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Wed 14th Oct 2020 - Update: More sector restrictions and ‘circuit breaker’ possible, Comptoir and Just Eat trading
Government warns further restrictions could be placed on hospitality industry as MPs attack 10pm curfew: Health secretary Matt Hancock has warned further restrictions could be placed on the hospitality sector as MPs went on the attack over the 10pm curfew. Hancock said thousands more people will die and “harder economic measures” will be needed without tough new coronavirus restrictions. He warned of loss of life “too great to contemplate” as he attacked those in his own party who opposed the curbs on hospitality. In a vote that underscores the anger on the Tory back benches, 42 Conservative MPs, including the former cabinet members David Davis and Esther McVey, rejected the 10pm curfew on pubs and restaurants, amid accusations the country was “going bankrupt”. MPs approved the tiered system of lock-down that was announced on Monday (12 October) but used a separate non-binding vote on the closing time of hospitality venues to register their displeasure with the government’s direction of travel. Defending the strategy, Hancock poured scorn on the idea of herd immunity and said elderly people could not be fenced off from risk while everyone else “returns to normal”. He added: “We do not rule out further restrictions in the hospitality, leisure, entertainment or personal care sectors,” he said. “But retail, schools and universities will remain open.” Sir Graham Brady, chairman of the 1922 Committee of Tory backbenchers, said simple steps such as getting rid of the 10pm curfew could mitigate some of the worst effects of the lock-down. Sir Edward Leigh, Conservative MP for Gainsborough, demanded the scientific basis for the 10pm closing time. Tory backbenchers are also demanding chancellor Rishi Sunak extends support to hospitality businesses caught in tier-two lock-downs. Venues ordered to close by the government will be given grants of up to £3,000 a month and the government will also pay two thirds of staff wages. However pubs and restaurants in tier-two regions – such as Manchester, Leeds, Birmingham and Newcastle – will not be eligible for support since they are allowed to stay open — although the 10pm curfew remains in place as well as a ban on household mixing. UKHospitality warned this week businesses in tier-two areas were seeing only 40% to 60% of normal trade while the British Beer & Pub Association said “thousands” of local pubs and jobs would be “lost for good”. Andy Street, the Conservative mayor for the West Midlands, expressed anger Birmingham had been placed in a tier-two lock-down and called for the government to compensate hospitality businesses for their loss of income. But Steve Barclay, chief secretary to the Treasury, warned against spending “more and more”, saying the government had already committed more than £200bn to fighting the pandemic. From today (Wednesday, 14 October) Liverpool will be placed into a tier-three lock-down, meaning bars, gyms, betting shops and leisure centres will be forced to shut. Restaurants will remain open as well as pubs that serve “substantial” meals. Meanwhile, the 10pm curfew, introduced last month, has led to plunging sales for hospitality firms but alcohol sales have soared at supermarkets as people stock up to drink at home instead, data from Kantar has shown. Fraser McKevitt, head of retail and consumer insight, said shoppers were moving their eating and drinking back into the home as a result of rising infection rates, restricted opening hours at hospitality venues and the end of the Eat Out To Help Out scheme. Scientific advisers have said the curfew would be unlikely to stop the virus’ spread.

PM concedes ‘circuit breaker’ may be necessary if tier system fails: Prime minister Boris Johnson will consider a “circuit breaker” lock-down if his tier system fails to work after Sir Keir Starmer increased the pressure on him by calling for new national restrictions. Government sources said Johnson could order a two-week closure of pubs, restaurants and some other businesses if measures brought in today (Wednesday, 14 October) in covid hotspots do not reverse the spread of the virus. A decision will be taken toward the end of next week, ahead of the half-term holiday for state schools which begins on 26 October and would mark the start of any temporary lock-down. One option under consideration is for regional circuit breakers, which might be preferred by Johnson after he likened a second national lock-down to a “nuclear deterrent”. One senior source said the chances of a circuit breaker were “at least 80%”. It comes as labour leader Sir Keir Starmer announced his own alternative plan in a televised press conference. For the first time, Sir Keir announced Labour would back a circuit breaker, and suggested how it should be done, with the closure of all pubs, bars and restaurants and a compensation package so “no business loses out” in order to “break the cycle” of infection. He said schools should stay open but the lock-down should coincide with the half-term holiday. He warned: “If we don’t, we could sleepwalk into a long and bleak winter. That choice is now for the prime minister to make. I urge him to do so.”

