Langton Capital – 2021-01-14 – PREMIUM – Whitbread, Scotland, Pizza Express, TUI, G4M, Everyman etc.:
Whitbread, Scotland, Pizza Express, TUI, G4M, Everyman etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: You know it’s bad when your barber asks you if you have a big hat. And when you cut your own hair and ask it of yourself, it might be worse. But I don’t know what I expected because, having cut our four lads’ hair, badly, for a decade or more in their youth, I still persuaded myself that an incremental 15yrs of inactivity was just what I needed to perfect my technique. But, as they say, reality bites. Any thoughts of layering my Barnet skilfully into my neck, cutting carefully around my ears and feathering what I’ve got left on top into some sort of Mr Whippy affair didn’t survive my early decision not to bother with a mirror and it all went downhill from there. Specifically, the cutter guard fell off and I shaved a stripe down the middle of my head. No going back at that point. You can’t glue it back on, I was told, gleefully, by the lads in a parody of me circa the Millennium when we clocked me hiding behind the sofa on Zoom later on and, as the dog had eaten much of the shorn hair as soon as it left my head, I wasn’t going to wait for it to pass through his digestive system to slap it on my head and try to prove them wrong. Not in this world. Not whilst we’re in lockdown and there’s a perfectly good Dennis the Menace fancy dress wig festering in the loft. 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. WHITBREAD Q3 TRADING UPDATE: Whitbread has updated on trading for its Q3 and our comments thereon are set out below. Headline numbers: • Whitbread has updated on trading for the 13wks to 26 November (its Q3) saying that ‘government COVID-19 restrictions continued to create very challenging hotel market conditions’ • It says ‘as a result, total UK accommodation sales were down 55.2% with occupancy at 49.3%’. Premier Inn total sales (including F&B) were down by 54.7% in the quarter. • Occupancy levels rose to 58% in September ‘driven by relatively strong leisure demand in tourist locations and business demand recovering from a very low base.’ • October was 52% with 35% in November. WTB says ‘throughout the quarter, demand remained stronger in the regions, with demand in metropolitan areas, and in particular in London, remaining weak.’ • The group says ‘in the five weeks ended 31 December 2020, total UK accommodation sales year-on-year were down 66.4% representing a continued outperformance of the hotel market of 11.1pp, with total UK sales down 73.4%.’ • The group adds that ‘despite this, a resilient operational performance resulted in the vast majority of our hotels remaining open during the quarter’ with market share gains and a ‘continued focus on operational excellence, health and safety measures, efficiencies and managing cashflows’ • The group says that it has ‘accelerated estate growth in Germany, with an open and committed hotel pipeline now at 68 hotels following the successful completion of the acquisition of 13 hotels from the Centro Group’ • Whitbread says it is ‘well positioned to continue its outperformance versus the market and to emerge in a strong position in the long-term.’ Current operational and financial position • Whitbread says that it saw an ‘improved demand for business travel, and some leisure travel, [which] resulted in the majority of our UK hotels remaining open during the first half of December, with demand levels falling as the Government’s tier restrictions tightened in the second half of December and through into the New Year.’ • Units are currently under increased restrictions with only ‘essential business and keyworker accommodation.’ The group says ‘around two-thirds of our hotels remain open, while all our restaurants are closed.’ • Accommodation sales were down 66.4% for the 5 weeks to 31 December 2020 with occupancy at 31.1%. • WTB says ‘21 of our 29 operational hotels in Germany remained open but under severe restrictions, and therefore similar to the overall German hotel market, recorded low levels of occupancy. These restrictions have been extended until at least the end of January.’ • We would suggest that food has been hit more than accommodation, London more than the provinces and business more than leisure • WTB says ‘the short-term trading environment remains challenging, and given the ongoing and fast-changing nature of the COVID-19 situation, visibility of expected revenue and cost trends remains very limited.’ • It adds ‘FY21 cash and profit sensitivities remain broadly consistent with those articulated at our interim results in October.’ • Re Germany, WTB says performance will be suppressed in the short term ‘meaning that losses will increase in FY22 and continue into FY23. The recent acquisition in December of 13 hotels from the Centro Group will result in a loss in Germany next year of c£10m whilst these sites are refurbished and rebranded to Premier Inn.’ • The company says ‘in addition, in FY22 the impact of every 1% decline in Germany RevPAR vs our pre COVID-19 Germany RevPAR expectation of c£60 will result in a £1m reduction in profit before tax.’ Balance sheets, cashflow, debt & potential expansion: • The company tapped equity markets in May last year and said at the time ‘the purpose of the Rights Issue is to ensure that Whitbread emerges from the COVID-19 pandemic in the strongest possible position to take advantage of its long-term structural growth opportunities and win market share in both the United Kingdom and Germany.’ • CEO Alison Brittain says ‘we are well placed to continue to outperform the increasingly constrained budget branded’ and adds ‘we expect to see increasing opportunities to develop in both the UK and Germany.’ • Brittain says ‘we continue to protect our liquidity through the careful management of our cash position, and to take actions to ensure that we exit the crisis as a leaner, stronger and more resilient business.’ • The company concludes ‘our strong balance sheet also provides the opportunity to take full advantage of the enhanced structural opportunities that we are already seeing in the market.’ • WTB says ‘the Group’s balance sheet remains strong with a net cash position at 31 December 2020 of approximately £40.0m compared to £196.4m at the end of H1.’ • WTB adds ‘capital spend was £98.4m in the four months to 31 December 2020. The Group also had cash on deposit of £814.9m and access to a £900.0m undrawn revolving credit facility, and up to £300.0m available under the Government’s Covid Corporate Financing Facility (CCFF) scheme.’ Company comments: • CEO Alison Brittain says ‘since the start of the COVID crisis, we have responded quickly and robustly to the changing restrictions and have learnt to rapidly adapt our operations as required.’ • She adds that the group has been able to deliver ‘strong market share gains in the UK, demonstrating the benefits of our strong brand, direct distribution, and our unique operating model.’ • Ms Brittain adds ‘we expect the current travel restrictions in the UK and Germany to remain until at the very least the end of our financial year.’ As this is February, it is very much expected. • Brittain adds ‘with the vaccination programme underway, we look forward to the potential gradual relaxation of restrictions from the Spring, business and leisure confidence returning, and our market recovering over the rest of the year.’ Langton Comment: • WTB is in a relatively good position – but that’s not ‘good’ in absolute terms. However, if accommodation is to remain a ‘thing’ – and we believe that it is – then the group remains a relative winner. • Whitbread announced a 1 for 2 rights issue to raise £1.009bn gross in May. The Rights price was 1500p and the Theoretical Ex-Rights Price at the time was £22.69. • The group’s shares then bumped along around that level until early-November, when positive vaccine news began to buoy the shares of the company and the sector as a whole. WTB shares breached £30 almost immediately and have been hanging around the £30 mark, to away developments, pretty much ever since. • Comparative numbers are relatively meaningless. There is light at the end of the tunnel, but timing is uncertain, to say the least. • Premier Inn should benefit from the move to staycations likely this year and the group’s disposal of Costa looks well-timed. • Pricing is currently very weak in the hotel market and, although UK cottage holiday companies may try to put prices up for summer 2021, it is entirely possible that hoteliers, given the ancillary income that they can earn from F&B, may keep prices down. • WTB is still underrepresented in London and the hotel market in the capital may remain subdued for longer than that in the country as a whole. See our comments on STR’s numbers a few days ago. • It is little surprise that losses in Germany will extend into at least one more year but the group maintains that it is in a beneficial position relative to its competition. • We have commented previously that WTB has pulled all the levers available to it to preserve cash and to position itself for the future. • It is relatively well-positioned versus its competitors and, over the longer term, the group has proved itself an effective builder of estates of largely freehold-based leisure assets. • Our comments on expected 2021 trading will continue tomorrow. PUBS & RESTAURANTS: Covid issues: • The MA has reported that JD Wetherspoon has retracted posters from the windows of some of its pubs following its ‘lockdown-sceptic’ comments. Mayor of Hackney Philip Glanville called for the removal of the posters commenting: ‘Totally inappropriate given the number of deaths we’re seeing locally and pressure on our health services’. • The first minister in Scotland, Nicola Sturgeon has announced further Coronavirus restrictions around takeaway and click and collect. Nicola Sturgeon said: ‘I know this is not a popular move, but it is intended to underline and support the fact that we should only be leaving home for essential purposes’. • UK Hospitality has clarified that walk up takeaways, click and collect for food is still allowed, however, customers will be prevented from entering premises. • The NPD has calculated that if the rest of the UK were to follow Scotland’s lead on further restrictions to the takeaway and click and collect industry, a further £300m would be wiped from the F&B sector. Dominic Allport, insights director (foodservice), The NPD Group, said: ‘The impact of a Government imposed closure of click & collect takeaway meals would be devastating to the restaurant trade, especially the small independents that so many Brits frequent up and down the country’. • The Local Data Company blogs that ‘the pandemic has had a significant impact on UK towns and cities, and this shows no signs of abating as we work through the reality of another prolonged period of lockdown.’ This is true and obvious. • LDC says ‘one of the main trends we saw was significant regional differences with the West Midlands seeing the lowest reopening rate in England at 65.9% of units (at the end of August), compared to Greater London at 77.9%.’ • This became muddied as we faced ‘the constantly evolving tier system’ but it does seem as though city centres have been consistently more-heavily impacted by closures than have suburban locations. Company news: • PizzaExpress has exited 23 extra UK locations, following the 74 sites already closed due to the group’s recent CVA. • Lidl UK has seen sales increase 17.9% in the four weeks to Dec 27, making it the fastest growing retailer versus the big four, Tesco, Asda, Morrisons and Sainsbury’s. • The plant-based brand, This, has stated that it has sold more than £300k worth of product in the first week of January, due to increased Veganuary sales. • Debenhams announces that six of its stores will not reopen, affecting 320 jobs. The firm is in administration under FRP Advisory, who are looking for a sale of all or parts of the business. • Nightcap PLC, which was ‘established in 2020 to take advantage of the significant changes taking place within the premium bars segment and the hospitality industry more generally in the UK,’ listed on AIM yesterday having raised money at 10p per share. The company has purchased the London Cocktail Club, which it believes ‘to be a scalable model that is well-positioned to take advantage of the current opportunity in the hospitality segment of the UK property market for taking on attractively priced sites against a backdrop of decreased competition.’ • CEO Sarah Willingham says the admission to AIM ‘marks the start of Nightcap’s mission of becoming the UK’s leading bar group by supporting entrepreneurs and businesses that have taken such a hit during the pandemic.’ Ms Willingham says ‘hospitality currently faces the worst challenges in our lifetime but…when the restrictions are lifted, people will want to enjoy their freedom by having fun and coming out to socialise again.’ Other news: • The Food & Drink Federation has said that Brexit red tape is likely to increase food supply chain costs. HOTELS & LEISURE TRAVEL: • International travellers will need to provide proof of a negative pre-departure Covid test, with these measures likely lasting until at least until mid-March. This requirement is subject to a 28-day review, with the first review set to be in mid-February. • VIP Ski has been rescued from administration after a start-up headed by its former boss paid £175,000 for the company. The firm has £6.8m in unsecured claims. • OTA Hostelworld is looking to secure €30m as net bookings for 2020 were down by at least 80% on pre-Covid levels the previous year. The company had net cash at the end of last year of €18.2m with liabilities of €20.7m. • Deutsche Bank, which has $340m outstanding loans to the Trump Organisation, has said it will not deal in the future with Donald Trump amid a growing corporate backlash against the President. • Rules requiring international arrivals into the UK to have proof of a pre-departure negative Covid test have been delayed from Friday until Monday. • Coach & other holiday operators have said that the commencement of vaccinations of older UK residents has led to a spike in holiday enquiries from those groups. • TUI owned Marella Cruises has pushed back the earliest date for the recommencement of its operations in Europe until March 31. OTHER LEISURE: • Gear4music, the UK largest online retailer of musical instruments has reported sales up 10% on last for the 3 months ended 31 December 2020. Gear4music’s Chief Executive Officer, Andrew Wass, commented: ‘I am pleased to report a very successful FY21 peak trading period, that continues to reflect the significant commercial and operational progress that we have made during the last two years’. • Everyman Media Group has reported in a trading update that the group continues to concentrate ‘on reducing capital expenditure and operating costs to a minimum’, while sites are forced to close. Paul Wise, Executive Chairman of Everyman said: ‘We remain optimistic for the coming year post-lockdown and continue to have confidence in people’s appetite to socialise and to be entertained; we believe we will be in a strong position once it is safe to welcome back our customers and teams’. • Feast It has raised £1.7m as it prepares for an events ‘boom’ post-pandemic. Digby Vollrath, co-founder of Feast It, commented ‘There was a big shift in people’s attitudes towards virtual events in the latter half of 2020’. • 888 has updated on trading saying that it is ‘pleased to announce it continued to deliver a strong performance to the end of the year, with both revenue and active customer numbers in December representing all-time monthly records for the Group. As a result, the Board now expects the Group to report revenue and adjusted EBITDA for the Period moderately ahead of its prior expectations.’ FINANCE & MARKETS: • The Bank of England’s MPC has suggested that the UK economy is now going through its “darkest hour.” Chancellor Sunak’s Budget, planned for 3 March, should at least begin to comment as to how the support measures introduced to date are to be paid for through increased taxes and reduced spending elsewhere. • The UK’s major supermarkets have warned that “urgent intervention” is needed to allow food supplies through to Northern Ireland. They say that availability will worsen and prices rise unless something constructive is done soon. • Honda’s Swindon plant is to close temporarily next week due to a shortage of semiconductors. • ECB boss Christine Lagarde has warned governments against easing off on stimulus packages too soon. • Sterling mixed, oil down, gilt rates down, marked mixed, London set to open up c21pts. RETAIL WITH NICK BUBB:
• Today’s News: Today is “Super” Thursday, traditionally the best day to bury bad news, because of the sheer number of retailers reporting on Christmas trading at the same time, but today is not quite as busy as usual, for various reasons, and there is not much bad news to be had…with the exception of poor old Card Factory, which has flagged that it is “constructive” discussions with its banks, having seen profits wiped out by the lockdowns just before Christmas. Mighty Tesco, however, has claimed “market-leading” performance for its 8.1% LFL sales growth in the UK over the 6 weeks to Jan 9th (even though that looks only par for the course): profit guidance for the year is unchanged. Mighty Boohoo (our “Tip for 2021”) has, inevitably, delivered a strong update, with 40% sales growth over the last 4 months (including 40% UK growth) and has upgraded full-year guidance. We haven’t had time |
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