More tiers, Restaurant Group, Fulham Shore, DP Poland, GfK etc.:

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A DAY IN THE LIFE:

News flow should be drying up next week but today has been rather busy (see below).

We’ll be trying to make it back up north later and the email next week a) should exist but b) it could be a little shorter.

As many may be taking an earlier break, it’s an appropriate time to wish all of our readers as good a Christmas as they can possibly have under the circumstances and say that we heartily hope the 2021 will be more peaceful, healthy and profitable than 2020 has been.

Anyway, perhaps it’s time to curl up with a good book. Just so happens we’ve written one.

HERE

On to the news:

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CGA, UK HOSPITALITY & LANGTON CAPITAL COMMENTS:  On what the covid-19 pandemic means now and what if any may be its permanent effects: 18 Dec 2020:

Introduction:

• CGA and UK Hospitality have combined to produce a report looking at the impact of COVID-19 over the last year. They also consider trends likely to manifest themselves into 2021. See also Langton comments.

o This week on the extension of the eviction moratorium & longer term changes in the relationship between tenant & landlord

o And last week on ‘short term vs long term changes’ as a result of Covid alongside a piece on ‘changes accelerated by Covid-19’ (Mon 7 and Tues 8 respectively)

• We mentioned online ordering, working from home, the move away from cash, film releases bypassing cinematic release, the use of Apps etc.

• We suggested that changes ‘accelerated’ by Covid were more likely to be permanent than changes ‘caused’ by Covid. In the former category, we said that rents must fall.

CGA & UKH joint report on the impact of Covid. 

• The report suggests ‘the UK’s hospitality sector has suffered lost sales of more than £53bn in 2020, with more losses to come from a collapse of Christmas trading—but a COVID-19 vaccine rollout provides grounds for cautious optimism in 2021.’

• The ‘Survival to Revival’ report, the eighth edition of the Future Shock series of reports, suggests that consumer confidence has taken a hit ‘with 78% of British adults concerned about the long-term financial implications of the pandemic.’

• The industry is also seeing ‘hesitant business confidence, with 27% of leaders of multi-site groups predicting they will be unviable by mid-2021 with current levels of support.’ Some 98% of England’s licensed premises are currently in Tier 2 and 3 areas. The report predicts:

o An ongoing greater consumer use of technology in restaurants, pubs and bars

o A further increase in delivery sales—of alcoholic drinks as well as food

o A continuation of the lockdown trend of eating and drinking close to home rather than travelling to city centres and

o Increased availability and affordability of property in the wake of business failures.

• CGA says ‘this has been the most difficult year in hospitality that most of us have ever known, and our report is a chance to reflect on the havoc it has wrought—but just as importantly to look forward to what we all hope will be a happier 2021.’

• There will be more casualties ‘but, among businesses that have been able to sustain themselves, the pandemic has instilled a resilience and innovation that will stand them in good stead for years to come.’ CGA suggests that there is ‘pent up demand’ on the part of the consumer.

• UKH says ‘undoubtedly, 2020 has been a disaster for the sector. Every aspect of hospitality in every corner of the UK has come under enormous pressure and we are by no means out of the woods.’ It is to be hoped that, as various vaccines are rolled out, there should be some ‘confidence that the next year will be dramatically better than this one.’

PUBS & RESTAURANTS:

More Tears:

• Health secretary Matt Hancock has announced large sections of England will enter into Tier 3 this weekend. Speaking in parliament this morning, Hancock said: ‘No one wants tougher restrictions any longer than necessary. But where they are necessary, we must put them in place… We’ve come so far, we mustn’t blow it now’.

• Night-Time Industries Association CEO Michael Kill said the aid offered by government to date was “grossly disproportionate” to the costs of closure. Hospitality operators moving into Tier Three in Hertfordshire etc will only have a matter of hours to get rid of the stock, cancel bookings and furlough staff that they had taken on in anticipation of doing at least a little Christmas Trade. The small number of units lucky enough to be operating in areas coming out of Tier Three, will have only a few hours to stock up, source staff etc.

