Langton Capital – 2021-04-23 – Co accounts, R number, habits, Deliveroo, Uber, Pernod, Heineken etc.:

April 23 2021

Co accounts, R number, habits, Deliveroo, Uber, Pernod, Heineken etc.:

A DAY IN THE LIFE:

Well, I’m back in York and the frost’s killed my runner beans.

I mean, fifteen degrees and sunny during the day and minus three at night, what’s all that about? But more fool me for putting them out but when the packet said that in the north of England they should only be planted out in late-May. Of course, I thought ‘nah, I won’t do that, I’ll do this’ and, as is so often the case when overconfidence collides with ignorance, death and destruction has been the result.

Still, this is the death and destruction of a few beans we’re talking about. It’s not as though I was organising the response to Covid or the economic future of the country or whatever. That would have been harder to live down but, as we’ve a sunny weekend coming up, that’s quite enough of that. On to the news:

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PRIVATE COMPANY ACCOUNTS:

New World Trading Co, Pie Minister, Market Town Taverns. See premium email.

FULHAM SHORE – TRADING UPDATE & NEW SITE PLANS…

The Fulham Shore has updated on trading post reopening (outdoors only) our comments are set out below:

Re trading:

• Fulham Shore says that it has 70 of its 72 units open.

• Some are open for outside dining and others for delivery & collection (and some for both). The Company says ‘currently, 37 out of the 52 operational Franco Manca pizzeria and 16 out of the 18 operational The Real Greek restaurants have outside tables.’

• Fulham Shore says that ‘group sales in the week ended Sunday 18 April 2021 were very encouraging, being not only ahead of the previous week, but also ahead of the same week two years ago in April 2019 (as April 2020 was in the first lockdown, it is not comparable).’

• The company says ‘these trading results were achieved without any inside seating and our colleagues in the restaurants deserve great credit as demand has far exceeded the number of seats available at peak times.’

Ahead of 2019:

• Fulham Shore is ahead of 2019. Open Table has elsewhere today reported that reservations and diner numbers are still well below pre-covid levels.

• Speaking for the wider industry, it says ‘this encouraging trend continued throughout the first week of opening, with UK wide figures showing that on average, seated diner numbers were only down by 38% over the first seven days compared to the same period in 2019.’

• Fulham Shore is, as it has said, up on 2019

Re site opening programme:

• FUL says that ‘encouraged by these figures, the Group continues to identify potential new locations for our two businesses. In the last two weeks, we have inspected sites in many towns and cities across the UK including London, York, Durham, Newcastle, Edinburgh, Glasgow, Cardiff, Liverpool and Manchester, for either new or additional sites.’

• The company says ‘many of the restaurant locations we are seeing are available as a result of insolvency events and, as a result, are typically pre-existing fitted units. Sites of this nature have a lower opening cost to the Group compared to shell units.’

• It says ‘we therefore expect a reduction in the Group’s average capital expenditure per new site in the short term, and that this should improve our return on capital.’

• FUL adds ‘the Group continues to be presented with a number of excellent potential retail locations, almost on a daily basis. The Board hopes that Fulham Shore can contribute towards the revival of town centres with new restaurant openings as the COVID-19 restrictions ease.’

• In the very short term, the company says ‘we are currently in the process of building two new Franco Manca pizzeria: on High Holborn in London and on Mitchell Street in the Merchant City, Glasgow, with opening dates scheduled for June 2021.’

• FUL concludes ‘the Board believes that the next few months may be the most exciting in the Group’s short history and looks forward to opening our restaurants fully once permitted and capitalising on the property opportunities that are being presented to us.’

Langton View:

• The fact that Fulham Shore’s sales are ahead of the same period two years ago with maybe only 30% of its space open (and delivery) is very positive.

• And remarkable but, as we have commented on a number of occasions, there will be winners within what is a currently-troubled restaurant sector.

• The sector had been suffering from overcapacity (as witnessed by the CVAs in 2018) before Covid struck but the pandemic has put a number of companies out of business

• Others will slim down their estates and moderate their new opening programme going forward whilst some others, Fulham Shore amongst them, will be a beneficiary

• Sites are now more available and cheaper and the group’s track record of providing what customers want, where they want it and at a price they are prepared to pay, is paying off

• Provenance, authenticity, value for money etc. will remain important factors going forward

• The company is a winner in its field & now has now decided to step up its opening programme at a time when sites are more widely available and competitors are unable to step up to the plate

• The group has the flexibility to reduce debt but it has decided that the time is right to increase outlet numbers. This is a sign of confidence.

• Over the longer term, we expect FUL to prosper. It is selling an attractive product at an attractive price. The company has suggested in the past that both its Franco Manca and its Real Greek chains could triple in size and we believe that this remains a reasonable ambition over the medium term.

PUBS & RESTAURANTS:

R number:

• The NIESR has produced its weekly estimate of the R number in the England, saying that they believe it is in the range 0.8 to 0.9 in the period up to 20 April. The NIESR says that the number in Northern Ireland is higher, at around 1.025 and in Wales it is 0.875. In Scotland, it is in the range 0.8 to 0.9. The NIESR says ‘based on our model, by 17th May when step 3 re-opening is due to restart, we expect the trend value of daily cases to be around 600; admissions to be below 50, and deaths to be well below 25.’

• Langton comment. This is unchanged and in line with expectations and also in line with the continued opening up of the economy. No change to the belief that indoor hospitality will be allowed to reopen on 17 May.

Covid inspired changes:

• Alix Partners suggests that Covid-19 anxieties are driving significant changes in consumer behaviour. It says ‘consumers across the board have had to learn new behaviours and adopt new habits in their everyday lives.’ It says ‘while many will go back to spending through familiar pre-pandemic mechanisms, others will not abandon behaviours learned during this period anytime soon.’

• Alix Partners says ‘people have been riddled with anxieties about finances and physical as well as mental health over the last year. Our study has found that consumers who have felt the most vulnerable are more likely to exhibit permanently changed habits. Significantly, the survey found that these consumers span all age groups, genders, income levels, and locations.’ Just how this will impact behaviour going forward is one of the most important questions facing the hospitality industry as it emerges from the pandemic.