Langton Capital – 2021-04-01 – Langton Capital – 2021-04-01 – PREMIUM – Deliveroo, property vacancies, Bank Holiday hopes, FSTA, MARS etc.:
Deliveroo, property vacancies, Bank Holiday hopes, FSTA, MARS etc.:
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A DAY IN THE LIFE:
We chickened out of driving through a ford the other day. It’s at location 54.437853 north, -0.731731 west if you want to have a look on Google Street view HERE.
Just a couple of points in my defence. Yes, there are wet tyre marks coming out of the ford but:
a. This is a river, not a stream (it’s the River Esk. It runs through Whitby a few miles further on where, though it’s admittedly tidal, it’s also 20 feet deep).
b. The Google photo was taken in August. This is not August.
c. Somebody may well have splashed what look like wet tyre marks on the road in order to sit back, film the subsequent carnage and put it on YouTube.
d. Even in August 2011, when the Google photo was taken, the river looks to be about a foot deep by the marker with the water bubbling past. The marker may be a poor joke. It might be the edge of the river, not the middle. Somebody may have changed the digits and anyway, a foot of water moving at 20 miles an hour could probably shift a car, certainly enough to wedge it under the footbridge and make a fool of its occupants.
e. 5pm on a chilly evening when it’s getting dark in the middle of a pandemic isn’t a good time to be ringing the emergency services (the members of whom also have smart phones, could load you up to YouTube etc.)
f. If there’s a reason that the Street View doesn’t go through the ford. it’s probably that the driver didn’t think he was paid enough or he was using his own vehicle or he didn’t want to be uploaded to YouTube etc.
g. The sign on the other side, the side that we actually approached from, said Ford Ahead: Frequently Impassable’. And, stop me if I’m wrong, but the only way to be sure a ford is impassable is to try it and find out.
And we could go on but, suffice to say, we live to fight another day. On to the news:
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DELIVEROO SINKS TO 27% DAY ONE DISCOUNT.
Shares in Deliveroo opened badly and got worse.
They had been sliding (in the pre-pre-grey market) when the a) the company stopped saying they would be priced at the top of the range then b) cut the range and then c) announced the IPO would be at 390p, the absolute low point of expectations.
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This looks bad because it is bad. We’ll get onto implications for the wider market later but opening at a c30% discount and staying there all day is definitively not what the doctor ordered. No doubt the advisors will be shedding a tear as they cash their fee cheques, but this is quite serious.
• The BBC says ‘Deliveroo shares have plummeted on its stock market debut after a number of major UK investors expressed concerns about its gig economy worker model.’ You couldn’t get much more fundamental than that.
• Sky says the issue is a ‘flop’. It says it was ‘shunned’ by some large investors. Sky chides ‘the loss-making company said this week that it had received “significant demand” from investors across the globe.’ The demand didn’t seem to do much to stop the share price slide. Sky says the shares have received a ‘dismal reception.’ There is plenty of egg to go around as Sky points out chancellor ‘Sunak had hailed the company as a “true British tech success story” when it confirmed earlier this month that it would float in London.’
• Reuters says the shares have ‘plunged’, AJ Bell jokes that the company should be renamed ‘Flopperoo’, City AM says there are concerns over the company’s economics and there is much more of the same.
• The FT puts the terrible performance down to ‘short sellers, an unfortunate roadshow and terrible timing.’ It says that the Deliveroo IPO was potentially ‘the worst IPO in London’s history’ (this from one of the company’s own bankers). The FT calls the IPO a ‘dramatic failure’. The share price fall was ‘despite frantic efforts by its lead bankers Goldman Sachs and JPMorgan to shore up the stock’ says the FT.
• The FT says that Deliveroo’s advisors were blaming short sellers. But a) short sellers do not short what they believe to be good stocks (at least not as a rule) and b) they do not short at what they think is a reasonable share price and c) they, the bankers, will have been paid millions of pounds, perhaps dozens of millions of pounds, to stop these things from happening.
• The FT fears that this may have damaged the IPO market in general. It could have hurt London in its attempt to keep tech stock listings in the UK. Listing rules apparently meant the company could not IPO below the bottom of the range, 390p, that it had already indicated. Chancellor Rishi Sunak, who hailed Deliveroo as a “true British success story” was forced to deny that he was embarrassed by the stock’s performance. He said ‘gosh, no.’
