Today’s email

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All the best & have the best day that you can under the circumstances, Mark

More on M&B, CDG, Rank, Fuller’s delays numbers again, reopening etc.

A DAY IN THE LIFE:

Euphemisms are probably as old as language itself and they maybe do soften the blow from time to time.

We’ve ‘passed on’ or whatever and they’re always evolving such that pre-packs, CVAs, failures, bankruptcies, collapses, closures, administrations, insolvencies etc are sometimes now referred to as ‘insolvency flips’.

They’re where you can’t quite manage a pre-pack, as potential buyers (or sometimes takers for free) won’t touch what’s currently on the table & the subject has to be carved up a little, something best achieved in administration.

But an insolvency flip suggests action. Ingenuity and dynamism because you wouldn’t ‘collapse into an insolvency flip’ in the same way that you would collapse, exhausted, into administration, would you?

Anyway, there’s all that ‘a rose by any other name’ (in reverse) stuff still out there and, whatever the words, the impact on units, employees, landlords, the High Street etc will be broadly the same.

But maybe not, maybe the Luftwaffe were just a bunch of town planners ahead of their time and unemployed staff could be ‘transitioning colleagues’ etc.

So, you see, it’s much better now, huh? Failure is just success by a more roundabout route. Follow us on Twitter at @brumbymark and on to the news:

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MITCHELLS & BUTLERS – H1 CONFERENCE CALL: Following the announcement of its H1 number yesterday morning, Mitchells & Butlers hosted a conference call for analysts and our comments are set out below:

Company presentation:

• The lockdown, though expected, came suddenly. Stock had to be disposed of, staff furloughed (99%) and cash and assets secured. See Premium Email. 

MORE COMPANY ADMINISTRATIONS. CDG APPOINTS ALIX PARTNERS: We have mentioned the conveyor belt that is currently carrying operators towards administration. CDG appointed Alix Partners yesterday. 3 July 2020:

• CGD, which operates the Café Rouge, Bella Italia and Las Iguanas chains, has appointed administrators and said that 91 sites (out of around 250) would close immediately. They are closed already, of course, but they will not reopen and the staff will be made redundant. Some 1,909 staff will lose their jobs amounting to just under a third of all of CDG’s employees. See Premium Email (and below)

PUB & RESTAURANT NEWS:

Covid-19 issues & reopening:

• GfK updates on consumer confidence in the UK today saying the mood ‘is still fragile amid few signs of economic stability.’ It says that four of its measures of confidence increased and one measure decreased. 

• GfK says ‘despite the backdrop of dire warnings about the state of the economy, large-scale job losses, the end of furlough with the prospect of further unemployment, and a possible second-wave of COVID-19, consumers appear to be slightly more confident as lockdown loosens across parts of the UK. After the recent near-historic low of -36 for the Consumer Confidence Barometer last month, we‘re seeing some early signs of improvement [to an aggregate of minus 27] across most measures for our fourth COVID-19 flash, even though all our core scores remain negative. The seven-point jump in the Major Purchase Index [to minus 25] could bode well for ‘reopening day’ this Saturday as more shoppers hit the high streets after a trip to the pub and visit to the hairdresser. However, economic headwinds could easily blow any recovery off-course with confidence remaining fragile and volatile amid few
signs of stability.’

• CGA and Fourth’s latest New Business Confidence Survey seems to be covering most of the bases as it ‘indicates widespread anxiety but signs of guarded confidence.’ The message may be a little confused but that accurately reflects the outlook, which is uncertain, to say the least.

• CGA says ‘managed pubs, restaurants and bars are planning a gradual re-opening’ with 59% of businesses in eligible businesses (that is just those in England) planning to reopen some sites on 4 July with a further 18% intending to open during the following week

• A Monday start would certainly have made more sense in some ways but many operators maybe feel duty bound to open the first moment that they are able to. An average of 60% of an operator’s sites will be open in the first week and only a quarter of operators say that they will open all sites immediately.

• Demand is first among worries, quoted by 84% of operators. City and town centres could be more challenging than suburban locations. This accords with M&B’s experience through its Alex subsidiary in Germany,.

• CGA says ‘excitement has to be tempered by huge uncertainty about consumer attitudes and trading, and it’s little surprise to see concerns about redundancies, closures and profits. While it’s pleasing that confidence is seeping back into the market, businesses will be anxiously waiting for the ‘new normal’ of eating and drinking out to emerge.’

