Fuller’s, service sector, strikes, WFH, outlook, holidays etc.:

A DAY IN THE LIFE:

Thanks go out to those who replied to the email yesterday with comments on their favourite cover versions.

The most covered songs of all time, reportedly, are Yesterday, I Can’t Get No Satisfaction and Love Me Tender.

Maybe few surprises there.

The ‘best’ covers was, of course, more subjective. A few replies, so thanks for that. How about:

• Hurt – Johnny Cash (Nine Inch Nails)

• Nothing Compares to You – Sinead O’Connor (Prince)

• Hallelujah – Jeff Buckley (Leonard Cohen)

• All along the Watchtower – Jimi Hendrix (Bob Dylan)

• Blinded by the Light – Manfred Mann (Bruce Springsteen)

Anyway, all good things must come to an end. So let’s move from song and probably dance to the trading environment out there. On to the news:

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QUESTION OF THE WEEK?

Question of this week:

What will happen to the delivery market now that restaurants are open again, times are getting hard and there may be some discounting? This is a vitally important, real-world question, the answer to which may determine whether delivery – or more specifically some of the companies within it – have much of a future.

FULLER’S FULL YEAR NUMBERS:

Fuller’s has this morning reported FY numbers and our comments thereon are set out below:

The numbers:

• Fuller’s reports revenue of £253.8m (2021: £73.2m) with adjusted profits of £7.2m against an adjusted loss of £48.7m a year ago.

• Adjusted earnings per share are 9.79p per share (2021: loss 72.09p) and there is a returned dividend of 11.31p. H1 was 3.90p, final is 7.41p.

• Fuller’s says that the year was still ‘significantly impacted during the year by coronavirus related closures, restrictions and working from home guidance.’

Re trading:

• Fuller’s says that its Digital Transformation project has ‘delivered, improving the customer experience and enhancing our analytical capabilities to target new and existing customers.’

• It says it has ‘successfully implemented our new central finance system, which has enhanced the quality and timeliness of business information

Cash flow, debt & balance sheet:

• Debt is reduced to £131.9m (2021: £218.1m). The group has a recently announced, four-year £200m facility. It says there is ‘headroom for future growth in place.’

• There is a ‘new Directors’ valuation of the total property portfolio at £995.6 million, approximately £400 million above our current book value, which implies an adjusted net asset value per share of £13.80.’

• Fuller’s says it has ‘continued to maintain capital investment in the estate, with £26 million invested in the year to enhance capital values and drive growth.’

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PUBS & RESTAURANTS:

The Jubilee effect:

CBA has updated on the impact of last week’s two Bank Holidays, saying that the holidays were generally positive but that ‘street parties dented trading over the weekend.’ CGA says that ‘On Premise sales from last Wednesday to Sunday (1 to 5 June) were 5% higher than the average for the equivalent period over the previous 12 weeks. However, after uplifts of 47% on Wednesday, 54% on Thursday and 7% on Friday, sales dropped by 20% and 22% on Saturday and Sunday respectively.’

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Impact of the planned train strikes.

Sector representatives have warned that the planned rail strikes later this month will have a devastating impact on many businesses. The impact will be slight compared to lockdowns, of course, but there is no state aid available and, in many cases, balance sheets are hardly robust.

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Footfall:

The latest BRC-Sensormatic IQ research, which covered the period including the long Jubilee weekend, shows that UK footfall rose by 17.1%. The BRC says that Thursday was up 45.6% – though this would have been comparing what was a Bank Holiday this year with a normal workday in any other year. Wednesday was up by 44.4%.

Near term outlook:

Risk Capital principal Luke Johnson has told the UK Hospitality conference that the industry is facing “two years of hell.” He says operators will need to “batten down the hatches and probably pray.” He says it’s ‘going to get really bad this Autumn. Companies should be raising money to protect themselves.’

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UKH CEO Kate Nicholls has told the same conference that the Government has not done enough to help the sector attract investment. She says ‘the level of debt the sector is carrying impacts the economy as a whole, because the sector is a driver of the economy. She adds ‘the margins are squeezed and the demand bouncing back is not translating into profitability.’

