Fuller’s webinar, football, labour, inflation, amber list concessions etc.:

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A DAY IN THE LIFE:

In a permanent reminder that you should never give in to the whims of 12yr olds – because they won’t be 12 forever and whatever you do then will rebound on you later – we have a bearded dragon.

I say we because daughter is now only vaguely aware that it lives somewhere in the house and, I fear, it may have gone senile.

This because all it does is stare at me with its mouth open. True, this has been a feature of its existence since it was little more than an egg but now it looks as though it really means it, there just isn’t anything behind its eyes.

And yes, I’m sure, if I stopped moving it would pop over to see if any bit of me was worth eating but, in the meantime, it just does nothing.

Anyway, that’s not an option for Langton this morning as we have things to do. On to the news:

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FULLER, SMITH & TURNER – FY NUMBERS:

Following the release of its FY numbers yesterday, Fuller’s hosted a webinar for analysts and our comments thereon are set out below:

The group says Central London units ‘still less than 50% of 2019 levels’ but maintains that they are ‘building back strongly…’

The numbers & trading:

• The group reopened its entire estate on 17 May (including airports and Central London). The ‘heart of London’ units are underperforming the whole estate

• Group says it is ‘geographically balanced’ and that the drop in Central London sales is ‘temporary’

• 45% of the estate (175 units) is tenanted. They are predominantly suburban and rural (and provide something of a balance vs the city-centre managed units)

• Slide 14 gives the Covid impact. Closure cost 71% of possible sales periods. Cash burn when closed was £4-5m per month. Costs when open are a much higher c£25m per month.

• When open, managed pubs’ LfL were 64.3% of 2019. Tenanted pubs have a much lower structural cost base. This division reported a trading profit of £1.2m in the year.

• Rent roll payable (reduced by concessions from landlords) is £6m to £7m. Normally, ‘nearer £10m’.

Balance sheet, capex, debt etc.:

• The period(s) of closure allowed the group to ‘revisit its capital projects’ at a time that would not result in periods of closure. There may be some projects short term but more could happen after the summer and Christmas

• The company will further invest in outdoor areas. This should show (an unspecified) ‘high return on capital’.

• FSTA raised £10.8m from disposals during the year. Most of the churn has now happened.

• Debt at year end (March 21) was £218m. At the end of June, largely due to the £52m equity placing in April (but also due to profitable trading), it had fallen to £151m.

• There should be (about now) and unwind of the working capital outflow caused by closure

Current Trading, outlook, dividend & other:

• There is no proposal to pay a final dividend. This will be ‘kept under close review’.

• Short term priorities include a focus on 19 July, the refinancing of the group’s bank facilities. The group will also consider acquisitions.

• Any impact on margins of your operational changes? Around 50% of orders are via app. This will remain high.

• There are supply chain issues at present (including staff as a ‘supply’). Self-isolation is an industry-wide problem.

• Recruitment challenges? Less of an issue than for some others. Says ‘we have some short term challenges [NHS app] but we’re managing those well.’

• Pricing and costs. Input prices – seen ‘a small amount of cost inflation’. Prices ‘were put up around reopening’. Customers have accepted this. There is a service charge added on order & pay in some Cotswold & New Forest pubs

• How many rival pubs could close? No real comment. Might you buy selected pubs? Co is ‘in a perfect position to do so’ should units become available. The main focus will be on the existing business

Company comment:

• CEO Simon Emeny says the company has a large number of predominantly freehold, ‘timeless and iconic, sites’.

• Although viewed as a London pubco by many, CEO Simon Emeny says that the group has an ‘excellent geographic balance’

• The ‘pre-visit experience’ is now a part of the journey – FSTA is investing in search functions, websites, online information etc.

• Co is 44% inside M25. How does trading vary? Co classes ‘urban’ as City & West End. Rural is exceeding 2019, suburban demand has been good (but capacity is restricted).

• The urban sites are the highest volume (normally). These are all now open and (in total) are in cash profit. They will ‘take longer to mature’. They are ‘showing very strong progress…over the last 2-3wks’

• The urban units are ‘still more than 50% below 2019 numbers’.

Langton Comment:

• Fuller’s has some cracking pubs.

• Many are in ‘the right place’ but, it has to be said, just at the moment, some are not.

• As we said earlier, Fuller’s has a wonderful, largely freehold, estate. It has historically traded at a premium to its peers and London has always been a positive for Fuller’s but, with trading in the Capital still somewhat uncertain, would be buyers may decide to await further news before committing to the shares.

