisks all over it, it would appear that I’m not to be trusted.
‘You only ever buy dog food and beer,’ I’ve been told – and, much to my surprise, that was said like that was a bad thing.
Because isn’t it better to be certain to please me and the dog rather than run the risk of pleasing nobody at all and, besides that, I’ve bought dry roasted peanuts and shaving cream in the past.
Queue pitiful shrug and off you go, job done. Follow us on Twitter at @brumbymark and on to the news:
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THE HIDDEN COST TO JOBS: Jobs have been protected by the furlough scheme. But have they been saved or is it just hiding the higher level of unemployment that already exists? 1 July 2020:
Job losses are being announced in earnest now – see SSP below. The furlough will taper in August. Given the legal requirement for a 45dy ‘consultation period’, some employers are counting backwards from the date on which their employees will start costing them real money, and they are kicking off the process now. See SSP below, for example. See Premium Email.
SSP CUTS 5,000 UK JOBS, SALES IN UK RUNNING DOWN 90%, BETTER ELSEWHERE.
• SSP Group has this morning updated on trading and a proposed reorganisation of its UK business ‘to reflect the current low level of UK passenger demand resulting from COVID-19.’
• SSP’s CEO Simon Smith says ‘Covid-19 continues to have an unprecedented impact on the travel industry and on SSP’s businesses in all geographies.’ The company is taking further action to reduce costs. It has already raised equity from the UK market, passed its H1 dividend, has access to government backed loans, shuttered sites, reduced capex etc. It says ‘we are beginning to see early signs of recovery in some parts of the world and are starting to open units as passenger demand picks up. However, in the UK the pace of the recovery continues to be slow. In response to this, we are now taking further action to protect the business and create the right base from which to rebuild our operations.’
• SSP says ‘regrettably, we are starting a collective consultation which will affect our UK colleagues. These are extremely difficult decisions, and our main priority will be to conduct the process carefully and fairly. Importantly, we are retaining the flexibility to upscale operations and swiftly re-open additional units if we see improved sales over the summer.’
• SSP expects travel hub passenger numbers to remain depressed and, with numbers currently down 85% on last year, it says ‘our expectation is that by the autumn only around 20% of units in the UK will have opened.’ It will cut up to 5,000 jobs as a result at a one-off cost of £8m to £10m. It says the redundancies will be confined to the UK and says ‘at this stage, we have not commenced restructuring of a material scale in any other geographies due to our expectations of a more rapid recovery, the longer durations of furlough support or our contractual lay-off arrangements.’
• The group adds ‘the medium-term prospects for the Group remain positive. The objective of the action that we are proposing today is to ensure that we manage through this pandemic, rebuild our business as demand recovers and, in time, deliver long term sustainable growth for the benefit of all our stakeholders.’
• SSP reminds us that ‘with the global lock-down continuing, and as we indicated in June, sales in April and May were approximately 95% below last year. During June sales have recovered slightly and are now running at approximately 90% below last year, with stronger performances in Continental Europe and North America reflecting the gradual easing of lockdowns in these regions offset by the UK and Rest of World, where sales remain below this level.’
• The group says ‘our liquidity position remains consistent with the detail we provided at the interim results. At the end of the reporting period and following the equity issue in late March, the Group had approximately £413m of available liquidity, with access to around £343m of additional facilities secured in April and May, a total of approximately £756m.’ It says ‘taking into account this level of cash and available facilities, the Group is confident that it has sufficient funds to allow it to operate throughout even its most pessimistic scenario.’
PUB & RESTAURANT NEWS:
Covid-19 issues & reopening:
• Jury still out on whether the £10,000 and £25,000 grants were meant to help tenants to pay their rent. See Premium Email tomorrow.
• The Pub Governing Body has ‘called on member companies (owning up to 499 tied pubs in England and Wales and the majority of tied pubs in Scotland) to continue to engage actively with tenants and lessees regarding ongoing support, taking account of the government’s code of conduct for commercial property relationships during the COVID-19 pandemic, recognising that continuing government controls will constrain trade materially and that some pubs may not be able to open at all.’
• The Body also ‘confirms that rent review negotiations that were suspended from 16 March 2020 can recommence from 1st July 2020 following the government’s decision to allow pubs that are able to comply with specific safeguarding measures to reopen.’
• London Union’s Jonathan Downey has suggested that the Bill proposing to fast track external seating applications and de-regulate off sales for pubs may be ‘held up in the Lords, meaning it won’t be passed into law until late July-ish.’
• Downey also says that ‘re-opening is going to be a nightmare for some of us and there will be differences everywhere.’ He says that the reaction of the police and EHOs will vary by region with some zealot likely to stamp on anything they can. He says he is ‘hearing about Westminster rejecting one risk assessment because there was a DJ’ and he reminds readers of the early days of the lockdown when police and councils were ‘taping/cordoning off park benches and shooing people along that were standing enjoying a cigarette’.
• Wireless Social has reported on footfall saying that ‘the overall picture of footfall last week is of very little change from the previous week – perhaps people were just having a last few days of lockdown before hitting the hospitality venues at the weekend.’