• The survey shows something of a recovery in business confidence. In April, a similar poll found only 15% of leaders were optimistic about their business’ prospects over the next 12 months. That number has more than doubled to 32%.

• UKH, the BBPA and the BII have come together to produce guidance on the government’s reopening guidelines. UKH says that the flexibility shown in the guidelines ‘has come hand-in-hand with some confusion about how the guidelines should be applied.’ The guidance is available from the trade bodies directly.

• Trade bodies have also come together and issued joint guidance to businesses on supporting the Government’s track and trace customer registration scheme. The guidance ‘aims to provide clarity to enable businesses to take positive steps towards achieving the scheme’s public health objectives, as well as businesses’ obligations and practical tips to implement a successful scheme.’ The trade organisations say ‘this guidance provides clear instructions to businesses on their obligations and reminds them why it is important that they make a success of the scheme. It is in the interests of everyone in the country that we all understand our role in the scheme and its importance in the context of the COVID-19 pandemic.’ It is available on the organisations’ websites.

• UKH has called on the Welsh Government to give a firm date for reopening. It has welcomed the provision of the firm date of 15 July in Scotland.

• A number of trade bodies alongside the London Night Czar and the National Police Chiefs’ Council have commented on the upcoming reopening of pubs on 4th July saying ‘we know that people are keen to begin to get life back to normal and understand the important role the pub can play in that.’ The statement goes on to say ‘we also want to impress upon people the importance of behaving responsibly. We ask pub goers to be supportive of landlords and pub staff, helping them to reopen in the best way possible.’

• Downing St is reported to have warned pub-goers not to ‘overdo it’ on Saturday. The Treasury had earlier urged customers to ‘grab a drink and raise a glass’ to the reopening. The tweet has been taken down. PM Johnson will tell the UK that it is not out of the woods yet when he speaks this evening.

• The Night Time Industries Association, whose members have not been allowed to reopen from tomorrow, has said this could be a Doomsday rather than an Independence Day for the operators of ‘intentionally crowded’ units.

• On a positive note, Soho streets are to be closed to traffic from this weekend.

The consumer:

• More redundancies in the pipeline from Casual Dining Group (see below, about 2,000), from Accenture, around 900 and from a number of other retailers.

• The FT reports three quarters of UK manufacturers are planning job cuts before the end of 2020.

Company news:

• Fuller’s, which was due to announce its FY numbers today, has delayed them for the second time. The company says its ‘auditors have informed us that they will need additional time to complete the formalities of the audit process, which has resulted in a further delay to the results.’

• Fuller’s says ‘the delay is a result of the auditors’ internal processes, with Grant Thornton continuing to cite the complexities surrounding COVID-19 and related abnormal working arrangements as the reason behind the time taken to complete the audit.’ It says it ‘will now announce a revised date for its Full Year results for the year ended 28 March 2020 shortly.’

• Young & Co, which shares a year end with Fuller’s, reported full year numbers nearly a month ago. Its auditor is Ernst & Young.

• Going (too numerous to mention), going (ditto), gone (numerous & now including Casual Dining Group). See also Prezzo below.

• CDG, which operates the Café Rouge, Bella Italia and Las Iguanas chains, has appointed administrators and said that 91 sites (out of around 250) would close immediately. They are closed already, of course, but they will not reopen and the staff will be made redundant. Some 1,909 staff will lose their jobs amounting to just under a third of all of CDG’s employees. See Premium Email.

• The company says due to the ‘extreme operating environment it is in the best interests of all stakeholders for the Group to enter administration, to enable the Group to conclude negotiations with landlords regarding the estate.’

• CDG is one of the many companies that entered into a CVA. It was early off the mark (in 2014) and a number of competitors followed suit including a rush in 2018. Carluccio CVA’s in 2018, for example. Covid-19 has worsened the situation markedly and has made the need for more urgent action even more acute than it had previously been.

• CDG CEO James Spragg says that other options, such as a potential sale, have been explored. He says ‘after reviewing all our options with advisors, it became clear that we needed to take this action in order to protect the business and secure the best possible future for Casual Dining Group as we look to conclude a potential sale.’ Alix Partners has been advising CDG for some time and it will take over as administrator of the company.

