SSP, Ten Entertainment, Escape Hunt, curfews, WTB, TUI & other:

A DAY IN THE LIFE:

It’s getting chilly out there in more ways than one.

Around 22 degrees up North yesterday with sunshine but a somewhat more bracing 12 degrees expected today (with rain, then tomorrow rain, Friday rain) and that will make more obvious the inevitable shift at this time of year from summer to autumn.

And that might be a mental as well as a physical shift because, with the nights now longer than the days, overnight frosts only a few weeks away and PM Boris Johnson and his team putting their serious voices on and telling us to be vigilant and prepared and all the rest of it, it feels as though the tone has become a little more sombre.

But, on a brighter note, the UK still should still hopefully spend 98 or 99yrs out of every century not in a pandemic. And leisure remains an aspirational and an income elastic good and, for the companies that can keep their heads above water, there will be less competition and higher margins at the end of the day – or at least at the end of the rainbow.

Anyway, the Langton recovery from our brush with Covid-19 continues apace. It’s still not much fun getting tired chasing the dog around but it’s a step up from getting out of breath brushing your teeth and, as they say, every little helps.

Follow us for real time developments on Twitter at @brumbymark. On to the news:

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REDUNDANCIES: Sadly, these may accelerate in the coming weeks as many businesses will be counting backwards from the end of furlough next month. 23 Sept 2020:

Introduction: See Premium Email. 

PUBS & RESTAURANTS:

New government restrictions:

• Nobody said this was easy but the 10pm curfew, table service and the order to work from home are the main changes.

• The latter is a clear U-turn whilst the first point is a reversal of August’s policy of actively encouraging consumers to return to pubs, restaurants, cafes and coffee shops

10pm closing, table service etc.:

• Pubs from tomorrow must close (not call last orders) at 10pm. They must also operate a table service only (no standing at the bar).

• Feedback we have received suggests that managed pub operators and most casual diners generate between 2% and 4% of their income after 10pm. This rises to between a fifth and a quarter for bars. It will be (or would be if they were open) higher for nightclubs.

• Food led pubs tend to close their kitchens considerably before 10pm.

• There has been talk of the measures being in place for six months.

• The BBC runs with anecdotal comments from some bar operators that they ‘do more than a half of their business’ after 10pm. Such outlets, though they will be in a financial mess, will be few and far between.

• The extent to which the rule changes (and the raised tempo of warnings etc.) change consumer behaviour has yet to be seen. It 1) will change it and 2) it will not change it for the better.

• The planned return of spectators to sports venues will not happen on 1 Oct. Face coverings must be worn by shop staff, taxi drivers and passengers and customers in indoor hospitality venues will also have to wear masks, except when seated at a table to eat or drink

• Rules in a nutshell here.

A couple of observations:

• 10pm, if people really wanted it to be, could become the new 2am. Any disintermediation of this sort would undermine the rationale behind the curfew.

• If the majority of pubs and restaurants generated c3% of their revenues after10pm, it does suggest this may not have much of an impact on the R rate. PM Boris Johnson told the House the new rules were ‘carefully judged’ to cut the R rate whilst causing ‘the minimum damage to lives and livelihoods’. It’s not entirely clear that this is possible.

• This is a tricky situation for any government. But stamping on both the brake and the accelerator within a short period of time does not make for a smooth ride.

Trade response:

• CEO of the BBPA Emma McClarkin says ‘a curfew is particularly heart-breaking for those pubs in areas where infection rates remain under control. There seems to be little available evidence that pubs, with their strict adherence to Government guidelines, are unsafe, so we are unsure that this blanket measure will make a major difference.’

• Ms McClarkin says ‘a 10pm curfew will devastate our sector during an already challenging environment for pubs. Pubs were struggling to break even before today and these latest restrictions will push some to breaking point.’

• SIBA CEO James Calder says ‘after a month of being encouraged to support the hospitality trade the public is now being warned off. A 10pm curfew will be at best a marginal measure in controlling the virus, but will impact directly on pubs, staff and breweries.’

• He says ‘we need a comprehensive new package of measures including VAT cut extension to beer, rent support, business rates cuts and a cancellation of the planned rises in beer duty for small brewers.’

