Landlords, London Tier Three, Shaftesbury, Everyman, vaccines etc.:

A DAY IN THE LIFE:

A couple of days in Thornton Dale (in the pouring rain) over the weekend, and very nice it was too, to get into the countryside.

A bit of (admittedly not very challenging) walking followed by substantial meals in the evenings and liberal quantities of Black Sheep, Theakston’s Best and Wainwright at a very-reasonable £3.80 a pint.

But all good things have to end and we came down to London yesterday, opened the post, chucked away the dead plants & then got out to have a couple of pints of Camden Pale Ale (at £6.25 a pint) and a passable pizza at fourteen quid.

Which was a shock but not a shock at the same time and, as the restaurant was pretty full, it looks as though customers are happy to pay such prices – or at least not sufficiently unhappy to do anything about it.

Anyway, a much more reasonably priced pizza coming up today. On to the news:

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IN TODAY’S PREMIUM EMAIL:

Here we consider the hot topics & hope to analyse as well as report.

THE RELATIONSHIP BETWEEN LANDLORDS & THEIR TENANTS: When looking for permanent changes likely to result from Covid-19, property law comes to mind. Surely the relationship between landlords and their tenants must change? 15 Dec 20:

Introduction:

• Both sides agree that tenants owe landlords a lot of money.

• But there the agreement ends as, whilst landlords say leases are legally binding agreements entered into by consenting adults, tenants say they simply can’t pay. See Premium Email

PUBS & RESTAURANTS:

London into Tier Three from midnight tonight:

• Christmas ruined for London, official.

• Despite the suggestion that it would review the constituents within the tiers on Wednesday, the government has announced that London is to go into Tier Three from midnight tonight.

• The next formal review, excluding tomorrow, will be on Weds 30 December with the result to be announced on Christmas Eve. Theoretically, though one does get the impression that some of this is being made up on the hoof, that will be the first opportunity that the capital will have to emerge from the virtual shutdown that is Tier Three.

• Health Secretary Matt Hancock mentioned variants to Covid-19. But genetic mutations are common. Hancock said that there was no evidence that any mutations were more dangerous than the prevalent strain. He said medics were investigating whether the ‘new strain’ could be linked to what he said was the ‘recent faster spread’ of the disease.

Industry comments:

• Too many to run through individually but fair to say that the trade has reacted with disappointment and anger to the news that London is going into Tier Three from midnight tonight.

• The British Beer & Pub Association says ‘that in London alone the restrictions will force 1,250 pubs who remained open in tier two to close, putting nearly 8,000 more sector jobs at risk worth an additional £16 million to the local economy.’ It says ‘in total, 56,000 sector jobs are now at risk in London.’

• CEO Emma McClarkin says this is ‘another nail in the coffin for London’s pubs, as well as those affected in parts of Hertfordshire and Essex.’ She adds that it ‘could completely destroy many pubs in London and parts of Hertfordshire and Essex who have taken bookings for the lead up to Christmas and New Year’s Eve if the tiers don’t change before then.’

• Ms McClarkin says ‘it is not fair that pubs in London and other parts of England receive four times less financial support than pubs in Wales. Particularly as pubs in London are the most expensive to run.’

• Ian Payne of Stonegate pubs tweets ‘how can any sane individual justify keeping Central London retail open when hospitality has to shut. We have all seen the crowds in Oxford St at the weekend. This is sheer madness.’

• Alex Reilley of Loungers tweets ‘Hospitality has done all it can, at whatever cost to comply with whatever the government has required us to do. The way we’re being treated is sickening – there’s no respect just hollow words of sympathy & support amounts to spare change being chucked on the ground at our feet.’

• Charlie Gilkes of the Inception Group says ‘24 hours notice to close after only 13 days, having spent a fortune getting reopened for Xmas trading after lockdown. Devestating.’

• Football commentator Gary Lineker chips in and tweets ‘really feel for the hospitality industry and those that work in it. They’ve done so much to ensure hygiene and safety is paramount, to the extent that the data suggests it’s not a high risk space, and now they have to close, yet again. Brutal. Really brutal.’

• Chef Fred Sirieix says ‘Tier 3 – #hospitality closed while shops and schools are open. I don’t get the logic or reasoning. Can anyone explain please?’

• David McDowall, COO of Brewdog, says ‘Hospitality once again in complete disarray. An increase in cases in London which happened whilst we were shut is to be resolved by closing us down again? The incredible teams who work in this industry deserve better. This decision will be the final straw for many businesses.’

• Simon Emeny of Fuller’s tweets ‘and at that point [will the PM] need the creativity and employment that UK Hospitality brings and will need us to invest and create jobs? We urgently need now a clear roadmap for this sector to lead the UK into recovery’

• Coca Cola advertises ‘it’s been a tough time for the hospitality sector and it’s not over yet. That’s why we’ve invested £20 million to help thousands of small businesses stay open. And we’ll continue to do all we can because when it comes to supporting the hospitality sector, we mean business.’

• Hawksmoor tweets to say how sorry it is that it will be unable to honour bookings.