• Michael Kill says ‘as even more areas have been dragged into the tightest Covid restrictions, with limited changes to the current restrictions particularly in the north. The Government has compounded an already critical position within the night-time economy and hospitality sector.’ He says ‘thousands of businesses and employees have supported the Government’s public health campaign against Covid, creating safe, regulated environments for people to socialise. This financial burden and commitment has been recognised only in lip-service, with insubstantial support measures to repay confidence in the sector.’

• Alex Reilley of Loungers tweets ‘So I think we’ve just gained 9 sites but lost 15.’ This will not be atypical across the country. If anything, it is slightly better.

• The north of England including new Tory seats in the former ‘Red Wall’ will feel somewhat aggrieved that no areas on the north have moved down a tier. Manchester Mayor Andy Burnham yesterday reminded the BBC that Manchester had been in effective lockdown for four & a half months already. Big Hospitality points out that cases in Manchester are currently running below the national average.

• There has reportedly been something of a surge in demand for sherry. The Co-op is quoted as saying that ‘it’s great to see that consumers are experimenting with their drinks and that sherry has made a comeback.’

Trade reaction:

• The trade has reacted angrily to the news that eight more regions have moved into tier three whilst only three regions have moved down. More than a net 10m Britons have moved into Tier Three in the last week. The latest changes will take effect from midnight Friday into Saturday morning.

• The BBPA says ‘the Secretary of State announced that from Saturday there will be more areas moved into tier three across England this Christmas, meaning the future of more of Britain’s pubs hangs by a thread as they will either be closed in tier three or unable to operate viably under tier two restrictions.’

• It says ‘the changes announced today mean that over 32,500 pubs will now be at risk of permanent closure under tier two and three restrictions – 85% of the total in England. There were only minimal movements announced from tier three to two, and two to one.’

• The BBPA calls for more help. CEO Emma McClarkin says ‘the update on tier restrictions announced today is not the shift in the right direction that our sector desperately needed and hoped for. More regions being placed under tier three restrictions means more closed businesses, leaving the future of Britain’s pubs truly hanging by a thread this Christmas.’

• Ms McClarkin says ‘the Prime Minister and Chancellor have no excuses. They must now secure pubs and jobs by giving locals in England the same support as those in Wales. Without such support, a wave of pub closures is guaranteed at a time when they should be leading the economic recovery.’

• William Lees Jones of JW Lees in Manchester tweets ‘I’ve kept quiet today because I’m so disappointed in government – Greater Manchester has passed the 5 tests and is lower than many T2 areas but fairness is gone and the govt have shafted us.’

Company results / news:

• The Restaurant Group has provided a further update on trading saying that ‘cash-burn during the November national lockdown was minimised to c. £5.5m for the month.’ It says ‘this is £2.0m higher than during the first lockdown due to  rents payable under the terms of the Leisure CVA as well as employer contributions towards furlough payments.’ The group had a working capital outflow of £15m.

• RTN says it ‘anticipates further significant disruption on trading whilst [new] restrictions remain in place.’ It says it will have ‘approximately 145 sites which will trade for dine-in across the UK , 142 sites which will provide delivery and takeaway services only, with the remaining 103 sites closed.’ It says this ‘is significantly worse than when the initial tiering restrictions came into effect.’

• RTN adds ‘the mix of locations impacted across the tiers will continue to evolve, but if UK tiering allocations were to remain the same as currently in place throughout the first quarter of 2021, this will have a significant adverse impact on the Group, and indeed the wider hospitality sector.’

• RTN says ‘whilst the tiering restrictions make the outlook for the first quarter of 2021 extremely challenging, the Board is encouraged by the welcome news of the Covid-19 vaccine being rolled out in the first half of next year.’ It says it ‘believes the Group is well positioned to benefit from a sustained removal of restrictions given its previous strong trading performance following the first lockdown.’

• RTN concludes ‘we therefore expect a strong recovery when there is a return to more normal levels of customer activity. The timing of that will depend primarily on government restrictions being eased.’

• The Fulham Shore has reported H1 numbers to 27 September 2020 saying that revenues were down by 44.9% at £19.9m with headline EBITDA of £3.7m and a loss after tax of £3.9m (2019 profit £0.4m).