• UKH says ‘it is hard to understand how these measures are the solution to fighting the disease when Government data shows that just 5% of infections out of the home are related to hospitality.’ Kate Nicholls adds ‘these restrictions will come as another crushing blow for many hospitality businesses struggling to recover so it’s crucial these new rules are applied with flexibility.’

• JDW’s chairman Tim Martin called the rules ‘utterly stupid’. Fuller’s Simon Emeny says that more job losses will result. He says ‘pubs can actually be part of the solution – they are not part of the problem.’ CEO of the Night-time Industries Association says the curfew is a ‘devastating blow to the already beleaguered night-time economy.’

• The Food & Drink Federation says ‘these new restrictions on the UK’s fragile hospitality and food service sector are a potentially fatal blow to manufacturers who specialise in supplying the hospitality sector. Many pubs and coffee shops will not be able to trade profitably under these new rules and will have to close again, with further threats from enforced closure due to local or national lockdowns. Those businesses and their suppliers also now face losing their furlough lifeline.’

Working from home (again):

• Office workers are once again being told to work from home where they can. The CBI says this is a ‘crushing’ blow that could have a ‘devastating impact’.

• CBI DG Carolyn Fairbairn says ‘the impact on people who are coming back into their offices, the impact on city centres, so dependent on the bustle of city life, our creative industries – this will have a devastating impact on people and businesses.’

• The government had recently been encouraging staff to return to their workplaces. It had been obliging civil servants to do so. This will go into reverse.

• Clearly not good news for Pret (taken here as a proxy for city-centre grab-n-go outlets). Nor for commuter bars, coffee shops and the like.

• New West End reports that West End footfall was down 1% week-on-week on Monday, 21 September. It will be interesting to see what happens after today. Compared to the same day last year, West End footfall was down 57%

Other Covid-19 issues:

• Governor of the Bank of England Andrew Bailey has called for the government to ‘stop and rethink’ the furlough scheme. He is suggesting that some industries may be in need of an extension.

• Bailey says ‘we have moved from a world of generalised employment protections, to specific and focussed areas.’

Company news:

• JD Wetherspoon is to cut between 400 and 450 jobs at its airport outlets. CEO John Hutson says ‘the company has written to 1,000 people employed in its pubs at six airports (Gatwick, Heathrow, Stansted, Birmingham, Edinburgh and Glasgow) to inform them that a possible 400 to 450 positions are at risk of redundancy.’

• JD Wetherspoon chairman Tim Martin has told Sky News that the new rule re early closure ‘is utterly stupid because what you have got at the moment is 3.2 million hospitality workers trying their very best to enforce social distancing rules.’

• He says ‘people will obey them if they think they are in their best interests. What they are doing is making those people redundant at 10pm and turning everyone out into the streets. What are 19, 20, 21-year-olds going to do – go home to mum? We’ve done a good job at social distancing in pubs.’

• Mr Martin says that contradictory signals are being sent out by ministers. He told Sky ‘the whole thing is nuts. I’m fairly certain the government hasn’t got a clue what it’s doing…these jokers are ruining the country. At the moment, he [Boris Johnson] is definitely not up to the job.’

• SSP says sales are running at just 24% of last year’s numbers. The group has updated on trading for its H2 saying that there has been ‘extensive action to reduce the cost base and preserve cash is expected to result in a materially lower cash usage than anticipated at the Interim results and an underlying EBITDA and operating loss broadly in the middle of the range indicated.’

• SSP says ‘Covid-19 continues to have an unprecedented impact on the travel industry and on SSP’s businesses in all geographies.’ It says ‘we have seen some improvement in passenger demand since the start of the crisis and we have reopened units swiftly and profitably in response to this, with over one third of our units now trading.’

• SSP says ‘current weekly sales are running at approximately 76% below last year, representing an improvement from the third quarter when sales were approximately 95% lower in April and May and 90% lower in June.’ It says ‘the sales improvement has been driven by a stronger recovery in Continental Europe, where weekly sales are approximately 66% lower year-on-year, compared with the UK, North America and the Rest of the World, where weekly sales remain around 80-85% lower year-on-year.’

