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Fri 16th Oct 2020 - Update: JD Wetherspoon and Loungers trading, Star Pubs & Bars introduces 'tiered' rent concessions
JD Wetherspoon reports like-for-likes down 15% in most recent 11 weeks as Tim Martin warns table service is ‘turning pubs into restaurants’: JD Wetherspoon has reported like-for-likes sales in the in first 11 weeks of the new financial year have been 15% below those of last year, with “strong sales” in the first few weeks, followed by a “marked slow-down” since the introduction of the 10pm curfew and other regulations. Chairman Tim Martin warned lock-down is “only deferring and not solving the problem” and is “threatening the entire economy”. He said the introduction of table service only have been particularly damaging for trade, depressing sales for customers who find it too much “faff”. Martin said: “Warren Buffett, chairman of Berkshire Hathaway, commented in 1989 on the dangers of what he calls the ‘institutional imperative’ and how it compels companies to stay on the same course, even if it’s the wrong course – and how it compels companies to imitate competitors. The institutional imperative applies just as much to governments as it does to boards of directors. Since 100 governments adopted a lock-down strategy, it was very difficult for any government to adopt a different course. However, pubs eventually reopened in England on 4 July and in the rest of the UK shortly thereafter. The lock-down was far longer than was necessary to achieve its stated objective of ‘flattening the curve’ so as to assist the health service. Before pubs reopened, a detailed and comprehensive operating plan for the hospitality industry was nevertheless agreed on among the government, parliamentary committees, UKHospitality, civil servants and other interested parties. The regulations and guidelines reflected in the plan drastically reduced pub capacity, but were carefully thought out and had the backing of the industry, legislators, licensing officials, local authorities and the public. For the two months following reopening, it appeared the hospitality industry, in difficult circumstances, was adapting to the new régime and was getting ‘back on its feet’, albeit in survival mode. It appears that the government and its advisers were clearly uncomfortable as the country emerged from lock-down. They have introduced, without consultation, under emergency powers, an ever-changing raft of ill-thought-out regulations – these are extraordinarily difficult for the public and publicans to understand and to implement. None of the new regulations appears to have any obvious basis in science. For example, a requirement for table service was introduced – which is expensive to implement and undermines the essential nature of pubs for many people – pubs have now become like restaurants. Customers can approach the till in a shop, but not in a pub – which is, in no sense, ‘scientific’. In addition, face-coverings, for which the health benefits are debatable, need not be worn while seated, yet must be worn to go to visit the bathroom – another capricious regulation. The most damaging regulation relates to the 10pm curfew, which has few supporters outside of the narrow cloisters of Downing Street and SAGE meetings. This has meant many thousands of hospitality industry employees, striving to maintain hygiene and social-distancing standards, go off duty at 10pm, leaving people to socialise in homes and at private events which are, in reality, impossible to regulate. In marked contrast to the consistency of the comparatively successful Swedish approach, which emphasises social distancing, hygiene and trust in the people, the erratic UK government is jumping from pillar to post and is both tightening and tinkering with regulations, so we are now in quasi-lock-down, which is producing visibly worse outcomes than those in Sweden, in respect of both health and the economy. Risk cannot be eliminated completely in pubs, but sensible social-distancing and hygiene policies, combined with continued assistance and co-operation from the authorities, should minimise it. Like-for-like sales in the first 11 weeks have been 15.0% below those of last year, with strong sales in the first few weeks, followed by a marked slow-down since the introduction of a curfew and other regulations, some of which are referred to above. The recent curfew and introduction of table service only have been particularly damaging for trade, depressing sales for customers who find it too much ‘faff’, at the same time as substantially increasing costs. As a result of recent changes in regulations, the outlook for pubs over the remainder of the current financial year is even more unpredictable than hitherto. The company has successfully adapted its business, over the past 41 years, to cope with widely different political and economic circumstances. We now employ more than 40,000 people, 10,000 of whom are shareholders in the company, and are a major contributor to national income, paying approximately one pound in every thousand of treasury receipts in 2019 and in preceding years. However, the company and the entire hospitality industry need a more sensible and consistent regulatory framework in which to operate – the current environment of lock-downs, curfews and constantly changing regulations and announcements threatens not only pub companies, but the entire economy. The most important lesson, as professor Mark Woolhouse of Edinburgh University has said, is that ‘lock-down just defers the problem; it doesn’t solve it’.” Like-for-like sales were down 29.5% in the 52 weeks ended 26 July 2020, having increased by 5.9% in the first half. Total sales fell 30.6% to £1,262m. Profit before tax pre-IFRS 16 was down 133.3% to £34.1m, including property losses of £0.6m. After exceptional items, profit before tax pre-IFRS-16 dropped 199.3% to £94.8m. Bar sales decreased by 29.3%, food sales by 30.1%, slot/fruit machine sales by 20.9% and hotel room sales by 38.7%. Exceptional items totalled £60.7m (2019: £7.0m). There was a £3.5m loss on disposal, an impairment charge of £44.0m, expenditure in relation to covid-19 of £29.1m and a credit of £15.9m in respect of a long-standing claim with HMRC for VAT on fruit/slot machines. For the year ending 26 July 2020, as a result of the new IFRS-16 standard, Ebitda has increased by £58.5m and operating profit by £9.8m. The company opened two pubs during the year, with nine sold or closed, resulting in a trading estate of 872 pubs at the financial year end. The average development cost for a new pub (excluding the cost of freeholds) was £2.3m, compared with £2.6m a year ago. The full-year depreciation charge excluding right-of-use assets, was £79.3m (2019: £81.8m).

