Whitbread, current trading, home working, beer, loans, Entain etc.:

A DAY IN THE LIFE:

Our essay crisis (self-imposed by us ignoring the requirement to produce a quarterly VAT return and our annual accounts in the same week) was exacerbated yesterday by our overriding need to watch two robins in the garden fighting over the possession of a puddle.

The one claimed ownership, ruffled up its feathers and splashed around for all the world as though it owned the place, whilst the other looked on jealously and occasionally tore the hell out of a piece of grass or tossed a twig aggressively in the air.

Which seemed to cheer up the puddle-owner immensely. As he continued cavorting around before emptying his bowels in the water and flying off squawking after which it was necessary for us to research avian violence online before breaking for a coffee and then a quiet sit down. We’ll try again today. On to the news:

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WHITBREAD – FULL YEAR NUMBERS:

Following the release of its FY numbers yesterday morning, Whitbread hosted a webinar for analysts and our comments thereon are set out below.

The numbers (see also earlier email):

• Occupancy slipped from the normal 75% plus to 40% in March last year, a negligible 1-2% in April and May, and a Covid high of 58% in September. Occupancy then fell to 35% in November (Lockdown II) and 23% in January (Lockdown III).

• The group benefited from £154m of furlough receipts. The company has impaired goodwill and other valuations by £348m.

• CFO Nicholas Cadbury says the group should get back to pre-Covid margins in FY24 (the company is a February year-end). The co is working on a range of potential outcomes and they may not fit neatly into one particular year or another.

Germany:

• Whitbread says it moved from 6 hotels at the beginning of the year under review to some 30+ now with another 42 in the pipeline

• The German market is challenging at present. The group has ‘materially accelerated’ its pace of growth. The recovery in Germany may ‘be about 2mths behind the UK’. The independent competitor set will be ‘constrained’.

o Occupancy in Germany is 10% to 15%.

• Group has ‘line of sight’ to 60k rooms in Germany.

• Opportunity for M&A? There have been and will be opportunities. Government is propping up some operators at present. No reason why the group should not be no1 in Germany.

Reopening and medium term trading:

• Some 90% plus of the group’s hotels are open in the UK. Occupancy in the UK is around 30%. The ‘vast majority’ will open from 17 May. The group expects a strong leisure staycation market.

• ‘Trade’ business demand has been relatively stable, but ‘office-based’ business demand is not yet materially present. The co does not believe this will happen ‘until after the summer’ – and it may have ‘been structurally altered’. Outer London is trading more in line with the UK’s provinces

• Group believes it should be back at pre-Covid levels by 2023. The UK to UK market will be stronger than that driven by overseas visitors.

• Any problems re-hiring staff? WTB is c40% staff turnover in normal times. Attrition rates have fallen during furlough.

• For more comment, see premium email.

PUBS & RESTAURANTS:

Current trading:

• S4 Labour has weighed in saying that it’s data suggests that ‘hospitality like-for-likes are down 10.5%, with 70% of sites trading at similar or above 2019 levels.’ This is a) a good performance but b) does not account for the units that are still closed and who may be down by as much as 100% on a LfL basis depending on whether or not they have any delivery or click and collect business. S4L says ‘there is little change in the number of sites that were able to open in the second week of re-opening, with 45% of sites still not trading, and those that were trading, saw like-for-likes 10.5% down compared to the same week in 2019.’ S4L says ‘despite the decline, the distribution of sites trading at similar or above levels to the same week in 2019, has jumped from 45% in re-opening week, to 70% of sites last week. The figures should be viewed in the context comparing pre-pandemic trading
conditions against significantly reduced capacity in most sites currently.’

• Langton comment: See premium email

Working from home or homing from work:

• The City of London is biting the bullet and is planning to convert offices left vacant after the pandemic into hundreds of new homes as part of a recovery strategy. The BBC reports ‘the City of London Corporation, which looks after the Square Mile, is aiming for at least 1,500 new homes by 2030.’ Admittedly, that’s a modest number and a relatively long timescale.

• Langton comment: See premium email

Other Covid news:

• The Daily Mail reports that pubs are facing a shortage in draught beer after strong demand in pub beer gardens and the like. CAMRA says ‘the beer shortage issues that are being faced my some publicans across the UK is a serious problem that is affecting their ability to trade efficiently and turn a profit. Since reopening, pubs have faced an increase in demand from customers as many people flocked to pubs across the UK, so it is a real shame that some pubs are unable to stock some of their best selling products.’

• Other Covid news see premium email:

New loans & rent arrears on the balance sheet:

• The ICAEW reports ‘small businesses that have accepted government support in the form of CBILS and Bounce Back Loans may find themselves at a crossroads as they seek a way through distress into recovery.’ It quotes licensed insolvency practitioner Mazars as saying that many operators have survived due to government help. It says some now owe money to banks, landlords, suppliers, the HMRC (VAT and PAYE) and to the government via CBILS and bounce-back loans.

• Langton comment: See premium email

Company & other news:

• Starbucks has reported Q2 Fiscal 2021 Results saying that LfL sales grew by 9% in the US and by 91% in China where the group is up against lockdown comps. CEO Kevin Johnson says ‘I am very pleased with our progress to date in fiscal 2021, as our second quarter results demonstrated impressive momentum in the business with full sales recovery in the U.S. Our strong results validate our ability to adapt to changes in our environment and the needs of our customers.’ He says ‘we have positioned Starbucks for the inevitable great human reconnection that we see unfolding in the U.S. and will propagate in every market around the world.’

• Langton comment: See premium email.

• Deliveroo has appointed Karen Jones to its board. It reports that she will become Chair of the Remuneration Committee and join the Audit committee.