• We could see the losses (nearly a billion quid since incorporation and counting), the fact that Covid is (hopefully) a rare event, that the company told the CMA little more than a year ago that it was bust, that Uber had been forced to treat its drivers as employees, that there were two classes of shares with Mr Shu having super-shares, that the issue was being spurned by old-school investors, that restaurants may soon be resentful and resurgent and we scratched out heads.
• And we concluded that if it walked like a duck and quacked like a duck, it was probably a duck. It was fully if not over-priced and might struggle to attract support but, in the weird world of IPOs, Gamestop and the like, we still didn’t know what the shares would do. We did not think it was an attractive investment, though we didn’t know what others would do. But now we do. For some reason either:
• A) Investors who paid 390p a few hours ago are immediately selling for a quid less. Or,
• B) Insiders, despite lock-in provisions, are somehow selling. Perhaps small employees – but look at the volume, 88 million shares. Or,
• C) Hedge funds have somehow managed to borrow stock & short the issue – and they are making out like bandits.
• This hasn’t done much to bolster Mr Sunak’s idea that tech stocks should list in London. Or, indeed, list at all.
• The advisors probably did very nicely, thank you but, as Reuters quotes one trader as saying ‘all we’ve seen is one-way traffic, not a single buyer,’ it’s possible that the shares are being mopped up by advisors to the issue because, though there ‘isnt a single buyer’, the shares are clearly going somewhere.
• AJ Bell asks ‘how could a company that was valued at 3 billion (pounds) in November, 5 billion in January, be magically worth 8-9 billion in March – particularly when according to its own statements it was potentially in need of emergency funding last year.’ Yes, how indeed.
• Sky says the crash has ‘massive implications for both investors and for future investment.’ It was the biggest IPO for 10yrs and it has been a stinker.
• The failure may slam shut the door on vendors wishing to exit shareholdings on IPO. Some issues involve no second hand (i.e. directors’) stock, only new shares. Incoming investors have ever reason to be wary when insiders are selling.
• Oxford Nanopore only yesterday said it was planning to list in London rather than on NASDAQ. It’s not clear just how firm a decision that is.
• Some have suggested that Deliveroo’s share marketing campaign was lacklustre. But we would go back to our point above, ducks that look like ducks. Maybe this was simply a loss-making company and the pricing was wrong.
• Probably not making many friends buy yesterday we tweeted:
• Oops. Deliveroo looking to be around 298p, a quid off its issue price.
• Deliveroo bursts from the IPO gate & immediately falls flat on its face. Wonderful chance to invest in future-tech? Or an unseemly rush for the exit by insiders (who know more about the company’s prospects than we do) egged on by greedy advisers? You decide. Oh, you have.
• Deliveroo insiders’ choice. Be told by the market it doesn’t believe your business model and have nothing in your pocket but a few bus tickets and some lint – or be told the above and have five hundred million quid to swan about with? Ah, let me think…
• Deliveroo tanks. But who are the sellers? Lock-in should stop many insiders. So have the hedgies found a way to short it? Or are people who paid 390p a few hours ago selling now at a quid or so lower?? Decidedly not what the doctor ordered.
PROPERTY – VACANCY RATES, REOPENING PLANS ETC.
Property specialists The Local Data Company look at retail and leisure usage across the country. The analyst hosted a webinar for interested parties last week. LDC’s focus may be more on retail but it a) has something to say about leisure and b) conditions for retailers will impact on footfall and rents and therefore impact leisure operators as well.
• The Local Data Company has updated on the state of the market for retail property saying that there was a net loss of 11,319 retail (including leisure) units on the High Street, in shopping centres and on retail parks last year. LDC says this follows on from a net loss of 9,169 units in 2019 and 7,550. In 2016, by contrast, there was a net reduction of only 1,838 units.
• LDC says the vacancy rate at the end of 2020 was 13.7%, up from 12.4% last year. Working out which units were permanently closed and which might possibly reopen after lockdown, could not have been easy. The figure could be an underestimate. The vacancy rate for leisure units was 10.7% (formerly 9.7%) and for retail it was 14.9% (was formerly 13.5%). Leisure has had a tough time of it as far as trading (or non-trading) is concerned, but its services (with the possible exception of the bookies), cannot be as easily replicated online. LDC says that it will publish Q1 vacancy rates shortly.
