BUSINESS OUTLOOK Review. Realign. Recover christie.com TABLE OF CONTENTS GLOBAL MANAGING DIRECTOR’S STATEMENT 4 RETAIL 30 BANK SUPPORT AND BUSINESS RECOVERY 6 LEISURE 36 COVID-19 TIMELINE 8 PUBS 40 CHRISTIE FINANCE 10 RESTAURANTS 44 CHRISTIE INSURANCE 11 HOTELS 48 DENTAL 12 INTERNATIONAL 52 PHARMACY 16 TRANSACTIONAL TABLES 60 CARE 20 VENNERS & ORRIDGE 66 CHILD CENTRIC 24 CHARITY ACTIVITY 67 Darren Bond Global Managing Director OVERVIEW clients who were navigating the crisis in a similar manner. uncertainty around how long it will take to return to a Whilst we saw lenders pause valuation activity in April and stabilised trading level and what that level might look like. 2020 turned out to be a year that May, this returned from June and volumes were back to As things stand at the moment, there is little evidence of pre-COVID levels by the end of 2020. Positively, after a any considerable price adjustment and we expect that to no one could have predicted. What few months of coming to terms with the virus, we saw play out in 2021. The market remains well capitalised and started very positively in the first transactions resume with buyers and sellers remaining ready to invest in our sectors, confident of the recovery two months of the year, soon led stoic and determined to close deals. Transactions ahead. continued, with nominal adjustment to pricing, as buyers to a frenzy as businesses all around remained committed to their acquisitions. Overall, we saw our price indices move negatively by 2.5% last year. The movements were biggest in hospitality, the UK had to take stock of the As we entered the second half of 2020, the resilience and across restaurants, pubs and hotels. Coronavirus (COVID-19) situation creativity of operators involved in our sectors showed in and very quickly adapt. abundance. Hospitality briefly returned to life from July I am confident that our markets onwards and the sector pulled out all the stops to provide have some incredible characters A message from government requiring us to socially a safe and secure dining and drinking environment for distance ourselves on 16 March 2020, quickly escalated their customers. Sadly, hospitality became the scapegoat and determined individuals. We to a ‘you must stay at home’ message and businesses blamed for further increases in COVID-19 cases from expect the majority of businesses being forced to close from 23 March 2020. autumn onwards. Those of us passionately involved with the sector find this both disappointing and misleading. will bounce back as COVID-19 starts Our sectors were significantly affected, with hospitality to recede, however, the longer the being the hardest hit. Hotels, pubs and restaurants were We saw strong activity across restrictions continue, the harder it closed immediately, with cellars and kitchens still full our sectors continue over the of product. We also saw children’s day nurseries, dental may be for those without further practices, garden centres and leisure businesses forced remainder of the year, with financial support. to close. impressive levels of viewings, offers The care sector rallied and, whilst businesses had to and completions, despite all the Finally, I would like to say thank you to the amazing team of adapt with an unfortunate wave of cases passing through colleagues across the UK and Europe that I work with every homes, it did so as best it could. We also saw pharmacy head winds facing the market. day at Christie & Co. Their hard work and fortitude has been businesses continue to trade, alongside convenience incredible to see over the last year and they have ensured So, what was the impact on values due to COVID-19? The retail which was one of the big benefactors of the that all of our clients continued to receive the very best immediate answer is that this still remains to be seen. lockdown as individuals shopped local under lockdown advice and support through this challenging period. Following the Global Financial Crisis, we saw that price restrictions. movements in our markets took a couple of years to In the period that followed, up to June, we all turned to adjust. There is a logic that businesses cannot be worth video calls and offered our support to friends, family and the same as they were pre-COVID, particularly given the Business Outlook 2021 44 INDEX BASED ON AVERAGE SALE PRICES (FROM A BASE OF 100 IN 2005) 170 160 150 140 130 120 110 100 90 80 70 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Hotels Restaurants Retail Dental Pubs Care Pharmacy Childcare Christie + Co Average Index Retail Price Index House Price Index Business Outlook 2021 4 BusinessBusiness Outlook Outlook 2021 2021 5 Stephen Jacobs Director Bank - Support & Business Recovery OVERVIEW through the Coronavirus Job Retention Scheme (CJRS), With most of the support due to end in Spring 2021, financial support in the form of cash grants, loans (the we anticipate a significant rise in business distress and Business Outlook 2020 reported a Coronavirus