Langton Capital – 2021-03-22 – JDW H1, closed units, comps, staycations, foreign hols, Hawthorn etc.
JDW H1, closed units, comps, staycations, foreign hols, Hawthorn etc.
A DAY IN THE LIFE:
But let’s put that to one side. It’s interesting don’t you think that, having heard them butchered or carved up in one way or another, some words will never quite sound right again.
I’m thinking of a few so, here are the words, followed by the pronunciation that I had in mind. See if you can put a name to a word.
China. A large & venerable country pronounced sneeringly as ‘Chiy-e-nah’ is some quarters.
Authority. It may be earned or deserved. But who pronounces it ‘authoritaaaay’?
Freedom. Earned and in need of constant maintenance. But who shouted ‘freeeeedom…’?
Answers underneath ‘Advertise with us’ below. On to the news:
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The word China was mangled by former president Donald Trump.
‘Miaaay authoritaaay’ should be respected, said South Park’s Eric Cartman.
Freedom was, of course, promised by Mel Gibson’s William Wallace.
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JD WETHERSPOON – H1 NUMBERS:
JD Wetherspoon on Friday reported H1 numbers for the 26wks to 24 January and our comments thereon are set out below. See premium email for comments on the subsequent conference call:
• JDW reports that revenue in the half year was down by 53.8% at £431.1m. Like for like sales were down by a similar 53.8%
• The group is reporting a pre-IFRS 16 loss before tax of £46.2m (prior year: profit £57.9m) with an operating loss of £20.7m (prior year profit £76.6m)
• The loss per share is 36.4p vs a profit per share in the prior year of 44.3p
Cash & balance sheet:
• The company reports that as at 24 January 2021, net debt, including bank borrowings and finance leases, but excluding derivatives, was £811.9m (2020: £817.0m).
• Including accrued payments, it says ‘net debt plus ‘trade and other payables’ have remained at approximately the same levels from year end 2019.’
• The group says ‘as a result of the pub closures, the normal net-debt-to-EBITDA covenant has been waived by the company’s lenders. The net-debt-to-EBITDA ratio has been replaced by a minimum liquidity covenant of £75m. As at 24 January 2021, the company had liquidity of £225.0m.’
• The company previously stated that its intention to keep the net-debt-to-EBITDA ratio at around 3.5 times for the foreseeable future. The company says ‘the ratio might rise for a temporary period, if there were, for example, a sudden deterioration in trading, in which instance the company would seek to reduce the level in a timely manner.’
• JDW raised £93.7m via a placing of new shares at 1120p on 19 January. The company said ‘the net proceeds of the placing will be used to further strengthen the company’s balance sheet, working capital and liquidity position during the period of disruption.’
• It said it ‘will provide sufficient liquidity to deal with very low sales after reopening, helping the company to return to growth as the market normalises.’
• There were no share buybacks during the period and a dividend is not being recommended
• JDW said in January ‘additional capital will facilitate the acquisition of new properties, which are likely to be available at favourable prices, as a result of the pandemic.’
• During the year, JDW says ‘we opened two new pubs and closed or sold two, bringing the number open at the period end to 872. Following a review of our estate, in recent years, we placed around 100 pubs on the market, most of which have now been sold.’
• The company updates ‘ten years ago (FY11) our freehold/leasehold split was 43.4/56.6%. At the half year end, it was 64.4/35.6%.’
• JDW chairman Tim Martin says ‘Wetherspoon and its employees, along with the hospitality industry, have worked very hard to comply with ever-changing government guidelines.’
• Mr Martin says ‘it is disappointing that so many regulations, implemented at tremendous cost to the nation, appear to have had no real basis in common sense or science – for example, curfews, “substantial meals” with drinks and masks for bathroom visits.’
• When it raised money from equity holders, JDW had four potential scenarios. The central assumption is that pubs are closed to end-March. It said sales could be down 50% on reopening and rise by 5% per week thereafter. As it turns out, pubs will open (outdoors only) a little later than that and inside areas will not be open until May.
• This is an industry-wide issue, of course but, on this basis, sales this year (to end-July) will be down more than the previously indicated 30%.
• EBITDA may be a shade worst than the indicated £13m with a loss before tax of £112m. Debt may peak this financial year a little over the indicated £969m.