Working from Home:

Researchers at King’s College London have been told that only 10% of London office workers wish to work from the office permanently as they did pre-pandemic with 73% saying that WFH at least one day a week would suit them better.

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Minimum pricing.

Public Health Scotland has suggested that there is some evidence that less well off consumers are cutting back on essentials in order to maintain alcohol purchases in the wake of the introduction of minimum pricing.

Inflation:

The price of petrol yesterday rose by its largest single amount – around 5p per litre – in a day for 17yrs. Petrol is now around 181p per litre and diesel is 186.5p.

Delivery:

Foodservice analyst Peter Backman, writing in theDelivery.World, has said re delivery that, if the ‘last two years have shown anything, it’s that there is demand – around the world – for having food delivered. And customers seem to be prepared to pay a premium for the service – menu items may be priced more highly on restaurant delivery apps and websites, customers may be asked to pay to have the food delivered. And then they may tip the rider.’

He adds ‘above all, this shows that food delivery – or restaurant delivery – is wanted, and that customers are prepared to pay for it. So demand is not dead.’ He poses the key question, however, as to whether existing companies, where some five operators stand head and shoulders above the competition, can ‘deliver the profits that investors are looking for?’

Discounting:

M&B’s Sizzling Pub chain is selectively offering drinks for £2.50 a pint (Carling, John Smiths, Strongbow, Coors) this Friday and Saturday and on the same days the week after. Vouchers & QR codes can be used multiple times in an evening.

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Other news:

The ISWR has reported that global beverage alcohol value rose by +12% last year to reach US$1.17 trillion.

COMPANY NEWS:

Molson Coors Beverage Company is to invest $65 million in its Fort Worth Brewery in order to build up its hard seltzer capacity.

Bridgehouse Brewery’s 4.5% blonde ale White Crow is to be served in Parliament this week with profits going to Ukraine charities.

Searcys is to close its St Pancras Champagne Bar for an extensive refurbishment over the summer.

UK SERVICES SECTOR:

There are a lot of polls and surveys being produced. They often point in slightly different directions. The S&P (was Markit) PMI survey is one of the largest and longest running. The services element covers all service industries (and not just hospitality), but it is nonetheless worthy of comment.

Summary:

Foodservice analyst Services sector PMI: S&P’s Service Sector PMI for the UK in May fell to 53.4 in May, down from 58.9 in April.

• The flash number, which was released around 24th of the month, had been 51.8, suggesting that momentum may have picked up towards the end of the month.

The bullish interpretation.

• Although the May number represents a slowing of growth, it is still growth in absolute terms as any number above 50.0 implies expansion. The number of 53.4, however, is the lowest in 15 months.

Bearish signals.

• S&P seems to be more at home with this interpretation.

• It says ‘May data pointed to a difficult month for the UK service sector as business activity growth eased considerably since April and margins were squeezed again by rising inflation.’

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HOLIDAYS & LEISURE TRAVEL:

Research by Allianz Partners has found that 84% of respondents believe they will get away for a holiday this summer. Of the holidaymakers, 58% will take a staycation and 42% will travel abroad.

Jet2 CEO Steve Heapy has told Travel Weekly that holidaymakers should book 2023 holidays early as prices could rise.

Park Holidays has bought two holiday parks in Lossiemouth and Burghead, Moray.

FINANCE & MARKETS:

The Organisation for Economic Co-operation and Development expects the UK economy to grow by 3.6% this year, followed by 0% growth next year. This is the slowest growth in the G7.

Separately, the BCC has cut its estimate for growth in the UK to 3.5% this year (from 3.6%) against a deteriorating economic outlook. It also expects the UK inflation rate to reach 10% in Q4 2022 ‘comfortably outpacing average earnings growth’. The BCC sees 0.6% growth next year and 1.2% in 2024.

The Halifax has said that the price of the average house in the UK rose by 10.5% in the year to May – but it says that growth is slowing.

Sterling weaker at $1.2529 and €1.168. Oil price higher at $123.93. UK 10yr gilt yield up 3bps at 2.24%. World markets broadly lower yesterday and London set to open down around 34pts as at 6.30am.

FORTHCOMING NEWS:

A quiet week. Fuller’s full year numbers today.

RETAIL WITH NICK BUBB:

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