• Sky News reports that Prezzo has appointed FRP Advisory to attempt to auction the company and presumably sell it to the highest bidder. Prezzo has around 180 restaurants. Prezzo underwent a CVA in 2018.

• Property Week reports that ‘pub giant JD Wetherspoons has forged deals with landlords to pay zero rent now and defer payments until next year or switch to monthly payments.’

• Revolution Bars Group is to open six sites on Monday 6 July. It will phase in its remaining 68 sites thereafter.

• The Real Greek has announced that it is to open 7 of its locations on 4 July with its remaining units to open ‘in due course’.

• Shake Shack is to open a delivery-only unit in Brighton on 3 July.

• Seafood restaurant Rockfish is to open its Plymouth restaurant on 4th July. Mitch Tonks says ‘we’re opening our restaurants up one at a time and making sure all the changes and measures we’re introducing absolutely work for our customers and our teams.’

• Peroni Nastro Azzurro is to launch a multi-channel advertising campaign this month including support for the on-trade.

• The FT reports that Soho House is to push ahead with expansion. The group has spent some £5.4m refurbishing properties and amalgamating its 24 websites into one since the lockdown in March.

HOLIDAYS & LEISURE TRAVEL:

• The government is to abandon its idea of air bridges in favour of quarantine exemption lists. As many as 75 countries are believed to be included in the first list. A full list is to be published later today. The publication of the list will not guarantee that reciprocal arrangements will be put in place by the countries concerned.

• Business Travel News says that unclear rules re quarantines are dampening the demand to travel for business purposes.

• Cottages.com has suggested that there will be a summer staycation sell-out in the UK this year. Various reports that Cornwall is ‘booming’, that The Dales are ‘selling out’ etc.

• Resolution service Resolver has said that would-be holidaymakers are unlikely to be able to claim on their holiday insurance if they are unable to travel because they are having to self-isolate.

• The WTTC says that the UK has been slow to announce which countries would be deemed safe to fly to (and back from).

• STR reports that US hotel occupancy was down 39% year on year in the week to 27 June. Room rates were down by 29% and REVPAR was 57% lower.

OTHER LEISURE:

• The Rank Group has announced that it will ‘commence the reopening of its Mecca bingo clubs from tomorrow, 4 July 2020.’ It does not yet have a date for its casinos saying ‘the Group is continuing to engage with Government as we seek to secure a date for the reopening of Grosvenor’s casino estate.  We will provide a further update when progress can be announced.’

• Rank CEO John O’Reilly says ‘I am pleased that we will be able to start welcoming our loyal Mecca customers back into their clubs on Saturday’. He continues ‘our Grosvenor venues are also ready to safely open and we are working hard to ensure we receive the support of Government to reopen our casinos soon.’

• GVC has called on the government to announce a review of the Gambling Act. CEO Kenny Alexander says ‘we fully support the recommendation to bring forward the UK Government’s Review of the Gambling Act and we will play a full and active role in this process.’

• The EU is questioning whether Google’s proposed takeover of Fitbit will harm competition, or give the online giant access to too much personal data.

• Google in the US has confirmed that it will not open its offices until at least 7 September.

FINANCE & ECONOMICS:

• Payroll numbers increased by 4.8m in the US in June. The jobless rate is 11%.

• A former head of the civil service has told the FT that a wealth tax is now possible to pay for Covid spending.

• Sterling down vs dollar at $1.2462 but up vs Euro at €1.1093. Oil price higher at 42.64. UK 10yr gilt yield down 3bps at 0.19%. World markets higher yesterday. London set to open up a handful of points.

START THE DAY WITH A SONG:

The song has been furloughed. See you on the other side.

RETAIL WITH NICK BUBB:

• Consumer Confidence Watch: After today’s latest “flash” GFK Consumer Confidence report, it’s worth noting that the record -39 index low seen in July 2008 has still not been tested so far in the current crisis…The overall index has improved by 3 points from -30 to -27, after hitting -36 in the “flash” report for the second half of May. Polling was done between 18th and 26th June. GfK’s Client Strategy Director Joe Staton says: “Despite the backdrop of dire warnings about the state of the economy, large-scale job losses, the end of furlough with the prospect of further unemployment, and a possible second-wave of COVID-19, consumers appear to be slightly more confident as lockdown loosens across parts of the UK…The seven-point jump in the Major Purchase Index could bode well for ‘reopening day’ this Saturday as more shoppers hit the high streets after a trip to the pub and visit to the
hairdresser”.