Comptoir reports pre-tax losses of £5m as revenue drops 61.4%, 50% of workforce made redundant: Comptoir Group, the owner and operator of Lebanese and Eastern Mediterranean restaurants, has reported group revenue fell 61.4% to £6.1m for the six months ending 30 June 2020, compared with £15.8m the year before. Gross profit dropped 60.9% to £4.5m, compared with £11.5m the previous year. Adjusted Ebitda before highlighted items fell 78.3% to £0.45m, compared with £2.1m the year before. Pre-tax losses rose to £5m, compared with £548,000 the previous year. It had net cash and cash equivalents at the period end of £5m, compared with £3.4m the year before and £5.1m as of 31 December 2018. The board carried out a full impairment review at the half year and as a result, impairment of £2.6m has been charged, “based on judgement of future cash flow generation from each restaurant”. The company reported as a result of the pandemic the team across its restaurants and head office has reduced by about 50%. It said it had come to “mutually agreed positions” with many of its landlords involving rent waivers, deferments and deductions from rent deposits and “more importantly” turnover rents instead of base rents going forward, However, the group said there were a number of landlords “who have not been as co-operative and we are still in discussions with them as this is vital for our survival”. The board also took the decision to apply for the government-backed Coronavirus Business Interruption Loan Scheme and has drawn down on this loan. The company stated: “This additional borrowing will help protect the cash position particularly with the requirement to pay the additional liabilities due to landlords, HMRC and other creditors as a result of deferred payment plans put in place during this pandemic period and also to give us headroom for survival during the anticipated low revenue expected for the second half of 2020 and continuing at least until the end of 2021.” Chief executive Chaker Hanna said: “The group began a phased reopening of its restaurants for full dining, takeaway and delivery services from 4 July. As at 1 October we have reopened 19 of our own operated restaurants leaving five still closed, pending the outcome of ongoing negotiations with the landlords. Our franchise partners HMSHost has reopened three out of the four sites they operate leaving just Dubai Airport still currently closed. The two franchise restaurants operated by The Restaurant Group (TRG) in Heathrow and Gatwick will not reopen under the TRG franchise agreement, however, we are in early discussions with airport authorities for the possibility of reopening them as company owned, or with another franchise partner, if and when the passenger numbers return to normality in the future. Trading in the early stages of reopening has inevitably been very challenging with the focus on the health and safety of our restaurant teams and guests being of ever more increasing paramount importance. Focus has continued on protecting the cash position, particularly bearing in mind the large majority of our restaurants are London based which are still very quiet in terms of footfall, driven by very low number of tourists, offices still unoccupied and theatres still closed. Also the need to service the increased deferred liabilities of the business has placed even more pressure on the available cash position. With the huge reduction in revenue, the focus on the control of operational costs and the tightest possible management of our cash is now absolutely key and continues to be at the forefront of minds as we navigate through these unprecedented times for us and the entire UK hospitality. Cost saving measures introduced include redeployment of field based operational support managers into the restaurants and reduced salaries across the central support and executive teams plus all of our salaried site management teams. The focus on the health and safety of our team members and guests has been further enhanced by the implementation of a new Comptoir app providing our guests with the option to order and pay safely at the table. Alongside revised rota management protocols and the introduction of safeguarding equipment and other related measures, we have sought to optimise protection from the covid-19 virus. The introduction of the recent 10pm curfew across hospitality has placed further pressure on our restaurants. The company are mindful of the increasing imposition of government enforced localised lock-downs and the potential for future wider restrictions and even national lock-downs.”

