Intercon, Vianet, confidence, Tier II changes, compensation etc.:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

And the other thing I’d meant to catch up on during lockdown (or Lockdown One, as we may soon be calling it) was my paperwork.

However, not only am I being chased by the Make Tax Digital people again, but I’m being reminded I have to get my VAT return in by month end, Langton’s Company Return needs doing, I have to submit the company’s corporation tax return, once again a string of near-zeros, and I have to produce some sort of account of my personal tax calcs for the year to last April all by, about, Christmas.

And my in-tray, or trays I should say as there are now three of them because of their tendency to topple over and spill papers all over the carpet when they get above about 36 inches tall, has been glaring at me since March.

And, untouched, it can glare at me a bit longer because watching raindrops on the window has once again taken precedence and then, at some point the phone will ring, it will be coffee o’clock and then the day will be gone, too busy…On to the news:

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PRIVATE COMPANY ACCOUNTS – CATAPULT VENTURES: Recruitment company Catapult was launched in 2015 to disrupt the market for staffing. 23 Oct 2020:

Introduction:

• Co-founded by Briton Ben Dixon, Icelander Olafur Johnson and Dane Steffen Petersen, the company was launched in 2015.

• Dixon says it is ‘a venture backed online staffing platform…where we’re creating the world’s best part time job.’

What the company does:

• The company’s website aims to provide a resource ‘for research and insights on how to build a more flexible workforce.’

• The company raised £4.3m in fresh capital in early 2019 (taking its running total to £10m) at that point, and it raised further funds (on our reading of the confirmation statement at least) of around £2.1m in June this year

• The company reports that it uses AI to match the skills and experience of workers to employers’ requirements.

• The aim would appear to be to provide a marketplace between the parties, in a similar way to the ways in which Uber or Just Eat operate

• Businesses shown on its website include Clarks, Topshop, New Look, Paul bakeries and Planet Organic

• Catapult specialises in jobs in the retail and hospitality sectors, such as waiter, bartender and sales assistant. This seems sensible as staff turnover in these industries is relatively high, particularly at the more junior end of the scale.

• It operates in 30 cities and intended, at least in 2019, to expand domestically and further into Europe. The company avoids zero-hour contracts

Is there any money in it?

• So far, so good – but is there any money in it?

• The company only produces ‘exempt’ accounts as it has a small number of shareholders. It produces a balance sheet but there is no publicly available P&L account

• The company has reported accounts to end-December 2019 to Companies’ House showing that it has generated a retained loss of £11.5m since incorporation

• That takes shareholders’ funds down to £649k and implies that most funds raised (referred to above) have been either ‘lost’ or ‘invested in growth’, depending upon your point of view

• The retained loss increased by £3.3m during the year, suggesting that amount had been lost (or ‘invested’) during the 12mths to end-December last

• The loss suggests a burn rate of nearly £300k per month and implies that our comment about a 2020 fund-raise is likely to be right

The future:

• Although the legal minutia involved in keeping personal data for part time staff online – particularly if there is feedback from employers recorded (GDPR and all that), the idea of an online jobs market is not a bad one.

• But it may be a crowded market and, as Catapult’s losses suggest, it may be expensive to break in to

• And the Covid-19 period, which we are still living through in real time, must be tough

• Recruitment in the industries serviced by Catapult went into a deep freeze that it has yet to emerge from and revenues must have been hard to source

• Good luck to the company but, it must be said, the timing looks a little unfortunate

PUBS & RESTAURANTS:

Chancellor Rishi Sunak’s latest support package:

• Chancellor Rishi Sunak has announced increased support for jobs hit by Covid restrictions.

• The furlough ends next week. The Job Support Scheme, which will replace it in November, was deemed too feeble.

• The new scheme will see businesses not forced to close access support (not just those in Tier III).

• The taxpayer subsidy has doubled with payments of 62% of hours not worked. Boris Johnson says the move will ‘protect people’s livelihoods’.

Trade response:

• The British Beer & Pub Association says ‘the new package, which includes cash grants and an enhanced Job Support Scheme, addresses some of the concerns it had been highlighting to Treasury. It said the measures will help thousands of pubs who have seen their businesses greatly hampered by tier two restrictions, but until now were not receivingany support.’

• CEO Emma McClarkin says ‘this necessary and welcome support package will help thousands of pubs with tier two restrictions who otherwise faced devastation to their businesses.’