• FUL says that it has raised equity and new debt and extended the maturity date of the existing RCF loan facility by 12 months to March 2022. The company says that ‘delivery and takeaway operations partially mitigated losses in the first quarter.’ It adds that it opened 1 new Franco Manca pizzeria on The Cut, Waterloo, London during H1 and also one further The Real Greek (to 19 operated) opened in The Lexicon, Bracknell.

• Chairman David Page says ‘we are pleased to have delivered a creditable performance during the first half of the current financial year despite all Franco Manca and The Real Greek restaurants being closed to dine-in customers for more than half the period. The Group generated positive Headline EBITDA during the second quarter (July to September) reflecting the popularity of our businesses and their great value proposition.’

• Mr Page says the company’s ‘performance was driven by the ability of our teams at both Franco Manca and The Real Greek to adapt quickly to the continuing changes implemented by the UK Government in their response to COVID-19.’ He adds ‘we continue to explore new opportunities and are encouraged by the positive customer response to our recently launched Franco Manca and The Real Greek “Meal at Home” kits and new e-gift cards, both of which were launched during the November lockdown.’

• New site acquisition opportunities are arising. FUL says ‘following the period end, on 5 November 2020 most of our restaurants closed again to dine-in customers following the UK Government’s second national lockdown.’ These units reopened and, as London and much of the rest of the country went into lockdown (a.k.a. Tier Three) again, they have closed.

• FUL concludes ‘despite the near-term uncertainty, the Board remains confident in the long-term strength of the Group and believes it is well positioned to both deliver strategic growth and capitalise on opportunities as a sense of normality resumes.’ FUL had mid-December net debt (excluding lease liabilities) of £3.7m with undrawn debt facility of £11.5m (increased from £7.5m as at 27 September 2020) out of total facilities of £25.75m.’

• FUL says ‘our post Half Year trading, despite a second lockdown, and our significant debt headroom continue to demonstrate the Group’s ability to emerge from this period as a successful survivor in an albeit reduced UK restaurant sector.’ It says ‘we are close to agreeing terms on further sites due to open in calendar year 2021 in London and around the UK for both of our businesses, and look forward to welcoming new customers through our doors when we are able to do so.’

• DP Poland has announced an accelerated book build in order to raise £5.2m during its merger with fellow Polish operator, Dominium. The company says ‘the acquisition constitutes a reverse takeover’ and is conditional upon Shareholder approval. It says the ‘net proceeds of the Fundraising receivable by the Company will principally be applied towards capital expenditure for integration and costs, network optimisation and for general working capital purposes.’ The group expects the result of Fundraising to be announced later today.

• DPP says the directors ‘believe that Dominium’s operations are complementary to the Company’s. Certain Dominium restaurants are located in some of the most prominent tourist destinations in Poland which is considered by the Directors to be an extremely valuable asset, given the importance of footfall on revenue generation for both eat-in and takeaway sales.’

• It adds ‘the Acquisition will almost double the number of stores within the Company’s portfolio to 126 stores, and will provide a basis for further expansion and market penetration into new cities and towns, enabling the Company to further build upon the reputations which have been developed by DP Poland and Dominium respectively.’

• The purchase will put the combined Company within the top three pizza chains in Poland in terms of stores and restaurants. It says ‘it is expected that this improved scale will help the Company to achieve its objective of becoming a market leader in Poland, and it will help defend its current position from the growth noted amongst competitors.’

• Synergies will be achieved. Existing directors (of DPP) will leave the company with the exception of Nicholas Donaldson and Robert Morrish and the additional Proposed Directors of the enlarged group are Piotr Dzierżek, Przemyslaw Glebocki and Jakub Chechelski.

Furlough scheme extended:

• Chancellor Rishi Sunak has said the government will extend the furlough scheme for one month until the end of April 2021. Sunak says this will provide ‘certainty for millions of jobs and businesses.’ Up to 80% of wages will be covered. Mr Sunak says ‘our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy to recover and protecting livelihoods across the country.’