• Wireless Social says ‘there were still a few changes in the drivers of footfall. Non-essential shops in Wales had reopened from Monday and we can see a definite increase in footfall in Cardiff last week. Although we have been seeing a gradual increase in footfall in the towns and cities over the past few weeks, the good weather that many experienced towards the end of last week meant that people instead headed to the beaches and similar places and consequently urban footfall decreased, most noticeably on Thursday.’ Footfall is still running at less than half of pre-Covid levels.
• National Restaurant News once again suggests that moves to open up territories in the US are running in parallel (but in the opposite direction) to moves to reimpose lockdowns in some territories due to spikes in infection in others.
• The above is perhaps a feature of the federal system in the US though, with Leicester in the UK coming in for special measures, there are some equivalent moves this side of the pond.
• In the US, the governors of New York, New Jersey and Connecticut jointly announced a travel advisory that requires a 14-day quarantine for those traveling from nine states with “significant community spread,” a list that as of Wednesday included Alabama, Arkansas, Arizona, Florida, North Carolina, South Carolina, Washington, Utah and Texas.
• UK Hospitality has called on the government to provide additional aid for hospitality operators in any areas (such as Leicester) that may find themselves unable to reopen in line with the rest of the country. UKH’s Kate Nicholls says ‘if local lockdowns are going to be a feature of the national reopening, then it must be accompanied by targeted support. The furlough scheme provides a degree of flexibility, but we need financial support for those businesses not able to open but still staring huge bills in the face.’
• The Telegraph reports that ‘Pizza Express is withholding rent payments as it battles its way through the coronavirus pandemic.’
• Pizza Express reportedly wrote to landlords on Friday saying it is not in a position to pay quarterly bills that fell due last week. Overall, less than a fifth of the rent due across the nation’s retail and hospitality outlets is thought to have been paid.
• Mosaic Pub & Dining, which has 30 sites between Birmingham and the South Coast including London, is to open 27 of its 30 sites on 4 July. Two sites in the City will not open until demand levels have been more fully assessed.
• Diageo is to stop spending money on social media advertising for the time being. It has cited ‘unacceptable content’ appearing near the company’s ads.
• NRN in the US reports that Uber Technologies is potentially interested in buying Los Angeles-based operator Postmates.
• Weston’s Cider is to donate 1,880 kegs of Stowford Press to pubs across the nation to help the on-trade get back on track following Covid-19 lockdown reports the MA.
• Papa John’s in the US has reported that same-store sales have been up 24% in North America over a five week period ended on June 28, and that international same-store sales saw a 6% rise. The company believes that Q2 sales will be up 28%.
• Papa John’s CEP Rob Lynch says ‘in June Papa John’s delivered a third consecutive month of double-digit sales growth in North America and strong growth internationally. The events of the past few months have accelerated Papa John’s transformation into an innovation-driven organization, contributing to our strong business momentum today.’
• New Look is reported to have hired CBRE to help it negotiate with its landlords. Retail Week says ‘the move increases the possibility of its falling into a pre-pack administration.’
• The Daily Mail reports that TM Lewin is to close all its stores and cut 600 jobs after collapsing into administration. Harveys and Bensons for Beds have also entered administration.
HOLIDAYS & LEISURE TRAVEL:
• The EU has authorised a ‘safe list’ of countries from which it will accept ‘non-essential’ visitors. The countries include Algeria, Rwanda and Tunisia but exclude the USA. The UK is on the list as it is still in its standstill agreement.
• Dnata Travel Group CEO John Bevan has suggested that talk of an ‘explosion’ in travel bookings should be taken with a ‘pinch of salt’.
• The WTTC says that London is now at the bottom of a list of 10 major European destinations for travellers largely due to its border and quarantine regulations.
• Genting Cruise Lines aims to restart its Dream Cruises from 26 July.
• Operators suggesting no-fly holidays could boom, staycations could be popular, ‘bucket-list’ trips will be brought forward, all-inclusive holidays will be in demand etc. All sensible but most commentators have vested interests.
• EasyJet is to close bases at Stansted, Southend and Newcastle and cut around 700+ pilots’ jobs. The company says it ‘has today started formal consultation on proposals with employee representatives including Balpa and Unite on all of its UK-based pilots and crew.’
• Birmingham Airport has said that it has commenced discussions that could lead to around 250 job cuts, or around a quarter of its total workforce.
• Carnival UK has confirmed cuts to its sales team. Around 450 roles are likely to be made redundant.
• Escape Hunt announces that it raised c£4.316 million (before expenses) through its Placing, Open Offer, Subscription and issue of Convertible Loan Notes.
FINANCE & ECONOMICS:
• The ONS has reported that the UK economy shrank by 2.2% in calendar Q1. This is a tad worse than its earlier estimate of a 2.0% contraction. It is the worst quarter since 1979. But it won’t be the worst quarter for long.
• The ONS says ‘all main sectors of the economy shrank significantly in March as the effects of the pandemic hit.’
• PM Boris Johnson has not ruled out putting up taxes to pay for his ‘build, build, build’ plan for the UK to spend its way out of recession. The Tory Party is committed by its 2019 general election manifesto not to put up income tax, VAT or National Insurance.