• Ms McClarkin continues ‘additional cash grants for businesses under tier two restrictions also provide a crucial lifeline to our pubs, which we welcome. We look forward to seeing the detail on the grant delivery and hope these will remain under review in terms of covering actual fixed costs for businesses forced to close in tier three.’

• The Society of Independent Brewers says that its breweries ‘must be included in Government support measures.’ It says ‘today’s extension of the JSS scheme announced by the Chancellor will help retain jobs in pubs and bars over this incredibly difficult winter period.’ But it continues, pointing out that ‘small breweries are not automatically eligible’. It says ‘small breweries are part of the fabric of hospitality and Government should make all breweries automatically eligible for the £2,100 grants and JSS support as the rest of hospitality. Breweries who employ skilled people should not left at the mercy of discretionary grants which many didn’t get last time around.’

• Simon Emeny at Fuller’s tweets ‘we have had many challenging days and nights navigating some often illogical decisions by 10 Downing St but at least today Rishi Sunak has listened to our wish to protect as many job as we can and revised the job support scheme.’

• Jonathan Downey of London Union says ‘it’s good to get some of what’s in Rishi’s massive bag of taxpayer cash but it can’t provide anything like the support hospitality needs. We’re too big. Let business build back and remove the restrictions on households socialising in our venues.’

• Other tweet that the government seems happy for business meetings of over six people to go ahead as more than six advisors met in a Franco Manca pizzeria, socially-distanced, of course, yesterday morning.

Consumer confidence:

• GfK reports on consumer confidence. It says ‘there’s a worrying threat of a double-dip in consumer confidence as concerns for our personal financial situation and even deeper fears over the state of the UK economy drag the Index down six points this month.’

• It says ‘despite low inflation and rock-bottom interest rates, a buoyant housing market and a raft of Government financial stimulus measures, the prospect of rising unemployment is severely depressing our outlook. Worryingly, this data was collected before the new round of COVID-19 restrictions came into force and the end of the furlough scheme, so this will negatively impact the Index in the run-up to Christmas and the months beyond. Expect the autumn chill to give way to much stormier conditions.’

• GfK says that its overall UK Consumer Confidence Measure fell by six points to minus 31 for October. It says ‘all measures decreased in comparison to the September 25th announcement.’ When asked about the general economic situation, the measure fell by six points to minus

Other restrictions:

• Stoke-on-Trent, Coventry and Slough are to move into Tier Two on Saturday.

• The Metropolitan Police has dropped demands that pubs check customer IDs to ensure that they were not mingling inappropriately. JDW chairman Tim Martin had earlier bemoaned the fact that ‘civilians – publicans – are being required to verify living arrangements for other civilians.’

• Martin continued ‘if Boris [Johnson], Hancock and co are not deliberately despotic, they’re certainly innumerate and incompetent – and are playing a dangerous game with civil liberties.’

• Five hospitality trade bodies in Scotland have commenced legal action against restrictions imposed on the licensed trade by the Scottish Government.

• Culture Secretary Oliver Dowden has told ITV that consumers in Level II areas can meet others for lunch as long as it’s work-related. Dowden says ‘work includes business functions and that’s why the definition has been extended to cover this. It is part of saying that people can interact as part of their work in business.’

Company & other news:

• Vianet Group has updated on trading saying that it is ‘pleased to report that trading for the first half of the current financial year has been ahead of our COVID-19-revised management forecasts. There has been month-on-month improvement in operating profit and cash since the start of the financial year with September moving into profit.’

• Vianet says ‘whilst the C-19 situation remains difficult to predict, the Group is in a robust financial and operating position to navigate FY2021 and continue the solid momentum that was building prior to C-19 and deliver on the exciting growth opportunities that we see ahead of us.’

• Chairman James Dickson says ‘having seen a month-on-month improvement in operating profit and cash since the start of the financial year, Vianet remains in good shape to come through the C-19 crisis and emerge strongly.’ He says ‘however, we once again find ourselves in uncharted waters alongside our hospitality sector customers following the government’s announcement of further new measures over the past two weeks.’

• Dickson adds ‘the new restrictions on hospitality are extremely frustrating for the pub industry.’ He concludes ‘nevertheless, we continue to closely monitor the C-19 situation and proactively manage the measures imposed by the government.’