• SSP says in the UK ‘there has also been a recovery in the air sector over the summer predominantly from leisure customers, albeit considerably lower capacity and renewed quarantine restrictions reduced activity. The rail sector remained very weak during the third quarter.’

• SSP concludes ‘overall sales in the second half of the year are expected to be approximately 86% lower year-on-year, resulting in a reduction in revenue of around £1.3bn compared to H2 2019.’ The group says ‘we have seen some limited improvement in traffic in a number of regions, with sales currently at around 24% of pre-Covid levels. As we head into the winter months, demand may well remain subdued. However, we have an important role, providing food and beverage services to the travelling public, and we will continue to re-open units dynamically where we see demand, maximising the profitability of the reopening programme and rigorously controlling costs and cash.’

• SSP concludes ‘looking further out, we firmly believe that demand for travel will return and the actions we have taken since February, together with the evolving market backdrop, will ensure SSP emerges as a fitter, stronger leader in the sector.’

• Ten Entertainment has reported H1 numbers saying the group is ‘in excellent shape with a proven strategy to maximise our future opportunity.’ H1 sales were £22.5m vs £41.4m with an adjusted EBITDA loss of £1.5m vs a profit of £11.2m in the prior year.

• Sky reports that lenders to Wahaca will have to ‘write off millions of pounds of debt in a financial restructuring that will also involve the closure of a third of its outlets.’

• AG Barr yesterday reported H1 numbers to 25 July. Revenues were down 7.6% at £113.2m with pre-exceptional PBT up 19.4% at £16.6m. CEO Roger White comments ‘we remain on course to deliver a full year performance in line with the revised expectations we communicated in the July 2020 trading update. We have continued to invest in our core brand equity for the long term, maintained our quality and service standards and remain a profitable and cash generative business in a robust drinks sector. We are confident that our business will continue to prove its resilience for the balance of this year and beyond.’

HOTELS & LEISURE TRAVEL:

• Whitbread yesterday updated on trading saying that London revenues remained depressed and that it expects to see ‘demand for travel remaining subdued.’ It is thus making 6,000 staff redundant in the UK.

• Regarding current trading, Whitbread said ‘trading in the first two weeks of September saw year-on-year total accommodation sales remain ahead of the market. Bookings in tourist destinations remain strong, and business bookings are growing, albeit from a low base.’

• It says ‘September and October are traditionally a period when business bookings pick-up after the quiet summer period, however at this point it is too early to assess the impact of COVID-19 on this traditionally busy booking period.’ The company says ‘we also note recent UK Government announcements regarding increased local and regional lockdowns and we will continue to closely monitor the situation.’

• TUI yesterday updated on trading ahead of the end of its financial year saying ‘summer 2020 and Winter 2020/21 capacity have been reduced as a result of recent volatile changes in travel restrictions’ but that overall, the FY20 cash outflow ‘remains as expected.’

• TUI said ‘leisure holidays remain important to customers and have been one of the most missed activities during the pandemic, with leisure travel expected to recover faster than business travel. Our integrated model, underpinned by our trusted and leading brand, offering differentiated products and attractive value propositions, combined with proven flexibility in a volatile environment, means we are strategically well placed to benefit as leisure travel volume recovers over the coming seasons.’

• Hostelworld has announced that TJ Kelly, Chief Financial Officer, is leaving the Group to become Chief Financial Officer of Origin Enterprises plc. The company says ‘the Group maintains comprehensive succession plans and conducted a rigorous succession planning exercise during 2020 to identify successors for the Company’s senior executives. In line with the Group’s succession planning, TJ will be succeeded by Caroline Sherry, Group Financial Controller, who will, in due course, be appointed to the Board of Hostelworld as an Executive Director.’

• Skyscanner reports that 85% of would-be travellers would be more likely to travel if airport testing was in place. Which it isn’t.

• Jet2holidays has extended the suspension of its Canary Islands holidays to 17 October.

• Holiday Pirates has reported that UK holidaymakers have travelled less this summer than their European peers.