PUBS & RESTAURANTS:

Trading:

• The BBPA predicts England fans will drink over 7 million pints on Sunday as England plays in the Euros final against Italy. However, the trade association warned that pubs are set to lose out on nearly £9 million in beer sales alone during the final due to trading restrictions, which will mean they sell 2.4m fewer pints during the match than if they had already been removed.

• Emma McClarkin, CEO of the BBPA, said ‘Only when the restrictions are removed can our pubs recover, but to do so they need Government investment to build back better…We are calling for reform of VAT, beer duty and business rates on pubs and breweries which will help build stronger communities, jobs, investments’.

Labour and supply issues:

• The BBPA has warned that a temporary extension of working hours for hauliers is not the answer to a shortage of staff being experienced in the logistics sector. It also warned of continuing concerns in the beer and pub sector over NHS Test & Trace ‘pings’ forcing staff to self-isolate, resulting in pubs reducing their opening hours or even temporarily closing.

• The Press & various trade journals comment further on staff shortages. The Guardian says chefs, waiting staff, hotel porters, cleaners and front of house staff are all in short supply. The Resolution Foundation says Covid and the furlough scheme had an effect like a fire alarm going off. Bottlenecks at the lifts (and trips to get a coffee etc) mean that buildings take much longer to fill up than they did to empty. This is a sensible analogy but, if you substitute ‘returned to Poland permanently’ for ‘queue at the lifts’, you can make the situation more secular than temporary. The end of furlough should remove some confusion as to just who is available to work and who is not.

• Further comment: In the US, Papa John’s International has announced it will ‘invest’ $2.5 million in new hiring, referral, and appreciation bonuses for employees at company-owned restaurants this year. Nation’s Restaurant News reports ‘in the wake of continued industry-wide labour challenges, Papa John’s is certainly not the only chain to offer hiring and retention bonuses to incentivize new and pre-existing employees. Darden Restaurants announced in March that they would be offering $17 million in bonuses and raising their hourly pay floor.’

• Wages, labour & food costs. US journal Restaurant Dive reports that labour shortages and food costs are now restaurateurs main concerns. It says ‘nearly eight out of 10 operators are confident in their ability to survive beyond the pandemic, according to research from Quadrant Strategies’ but says that ‘more than 75% of restaurant operators are concerned about rising food costs and worker shortages. Increased cost of goods is the top concern for restaurant operators (43%), followed by employee shortages (35%), reduced demand due to COVID-19 (29%), employee wages/costs (24%) and rising minimum wage (23%).’

• Meanwhile, the ONS has reported that the number of workers on furlough is now at its lowest level since the scheme began. It says that 1.3m people were still on furlough in the second half of May. This is around 5% of the workforce. Some 6% of the workforce was furloughed in H1 May and around 33% was on furlough early last summer. Fears of job losses when the scheme end may be abating to be replaced, perhaps, by fears that simply not enough staff will be available when things really get going.

Inflation:

• The May CGA Prestige Foodservice Price Index suggest that food and drink prices rose by 2.5% on the month.

• Further comment: The Index suggests that prices rose in seven of 10 categories with prices hitting their highest overall point since the measure began in January 2015. The Index blames restocking and challenges in production and distribution as causal factors. Shortages of labour across the supply chain are leading to price pressures. Pay levels have been raised in some quarters and these increases are being passed on to customers (i.e. pubs and restaurants).

• The CGA Prestige survey suggests that there are problems at ports and categories that have been particularly affected include fruit, with prices up 7.0% month-on-month and vegetables (up 3.2%). Fruit and veg pickers have been hard to find and some stock is not making it to market. Prestige says ‘the reopening of hospitality on 17 May proved much more challenging than many suppliers and operators anticipated.’ It adds ‘some suppliers have even made decisions to suppress demand by raising minimum order levels and de-selecting some customers.’

• CGA adds ‘while it has been great to see hospitality venues opening their doors again, rising food and labour costs and Covid restrictions have created tough market conditions.’ It adds ‘supply challenges will hopefully start to ease as we settle into a new normal of trading. But these figures are another reminder that the sector’s crisis is far from over, and businesses need and deserve sustained financial support from government in the months ahead.’

Other Covid news:

• The Scottish Government is advising operators who took advantage of a ‘relaxation’ in planning and building rules for outdoor areas to apply for consent as the ‘grace period’ ends in September.

Company & other news:

• Inception Group, an 11-strong bar chain, says recovery for its central London sites will ‘take months if not years to get back to where they were’ as tourism would take a while to return and offices could be slow to reach full occupancy.

• Ready Burger has raised £2m in its first funding round on Crowdcube, with ‘ambitious’ plans to roll out restaurants nationally and internationally. The Vegan burger restaurant currently has one site in London.