• Vacancy rates are 13.7% on the High Street, 10.0% on retail parks and 17.1% in shopping centres. This will impact ancillary ‘leisure’ operators such as sandwich shops and coffee shops. The least good place to be, currently, may be an airport. Maybe then a train station but shopping centres do not look to be having an easy time of it either.
• City of London badly hit.
• Geographically, LDC says that vacancy rates are up across the country. The North East was high & is getting higher – now 19.5% and was 17.5%. This is pretty awful. London was 8.6% but has risen to 10.4%. Residential areas have performed better than city centres. The City of London is particularly bad (no commuters, tourists etc.) with vacancy rates rising from 5.2% to 11.5% (albeit over a longer period, from 2015 to 2020. In 2019, it was 8.0% with CVAs already kicking in). The City is a high rent area and has seen more than its fair share of closures due to CVAs etc. Even some essential retail units (LDC says 16.4% of units – shut now but not necessarily permanently) have stayed shut in the City as there are simply fewer people around.
• Closures by unit type.
• Some 994 bookies have closed over the last year. Also, 749 fashion shops and 390 ladies’ wear shops. Around 833 pubs have also shut. There are even fewer charity shops. Male grooming is taking more space with 800 opening. Beauty parlours and nail bars took another 734 sites. There are more independent and fewer multiple casual dining sites, this probably due to CVA activity in the one area and not the other.
Looking at reopening plans
• LDC says that leisure and retail operators did not reopen the moment they were allowed to last year (for pubs it was 4 July.) It says only 70% had reopened (both leisure and retail) by July, with 81% open by August and 83% open by September. We may see something similar the week after next. Non-essential retail is allowed to fully reopen from 12 April and pubs and restaurants are allowed to serve customers outside.
• Some units did not reopen at all – despite the fact that the units owners had not gone out of business. It reports that 3.6% of non-essential retailers hadn’t reopened by the end of the year. This was 4.2% in London and only 0.4% in the East of England. Town centres, as we have heard elsewhere, were worse than villages and suburban areas. This may be in part because people feel more comfortable outside or, at least, not inside in a shopping centre sense.
• LDC estimates that the vacancy rate will increase further this year, perhaps to around 14.5% from its current 13.7%. Q1 data will come soon. It says we have not yet seen the full impact of Covid. The analyst says that the move towards ‘hybrid’ working (some at home, some in the office) could change demand for units permanently. LDC adds that exits to alternative use have dropped between 2019 and 2020. A lot of plans will simply be on hold.
PUBS & RESTAURANTS:
• Travel Weekly says there are calls for a new bank holiday in September to help the domestic tourism industry recover from a “devastatingly hard year”. There has been a 66% slump in visitor numbers to leading attractions in the UK. Visitor numbers to Edinburgh Castle were down by 87% and visits to the Royal Museums Greenwich were some 96% down.
• The BII says ‘the pandemic has caused an unprecedented fall in volumes of cask beer being sold, down over 60% in 2020 versus the previous year. The widespread impact on the nations’ brewers has put many of these unique suppliers to the pub sector at risk of business failure.’ It says ‘over 76% of respondents to the BII’s recent survey, said that Cask Ale was very or extremely important to the offering on their bar, but 43% have also said that they will reopen with less pumps than they had previous to the pandemic.’
• Calls for a VAT cut on beer.
• The BII says ‘critical support of our pubs is required through a long term extension of the VAT cut to 5% which should include alcoholic beverages and not just food and soft drinks. We also recognise the need for a fundamental reform of beer duty, which is essentially an unfair tax on pubs and the wider brewery sector. However, a critical early step ahead of that full reform, would be to place a lower differential rate of duty on draft beer in pubs and bars, to support independent brewers at a time critical to their businesses, and allow pubs to continue offering a full range of cask ales on the bar.’
• Cask Marque says moving an OK cellar up to a 5-star cellar will increase lager yields by 3% and cask yields by 8%. Analysis from Vianet shows that a great cellar can increase sales volume by 5%. Paul Nunny Director of Cask Marque said “We have successful trailed the course modules and now held a first live event. The feedback from the 25 delegates attending was very rewarding and 100% of the delegates said they would recommend the training to their colleagues.’ See more on Cask Marque’s website or find them on 01206 752212
• Sky reports ‘most Britons support the idea of vaccine passports, according to a new poll – with 62% saying they would be fine with using one to get into a pub or restaurant.’ Sir Keir Starmer says it is against the British instinct.
