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Summary
- Disallowing sale of alcoholic beverages can seriously impact the earnings of pubs & restaurants for October.
- The new regime of restrictions is also likely to discourage consumers from going out
- Sudden change in policies and regulations can severely impact the business of most companies
As the UK recorded a sharp upward trend in coronavirus infections, the British government has introduced further Covid-19 restrictions. The UK has recorded more than 14,000 fresh cases of Covid-19 infections in the last 24 hours. A nationwide ban of two weeks on drinking in licensed premises has been imposed in Scotland, which indicates that the suffering for the Entertainment & Leisure sector is likely to extend for some more time.
Also read: Pandemic Headwinds on Two Travel & Leisure Stocks - TUI AG and Saga PLC
The New precautionary regime has been rolled out for preventing the spread of the deadly virus
- Pubs & restaurants are allowed to serve food & non-alcoholic beverages only during 6:00 hrs to 18:00 hrs starting from 9 October to 25 October.
- Alcoholic beverages could be served outdoors up till 22:00 hrs. Notably, serving of alcohol inside the premises is strictly prohibited.
- “Rule of six” is still applicable while adhering to 2 metres physical distancing norms.
- Face masks are mandatory in an indoor setting, non-compliance may lead to the imposition of fines
- Entertainment zones would remain closed
Also read: A look at Pubs and Gambling Stocks Post Lockdown Relaxation
Let us put our lens through a few Entertainment & Leisure businesses which are likely to get impacted in the wake of new Covid-19 rules announced by the government.
Marston’s Plc
Pubs and breweries operator, Marston’s Plc (LON:MARS) is likely to suffer severely in terms of cash flows and liquidity in the wake of another lockdown. The Covid-19 disruption has already led to the severe impact of around £40 million decline in revenue. The company managed to raise £61 million through the sale of 168 pubs.
The UK government has unveiled new rules for pubs, bars, and restaurants. All hospitality venues would be restricted to table service only and must have 10 pm as their closing time. However, Marston’s joint venture with Carlsberg UK shall help the former company attain a better penetration in the segment.
The Company would utilise the proceeds to reduce its debt levels, and the joint venture is expected to complete by the fourth quarter of 2020. From January till date, Marston’s shares are down by nearly 70 per cent.
- City Pub Group Plc
City Pub Group Plc (LON:CPC) manages an estate of pubs in England and Wales. As the lockdown was lifted and pubs were allowed to recommence trading, City Pub Group reopened 37 of its 48 trading pubs during the first week of July. The company witnessed stronger cash flows and revenue generation.
City Pub Group generated total sales of £12.1 million during the first half of 2020 as it achieved 80 per cent of its sales in comparison to pre-pandemic times. The company has sufficient liquidity along with £13 million of net debt and a strong balance sheet. The Company has reduced its cost structure, which has led to profitability and cash generation. From January till date, City Pub shares are down by more than 72 per cent.
- Rank Group Plc
FTSE 250 listed multi-channel gaming operator, Rank Group Plc (LON:RNK) operates through three brands – Grosvenor Casinos, Mecca, and Enracha. The regulatory and legislative regimes for betting and gaming are constantly under review and can change at short notice. These changes could benefit or have an adverse effect on the Company’s performance. Another lockdown in the wake of COVID-19 can pose a massive risk to dividend policy outlook, as it could lead to a substantial decline in profits. Moreover, the economic fallout can massively influence consumer spending on leisure activities.
The overall net gaming revenue of the company was down by 15 per cent for the fiscal year 2020. In the wake of COVID-19 pandemic, the Board has not proposed a final dividend for 2020. The Group had a net debt of £63.2 million (IFRS 16 adjusted) on 30 June 2020. From January till date, Rank Group shares are down by more than 65 per cent.
- Ten Entertainment Group Plc
Ten Entertainment Group Plc (LON:TEG) is a United Kingdom-based tenpin bowling operator. The Company offers a wide variety of family-oriented entertainment activities which includes amusement machines, table-tennis, soft play, laser games, pool tables, and restaurants and bars services.
The Company had reopened 35 centres across England in August. Ten Entertainment implemented all the checks & balances with respect to the safety of its customers. The Company had set up a new platform for placing online orders for drinks and food, which will allow customers to make orders directly to the table using QR (Quick Response) code.
The total sales during the first half of 2020 had nearly halved to £22.5 million in contrast to the previous year period. The Group’s trading now stands at 83 per cent of previous levels with all 46 centres operational. Another lockdown may severely impact the business of the company. From January till date, Ten Entertainment Group shares are down by more than 58 per cent.
The closure of pubs and leisure spaces during the peak of the unprecedented crisis has severely impacted the business dynamics of the sector. Implementation of safety protocols in this kind of business is a tough ask.
Sudden change in government policies and regulations can severely impact the business of the companies operating in this sector. Moreover, the prolonged restrictive environment might lead to further job losses in the sector.
