Langton Capital – 2023-03-20 – PREMIUM – Selling assets, strikes, wages & labour, ROO, Honest Burger, holidays etc.:
Selling assets, strikes, wages & labour, ROO, Honest Burger, holidays etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: Good morning and, after a week during which there was quite a lot of activity in the normally placid Swiss market, welcome to another working week. If you put your clocks forward at the weekend, you’re a week ahead of us and, though that might sometimes be a good thing, you’ll miss your train and be an hour early for all your meetings for the next 7dys. The weather is bad and it isn’t expected to improve this month with the weather boffins saying March could challenge rainfall records. Thanks for that & on to the news: PUBS & RESTAURANTS: Budget: Comment continues. The British Institute of Innkeeping has claimed that the Spring Budget ‘offers little comfort’ for pub operators. Steve Alton CEO said ‘Without further support from government, Ofgem must now step in urgently to tackle the energy suppliers holding our sector hostage with sky-high standing charges and energy prices that will in many cases be three to four times that of 2021 rates…’ • The government has moved to support consumers & Mr Alton continues, saying ‘the positive steps taken by government to support families with enhanced childcare support, a freeze on fuel duty and other measures, may provide some confidence to allow consumer spending to rise, but for the immediate future, pubs will be facing significant trading challenges.’ Help with VAT. Tobias Ellwood, the MP for Bournemouth East, has called on the Treasury to halve the VAT on hospitality to help the industry overcome cost pressures… • Ellwood noted a petition on the UK Government Parliament website, which has more than 12,000 signatures and calls for the VAT on Hospitality to be reduced 10%. He says ‘tourism destinations were affected, such as Bournemouth, because of the pandemic. Grateful, of course, for that Government intervention then. But as hospitality recovers today, it’s hit by the perfect storm of inflation driving up wages, higher fuel prices and, of course, increased utility costs.’ he says ‘I hope the Treasury will do the maths, will lower VAT, and allow hospitality operations to survive and indeed build and grow.’ • Langton. Genuine beliefs and posturing can be hard to disaggregate. Indeed, it may be impossible. Calling for one third party (the taxpayer) to pay money to another third party (consumers a.k.a. voters) has some attractions because a) it may be popular and b) it doesn’t cost the person making the request any money. But, with the Treasury currently where it is, it may simply not be possible. Transport strikes: UKH CEO Kate Nicholls tells the BBC ‚London businesses are on their knees as a result of the collateral damage they facing as the tube strikes and train strikes and bus strikes continue to bite into sales and revenue.’ She says every strike provides more incentives to people to work from home and reduces incentives to come back to city centres. Elsewhere, head of the RMT union Mick Lynch has said that transport ministers should follow the example set in the Department of Health and offer “new money” to striking workers… • Mr Lynch says there needs to be a small “change in attitude” in offering NHS staff in England – including nurses and ambulance workers – a 5% pay rise from April as part of government negotiations. He said from the picket line ‘the difference in that is there are no conditions, it’s new money – but our members are expected to swallow vast changes to their working conditions and they’re not prepared to do that to get a very modest, poor pay rise.’ • Mr Lynch said ‘in order to get something moving they’ll have to take away some of the conditions they’ve put on this proposal, and we want some fresh money in the pay proposal, so we’ll see what happens next week.’ • Langton. Train strikes have blighted the hospitality industry for the thick end of a year and the faster they are resolved the better. The RMT was on strike last week and further strike action is planned for 30 March and 1 April. Mr Lynch says the RDG needs to ‘sort themselves out and settle our dispute with an improved offer’. He says ‘they are incapable of providing a decent service to passengers and the sooner they are brought into public ownership the better.’ Trading: CGA commented on St Patrick’s Day (ahead of the day itself) saying that ‘with St Patrick’s Day falling on a Friday this year, pubs, bars and suppliers will get a welcome boost to drinks sales—and of stout and spirits in particular…’ • CGA adds there is usually a ‘halo effect of the occasion, as extra sales spill over into the days before and after. The rate of sale for spirits on the Saturday after St Patrick’s Day in 2022 was 11.2% above the average Saturday, generating £1,408 per managed outlet. This indicates that venues should enjoy an upswing in stout and spirits on Saturday as well as Friday.’ • CGA’s Matthew Meek seems to have ignored Valentine’s Day when he comments ‘St Patrick’s Day is the first impactful special occasion of the year in the On Premise, and it will be a timely boost after challenging trading conditions in the first few months of 2023. With Mother’s Day following on Sunday, it should be a very strong weekend of sales, though the rate of growth will depend on factors including consumer confidence and the weather. Venues that execute drinks activations well will have a useful springboard for the next few months.’ Wages: Competition for staff continues. Aldi has given its store employees the third pay rise in 12 months, as the battle for staff intensifies. The supermarket group will lift starting pay to £11.40 an hour nationally and to £12.85 in Greater London… • Langton. Earlier this month, Pret a Manger also gave staff their third pay rise in a year. We are hearing that the competition for staff is maybe a fraction less stiff but comments have also suggested that the cost of attracting new colleagues remains high. Retention is also an issue. The Resolution Foundation says that British workers are little better off than they were 15yrs ago and says that the wage with other countries, such as Germany, has widened. It says the average UK household incomes have fallen to £4,000 behind those in Germany from £500 some 15yrs ago before the financial crisis, the change of government, Brexit & Covid… • Resolution Foundation CEO Torsten Bell says this is ‘almost completely unprecedented’. He says that ‘nobody who’s alive and working in the British economy today has ever seen anything like this.’ He adds ‘this is definitely not what normal looks like. This is what failure looks like.’ Labour: The government has declined to add hospitality to its shortage occupation list. CEO of UKH Kate Nicholls says ‘ongoing labour shortages are crippling hospitality businesses, forcing them to reduce their hours and costing the industry billions in lost trade…’ • She says ‘with shortages in the sector two-thirds higher than pre-pandemic, it’s clear there aren’t enough active people in the economy to fill all the roles we need, despite the extensive work the sector is doing to recruit domestically, including the economically inactive.’ • City AM points out that a government report published on the same day also showed that from November 2022 to January 2023, compared with the period before the pandemic vacancies are 72 per cent higher in hospitality and 65 per cent higher in construction. • Lib Dem treasury spokeswoman Sarah Olney tells the paper ‘London’s restaurants, pubs and bars help form the backbone of the city’s economy, yet this Conservative government has continually ignored their calls for help.’ She says ‘the government immigration approach post Brexit is haphazard and non-sensical. I fail to understand why the building trade can get work visas but not hospitality. Let’s be honest. Brexit is not working and let’s get back to free movement of people in Europe and the single market.’ Other news: Selling assets & exiting sites – more easily said than done? There have been a number of announcements recently regarding asset disposals. These have been a mix of freehold and leasehold and have come from operators including Marston’s, Byron, JD Wetherspoon, Restaurant Group and others including Prezzo, which said its estate was under review. But is an exit easily achieved? Client copy. HMRC numbers show that overseas exports of Scottish food and drink reached the highest figure on record in 2022, bringing in some £8.1 billion for the year. Food amounted to some £1.9bn of the number with drink making up the balance… • The SNP’s Rural Affairs Secretary Mairi Gougeon told The Standard ‘it is hugely welcome to see Scotland’s food and drink exports were worth a record £8.1 billion in 2022, up by almost a third (30.6%) on the previous year.’ She says ‘this is testament to the quality, innovation and skill shown by everyone working in the industry across the length and breadth of Scotland.’ • Ms Gougeon adds ‘the Scottish Government has long supported the sector – particularly through the various challenges of the last few years caused by Brexit, the Covid-19 pandemic, the ongoing war in Ukraine and rising inflation. We have worked with industry to strengthen and unlock markets across the globe for Scottish producers through the Scotland Food and Drink Export Plan.’ Food Tsar Henry Dimbleby has resigned in order to be free to the Tories’ “insane” inaction against obesity. He told the Sunday Times there was an obsession with ‘ultra-free-market ideology’ and said this was partly to blame for the fact that two-thirds of adults in England were either overweight or obese. He says ‘this government is going backwards’ and adds ‘after Boris Johnson’s hospitalisation [with Covid-19 in 2020], they were going to restrict advertising of junk food to children. They’re not going to do that. They’re just not tackling it.’ COMPANY NEWS: Deliveroo CEO Will Shu has told The Telegraph that the collapse of Silicon Valley Bank shows it was ‘right to go public despite the takeaway app’s value dropping 80 per cent since its IPO…’ • Langton. Yes, but the right thing for whom? Anybody who sold shares or exited or reduced lending to Deliveroo as a result of the IPO will be pleased but incoming shareholders will not as the deal is still the worst ever UK listing in terms of money lost by investors. Honest Burger CEO Frank Hayes has said the company is exploring regional opportunities under an evolved property strategy. The 44-strong burger chain has recently put in place a new management team including a new CFO, CMO, people director & head of technology… • Hayes told the MCA ‘we’re just beginning to think now, okay, where do we go next? And the vision of that is, it will be regions, not London, because we’re pretty well penetrated here.’ he says ‘one of the features of our estate has always been, we’ve never had any obvious loss-makers.’ He says there are ‘no obvious drags on the business that you’ve got to get rid of.’ • Langton. Taking the above comments at face value, it must be said that having no losers out of 44 is a remarkable achievement. Mr Hayes says ‘we’ve gone for more high-profile sites, typically with a higher rent associated with – though of course, higher rented regional locations are typically still a lot cheaper than in London.’ He says ‘going forward our regional sites will probably be higher profile, it’s a slightly different property strategy.’ One can always buy revenue by paying for the best sites although that may not be the case here. Kopparberg has announced the release of its limited-edition 4% ABV Summer Punch variant. Head of marketing Rob Salvesen said ‘Peach as a flavour has been trending across social media and our limited-edition Summer Punch delivers the goods when it comes to flavour and summer vibes.’ Coffee brand Grind has announced a £15m investment round to fund further growth. It has completed the acquisition of a ready-to-drink coffee company, Bottleshot Coffee. Grainstore Brewery’s ‘Nip’ and North Brewing Co’s ‘Triple Fruited Gose – Mango Guava Guava’ have taken home Overall Champion Gold in the Cask and Keg Awards at the SIBA Independent Beer Awards 2023. Co-founder of North Christian Townsley says ‘we’ve worked really hard to get the balance in this beer perfectly between the slight sweetness that the salt brings out, and the sourness and fruit of the beer itself.’ HOLIDAYS & LEISURE TRAVEL: ABTA reports that 62% of people have been on an overseas holiday since the lifting of the UK’s Covid travel curbs a year ago… • ABTA CEO Mark Tanzer says ‘what a difference a year makes. One of the sectors hardest hit by the pandemic is now back, and in a big way, with demand for travel reaching pre-pandemic levels.’ He says ‘both our research and reports of strong booking levels from our members show that holidays remain a spending priority for the year ahead, despite the current squeeze on finances.’ • Tanzer says ‘on the whole, people are preferring to adapt their travel plans rather than scrap them entirely, primarily by going all-inclusive, booking early, or holidaying outside of busy periods.’ He concedes that ‘challenges do still lie ahead, and many smaller companies still have a debt hangover from the pandemic, but for now at least, leisure travel isn’t feeling the same impact of the cost of living squeeze as other parts of the economy.’ • Tanzer concludes ‘a clear focus for the sector will be to continue the recovery by building a more sustainable industry, ensuring people and communities gain the economic and social positives it brings while addressing environmental challenges.’ He says ‘government support in this area will be critical in helping with hard to tackle issues such as decarbonising aviation.’ Security guards at Heathrow Airport’s Terminal Five are to strike for 10 days from 31 March in a dispute over pay. The period includes the Easter break. YOTEL is to open its first aparthotel brand YOTELPAD in Stratford later this year. Mark Warner is set to open a new resort on the Greek island of Lesvos, due to start taking holidaymakers from May 10. Prices for seven nights half board at Aeolian Village Beach Resort start at £749 per person based on two adults sharing with flights from Gatwick. Airport delays blame game. The Telegraph reports that CEO of Gatwick Stewart Wingate is demanding assurances from 43 airlines including British Airways that passengers will not suffer a repeat of last summer’s travel chaos… • Gatwick was forced to restrict the number of flights last summer as it became apparent that the airport would otherwise be overwhelmed. Just who, if anyone, was to blame for the delays is a hotly debated topic. P&O’s decision to fire 786 crew members without notice or consultation over Zoom last March and replace them with much cheaper agency workers has resulted in no government action despite promised sanctions, according to the Trades Union Congress. Virgin Orbit is reported to have begun drawing up contingency plans for insolvency after halting operations and furloughing its workforce. Virgin Orbit is 75%-owned by Sir Richard Branson’s holding company and is listed on the Nasdaq stock exchange… • Virgin Orbit says it ‘is initiating a company-wide operational pause, effective March 16, 2023, and anticipates providing an update on go-forward operations in the coming weeks.’ It adds ‘on the ops side, our investigation is nearly complete and our next production rocket with the needed modification incorporated is in the final stages of integration and test.’ FINANCE & MARKETS: Eurostat reports Eurozone inflation down 0.1% MoM to 8.5% in February, as a big fall in energy costs was offset by a price surge in nearly all other areas. Inflation excluding volatile food and fuel prices, an indicator closely watched by the ECB, jumped to 5.6% from 5.3%. US industrial output was unchanged in February per the US Department of Commerce. Estimates had been for growth of around 0.2%. UK housing market. Analyst Built Place reports that the number of properties being withdrawn properties from the market because of lower offers from would-be buyers has risen sharply. The OECD says that the fight against inflation must go on. The US Fed reports on Wednesday and the Bank of England updates on monetary policy this Thursday… • The OECD reports that the UK will be the only economy in the G20 apart from Russia to shrink this year. Commenting on the situation worldwide, the OECD says ‘global growth is projected to remain at below trend rates in 2023 and 2024, at 2.6% and 2.9%, respectively, with policy tightening continuing to take effect. Nonetheless, a gradual improvement is projected through 2023-24 as the drag on incomes from high inflation recedes.’ The new, post-Brexit “infrastructure bank” that was meant to replace funding from European Investment Bank, is reported set to deliver only a fifth of the financial support the EIB provided before the UK left the EU reports the OBR. UBS has bought Switzerland’s second largest bank, Credit Suisse, for £2.7billion in what has been termed a shotgun marriage. The Swiss central bank says ‘a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation’. The government has organises a liquidity assistance loan of up to £88billion. Credit Suisse shareholders will be virtually wiped out. Sterling up at $1.2183 and €1.1414. Oil down almost $4 over the weekend at $71.46. UK 10yr gilt yield down another 11bps at 3.28%. Markets down on Friday & London set to open down around 90pts as at 6.30am. RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): The planned five-week strike by passport staff led the front page headlines of the Tory tabloids on Saturday, along with yet more photos of Princess Kate…The Daily Mail wailed about the “Passport strike threat to holidays”, the Times flagged that “Holidays hit as passport staff walk out over pay” and “We’re not going on a summer holiday” declared the Daily Star. The Telegraph reported on the arrest warrant that has been issued for Russian leader Vladimir Putin by the International Criminal Court (“War crime arrest warrant for Putin”), whilst the Guardian’s top story was that doctors are being offered cash bonuses of up to £5,000 to recruit their colleagues from the NHS into jobs at private hospitals…And the FT reflected on a turbulent week for the global banking sector: “Value of global bank stocks dives $460bn after “week of madness””.
• Saturday’s Press and News (2): In terms of Retail news, the focus remained on the embattled John Lewis Partnership after Thursday’s losses, with the Times trailing a detailed article about the outlook for the group with a slightly misleading headline on its main Business page: “Will John Lewis staff ever see a bonus again?”. The JLP feature article itself was headlined “Critics can see red flags amid White’s plan to keep on cutting” and noted the pressures on the Chairman Sharon White, in the light of the decision to bring in “an extra pair of hands” as CEO, concluding that “if she and Kankiwala can’t deliver- quickly- they could join the tranche of partners soon looking for new jobs”. In other news, the stockmarket report in the Times noted the further fall in the Currys share price on Friday, after Thursday’s profit warning and there was a snippet in the Times about the news
• Sunday’s Press and News (1): On Sunday, the Tory papers moved on to trumpet Suella Braverman’s PR visit to Rwanda, as part of her efforts to deport migrants to the African state, with the Guardian highlighting that left-wing papers were not invited on the jaunt. The Mail on Sunday front-page headline was “Suella: I’ll send boat migrants to Rwanda by summer”, with a similar headline in the Sunday Telegraph. The Sunday Mirror noted that her trip coincided with the return of her critic, Gary Lineker, to “Match of the Day” on BBC One and said that “Britain should be proud of Lineker”, as it reported that the refugee Rasheed Baluch who lived with the football presenter for weeks, has praised his host. The Observer led with the news that a defiant Boris Johnson is preparing to defend his actions during the Partygate scandal at a televised inquiry on Wednesday (“Johnson makes last-ditch bid • Sunday’s Press and News (2): On Sunday, the John Lewis Partnership stayed in the spotlight, as although the Sunday Times led its Business section with the news that UBS is scrambling to buy its struggling Swiss rival Credit Suisse, it led its main News front-page with a scoop, jointly penned by its well-respected Business Editor, Oliver Shah, that (as noted above) JLP is considering a plan to sell a minority stake to an outside investor, to raise between £1bn and £2bn in money for new investment. The Sunday Times also had a detailed follow-up article on pg 4 of the main paper about the problems of JLP, headlined “A radical plan to rescue Middle England’s favourite”, noting that the High Street crisis has put its employee-owned model under strain and that it may need an outside partner to survive.
