Langton Capital – 2021-07-16 – PREMIUM – Freedom Day, Recovery Monitor, footfall, masks, M&B, staycations etc.:
Freedom Day, Recovery Monitor, footfall, masks, M&B, staycations etc.:
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A DAY IN THE LIFE:
With the weather turning better, it’s a tempting thought, indeed it’s an almost irresistible urge, to take your work outside and get a bit of it done al fresco.
Which is what we’ve found ourselves doing recently.
But I’d forgotten just what a task it can be because, first, you have to clean the bird poo and whatever gunk drips off trees from your chair and table & then bring everything outside.
And it’s at this point that you find the battery’s nearly flat on your laptop, that the wires are never long enough, that the extension lead is in the shed and that the key to said outhouse snapped off in the lock a few days ago.
With the door locked rather than unlocked, of course but, without too much violence, you can effect entry, boot up your laptop, bring out your sunhat, sunglasses, bottle of water, pens, pencils, papers etc then locate the parasol, attend to the spiders, bird poo and gunk that are attached thereto and get the show on the road.
At which point it will either start to rain or the wind will pick up and scatter your papers far and wide, a larger than equitable number of which will end up in the pond.
Anyway, rather sun than no sun. on to the news:
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PUBS & RESTAURANTS:
19 July reopening forecasts:
• CGA & Alix Partners have suggested that ‘nearly 12,000 hospitality venues could finally open on ‘Freedom Day’’. But, it says, ‘challenges remain for the sector.’ The latest Market Recovery Monitor research also says that permanent closures ran at an annualised rate of 25 units per day across the last 12 months.
• The research suggests that ‘while just under 89% of all known UK hospitality venues were open by the end of June 2021, 11,928 sites have yet to reopen and the hope is that many of these will do so on the 19 July.’ The Recovery Monitor maintains that ‘the lifting of remaining restrictions is significant for the late night-market, which is one of the last remaining hospitality sectors to have been given the go-ahead to reopen. Sports and social clubs are also set to benefit, having been hard hit by social distancing requirements.’ It says ‘31.2% of large and late-night venues and more than one fifth (22.9%) of sports and social clubs were still closed as of the end of June 2021.’ Some 11,092 independent licensed premises remained shut as of the end of June.’
• Further comment: We would suggest that a proportion of the 11,092 independent units may not reopen. Whether this is due to business failures or personal fatigue or other factors – such as a simple lack of willingness to go on – will perhaps never be clear. However, if units are closed at a time when the sun is shining, there is deemed to be a wall of money waiting to be spent and the Euros were helpful to wet-led units, they will need (unless they have simply been too small to reopen given social distancing requirements) quite an incentive to open come Monday.
• CGA says ‘after a hugely difficult 16 months for hospitality, and an unwelcome extra four-week delay until ‘freedom day’, it will be a huge relief to see many more sites open. But with so many venues still closed and restrictions still in place, it will be a very anxious wait to see how many are able to reopen. Hospitality has already lost more than 9,000 sites during the COVID-19 crisis, and sustained government support is essential to prevent further damage.’
• Alix Partners adds ‘while Freedom Day will be welcomed by many operators in the late-night market, it certainly does not signal the end of the challenges for those businesses and the wider sector. Operators face a summer of dealing with recruitment difficulties and staff absences due to self-isolation, combined with the tapering away of Government support and tackling huge levels of debt. It promises to be a long road to recovery for hospitality.’
• The Recovery Monitor says ‘we have lost 25 hospitality venues per day since June 2020’ and it adds ‘significant challenges lie ahead.’ It says there are around 106,000 licensed premises in the UK at the moment, down from around 115,000 in June 2020. Getting a clear read on these numbers must be difficult as all units were required to be shut a year ago and not all are allowed (or able) to open now. CGA says ‘this equates to an 8% contraction of the market in just 12 months.’
• Further comment: If demand holds up (particularly if there really is a wall of money still waiting to be spent) and supply (in terms of unit numbers drops), then surviving hospitality companies should see revenues move higher on a per-unit basis. Add into this the fact that VAT on food and soft drinks is only 5% at the moment and margins could be good. Few operators would want to say more than that but, for some players, trading could be very good at the moment and it could be even better when capacity restrictions (per venue) are removed next week.
Other Covid news:
• Some 530,000 people were pinged last week, 520,000 of them in England. These staff members, predominantly younger workers, will be absent from the workforce unless they are able to work from home.