OTHER LEISURE:

• Ten Entertainment’s executive chairman Nick Basing says ‘I am pleased that even in extreme adversity the team have taken decisive action that has enabled the Group to emerge from Lockdown so strongly, putting in place sufficient cash liquidity to protect it through a continued period of uncertainty.’ He says ‘we have made a very good start, showing that we have a safe and attractive business for customers and staff.’

• CEO Graham Blackwell adds ‘we are really encouraged by our reopening performance.’ He adds ‘our proven strategy remains relevant, and with a track record of eight consecutive years of like-for-like sales progression, I am confident that we will return the business to growth.’

• Escape Hunt has announces that it has signed a licensing agreement with a software provider, which gives the Company full access to a digital platform on which it can develop remote multi-player games.’

• CEO Richard Harpham says ‘this licensing agreement gives us access to a number of existing games and more importantly, we have the ability to create our own games which will be delivered digitally.’ He adds ‘the platform is an important step in building our ‘Escape Hunt for Business’ and ‘Escape Hunt for Education’ offerings, enhancing our digital capability and also in creating games which are truly scalable.’

FINANCE & MARKETS:

• Michael Gove has told exporters from the UK to the EU to expect to face 7,000-truck-long queues in Kent and two-day delays to trade after the Brexit transition period ends.

• Sterling €1.0888 and $1.2721. Oil $41.46. UK 10yr gilt yield 0.21%. World markets broadly better yesterday with London set to open up around 50pts.

RETAIL WITH NICK BUBB:

• Today’s News: The strong Nike Q1 results came out after hours in the US tonight and the shares traded as much as 13% up in response and, although the big sales beat was driven by Online and China, the Nike news should boost the likes of JD Sports today. Back in the UK, the embattled Superdry was boosted yesterday by Director share buying and Joules should be boosted today by its reassuring Q1 trading update ahead of its AGM (at 9.30am at the HQ in Market Harborough), with overall group sales down 18% in the 13 weeks to 30 Aug, but with Retail store sales only 10% down since reopening. Today also brings the Mothercare AGM (at 11am at the new HQ in Hemel Hempstead), but there has been no trading update so far.

• Kingfisher: The interims statement yesterday (for the six months to end July) was incredibly long and detailed and not particularly well laid out, but, after a wobble in the share price last week on worries that trading in France slowed in August, investors were reassured to hear that Q3 group LFL sales are running up 16.6% over the last 7 weeks, with “growth across all banners and categories”. That level of growth is not as strong as at the peak of the post-lockdown bounce in June/July, but it is still encouraging and Thierry Garnier, the new CEO, says “The crisis has prompted more people to rediscover their homes and find pleasure in making them better. It is creating new home improvement needs, as people seek new ways to use space or adjust to working from home”. The shares rallied by c10% in response yesterday.

• Next: The Next interims statement last Thursday (for the 26 weeks to 25 July) was amazingly detailed and thorough, even by Next’s high standards, earning much praise from the Business editorials the next day, which noted the high quality management of the business by the inestimable CEO Simon Wolfson  (as well as his lucid views on the pros and cons of “home” versus “office” working). The City was impressed with yet another big upgrade to full-year profit forecasts (to £300m pre-tax), given the resilience of trading, even though Next did not expect the impressive full price sales growth in the last seven weeks of 4% to be sustained (as it was driven by the cool Bank Holiday weather and fewer overseas holidays). Interestingly, Next highlighted that the reason why sales had held up much better than it had initially anticipated was down to three factors working in its favour: the
scale and continued success of the Online business; the fact that Next have significant Home, Childrenswear, loungewear and sportswear businesses (which have done relatively well during the pandemic) and the relative strength of Next’s out of town Retail Park stores. Next revealed that the Home, Childrenswear, loungewear and sportswear areas accounted for just over half of total sales a year ago and that they were only down by 17% in the first half (versus a 53% drop in the rest of the business). And Next also revealed that Retail Parks accounted for as much as 62% of Retail sales last year and were only down by 15% in sales post-lockdown (whereas city centre stores were 37% down).