Rents:

• See also Premium Email.

• The Licensees Association has written to government outlining the steps it believes should be taken ‘to ensure landlords and tenants are able to arrive at mutually acceptable ways forward and to avoid the predicted bloodbath within the hospitality sector.’

• It calls for ‘a compulsory rent review to ensure that the rent is reset to market rates.’ It says ‘failure to do this will only result in the death of a thousand cuts to tenants where the market rent is considerably lower than the existing rent payable.’

• The Licensees Association says that landlords should forgive accrued rents (to some extent). It says there should be ‘a minimum level of rent forgiveness, for affected premises, of 50% rising to 90% where the tenant has been unable to trade in any way for the entire rent quarter (or month were rent is paid monthly).’

• Nick Griffin, CEO of The Licensees Association, says ‘without positive steps and government intervention landlords and tenants face resolving the £1.6bn rent debt between them.’ He says ‘our measures are circulated among our membership for approval and it’s evident that as we have no landlord influence within The Licensees Association that tenants recognise the pressures landlords are facing too in calling for tax relief.’

Other Covid news:

• Joint research from hospitality software providers S4labour and Tenzo the business intelligence specialists, has shown that ‘despite a 98% year on year increase in takeaway sales during the first full week of trading since lockdown 2.0, eat in sales slumped 50% over the same period, resulting in a 46.7% overall decline in year on year sales, comparing last week with the same week in 2019.’

• The research says ‘taking a look at the whole Covid period between March the 20th to the 21st of December, the hospitality industry has suffered a sales decline of 56.5% on the same period in 2019, the majority of this driven by lockdowns and the Tier system. During the periods of the year with the least restrictions, between July and September, sales were down just 7.5% year on year.’

• S4labour says ‘Covid-19 and the various restrictions on hospitality have been devastating. The innovation in take-away and the speed at which operators have adapted has been remarkable. While take-away will have helped some operators keep their heads above water, the model doesn’t work for many. News that London is going into tier 3 this week will be devastating, for those who would not have been able to plan for such an abrupt end of trading.’

• The British Beer & Pub Association says it ‘expects beer sales in pubs to be as much as 90% lower than normal this December.’ It says that typically during the month of December, including Christmas, pubs sell almost 300 million pints of beer. This could be down to 30 million this year.

• The BBPA says the data shows ‘the extreme impact the tier system is having on the viability of pubs and breweries this Christmas.’ The sector could lose as much as £935 million in turnover. CEO Emma McClarkin says ‘these stark numbers show that this Christmas could be the last for many of our pubs.’

• Ms McClarkin says ‘the one-off payment for pubs of £1,000 doesn’t come anywhere close to compensating for up to 270 million lost pint sales or almost £1 billion hit to their turnover. Currently, in England there is no compensation available for our hard-hit breweries unlike in Wales and Scotland.’

The impact of reduced visitor numbers:

• Foodservice analyst Peter Backman says that ‘last year, tourists from overseas spent £2.8 billion eating and drinking in the UK, having doubled over the last 15 years.’ He says ‘it would appear that overseas tourists spend in the range of £0.6-0.9 billion on food and drink in pubs (with food probably accounting for 60% to 70% of the total).’

• Backman says ‘this is a relatively small proportion – likely 3 or 4% – of total pub income. However, for some pubs in central London, central Edinburgh, Stratford upon Avon, Windsor, and other places where overseas tourists make a point of visiting, the hit might be particularly hard, especially in what are already very testing times.’

• He says ‘nevertheless, pubs that have a high level of income from tourists are faced with some pressing questions about their future. And I fear that the answers will not be on the positive side.’

• Yesterday, we reported that Visit Britain is forecasting that arrivals into the UK from overseas could be around 16.9m last year, up 73% on the 9.7m expected this year but well down on the 40.9m visitors in 2019. Inbound visitor spending may be £9 billion in 2021, less than a third of a record £28.4 billion in 2019 but up 59% on the 2020 figure of £5.7 billion.

Other news:

• Property owner Shaftesbury reports full year numbers saying that it is ‘positioning the business, financially and operationally, to return to long-term prosperity and growth.’ The company is a major landlord in the west end with many hospitality tenants. CEO Brian Bickell says ‘rarely in history has the world seen such widespread disruption to normal patterns of life. Only now are we seeing the first positive signs that conditions will begin to improve in the year ahead.’

• Rarely indeed. And rarely do tenants agree wholeheartedly with their landlords. But in assessing the pandemic, they perhaps do. Bickell says it ‘has had a significant impact on our performance, particularly during the second half of the financial year, depriving our hospitality and retail occupiers of footfall and trade and resulting in reduced rent collections, increased vacancy, reduced occupier demand and a fall in property valuations. Our key priority has been, and continues to be, supporting our occupiers through this period of disruption.’

• The latter will be of some comfort to tenants. Bickell continues ‘the economies of London and the West End have a long history of structural resilience, having weathered many episodes of challenge and uncertainty. Their unique features, which come from a culture of constant evolution across a broad-based economy, attracting talent, creativity, innovation and investment from across the world, will hasten their recovery and reinforce their enduring appeal to businesses, visitors and residents alike. The long-term prospects for our portfolio, located in the busiest and liveliest parts of the West End, are underpinned by these valuable qualities, together with the experience, innovation and enthusiasm of our team.’

