Langton Capital – 2020-10-09 – PREMIUM – Marston’s & Carlsberg JV cleared, RTN, IHG, N of England etc.:
Marston’s & Carlsberg JV cleared, RTN, IHG, N of England etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: Hofstadter’s Law says that, no matter how much you understand Hofstadter’s Law and know that things always take longer than you imagine, they will still take longer than you imagine. And the same is kind of true with regard to Covid-19 because, having read Albert Camus novel The Plague earlier this year, I had in mind that these things last longer than you would hope, like or even imagine, the current coronavirus pandemic is stretching out interminably. Indeed, as we tweeted yesterday, the problem with Covid-19, see, is it’s a virus. It doesn’t know when to get off the stage. You can boo and hiss at it as much as you like but it doesn’t care. Indeed, it remains inconvenient, harmful, and even deadly, long after it’s become tiresome, boring and tempting to ignore and therein lies a problem. Because it’s hard to maintain a permanent state of vigilance and, as the WW1 soldiers shot in the head by snipers that they could easily have avoided found out to their cost, occasional slips can have a high price. Anyway, all that redundant wisdom from a bloke who rolled the dice once to often and caught the disease a month ago. Time to move on to the news & follow us for real time developments on Twitter at @brumbymark: ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. THE NORTH OF ENGLAND: At least the government’s Leak Machine is functioning efficiently with more policies, these regarding increased restrictions in the North, being flagged in the Press. 9 Oct 2020: Introduction: • See also General Email below. • The mood music has changed markedly in the last few days. A further tightening, particularly in the North of England, is likely next week. • Messrs Whitty and Vallance are widely a) criticised by libertarians, Malthusians and Great Barrington supporters but b) listened to by politicians (and we would suggest for good reason). • See yesterday and below for what’s happened in York and more widely in the North of England over the last month. • The number of infections has risen roughly 20-fold since the beginning of September and, compounding from these levels, it’s easy to project scary numbers within a short period of time from now Direction of travel: • Hence, it is probably not too radical to suggest that regulations are likely to be tightened • The easing of the 10pm curfew is perhaps less likely than it was even a week ago • Nobody contests that a closure would be bad news for the venues impacted • The arguments, such as they are, are a) is a hospitality closure warranted and b) who can and should pay? The role of hospitality: • You should watch what people do rather than listen to what they say • Often, the two things will be in accordance with each other but, if a person says ‘I would hand a twenty pound note into the police’ you might get a more accurate picture if you put a note in front of a selection of people and observed what they did • With that in mind, PHE has been producing Pie Charts for weeks showing that only around 4% of infections came from food outlets & restaurants (compared with 38% at schools / universities, 18% at care homes, 26% in the workplace etc) • The government’s actions have not seemed to be dictated by the above • Boris Johnson a week ago and Robert Jenrick yesterday morning have pointed the finger at hospitality. Jenrick told the BBC there was ‘evidence hospitality plays a role’ in spreading the virus. • He said ‘it is commonsensical that the longer you stay in pubs and restaurants, the more likely you are to come into contact with other individuals. The more drinks that people have, the more likely that some people are to break the rules.’ Official, sensitive advice not shared with you and me • The Guardian has seen slides marked “official – sensitive” which say that the ‘US Centers for Disease Control which found that, compared with Covid-free people, those with coronavirus were twice as likely to report having dined at a restaurant in the 14 days before becoming infected.’ • Don’t shoot the messenger. • The secret slides shown to MPs quote Public Health England as saying that ‘41% of under-30s with Covid had contracted it in a pub, bar, restaurant or cafe.’ • This doesn’t seem in line with its previously produced pie charts, the latest of which was for week 40, i.e. last week • The sensitive briefing says: ‘a quarter of infections across all ages originated from those settings.’ • Although it is not popular to say so, these numbers could be underestimating the impact of hospitality overall as one or two students bringing Covid-19 back into a halls of residence after a night out could infect a dozen more – and the dozen would not be registered as hospitality transmissions. • Certainly this looks to be the sort of information that is influencing government policy (or at least the sneak previews that we have had so far) to date PUBS & RESTAURANTS: The North of England: • MPs have been warned by the UK’s Chief Medical Advisor Chris Witty that the number of coronavirus patients in intensive care in the north of England could surpass its April peak if infections continue rising at the current rate. • Given the exponential nature of infection, that is a disturbing truism. Changed behaviour could and should derail the growth before it gets to those sorts of levels. • As we mentioned in yesterday’s Premium Email ‘looking at our own dear York as an example, infections per 100k, when Langton Capital succumbed personally to the virus, almost exactly a month ago, were around 15. • In the four weeks since, infections have risen to around 35, then 50, then 70 and most recently 199 per 100k registering a veritable explosion in the last 10dys or so. To put this in context, York is running at around 2.5x Scotland as a whole, almost 2x England as a whole and around 0.5x hotspots such as Leeds, Liverpool & Newcastle.’ • York has seen infections double almost four times in a month. That’s what exponential growth looks like and the game is to knock it (exponential growth) off track. This will involve limiting human to human contact. It’s this sort of private briefing that is energising ministers. • The mood music is pointing to tighter rather than more relaxed regulations. MPs may be furious that such tightening has been flagged in the press before it has been discussed in parliament – but that may not change what is about to happen. • The Guardian says the ‘new restrictions [are] expected to be announced next week for millions of people, and likely to hit hospitality venues.’ It says ‘several MPs expressed frustration that they were given no clarity on what measures might be imposed in their areas, or when, following reports that the closure of pubs, bars and restaurants was expected to be announced in some areas on Monday.’ • Whitty and his colleagues have ‘set out the medical rationale for further restrictions in the regions, according to one MP who was present, adding that he was struck by the stark warnings about hospitalisations.’ • The Guardian says ‘in the north-east and Yorkshire, the weekly average of hospital admissions fell to a low of seven on 16 August but had risen to 107 by 2 October.’ It says ‘the weekly average of admissions increased by 51% in the most recent week, from 25 September to 2 October. Patients needing a ventilator bed increased from five on 13 August to 79 on 4 October.’ See our comments on the growth rate of infections in York. • Sky says it has seen ‘blueprints of the current plans’ that mean ‘pubs, restaurants and leisure facilities are expected to be closed in parts of the North put into the strictest tier [of regulation].’ • It says ‘Whitehall sources stressed that nothing has yet been signed off. “There’s still a lot of work to be done.”’ • The Telegraph, on the other hand, reports that a ‘decision to close pubs and restaurants in the north of England now looks inevitable’. It says that the briefing to MPs by Chris Witty was not backed up by the published data although secret slides did show there were major concerns about transmission in the hospitality sector. It is not known why these slides have not been made public although the government had been boosting visits to the sector recently via EOTHO. The role of hospitality: • The Guardian has seen slides marked “official – sensitive” which say that the ‘US Centers for Disease Control which found that, compared with Covid-free people, those with coronavirus were twice as likely to report having dined at a restaurant in the 14 days before becoming infected.’ • See Premium Email. Further leaks re restrictions etc.: • Sky reports ‘England is expected to be carved into three different lockdown tiers next week, with millions of people facing tougher restrictions as the government tries to get a handle on rising coronavirus cases and hospital admissions.’ • A simplification could at least make the system understandable. • Some time ago we tweeted re our currently over-complicated patchwork jigsaw of regulations ‘here’s a thought, 6 levels, 0 to 5. Zero = free, 5 = lockdown like March. Between are graded rules re number allowed to meet, indoors or outdoors etc. Put it on Google & hey presto, we might understand it.’ Company reaction re Scotland and, potentially, Northern England: • Punch Pubs CEO Clive Chesser says re Scotland ‘these are clearly difficult circumstances and we fully understand the severity of the ongoing crisis. As an industry, we have gone to great lengths to ensure our venues remain a safe place to be, fully complying with all of the Government guidelines on operating a ‘Covid safe’ environment for our customers and teams.’ • He says ‘the latest announcement made by the First Minister is bitterly disappointing and once again pubs are being disproportionately targeted. There is a distinct lack of evidence in the paper published that points to the virus being spread in pubs.’ • The BBPA says re the North of England government leaks regarding closures, if enacted, ‘could destroy pubs there. It would be on top of what is already a very challenging period for the sector with the 10pm curfew and rule of six, plus service limited to tables, resulting in a huge reduction in consumer confidence.’ • The BBPA calls for evidence of transmission and for the efficacy of its measures. CEO Emma McClarkin says ‘a local lockdown without immediate additional and adequate support will destroy many pubs.’ She says ‘the Job Support Scheme is not fit for purpose to save jobs in businesses facing a local lockdown. Proper measures need to be taken, as they were in the Job Retention Scheme, if jobs are going to be saved. Grants will also be needed for businesses impacted by local lockdowns to survive this period.’ • Martin Wolstencroft, CEO of Arc Inspirations, has called for sight of evidence to back up the government’s leaked local lockdown plans for the hospitality sector. Footfall: • Wireless Social reports that ‘recent footfall from last weekend (3rd Oct) suggests that the footfall is dropping again.’ It says that, across the UK, it is down 46% on February levels. • Wireless Social says ‘certain towns and cities are faring better and worse than others. Greater Manchester, which is subject to local lockdown restrictions, is currently at minus 55% of the footfall seen in February, which is 10% behind the rest of the UK.’ • It says ‘the same can be said for Liverpool which was also placed under stricter lockdown conditions last week, last Saturday footfall was at minus 60% of the numbers seen on the same Saturday in February, and Sunday at minus 50% of February’s footfall.’ • New West End reports that West End footfall was up 17% week-on-week on Wednesday, 7 October. Such short term numbers will be impacted by the weather. It says ‘compared to the same day last year, footfall was down 55%.’ • A CBI / PwC survey has suggested that 74% of City firms are reviewing how much office space they need in the light of the boom in home working. • The survey says c71% of firms were now investing in their IT systems to support remote working. Company news: • Marston’s has reported that the Competition and Markets Authority has cleared its proposed joint venture with Carlsberg and that the antitrust condition to Completion has now been satisfied. The group says the transaction will now complete at the end of October 2020. • The CMA had been ‘considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.’ It has effectively found that there is no case to answer. • Canadian fast food chain Tim Hortons is reported set to launch a major expansion in the UK creating perhaps 2,000 jobs. • US chain Which Wich Superior Sandwiches is to open two new virtual restaurant locations in Battersea and Bethnal Green this month. • Restaurant Group’s Director’s Remuneration Plan was approved at its AGM yesterday, though only by 63% to 37% • McDonald’s has reported Q3 numbers saying that US LfLs were up 5%. The company says its international markets segment, which includes France and the United Kingdom, saw same-store sales fall 4.4%. • McDonald’s says ‘while current year business results have been impacted by the Covid-19 pandemic, the pace of recovery paired with the Company’s strong financial position support this increase to the dividend while still giving the Company the ability to invest in the business.’ • Compass Group is to collaborate with street food operator Kerb to bring its traders to stadiums and venues nationwide from 2021. • Oakman Group has issued a trading update for the 13 weeks ending Sunday 4th October saying that the company increased revenues by 40.6% ‘with the four fledgling Ashmore Inns contributing £1.3m.’ • The company says ‘Oakman Inns’ 24 pubs and restaurants showed a Like-for-Like increase of 25.4%, up £2.7m. Wet Sales were up 12.7% and Dry up 45.5% on Like-for-Like sales. Unsurprisingly, room sales across the estate were down 52.3%.’ • Oakman says ‘even removing the benefit of VAT cuts and the EOTHO scheme, they would still show double digit growth in Like-for-Likes.’ HOTELS & LEISURE TRAVEL: • UK visitors to Italy will have to show evidence of a negative Covid-19 test on arrival after a clampdown on countries “at a greater risk.” This also includes France and Spain. • Carnival Corporation yesterday afternoon reported Q3 numbers with a smaller-than-expected loss. It says bookings for H2 next year are higher than anticipated. CEO Arnold Donald says ‘we have come full circle from initiating a suspension in the early days of the pandemic, to transitioning the fleet into a pause status, right sizing our organization and, now, embarking on the phased resumption of guest operations.’ • Carnival has said that booking trends for 2021 indicate long-term potential demand for cruising. It says ‘many of the company’s brands source the majority of their guests from the geographical region in which they operate. In the current environment, the company believes this will benefit it in resuming guest cruise operations.’ • Carnival says ‘the pause in guest operations continues to have a material negative impact on all aspects of the company’s business, including the company’s liquidity, financial position and results of operations.’ • The National Trust is to cut around 1,300 jobs • Travel Weekly reports travel agents as saying that ‘the unexpected removal of Turkey from the UK’s travel corridor list has left them despairing, with few destinations left to sell and clients questioning whether to book at all this winter.’ • STR reports that US hotel occupancy was down by 30% year on year in the week to 3 October. Room rates were 26% down and REVPAR was some 48% lower. • Intercontinental Hotels has commented on the hotel industry at an annual hotel conference saying that hoteliers could be beneficiaries if businesses scale back on renting office spaces. CEO Keith Barr says ‘people will be meeting in hotels more as they go to offices less. Shrinking office space, but also leisure will come into play as (staff has) learned to work remotely.’ • Commenting on the leisure sector, Barclays has said that 4.8m Brits or 9% of the population say Health and Wellness is extremely important to them post CV-19. Some 61% of businesses plan to invest more on health and wellbeing over the next 3 years and 22% of consumers are looking at “staycation” in the UK for the foreseeable future • Private jet rental companies are beginning to market their wares by saying that social distancing is easier to maintain if you rent the whole plane. That’s what swung it for us. FINANCE & MARKETS: • The ONS reports that the UK economy grew by 2.1% in August. The economy remained at that point some 9.2% smaller than before the pandemic struck. • Treasury official Charlie Bean has warned that the second wave risks putting Britain’s economic recovery from the coronavirus pandemic “on hold” • Sterling higher at $1.2953 and €1.0998. Oil higher at $43.18. UK 10yr gilt yield down 2bps at 0.29%. World markets better yesterday. London due to open up around 7pts. RETAIL WITH NICK BUBB: • Today’s News: Apart from the publication of the Dunelm Annual Accounts, there is no Retail company news out today, but the big property company British Land has issued an operational update, announcing that it is resuming dividend payments, given better than expected September quester rent collection. Interestingly, in terms of its Retail portfolio, British Land highlight that its out-of-town Retail Parks are driving its outperformance of the national benchmarks, eg with Store sales in September only down 7% LFL (with footfall only 11% down). British Land give a shout-out to the particularly strong performances from the Giltbrook retail park in Nottingham, Mayflower in Basildon and Nugent in Orpington. • Trade Press: The front cover of Retail Week magazine today is a photo of an Asda distribution lorry on a motorway with the headline “Asda’s new direction”, after the planned sale to the Issa brothers, to flag up the main feature on “Asda’s £1bn question: where to splash the cash?”. RW also have features on M&S’s Food Marketing Director Sherry Cramond, “The stores that Retail bosses love to spend in” and “How Dave Lewis saw Tesco through turbulent times”. In his column, the Editor looks at the recent trading updates from Greggs, Hotel Chocolat, Card Factory, Boohoo and ScS and thunders “Whisper it, but retail is on the road to recovery”, noting that “The headlines do not even begin to paint the full picture of an industry that is battling back”. • BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that in w/e Sunday Oct 4th, BDO Fashion LFL sales were down by 11.1% (with Store Fashion sales down c38%), whilst Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were down by 4.4% (down c30% in Store sales, but up c69% in Online sales). • News Flow Next Week: A busy week kicks off first thing on Tuesday with the BRC-KPMG Retail Sales figures for September, quickly followed by the French Connection interims and the latest monthly Kantar/Nielsen grocery sales figures. Wednesday then brings the ASOS finals, the Just Eat Q3 update and the Watches of Switzerland AGM. The Dunelm Q1 update is on Thursday and then we get the much-awaited JLP Strategy review on Friday. |
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