Langton Capital – 2021-08-31 – Delivery, shortages, rates, contactless, FUL, ROO, Flight Club etc.:
Delivery, shortages, rates, contactless, FUL, ROO, Flight Club etc.:A DAY IN THE LIFE: As we edge closer to September, the number of out-of-office replies should drop as people return from holidays to face the autumn but the bigger question is, will this involve returning to the traditional workplace in the same numbers as seen in 2019, or will working from home remain a major thing? So long as the work gets done, you may think that’s not a major issue but, if you’re responsible for scheduling commuter trains or if you have a coffee shop next to a transport hub in Central London, it most certainly is. And that brings home the opposing comments that ‘business isn’t without risk’ and ‘100yr events (which seem to come around more frequently than every 100yrs, it has to be said) aren’t represented in 10yr models’.. The latter comment is perhaps the more appropriate at present because, if when the various sandwich shops, coffee shops and snack bars were doing their models, they’d been told they would spend a year at 10% of normal revenues and another three at 50% or so, they would have come up with very different results. In addition, the risk return they required on capital would be higher, there would be much fewer of them, etc. But that’s a somewhat heavy, September rather than August-type comment that we perhaps should have saved until tomorrow. Still, on to the news: 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 now largely written 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. Prices: £295 for one subscription, £495 for multiple, both plus VAT. Or sign up for easy in, easy out monthly option: PUBS & RESTAURANTS: Trading – demand: • This remains variable across geographies and business types. The Telegraph reports that ‘the number of people dining out in London remains below pre-pandemic levels months after Covid restrictions were lifted.’ It says that ‘a lack of tourists [is] still hurting the capital’s pubs and restaurants.’ It says diner numbers are around 8% below numbers seen in 2019. It says that numbers are up to a third higher in other areas of the country. • Further comment: See premium email. Staff & product shortages: • Lorry driver shortage continues to bite. The field is split between business, which sees its empty shelves as something other than a figment of their imagination, and shortage deniers who insist that any problems either don’t exist, represent temporary ‘perturbation’ or can be solved by upping wages and passing on the cost to the consumer. • Further comment: See premium email. • The ONS reports that 20.4% of accommodation and food service operators have had issues with getting goods or services in the past two weeks. A further 9% stated they had been unable to get the materials, goods or services they required. Elsewhere, global shipping costs are reported to have been pushed to a new high in August. Cost increases are likely to lead to price rises down the line. Labour costs: • Workforce management specialist Bizimply reports that hospitality operators are under increasing pressure to pay the Real Living Wage (RLW). The company said ‘Upward pressure on wages is a consequence of operators restaffing as hospitality reopens after the pandemic, at the same time as the sector deals with the reality of significant labour shortages post-Brexit’. • Further comment: See premium email. Delivery: • The space under Finsbury Square, which was first an air-raid shelter but which became a public carpark, may be converted to be used as a hub for food delivery riders by its new owner, British Land.
• See comment on New York fee caps below. Also in the US, the city of Chicago has filed two consumer protection lawsuits against DoorDash and Grubhub for “engaging in deceptive and unfair business practices that harm restaurants and mislead consumers.” The lawsuits are the result of an investigation led by Business Affairs and Consumer Protection and the city’s law department. Massachusetts sued Grubhub earlier this year for breaking its temporary fee cap. Chicago mayor Lori Lightfoot says ‘as we stared down a global pandemic that shuttered businesses and drove people indoors, the defendants’ meal delivery service apps became a primary way for people to feed themselves and their families, as well as support local restaurants. It is deeply concerning and unfortunate that these companies broke the law during these incredibly difficult times, using unfair and deceptive tactics to take Other issues: • The FSB, which represents small businesses in the UK, has said that business rates are a major disincentive to invest in green and other socially responsible measures. Chair, Mike Cherry, says ‘this is a levy that hurts small firms trying to do the right thing: if you put solar panels on the roof to aid your transition to net zero, or install ventilation to support the wellbeing of your staff, the Valuation Office Agency will advise your local authority that you should be paying more in business rates.’ • Further comment: See premium email. • Scottish first minister Nicola Sturgeon is reported to be considering the use of vaccine passports north of the border for pubs, night clubs and restaurants. • The High Street: The Local Data Company reports that 35 of the BHS stores that closed down when the chain went bust five years ago, are still unoccupied. That represents around a fifth of the then estate. Since BHS failed, several other department store chains have either failed (e.g. Debenhams) or put a number of sites onto the market. • Further comment: See premium email. • Single use plastics: The FT reports the government’s comment that ‘single-use plastic cups, plates and cutlery could soon be banned in England.’ It says ministers will launch a public consultation in the autumn about the prohibition of an array of disposable items, including knives, forks and polystyrene cups, as the government works towards its goal of eliminating all “avoidable” plastic waste by 2042. • Further comment: See premium email. • Contactless payments will be capped at £100 from 15 October, with the limit currently at £45. Consumer advice group Which? warned that if criminals tried to take advantage of the increased limit, it could put consumers at financial risk. There may be a daily limit to usage but, without having need to resort to a PIN number, a thief could be able to make several £100 purchases before cards are reported missing. • Westminster City Council has announced that it is set to end the traffic-free roads scheme set in place during the pandemic. However, Mayor Sadiq Khan said ‘traffic-free roads have been a lifeline to hospitality businesses in Soho…I’m determined to see bars and restaurants flourish once again, and I stand ready to work with Westminster and the local community to ensure they do’. • The Society of Independent Brewers reports that 96% of small independent brewers in Scotland are unprepared for the Deposit Return Scheme due to be introduced next year. The recycling scheme is due to be introduced in July 2022, in which a refundable deposit will be added to every bottle and can sold in Scotland as well as hefty enrolment and administration fees for independent businesses and breweries. • In the US, New York City Council passed a permanent commission fee cap on third-party deliveries, capping them at 15% per order and all other fees will be capped at 5% per order except for transaction fees. It is said that New York’s legislation could influence other major cities to adopt permanent caps to help struggling restaurants. • Further comment: See premium email. Company news: • The Sunday Times reports that Fulham Shore, which owns the Franco Manca and Real Greek chains of restaurants, is set for further growth. The Company hosts its AGM later in September. The Sunday Times says the group is seeing ‘international growth on the horizon, and soaring summer sales’. It rates the shares a ‘buy’. • In the US, McDonald’s has suggested that franchisees should close their dining rooms in areas where COVID-19 cases exceed 250 per 100,000 people on a rolling three-week average. • Heineken’s UK Star Pubs and Bars estate is to inject £38m into its portfolio of pubs. • Deliveroo has reported a ‘historical’ shareholding by Delivery Hero SE saying ‘the first TR-1 notification received by the Company from Delivery Hero was that which disclosed a holding representing 5.09% of the Company’s Class A ordinary shares. This was received after market close on 6 August 2021 and was duly published by the Company on 9 August 2021. Subsequently, the Company has received two further TR-1 notifications from Delivery Hero regarding the crossing of lower disclosure thresholds in the Company’s Class A ordinary shares on its way to accumulating its current stake. These disclosures are now being on-notified by the Company.’ It says these should ‘clarify’ the situation and says ‘Delivery Hero’s holdings represented the following percentages of the Company’s total Class A ordinary shares: 3.01% on 8 June 2021, 4.36% on 2 August 2021, and 5.09% on 6 August 2021.’ • Flight Club has submitted plans to Cheltenham Borough Council seeking permission for darts venue to open in the town. The site, which would occupy Units 11 and 12 at the Brewery Quarter, was previously home to Mexican restaurant Chiquito, a brand owned by The Restaurant Group until the majority of its units were put into administration early last year. • EG Group reports that Leon’s integration into the group has seen ‘strong progress’. EG plans to open a further 10 Leon restaurants in 2021. In the three months to 30 June 2021, the group reported total revenue of $6.5bn, up 57% YoY. • Delivery Hero reports H1 gross merchandise value (GMV) up by 78% YoY to €16.2bn from €9.1bn but EBITDA losses of €332.3m compared to €323.5m the year prior. In Asia, the adjusted EBITDA of -€202.2m improved only marginally compared to the previous year’s period, whereas in Europe adjusted EBITDA improved from -€7.9m to €1m. • Hawksmoor is set to open a site in New York at the ‘beautiful National Historic Landmark built as The United Charities Building in 1893 with an incredible 10m-ceilinged assembly hall that will be the main room of our restaurant’, says the company. HOTELS & LEISURE TRAVEL NEWS: Trading: • A study conducted by BVA BDRC reports that intent to travel overseas remained low in the UK, stating that there was a lack of confidence that booked trips would go ahead. As of May, only 42% of UK adults were seriously considering an overseas short break or holiday in the next 12 months. Low confidence that trips would go ahead was caused by concerns around the threat of government restrictions and/or quarantine either in the UK or in the destination. • Home Office figures show that arrivals by air to the UK during the course of the pandemic have been, on average, about 90% lower than pre-Covid levels. There were just over 1.4 million air passenger arrivals to the UK in July 2021, compared to the 11.1 million recorded in July 2019. • Further comment: See premium email. • Global confectioner Mars is reported set to cut its business travel budget by a half. Trends & other: • Abta members report that holidaymakers have been primarily booking Mediterranean beach breaks for the bank holiday weekend. Crete and Majorca are the most popular destinations, followed by Croatia, Malta, Rhodes (Greece) and Cyprus. • General secretary of the GMB union, Gary Smith, said he wanted to end the ‘exploitation’ of more than 200,000 drivers in the industry ahead of a meeting with Uber bosses. Uber has formally recognised that 70,000 of its drivers in the UK will be represented by the GMB. OTHER LEISURE: • China is to limit online gamers under the age of 18 to just an hour’s play on Fridays, weekends and holidays. A state media outlet has branded online games “spiritual opium”. FINANCE & MARKETS: • US Fed chair Jerome Powell has said that US central bank could begin withdrawing stimulus this year. However, he said the bank was in no hurry to put interest rates up, despite a recent spike in inflation. • Government spending. Promises may be becoming untethered from financial reality. The Telegraph says chancellor Rishi ‘Sunak is right to put the brakes on the HS2 white elephant.’ It says the ‘high speed rail link has little relevance to ‘Red Wall’ voters and abandoning the leg to Leeds is the right thing to do.’ • Sterling stronger at $1.3781 and €1.1659. Oil price up at $73.19. UK 10yr gilt yield down 2bps at 0.58%. World markets mixed on Friday with London set to open up around one point as at 7.15am. • The Lloyds Bank Business Barometer has found that UK business confidence is now at a four year high in the wake of the relaxation of self-isolation rules and the vaccine rollout. RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): The front-page headlines on Saturday were dominated by the continuing rush to evacuate Afghan allies from Kabul airport: the Telegraph highlighted “PM’s “great regret” at leaving Afghans behind”, the Times flagged that “US prepares to strike back”, the Daily Mail highlighted “Hostage fears for 1,000 UK allies” and the Guardian noted “Fear and fury as thousands abandoned to Taliban”. The FT had a lot of coverage of the “Escape from Afghanistan”, but the main FT headline was “Kwarteng call to hire UK workers”, flagging that the Business Secretary has rejected calls to introduce short-term visas for Overseas lorry drivers. • Saturday’s Press and News (2): In terms of Retailing stories, the main news was the successful $7bn float of the Cazoo Online second-hand car retailer in New York. Otherwise, the main focus was on the cooling in Sainsbury bid speculation, after their house broker UBS downgraded their recommendation, as flagged by the headline of the stockmarket report in the Times: “Sainsbury’s shares hit by a hint that US deal doesn’t check out”. • Sunday’s Press and News (1): The photos on the front-pages of the Sunday papers were dominated by shots of the interior of the packed transport plane flying the last UK troops out Afghanistan: the headline in the Sunday Telegraph was “Britain out of Afghanistan”, whilst the Sunday Times went with “Afghan blame game erupts” and the Observer revealed “Foreign Office ignored frantic pleas to help Afghans”. The Mail on Sunday ran with an exclusive about a “cash for access” row involving Prince Charles (“Charles for sale furore”)
