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Morning Briefing for pub, restaurant and food wervice operators

Fri 30th Jul 2021 - Pandemic cost hospitality £100bn in sales
Pandemic cost hospitality £100bn in sales: Hospitality businesses have suffered a £100.2bn drop in sales from pre-pandemic levels in the 15 months since the start of the covid-19 pandemic, the latest edition of the UKHospitality Quarterly Tracker with CGA reveals. Prolonged closures and severe trading restrictions limited total sector sales in the 12 months to end-June 2021 to an estimated £59.8bn – down by £72bn from the total of £131.9bn in the 12 months to end-June 2019. Adding on the second quarter of 2020, this brings total sales in the last 15 months to £64.4 bn, £100.2 bn below the total of £164.6 bn in the 15-month period to June 2019. The latest quarterly figures are a notable improvement on recent year-on-year comparatives, following the easing of restrictions for restaurants, pubs, bars, hotels and entertainment venues since mid-April, compared to a period when hospitality was almost totally shut in 2020. As a result, estimated sales in the three months to end-June 2021 totalled £18.4 bn, compared to £4.6 bn in the same quarter of 2020. The sharp increase shows that hospitality’s recovery is underway, and that strong consumer demand for the sector can help to power the UK’s wider economic revival. However, the £100.2bn shortfall in sales from pre-pandemic levels indicates the seismic impact of covid-19 on the UK’s hospitality sector. While the easing of restrictions from Monday 19 July has given businesses greater freedom to trade – and allowed some to open for the first time in 16 months – many now face major challenges including debt burdens, staffing crises and fragile consumer confidence. Kate Nicholls, chief executive of UKHospitality, said: “These figures confirm in stark terms the huge impacts on the hospitality sector during covid. Furthermore, while we hoped to be close to normal trading from 19 July, in reality hospitality businesses instead remain impeded, by the ongoing ‘pingdemic’ crisis, the pre-existing staffing shortage and the looming shadow of vaccine passports over some of the sector. History tells us that hospitality can be a leading economic force in driving an economic recovery but to do so in current conditions and with huge debt accruals, it will need further support to push it over the line and back to pre-covid trading. Extension of the business rates holiday, speedy resolution to the rent problem and retention of the lower VAT rate indefinitely are more crucial than ever to safeguard jobs and businesses.”

Updated database of multi-site businesses released at midday today and another brand new database released at same time too: The updated database of multi-site companies for July, which is produced in association with Virgate, will be sent out today (Friday, 30 July) at midday. The Propel Multi-Site Database will include 71 additions and is exclusively available to subscribers. The 71 new companies operate 477 sites between them and increase the total number of companies on the database to 1,951. Subscribers will not only receive the database as a PDF and an Excel spreadsheet, they will also be sent a 12,094-word report on the businesses added during July. The go-to database provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. In a new feature this year, there is a synopsis of what the business does and significant news associated with it. It is updated at the end of every month. Premium subscribers will also receive a new database at exactly the same time today, at midday, (Friday, 30 July). The New Companies Database will focus on the newly announced openings and upcoming launches in the sector and will be updated at the end of every month. Meanwhile, subscribers also have access to another database called Turnover & Profits Blue Book. The Blue Book, which is also updated every month – on the second Friday of the month – provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Propel insights editor Mark Wingett. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The regular single subscription rate of £395 plus VAT for operators and £495 plus VAT for suppliers remains the same. In today’s (Friday, 30 July) Premium Opinion column, Propel insights editor Mark Wingett looks back at the week just gone, with a focus on the decision by NewRiver to sell Hawthorn to Admiral Taverns. Email to sign up.

Shepherd Neame – we will lose less than originally forecast: Kent pub operator and brewer Shepherd Neame, has reported it has performed well, generating cash and profits ahead of our expectations since the resumption of trading on 12 April. The company stated: “Initial outdoors trade from 12 April to 16 May was encouraging, but demand has taken a step up from 17 May when indoors trade was allowed. The business continues to benefit from pent-up demand for the pub experience. Our rural and coastal pubs and hotels, in particular, are benefitting from their unique locations and great outside space. Beer volume in all channels is strong. Overall retail sales have been impacted by the extended closure of 15 Central London pubs. From 19 July, now that restrictions are lifted, we have re-opened almost all of these, although we expect their trade levels to remain below prior levels for some time to come. For the 11 weeks from 12 April to 26 June, managed pubs that were open and trading achieved 84% of their 2019 revenue and total retail sales, including those closed pubs in London, were 60% of 2019 levels. For the initial period of outdoor trading between 12 April and 16 May open pubs achieved 62% of 2019 levels and from 17 May, when indoor trading resumed, to the year end, those sites that were open achieved 97% of 2019 levels. Since full restrictions have lifted on 19 July we have seen a modest increase in sales. For the 11 weeks from 12 April to 26 June, our tenanted pubs achieved 77% of their 2019 volume. For the four weeks of June, they achieved 91% of 2019 beer volumes. After charging no rent for all the weeks of lockdown, our tenanted pubs returned to 90% of normal rent as from 21 June and, as from 2 August, will return to normal rent. Total beer volume has been resilient throughout the pandemic, and we have obtained new on trade customers and new listings in the grocery trade and export. As the on trade has re-opened, sales have been buoyant, with total volume in all channels in May and June up +8.4% versus 2019 and total own beer volumes excluding contract down -3.6% for the same period. Although the restart has been most encouraging, the company will inevitably report a loss for the financial year to 26 June, after such lengthy periods of closure, though less now than originally forecast.” Jonathan Neame, chief executive of Shepherd Neame said: “It has been great to be open again, and our team members and licensees are delighted to be able to welcome our customers back. Although we continue to trade below full capacity, we have benefitted from strong pent-up demand. The business is back on the path to recovery and has been cash generative and profitable since re-opening. Although we naturally have to be cautious in case further restrictions are imposed during the winter months, we are now looking forward and planning beyond the pandemic with some optimism, driven by the rapid return to near normal trading levels in the past few weeks.”

Cineworld secures additional liquidity: Cineworld has secured $200m of incremental loans maturing in May 2024 from a group of its existing lenders. The company stated: “The new debt facility does not have a material impact on the group’s weighted average cost of debt. The group has also agreed covenant amendments on certain of its existing debt facilities, including reducing the minimum liquidity requirement and relaxing limitations on the use of cash, among other modifications which will further support the group as cinemas restart trading. Cineworld believes that this further liquidity, in addition to the US CARES Act refund of $203m that was fully received in May 2021 and the $213m convertible bond raised in March 2021, together with the tight control over cash usage will provide the group with the financial and operational flexibility and resilience to execute on its business strategy as it resumes its operations. Since cinemas started reopening in April 2021, trading has continued to improve, and the group is now well-positioned to benefit from pent-up customer demand and the exceptionally strong film slate through the second half of 2021.” Mooky Greidinger, chief executive of Cineworld, said: “The additional liquidity announced today provides the group with significant operating flexibility now that cinemas have opened across the world. We are monitoring the evolution of the virus and its potential impact on our business, but we are very excited about the potential of the unprecedented slate of films in the second half of 2021 (mainly in the fourth quarter). We remain confident in the prospects for our business and continue to look forward to welcoming our customers back to the best place to watch a movie.” 

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