• Langton comment: This is all well and good but what people say and what people do can be two different things. As we tweeted yesterday, gold plated lavatories and robot servants may also be popular but it comes down, ultimately, to practicalities and price. We’re not saying for a moment that this is necessarily a bad idea. Just that it might be hard to put into operation on the ground. UKH says ‘from a consumer position, you will also have issues regarding frontline staff having to enforce the law about this.’
• Working from home:
• PwC is telling staff that they can work from home a couple of days a week and start as early or late as they like, reports the BBC.
• The consumer:
• Households saved a record £238bn last year per the ONS. The Bank’s Andy Haldane says this wall of money will be spent in short order. Others are not so sure, saying that much of it has been saved by relatively wealthy and relatively old consumers, who may simply leave the cash unspent.
Company & other news:
• Fuller, Smith & Turner announced yesterday that it had completed the placing of new ‘A’ Ordinary Shares at 830p to raise around £53.6m. CEO Simon Emeny subscribed to 6,024 of the A ordinary shares.
• Marston’s operations team has launched a nationwide project to help equip pubs with alternative outdoor spaces to safely welcome back guests. Head of Property Andy Kershaw says ‘outdoor seating at our pubs has become more important than ever, especially as we come out of lockdown. We already have some of the best outdoor spaces in UK hospitality and as much as we wanted to expand, we also needed to.’ Kershaw adds ‘so far we have worked on almost 300 pubs. We have worked closely with our contractors and suppliers, as well as our property team to ensure that we are meeting not only government guidelines on outdoor social spaces, but also ensuring that we don’t compromise on pub operations and customer experience.’
• A group of Leeds hospitality outlets are intending to create one, substantial, outdoor drinking area in Merrion Street, covered by a 50 metre canopy. Separately, Leeds brewery North Brewing Co has been awarded Best Brewing Pub Company at the Morning Advertiser’s Publican Awards.
• Vinexpo Paris and Wine Paris 2021 have been cancelled.
• The new minimum wage comes into force today affecting around 2m workers. The minimum pay is up 2.2% to £8.91 per hour.
• Time Out has updated on its share issue saying that ‘the Company has placed a total of 24,320,000 new ordinary shares…at a price of 35 pence per Firm Placing Share with existing institutional and other investors.’ It says it has raised £17.0 million, representing approximately 17.1 per cent. of the Company’s issued share capital immediately prior to the announcement of the Capital Raising. It says ‘together, the Firm Placing and Retail Offer of 28,320,000 New Ordinary Shares at the Issue Price are expected to raise gross proceeds of approximately £9.9 million.’ CEO Julio Bruno says ‘thanks to the support of our shareholders and new investors, this successful fundraise will allow Time Out to emerge from this period of disruption in a stronger position. We now look forward to once again opening the doors of our existing Time Out Markets and to opening new ones in great cities around the
HOTELS & LEISURE TRAVEL:
• ABTA research has suggested that the Covid-19 pandemic has made it more likely that holidaymakers will book with a travel professional and book a package holiday than organise a DIY holiday. The main reason cited was the importance of feeling protected and reassured. ABTA says ‘travel professionals and package holidays have an important role to play in helping people feel reassured and confident to book and travel this year.’
• Cruise capacity. MSC Cruises has told Travel Weekly there will not be an overcapacity problem in UK waters this summer. This despite Disney and others announcing UK cruises, RCL yesterday saying it was bringing Anthem of the Seas back to the UK and MSC itself saying that it will offer UK cruises.
• Malta is reported set to reopen to vaccinated British travellers and tourists from 1 June. It is far from clear whether or not Brits will be allowed to travel from that date.
• Spain is to require people to wear a face covering at all times when they are outside.
• HVS Europe has said that hotel valuations have fallen in the past 12 months, although not as steeply as some had initially anticipated. It says hotel values declined by between 5% and 15% compared with the previous year. HVS says ‘the impact of the pandemic on cash flows and profits has been dramatic, although government support and payroll subsidies helped to soften the blow. All tiers of hotel have been affected, but particularly the upscale and luxury properties as they tend to be more exposed to group and convention demand as well as international visitors.’
• William Hill has updated on the Caesars bid saying ‘the Scheme Court Hearing seeking an Order of the Court to sanction the Scheme was held today and a judgment is awaited.’ It says ‘an updated timetable of principal events for completion of the Acquisition and the Scheme will be announced in due course.’