• SIBA CEO James Calder has said that the move to permanent ‘alfresco’ pavement licenses for pubs, bars and taprooms is a positive move. He says ‘one of the few positives for hospitality businesses over the last year and a half has been the relaxation of pavement licensing which has allowed more alfresco dining and drinking spaces to be created in our towns and cities.’ Calder adds ‘the lifting of restrictions on ordering at the bar, social distancing, and mask wearing, combined with the extension of these previously temporary measures could not have come sooner for a struggling sector – but we also need Government to confirm they won’t make harmful changes to small breweries’ relief, and introduce a lower rate of beer duty for beer sold in pubs in order to give the sector a real chance of recovery.’
• The CEO of Young & Co, Patrick Dardis, has criticised the government for passing the buck to business and says that Covid passports in venues is a ‘non-starter’. Dardis says the government is ‘passing the buck and avoiding the big decisions.’ He adds ‘they said the work from home message will end, then they said it wouldn’t. The guidance is just riddled with confusion and that makes our job really complex. It’s all coulds, woulds, and shoulds, without actually taking a firm stance that could give people confidence.’
• UKH has ‘warmly welcomed the launch of a new Hospitality Strategy as recognition of the unique and valuable contribution the sector’s pubs, restaurants, hotels, nightclubs and other venues make to the UK’s economic and social wellbeing.’ It says focusing on reopening, recovery and resilience makes sense but points out that ‘hospitality has been the hardest hit during the crisis, suffering the permanent closure of nearly 10,000 licensed premises and losing more than £87bn in sales, leaving businesses deeply in debt and at risk of a long road to recovery.’
• Further comment: Talk is cheap and, as UKH CEO Kate Nicholls says, ‘the pandemic has devastated the hospitality sector and businesses are desperate to bounce back strongly and return to profitable trading.’ You can’t take promises to the bank and the list of people and bodies disappointed by the government (fishermen, farmers, Ulster Unionists etc) is long and growing but, nonetheless, UKH says ‘this new Hospitality Strategy is so important – it offers a strong platform to deliver the supportive regulatory and trading environment we need to recover, rebuild resilience and thrive.’
• News that Scotland will move to level zero from Monday, 19th July has received a mixed reaction from the trade north of the border. Scottish Licensed Trade Association managing director, Colin Wilkinson, said it was a ‘relief to have some clarity’ but says that issues remain to be faced. Units will be allowed to open until midnight but the one metre distancing requirement remains in place. The SBPA says the midnight curfew ‘is hugely disappointing and will exacerbate the financial difficulty many hospitality businesses find themselves in’.
• The Centre for Cities has reported that the recovery in footfall in a number of cities is faltering. It says footfall dropped in June across the UK. It says ‘much discussion in the lead up to restrictions being lifted was about the amount of pent up demand that lockdowns had created, and the likely splurge in spending as a result. But while there was an initial jump, the data suggests this may have faltered.’ It says ‘the weather and growing COVID-19 cases may be reasons for this, but with the end of the furlough scheme is in sight, high street businesses and workers will be hoping that the removal of restrictions on 19th July will help to sustain the high street’s recovery and bring more people back to the centre of our cities.’
• More firms have hit out against the lack of guidance re facemasks. Transport rules are said to be a ‘mess’ and retailers are being left to themselves to decide whether or not to require face coverings to be worn. Sainsbury’s has said it would require them and Tesco & ASDA have followed suit. They seem to be saying they would like them to be worn but add that they won’t do anything about it if they are not. Loungers’ Alex Reilley tweets ‘I have an increasing fear that the most shambolic episode in the handling of the pandemic by 10 Downing Street is still to come.’
• The Express says that amber list flip-flopping and lack of consistency should provide a boost to staycations. Hard to disagree with that.
• The British Business Bank reports that 1.67m UK businesses have taken out government-backed loans totalling £79.3bn. The construction (17%) and wholesale and retail (15%) sectors topped the list in terms of loans by value.
• Union Unite says that UK factories may be forced to close down if isolation warnings continue at their current pace. This may be true as factory work can’t be done from home. But nor can hospitality work and, as the hospitality workforce is almost certainly younger than that employed in factories, this is an even more acute problem for our sector. Having said this, Nissan in Sunderland has indicated that it currently has staffing problems and three are concerns for some meat-production factories. Goldman Sachs in London has said that it hopes 70% of its staff will be back in the office on Monday – it will require staff to wear masks.
• The R rate: The NIESR reports that the R rate continues to vary across the UK. It remains above 1.0 in all UK regions except Scotland. It says ‘the North West is now showing strong signs of approaching the peak in cases, with many local authorities already past their peaks. Similar patterns are likely to emerge nationwide albeit with a time lag.’
