Shepherd Neame, YUM, CINE, Just Eat, SBUX, Molson Coors, Amazon etc.

A DAY IN THE LIFE:

The number of out-of-office replies to our morning email is running at 3x normal levels and, rather than try to beat the holidaymakers in question, Langton will soon be joining them.

There won’t be an email next week or the week after as we jet, or rather drive, to the sunny climes of the Yorkshire Dales followed by the steamy environs of the Deep South (a.k.a. the Derbyshire Peak District).

We’ll be doing out bit, undertaking on-the-ground, staycation research. This will doubtless involve chatting up publicans, sampling beer, pies and chips and shovelling down ice-cream.

But we’re here for the remainder of the week and, come holiday-time, we’ll tweet the odd bit on @brumbymark. On to the news:

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SHEPHERD NEAME – FULL YEAR TRADING UPDATE:

Trading:

• Shepherd Neame has updated on trading for its full year to 26 June. The group, which last updated on 21 April, says that ‘since the resumption of trading on 12 April the Company has performed well, generating cash and profits ahead of our expectations. Initial outdoors trade from 12 April to 16 May was encouraging, but demand has taken a step up from 17 May when indoors trade was allowed.  The business continues to benefit from pent-up demand for the pub experience. Our rural and coastal pubs and hotels, in particular, are benefitting from their unique locations and great outside space. Beer volume in all channels is strong.

• Shepherd Neame continues ‘overall retail sales have been impacted by the extended closure of 15 Central London pubs. From 19 July, now that restrictions are lifted, we have re-opened almost all of these, although we expect their trade levels to remain below prior levels for some time to come.’ It says ‘for the 11 weeks from 12 April to 26 June, managed pubs that were open and trading achieved 84% of their 2019 revenue and total retail sales, including those closed pubs in London, were 60% of 2019 levels. For the initial period of outdoor trading between 12 April and 16 May open pubs achieved 62% of 2019 levels and from 17 May, when indoor trading resumed, to the year end, those sites that were open achieved 97% of 2019 levels. Since full restrictions have lifted on 19 July we have seen a modest increase in sales.’

• It says re its tenants, that ‘for the 11 weeks from 12 April to 26 June, our tenanted pubs achieved 77% of their 2019 volume. For the four weeks of June, they achieved 91% of 2019 beer volumes. After charging no rent for all the weeks of lockdown, our tenanted pubs returned to 90% of normal rent as from 21 June and, as from 2 August, will return to normal rent.’

• Total beer volume has ‘been resilient throughout the pandemic, and we have obtained new on trade customers and new listings in the grocery trade and export. As the on trade has re-opened, sales have been buoyant, with total volume in all channels in May and June up +8.4% versus 2019 and total own beer volumes excluding contract down -3.6% for the same period.’

Cash flow, debt & balance sheet:

• The company says ‘net debt has remained under control, with rigorous cost control and good cash flow since the restart – a significant achievement given the circumstances. At the year end, net debt was £89.8 million. This has reduced from £92.4 million in December 2020. Our banks have relaxed normal covenants through to September 2022 and these have been replaced by a minimum liquidity covenant.

• It adds that it ‘has sufficient and growing liquidity to restore its financial health over the next 12 to 18 months. Whilst costs are still tightly controlled and the business is being run very prudently, the Board is increasingly confident of a full recovery and a return to the prior growth path and dividend pay-outs for shareholders.’

Company & other comment:

• See Premium Email.

PUBS & RESTAURANTS:

Government support:

• The number of people on furlough is now at its lowest level since the scheme was introduced reports the ONS. A further 600k workers exited the scheme last month meaning that some 1.9m people were on furlough at the end of June (down from 2.4m in May). Chancellor Rishi Sunak says ‘it’s fantastic to see businesses across the UK open, employees returning to work and the numbers of furloughed jobs falling to their lowest levels since the scheme began.’ City AM reports the Treasury as saying ‘spending at pubs and restaurants has particularly risen sharply since the resumption of outdoor dining in April, prompting these businesses to recall workers the fastest of any sector. More than a million hospitality and retail workers moved off furlough over the last three months.’ Nearer to home, Marston’s and M&B have said that trading improved when indoor dining was allowed and, though it is
very early to say, they both indicated that revenues responded positively to Freedom Day last week.

• Further news. See premium email.

Other covid news:

• The Scottish Hospitality Group has proposed that employers should be allowed to assess the risk of spreading covid when employees are pinged. It has sent its proposal to the UK and Scottish Governments and is urging them to adopt. It says ‘business owners want to do the right thing by their staff and the public, so the lack of clear, consistent guidance from both governments is really frustrating.’ It adds ‘the fact that we need to make decisions which affect our businesses, the health and safety of our staff and customers, means we can’t afford to sit back and wait for Test & Protect to get in touch. This is something that Holyrood and Westminster must take seriously ahead of restrictions easing further.’

