Langton Capital – 2021-03-25 – Compass, Deliveroo, YUM, Cineworld, TUI, confidence, holidays & other:
Compass, Deliveroo, YUM, Cineworld, TUI, confidence, holidays & other:
A DAY IN THE LIFE:
Yesterday saw Langton indulge itself in two (quite long but interesting) webinars split by an always unpopular task over any lunchtime, namely plunging the septic tank.
The three events had their fair share of drama, tears, frustration and awful smells but, it has to be said, one of the three brought much more than its fair share of the above so why, you might reasonably ask, do we put ourselves through it?
Well because we had to cut the grass, of course.
And the mower’s three flat tyres and its flat battery are only a part of the problem. I can charge the battery, fill tyres with puncture repair foam, find a jerry can, buy petrol and replace the oil (which seems to have soaked into the garage floor) in my sleep but that still leaves the swamp that has welled out of the ground in the middle of the grass to deal with.
But don’t worry, we won’t go into detail, you may be eating your breakfast.
And be one of those lucky, lucky people that never has to deal with the contents of any toilet bowl more than once but anyone out there with a septic tank, poor drainage, clay-based soil, negligible vertical drop and well-fertilised grass that won’t stop growing, will know only too well what I’m talking about.
Anyway, enough of the toilet humour. On to the news:
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PUBS & RESTAURANTS:
Business confidence bouncing strongly:
• Markit has produced flash PMI (purchasing manager index) numbers for this month saying that confidence had risen markedly and that there had been a surge in new orders in certain areas. Hospitality is currently – and understandably – champing at the bit as it will only be allowed to reopen – and then only outdoors – on 12 April. The flash services PMI came in at 56.8, up from 49.5 in February. Any number above 50.0 implies expansion. Although hospitality will not have contributed to these numbers, Markit says ‘the rate of business activity expansion was the strongest seen since August 2020. March data also signalled a return to growth for new orders and employment across the service economy. Service providers widely commented on improving consumer confidence and signs of pent-up demand.’ See also Finance & Markets below.
More Covid-19 news:
• The BBPA reports that some utility providers are ‘refusing to supply many pubs with energy.’ The trade body says ‘a number of pubs across the UK had experienced poor commercial behaviour whereby some utility companies were refusing to renew contracts or simply to supply energy to them, even where such supply includes domestic use.’ This may be a commercial decision based on the potential for bad debts but, as the BBPA points out, pubs are often where the licensee lives. The BBPA also said that ‘where new contracts are being negotiated, they typically remain subject to punitive, out of contract rates with renegotiations lasting for weeks or months.’
• Langton comment. See premium email.
• This is inconvenient ahead of reopening to say the least. And the BBPA, which represent pub companies, is right to say that the utilities would not do this to domestic users. But it is possible, indeed very likely, that the utility companies have had a tough time of it chasing down bad debts across many sectors of retail and hospitality where, as we said very early in the pandemic, the attitude will have been ‘have cash, keep cash’.
• The BBPA says Ofgem has agreed to further investigate the issues reported. But it says it ‘remains concerned that publicans seeking to renew or secure energy contracts will continue to experience refusals to supply, or be forced to pay inflated fees during this process, increasing their risk and reducing their options in terms of securing competitive rates for energy supply.’ CEO Emma McClarkin says ‘publicans have already suffered enough through this pandemic. The last thing they need is energy companies refusing to supply them or renew contracts.’ This is true but there are (almost) always two sides to every story.
• The ONS has confirmed that over half of the jobs lost in the last year have been lost in hospitality. it has also said that around 85% of jobs lost were those of workers aged below 35yrs. This is one of several areas (others being geography, product type etc) where it is clearly not true that we are all in this together. At least not equally.
• Langton comment. See premium email.
• There may have been some oversupply in the hospitality industry going into the pandemic. Indeed, the rash of CVAs in 2018 suggest that some contraction was perhaps on the cards even if Covid-19 had not caused such intense problems from end-February last year onwards. Chancellor Sunak said, when introducing the furlough last spring, that the government wasn’t in the business of saving jobs that were not capable of salvage. But that didn’t go down well and he has since restricted his comments to something along the lines of ‘we can’t save every job…’
• That is certainly true but, as a hard-hit industry and a major employer of younger people into the bargain, some help to hospitality could be called for, as the industry is a genuine benefit to society in that it is a fertile breeding ground for entrepreneurs and is often the entry point into the workplace for many young employees.