Returning to work:
• This is of much more than academic interest to a large number of companies including city-centre sandwich and coffee shops, cafes, city centre bars and operators with sites in or near commuter hubs. The Institute of Directors says that government comment recently has featured a number of “mixed messages” and “rather obvious statements.” It says employers may be incentivised by existing laws, such as the requirement to put in place ‘sufficient control measures’ to ensure safety, to err on the side of caution when it comes to demanding face coverings or even when it comes to asking workers to come back to the office or not.
Company & other news:
• The government’s National Food Strategy, which was drawn up independently by Leon’s Henry Dimbleby, will include the recommendation that a £3bn levy on sugar and salt should be considered as a “once-in-a-lifetime opportunity” to do something about obesity (and help tackle climate change). This is not yet government policy and PM Boris Johnson has said in a speech in Coventry that he is ‘not attracted’ to a salt and sugar tax which, he says, would hit “hard-working people” the most.
• M&B has updated on board changes saying ‘further to the Company’s announcement on 28 May 2021 that Colin Rutherford, Imelda Walsh and Ron Robson would step down from the Board by the end of July, Mitchells & Butlers plc announces that Colin Rutherford and Imelda Walsh have indicated that they will step down from the Board with effect from 19 July 2021 and Ron Robson has confirmed that he will step down from the Board on 31 July 2021.’
• Arc Inspirations has reported that sales rose by 35% compared to 2019 since it resumed trading in May. The group has reopened 15 out of its 17 bars across the north of England. CEO Martin Wolstencroft comments ‘to be delivering this performance in our business before restrictions have fully fallen away is testament to our fantastic teams, who have embraced the challenging situation and shown tremendous adaptability, plus a real desire to make the return of hospitality brilliant for our guests.’ He adds ‘we think it says a lot about the very strong culture that underpins our business and also the huge consumer demand for what we deliver every day.’
• Wolstencroft adds ‘as an industry, we have faced enormous challenges over the past 18 months and while there are clearly more ahead, we are proud to be seeing this level of sales performance.’ He says ‘it’s been a real collective effort, with teams moving venues to cover shifts – including the senior management team – and everyone digging in, staying committed and helping us to rebuild together.’
• An entire whisky distillery is being shipped from Buckie in Moray, Scotland to China today.
• Ex-boss of Wickes, Iceland and Focus DIY, Bill Grimsey, has said that UK small shopkeepers are facing a £1.7bn mountain of debt and adds that there could be a “tsunami” of shop closures this autumn.
• Cask Matters is instigating a “Stand Up For Cask” campaign that coincides with the changes in lockdown rules in England, which allow people to stand and chat in pubs – and crucially, to order from the bar. Paul Nunny says ‘the end of regulations should be the start of a comeback for our national treasure, cask ale. Cask has been all but lost during the past 18 months, and it now needs a huge injection of support if a choice of beers on the bar isn’t going to become a thing of the past.’
• Soho House’s parent company, Membership Collective Group, has raised $420m via an IPO in the US. The price was at the lower end of expectations and the group is valued at around $2.8bn. Founder Nick Jones says ‘this move will enable us to accelerate our investment in improving both the physical and digital elements of your membership.’
• Five Guys is to launch a new flagship site in London on Bishopsgate.
• Smirnoff has launched a new pink vodka, Smirnoff Raspberry Crush, in the UK.
HOTELS & LEISURE TRAVEL NEWS:
• Advantage Travel Partnership has said that government flip-flopping on destinations has left it and its customers ‘yet again looking down the barrel of the worst groundhog day ever.’
• TTG reports Travel Network Group as saying the decision to move the Balearic Islands from the green watchlist to the amber list highlighted the reality for the travel industry that summer would be “on a much smaller scale” compared with pre-Covid years. ABTA said the move was a “step back for the travel industry.”
• Travel Counsellors reports that Spain has continued to be the most-booked destination on its platform.
• The Business Travel Association points out the awkward fact that ‘the majority of additions to the green list will not accept entrants from the UK. This lack of international protocols make any changes irrelevant for British business travellers.’ It says ‘there must be a global approach in international standards for travel. Until such protocols exist, the travel sector remains in lockdown and must be supported.’ It concludes ‘next week’s Freedom Day will be another day in handcuffs for our industry.’
• Mask wearing remains a confused space. Tube trains will require them, as will airlines and Heathrow. Train operators may not but, between writing these words and you reading them, everything may have changed (again).
• Intercontinental Hotels premium collection brand, voco Hotels, has opened its very first hotel in the Netherlands, voco, in den Haag.
• TTG reports that South Wales-based travel firm Sam Smith Travel has ceased trading as an Atol holder according to the CAA.
• STR reports that US hotel occupancy improved week over week in the week to 10 July with achieved daily rate now ‘the highest on record’. Occupancy was 67.2% (down 9.3% on 2019) and REVPAR was $93.99 (down 4.4% on 2019).