• Nichols updates on trading saying that it has seen ‘strong growth achieved by the Vimto brand in the UK and a solid start to the year for the Group’s International business have largely offset significant declines in the UK Out of Home route to market. As a result, total Group revenue in the period decreased by only 5.9% to £30.7m against the prior year, despite the impact of the UK lockdown.’

• Langton comment: See premium email.

• Deliveroo yesterday announced a two year delivery partnership following a successful trial ‘which has helped to attract new and younger customers.’ Deliveroo says ‘it will expand its Deliveroo service to 110 new shops across the country with up to 400 new Waitrose shop roles created by the expansion plan.’ This will increase the number of shops to 150 in total by the end of the summer. Deliveroo says ‘as we expand further across the country, this partnership will mean more choice and selection for our customers.’ Terms are not given. Waitrose could add 400 jobs.

• DoorDash in the Us is offering a three-tiered pricing structure for restaurant operators, with the lowest commission fees set at 15% and the highest set at 30% reports NRN.

• Waitrose has reported that the sales of picnic food have grown

• Asahi reports its Super Dry is the Worldwide Partner of Rugby for the World Cup in 2023 in France

HOTELS & LEISURE TRAVEL:

• EasyJet and easyJet holidays have flexible policies regarding flight changes in order to boost consumer confidence in booking trips

• Travel Weekly quotes private equity firm ECI Partners as saying that the value of domestic holiday companies has risen as a result of increased staycation numbers.

• The US and the EU are to recognise each-others’ vaccine passes. TTG reports talks have yet to commence between the EU and the UK.

• TUI boss Fritz Joussen has said that vaccination success is key to growth but that talk of quarantines is toxic.

• Ryanair says domestic holidays will be dumped once Brits are permitted to travel overseas. It’s a view.

• Cyprus and Malta and other destinations offering quarantine free travel to vaccinated Brits. Presumably vaccinated anybody.

• Insurer Battleface has looked into what customers would pay for a Covid test. Only 4% would pay £75 plus. The average price people would be willing to pay was £22. This is an aspiration as tests currently cost 5x that or more.

• BA is hoping wealthy tourists will fill seats left empty by business travellers.

• The CAA has said Heathrow cannot put its charges up by 10%. This is the subject for further discussion as operators vie with each other to direct any wall of money that they can identify in their direction.

• Ipsos Mori has found that almost two thirds of business travel managers believe that ‘travel returning to pre-pandemic levels is not desirable’.

• Lyft has sold its driverless vehicle unit to Toyota

OTHER LEISURE:

• 888 Holdings has updated on Q1 saying that revenue growth of 56% was ‘driven by strong growth in regulated markets’. It says total revenue was $272.5m. CEO Itai Pazner says ‘the strong momentum in 2020 has continued into the first quarter of 2021, with a new all-time-high for FTDs and revenues, although year-on-year trends were partly inflated by the disruption to sporting events at the end of the prior year period, and increased demand for digital entertainment during this period across our main markets.’ He concludes ‘we remain very pleased with the strong momentum in the business and the continued positive customer reaction to our suite of new products and innovations. As a result, and underpinned by the Group’s strengths as a product-centric, responsible, and diversified operator, the Board believes that 888 has an outstanding platform to deliver continued strategic progress during
2021 and beyond.’

• Entain yesterday reported that it has made a ‘revised offer of A$3.5 billion to the Board of Tabcorp to acquire its Wagering and Media business.’ It says it ‘believes that the Revised Proposal is compelling both in terms of the value it represents for Tabcorp shareholders in cash, and certainty of deliverability.’ It says a further announcement will be made as appropriate.

FINANCE & MARKETS:

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RETAIL WITH NICK BUBB:

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TRADING STATEMENTS & EVENTS:

Upcoming results are set out below:

• 27 Apr 21 Whitbread FY numbers

• 27 Apr 21 Starbucks Q1 numbers

• 28 Apr 21 Carlsberg Q1 numbers

• 28 Apr 21 YUM Brands Q1 results

• 28 Apr 21 Sainsbury FY numbers

• 28 Apr 21 888 Q1 numbres

• 29 Apr 21 Molson Coors Q1 numbers

• 29 Apr 21 Royal Caribbean Q1 update

• 29 Apr 21 Texas Roadhouse Q1 numbers

• 29 Apr 21 WH Smith H1 numbers

• 30 Apr 21 Safestay General Meeting

• 4 May 21 Campari Q1 numbers

• 5 May 21 Ten Entertainment AGM

• 6 May 21 Shake Shack 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)

• 10 May 21 Marriott Q1 numbers

• 12 May 21 Compass Group H1 numbers

• 12 May 21 Stock Spirits H1 numbers

• 12 May 21 TUI H1 numbers

• 12 May 21 Just Eat AGM

• 14 May 21 Tasty AGM

• 18 May 21 Britvic H1 numbers

• 19 May 21 Marston’s H1 numbers

• 20 May 21 Fevertree AGM

• 20 May 21 888 AGM

• 25 May 21 Restaurant Group AGM

• 25 May 21 Shaftesbury H1 numbers

• 26 May 21 C&C FY numbers

• 3 Jun 21 New River full year numbers

• 8 Jun 21 DP Eurasia AGM

• 15 Jun 21 Vianet full year numbers

• 24 Jun 21 Bank of England MPC meeting

• 27 Jul 21 Campari H1 numbers

• 3 Aug 21 Domino’s Pizza 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

• 19 Aug 21 Rank FY numbers

• 22 Oct 21 Intercontinental Hotels Q3 numbers

• 26 Oct 21 Campari Q3 numbers

• 8 Dec 21 TUI FY numbers

LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line.