• Sportech has reported full year numbers to end-December saying that revenue from continuing operations was £20.0m, down from £33.6m last year. It is reporting a loss from continuing operations before tax of £10.3m against a loss last year of £15.5m. CEO Richard McGuire says ‘COVID-19 created unprecedented challenging conditions for our businesses and the industries we serve.’ He says ‘despite the challenging global environment, our performance in 2020 was better than initially forecast in March 2020.’ Sportech adds ‘we continue to evaluate further investment prospects within the Connecticut Venues business to support potential expanded gaming opportunities. Management and personnel in our US headquarters in Connecticut remain fully motivated to be part of that state’s expanded gaming solution.’ The CEO concludes ‘I am encouraged by the resilience shown by the business in facing the
• Paul Simon has sold his song catalogue to Sony Music Publishing.
• The CEO of Bet365, Denise Coates, has reportedly earned a salary of £421m in the year ending 29 March. She also earned £48m in dividends.
• The Association of Leading Visitor Attractions is looking for the silver lining when it says that this could be a “phenomenal” summer of culture in the UK without crowds, queues or inbound tourists. Domestic tourists could have many venues to themselves. The ALVA’s Bernard Donoghue says this will be ‘culture without crowds. You will be up close and personal with animals or art in a way you would never have experienced before and possibly won’t in the future. If you were ever going to have a holiday in Britain, this is the time to do it.’ We may not, for all that, have much choice.
FINANCE & MARKETS:
• The ONS has reported that GDP fell by 9.8% last year with rises in Q3 and Q4 of 16.9 per cent and 1.3 per cent partially offsetting the Q2 drop. The OECD confirms that the UK economy registered the heaviest fall of all countries in the Organisation for Economic Co-operation and Development except for Argentina and Spain last year.
• The Nationwide reports that UK annual house price growth slowed in March with prices down by 0.2% in March versus February. Over the last twelve months, the average house price was 5.7% higher. The Nationwide says ‘given that the wider economy and the labour market has performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget.’
• Sterling higher at $1.3764 and €1.1747. Oil down at $63.14. UK 10yr gilt yield up 3bps at 0.85%. World markets mixed yesterday with London set to open up around 13pts.
RETAIL WITH NICK BUBB:
• Next: The Next finals today are accompanied by a very long and detailed statement and we will wait until the presentation to analysts at 8.45am (followed by a 10am conf call) to plough through all that, but the key point us that the fall in profits from £729m to £342m is in line with the guidance back in January, given the impact of the lockdown store closures. However, CEO Simon Wolfson says that he expects the Online sales shift to be lasting and notes that “in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones”. And after a stronger than expected start to Online trading in the new year, with sales more than 60% up over the last 8 weeks on 2 years ago, Next has raised its profit guidance from £670m to £700m. The shares have had a good run though and whether that is enough to sustain the share price today remains to be seen,
• BDO High Street Sales Tracker: Despite the continuing impact of the lockdown on “non-essential” stores, today’s BDO High Street Sales Tracker for medium-sized Non-Food chains should have painted a strong picture for w/e March 28th, as the beginning of the pandemic lockdown a year ago meant that the comps were very soft…And the outcome was strong, but our usual stricture, that it should be remembered that the BDO index is just an unweighted average of percentage changes in the sales of their reporting retailers and shouldn’t be taken too literally, needs to be reinforced, as the outcome was very silly! BDO Fashion LFL sales were actually up by c130% (with Store Fashion sales said to be up 724%, laughably)…and Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as the Fashion retailers) were up by c132% (up c1490% in Store sales and up 155% in Online
• Upcoming News: After the Easter break, there are a few things going on next week, beginning with the Homeserve pre-close on Tuesday, followed by the monthly Nielsen grocery sales figures on Wednesday and the Dunelm Q3 and the ASOS interims on Thursday. In the week after, the big event will be the non-essential shops re-opening in England on Monday April 12th, whilst Tuesday April 13th brings the BRC-KPMG Retail Sales for March, the JD Sports finals, the Just Eat Q1 and the French Connection finals. The Tesco finals are on Wednesday April 14th, followed by the THG finals/Q1 update and the Naked Wines finals on Thursday April 15th
• NB It may well be April Fool’s Day, but “The Daily Retailer” will definitely be taking a short break after Easter and we will be back on Monday April 12th.