• JDW’s ‘reasonable worst case’ scenario may be a little nearer to what we now expect. The company said this would see pubs reopen early-April at minus 50% and stay at that level for the remainder of the financial year. Under these circumstances, sales would be down 43%, EBITDA would be minus £33m and the loss before tax would be £159m. Debt would peak this year at £1.02bn.
• JDW has both defensive and potential expansionary reasons for having raised money and these remain valid. There is no trading to comment on at present and numbers (other than the critically important debt and cash-burn numbers, see prior emails) are not entirely meaningful at this stage.
• But pubs and JDW have weathered previous recessions and the opportunity to add freeholds is a real one. We have said before that JDW’s assets recently earned £105m to £110m in PBT and we see no reason why they should not do so again. Debt has increased but so has the opportunity to take market share. Having said this, the group’s shares have been strong recently and a pause for breath may be called for.
JD WETHERSPOON: H1 CONFERENCE CALL:
See premium email.
PUBS & RESTAURANTS:
Covid has reduced supply:
• Estimates vary but range up to 25%, even 30% when it comes to the number of branded casual dining outlets that will not reopen. Not quite comparing apples with the above oranges as the study below is looking at the total market for licensed outlets, but CGA pubs some numbers on the situation when it says ‘Britain has 7,592 fewer licensed premises than it did before the COVID-19 pandemic hit.’ It’s latest Market Recovery Monitor says there has been a ‘rapid acceleration in closures since the start of 2021.’ It says ‘Britain’s total licensed premises fell by 2,713 over January and February—equivalent to 46 closures a day’ and says ‘Britain had 107,516 sites at the end of February 2021, down by 7,592 or 6.6% from 115,108 in March 2020.’
• The closures have not been evenly spread across business types or geographies. CGA says ‘independent businesses have borne the brunt of closures. A total of 5,112 have been lost since March 2020, including 1,971 in January and February alone. This reflects the vulnerability of small and family-run businesses by comparison to well-invested restaurant and pub groups, which have recorded 1,229 closures—fewer than a quarter of the independent sector’s number.’
• Langton comment. See premium email.
Covid anniversaries are upon us:
• Comps are set to get much, much easier. Consumers were advised not to undertake non-essential travel or contact with each other on 16 March last year and the first lockdown was imposed from 23 March. S4labour says ‘the hospitality industry lost just over £89 billion in revenue through the full year since March 23rd 2020, when the hospitality industry was first instructed to close. This is equivalent to 68.9% of annual revenue, representing an average decline of half a million per site across the U.K.’
• Langton comment. See premium email.
• Covid – the staycation market:
• The government has put the cat amongst the pigeons by saying over the weekend that foreign holidays may not be possible this year. See premium email.
• Langton comment. See premium email.
Other Covid news:
• CGA reminds readers that 76% of consumers are ‘likely to visit a venue with outdoor seating within a month of reopening. A third (33%) plan to get back within a week, and 12% intend to return on the first day they can.’ Some 24% are unlikely to return until at least 17 May, when venues can trade inside again.
• Some observers in Scotland suggesting that celebrations following Glasgow Rangers’ victory in the Scottish Premiership sparked celebrations that may have led to a resurgence in Covid infections and may potentially be a factor that slows down the momentum towards re-opening North of the Border. This impacted Glasgow but there are fears that the whole of the Central Belt could be lumped together.
Company & other news:
• Hawthorn has revealed its latest package of support for Pub Partners and Operators ahead of the reopening of pubs in England on 12th April, and Scotland on the 26th. The company says rent will be capped at around 30% until the end of May, before increasing to 50% in June and 75% in July before returning to 100% in August in-line with the expected gradual increase in trade. Hawthorn also says it is ‘providing additional packages of support for its Operator Managed pubs, with around £550,000 worth of support to be paid to Operators at both trading and non-trading pubs, with funds covering labour costs, and being invested in outside areas to increase capacities.’
• Canadian restaurant brand, Tim Hortons, has announced that it is to open its first drive-thru restaurant in Yorkshire, in Sheffield. The unit should be open from early summer.
• Texas Roadhouse in the US has announced that President Jerry Morgan will also assume the title of Chief Executive Officer of the Louisville-based restaurant company. The promotion is effective immediately. Kent Taylor, the founder, CEO and Chairman of the Board, died last week.
• Accolade Wines has announced the purchase of Australian wine company Rolf Binder Wines.