• Shadow chancellor, Labour’s Anneliese Dodds said Sunak had ‘waited until the last possible minute to act, leaving businesses in the dark with less than 24 hours before they have to issue redundancy notices.’ She said his ‘irresponsible, last-minute decision-making has left the UK with the worst recession of any major economy.’

• The BBPA welcomes the extension saying ‘extending the furlough scheme and committing to a Government contribution of 80% through to the end of April is a hugely positive move. With today’s regional tiering review meaning 85% of England’s pubs are now closed or unviable under tier two or tier three restrictions, Government support is more critical than ever.’

• CEO Emma McClarkin says she now wants the government to ‘turn its focus to a support package to protect hospitality businesses as well as committing to a roadmap out of this crisis in line with the vaccine rollout. Pubs and brewers need enhanced grant support, extended business rates holidays and VAT reductions and a cut to the rate of tax on beer. It is only with that kind of backing that Britain’s brewers and pubs will be in a position to reopen, continue to employ all those staff currently furloughed and help lead the much-needed economic recovery.’

Other news:

• GfK has produced UK confidence numbers for December & says ‘many might be surprised that we are ending 2020 on a much brighter note after a roller-coaster of a year. It’s safe to say that consumers are looking for good news and they have found it in the form of the UK’s COVID-19 vaccination programme getting underway, which has lifted the mood pre-Christmas 2020.’

• GfK says ‘the 15-point leap in consumer views on the future economy stands out and we have not registered a change of that magnitude for that measure since April/May 2011. The renewed expectations on personal finances looking ahead are also welcome, while the six-point uptick in the Major Purchase Index is good news for online and offline retailers. While confidence is still in negative figures, are we finally heading in the right direction?’

• GfK says the overall score in the UK is up 7pts to minus 26 this month. It says ‘all five measures increased in comparison to the November 20th announcement.’

• OrderPay suggests that the pub and bar sector could lost sales of c£2.6bn compared to last year’s December trading. It says ‘we know that the festive period is usually the busiest time of year for pubs as people come together to socialise and celebrate. But this year things are very different and it’s clear from our data that the restrictions are hitting pubs hard and resulting in a staggering amount of lost sales – for individual operators and across the industry as a whole.’

• CGA and UK Hospitality have combined to produce a report looking at the impact of COVID-19 over the last year. They also consider trends likely to manifest themselves into 2021. See Premium Email.

• Chief Executive of Revolution Bars, Rob Pitcher has condemned the government’s coronavirus curbs, calling them: ‘nothing short of scandalous’.

• Moët Hennessy has taken a minority stake in Vermont-based whiskey brand Whistlepig. Wilco Faessen, co-founder of Whistlepig commented: ‘We have long admired LVMH as a builder of amazing brands and products, and we have learned a lot from Moët Hennessy over the years’.

• Inspire Brands has purchased Dunkin’ for $11.3bn, taking it to one of the largest restaurant groups in North America.

Company news:

• Nightclub operator Deltic has been bought out of administration by Scandinavian firm Rekom UK for an undisclosed sum. Some 42 of Deltic’s 52 bars and clubs will remain open (when they are allowed). CEO Peter Marks will remain at the company. Rekom says ‘we have been looking at the UK market for the past few years as part of our ambition to become one of the largest pan European nightlife groups.’

• Peter Marks tweets ‘…what can I say other than this is the most amazing sector to work in. We’ve had so many messages of support from people in our sector. I hope no one else has to go through what we have had to.’

HOTELS & LEISURE TRAVEL:

• Hawksford Trustees announces that it has sold 3.9 million ordinary shares in On the Beach at a price of 360 pence per share. The announcement says the Company is not a party to the Placing and will not receive any proceeds from the Placing (which amounts to around 2.5% of the equity).

• Tenerife is to close its borders for 15 days from today, but holidaymakers are exempt from the restrictions. Jet2holidays, the biggest UK tour operator for the Canary Islands, said it would continue operations and had assurances that the move does not affect holidaymakers.

• Which? has asked the Financial Conduct Authority to investigate the travel insurance market before travel resumes after the Covid-19 pandemic. It claims no travel insurer is providing complete cover for Covid-19 and related disruption for customers travelling abroad. 