• Hotel News Now reports that, in the US, although corporate and international guest numbers are soft, transient business, mostly leisure, is strong.
• The Department for Digital, Culture, Media and Sport committee inquiry into the music industry has concluded that music streaming needs a “complete reset.” The committee thinks that streaming has channelled money to record labels and away from performers.
SOME OF YESTERDAY TWEETS (WITH INTROS):
Amber list flip-flopping must help staycations. Rents also a feature, with landlords and tenants disagreeing as to who should flash the cash in order to clear the impasse. Comment on inflation. Temporary? You really think so?
• Amber list includes Balearics from Monday. Double jabbed returners OK but otherwise need to test, self-isolate, take time off work etc. Hits labour availability for hospitality as these are younger people. Attrition rate atrocious, 3 of Langton’s 4 adult sons pinged in last 2wks
• Amber list flip-flopping must be a boost to staycations. Brings its own issues, of course. Labour availability, staff accommodation in resort etc. Still, better have the cash circulating in Brid & Brighton than Benidorm…
• Outstanding rents back in the news. Maybe half of the peak outstanding £7bn (across hosp. & retail) has been paid back. £1.5bn is ‘agreed’ and £2bn still disputed. UKH says stalemate due to landlord unreasonableness, landlord bodies say big tenants bullying small landlords…
• Inflation. Temporary? Will only be able to say with the benefit of hindsight but, at the moment, the rising price of 2nd hand cars is a good example of what happens to prices when demand increases and supply cannot. This reads across, pretty much perfectly, to the labour market
• DP Poland updated on Tuesday and it hosted a webinar. Vianet had its AGM & trading update and Pepsi reported on Q2 in the afternoon.
• DP Eurasia updated on H1 on Wednesday and Just Eat updated on Q2 trading on Thursday.
Next week is busier.
• 19 Jul 21 is ‘freedom’ day – although it’s not called that anymore. Tuesday sees Young & Company host its AGM. Tuesday we have full year numbers from Loungers and H1 figures from Nichols. Wednesday brings Britvic’s Q3 update and Thursday sees Premier Foods host its AGM and update on Q1 trading.
FINANCE & MARKETS:
• The rate of unemployment in the UK fell to 4.8% in the three months to May, down from 5.0% in the three months to February.
• The number of job vacancies in the three months to June exceeded that recorded prior to the pandemic. The ONS says ‘the labour market is continuing to recover, with the number of employees on payroll up again strongly in June.’ It says this ‘is still over 200,000 down on pre-pandemic levels, while a large number of workers remain on furlough.’
• The ONS reports that it believes underlying wage growth, excluding distortions caused by Covid, was between 3.9% and 5.1% for average weekly earnings. For average earnings excluding bonuses it was between 3.2% and 4.4%. Those are pretty wide ranges.
• The NIESR comments on average earnings saying they ‘are predicted to accelerate 8.5 per cent in the second quarter of 2021, easing to 5.4 per cent in the third quarter, because of compositional and base effects.’ It adds ‘underlying wage growth which excludes base and compositional effects increased to 3.8 per cent in the three months to May.’
• Further comment. Wage shortage stoking inflation. The NIESR says ‘reports of labour shortages in some sectors are starting to feed into wage inflation.’ It adds ‘when the furlough scheme ends, labour availability will increase and this should limit the rise in wages. The post-pandemic jobs may be quite different from the pre-pandemic jobs and some employees may have to update their skills to match the new opportunities.’
• Sterling slightly higher at $1.3835 and €1.1714. Oil price up at $73.20. UK 10yr gilt yield up 4bps at 0.67%. World markets down yesterday but Far East better and London set to open up around 20pts as at 7.15am.
RETAIL WITH NICK BUBB:
• Today’s News: After the harsh punishment that the ASOS share price took yesterday after an in-line profit outlook statement, shareholders in Burberry may have to adopt the brace position after today’s Q1 update, which flags that the full-year outlook is broadly unchanged, despite the headline “Growth acceleration” (with Retail LFL sales up c90% on last year and up 1% on 2019). Ahead of its AGM, the home improvement insurance business Homeserve has also flagged an in-line performance. The Telegraph had expected the Frasers finals today, but at 6.20pm last night the company flagged that the finals will be on August 5th
• Next Week’s News: Tuesday brings the latest 4-weekly Kantar grocery sales figures, plus The Works’ finals. On Thursday we get the Howden interims, the Wickes H1 update and the Mulberry interims. Friday then brings the monthly GFK Consumer Confidence index and the ONS Retail Sales figures for June.