• KFC has announced plans to create a further 5,400 jobs across the UK and Ireland as demand has risen for takeaway meals during the coronavirus crisis. The jobs will be in addition to the 4,300 roles created since March.

• NRN in the US says that delivery now represents half of digital sales at Chipotle Mexican Grill. It adds ‘but the popular pandemic ordering channel is starting to hurt margins, prompting the chain to test raising menu prices found on third-party marketplaces and the company’s own app. Price increases vary by test market, ranging from 7% to 17%, company leaders told analysts during the brand’s third-quarter conference call Wednesday afternoon.

• Pernod Ricard has said that lockdowns are likely to hit its business heavily in the upcoming quarter, typically the busiest of the year. The company reported quarterly numbers to end-Sept yesterday, saying that ‘we expect a second quarter [for Pernod that is the quarter to end-Dec] that will be heavily impacted by the COVID crisis. There is a second wave of infections in Europe and new restrictions in France, even lockdowns in Ireland, Britain.’

• Diageo’s Guinness operation it to launch a 0.0% alcohol alternative to its staple stout product on Monday.

• West End property owner Shaftesbury yesterday launched a funding operation to raise £297m in new equity at 400p per share. CEO Brian Bickell says ‘the Capital Raising announced today will ensure the Group maintains the financial flexibility and resources to navigate the unprecedented near-term operational challenges caused by the Covid-19 pandemic, and that we will be well-placed to benefit from the gradual return to more-normal patterns of life and activity that have always made London’s West End an unrivalled global destination.’

• Shaftesbury says that it ‘has a virtually impossible-to-replicate real estate portfolio that extends to 16 acres in the heart of London’s West End.’ It says ‘the continuing restrictions implemented by the Government, and the uncertainty regarding their duration and extent, has had, and continues to have, a material adverse effect on normal patterns of activity and business in the West End. The Group has seen a material deterioration in domestic and international footfall and trading conditions faced by its food, beverage and retail occupiers.’

• ASDA has opened its first sit-in Greggs café in one of its supermarkets

HOTELS & LEISURE TRAVEL:

• TUI and Jet2 have announced that they are to resume flights to the Canary Islands after the destination was granted travel corridor status from the UK. Flights will commence as soon as tomorrow.

• TUI says ‘the reintroduction of the Canary Islands is a positive step forward for our business and all our customers who wish to enjoy a well-deserved break overseas this half-term and during the winter months. We haven’t been able to take people on a Tui holiday to the Canary Islands for 89 days, when the sudden quarantine and subsequent travel advice was imposed with little notice.’

• TUI says ‘we urge the government to continue to work closely with the industry on airport testing so we can open up more destinations in the coming weeks.’ Jet2 comments ‘the Canary Islands are hugely important, for us and independent travel agents as businesses, and for our customers as a much-loved holiday favourite too. We know how much our customers want to get away for some winter sun in the Canaries, and they can do this again from October 30 onwards.’

• Intercontinental Hotels has reported Q3 numbers saying that group REVPAR was down by 53.4% in the period. It says ‘RevPAR reflects a 30%pts reduction in occupancy YoY, with rate holding at ~80% of prior year levels.’

• IHG says ‘occupancy improved to 44% from 25% in Q2; 199 hotels (3% of estate) remained closed at 30 September.’ CEO Keith Barr says ‘trading improved in the third quarter, although progress continues to vary by region. RevPAR declined 53%, compared to a 75% decline in the prior quarter, while occupancy was 44%, up from 25% in Q2. Domestic mainstream travel remains the most resilient, and our industry-leading Holiday Inn Brand Family positions us well to meet that demand as it slowly returns.’

• IHG says ‘despite the challenges we’ve faced, we have continued to open new hotels and sign more into our pipeline. This is recognition of consumer preference for our brands and strong owner relationships, and also the long-term attractiveness of the markets we operate in and the relative resilience of our business model.’

• The group concludes ‘a full industry recovery will take time and uncertainty remains regarding the potential for further improvement in the short term, but we take confidence from the steps taken to protect and support our owners and drive demand back to our hotels as guests feel safe to travel. Our actions have resulted in ongoing industry outperformance in our key markets, and we remain focused on leveraging the strength of our brands, scale and market positioning to recover strongly and drive future growth.’