• Sunday’s Press and News (2): In terms of Retail stories, the main news in the Sunday papers was the Sky News report that Sainsbury is weighing up a £200m bid for the ailing Sainsbury’s Bank from the US private equity firm Centerbridge, as noted by the Sunday Times, the Sunday Telegraph and the Mail on Sunday. The Mail on Sunday noted separately that the US hedge fund Third Point has cut its entire short in Sainsbury’s, on the back of the Apollo bid speculation. The Sunday Telegraph also had an article about the Morrisons bid situation (“How pensioners got a lock over Morrisons’ bidders”) and the Sunday Telegraph had a lengthy Business editorial about how Tesco and Sainsbury need to start showing that they can grow again and make their own acquisitions, if they want to avoid being taking over as well (“Tesco and Sainsbury’s must fight for their future”). The former Tesco CEO Terry • Sunday’s Press and News (3): In other news, the Sunday Times highlighted that the Issa brothers plan to open over 300 Asda convenience stores across their EG petrol forecourt empire, following a successful trial of “Asda on the Move” at five locations. The Sunday Times also flagged that a record land price has been paid for a former Arcadia distribution warehouse in Milton Keynes and it also had a feature about the shady entrepreneur Ted Ward who is behind the fledgeling “15:17” department store chain (“Del Boy of retail who won’t quit”). The Business Leader column in the Observer stuck the boot in on the controversial share incentive scheme unveiled by Frasers Group for their erstwhile new CEO Michael Murray (“If the son-in-law rises to £100m, what will Ashley’s staff think?”). • Sunday’s Press and News (4): In terms of all the Economics comment columns in the Sunday papers, we give our usual shout-out to the column by the Sunday Times Economics correspondent David Smith (“A Brexit headwind the UK recovery could do without”), in which he noted that “our exit from the single market is exacerbating supply shortages”. The column in the Sunday Telegraph by the veteran City commentator Jeremy Warner also deserves its usual shout-out: headlined “Little did we know, but 9/11 was the start of the West’s economic crisis”, he noted that “whilst the West has languished in economic torpor, China has forged ahead”. We also enjoyed the column by the Economics correspondent, Philip Inman, in the Observer, headlined “Sunak’s Scrooge could spoil party for Johnson”. • Bank Holiday Monday Press and News (1): The front pages today are again dominated by the Afghan crisis: the Guardian leads on “Taliban say they will allow more departures as US strikes Kabul”, while the FT has “US says drone strike foiled fresh attack on airlift”. The Times leads with “Terror threat ‘worst in years’” and the Telegraph says “Afghan commandos could fight for Britain like Ghurkas”. The Daily Mail, however, goes with “GP’s who see only HALF of patients in person”. • Bank Holiday Monday Press and News (2): In terms of Retail news, there were quite a few “fillers” in the Bank Holiday Monday papers: the Daily Mail highlighted that the Morrisons bid has added £8bn to the combined market cap of the listed supermarket chains (including Ocado and M&S) since the CD&R approach was first revealed on June 19th. And the Guardian had a full-page article about how the proof will be in the pudding, in terms of whether the private equity takeover affects the Morrisons business: “Bradford eyes takeover of Morrisons with scepticism”. And the Times had a big feature on how the Co-op group has expanded its Academy school programme: “How next generation will learn to love the Co-op”. • Today’s News: There is still no news from Fortress about an offer to top the agreed bid from their rival CD&R for Morrisons, but Morrisons’ convenience store partner, McColl’s, has announced that the Open Offer of up to £5m of shares was under-subscribed and only £3m was raised (on top of the firm placing of £30m, to prop up the balance sheet enough to finance more expansion of Morrisons Daily stores). • This Week’s News Flow: After yesterday’s Bank Holiday, this week is quiet, but, as we move into September, tomorrow brings the WH Smith pre-close update, plus the McColl’s EGM to approve the aforementioned highly dilutive equity placing, whilst in the evening the latest FTSE index quarterly review is announced (with Morrisons expected to make it back into the FTSE 100 index). On Thursday the jeweller Signet announces its Q2 results in the US. TRADING STATEMENTS & EVENTS: Upcoming results are set out below: • 1 Sept 21 PPHE H1 numbers • 2 Sept 21 Jet2 AGM • 2 Sept 21 Gym Group H1 numbers • 7 Sept 21 DP Eurasia H1 numbers • 9 Sept 21 Gear4Music AGM • 15 Sept 21 Restaurant Group H1 numbers • 16 Sept 21 C&C H1 trading update • 21 Sept 21 Compass Group full year update • 22 Sept 21 Ten Entertainment H1 numbers • 23 Sept 21 Playtech H1 numbers • 25 Sept 21 (est) GfK UK Consumer Confidence numbers • 30 Sept 21 New River investor day • 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. |
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