• Bank of England economist Andy Haldane says that the UK could engineer a V-shaped recovery. Some fear that it may be L shaped. Haldane concedes ‘as the furlough scheme tapers from August, however, there is a risk this greater number of furloughed workers are not hired back by employers, adding to the unemployment pool.’
• Credit Card lending contracted in May by 10.7% year on year. Mortgage approvals amounted to just 9,300, the lowest number on record.
• Job losses kicking in as Airbus says it is to 1,700 in the UK as part of a major restructuring, SSP to cut 5,000 roles. Much more going on beneath the radar.
• The deadline for requesting an extension to the Brexit standstill period has now passed. The FT reports that more than 100 UK company chiefs, entrepreneurs and business groups have written to the prime minister warning that it would be “hugely damaging” to the economy if Britain leaves the EU without a deal at the end of this year.
• Sterling up at $1.2366 and €1.1017. Oil higher at $41.72. UK 10yr gilt yield up 1bp at 0.17%. World markets mixed. London set to open up around 10pts.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Sainsbury: Today’s Q1 update covers the 19 weeks to June 27th and so it includes an extra 9 weeks on top of the first 7 weeks previously reported and the outcome is bang in line at +8.2% LFL, with management highlighting the help from warm weather and a particularly strong performance from Argos (which was up 10.7%, despite the store closures).
• Today’s News: An unexpectedly busy morning has brought liquidity and rent collection updates from the embattled landlords, Hammerson and British Land, as well as a stronger than expected Q1 from B&M (with the UK up nearly 27% LFL). Topps Tiles has also announced a stronger than expected Q3, with June overall only down 20% in sales and last week just 5.4% down. Sticking to the DIY theme, Kingfisher announced at the market close yesterday afternoon that a new non-exec Director in December will, amazingly, be one Tony Buffin, the former COO of their rival Travis Perkins. And after hours, the embattled Ted Baker confirmed the completion of the sale of the freehold of the HQ near King’s Cross (aka The Ugly Brown Building) to the British Airways Pension Fund for a cash consideration of £78.75m (about £72n net), despite the vagaries of the current property market.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 26 Jun 20 Marston’s H1 numbers
• 26 Jun 20 DP Poland AGM
• 26 Jun 20 Sportech AGM
• 26 Jun 20 888 trading update
• 26 Jun 20 Comptoir AGM
• 26 Jun 20 Tesco AGM & Q1
• 29 Jun 20 Restaurant Group CVA creditors’ meeting
• 30 Jun 20 Intercontinental Hotels H1 update
• 30 Jun 20 On the Beach H1 numbers
• 30 Jun 20 Vianet AGM
• 1 Jul 20 Constellation Brands Q1
• 1 Jul 20 Sainsbury Q1
• 1 Jul 20 ABF update
• 2 Jul 20 Mitchells & Butlers H1 numbers
• 3 Jul 20 Fuller’s FY numbers
• 3 Jul 20 GfK consumer confidence numbers
• 7 Jul 20 Whitbread AGM
• 13 Jul 20 Pepsi Q2 numbers
• 21 Jul 20 DP Eurasia H1 trading update
• 23 Jul 20 C&C AGM
• 28 Jul 20 Gregg’s H1 numbers
• 28 Ju. 20 AG Barr trading update
• 7 Aug 20 Diageo FY numbers
• 11 Aug 20 Domino’s Pizza Group H1 numbers
• 9 Oct 20 JD Wetherspoon FY numbers
Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year.
2019 COMPARATIVE RESULTS:
• 11 Jul 19 Dart Group FY numbers, 16 Jul 19 Fulham Shore FY numbers, 17 Jul 19 Nichols H1 numbers, 24 Jul 19 Marston’s Q3 trading update, 25 Jul 19 Fuller’s FY numbers, 25 Jul 19 Compass Group Q3 update, 25 Jul 19 Diageo FY numbers, 30 Jul 19 Gregg’s H1 numbers, 31 Jul 19 M&B Q3 update
• Lockdown: The road back? The path to a bad place is made up of small steps, all of which looked sensible at the time. There is a danger, not saying we’re there, that sloth will be legitimised as virtue. And, at the macro level, if you don’t work, you don’t eat.
• So, it’s a good job the Gov. is so competent, has an oven-ready, world-beating plan to get us back to work in place. If we were being run by a bunch of panicky plate-spinning, clown-shoed incompetents, we’d be in trouble.
• There must be a sensible way back to work. Think of balance. That’s not a rude word. Could be a road between the brutalist, Dickensian, ‘they all gotta die some time’ people on the one hand and the ‘lockdown fanatics’ on the other.
• Life in lockdown. Give me liberty or give me beer. I’m past choosy.
• Message to government. Do the right thing, for heaven’s sake. Give us the hard word. Tell us we need to get back to work, what this will all cost, who will pay for it and how etc? Running a country isn’t like winning an election, it’s not a popularity contest.
• Worrying development. Seems I can’t be trusted. Been given shopping list. Asterisks all over it. Shampoo? Bin-liners? Apparently, I ‘only ever come back with beer & dog food’. Trudat. But said like it’s a bad thing…?
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