• Commenting on the government’s announcement that Lifetime Skills Guarantees would extend to hospitality and catering courses, Kate Nicholls, CEO of UKHospitality said this is ‘a fantastic reflection of industry and Government working collaboratively to deliver workable employment and skills solutions.’ She says ‘despite being the nations’ third highest pre-Covid employer, our sector currently faces an acute skills and staff shortage. Hopefully today’s announcement, hot on the heels of a bespoke Hospitality Strategy, can be one of many steps towards upskilling our workforce.’ The BBPA says it’s is also ‘delighted to see the inclusion of hospitality and catering qualifications in the Lifetime Skills Guarantee.’ The BBPA says ‘as restrictions are removed on pubs and they begin their road to recovery, we know they have a vital role to play in helping the communities they serve build back
better. The inclusion of hospitality and catering qualifications in the Lifetime Skills Guarantee is a great first step for this.’

Company news:

• Just Eat is to overhaul its charging structure. It has raised its service charge from 50p up to £1.99.

• Further news. See premium email.

• Amazon yesterday reported record sales of $113bn for the second quarter with profits of $7.8bn. The revenue rose from $88.9bn in the same quarter in 2020 but it was slightly lower than Wall Street estimates. Sticking to the script that the company was more than just a profit driven enterprise, CEO Andy Jassy says ‘thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers – I am very excited to work with you as we invent and build for the future.’

• Shares in Robinhood, which rose to prominence as the facilitator of bear squeezes and Reddit-inspired stock market raids, saw its shares fall 8% on its IPO. It had priced its shares at the lower end of the range.

• Molson Coors yesterday reported Q2 numbers saying that it has seen its ‘best quarterly top-line growth in more than a decade as [it] continues to deliver on its revitalization plan.’ The company has reaffirmed its full year guidance. Q2 sales rose by 17.4% reported and 13.7% in constant currency terms, partly aided by soft comps and partial or full hospitality reopening in its main markets.

• Molson. CEO Gavin Hattersley says ‘in the second quarter, we made significant progress against our revitalization plan that we laid out nearly two years ago’ He says ‘we continued to invest in our capabilities, including the announcement of a new hard seltzer canning line in the U.K. and investments to quadruple our production of hard seltzer in Canada.’

• Further news. See premium email.

• Yum! Brands has also reported Q2 numbers saying that it opened a record 603 Net-New Units. It is reinstating its growth programmes and is raising its new unit guidance. YUM says it generated worldwide system sales growth of 26%, with 23% ot this coming from same-store sales and 2% from unit growth. EPS in the quarter wias $1.29 (up 91% on soft comps). Excluding ‘Special Items’, EPS was $1.16, an increase of 41% over the prior year quarter.

• YUM CEO David Gibbs says ‘our strong second-quarter results, led by record unit development and 23% same-store sales growth are a testament to our iconic brands, world-class talent, and best-in-class franchisees.’ He adds that ‘this sustained momentum was underpinned by our investments in digital and off-premise and the agility of our brands to meet the needs of consumers in an ever-changing environment.’ Gibbs says ‘on the basis of these strong results, we’re reinstating our long-term growth algorithm and revising the unit growth component of this algorithm from 4% unit growth to between 4% and 5% unit growth. The resilience of our diversified global business positions us perfectly to drive growth and maximize value creation for all our stakeholders for years to come.’

• Further news. See premium email.

• The FT reports that Pret A Manger could be considering a move into coffee vending machines. The company, which is owned by coffee giant JAB Holdings, is reported to have trademarked the name “Pret Express” under the class of “vending machines” and “coffee vending and dispensing machines”, as well as “Pret Perks”.

• Big Table Group (formerly Casual Dining Group) has appointed Paul Stokes as the company’s Head of Acquisitions.

• Further news. See premium email.

• Accountant in Bankruptcy have reported  that the number of firms entering liquidation in Scotland has risen sharply to 163 in Q2 this year, up 65% on the same quarter in 2020. Insolvency & restructuring body R3 says ‘with an uneven easing of restrictions across the country, a number of businesses are still adapting to the ‘new normal’ and will have to wait a while before they return to pre-pandemic trading.’

HOTELS & LEISURE TRAVEL NEWS:

• Dominic Raab has told Sky News that he is “increasingly confident” that more countries will be added to the amber and green travel lists. There is, at the moment at least, quite a difference between the two lists meaning that it will be important which list countries find themselves on. Raab says ‘we keep an eye on the variants, but because of the 70% double vaccination of our population and because we are insisting only people from the US, the EU and perhaps in due course, as we build up confidence in the system other countries, we proceed on that basis.’ Raab was criticised for putting France on the amber plus list, simply because of high infection rates in Reunion, which is 6,000 miles away in the Indian Ocean.