Companies & other news:
• Compass has updated on trading for the period from 4 February 2021. The group says group organic revenue was down 33.7% in Q1 this financial year and down 28% in Q2. For H1, organic revenue was down by 31%. The group has a March year end. See premium email for detail & comment.
• Amazon is reported set to cut its stake in Deliveroo as a part of the upcoming IPO. Reuters says Amazon will but its stake from 15.8 per cent to 11.5 per cent. Amazon took the stake after Deliveroo persuaded the Competition and Markets Authority that, were the deal not to be allowed to go ahead, it could go bust.
• Big Hospitality reports that’s competitive socialising company Social Entertainment Ventures is to undergo a rebrand that will involve it changing its name to State of Play. The Bounce, Puttshack, Flight Club and bingo brand Hijingo operator recently brought in Lesley Mcilroy as UK marketing director. Company founder, Adam Breedon, who launched the company back in 2010, has moved into a non-executive role.
• YUM Brands, which owns the Pizza Hut, KFC and Taco Bell, has acquired Tictuk Technologies, a marketing technology and omnichannel solutions company that specializes in conversational commerce. The terms of the deal were not announced. Tictuk develops integrations for social media and messaging channels, including WhatsApp, Facebook Messenger, SMS and email. Whilst that is somewhat unintelligible, it may be the future.
• An array of industry observers have suggested that the increased use of technology will stick post Covid. YUM says ‘Tictuk Technologies [is] a leading Israeli omnichannel ordering and marketing platform company.’ It says ‘the addition of Tictuk to Yum! Brands’ technology portfolio will give the Company the ability to offer more ways for consumers globally to access and order its KFC, Pizza Hut, Taco Bell and The Habit Burger Grill brands through some of the world’s most popular social media and conversational platforms.’ It says ‘the right technologies will allow us to better serve customers with the best offer and delicious food in a way that’s most convenient for them.’
• Commenting on the launch of consultation on the bottle Deposit Return Scheme in England, Wales and Northern Ireland, SIBA says ‘the Government has clearly acknowledged the significant burdens the proposed scheme will place on small businesses and we are concerned about the combined impact of administration costs, producer fees and labelling requirements will have on small breweries and the choice and availability of independent craft beer. The industry has been hit hard by Covid and it will take many years to recover.’
• Other news: Korean chicken offer Wing Wing has opened a new flagship restaurant at Charing Cross Road. Chinatown Bakery is expanding on Wardour Street. Shaftesbury is the landlord in both cases. Krispy Kreme has said it will give a free donut to anyone who has been vaccinated every time they visit a store for the rest of the year. Sadly, this is a US offer. Eat Just, which applies cutting-edge science and technology to create healthy & sustainable foods, has secured $200 million in a new funding round led by the Qatar Investment Authority. Flynn Restaurant Group in the US has announced that the franchise company has completed the acquisition of NPC International’s Pizza Hut portfolio of 937 locations, and most of the company’s Wendy’s restaurants (194 units), in a previously announced deal.
• Jobs & bricks & mortar stores. The John Lewis Partnership has announced that it will not reopen eight of its 42 John Lewis shops from lockdown. Some 1,465 jobs are at risk. See Nick Bubb below for more detail.
HOTELS & LEISURE TRAVEL:
Overseas travel decision:
• PM Boris Johnson has said an announcement on the legality or otherwise of foreign holidays may be made on April 5 (rather than a week later as had been previously expected). Holiday operators have been calling for clarity. The decision, though not certain, could go against the overseas operators. Re holidays, Johnson has said ‘my advice is to everybody to wait for the global travel task force to report. We’ve heard already that there are other European countries where the disease is now rising so things certainly look difficult for the time being but we will be able to say more we hope in a few days’ time, I certainly hope to say more by April 5.’
• Travel Weekly says ‘sources close to the government’s Global Travel Taskforce say speculation that travel won’t resume until after May 17 is “frustrating” and insist “nothing has changed”.’ The mood music has been running the wrong way. Or the right way if you are a company that could benefit from staycation spending. In recent days, a number of ministers have cautioned against booking summer holidays and a £5,000 fine has been introduced for those taking holidays overseas before the end of June. A ‘leading industry source’ told Travel Weekly: “It’s frustrating, but the decisions have not been made yet. It doesn’t change anything. People are reading the legislation to mean there will be no travel until the date in the regulations, but it does not necessarily mean that.’
