Langton Capital – 2021-08-19 – PREMIUM – Recovery Tracker, chicken, labour, Carlsberg, Rank Group etc.:
Recovery Tracker, chicken, labour, Carlsberg, Rank Group etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: Like many people, I take my surroundings for granted but, after having been in London (on and off) for over thirty years, I decided earlier this week to walk around with my eyes open for a while, to see what all the tourists (when they are here) are always ooooing and aaaahing at. But, as with a diver coming up from the deep, I decided to do it slowly, with a series of one or two mile walks. I’m only a couple of walks in but, my goodness, there’s a lot to see. Of course, there are the obvious things that even I have noticed over the decades such as the Tower of London, Tower Bridge, St Paul’s etc but there’s so much besides and, but for the 1666 fire, Herman Goering’s flyboys and the 1960s planners, there’d be so much more. Did east of Bank first, with its warren of alleys south of Cornhill and the Barbican & Smithfield yesterday, where St Bart’s church has managed to evade my attention for a third of a century and the number of pubs tucked away down alleyways is legion. Any suggestions welcome. Maybe one to three miles, an hour to an hour and a half. So, after a thrilling (and rather misleading) four-one victory on the first day of the season, recent results suggest that Hull City is choosing to beat the crowds and has started its relegation battle early. ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. CHANGED EMAIL FORMAT: The Premium Email is unchanged. The Free Email is written and pre-sent the evening before. It may not include breaking stories nor Langton comment. See Twitter for in-day comment. Let us know if you would like an example of the Premium Email. PUBS & RESTAURANTS: Trading: • The Lloyds Bank UK Recovery Tracker suggests that output for UK food & drink businesses fell in July due to product supply and staff shortages. The Recovery Index fell from 60.5 in June to 45.6 in July. Any number below 50.0 indicates a reduction in output. Lloyds says ‘businesses in the services sector saw costs rise at an unprecedented rate since the services input prices index began in July 1996.’ It says ‘as the economy edges back towards pre-pandemic GDP levels, there will understandably be less capacity for such rapid and out-sized gains’ and adds that ‘pipeline issues represent early indicators of the potentially broader inflationary pressures to come. While UK annual CPI inflation slowed in July, this will likely prove a temporary respite, particularly if businesses continue to face further price pressures.’ Supply – units: • Hot Dinners suggests that the number of restaurants opening in London will rise this year with a “particularly strong” autumn pipeline. Expansion against 2020 numbers is hardly surprising. Hot Dinners says there could over 200 new openings this year versus 137 in 2020. It says that trading this month in central London has been stronger than anticipated. The Evening Standard says this was driven by the easing of self-isolation rules and a hopeful winding down in the pingdemic. Supply – labour: • The ONS has said that there are currently 117,000 job vacancies in the accommodation and food service sector, up sevenfold on the 16,000 in the same (May to July) period in 2020. The lockdown was more severe in the July-end quarter last year than it is thus. However, even smoothed for that, the labour shortages feel somewhat more acute. • Disaggregating the above between Brexit, the pingdemic and allegedly cushy furlough payments delaying a desire to return to work has been virtually impossible. However, as the pingdemic should end for double-jabbed individuals and the furlough scheme ends next month, it should be more straightforward shortly. • Further comment: UKH says ‘the sector is experiencing widespread recruitment challenges and this is just one of the many negative effects stemming from a prolonged period of closure that hospitality has suffered.’ It adds ‘while furlough has helped protect many sector jobs, businesses that have been haemorrhaging cash or accruing debt during enforced enclosures and trading restrictions have been forced to let staff go and were unable to reopen with full teams intact. Some of these workers will have moved to different sectors that have been open and busy over the course of the pandemic.’ • In appealing for further special treatment, UKH says ‘this is just more evidence of how hospitality has been uniquely hit by the pandemic and of the crucial need for Government to continue its support.’ This will be weighed against the various other open-ended commitments made by the government such as the promise to build a green economy and to level up the north. An earlier airy promise, to raise pensions by the higher of 2.5% or the rise in average earnings or inflation, has now been dumped. Supply – product: • Feedback following yesterday’s comments on the Unite drivers strike suggests that the impact is being felt already as operators try to buy forward. Shortages are being exacerbated by this increase in hospitality demand. packaged and long-dated products are being impacted. • Lynx Purchasing has said that problems with the supply of chicken will shortly be felt by the hospitality industry. • Further comment: This won’t come as a surprise to either Nando or KFC, both of whom have referenced shortages as the reason behind unit closures, the loaning of staff to suppliers or reduced menus. Lynx says ‘most pub menus will have a chicken burger, chicken skewers, chicken Kiev or other prepared chicken products somewhere on the menu. It’s going to be important over the next few months to have a plan B if your usual supplier can’t meet demand, whether that’s an alternative product or speaking to other suppliers about availability.’ • Lynx adds ‘poultry supply is a major concern as the impact of Covid continues to be seen globally. Demand is high across the board, and prices reflect this. As operators plan for Christmas, the best advice is to either place orders early to get the best pricing, or offer alternatives.’ This will be an option for pubs and most restaurants in a way that it is not for, for example, KFC or Nando’s. hopefully supply issues can be ironed out in a non-glacial time period as broiler chickens are killed at six weeks of age and getting hold of fertilised eggs shouldn’t be too much of a problem. Free-range broilers will usually be slaughtered at 8 weeks old and organic birds at maybe 12 weeks old. • The Telegraph has reported on a number of supply chain operators as saying the shortages that caused Nando’s to shut a number of restaurants will continue for some time. It says ministers have failed ‘to heed repeated warnings that the Brexit fallout, EU worker rules and logistics problems would continue to hit food supply.’ The paper said a day earlier that Brexit was not to blame for the shortages. It quotes Avara Foods, one of the country’s largest chicken suppliers to supermarkets and restaurants, as saying that Britain’s workforce had been “severely depleted as a result of Brexit” and that this was “causing stress on UK supply chains in multiple sectors”. • Further comment. The pingemic has also impacted supply but, as the double-jabbed do not need to isolate when pinged now, this should abate. The Telegraph quotes a ‘poultry industry source’ as saying ‘we need new workers to come on board to cope with this demand and, while the Department for Environment, Food and Rural Affairs have been helpful, the issue is with the Home Office. There are shortages fluctuating between 10 per cent and 20 per cent of staff, so we need some emergency changes to get workers overseas who can fill this gap.’ • Head of the British Poultry Council Richard Griffiths has called ‘on the government to fast track workers as the sector faces severe disruptions’ reports Sky. It says ‘the group has contacted the Home Office about the issue, but has yet to receive a response.’ Sky says ‘a spokesperson for one of Britain’s biggest poultry producers said that the company was not experiencing any inconvenience due to the so-called ‘pingdemic’.’ This is good as far as it goes but bad in that it means the issues could persist when the pandemic abates. Other news: • See Travel section below for how leisure stocks in the US have given back a lot of the gains relative to the market that they have made since good vaccine news became more established around November last year. • Inflation. See Finance & Markets. • Demand. Rail fares to rise, suck money out of pockets (including mine). See Travel below. Company news: • Nando’s says it hopes to have all its restaurants reopened from Saturday after around 50 outlets were shut because of chicken shortages. The company tweeted ‘the UK food industry has been experiencing disruption across its supply chain in recent weeks due to staff shortages and Covid isolations, and a number of our restaurants have been impacted.’ It adds ‘however, since Monday, a team of our brilliant Nandocas have been supporting our key suppliers onsite – working in partnership to help get things moving again, and this has already had a positive impact on affected restaurants.’ • Further comment :Chicken king Ranjit Singh Boparan last week said the ‘supply of chicken and turkey is under threat. Our retail partners and the wider supply chain have worked together closer than ever before to ensure we retain food supply and this is of huge credit to everyone. But we are at crisis point.’ As mentioned above, the turnaround period from the twinkle in a cockerel’s eye to D-Day for a broiler chicken is less than ten weeks all in. • Darwin & Wallace has appointed Mark Crowther, former CEO of Liberation Group, as a non-executive director and Patrick Wilson as non-executive chairman, as it looks to capitalise on its strong performance coming out of the pandemic, per Companies House documents. The MCA reports that MD Mel Marriott says ‘we took the opportunity to reflect, as many companies have, on what we are going to need, the skill sets and advice and support to go forward and take advantage of the strong position we are in.’ She adds ‘we are really lucky to have the likes of Mark and Patrick joining us.’ Outgoing chairman John Connell founded and funded the company some nine years ago. • Carlsberg yesterday reported 2% organic growth in beer volumes from before pandemic in Q2 this year. It says that sales were helped by the hot weather, Euro 2020 and the reopening of bars across Europe. The CEO has said that he expects higher commodity costs next year. • Further comment. Carlsberg has said that certain key markets are now “well above” 2019 levels. It says ‘Western European markets are reopening, but a reverse trend is going on in Asia, particularly in Vietnam, Laos and Malaysia.’ The company says that its hedges against commodity price rises will only hold back the impact of higher costs until around the end of this year. Chief Executive Cees ‘t Hart says that “significantly higher” costs will impact the company next year. He mentioned aluminium, barley, paper and oil as drivers of cost. • The company’s sales were ahead of expectations and it now expects operating profit to rise by between 8% and 11% this year, up from its previous guidance of 5-10% growth. Sales in Q2 rose 17% to 18.69 billion Danish crowns, compared with a 17.97 billion crown forecast by a poll of analysts compiled by Reuters. • MasterChef winner Sven Hanson Britt is looking to open a debut restaurant in London this autumn after a crowdfunding campaign. HOTELS & LEISURE TRAVEL NEWS: • The Biden administration in the US is set require mask wearing on airplanes, in trains and on buses through to the end of this year. • Moody’s reports that Hyatt Hotels Corporation’s purchase of Apple Leisure Group is credit positive for Hyatt ‘because it increases its managed/franchised portfolio by 33,000 rooms focused in the fast-growing all-inclusive segment, reduces its reliance on its owned portfolio and increases its earnings generated from leisure travel.’ • STR reports that they US hotel industry pushed room rates to nine-month highs in July. Occupancy was down 5.5% on 2019 with room rate, at $143.30, up 5.5% and REVPAR up 0.2%. STR says ‘when adjusted for inflation, the ADR and RevPAR levels were lower than the all-time highs recorded in 2019. On an absolute basis, occupancy was the highest for any month since August 2019.’ • FTI Consulting says that Europe’s airlines have by and large avoided bankruptcy thanks to taxpayer, shareholder and bank support but it says the ‘sector may be at a tipping point’. It says ‘airlines in Europe have implemented only moderate fleet cuts’ and says more may follow. FTI says carriers are still burning cash and warns ‘the perfect storm in Europe’s aviation is yet to come.’ • Bloomberg reports that travel stocks have given back all of their relative stock market gains made in the period since ‘Vaccine Monday last November, when Pfizer Inc. announced its successful trial results.’ It says ‘hotels, resorts and cruise lines are doing a little better, but are also in a slump that has lasted since March.’ • Further comment: Bloomberg’s Opinion piece says that European airlines are on a par with those in the US but adds that hotels in Europe have ‘been far superior, remarkably regaining all its lost ground by early this spring.’ It implies that cruise ships (big in the US but slight in Europe) are included in the hotel segment in the US when it says ‘this may have something to do with cruise lines, which are particularly strong in the U.S. and have arguably been more damaged than any other industry by the pandemic.’ It concludes ‘the resurgence of Covid fear is greater in the U.S., but the more important point is that the trend is the same beyond American shores.’ • Bloomberg opts to be brave and says ‘viewed positively, this could create a nice buying opportunity. It still isn’t clear that the delta variant, for all its infectiousness, can do anything like the damage that the first waves wrought on the global economy, before there were vaccines and when the medical profession hadn’t yet developed techniques to keep patients alive.’ • The July inflation measure (see comment below) is normally used to set the following year’s rail fare increases. This has come in (the RPI not the CPI) at a hefty 3.8% – the highest for ten years. OTHER LEISURE: • The Rank Group has reported full year numbers to end-June saying that net gaming revenue fell by 48% to £329.6m in the year with an operating loss of £92.0m and a loss after tax of £72.0m. On an underlying basis, the group says that revenue was down 50% at £288.2m with an underlying operating loss of £67.0m against an underlying operating profit of £48.4m in the prior year. The underlying loss per share was 20.3p compared with an underlying profit per share of 6.7p in 2020. • Rank says ‘with 79% of Group revenue being derived from our venues businesses, closures imposed in the Government’s response to the pandemic amounting to 59% of available operating days together with capacity constraints, reduced opening hours and other restrictions during the year have had a material impact on the Group, resulting in underlying LFL NGR down 50% on the prior year and an underlying LFL operating loss of £67.0m.’ • Further comment. The group was losing £15m per month in cash terms, it reports, this being net of the Government’s support through the CJRS scheme and business rates relief. The company says it has successfully retained liquidity and says that it has made ‘encouraging progress since our UK venues reopened on 17 May.’ It says ‘revenue in Grosvenor venues in the 13-week period to 15 August has been 19% below the same 13-week period of 2019 (pre-pandemic)’ and adds ‘in Mecca, revenue over the same 13-week period was 21% below 2019, with average weekly revenue of £2.6m marginally ahead of the cash breakeven level of £2.4m. Since restrictions were eased on 19 July, average weekly revenue has been £2.7m.’ • CEO John O’Reilly says ‘the year to 30 June 2021 was exceptionally challenging for the Group and, frankly, we are delighted it is over.’ He says ‘our venues have been performing ahead of our expectations following the easing of restrictions on the UK hospitality sector on 17 May and we anticipate further growth as travel restrictions eventually ease and tourism returns, particularly to London.’ Mr O’Reilly says ‘clearly there is still some uncertainty how the pandemic will impact our businesses over the next few months, however we are confident that with our leading bingo and casino brands, supported by a proven transformation programme and strengthened balance sheet, we are competitively well placed to benefit as the hospitality sector and its consumers emerge from the pandemic.’ FINANCE & MARKETS: • Headline UK CPI fell from 2.5% in the year to June to 2.0% in the year to July. This came as something of a surprise. A drop had been expected, but maybe to 2.3%. The Bank of England’s target is 2.0£. • Further comment: Clothing and footwear prices are reported to have fallen – as did the price of holidays. Transport prices rose. The NIESR says that its version of ‘underlying inflation’ fell ‘from 1.6 per cent in June to 1.4 in July.’ It ‘base effects will continue to add volatility to the headline inflation figure, as we expect an upward trend in August before another moderation in September.’ It seems to be suggesting that the Bank of England not do anything too rapidly. Looking ahead, the NIESR says its ‘medium’ scenario would see inflation settle at 2%. The ‘high’ scenario is a not-much-higher 3%. • The ONS reports that UK house prices hit a new record high in June with the average house now costing £266,000, up by £31,000 or 13.2% on the same month last year. Prices rose most rapidly in the north. • Due to the trade border now being effectively in the middle of the Irish Sea, the Irish Central Statistics Office has reported that exports from Ireland to GB (excluding NI) rose by 20% whilst exports from GB to Ireland fell by 32%. • The government is set to break its manifesto promise to older voters that it would maintain the pensions triple lock. • Scotland’s public sector deficit is reported to have more than doubled last year to £36.2bn. It stands at an annual 22.4% of GDP compared to 14.2% for the UK as a whole. • Sterling mixed yesterday at $1.3721 and €1.1748. Oil down at $67.37. UK 10yr gilt yield unchanged at 0.57%. World markets broadly down yesterday with the UK set to open down around 67pts as at 7am. RETAIL WITH NICK BUBB: • Nick is on a well-earned break. Back after the Bank Holiday. |
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