• Travlaw’s head of employment law, Ami Naru, claims that an earlier extension of the furlough scheme would have saved some jobs in the travel sector. Naru said ‘if employers had known the scheme was going to be in place from April for pretty much a full year, they would have been in a position to make more-informed decisions’.

• Motional, the $4bn JV between Aptiv and Hyundai, plans to launch fully driverless robotaxi services in major U.S. cities in 2023 using the Lyft  ride-hailing network. 

• STR reports that hotel occupancy in the US was down 37% on last year in the week to 12 December. It says rates were down 32% with REVPAR some 57% lower.

OTHER LEISURE:

• Gfinity has updated on trading for its AGM with Neville Upton, Chairman, saying ‘I am pleased that the positive momentum we saw at the start of the current financial year has continued.’ He says ‘the Company was operationally profitable in October and November and is on track for another strong performance in December 2020. The fact we have achieved month-on-month operating profitability for the first time since our AIM listing in December 2014 is an impressive milestone and a pleasing testament to the hard work of the team.’

FINANCE & MARKETS:

• Rishi Sunak has declared he must rein in government borrowing next year and signalled his opposition to a one-off wealth tax to pay for the coronavirus crisis. His intervention comes after government borrowing hit more than £22bn in October, the highest total for that month on record.   

• The MPC voted unanimously to maintain Bank Rate at 0.1% at its 16th of December meeting. The Committee also voted unanimously for the Bank of England to continue with the programme of £100bn of UK government bond purchases. 

• Sterling lower at $1.3526 and €1.1044. Oil down at $51.32. UK 10yr gilt yield down 1bp at 0.27%. World markets mixed yesterday with London set to open down around 15pts.

RETAIL WITH NICK BUBB:

Today’s News: Today is the deadline of the administrator for first-round bids for the Arcadia brands, so there could be news on this later. In the meantime, Frasers and #MadMike cleared the decks a little, by announcing yesterday afternoon they would not be bidding for Mulberry (not that the controlling shareholder wanted to sell anyway), although it’s not clear if they are trying to buy parts of both Arcadia and Debenhams…At least JD Sports have put all this behind them and, fresh from the defeat of the wretched CMA over the Footasylum appeal, management will be keen to hear what mighty Nike report with their Q2 results in the US in the evening. Jlp rita?

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 was never tested in the current crisis…as the overall index jumped to -26 from the -33 level that was seen in the report for last month (versus the -36 low seen in the early June “flash” report), which was even better than the -31 expected in the City, after the COVID vaccine news. GfK’s Client Strategy Director Joe Staton says in the press release that “Consumers are looking for good news and they have found it in the form of the UK’s COVID-19 vaccination programme getting underway, which has lifted the mood pre-Christmas 2020”.

Planet ONS Watch: In the so-called real world, as per the BRC-KPMG figures for November (the 4 weeks to Nov 28th), underlying Retail Sales were a bit disappointing last month overall, given the hit to Non-Food sales from the lockdown, despite the boost to Food sales from the collapse in “eating out”. But “seasonally adjusted” life was better 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 October, which were released at 7am this morning…City economists (who treat the ONS figures as the gospel truth) will be depressed with the 3.8% fall in month-on-month seasonally adjusted sales volume (inc fuel), but the ONS reports that non-seasonally adjusted value sales (ex-fuel) were 4.7% up in November year-on-year, because of a huge boom in Small Retailer Non-Food sales…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 in the sector now is on what Retail sales will be like in December.

BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that things stayed strong in w/e Sunday Dec 13th, the first full week after the lockdown came to an end in England: BDO Fashion LFL sales were up again, by c5% (with Store Fashion sales down by only c24%) and Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as the Fashion retailers) were up by c6% (down only c19% in Store sales, but up c68% in Online sales). The BDO survey is an unweighted average of percentage changes in sales, so it’s not to be taken too seriously, but with only a week to go to Christmas it remains to be seen whether the recent trading strength is a pull-forward of sales or something more genuine…

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

• 17 Dec 20 SSP FY numbers

• 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

• 14 Jan 21 C&C EGM

• 15 Jan 21 Gym Group trading update

• 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

• 3 Mar 21 Government Budget Statement

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