Langton Capital – 2021-10-13 – Marston’s, Just Eat, WFH, G4M, labour, site closures, Punch etc.:
Marston’s, Just Eat, Stock Spirits, WFH, labour, site closures, Punch etc.:A DAY IN THE LIFE: Langton must stop doing this to itself. That’s namely drinking in Sam Smiths pubs in the north of England and then coming down to London and suffering multiple near-heart attacks when it comes to paying, I kid you not, £6.50, £6.65 and a stonking £7.35 a pint in the E1 and EC2 post codes. I mean, if there were gold flakes suspended in the liquid, that would be one thing. But, if the pump says something reasonable, like 4.2% ABV and is alongside a bunch of others with words like ‘ordinary’ and ‘best’ and the like emblazoned on them, then I think there should be a health warning, even if only to avoid unpleasantness, because operators are not likely to react favourably when told to squirt the beer back into the pump (I don’t care how you do it, just do it) because I only wanted a beer, not to buy the pub. Anyway, behind this moan is a real point because, if you’ve ‘taken price’ and taken price and taken price again, what do you do for an encore? On to the news: LANGTON EMAIL: The Free Email is now written in short form. Full stories are in the Premium Email. Reply to this email if you would like to upgrade. See Twitter for in-day comment. Let us know if you would like an example of the Premium Email or to comment on the new format. Prices for the Premium, unchanged for 2yrs, are £295 for one subscription, £495 for multiple, both plus VAT. Reply to this email to order & request invoice. Or sign up for easy in, easy out monthly option HERE MARSTON’S FULL YEAR TRADING UPDATE: Marston’s has today updated on trading for its full year and our comments thereon are set out below: Sales progression: • Outdoor trade was allowed on 12 April. Indoors was permitted from 17 Mau and further regulations were removed on 19 July. Marston’s breaks down its LfL performance over these periods: o 12 April to 16 May – 77% of 2019 (drink 89%, food 59%) o 17 May to 24 July – 92% of 2019 (drink 93%, food 90%) o 25 July to 2 Oct – 102% of 2019 (drink 99%, food 102%) • The numbers are directionally positive. They still benefit from the lower rate of VAT (5% to end-Sept and 12.5% now) on food & non-alcoholic drinks. • In addition, footfall is lower and prices have been edged up a little. Spend per head is higher. Room revenues have been strong due to the buoyant staycation market. The entire period is shown below: o 12 April to 2 Oct – 94% of 2019 Other re sales: • Marston’s says that the Brain’s portfolio (of 156 pubs) is trading ahead of expectations. Marston’s is a tenant. The disposal of the freeholds by SA Brain should have no impact • The group says that ‘total pub sales were £402 million for the year, representing 78% of last year, reflecting the significant disruption to trading from the pandemic.’ Costs & other P&L items: • Marston’s comments that the labour market is tight but says this is not currently causing problems. It has been working on a 5-6% increase in the national minimum wage. • It says ‘whilst the labour market remains tight, particularly in city centres, we are currently managing this well.’ • Most costs are contracted for FY22 with gas contracts carrying into the following financial year Balance sheet & borrowing: • Marston’s reports £1,232m of debt at its year end. This is £97m lower than last year. Net of the Carlsberg JV receipt, debt is perhaps £130m higher. • The company has £90m of headroom and its debt is 94% hedged. Hedging in the securitisation is to the end of its term. • The company reiterates its target of reducing debt below £1bn by FY25. There will be some working capital movements (adverse) this year – delayed tax payments etc. but there should be a further payment from Carlsberg, perhaps of between £25m and £50m • The group specifies that ‘there are two one-off cash items, tax repayment of £50 million for VAT and duty and the contingent consideration receipt for the disposal of Marston’s Beer Company to the joint venture, the value of which was £25 million at the half year.’ • Capex should be around £55m for the full year (£40m of maintenance and £15m of expansionary). This is markedly down on the c£75m spent previously (adjusted for the removal of the brewing business). Some IT spend that could have been capitalised in prior years has been expensed through the P&L. Company comment: • CEO Andrew Andrea comments ‘we are delighted to be fully open again since trading restrictions were lifted in July.’ • He adds ‘we are encouraged by the trading momentum which we have experienced since April and pleased to be trading robustly and above 2019 levels again.’ • Mr Andrea says ‘our business benefits from an optimally balanced pub estate of food and wet led pubs that are predominately suburban, community based and well located for the changes in consumer behaviour that we are seeing.’ • Adding a note of caution, the CEO says ‘we are mindful of consumer confidence in the short term and the challenges impacting the economy and our industry. Government messaging will remain a key factor in determining sentiment.’ • The company concludes ‘looking ahead, we are now keenly focussed on our strategy of delivering exceptional experiences for our guests. We will continue to invest in our teams and pubs as we strive to meet our clear goals.’ Langton Comment: • Marston’s comments should reassure. The company is confident that it will reduce debt but, regarding trading, there is no formal guidance at this stage. • Marston’s shares have slipped from recent highs of over £1 on concerns that the consumer will edge back spending. Whilst there are challenges ahead, we believe that the company remains well-positioned to prosper. PUBS & RESTAURANTS: Site closures: CGA and Alix Partners have reported that the hospitality industry has ‘lost nearly 1,000 more sites since July as cost, staff and supply pressures mount.’ The latest report says that small independent businesses have been hit hardest, but managed groups appear to be more resilient. This will be partly because managed groups have, over recent years, cut their ‘tails’ on numerous occasions. The number of nightclubs has fallen by nearly 100 to just over 1,000. • See premium. Reply to this email to upgrade. Labour shortages. The labour shortage is front and centre on the back of the most recent comment from the ONS on unemployment and salary trends. These data are more delayed than most other ONS products due to the way in which they are collected and smoothed. Some of the data released yesterday was for the three months to end-August (namely the unemployment data) and some was for the three months to September (vacancy data). Any end-Furlough impact will only really show themselves in the three month period to include October (as the furlough ended at the end of September). The rate of unemployment fell in the three months to August (to 4.5% from 4.6% in the three months to July). The number of payroll employees rose to a record 29.1m (up 207k) in September. Job vacancies in the quarter to end-September rose to a record high of 1.1m, up around 300k on pre-pandemic levels. • See premium. Reply to this email to upgrade. Working from home. The ONS continues to suggest that there is a drift back to the office going on. City AM however reports a poll saying that ‘52 per cent [of British worker] would leave their job if they were forced back into the office full time, with 11 per cent saying they would quit on the spot.’ Talk is cheap, of course. This matters because office footfall is what drives revenue for many city-centre coffee shops, grab and go outlets, bars, restaurants and other operators. • See premium. Reply to this email to upgrade. Costs. The deal with CF Industries to keep its machines going & produce the CO2 that the food & other industries need, is likely to cost millions of pounds. Costs, ultimately, will be passed on to the consumer. • See premium. Reply to this email to upgrade. More on ‘the wrong kind of inflation.’ Kantar points out that food costs have risen by 1.7% in the year to October (having been negative for several months). Petrol costs are up over 30% year on year. Oil is at seven year highs & distribution cost increases are feeding through to essential items. That is, when they are available to buy. UKHospitality’s coalition to keep VAT at 12.5% has written a letter to the PM saying ‘We will be critical to your levelling-up agenda and we are eager to play our part. To facilitate our role there is one crucial lever that the Government can pull – to keep VAT at 12.5%.’ • See premium. Reply to this email to upgrade. Meat producers have warned of increasing prices this Christmas as the cost of carbon dioxide has increased again. • See premium. Reply to this email to upgrade. The managing director of Arla Foods, Ash Amirahmadi, has said the company is facing inflation pressures from higher energy, packaging and labour costs. • See premium. Reply to this email to upgrade. COMPANY & OTHER NEWS: Just Eat Takeaway has reported on Q3 trading. CEO Jitse Groen says ‘with most of the world returning to pre-pandemic life, our growth in the third quarter of 2021 has remained strong. Just Eat Takeaway.com is well-positioned for autumn and winter, our traditional growth season. We look forward to updating the market on the exciting opportunities for long-term growth across our business during our Capital Markets Day on 21 October.’ The CEO says ‘Just Eat Takeaway.com processed 266 million orders in the third quarter of 2021, representing a 25% increase compared with the same period of 2020. GTV amounted to €6.8 billion in the third quarter of 2021, up 23% compared with the same period of 2020.’ • See premium. Reply to this email to upgrade. CEO of Punch Pubs, Clive Chesser, has told Sky News that COVID-19 is not in the “rear view mirror” for Britain’s hospitality sector. He says that there is a “celebratory” tone in government that is not felt on the high street. Chesser says staff shortages are holding back the recovery and says ‘we need to continue to get the support from government through the COVID pandemic beyond the current measures that are in place and longer term and to have a real transition plan.’ He adds ‘I thought that the tone of the conference last week and the prime minister’s speech felt quite celebratory as if COVID is now in the rear view mirror and it’s been and gone. That is not how it feels.’ Felixstowe is awash with empty containers that it cannot shift due to a shortage of lorry drivers. The port is telling companies that it will take no more empties. There is some talk in the press of ships being diverted from Britain. This could lead to stock shortages down the line. The BBC says that ‘shipping giant Maersk told the BBC it is re-routing some of its biggest ships away from the port.’ If these still land in the UK – but not in their port of choice – then goods will need to be shifted and the demand for lorry drivers will increase rather than diminish. Sterling a little higher at $1.3616 and €1.1786. Oil price down at $83.34. UK 10yr gilt yield down 4bps at 1.15%. World markets lower yesterday and London set to open down by around 8 points as at 7am. CrepeAffaire has said it plans to open up to 50 new franchised stores over the next 2-3yrs. Neat Burger is opening a new site this week on Buckingham Palace Road. Licensing solicitor Poppleston Allen points out that Nottingham City Council’s ‘current Cumulative Impact Policy (which applies to relevant licensing applications for the sale of alcohol within the City Centre area and sale of alcohol off the premises within Radford, Berridge and Arboretum area) has been allowed to lapse.’ Savills reports that recovery within food and beverage (F&B) is particularly strong, with fast food being the fastest growing area of the market in the first half of the year, seeing a net growth of 333 units. Turtle Bay reports sales up more than 75% since it reopened its restaurants on 17 May, compared with the same 19-week period in 2019. • See premium. Reply to this email to upgrade. Hormel Foods has partnered with The Better Meat Co to bring products made using mycoprotein and other plant-based proteins to market. A survey by Corriere Vinicolo shows that Italian wine exports were up 15.6% in the first half of the year but that a sharp increase in commodities prices has halted the post-Covid pick-up. • See premium. Reply to this email to upgrade. LEISURE TRAVEL & HOTELS: Per Travel Weekly, Club Med is offering a 3 day sale with a low deposit scheme from £150 per person and children under six stay for free in all its sun resorts. Sky News reports that Starwood Capital, a specialist real estate investor, is considering a £850m takeover bid for Park Holidays. Intermediate Capital Group (ICG) hired HSBC and Royal Bank of Canada to run an auction of the company. Yesterday, EasyJet forecast a group pre-tax loss of between £1.135 billion and £1.175 billion for the year to September while reporting ‘clear recovery’ with positive autumn bookings. The company flew 58% of equivalent pre-pandemic capacity or 17.3 million seats, flying 13.3 million passengers, during the peak summer quarter. Eurostar is increasing capacity to the Continent over the festival season as travel demand continues to rise, with the Christmas timetable set to operate from December 12 until 8 January. OTHER LEISURE: Gear4music (Holdings) plc has updated on trading for the six months to 30 September 2021 saying that UK sales are now unchanged on lockdown sales a year ago and total sales are down by 8%. It says ‘gross margins remain strong at 28.0%’ and adds that there is a ‘strong levels of inventory going into peak trading period.’ • See premium. Reply to this email to upgrade. FINANCE & MARKETS: See Pubs & Restaurants for unemployment data. The ONS yesterday reported that the rate of pay growth had slowed in the quarter to August to 7.2% including bonuses from 8.3% in the quarter to end-July. Bonuses were rarer last year. Pre bonus, regular pay was up by 6.0% in the quarter, down from growth of 6.8% in the quarter to July. • See premium. Reply to this email to upgrade. The IMF has said that the Delta variant of Covid is weakening global growth prospects. It also says that differing rates of vaccine roll-out (rapid in rich countries & slower in poorer countries) is impacting growth. The IMF has cut its projection for global growth in 2021 only marginally to 5.9%, but there has been a change in mix. It is cutting its estimate for the US from 7% to 6% and for Japan and Germany from 2.8% and 3.6% respectively to 2.4% and 3.1% respectively. The estimate for the UK has been edged down from 7.0% to 6.8%. The IMF expects most advanced economies to return their pre-pandemic growth trends in 2022. The IMF has warned that inflation risks in Britain are “skewed to the upside.” Interest rate rise pre-Christmas expected by many. City AM sums it up when it headlines that the ‘red hot jobs market strengthens BoE rate hike bets.’ • See premium. Reply to this email to upgrade. RETAIL WITH NICK BUBB: • See premium. Reply to this email to upgrade. |
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