• Surrey-based Hogs Back Brewery will honour its pre-tournament pledge to give away pints of their Euros beer Three Hogs as a result of the England team reaching the final. CEO Rupert Thompson says ‘we are delighted to find that we underestimated the England side’s skill, determination and, yesterday at least, luck. Every free pint will be served across our bar with a broad smile.’

• Evolution. Sainsbury’s has decided to stop selling CDs and DVDs. It says that customers are going for music and films online.

PARTIAL TRAVEL FREEDOMS RESTORED:

• Transport secretary Grant Shapps has confirmed that fully-vaccinated  travellers will no longer have to self-isolate on arrival into England from amber list countries from July 19. However, they  will still be required to take a pre-departure test three days before they travel and a PCR test on day two of their arrival.

• CEO of Abta, Mark Tanzer, strongly welcomed the announcement from Grant Shapps, saying ‘Having to quarantine when returning from an amber list country has been a very significant barrier to travel for many people…We know there is significant pent-up demand to travel abroad – to see family and friends, make business connections and have a well-deserved holiday.’

• However, CEO of UKinbound, Joss Croft, said the announcement ‘does nothing for the UK’s inbound visitor economy. By keeping Britain closed, we are losing £70m a day in exports, businesses are on the brink, our cities remain empty and viable businesses are prevented from even beginning their recovery.’

• John Lundgren, CEO of EasyJet, welcomed the announcement, but caveated it by saying ‘Expensive testing could sadly make travel out of reach for some’ and that he did not want to see ‘a return to flying being a preserve of the rich’.

• Jet2.com and Jet2holidays will restart flights and holidays to 40 green and amber list destinations from 19 July. On the Beach, on the other hand, will not sell holidays until 1 September. On the Beach says it is celebrating the relaxation with caution ‘since we need to bear in mind that it is not just the UK government that can decide on how easy it is to go on holiday – British holidaymakers’ plans are also reliant on the policies in our holiday destinations too, and extensive testing requirements remain in place for customers travelling in both directions.’

• Other airlines have also reported a surge in bookings after the announcement. EasyJet said flight bookings from to amber list destinations were up 400% vs last week. British Airways reported a 96% increase in website views. Air Partner also reported a ‘a surge in enquiries’.

• The Department for Transport is to raise capacity limits to 50% for cruise ships operating domestic cruises with fully vaccinated passengers on board.

OTHER HOTELS & LEISURE TRAVEL NEWS:

• Iata reports total demand for air travel in May 2021 was down 62.7% compared to May 2019 and there was a 65.2% decline recorded in April 2021 versus April 2019. The body said the recovery of international airline travel continues to be ‘stymied by extensive government travel restrictions’.

• Research commissioned by travel insurance provider Battleface shows around 40% of Britons are planning to splash cash saved up during the Covid-19 pandemic on holidays. More than a third (38%) of adults reported that their next international holiday was planned for 2022, with 28% looking at 2023.

• Sheffield-based Kanoo Travel has ceased trading, with the company previously reporting  losses of £421,000 on revenues of £5.3 million in 2019. 

• Manchester Airport Group reports an 89.4% fall in passenger numbers last year, down to 6.3 million in the year to 31 March compared to 59.6m in the prior period. The company suffered a loss of £170.1m against a profit of £377.6m a year earlier.

• Chestnut Farm Holiday Park near York predicts a summer staycation boom with its collection of new residential lodges.

• Embrace Travel Group has taken over Prestige Holidays for an undisclosed sum.

OTHER LEISURE:

• Entertain is doubling its investment in its in-house games studios in order to provide customers with new and exclusive products and experiences. Headcount will double to around 300 people across Entain’s three in-house studios in the UK, Italy, and India within a year.

FINANCE & MARKETS:

• The Chancellor of the Exchequer, Rishi Sunak, has suggested that an 8% rise in the state pension next year might not be fair. He told the BBC a decision on pensions would be “based on fairness for pensioners and for taxpayers”. The triple lock – at whatever the cost – has been an election commitment for the Tory Party for the last several elections.

• Bloomberg reports on a number of industry surveys that suggest wage inflation is picking up in the U.K. after tighter migration rules and the pandemic reduced the pool of foreign workers.

• Sterling down at £1.3775 and €1.1639. Oil higher at $74.32. UK 10yr gilt yield unchanged at 0.6%. World markets weaker yesterday on fears about the sustainability of the global economic recovery, but London set to open up around 18pts as at 7am.

RETAIL WITH NICK BUBB:

• Nick is taking a well-earned break. He’s back on Monday.