• SIBA has awarded its Brewery Business of the Year award to Signature Brew
HOTELS & LEISURE TRAVEL:
• The likelihood of overseas holidays this summer took a knock over the weekend with Defence Secretary Ben Wallace telling Sky there was a risk that holidaymakers might bring back variants. Wallace then told the BBC that booking an overseas holiday would be ‘premature’. Shadow foreign secretary Lisa Nandy said she would not be booking a foreign holiday’. Nonetheless, Jet2 has registered a ‘rise in holiday booking confidence’ across potential travellers. Much of Europe is moving towards a third lockdown.
• Princess Cruises and P&O Cruises will require passengers on their UK coastal sailings this summer to be vaccinated.
• STR reports that US hotel comps are easing with the week to 13 March the least bad in a year. Numbers will shortly be well ahead of 12mth ago comparatives.
• UK video games industry body UKIE says that the size of the UK video games market grew to a record £7bn last year as lockdown drove growth. Top sellers during lockdown have been Animal Crossing & Call of Duty amongst others.
• The owner of the Fortnite and Houseparty video games, Epic Games, is reported to be finalising a $1bn fund raise that will value the company at as much as $28bn.
FINANCE & MARKETS:
• The ONS has reported that the government borrowed £19.1bn last month, the highest figure for February since records began in 1993. Borrowing was £17.6bn higher compared with February last year.
• The IFS has suggested that Britain could be headed for a new era of austerity. It says ‘plans can change but, as things stand, for many public services, the first half of the 2020s could feel like the austerity of the 2010s.’ PM Boris Johnson has ruled out austerity and tax rises. The Treasury says ‘this is categorically not a return to austerity.’
RETAIL WITH NICK BUBB:
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 11 Mar 21 Playtech FY numbers
• 11 Mar 21 Morrison’s FY numbers
• 15 Mar 21 Carlsberg AGM
• 16 Mar 21 Gregg’s FY numbers
• 16 Mar 21 C&C pre-close trading update
• 17 Mar 21 Hostelworld H1 numbers
• 18 Mar 21 Fever Tree FY numbers
• 18 Mar 21 Gym Group FY numbers
• 18 Mar 21 Bank of England MPC meeting
• 19 Mar 21 JD Wetherspoon H1 numbers
• 19 Mar 21 GfK UK Consumer Confidence numbers
• 23 Mar 21 DP Eurasia FY numbers
• 23 Mar 21 McColl’s FY numbers
• 24 Mar 21 M&B AGM
• 25 Mar 21 Compass Group H1 update
• 25 Mar 21 TUI AGM
• 29 Mar 21 Ten Entertainment FY numbers
• 30 Mar 21 AG Barr FY numbers
• 31 Mar 21 Various Eateries AGM
• 1 Apr 21 Sportech FY numbers
• 7 Apr 21 Saga FY numbers
• 8 Apr 21 Sportech FY numbers
• 8 Apr 21 Constellation Brands FY numbers
• Est. 9 Apr 21 Barclaycard Consumer Spending (March)
• 13 Apr 21 Just Eat Q1 numbers
• 15 Apr 21 Pepsi Q1 numbers
• 15 Apr 21 Naked Wines FY trading update
• 22 Apr 21 Domino’s Pizza PLC AGM
• 23 Apr 21 Gear4Music results
• 28 Apr 21 Carlsberg Q1 numbers
• 4 May 21 Campari Q1 numbers
• 6 May 21 Bank of England MPC meeting
• 7 May 21 Intercontinental Hotels Q1 numbers
• Est 9 May 21 Barclaycard Consumer Spending (Apr)
• 12 May 21 Compass Group H1 numbers
• 12 May 21 Stock Spirits H1 numbers
• 12 May 21 TUI H1 numbers
• 18 May 21 Britvic H1 numbers
• Est 19 May 21 Marston’s H1 numbers
• 26 May 21 C&C FY numbers
• 24 Jun 21 Bank of England MPC meeting
• 27 Jul 21 Campari H1 numbers
• 5 Aug 21 Bank of England MPC meeting
• 10 Aug 21 Intercontinental Hotels H1 numbers
• 12 Aug 21 TUI Q3 numbers
• 18 Aug 21 Carlsberg H1 numbers
• 22 Oct 21 Intercontinental Hotels Q3 numbers
• 26 Oct 21 Campari Q3 numbers
• 8 Dec 21 TUI FY numbers
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