Loungers reports like-for-likes up 25.1%, plans three new sites: Cafe bar brand Loungers, which operates 168 sites across England and Wales under the Lounge and Cosy Club brands, has reported like-for-like sales growth of 25.1% for the 13 weeks to 4 October. The company said its “significant” outperformance of the market since reopening on 4 July has been maintained and expects to open a further three sites in the current financial year. Loungers stated: “While the resurgence in covid-19 cases increases the likelihood of additional trading restrictions, we remain very encouraged by the strength of our trading post reopening. All 168 of our sites remain open and trading. Over the course of the period, the group opened two new sites, comprising Ponto Lounge in Hull and Cosy Club in Brindleyplace in Birmingham, taking the portfolio to 167 sites as at 4 October 2020. Sentado Lounge opened in Sittingbourne earlier this week, and while the group remains cautious with regard to the pace of roll-out it expects to open a further three sites in the current financial year.” Chief executive Nick Collins said: “I am delighted with our continued excellent trading, which reflects the resilience of our brands and fantastic performance of our team working in very difficult circumstances. Loungers, and the sector more broadly, have gone to considerable efforts to ensure the safety of our teams and customers. We anticipate further interruptions to trade in the coming weeks and months, but take confidence from our continued market outperformance. We remain well-positioned to accelerate our growth and to continue to lead the market once covid-19 is behind us.”