Business Interruption Loan Scheme (CBILS) insolvency from Q2, with the level of business failures and Bounce Back Loan Scheme (BBLS)), business rate relief minimised only if there is further strategic financial support rise in business distress during 2019 and VAT deferment. The introduction of the Coronavirus which addresses the issues. Moreover, there will be an due to operational cost pressures Act 2020 has given business tenancies protection from increasing requirement for turnaround and restructuring and the uncertainty of Brexit forfeiture due to non-payment of rent, and the Corporate assistance. Insolvency and Governance Act 2020 includes temporary influencing business and consumer provisions to suspend both winding-up petitions, by way We anticipate a rise in demand of a statutory demand, and wrongful trading, so a business confidence and economic growth. can trade on without the threat of personal liability for for Christie & Co’s consultancy, Whilst we predicted these factors would be ongoing directors. valuation, and brokerage services challenges in 2020, we could not have foreseen the These measures, coupled with banks giving support accordingly. COVID-19 pandemic and the tumultuous impact it would and forbearance to their debtors, have been a lifeline for have on commerce, the economy, and people’s lives. businesses, with many ‘artificially’ avoiding insolvency The UK economy is estimated to The effect of the pandemic on the markets we operate proceedings. This is reflected in The Insolvency Service’s have shrunk by 11% in 2020. in has been significant, but none more so than in social statistics for Q2 and Q3, which show a decline of 36% in -11% care, leisure, and hospitality. The care sector experienced company insolvencies, compared with the same period a wave of resident deaths, which significantly impacted in 2019. This mirrors Christie & Co’s activity in terms of WITH ONGOING LOCKDOWN MEASURES AND occupancy, and the reluctance of families to place their a reduction in the number of distressed businesses we POSSIBLE DISRUPTION FROM BREXIT, SOME loved ones in care facilities compounded the situation. valued and sold in 2020. ECONOMISTS ARE PREDICTING A UK DOUBLE-DIP The hospitality sector’s ability to trade throughout the RECESSION, AND A DECLINE IN GDP IN 2021. THE ROAD TO RECOVERY pandemic has been most affected by the government’s ‘whack-a-mole’ approach in attempting to bring an More positive estimates, however, unpredictable virus under control. Imposed lockdowns The road to recovery has been predict growth of 5%. 5% and various tier restrictions have resulted in intermittent hampered by this uncontrollable closures for large parts of the industry. Whilst unemployment and concerns around job security are virus and, whilst the timeline for likely to have a negative impact on consumer confidence, GOVERNMENT SUPPORT several key support measures has assuming a successful rollout of the vaccine and gradual easing of restrictions post lockdown in England and The severe disruption caused by the pandemic would have been extended, business support Scotland, the economy could experience a surge in pent-up led to business failure on a monumental scale, if not for demand from a more confident consumer with money, the unprecedented intervention of the UK government. has not kept fully apace with the saved during the pandemic, to spend. This resulted in over nine million workers being furloughed evolving trading restrictions. Business Outlook 2021 6 MARKET PREDICTIONS A significant rise in failed businesses from Q2, as BUSINESS DISTRESS-1 Percentage of distressed assets instructed by sector in 2020. operators encounter liquidity issues and many business 15% PUBS support measures come to an end. 28% HOTELS A rise in distress business sales, 6% RESTAURANTS with values most impacted for asset classes that flood 42% CARE the market. The leisure and hospitality sectors will be 3% RETAIL particularly vulnerable. 5% MEDICAL The likelihood of a double-dip recession as further restrictions 1% CHILD CENTRIC and the imposed third national Source: Christie & Co lockdown in January 2021 impact the economy. BUSINESS DISTRESS-2 BUSINESS DISTRESS-3 Distressed assets instructed for disposal by appointment type. Movements recorded Q2 and Q3 2020 compared A successful roll-out of the with the same period in 2019. vaccine programme and 3 easing of restrictions will 5 8 5 -40% Company insolvencies instil consumer confidence 11 Source: Insolvency Service and release pent-up demand 41 2019 2020 boosting the economy. (%) (%) 51 76 -36% Christie & Co insolvent assets instructed for disposal Source: Christie & Co Consensual Administration Receivership Liquidation Source: Christie & Co Business Outlook 2021 7 COVID-19 – DIARY OF EVENTS June 2020 17 15 31 22 Professional sport restarts without spectators. June 2020 January 2020 March 2020 England: Non-essential First two cases Chancellor Rishi Sunak shops, zoos and wildlife confirmed in the UK.