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Summary
- Chancellor Rishi Sunak has said that Eat out to Help Out II is not on the cards.
- The UK government spent nearly £850 million in subsidising 160 million meals under scheme in 2020.
Chancellor of the Exchequer Rishi Sunak has conveyed that the government does not intend to resurrect the bonanza announced for the hospitality sector after the initial lockdown that ended in July 2020. The popular meal subsidy scheme Eat Out to Help Out was launched to get consumers spending back and protect the battered sectors in the wake of pandemic led lockdowns.
As per the scheme, the British government paid half of people's meal bills when they ate out during the week. The Treasury-backed scheme was rolled out to incentivise the Britons to go out and spend as the sector was witnessing a lot of job redundancies. Also, the threat of uncurable awful virus persisted. Notably, the British government spent nearly £850 million in subsidising 160 million meals through Eat Out to Help Out scheme in 2020.
The 2020 was drastic for the hospitality industry as the unprecedented lockdown restrictions weighed down heavily on the industry players. The scheme was supposed to help the hospitality industry in terms of economic gains. Instead, the subsidy scheme acted as a catalyst for contributing to the spike in Covid-19 infections.
However, things have changed since the UK has access to the Covid-19 vaccines. The UK has finally found an end to vicious lockdowns. The government has already accelerated mass vaccination programmes and Sunak believes a strong consumption recovery in the UK due to pent-up demand that shall translate into spending in pubs, bars, restaurants.
Post announcement, no major impact was observed in the hospitality stocks as the announcement was on expected lines.
Let us put our lens through some Hospitality stocks listed on the London Stock Exchange.
Marston's Plc
UK-based Marston's Plc (LON: MARS) manages a chain of pubs and breweries. The hospitality company witnessed significant disruption in trading for 13 weeks in the wake of pandemic and lockdowns, according to its recent trading update for Q1 FY21. Notably, the pub and brewery owner could only muster £54 million in revenues for the first quarter of 2021.
The company has received initial proceeds of £233 million as it successfully completed the joint venture between Marston's Beer and Carlsberg UK Company. The company would use this amount to reduce its debt.
In December 2020, the hospitality company forged contracts with SA Brain. According to the contract, Marston’s shall operate Brain’s portfolio of 156 pubs in Wales.
The shares of the company seem to have made a solid start to the year 2021 as they delivered a staggering YTD return of over 25 per cent. MARS shares were marginally down by 0.05% from the previous day closing price and traded at GBX 95.80 on 12 March 2021 at GMT 11:29 AM+1.
Restaurant Group Plc
UK-based Restaurant Group Plc (LON:RTN) operates over 500 restaurants and pub restaurants. The group witnessed encouraging trading performance, particularly at Wagamama and Pubs businesses.
During the third national lockdown, the average takeaway and delivery sales stood at approximately 2.5x and 5.0x of pre-Covid-19 levels in Wagamama and Leisure during the four-week period ended February 2021.
As the lockdown restrictions are removed, the Group has accelerated reopening plans and seems to be well positioned across its diversified brand portfolio to generate value for its shareholders. The company has also secured additional financing with £500 million of new debt facilities in place and aims to raise a capital of £175 million to boost liquidity.
The shares of the company seem to have made an electrifying start to the year 2021 as they delivered a whopping YTD return of over 72 per cent. RTN shares were marginally up by 0.27% from the previous day closing price and traded at GBX 110.60 on 12 March 2021 at GMT 11:34 AM+1.
Whitbread Plc
UK-based Whitbread Plc (LON:WTB) owns a network of hotels and restaurants. During the Q3 2021, 82% of its restaurants opened with reduced capacity amid subdued market demand. Notably, the total F&B (Food & Beverage) sales were 53.9% behind year-on-year during the third quarter of 2021.
The company has a strong balance sheet with a net cash position of £40 million on 31 December 2020. The shares of the company seem to have made a solid start to the year 2021 as they delivered a double-digit YTD return of over 10.53 per cent. WTB shares were marginally down by 0.61% from the previous day closing price and traded at GBX 3,424 on 12 March 2021 at GMT 12:04 PM+1.