Just Eat reports order growth accelerates to 46%: Just Eat has reported order growth in the third quarter has accelerated to 46%. The company stated: “Order growth accelerated compared with the prior quarter, leading to a widening gap to competition in key countries, including the UK and Canada. Australia was the fastest-growing country, delivering market share gains with triple-digit order growth in the quarter. Just Eat has started an aggressive investment programme in the legacy Just Eat countries to strengthen its competitive positions, significantly increasing spending on marketing and sales. This programme has delivered accelerated growth while maintaining strong adjusted Ebitda. The company continued to enhance its restaurant selection, driven by several new partnerships, including the roll-out of approximately 800 McDonald’s restaurants and 300 Greggs locations in the UK. The integration of Just Eat and is on track. During the quarter, was migrated to the company’s core European IT-platform, following the earlier migration of Furthermore, all countries have now adopted the same branding, creating a single global brand identity. Last week the acquisition of Grubhub was approved by the Just Eat extraordinary general meeting. Subject to satisfaction of conditions, completion of the transaction is anticipated to occur in the first half of 2021.” Chief executive Jitse Groen said: “Order growth at Just Eat further accelerated, consequently widening the gap to competitors in our key markets. We have continued to generate strong adjusted Ebitda, while investing aggressively, and are well-positioned for autumn and winter, our traditional growth season.”

Cineworld and Odeon ‘may run out of cash by Christmas’: Cinema operators Cineworld and Odeon risk running out of cash by the end of the year after a second wave of the coronavirus pandemic scuppered any chance of a swift recovery. AMC Entertainment, the US company behind Odeon, warned it will soon run out of money if demand failed to return. Meanwhile analysts said Cineworld could be weeks from collapse. The company – which has shut all its 663 cinemas in the UK and US, with 45,000 jobs at risk – will need to raise $500m (£380m) from lenders to get through to next spring, they added. Both AMC and Cineworld have opened talks with creditors to access fresh funding. AMC said there was a “significant risk” it may not be able to strike a deal. About a quarter of the UK’s 110 Odeon cinemas are only open between Friday and Sunday. Most of AMC’s US sites – almost 500 out of 598 – have resumed operations, albeit some with reduced hours. Cineworld has hired PJT Partners to help with negotiations as it seeks a lifeline. Lenders appointed Houlihan Lokey and FTI Consulting ahead of talks over the future of the operator. Bank of America, an adviser to Cineworld on its aborted £1.6bn acquisition of Canadian rival Cineplex earlier this year, said the roughly $400m the company had in the bank in June would not be enough to get it to Christmas. Analysts at the US investment bank estimated Cineworld would burn through about $420m in the second half of 2020, assuming its sites remain closed until the end of the year. They said: “This suggests the group could run out of cash in November or December.” Bank of America said tapping investors for cash through a rights issue is unlikely, suggesting a deal with lenders is a more probable outcome. Cineworld previously warned it would need to raise $200m to $300m from investors. But that was before MGM decided to again delay the new James Bond film No Time To Die from November until April next year. The company is hoping to renegotiate terms on its revolving credit facility and access additional support from taxpayers. Kiranjot Grewal, a research analyst at Bank of America, estimated about $500m of new funds would be needed to get through the first six months of 2021 if no revolving credit facility extension was granted. This will be closer to $700m if the company starts paying full rents again next year, he said. It comes as it emerged a US hedge fund could player a major role in Cineworld’s fight for survival. Centerbridge Partners provided the bulk of a $250m secured loan to Cineworld in June to enable the operator to weather the fallout from the first wave of coronavirus, Bloomberg reported. The prospect of a US-headquartered Centerbridge, a distressed debt specialist, featuring in some of Cineworld’s top ranking debt will further fuel City speculation a debt-for-equity swap is on the cards. Over the weekend fellow cinema operator Vue said it would shut a quarter of its UK cinemas for three days a week.

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