• Today’s News: The M&S AGM is at 11am this morning and ahead of that there have been management changes at Studio Retail (Paul Kendrick, the MD, will take over as CEO upon the retirement of the current CEO, the veteran Phil Maudsley, at the end of the financial year) and Shoe Zone (the new FD is to be the aptly named Peter Foot). And there have been updates from 2 shopping centre landlords: Land Secs (which owns Westgate Oxford and Trinity Leeds, inter alia) has flagged that only 29% of its Retail rents for the June  quarter have been collected, with footfall down 40% in the last 2 weeks on last year and retail sales just 20% down. And Capital & Regional paints a similar picture.

• BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that in w/e Sunday June 28th, Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were down by 15.5% (down c57% in Store sales, but only up by c76% in Online sales), despite the re-opening of most “non-essential stores” in England on June 15th, with the mini-heatwave sapping shopping interest…

• News Flow Next Week: Tomorrow is “Super Saturday” in England, with pubs, restaurants, hotels and hairdressers allowed to re-open post-lockdown…As for next week, the delayed finals from both JD Sports and Halfords come out on Tuesday, whilst the Pets at Home AGM is on Thursday and at some point the Chancellor is expected to make a major economic policy statement.

TRADING STATEMENTS & EVENTS:

Upcoming results are set out below:

• 2 Jul 20 Mitchells & Butlers H1 numbers

• 3 Jul 20 Fuller’s FY numbers

• 3 Jul 20 GfK consumer confidence numbers

• 7 Jul 20 Whitbread AGM

• 13 Jul 20 Pepsi Q2 numbers

• 21 Jul 20 DP Eurasia H1 trading update

• 23 Jul 20 C&C AGM

• 28 Jul 20 Gregg’s H1 numbers

• 28 Jul 20 AG Barr trading update

• 6 Aug 20 Naked Wines AGM

• 7 Aug 20 Diageo FY numbers

• 11 Aug 20 Domino’s Pizza Group H1 numbers

• 19 Aug 20 Rank FY numbers

• 9 Oct 20 JD Wetherspoon FY numbers

Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year.

2019 COMPARATIVE RESULTS:

• 11 Jul 19 Dart Group FY numbers, 16 Jul 19 Fulham Shore FY numbers, 17 Jul 19 Nichols H1 numbers, 24 Jul 19 Marston’s Q3 trading update, 25 Jul 19 Fuller’s FY numbers, 25 Jul 19 Compass Group Q3 update, 25 Jul 19 Diageo FY numbers, 30 Jul 19 Gregg’s H1 numbers, 31 Jul 19 M&B Q3 update

YESTERDAY’S TWEETS:

• Covid-19. Remember when we were shocked & horrified by C19 in Italy. Terrific sympathy etc. Was backward rationalised as ‘they live in cramped accommodation, multi-generational households, aged population’. Now UK’s much worse than Italy. How did that happen?

• Life in Lockdown: Was doing some GCSE maths last night and can report as a result that it is just as interesting now as it was 40yrs ago.

• Boris’s Britain – it’s the way ya tell’em. Fit as a butcher’s dog taken on a whole new meaning. Pear shaped is the new svelte. Gotta be hope for the rest of us, huh? Mine’s a pint and keep ‘em coming. Chuck us a burger while you’re at it. Make it two.

• Unpleasant news alert. Sobering thought as we plan to reopen. Remember how tough it was last year? Recall the plague of CVAs in 2018? Closures, job losses, overbuilding, slack brands & poor trading. Sadly, those were the good times.

• Boris’s Britain – it’s the way ya tell’em. New corporate dance in town is the ‘insolvency flip’. One bound and our heroes are free. Previously known as pre-packs, CVAs, failures, bankruptcies, collapses, closures, administrations, insolvencies etc. Much better now, huh?

• Boris’s Britain – it’s the way ya tell’em. If ya can’t be Churchill, how about FDR? £5bn for infrastructure is the new trillion. Drop in a very big bucket. Seventy quid a head. To be fair, the media saw straight through it. Made 3rd or 4th lead. Dead before it hit the mic.

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