• BTN Europe reports that airfares are certain to rise post-Covid with choice and frequency of flights reduced. It quotes Airlines for Europe as saying ‘flying is not going to get cheaper with additional regulations and it will not be easier, including for business travellers.’

• US hotel occupancy in Q3 was at its lowest level on record, reports STR.

• STR reports that US hotel occupancy in the week to 17 October was 31% down on last year with room rates down by 28%. REVPAR was 50% lower.

OTHER LEISURE:

• Cineworld Group is reported to have ‘drafted in a team of City advisers to help steer it through talks about a restructuring of its vast debt mountain amid doubts about its survival prospects.’

• Sky News reports that AlixPartners will work with the company. Sky points out that ‘the survival of Cineworld and other cinema operators has been cast into doubt by the duration and intensity of the coronavirus crisis, with the delay to key film releases seen as a tipping point for the industry’s finances.’

• The use of celebrities to endorse betting may be banned. The Committee of Advertising Practice may have to be careful that it does not ‘restrain the ability to trade’ of the celebrities affected. It will also be quite tricky deciding just who is, and who isn’t, a celebrity.

FINANCE & MARKETS:

• EU negotiator Michel Barnier is in London again. A big reveal this week or early next has to be favourite with room for both sides to claim a victory.

• Sterling down at $1.3057 and €1.1065. Oil up at $42.29. UK 10yr gilt yield up 5bps at 0.29%. World markets mostly higher yesterday. London set to open around unchanged.

RETAIL WITH NICK BUBB:

Consumer Confidence Watch: After today’s latest report from the widely followed monthly GFK Consumer Confidence index, we would again highlight that that the record -39 index low seen in July 2008 has still not been tested so far in the current crisis…but the overall index slumped to -31 from the -25 level seen in the report for last month (versus the -36 low seen in the early June “flash” report), albeit polling was done between 1st and 14th October, ie well before the latest gloom about the economic impact of the “second wave” of the pandemic. GfK’s Client Strategy Director Joe Staton says: “There’s a worrying threat of a double-dip in consumer confidence as concerns for our personal financial situation and even deeper fears over the state of the UK economy drag the index down”.

Planet ONS Watch: In the so-called real world, as per the BRC-KPMG figures for September (the 5 weeks to Oct 3rd), underlying Retail Sales were again surprisingly good last month overall, given the continuing boost to Non-Food sales from household goods demand and the boost to Food sales from the collapse in “eating out”. And “seasonally adjusted” life looks to have been similar on the High Street on that bizarre parallel world, the Planet ONS (aka the Office of National Statistics in Newport), via the official Retail Sales figures for September, which were released at 7am this morning…City economists (who continue to treat the ONS figures as the gospel truth) will be impressed with the 1.5% improvement in month-on-month seasonally adjusted sales volume (inc-fuel), as the consensus was for only a 0.3% increase (albeit we note that our friends at Capital Economics were spot on with their
forecast). The ONS reports that non-seasonally adjusted value sales (ex-fuel) were 6.0% up on September last year. Interestingly, Large Businesses were 0.4% down, but Small Businesses were up by an improbable 12.0%, although the ONS, as per usual, doesn’t think the contrast worthy of comment. For an independent view of what Retail Sales were really like last month, we await the imminent verdict of the Retail Sales experts, Retail Economics, but the focus now is on what Retail sales will be like in October (see BDO below).

Today’s News: After the flurry of news yesterday, today has been quiet so far, but Superdry is still in the spotlight, as yesterday morning, just before its AGM, it was announced that the boss, Julian Dunkerton, had continued to buy more shares during close season, ahead of the Superdry pre-close on Nov 5th. All the resolutions passed easily at the AGM, by the way, although there was an interestingly large (c11%) vote against the re-election of Peter Williams as Chairman. Otherwise, the only news is that ASOS published its Annual Report & Accounts yesterday, if you’re interested in finding out what CEO Nick Beighton and the other Directors got paid last year…  

BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that things somehow stayed positive in w/e Sunday Oct 18th:  BDO Fashion LFL sales were badly down, by 7.1% (with Store Fashion sales down c35%), but Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were up by 0.6% (down c27% in Store sales, but up c71% in Online sales).

News Flow Next Week: The week kicks off on Monday with a Q3 update from the recently floated The Hut Group. Tuesday brings the QUIZ finals and the Shoe Zone pre-close update and then on Wednesday we get the Next Q3 update.