• Sunday’s Press and News (3): In other news, the Sunday Telegraph highlighted that M&S plans to increase the number of third-party clothing brands it sells, to lure shoppers away from Next and John Lewis. The Sunday Times flagged that yet another new activist hedge fund, Sparta Capital, has arrived on the THG share register and it had a feature on the growth of the second-hand fashion website Vinted (“Rags to riches”). The “Tipster” column in the Sunday Times looked at JD Sports and said the shares are a Buy (“JD Sports is racing away in athleisure”). The Mail on Sunday noted that Tom Morris of Home Bargains got a £20m dividend last year, despite a 26% fall in profits at his discount chain. And the “City Whispers” column in the Mail on Sunday highlighted that Iceland boss Richard Walker was oddly quiet about the Chancellor’s failure to tackle Business Rates reform last week, because • Sunday’s Press and News (4): In terms of post-Budget Economics comments in the Sunday papers, we give our usual shout-out to the column by the Sunday Times Economics correspondent, David Smith (“Not yet a plan for growth, nor one for investment”), in which he noted that the temporary increase in investment allowances will be like “a sugar rush that will not last and leave us with low business investment”. We also enjoyed the columns by the veteran City commentator, Jeremy Warner, in the Sunday Telegraph (headlined “Celebrity central bankers are the culprits in this financial meltdown”) and by the veteran Economics commentator, William Keegan, in the Observer (headlined “If it’s growth No 11 wants, here’s one suggestion: rejoin the EU”). • Today’s Press: According to the invaluable Guardian morning email briefing, there is plenty of variety in the front-page headlines today. The Guardian leads with the latest on the NHS pay row, with the headline: “Health union members in push to reject NHS pay deal”. The Times looks ahead to Baroness Casey’s policing report, saying “‘Toxic’ Met faces being broken up”. The Telegraph leads on the sale of Credit Suisse, as does the FT (“UBS to acquire Credit Suisse for $3.25bn after frantic talks”). The Daily Mail and Daily Express both report with varying degrees of confidence about European judges being set to drop objections to the UK’s offshore immigration plans. The i and Metro focus on the imminent release of Boris Johnson’s Partygate dossier. • BDO High Street Sales Tracker: Although we have to flag our normal caveats (ie that the weekly BDO High Street Sales Tracker for medium-sized Non-Food chains is statistically flawed, is focused on relatively upmarket businesses, is very skewed to Fashion and underplays “big ticket” spending), the latest survey, for what it’s worth, shows that trading still defied gravity and the snow in Northern areas in the w/e March 12th: Total BDO sales (including a few Homewares and Lifestyle retailers, as well as the Fashion retailers) were up by 8.3% LFL on the year before (with Store sales up 7.3% and Online sales increasing by 17.3%), although Fashion sales alone were only up by 2.0% LFL. • News Flow This Week: In the US, JD Sports’ big rival Footlocker holds its Q4 results and an Investor Event today in New York (“to discuss the company’s long-term strategic priorities, growth initiatives, and financial objectives”). Tomorrow brings the Kingfisher interims and the ScS interims, plus the Nike Q3 results (in the US). On Wednesday we get the Pendragon finals and Thursday brings the Wickes finals, as well as the latest MPC interest rate decision. First thing on Friday we then get the monthly GFK Consumer Confidence index and the ONS Retail Sales figures for February. |
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