Langton Capital – 2021-03-01 – Budget pleas, state aid, unit closures, JDW, SSP, Shake Shack etc.:
Budget pleas, state aid, unit closures, JDW, SSP, Shake Shack etc.:
A DAY IN THE LIFE:
We watched The Blues Brothers again over the weekend and it brought home that a) it’s been 20+ years since we last watched it and b) it remains an exceptionally good film.
The music’s spot on, the cartoonish nature of it works very well, Belushi is a nutcase, the deadpan humour is great, and the cast actually look as though they had fun making the film.
And the last shouldn’t be underestimated. The clothes & hairstyles may have dated but none of the above facets of the film have and, if we can say the same about ourselves and what we did and looked like back in the late 70s and early-80s, we’ll be abnormally lucky.
Indeed, check out Spielberg in the film we’ve just mentioned. He has a cameo at the very end and it’s a wonder he didn’t use whatever sway he had in Hollywood subsequently to have the last five minutes of the film destroyed!
Anyway, that’s enough of that. It’s March, it’s meteorological spring and the days are getting longer but the weather’s schizophrenic. We had a sunhat on yesterday and there’s frost on the ground this morning. On to the news:
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PUBS & RESTAURANTS:
Budget 2021 overview:
• Attention has switched from un-lockdown proposals to the possible content of Wednesday’s Budget.
• Rarely has so much attention been focused on the event. Sunak will outline the current state of the UK economy and its outlook. He will then give some details as to his proposed moves re taxation and borrowing.
• PM Boris Johnson has ruled out a return to austerity. If spending is not to be cut, the government will need to raise taxes or continue borrowing – or both.
• Borrowing could be a possible short-term fix. The Conservative backbenches, the Labour Party and business are all saying that it is too early to cut support and too early to put up taxes.
• The debt markets (and the currency markets) will ultimately be the judge of how far this can be allowed to go. See premium email for further comment.
• Ahead of Wednesday’s crucial speech, there is talk of Beer Duty cuts, of a continuation of the Furlough, the 5% VAT rate and the suspension of business rates and a potential £5bn ‘Save the High Street’ package.
Pre-Budget trade appeals for help:
• The BBPA and Long Live the Local have reported on a YouGov poll that ‘found that 3 in 4 Brits (76%) believed that pubs are important to local communities – a 4 percentage point increase since July 2019.’ It found that ‘64% also said that pubs are important in securing the future of local high streets.’
• The report says ‘when asked if they wanted the Chancellor to help pubs in the forthcoming Budget, only 12% of respondents thought the Government should not do anything. 52% of people supported a cut in business rates, 46% of people wanted to see a cut or freeze in beer duty and 42% supported a reduction on VAT on pub food.’
• Langton comment – see premium email.
• The survey also finds that 62% of respondents ‘think the Government should use the Spring Budget to support Britain`s brewing industry with 54% of people thinking a cut in beer duty should be included in the Budget, as 7 in 10 (69%) thinking that the level of beer duty in the UK, which is 11 times higher than that in Germany, is unfair.’ There may be some political traction here.
• The BBPA’s Emma McClarkin says ‘these findings serve as a much-needed reminder to how important local pubs are to our communities. People miss their local and the sense of community it brings.’ Long Live the Local says ‘people want Government to help Britain’s pub and brewing sector in this Budget -especially following the extremely tough year they have faced.’
• The Pubs Matter campaign is also asking for further support from no11 Downing street ‘to rescue our fragile pubs with an emergency package of support.’ A spokesperson for the campaign said ‘pubs and breweries across the UK have been amongst the hardest hit businesses in the pandemic, but we also know that they will be the most needed, with the public desperate to get back to those places that allow them to celebrate, commiserate and reconnect with each other once restrictions are lifted.’
• It says ‘the Chancellor holds the fate of the nation’s pubs in his hands as we face a critical turning point. The package of measures must support all businesses, including our traditional wet-led pubs, otherwise a large part of the UK’s heritage will be lost forever.’
Closures as a result of Covid-19 (and a bit due to over-expansion):
• CGA and Alix Partners’ Market Recovery Monitor reports that ‘nearly 12,000 licensed premises have closed in Britain since December 2019.’ There have been 4,170 new sites opened since December 2019 to give a net loss of 7,724 licensed units.
