Friday 15/03/19

1. In MACRO NEWS, Parliament votes for a Brexit delay
2. In HIGH STREET NEWS, Superdry’s former boss launches a new attack, Cineworld benefits from Regal, Savills flags a slowdown and it’s sofa so good for DFS
3. In CAR-RELATED NEWS, Uber’s self-driving unit closes in on a big cash injection and Tesla announces the Model Y
4. In INDIVIDUAL COMPANY NEWS, there’s more detail on what’s going on at Boeing
5. In OTHER NEWS, I bring you the partnership between music and cheese (not cheesy music). For more details, read on…

So MPs vote for a Brexit delay…

UK parliament votes overwhelmingly to seek Brexit delay (Financial Times, George Parker, Laura Hughes and Sebastian Payne) shows that Theresa May actually won a vote for a change as MPs voted to delay the March 29th Brexit date. She will now apply to the EU for a extension in the deadline to June 30th if MPs finally get behind her Brexit deal at another vote next Tuesday. If MPs do not vote through her deal, though, the extension could go much further out meaning that the UK would have to take part in European Parliament elections in May. In other words, MPs will have to choose whether to accept May’s deal or face a much longer delay that some say could drag on into 2020 or longer. The House also voted by 334-85 to reject an amendment calling for a second EU referendum. There are

now rumblings to the effect that the DUP and some of the pro-Brexit European Research Group are thinking of supporting May’s deal. * SO WHAT? * It is starting to look like May is getting a tiny bit of traction here. Eurosceptics face the prospect of long, expensive and undesirable delays that will probably involve a much softer Brexit than is currently on the table if they dig their heels in OR they get behind May’s current deal and let things move forward. It seems to me that although our MPs voted for an extension it kind of means nothing because the other 27 members of the EU will have to vote for the extension as well – and they’re unlikely to vote this way just for the sake of it. I would have thought that they will only allow the extension for something concrete (i.e. that it gives the UK time to implement the terms of its Brexit deal) or for a second referendum (which doesn’t look like an option any more). Those who have been holding out for a second referendum may just decide to back the deal because the alternative is worse.

There’s more high drama on the high street with the “Battle for Superdry”, Cineworld benefiting from Regal, Savills’ slowdown and DFS’ uptick…

Former boss launches ‘Save Superdry’ campaign (Daily Telegraph, Sophie Smith) should come as no surprise to Superdry-watchers as Julian Dunkerton, co-founder and former CEO of the company, has upped the pressure on current management by launching a formal campaign called “Supercharging Superdry”. He is seeking support from shareholders to reinstate him and appoint Peter Williams, chairman of Boohoo, as non-exec director. Dunkerton wants to take control of the design process and revive the brand. * SO WHAT? * You can see why he’s getting p!ssed off – since January 2018, the share price has plummeted by 75% and the company was kicked out of the FTSE250 last month! He believes that he can return the company to profitable revenue growth within two to three years and promised that he would not sell his shares in the company for at least two years as part of the deal. Current management are obviously blaming his legacy for the company’s current woes, but Dunkerton is saying that their strategy just isn’t working. The management team have a 0.25% share holding in the company while Dunkerton and his co-founder James Holder have a rather chunkier 28.5% in the business, so the argument that his interests are more closely aligned to shareholders does make some sense.

In contrast to Superdry, Cineworld aims for FTSE100 after success of Regal takeover (Daily Telegraph, Charlie Taylor-Kroll and Oliver Gill) takes a look at a company that is on the up as its £2.7bn takeover of US chain Regal, which made it the world’s second largest cinema chain with almost 10,000 screens in 10 countries, has helped pre-tax profits shoot up by 125% over the last year. Cost savings and synergies were both higher than market expectations. * SO WHAT? * There will be a certain sense of vindication here because Cineworld’s market value took a £400m hit

when it originally announced it would buy Regal but blockbusters such as Black Panther, Avengers: Infinity War and Incredibles 2 all helped box office revenues. Prospects this year are also looking good with Avengers: Endgame, Toy Story 4 and Star Wars: Episode IV in the pipeline. Cineworld just missed out on FTSE100 inclusion in the latest reshuffle, but if momentum continues it is surely only a matter of time before it makes the grade – and if it does, it will get an immediate little boost as tracker funds buy in.