• The Telegraph reports that there will be a staycation boom this year as destinations in the Eurozone suffer from a lack of British visitors.

• Further news. See premium email.

• A study undertaken by Fly Research has suggested that Brits are very keen to take a holiday in order to get a ‘break from the stresses of life’. The number of out-of-office replies to our email are currently legion and Langton, which is going on hols later today, can identify with the above statement.

• US airline United is to increase its services to London next month to a total of six daily flights in light of the news that fully-vaccinated American travellers will not have to self-isolate on landing.

• Accor reports Q2 numbers saying that revenue per available room for the whole of H1 is still down 60.4% versus 2019 because. CEO Sébastien Bazin says ‘we are ready for the rebound. Germany is better than we expected, as is Brazil, with now a fast vaccination rollout. … Bad news, and we have to learn to be patient, in Southeast Asia, which relies on international travel, and there are some poor markets in South America, such as Argentina.’

• The Wall St Journal has reported that flight attendants and pilots are struggling to find hotel accommodations in their destination cities. In the same way that shortages of accommodation in seaside towns limits the availability of bar staff, this is not helpful over the medium term.

• STR reports that US hotel occupancy in the week to 24 July rose to 71.4%, down just 7.8% on two years ago. Rate is up 4% and REVPAR is only 4.2% lower. STR says ‘historically, the middle weeks of July are the country’s highest occupancy weeks each year, and 2021 has been no different even as demand slows week to week.’

• Ride sharing co Swvl is reported set to IPO.

OTHER LEISURE:

• Cineworld Group has updated this morning saying that it has secured further liquidity and covenant waivers. The company says ‘following the opening of all cinemas in June 2021, Cineworld is pleased to announce it secured $200m of incremental loans maturing in May 2024 from a group of its existing lenders. The New Debt Facility does not have a material impact on the Group’s weighted average cost of debt.’

• The company adds that it has ‘also agreed covenant amendments on certain of its existing debt facilities, including reducing the minimum liquidity requirement and relaxing limitations on the use of cash, among other modifications which will further support the Group as cinemas restart trading.’

• Further news. See premium email.

FINANCE & MARKETS:

• The US economy grew at an annualised rate of 6.5% in the second quarter. This was slightly lower than hoped.

• Sterling mixed at $1.3948 and €1.1742. Oil up at $75.52. UK 10yr gilt yield down 1bp at 0.57%. World markets mixed yesterday but Far East lower in Friday trade and London set to open down some 43pts.

RETAIL WITH NICK BUBB:

• Further news. See premium email.

TRADING STATEMENTS & EVENTS:

Upcoming results are set out below:

• 29 Jul 21 M&B Q3 trading update

• 29 Jul 21 Diageo Q4 & FY

• 29 Jul 21 Compass Q3 update

• 29 Jul 21 AB InBev Q2 numbers

• 29 Jul 21 Molson Coors Q2 numbers

• 29 Jul 21 YUM Q2 numbers

• 29 Jul 21 Texas Roadhouse Q2 numbers

• 30 Jul 21 DPP AGM

• 30 Jul 21 Shepherd Neame FY trading update

• 3 Aug 21 Domino’s Pizza H1 numbers

• 3 Aug 21 AG Barr H1 trading update

• 3 Aug 21 Gregg’s H1 numbers

• 3 Aug 21 Marriott Q2 numbers

• 4 Aug 21 Royal Caribbean Q2 numbers

• 5 Aug 21 Bank of England MPC meeting

• 5 Aug 21 Shake Shack Q2 numbers

• 10 Aug 21 Intercontinental Hotels H1 numbers

• 11 Aug 21 Deliveroo H1 numbers

• 11 Aug 21 Hostelworld H1 numbers

• 12 Aug 21 TUI Q3 numbers

• 12 Aug 21 Cineworld H1 numbers

• 18 Aug 21 Carlsberg H1 numbers

• 19 Aug 21 Rank FY numbers

• 2 Sept 21 Jet2 AGM

• 15 Sept 21 Restaurant Group H1 numbers

• 21 Sept 21 Compass Group full year update

• 22 Sept 21 Ten Entertainment H1 numbers

• 23 Sept 21 Playtech H1 numbers

• 1 Oct 21 JW Wetherspoon

• 5 Oct 21 Gregg’s Q3 update

• 13 Oct 21 Marston’s FY trading update

• 22 Oct 21 Intercontinental Hotels Q3 numbers

• 26 Oct 21 Campari Q3 numbers

• 23 Nov 21 Compass Group FY numbers

• 24 Nov 21 Britvic FY numbers

• 30 Nov 21 Marston’s FY 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.