Langton Capital – 2020-12-16 – PREMIUM – Policy flip-flops, Xmas rules, Wagamama, Tasty, London Hotels etc.:
Policy flip-flops, Xmas rules, Wagamama, Tasty, London Hotels etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: So, London looked like even more of a ghost town this morning than it did yesterday. Commuters are being advised to work from home (if they can) and the trains, transport hubs and pavements are and will be less busy than they were last week. Hence news that rail fares are to rise by almost twice the rate of inflation in the New Year will not be welcomed by travellers – or by the Prets, Costas and Caffe Neros of this world who rely on them. The coffee shops (and sandwich shops and the like) tend to be clustered around train and underground stations, traffic junctions etc and their trade will be further impacted. They need to do a day’s business, often in the hour or two around lunchtime (or in wedges around office arrival and departure times) meaning that, if they’re not packed at the times you want to use them, and they’re not allowed to be, they will struggle to make ends meet. Furthermore, those commuters that do make it in will be less likely to hang around in the evening and, even if they did, the pubs & restaurants will be shut from today, except for takeaway. Taking a pint of Stella in a paper cup onto a train hasn’t appealed in the past and, given moves over the last year or two, it is likely illegal now. Hence, even with the government saying it won’t go back on its decision to ease up over Christmas and allow or encourage mingling, life still ain’t what it used to be. Anyway, perhaps it’s time to curl up with a good book. On to the news: ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. FLIP-FLOPPING GOVERNMENT POLICY. The real impact. Clicking a spreadsheet & modelling an appropriate soundbite is easy. Real life is harder. 16 Dec 2020: Introduction: • London and large areas of the country already in Tier Three are living through a third lockdown already. • Since mid-March. we were first warned to stay away from pubs. • Then they were obliged to close. Then they opened, petrol was sprinkled on the embers via EOTHO and then they were told to slow down, shut at 10pm etc. • Then they were locked down again. Then told to open. • Then (many were) put in Tier Three and told to shut for what should be the busiest fortnight of the year. • They do not have a reopening date. Pubs may be allowed to reopen in January but, given what an appalling month that is as a rule and mindful of the potential for the government to change its mind with 24hr’s notice once more, some may say ‘why bother?’ How can operators manage in practise? • There is very little good to be said for the above. • You may tell a soldier to dig a hole, fill it in again, dig it, fill it in etc a) to keep him busy and take his mind off other, less pleasant things but b) it is usually a punishment Busy good versus busy bad: • Emptying the till five times an hour is busy good. Shutting & reopening repetitively is busy bad. • If ever they were going to be ‘busy good’, pubs and restaurants would be in this position during the month of December. That is, right now. This week should be the busiest of the year, certainly for office parties and the like • But pubs couldn’t even open until halfway through the first week of the month, some were immediately put into Tier Three & never actually got to open their doors and London has had to shut today • And units that are open have had to expend goodwill and shoe-leather arguing with customers about whether cheezie chips are a main meal (no, apparently) and, if a Scotch Egg was a starter, are two Scotch Eggs a ‘meal’ The scale of the task: • Many, many operators have had to reorder food, drink and other consumables and re-boot staff, set up staffing rosters etc post lockdown two only to have to put everything into reverse yesterday (when it was announced that London was going into Tier Three) • Of course, some operators went straight into Tier Three from Lockdown Two and they still haven’t reopened at all • We may hear tomorrow that some areas are moving from Tier Three to Tier Two but this whole process does appear exhausting, confusing and not altogether joined up Getting ahead of the problem? • There may or may not be a Lockdown Three (although Tier Three effectively achieves this) • The government should have more insight than we mere mortals • Ditto insight re the approval processes, production and rollout of the vaccines that have been announced • Do a bit of maths, population over 80, people in care homes, vulnerable individuals etc. Speed of rollout of the vaccines, the velocity of the spread of the virus and there must be at least a chance that a plan could be formulated • You can have Christmas, guys, but you’re going to lose January. Or January and February, or Easter or whatever. • You can’t grow a turkey or brew beer in a day or a week or even a fortnight. And it’s destructive and wasteful to bin them once produced. • The opportunity to plan would be most welcome PUBS & RESTAURANTS: Calls for further restrictions: • The Government will not tighten rules over the Christmas period but will rather adopt a ‘sterner tone’ in talking to the population. Labour and some medical bodies are calling for a rethink, but the BBC says ‘we understand there are no plans to alter England’s regulations and other nations are unlikely to change them either. Three households will still be able to form a bubble for five days, but an information campaign is expected to be launched, urging people to limit interactions in the run-up, stay local where possible, and avoid visiting the elderly or at-risk relatives.’ • Elsewhere, Germany is in Lockdown over Christmas, The Netherlands & Italy also have firmer restrictions and France has introduced a night-time curfew, and bars and restaurants will remain closed until at least 20 January. • The British Medical Journal and the Health Service Journal have jointly said that plans to ease on household mixing over Christmas should be scrapped in order to prevent the NHS from being overwhelmed by coronavirus cases in the New Year. • The BMJ is published by the doctors’ union the British Medical Association, and the HSJ is read by NHS staff, managers and professionals. They say the government should ‘reverse its rash decision to allow household mixing…in order to bring numbers down in the advance of a likely third wave.’ • Talk of a third wave will not be welcomed by the hospitality industry. The journals say a third wave would hit non-Covid treatments and ‘could wipe out almost all the reductions in waiting times for elective procedures achieved in the past 20 years.’ The journals add ‘we believe the government is about to blunder into another major error that will cost many lives. If our political leaders fail to take swift and decisive action, they can no longer claim to be protecting the NHS.’ • Looking at the likely impact of the relaxed restrictions being proposed for Christmas. Karen Taylor, director of the UK Centre for Health Solutions at accountant Deloitte, tells Travel Weekly ‘if you look at the US, and the spike of cases following the relaxation over Thanksgiving, that would suggest a return [of restrictions]. Certainly, scientists are concerned there will be another increase [in Covid cases in the UK].’ Damage so far, calls for help etc.: • Kate Nicholls, CEO of UK Hospitality, says ‘so many pubs, restaurants, bars, cafes and hotels, having invested so much to make their venues safe, are only just clinging on by the skin of their teeth but will be forced to take another huge hit.’ • She says that, in London and elsewhere, ‘the burden of a region being moved into tier 3 falls almost exclusively on hospitality businesses. It is an illogical tactic that fails to tackle Covid effectively but does push businesses closer towards failure.’ • Ironically, London infection rates rose to levels that saw the capital go into level three largely during lockdown 2.0 when pubs & restaurants were only open for takeaway and delivery. • The ONS shows that there were 819,000 fewer workers on UK company payrolls in November than at the start of the Covid-19 pandemic. It says that hospitality was the worst hit sector. It accounts for a third of the job losses, followed by retail. The jobs lost in hospitality are predominantly those offered to younger workers, the least at risk themselves from the pandemic and those most likely to have to pay for it via higher taxes and lower service levels over the next few decades. • Some 297k jobs were lost in hospitality, compared with 160k lost in retail. Jobs have been added in the public sector including in health and social work. • The BBC speculates, not without reason, that the hospitality ‘industry will suffer even more when London, a hive of hospitality firms, enters tier 3 on Wednesday.’ The ONS says ‘we can see the hospitality sector has really struggled during the pandemic.’ It adds ‘if you look at the number of people losing their jobs, the number of people on furlough and the vacancies available for people looking for jobs in the hospitality sector, all that adds up to a very difficult time for that industry.’ • In an opinion piece, Morning Advertiser editor Ed Bedington says ‘once again the Government has demonstrated its total contempt and lack of understanding of pubs with its decision to move London and parts of Essex and Hertfordshire into tier three.’ He adds ‘according to the Government’s own rules, London should have been in tier three from the get go’ adding ‘the fact they’ve given operators a days notice to shut down operations is devastating.’ • The MA says ‘giving 24 hours’ notice is not acceptable and leaves operators sitting on stock that will now go to waste, leaving licensees again with further debt, and no offering of support or compensation from the Government to offset those costs.’ It adds ‘the situation is a joke and continues to underline the obvious contempt and lack of consideration this Government has for our industry.’ • British Gas is reported to be refusing to supply hospitality businesses as the utilities firm considers the sector too high risk. UKH’s Kate Nicholls says ‘this is the net effect of Government policies of closure and restrictions – good viable businesses now considered too high a risk to supply, to lend to or to insure. New customers being refused and existing customers seeing premiums and conditions increase. We need exit strategy.’ • A cross-party group of MPs and peers has come together to consider the impact of the Night Time Economy. It will work with the Night Time Industries Association, which represents 1,200 UK bars, clubs, casinos and music venues and will provide insight to the group. • CEO of the NTIA Michael Kill says ‘we are extremely pleased to have the support of many cross-party parliamentarians, and believe that this group will have a substantial part to play in the regeneration of the night time economy in the next 12 months.’ The largest club operator in the country, Deltic Group, is currently said to be up for sale. • SIBA backs calls from over 100 MPs who are telling the Chancellor ‘now is not the time for the Government to turn its back on our small breweries.’ Some 103 MPs have signed a letter saying that altering Small Breweries’ Relief will put a great British success story under threat at a time when many businesses are struggling to survive.’ • The letter says ‘small breweries have been at the heart of the craft beer revolution and exist in every part of the UK. They’re often led by entrepreneurial young people, whose innovations in brewing are helping expand choice for the increasingly discerning British drinker.’ • Harpers.co.uk says relatively minor changes to Covid restrictions could ‘dramatically enhance…the economic viability of Scotland’s hospitality industry.’ It quotes an impact study by BiGGAR Economics, commissioned by Diageo, which found that adjusting opening hours by around two and a half hours and allowing alcohol to be served under strictly controlled conditions would increase hospitality business turnover from £419m to £1.1bn. • UKH Scotland says ‘the restrictions, as currently in place, have a disproportionate impact on the hospitality sector and is costing the Scottish economy millions of pounds. A relaxation, as has been suggested by the industry would give our sector a transformative boost and help support business in the crucial recover period.’ • Wireless Social says that last weekend (12 Dec) saw the footfall across the whole of the UK stay relatively the same as the previous weekend. It says footfall in the most recent weekend was down 42% on February on the Saturday and down 47% on the Sunday. • Executives from HSBC, Lloyds & Natwest have said that corporate borrowers are hoarding around half of the £42bn lent out under the Government’s Bounce Back Loan scheme for small companies. Other news: • The Restaurant Group’s Wagamama subsidiary reported Q3 results today saying UK revenue decreased 20.8% from Q2 SY19 to £70.3 million in Q3 2020 with phased reopening of our restaurants for eat in dining from early July.’ • Wagamama says EOTHO ‘allowed us to drive strong footfall to our restaurants with UK LFL sales of 7.4% for the quarter.’ It says ‘adjusted EBITDA increased to £18.1 million in Q3 2020’ but says ‘Covid-19 continued to impact on trading, however the group continued to proactively manage costs during the quarter including the negotiation of a number of rent deals which have positively impacted the EBITDA position.’ • The RTN subsidiary says ‘the business effectively reopened the estate for eat in dining during the quarter, testing and learning, with customer and team member safety as a priority.’ For the year to date ‘UK revenue decreased 37.4% to £158.9 million in YTD Q3 2020. Strong performance in early Q1 2020 was followed by Covid-19 significantly impacting trading in Q2 2020, ultimately resulting in the closure of all of our restaurants. This was followed by a phased reopening of our restaurants for delivery and click and collect in Q2 2020 followed by eat in dining in Q3 2020.’ • CEO Emma Woods says ‘we are encouraged by the strong performance of the business in Q3, both for eat in and delivery. This was the last point we were able to trade in any sense normally and provides real confidence that the business can return to market leading performance when restrictions are again lifted.’ The company is still performing well against its peer group. • Rail fares are to rise by 2.6% in March, well ahead of the RPI in July, to which they should have been linked. This will not help commuters to decide to return to the office and, as such, cannot be taken as a positive for the likes of Pret and the large coffee chains etc. • Wildwood restaurant operator Tasty yesterday updated on trading saying that, post lockdown 2.0, it had ‘re-opened 38 restaurants with an additional 5 units providing takeaway and delivery services only, due to the Government restrictions. It is expected that a further 9 units will move to providing takeaway and delivery services only with the additional tier 3 restrictions being introduced in London and Essex on 16 December 2020.’ • The group says ‘certain restaurants within the Company’s estate have remained closed due to poor trading conditions in their locality. The Company continues to monitor developments affecting both the open and closed restaurants in line with the continually changing UK tier restrictions.’ • Tasty says it ‘intends to continue to offer takeaway and delivery services across the 43 open units, until such time as the Government announces that it is prohibited from doing so or it is not viable to continue those services.’ Re general trading, the company says operating ‘across the business continues to be challenging with Christmas parties cancelled and the differing levels of restrictions significantly reducing the number of customers eating out and related restaurant capacity restrictions.’ • Re rents, Tasty says it ‘has now been successful in achieving rent reductions and lease concessions on more than half of the estate. The Company is continuing consensual negotiations with landlords and other creditors in respect of outstanding rents and anticipates that this process will now be completed in January 2021. The Company will again be relying on Government support for employees’ pay and VAT, and business rate holidays and grants, where available.’ • Brewdog has launched a crowdfunding campaign to raise A$10m to expand its business in Australia. The investment offer is now open and runs until 11th February 2021. • Stonegate Group’s We Love Quiz programme, is ‘teaming up with Christmas-legend Brian Blessed OBE for a festive special pub quiz We Love Quizmas.’ Stonegate says ‘this year has been tough for everyone, especially for the hospitality industry. We have done everything that has been asked of us. We have adapted our businesses to the changing Government restrictions quickly, efficiently and diligently. All our venues have robust COVID-secure measures in place, so everyone can enjoy themselves this festive season in a safe and responsible way.’ HOTELS & LEISURE TRAVEL: • Gatwick airport has reported an upturn in bookings for travel over the Christmas period. Some 200 flights a day will operate. This is down on the 700 per day normally expected at this time of year, but it is an increase on recent traffic levels. • STR has reported that London hotels saw occupancy down by 73% in November to just 23%. It says average rates were down by 54% with REVPAR off by 87.5%. It says ‘amid a second lockdown in November, occupancy was the lowest for any month since July 2020, while the ADR and RevPAR levels were the lowest for any month this year.’ FINANCE & MARKETS: • The BBC reports the UK’s inflation rate fell dramatically to 0.3% in November from 0.7% in October, per official figures. • Commenting on the jobs & average earnings numbers released by the ONS yesterday, the NIESR says ‘we forecast average weekly earnings including bonuses to increase by 1.0 per cent in the fourth quarter of 2020.’ It says ‘2020 will probably end up being the worst year for total pay growth since 2009. Pay freeze for a large part of the labour force, in addition to lost income during the time spent in furlough have put more strain on the labour market than the modest rise in unemployment suggests. Even with rollout of an effective COVID-19 vaccine, the recovery in the labour market will take time.’ • Sterling higher at $1.3462 and €1.1067. Oil up at $50.58. UK 10yr gilt yield up 4bps at 0.26%. World markets broadly better yesterday with London set to open up by around 19pts. RETAIL WITH NICK BUBB:
Dixons Carphone: The interims today (headlined “Online success and accelerating transformation drive strong performance”) are pretty good, with PBT rebounding well on the back of 17% Electricals LFL sales growth and it is striking that management claim that the results would have been even stronger but for the store closures, as trading would not have been so good without the benefit of working from home during the pandemic…And Business Rates relief has been retained, although the company says “we urge a resettlement of business rates based on current rental values. This will increase the rates burden on warehousing and reduce it on retail stores”. Online reached as much as 58% of the sales of the UK business in the first half and trading remains strong, with Electricals LFL sales up 16% over the last 6 weeks. There is, however, no guidance on the full year profit outcome, apart from a News Flow This Week: There have also been management changes at Superdry today and a trading update from Travis Perkins (plus the return of Business Rates relief on Wickes etc). Tomorrow brings the Watches of Switzerland interims. Friday morning then brings the widely followed GFK Consumer Confidence survey for December and the ONS Retail Sales figures for November, whilst Nike report their Q2 results in the US on Friday evening. |
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