I doubt there will be much surprise about Savills warns over political uncertainty (The Times, Louisa Clarence-Smith) as the estate agent announced that it is expecting a slowdown in property dealmaking this year because of global macroeconomic and political uncertainty (in other words, US-related trade/tariff wars and Brexit). Its deal advisory division brings in almost 50% of its business. On the other hand, Savills kept its guidance for the year as it expected growth in other areas such as property management and investment management. * SO WHAT? * It’s unsurprising that a real estate agent is hunkering down amidst a storm of economic and political uncertainty but it seems to me that everyone is preparing for the worst and not even considering what might happen in a scenario where things really aren’t quite so bad. I’m not saying that I think things will be rosy – just that NO-ONE is talking about a huge amount of pent-up demand having to be released at some stage IF the talk of doom and gloom turns out to be overdone.

Talking of worries that proved to be overdone, DFS sitting pretty after late show by customers (The Times, Tabby Kinder) shows that profits roofed it as customers who stayed away in the hot summer months purchased soft furnishings like they were going out of fashion in the last five months of 2018. The retailer, which also owns Dwell and Sofa Workshop, said its profits before tax more than doubled in the 22 weeks to January! * SO WHAT? * This is quite a turnaround given that the company had a profit warning in June last year due to falling footfall at its stores and a slowdown in the housing market. The share price did falter slightly yesterday, however, as it warned of a tough 2019 with consumer spending expected to fall and potential delays hitting goods moving around after Brexit.

Uber nears a cash injection for its driverless unit and Tesla unveils the Model Y…

Uber in talks to sell $1bn stake in self-driving unit to SoftBank (Financial Times, Shannon Bond) heralds a potentially chunky cash injection (at least $1bn) for its Advanced Technologies Group from a consortium of investors including SoftBank’s Vision Fund and Toyota ahead of Uber’s anticipated stock market flotation. * SO WHAT? * The negotiations are still ongoing, but if this went ahead it would give the ATG a valuation of between $5-10bn, depending on how much cash was thrown at it. Uber has been thinking about selling a stake in ATG since at least October as investors were increasingly questioning the high costs of developing autonomous technology.

Musk unveils Model Y SUV in next big wager (Wall Street Journal, Tim Higgins) highlights the unveiling of what Tesla hopes will be to SUVs what the Model 3 is to the saloon/sedan market – the Model Y compact SUV. Its initial starting price will be $47,000 and it will have a range of up to 300 miles on a single charge, hitting 0-60mph in 3.5secs, but a more budget-friendly version will follow with a range of 230 miles and a more “sedate” 0-60mph time of 5.9secs. Musk expects to start deliveries of the Model Y in the autumn of 2020, with the cheaper version rolling out in Spring 2021. * SO WHAT? * I think that this is an important development for Tesla as the SUV segment continues to be red hot in the world of cars. The Model X is fine and dandy, but out of reach of mainstream budgets. The sooner Tesla can get a reasonably-priced SUV on the road the better – but then you are always faced with the whole thing of will they have production problems, will they be able to deliver without massive delays, will they run out of money etc.etc. Let’s hope so – but then again even if they do, everyone else is catching up fast with more new models and less production issues.

Boeing’s woes continue…

Following on from all the news on Boeing this week, Boeing 737 Max planes grounded until May for software tests (Daily Telegraph, Alan Tovey) puts a timeline on how much time is being allocated to fixing faulty flight control software in

the wake of the Ethiopian Airlines crash and Boeing halts 737 MAX deliveries after two fatal crashes (Wall Street Journal, Andrew Tangel and Ben Kesling) highlights the company’s current actions as well as a new nightmare as an official from the US Air Force raised concerns about one of the company’s largest military plane programmes. It never rains but it pours. Investigations are ongoing.

And finally, in other news…

You may well have heard in the past about farmers playing music to their cattle to improve the flavour of their meat, but I must admit that this is a new one on me: Hip hop best bet for a cheese that will please: Swiss study (Reuters, Denis Balibouse and Cecile Mantovani https://tinyurl.com/y46dvagy). Nice…