• Shaftesbury reports that it has ‘collected 53% of contracted rent for six months to 30 September 2020; 34% deferred or waived and 13% outstanding.’ It says it has ‘increased collaboration with neighbouring estates and stakeholders on operational matters and marketing to encourage visitors to return to the West End when safe to do so.’

• As far as the Covid-10 pandemic is concerned, Shaftesbury says ‘control measures [are] likely for much of 2021 but impact reducing as conditions improve.’ It says it expects a ‘gradual sustained return of local and domestic footfall as confidence returns’ and it remains ‘confident the West End and Shaftesbury’s portfolio will return to long-term prosperity and growth as the current global and local pandemic disruption recedes.’

• Peter Backman reports ‘it’s disappointing to see…footfall numbers rising only slowly from November’s full scale lockdown – even so, the…Index is where it was at the end of the first lockdown in late June.’ Open Table reports that year on year bookings in the months July through to December respectively, were down by 52%, 54%, 51%, 47%, 36% and 16% respectively.

• Stories that supermarkets are preparing to ration products if there is any sign of panic buying ahead of a potential no-deal Brexit.

HOTELS & LEISURE TRAVEL:

• IATA has reported that the welcome vaccine news has not yet had a materially positive impact on travel bookings. IATA says interest in flying and bookings are “exceptionally weak”. IATA chief economist Brian Pearce says ‘we’ve seen no improvement in international markets really for the last three months.’

• IATA says, however, that ‘the news on vaccines has been very encouraging. It does mean light at the end of the tunnel, but we’re still in the tunnel and there is some way to go to get out of it.’ It says ‘in October, there was a further slowdown of the muted travel recovery we saw in the summer.’

• Reports of hotel bookings in London being cancelled as the Capital moves into Tier Three tonight.

OTHER LEISURE:

• Everyman Media Group has announced that it has appointed Alex Scrimgeour to the role of Chief Executive Officer with effect from 18 January 2021. It says ‘Alex has extensive experience working in the leisure sector having established Côte Restaurant as both a reliable, consistent multi-site restaurant, as well as a respected and admired brand.’ Chairman Paul Wise says ‘with Alex’s knowledge and expertise, we look forward to reinforcing and expanding the Everyman brand and experience. The appointment reinforces our optimism in life beyond Covid.’

• Google went down for a while yesterday lunchtime leading to problems with Gmail, Google Drive, the Android Play Store, Maps, YouTube etc.

• Reddit is to buy short-video platform Dubsmash, which offers similar product to that available on TikTok.

FINANCE & MARKETS:

• Sterling up yesterday on the belief that a deal with the EU is coming. Both sides may be invested in making it look like a win. Or at least a draw. The detail will emerge over the coming weeks.

• Sterling up slightly at $1.3338 but unchanged vs Euro at €1.0972. Oil price lower at $49.95. UK 10yr gilt yield up 5bps at 0.22%. World markets broadly lower yesterday with London set to open down around 29pts.

RETAIL WITH NICK BUBB:

• Today’s News: There is still no news from Frasers Group about its pursuit of the bankrupt Debenhams…but shareholders in JD Sports will be delighted to hear that they have well and truly moved on from their recent talks about the aforementioned Debenhams by announcing another big move into US sports retailing, via the acquisition of the Shoe Palace chain based in California. The business had sales of $435m and profits of $52m last year, so the cash cost of the deal seems very low, at $325m, but, interestingly, the family who run the business, the Mersho brothers, have also been given a 20% stake in the existing JD American business of Finish Line and the plan is clearly to integrate the two over the next few years.  

• News Flow This Week: The Dixons Carphone interims are tomorrow and the Watches of Switzerland interims are on Thursday. Friday morning then brings the widely followed GFK Consumer Confidence survey for December and the ONS Retail Sales figures for November, whilst mighty Nike report their Q2 results in the US on Friday evening. 

TRADING STATEMENTS & EVENTS:

Upcoming results are set out below:

• 15 Dec 20 Shaftesbury FY numbers

• 16 Dec 20 Wagamama (Restaurant Group) bondholder update

• 17 Dec 20 Revolution FY numbers

• 17 Dec 20 JD Wetherspoon AGM

• 18 Dec 20 Fulham Shore H1 numbers

• 22 Dec 20 Revolution AGM

• 5 Jan 21 Morrison’s Xmas update

• 6 Jan 21 Gregg’s Q4 update

• 7 Jan 21 Constellation Brands Q3

• 12 Jan 21 Nichols FY trading update

• 12 Jan 21 Games Workshop H1 numbers

• 19 Jan 21 Premier Foods Q3 update

• 20 Jan 21 JD Wetherspoon H1 update

• 5 Feb 21 On the Beach AGM & trading update

• 11 Feb 21 Pepsi FY numbers

LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line.