• The report says ‘the number of permanent closures is expected to rise sharply, as the effects of trading restrictions—including a catastrophic drop in trade over the key month of December—take their toll.’ It says only 43.2% ‘of England’s pubs, bars and restaurants have an outdoor area of some kind, and while the number is higher among food pubs (78.4%) and community pubs (71.0%), it is far lower on high streets (25.6%) and among casual dining restaurants (11.4%).’
• The latter are amongst the sub-sectors already under most pressure.
• The Monitor says ‘these numbers set out the full, devastating impact of the pandemic on Britain’s licensed premises. The wipe-out of Christmas trade was clearly the final blow for many businesses, and the long wait that others now face to open their doors sadly means closures will mount even higher.’
• CGA says ‘there is huge pent-up demand for hospitality among consumers, and it is encouraging to see signs of resilience in the sector. Pubs have proved more durable than restaurants in recent months, and outside service will give many of them a useful kickstart if the sun shines. Amid all the closures, it’s also encouraging to see a steady flow of new entrants to the market. We remain very confident about the long-term future of the sector, but unfortunately there is more pain to come first.’
• Alix Partners’ MD Graeme Smith says the roadmap to reopening ‘will clearly benefit some segments of the market [but] a significant proportion of operators, even some of those with outdoor space, will not find it a viable option. For many businesses, it will not be until mid-June, when restrictions are more fully lifted, that they will be able to trade on a profitable basis.’
• Alix Partners says ‘the rapid acceleration in site closures since the start of the year demonstrates just how brutal the situation is. Businesses are burning through cash at an alarming rate as costs stack up, and within the sector there is despair as to why hospitality is at the back of the queue when it comes to reopening. The Budget is absolutely crucial to the future survival of thousands of sector businesses; a substantial package of financial support is needed to prevent greater numbers of closures across this year and beyond.’
• A new trade association, the Welsh Beer & Pub Association, has been launched to work alongside the BBPA in order to ‘represent the wide range of beer and pub businesses in Wales, campaigning for policy outcomes that help protect and grow the sector.’ There are over 3,000 pubs in Wales and approximately 120 breweries.
• Re the above, Mark Davies, CEO of Hawthorn, which has 26 community pubs in Wales says ‘pubs and the brewing industry have been at the heart of Welsh communities for centuries.’
• New figures produced by Makro show that Poles order pizza up to twice as often as they do in Italy itself. Pizza Portal, which is not limited to pizzas, says that pizza is ordered 61 percent of the time by its clients with burgers in second place at 22 percent.
• On Trade Consultancy invited partners to join it in raising money for charitable causes. It says ‘join On-Trade Consultancy in making a difference! Our wonderful team, clients and partners are collectively planning to complete the challenge of running, walking and cycling 2,021 miles over the course of 2021 to raise money for OTCs incredible Charity Partners, Hospitality Action! Any donation would be greatly appreciated and is going to the most amazing cause. Donation Link: https://bit.ly/3iFISgX.’
• JD Wetherspoon has commented on an article run by Bloomberg’s Businessweek saying that it contains a number of inaccuracies. The company maintains that it is not a “host to drunken students” and says that it is not “sacrificing worker pay for affordable prices”.
• JDW says its pubs are not split into “grid-like seating plans” and says it is misleading to say that it has leveraged “it’s scale to beat out smaller competitors”. It says it is untrue that it is the “most-hated” pub company in the country. JDW chairman Tim Martin says: ‘there are a number of other errors in the Businessweek article, but these are the main ones.’
• The Telegraph suggests that SSP’s share plan for management could be hard for shareholders to swallow. It says the company ‘will introduce a restricted share plan for management instead of one that is directly linked to performance amid uncertainty surrounding the coronavirus crisis.’ CEO Simon Smith will be eligible for an award worth up to 100pc of his salary, with Jonathan Davies, the chief financial officer, eligible for 75pc. The two directors were not paid bonuses in 2020 and both agreed to take significant pay cuts.
• Shake Shack has announced Q4 & full year numbers saying that LfL sales improved from minus 16% in Q3 to ‘nearly flat’ in Q4. Total sales in Q4 were up by 4%. CEO Randy Garutti says ‘we’re pleased to report revenue in the fourth quarter of $157.5 million, with same-Shack sales improving to down 17.4% compared to down 31.7% in the third quarter 2020. Looking at fiscal 2021, we were encouraged to see recovery momentum continue with same-Shack sales in fiscal January 2021 down only 5%, and with suburban Shacks delivering growth of 8% compared to last year.’
