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Highlights
- UK’s pub and restaurant companies are due to face a steep quarterly rent bill of about £1.5 billion amid sharp drop in the festive trading period due to omicron fears.
- Trade body, UK hospitality said about 33 per cent of pub and restaurant companies do not have any cash reserves left.
- Several hospitality sector bosses cautioned the industry was at risk of ‘bleeding out’.
UK’s pub and restaurant companies are slated to face a steep quarterly rent bill of about £1.5 billion, which is due on Christmas eve. This quarterly rent payment comes amid Omicron related worries, which has led to a sharp drop in trading.
Re-introduction of work from home measures and social restrictions in order to curb the new variant’s spread led trading at hospitality venues to fall by about 40 to 60 per cent during the holiday season, according to the industry trade body, UK hospitality’s CEO Kate Nichols.
This is expected to put several companies in the sector at risk of facing bankruptcy. According to data from the industry trade body, about 33 per cent of pub and restaurant companies do not have any cash reserves left.
Several hospitality sector bosses cautioned the industry was at risk of ‘bleeding out’ due to businesses that had managed to pull through in the previous two lockdowns would finally going bust.
This came amidst the UK’s business secretary Kwasi Kwarteng refusal to commit any support package as yet, despite having a call with industry groups after the Cabinet meeting.
Let us take a look at 2 FTSE listed stocks in the hospitality sector and their investment prospects amid the rising concerns:
- Young & Co's Brewery PLC (LON: YNGA)
Young & Co's Brewery is a UK based pub chain and is part of the FTSE AIM UK 50 index.
The pub company’s revenue, for the 26 weeks ended 27 September 2021, was at £149.6 million, compared to £52.7 million in the year before.
Its operating profit during the period stood at £27.5 million, reversing from a loss of £17.3 million the year prior.
Image source: Refinitiv
Young’s shares ended at GBX 1,480.00, down by 1.33 per cent as of 20 December, while the FTSE AIM UK 50 index closed at 6,306.52, down by 0.37 per cent.
The company’s market cap was at £516.09 million, and a one-year return of 31.56 per cent as of Monday.
- Loungers PLC (LON: LGRS)
Loungers is a UK based café bars and café restaurants operator. It is a constituent of the FTSE AIM All-Share index.
The group’s operating profit for the 24 weeks that ended on 3 October, was at £15.9 million, compared to £3.4 million in the year before, while the operating profit for the comparable period in 2019 was £2.03 million.
The company said, in its interim results published on 1 December, that despite being mindful of the Omicron variant news, the group was optimistic about its trading for the Christmas period and after.
Image source: Refinitiv
Loungers’ shares ended at GBX 278.50, lower by 2.79 per cent as of 20 December, while the FTSE AIM All-Share index closed at 1,158.85, lower by 0.81 per cent.
The company’s market cap was at £294.35 million and a one-year return of 28.82 per cent as of Monday.
