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Thu 21st Jan 2021 - Update: Furlough, distressed firms, Ten Entertainment, NewRiver Retail
Chancellor considers furlough extension and revival of job retention bonus in Budget: Chancellor Rishi Sunak is weighing up another extension of the government’s furlough scheme as part of plans to support the UK’s covid-hit jobs market. The £60bn scheme paying 80% of workers’ salaries has already been extended until April, but a continuation of the unprecedented jobs support is an option under consideration for Mr Sunak’s Budget on 3 March, sources told Bloomberg. More than four million people have been vaccinated so far but restrictions are likely to be lifted only gradually, potentially pushing the UK into a double-dip recession. The Bank of England’s chief economist Andy Haldane has estimated that around one million people have already lost their jobs since the virus struck. According to The Telegraph, other support tools being considered are said to include the revival of the £1,000 job retention bonus to encourage firms to keep staff on, which was announced in July but scrapped in October when the furlough was extended ahead of the second lockdown. The Chancellor also faces pressure from businesses to extend a series of reliefs on business rates and VAT to avoid a cliff-edge at the end of March which could trigger another wave of redundancies. The Treasury said: “At the upcoming budget the government will set out how we’ll ensure public services continue to receive the investment they need. We’ll also outline the next stages of our plan for jobs to support businesses and families across the UK. That has been our priority throughout the past year and it will be the priority for the year to come.” 

Big increase in number of distressed firms: About 630,000 businesses were experiencing significant financial distress as they entered the third national lockdown, according to new research, further underlining the economic damage being wrought by the pandemic. The Times reports that in the final three months of last year there was a 27% increase in companies suffering a marked deterioration in key financial metrics such as working capital, contingent liabilities and retained profits, or having county court judgments (CCJs) filed against them, compared with the same period in 2019. The “red flag” study from Begbies Traynor, the restructuring firm, found that every one of the 22 sectors it monitored exhibited increases in signs of such “significant distress”, highlighting the deteriorating financial situation for many companies. Businesses in the financial services, property and hotels, and accommodation sectors were particularly hard hit, but Begbies Traynor warned its figures were “the tip of a very large iceberg”. Julie Palmer, a partner at Begbies Traynor, said: “Without the financial aid and support measures the government has put in place during the pandemic, insolvency levels would have been much higher. However, the sad truth is that for many this will provide little more than a stay of execution as debt and structural changes take their toll.” Palmer said that new financial support issued during the latest lockdown “simply won’t be enough for thousands of businesses who likely will not survive in the interim”.

Ten Entertainment Group – we will benefit from pent-up demand and reduced market capacity: Ten Entertainment Group, which operates 46 family entertainment centres in the UK, has argued that there is significant pent-up demand for its centres once it is allowed to re-open. It stated: “Our underlying business model remains highly attractive and strongly cash generative with fully modernised sites, and a long-standing track record of organic growth and successful acquisition investment. Once the national position has eased, we are confident that customers will be eager to return to experience again our great value family entertainment offer. The reduced market capacity from the closure of casual dining and leisure businesses is likely to be favourable to our business as lockdown eases and pent-up demand is released.” Nick Basing, interim executive chairman, said: “Our leadership team have ensured that the business has been maintained in first-class shape for when we are able to reopen fully. We have used this extraordinarily challenging year to strengthen our underlying business model, and I’m delighted to confirm Graham Blackwell as chief executive who as an executive is second to none. The relevance of our great value family entertainment proposition should ensure a rapid return to our trajectory of sustained growth.” Chief executive Graham Blackwell added: “We expect there to be significant pent-up demand when our business reopens. Our highly popular competitive socialising model, operating in safe, spacious and well-invested centres, will be extremely attractive to people in a post vaccine environment. We have secured strong liquidity headroom well into 2022 and anticipate a rapid return to profitability and previous sales levels once the government eases trading restrictions.” The company added: “Total sales for the 2020 financial year were £36.3m which is 56.9% down on FY19 and 17.4% down on a like-for-like basis adjusting for enforced site closure periods. Unsurprisingly, with the significant disruption which has impacted all but three months of 2020, the group expects to report a loss for FY20.”

NewRiver  – we have benefited from minimal exposure to casual dining operators: Property landlord NewRiver, which owns pub operator Hawthorn, has reported rent collection for the first three quarters of the financial year continues to improve following key agreements made with retailers. It added: “Retail rent collection in respect of the fourth quarter, due on 25 December 2020, is currently tracking ahead of the levels seen at the same point in Q3. As in previous quarters, we expect the Q4 figure will continue to improve in the coming weeks. We are on course to meet our target to dispose of £80 million to £100 million of assets this financial year, despite the latest lockdown restrictions, with £157.4 million of disposals either completed, exchanged or currently under offer, across all asset types. In aggregate these disposals represent a 6% discount to March 2020 valuations. This figure comprises £53.3 million of completed disposals, £8.9 million of exchanged, and £95.2 million under offer. Reflecting our focus on essential retail, 52% of our occupiers by gross income are currently open and trading, despite the current lockdown restrictions across the UK. Eight of our top ten tenants have remained open throughout the latest lockdown. Our retail portfolio remained well-diversified, with our top tenant, B&M, representing 2.5% of our gross income. Our average rent remained broadly stable at £11.70 per sq ft (September 2020: £11.85) and our occupancy remained high at 96.0% (September 2020: 96.2%). We continue to have limited exposure to the structurally challenged retail sub-sectors that have been particularly impacted by covid-19 and recent restrictions, with no department stores in our portfolio, and minimal exposure to mid-market fashion and casual dining operators.”

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