• Shake Shack says ‘the first few weeks in fiscal February have been impacted by the cold weather and snowstorms across many parts of the country, with same-Shack sales down around 16% through the 17th of the fiscal month.’
• Re the outlook, Shake Shack says it ‘is not providing full guidance for the fiscal year ending December 29, 2021. The timing of return to pre-COVID sales levels is highly dependent upon the return of the high traffic areas that contributed to many of the strongest Shack sales, including those most reliant on travel, schools, offices and major gatherings, as well as ultimately, fully open dining rooms.’ It says ‘the timing of that recovery remains unknown today. As the Company approaches the one year mark in mid-March 2021 since the initial and extensive impact of COVID-19, it remains cautious about the near-term sales outlook, especially in its urban business.’
• Keurig Dr Pepper has reported net sales up 4.5% to $11.62 billion in 2020. The company says coffee sales were up 4.7% to $4.43 billion for the full-year and grew by 9.1% in Q4. Chairman & CEO Bob Gamgort says ‘KDP again delivered on its annual financial commitments in 2020, capped by a strong fourth quarter with exceptional growth in net sales that was driven by market share gains across our portfolio and accelerated household adoption of the Keurig system.’ It says ‘while we expect 2021 to be another challenging and unpredictable year, we’re confident in our ability to deliver the final year of the merger commitments communicated in 2018.’ It concludes ‘in 2021, KDP expects to deliver another year of strong growth and exceed its three-year merger target of 2-3% average annual growth.’
HOTELS & LEISURE TRAVEL:
• Some travel industry leaders are suggesting that vaccine passports could be available in time for the summer holiday season. The Times reports ‘vaccination passports will be here by summer.’ It says German Chancellor Angela Merkel has commented ‘everyone agreed we need a digital vaccination certificate.’
• However, EU president Ursula von der Leyen said developing the relevant technology would take “at least three months”. The European Council said in a statement: “We are determined to continue to coordinate our action to tackle the pandemic. For the time being, non-essential travel needs to be restricted.”
• Jet2holidays has suggested that the success of the vaccine rollout programme in the UK could mean that Britons are the first nationality that many overseas destinations will let visit.
• YouGov data has said there is little evidence of a boom in overseas holiday bookings. It says 9% of adults had booked a summer holiday in the UK when asked on 11 Feb – and the number had only risen to 11% on 25 Feb. YouGov says 6% had booked an overseas holiday by 25 Feb compared to 7% on 11 Feb.
• STR reports that US hotel occupancy in the week to 20 Feb was down 24% on the same week last year. Room rates were down by 22% and REVPAR was 41% lower.
• Flutter, which reports full year numbers tomorrow, has reportedly made £14m in shares available to staff for working during the pandemic. CEO Peter Jackson says, with regard to the review of gambling currently underway and the threat to advertising in sports, ‘if gambling is not allowed to continue its association with sports, because that’s what the Government decides, I think there would need to be a good transition period. I don’t think that the switch would be an easy one because the gambling industry is a source of revenue for the sector.’
• Twitter is aiming for revenues of at least $7.5bn in 2023, up from $3.7bn last year.
FINANCE & MARKETS:
• Budget – see above.
MORE LEISURE SNIPPETS:
Last-mile delivery company Gophr has received £4m in a new funding round.
A new restaurant, Bad Vegan, is opening its first site at Buck Street Market
eBay is reportedly set to spend ‘millions’ on expanding in the UK
The Hong Kong bar industry has reportedly seen 15% of its bars close
The consumer: LCP reports 6 million people have become ‘accidental savers’
The consumer. Rail fares are to rise by more than inflation for the first time in 7yrs
Discover Holidays, which includes brand Disabled Holidays, has ceased trading.
A study commissioned by RCL finds that the transmission of aerosol particles / Covid risk via air con on board ships is ‘exceptionally low’.
Walt Disney is to open a Star Wars hotel, the Galactic Starcruiser hotel, later this year
Extended Stay America executives see a lot of opportunity for expansion
Eurotunnel parent Getlink has reported “robust revenue” and a “solid performance” last year despite Covid
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