• News Flow This Week: Tomorrow brings the DFS finals and the Pendragon interims. The widely followed monthly GFK Consumer Confidence index is out first thing on Friday.

TRADING STATEMENTS & EVENTS:

Upcoming results are set out below:

• 16 Sept 20 Loungers FY numbers

• 22 Sept 20 Whitbread H1 update

• 22 Sept 20 AG Barr H1 numbers

• 22 Sept 20 TUI FY trading update

• 23 Sept 20 Ten Entertainment H1 numbers

• 24 Sept 20 Mitchells & Butlers FY trading update

• 24 Sept 20 Safestay H1 numbers

• 28 Sept 20 Diageo AGM

• 28 Sept 20 Time Out AGM

• 29 Sept 20 Gregg’s Q3 update

• 30 Sept 20 Compass Group FY update

• 30 Sept 20 Everyman Media H1 numbers

• 30 Sept 20 888 Holdings H1 numbers

• 1 Oct 20 Pepsi Q3 numbers

• 1 Oct 20 Constellation Brands Q2 numbers

• 6 Oct 20 Restaurant Group H1 numbers

• 8 Oct 20 Restaurant Group General Meeting

• 9 Oct 20 JD Wetherspoon FY numbers

• 22 Oct 20 Gear 4 Music trading update

• 27 Oct 20 Whitbread H1 numbers

• 29 Oct 20 YUM Q3 earnings update

• By 31 Oct 20 DP Poland H1 numbers

• 3 Nov 20 DART Group AGM

• 17 Nov 20 Gear 4 Music H1 numbers

• 19 Nov 20 Dart Group H1 numbers

• 24 Nov 20 Compass Group FY numbers

• 26 Nov 20 Britvic 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:

28 Aug 19 Fulham Shore AGM, 30 Aug 19 Gear 4 Music AGM, 6 Sep 19 Greene King AGM, 10 Sep 19 888 Holdings H1, 12 Sep 19 Comptoir H1, 19 Sep 19 Diageo AGM, 19 Sep 19 City Pub Group H1, 19 Sep 19 Saga H1, 23 Sep 19 Brighton Pier Group FY, 24 Sep 19 TUI Group FY trading update, 24 Sep 19 DP Poland H1, 24 Sep 19 Ten Entertainment H1, 24 Sep 19 Hotel Chocolat FY, 24 Sep 19 AG Barr trading update, 24 Sep 19 Tasty H1, 25 Sep 19 Shepherd Neame FY, 26 Sep 19 Time Out H1, 26 Sep 19 M&B FY trading update, 26 Sep 19 SSP FY update. 27 Sep 19 Escape Hunt H1

YESTERDAY’S TWEETS:

• Government tells industry, Press and H of Commons (in that order and probably earning itself another telling off) that pubs must shut at 10pm from Thursday and people should work from home (again. Or not) Sneak here – https://www.youtube.com/watch?v=2WT59lu4tCU&ab_channel=MetalMatt

• The full advice to pubs re 10pm closing was circulating at 10.30pm last night. Government trying to get ahead of the news & leaking it to Press, trade etc. Good luck with that. And advice may have changed by the time the PM addresses parliament at c12.30 in any case.

• Raab’s bodyguard leaving his loaded pistol on a plane leads to question: At what seniority point does incompetence cease to be a liability and become an asset / be rewarded rather than punished? MP level, junior minister, cabinet member…?

• Covid-19 wins Lottery as it makes jump from pangolins (are they even real?) & lesser spotted dingbats to humans who then jet it around the world double quick. An evolutionary ‘winner’ but hopefully, on a serious note, its existence-to-extinction could be squashed into c2yrs

• Hard reality. See the thing is, with a virus, the science never changes & it’s impervious to bluff & bluster. Lockdown (with farmers, police, transport, NHS, food factories & shops all working) got the R to 0.6 or 0.7. Everything else puts it up. Tricky call from here on in.

• Whitbread updates saying 91% of hotels open by end-August wit occupancy 51% in that month. Demand ‘subdued’ in London. Demand for travel ‘remaining subdued’. August total sales down 38.5% on last year. Group likely to make c6k staff redundant.

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