North west sector bosses lambast PM over ‘pointless’ tier three restrictions: North west brewery and pub bosses have warned prime minister Boris Johnson the government’s tier three restrictions “pointlessly victimises and destroys pubs, their employment and our northern communities”. Joseph Holt chief executive Richard Kershaw; Hydes managing director Adam Mayers; JW Lees managing director; William Lees-Jones; Oliver and William Robinson, joint managing directors of Robinsons; and Thwaites chief executive Richard Bailey said: “Our breweries and pubs have been an integral part of Greater Manchester, Lancashire, Cheshire and the north west’s communities for hundreds of years – we are on the ground – we are not running our pubs in a theoretical intellectual and political bubble 200 miles away in Westminster. The current government policy to single out pubs for closure in tier three with inadequate support is a national disgrace. It is clear, and the statistics show, that transmission of the coronavirus is happening in education, care homes, hospitals and the home. Already we have been trading with severe restrictions since 31 July in Greater Manchester but we feel that the government is now going too far and we stand by the stance that Andy Burnham, mayor of Manchester, is taking that our pubs cannot be closed down in the manner proposed with tier three restrictions and only very limited compensation. The government is not able to produce any evidence that pubs or the hospitality sector is a significant factor in coronavirus transmission – because there is none. Since the start of July our 860 pubs, in Manchester and around the north west of England and North Wales, have had not one case where they have been contacted by Track and Trace as a result of linked virus cases in one of our pubs. Our pubs have had between eight to ten million visits since reopening in July – we are aware informally of only 15 to 20 individuals who have been in touch with their pub in the days after visiting to say that they have contracted the virus. This equates to 0.25 people per 100,000 visits of pub-goers who might have or more likely did not contract the virus on a visit to a pub. Pubs are being victimised and made a scapegoat in a desperate political effort to be seen to do something – even though it is obvious it will not work as the real problem lies elsewhere. Victimising pubs for closure will destroy people’s businesses and employment, take away the homes of landlords and their families and cause community misery and financial ruin in the north of England and Wales. Shutting our pubs would be a deliberate political act of wilful economic destruction, visited upon the north for no gain. Our pubs have already been made covid-secure and are safe and ready to play their part in their communities through the winter – northerners should not agree that their economies, employment and communities are deliberately devastated by this Conservative government’s action.”

Star Pubs & Bars increases rent concessions with three-tier approach: Heineken-owned Star Pubs & Bars is increasing rent concessions for its leased and tenanted pubs in England with a new structure of discounts aligned to the government’s tier system of covid restrictions. It is also providing additional support to its licensees in Scotland and Wales affected by local lock-down restrictions. As part of the latest package of support for pubs in England, those in tier three (very high) areas will pay no rent and those in tier two (high) regions will receive a 90% rent reduction. Pubs in tier one (medium) parts of the country will continue to receive a rent reduction of 30% to 50% in November, as previously announced. In Scotland and Wales, similar levels of reductions are being applied according to local lock-down restrictions. Star Pubs & Bars has already committed to fund rent reductions totalling £27.8m and said this new rent concession package will “substantially increase” its investment in order to support its pubs in the long-term. Managing director Lawson Mountstevens said: “It’s an extremely challenging time for licensees who’ve been through months of uncertainty and constantly changing government rules and regulations. Our new three-tier rent reduction programme is designed to give them the support, clarity and reassurance they need. The latest local lock-down restrictions will have a devastating impact not just on pubs but on the communities they serve. The government must step up and do more to help. Additional financial assistance and a rethink of the 10pm curfew are urgently required.” The company said its rent support will remain under review and will be adapted in line with government announcements and support.

Hospitality tackles food waste on UN World Food Day: UKHospitality is urging industry businesses to continue to take steps to tackle food waste across the sector to coincide with UN World Food Day today (Friday, 16 October). Established to commemorate the formation of the Food and Agriculture Organisation of the United Nations in 1945, UN World Food Day raises the issue of food waste, a key challenge for the sector given it is one of its primary sources of carbon dioxide emissions. UN Sustainable Development Goal 12.3 calls for a halving of per capita global food waste at the retail and consumer levels and a reduction in food losses along production and supply chains, including post-harvest losses by 2030. UKHospitality supports WRAP and the work it is carrying out to reduce food waste in the sector. WRAP recently launched a pilot of its new online learning course – Guardians of Grub: Becoming a Champion – to support the hospitality sector with developing the skills and confidence to take action on food waste. This tool is freely available to all businesses within the industry. UKHospitality chief executive Kate Nicholls said: “Tackling this issue is essential for our sector, not only because it is of great environmental benefit, but because it will also help businesses cut costs at this time of existential crisis in the hospitality sector.”

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