• Ryanair boss Michael O’Leary says there will be a “strong recovery” in European holiday traffic this summer. He has dismissed “panic” about when international travel will restart. He nonetheless acknowledges that the restart date of May 17 “may move”. The industry will be hoping that it doesn’t move too much.
• The latest Deloitte Hotel Sentiment Survey has found that the majority of European hotel operators and investors expect disruption due to Covid-19 to extend into 2022. Some 71% expect disruption until at least the end of the first half of next year with 43% expecting it to continue into H2 next year.
• TUI is to shut 48 more High Street shops in the UK, affecting 273 jobs. The group announced the closure of 166 in July 2020 which affected up to 900 jobs. The group is expecting at least some of the shift to online holiday bookings to stick post pandemic. TUI will have 314 High Street retail stores after the closures.
• Barrhead Travel says it has seen strong sales of UK domestic cruises. TUI’s Marella Cruises has confirmed it plans to operate UK cruises this summer.
• Ride hailing company Didi Chuxing is reported to be considering New York over Hong Kong for its IPO.
• STR reports that both private and government buyers are looking at alternative uses for some older hotels. It mentions condos, affordable housing, student housing and assisted living as potential uses.
• Cineworld has reported full year numbers for the year ended 31 December 2020 saying that ‘the COVID-19 global pandemic has significantly impacted the industry and the Group’s results for the period, with all sites across the Group being temporarily closed from mid-March 2020. The sites are still closed. Group revenue of $852.3m (2019: $4,369.7m) and Group Adjusted EBITDA (loss of $115.1m) (2019: profit of $1,580.3m) for the period was severely impacted by these closures. See premium email for detail & comment.
• US Gamestop shares fell 20% yesterday to around £144 per share on the back of Q4 numbers. The video games retailer is still facing declining sales as demand moves to streamed or downloaded product.
• Industry body the BPI says that vinyl records may outsell CDs in the UK this year for the first time since the 1980s. Downloads and streaming still dominate the market.
FINANCE & MARKETS:
• The rate of inflation in the UK as measured by the CPI fell to 0.4% in February from 0.7% in January reports the ONS. Fuel prices rose but clothing prices fell. The NIESR says ‘after increasing steadily for three months, underlying inflation has moderated to the lowest level recorded in four years.’ It says ‘our measure of underlying inflation, which excludes extreme price movements, decreased to 0.2 per cent in February. Inflation is expected to reflect some volatility in the short term as the effect of ongoing lockdown impacts consumer prices in the non-essential retail market. We expect inflation to rise in the latter half of the year as the economic recovery gains pace on the back of a successful vaccination programme and higher producer costs are passed on to consumers, but we still expect inflation to remain below the Bank’s 2 per cent target in the year to February 2022.’
• Markit has reported flash PMIs for the UK’s manufacturing and services industries alongside an estimate of the composite figure. It says ‘business activity across the UK private sector increased in March and the rate of expansion was the fastest for seven months.’ It says ‘the headline Composite Output Index registered 56.6 in March, up sharply from 49.6 in February and above the crucial 50.0 no-change mark for the first time in three months.’ Services hit 56.8 and manufacturing was 55.6.
• Markit says ‘the UK economy rebounded from two months of decline in March, with business activity growing at its fastest rate since last August as children returned to schools, businesses prepared for the reopening of the economy and the vaccine roll-out boosted confidence.’ It says employment ‘rose for the first time since the pandemic struck as firms expanded capacity in response to the new inflows of work and brighter outlook.’ Markit concludes ‘worries persist though, especially in relation to near-record supply chain delays, a continued fall in exports and sharply rising prices, all of which are making life difficult for many companies.’
• The HMRC reports that the number of home sales in the UK rose by almost 50% last month compared with a year earlier as people rushed to beat a stamp duty holiday deadline that has since been extended.
RETAIL WITH NICK BUBB:
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 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 Cineworld FY numbers
• 25 Mar 21 TUI AGM
• 29 Mar 21 Ten Entertainment FY numbers
• 30 Mar 21 AG Barr FY numbers
• Est. 30 Mar 21 Time Out H1 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
• 28 Apr 21 YUM Brands Q1 results
• 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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