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17 May 2021

Hospitality: Re-opening and the Roadmap to Recovery

The next major step in England’s lockdown roadmap is the lifting of most legal restrictions on meetings outdoors of fewer than 30 people, and indoor hospitality, a moment many have been waiting for given the recent poor weather. The easing of such restrictions will also be a step welcomed by many businesses operating in the hospitality sector, with pubs, restaurants, hotels and cinemas now open to the public.

One such business that will especially benefit from the 17th May easing is pub and hotel operator Marston’s. The new rules will mean that the company will be able to offer its full suite of services to the public once again, with no restrictions on meals or curfews also helping to encourage customers back to its establishments.

Marston’s, as many expected, endured a torrid start to 2020 as COVID-19 spread across the UK and forced the closure of pubs and hotels. Shares in the chain fell nearly 80% between January and the end of March, as the uncertainty over the duration of the pandemic caused a significant sell-off in shares within the hospitality sector. While the company’s stock has yet to fully recover, optimism surrounding the effectiveness of the government’s late-stage COVID-19 response and the likelihood of the roadmap effectively predicting the UK’s entry back into normality, have pushed shares higher in 2021.

Despite recent results showing a 99.2% reduction in revenues, owing to the full shutdown of all Marston’s locations, the pub chain remained cautiously optimistic about the future. The company has taken various steps to maintain solid financial footing, with its recent joint venture with Carlsberg UK netting the company initial proceeds of nearly £223m, the majority of which has been used to pay down liabilities. This seems a sensible course of action given the company’s debt position which, at 26 times its annual profit, is alarmingly high, especially during a time of significant financial distress when it will be requiring cash on hand in order to survive.

Given the impending boom in the trade of the hospitality sector, we would hope Marston’s would be able to return to something resembling normality in the coming months. While face masks will still be required, weekend trade and those travelling within the UK for a holiday or business trip should help the firm return to growth just in time for the Summer rush, exacerbated by the football European Championships which should provide a further welcome boost to the recovering pub trade.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.

 
Hospitality: Re-opening and the Roadmap to Recovery
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