Friday 17/11/23

1. In M&A/INVESTMENT NEWS, Mars buys Hotel Chocolat, Young’s buys City Pub Group and Arctos buys into Aston Martin’s F1 team while Brookfield ditches its attempt to sell Center Parcs
2. In CONSUMER & RETAIL NEWS, US consumers get a break, Walmart has a tough time and Amazon starts selling Hyundai cars while in the UK consumers are faced with rising energy bills (although the oil price is falling), Premier Foods cut prices and Burberry is hit by the luxury downturn
3. In TECH NEWS, Lenovo sees PC recovery, Meta tries to wriggle out of child harm responsibilities and stars give AI voices a try
4. In INDIVIDUAL COMPANY NEWS, Great Portland ploughs money into London property, Crest Nicholson announces job cuts, Cruise continues to disappoint and Qinetiq’s share price takes a bath
5. AND FINALLY, I bring you my morning routine…

So Mars buys Hotel Choc, Young’s buys a rival, Arctos buys into Aston and Brookfield abandons the Center Parcs disposal…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

I’ll be conducting a commercial awareness bootcamp TOMORROW,  Saturday 18th November with Jake Schogger of the Commercial Law Academy! If you’re looking for something to turbo-boost your commercial awareness, why not give it a go?? Just register HERE.

Mars to buy Hotel Chocolat in £534m deal (Financial Times, Madeleine Speed, Laura Onita and Maxine Kelly) shows that the pet food and confectionary giant has announced the purchase of the UK’s Hotel Chocolat for a tidy cash sum, resulting in a nice little payday for the latter’s two founders of £280m! This price represents a massive 169.8% premium to its share price on Wednesday and comes after Hotel Chocolat announced a loss for the year thanks to falling demand and aborted expansion plans in the US and Japan. * SO WHAT? *I guess that the deal gets Hotel Choc the certainty and access to expertise of a big backer while Mars gets access to a higher-end brand. Fans will be glad to hear that Hotel Choc’s recipes won’t change 😁. Angus Thirlwell will stay on as CEO and reinvest 80% of his shareholding while Peter Harris will retire although he will also invest a chunk as well. Maybe Hotel Choc will have more success overseas with the might of Mars behind it!

Young’s agrees deal to buy rival for £162m (Daily Telegraph, Daniel Woolfson) shows that Young’s is going to buy rival pub chain City Pub Group for £162m. Taking control of City Pub Group’s 50 sites will take the number of pubs in southern England and Wales under Young’s control from 229 to 279. * SO WHAT? * Young’s offer was made at a chunky 46% premium above its last closing price and it could be a good strategic fit, particularly as central London pubs are seeing sales rise as workers returned to offices. The whole sector is seeing a lot of consolidation at the moment, what with The Restaurant Group (Wagamama etc.) being bought by US private equity firm Apollo for a 34% premium and Fulham Shore (Franco Manca, The Real Greek etc.) being snapped up by Japanese company Toridoll for a 35% premium earlier this year. I guess scale is needed to optimise costs that have rocketed up over the last few years thanks to rising inflation and wage increases. This hasn’t been helped by increasingly budget conscious consumers.

Elsewhere, Arctos invests in Aston Martin F1 team at £1bn valuation (Financial Times, Peter Campbell and Samuel Agini) shows that sports-focused private equity group Arctos Partners has announced that it will be investing in Aston Martin’s F1 team just ahead of this weekend’s Las Vegas Grand Prix. Arctos has stakes in various sports including football, basketball and baseball and the firm said it will “provide extensive resources to enhance” the team’s “reach and brand”. * SO WHAT? * Interest in F1 has been gaining in popularity in the US and among young people in the seven years since Liberty Media bought F1. That has obviously attracted interest from investors, hence the latest slug of money from Arctos.

At the other end of the scale, Center Parcs owner calls off £5bn stake (The Times, Tom Howard) shows that Canadian private equity firm Brookfield Property Partners has decided to cancel the sale of Center Parks after it failed to find a buyer to pay the £5bn price tag it was looking for. Brookfield bought it eight years ago for £2.4bn and had put a hefty price tag on it earlier this year, presumably hoping to tap into the staycation feelgood factor. The rising cost of debt has clearly played a part in the reticence as well as the high asking price.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

US consumers get a break, Walmart doesn’t and Amazon wants you to buy a Hyundai while in the UK energy bills look set to rise, Premier Foods cuts prices and Burberry has a tricky time…

In the US, Shoppers Are Finally Getting a Break on Prices (Wall Street Journal, Sarah Nassauer and Suzanne Kapner) shows that momentum for consumer goods price rises is on the wane, but then again consumers have been buying less and Walmart tumbles 8% on cautious holiday outlook for consumer spending (Financial Times, Alexandra White) shows that the US retail giant’s shares fell despite it raising full-year guidance as investors worried much more about its predictions for weaker consumer spending over the holiday season. Walmart: deflating prices can be good for business (Financial Times, Lex) shows that slowing consumer price inflation could benefit Walmart as consumers come in to buy their groceries (lower margin) while demand for discretionary products (higher margin) like appliances or furniture could start to rise again. Also its ad business, whose sales grew by 20% over the quarter, has margins of 70-80%, so there is something to play for! If consumers have any spare money whilst they are browsing on Amazon, however, it seems that they might be able to buy a car soon as per Hyundai to Be First Automaker to Sell New Cars on Amazon (Wall Street Journal, Ryan Felton and Sean McLain) which says that they will be able to buy cars on the platform from next year! Hyundai announced this yesterday at the LA Auto Show and it will be the first automotive brand to offer such a service. They will be able to buy a new car on Amazon from a local dealership and then pick it up or have it delivered! * SO WHAT? * I think that this is quite an interesting development and although some dealerships might get a bit twitchy at this, I think that they will still be able to play a part in the whole process. However, I think that this is potentially bad news for the likes of Cazoo (particularly if Amazon signs up more car manufacturers) as Amazon’s platform is very much tried and tested and can be a threat very quickly!

Meanwhile, in the UK, *** NEWS JUST IN – British retail sales fall to 2-year low as high interest rates hit households (Financial Times, Valentina Romei) *** shows that  British retail sales

surprised the market and fell to their lowest level since February 2021 at the height of Covid, prompting concerns that higher prices and interest rates are hitting households’ finances harder than had previously been thought. The ONS data showed that the quantity of goods bought in GB fell by 0.3% in October versus the previous month versus market expectations of a rise. At first glance this doesn’t look great for the crucial final quarter…and it doesn’t get much better in Energy bills to rise by almost £100 a year (Daily Telegraph, Jonathan Leake) as the bods at consultancy Cornwall Insight reckon that market volatility caused by the Israel-Hamas war will lead to annual energy bills rising from January (gas prices have been rising over recent weeks) although Oil price dip as China demand weakens (Daily Telegraph, Jonathan Leake) suggests that there could be hope for cheaper petrol prices (as long as petrol stations don’t drag their feet too much 🤣). Mr Kipling and Super Noodles maker cuts prices as cost inflation falls (The Guardian, Mark Sweney) shows that Premier Foods (maker of Mr Kipling cakes, Angel Delight and Bisto etc.) has announced price cuts on some of its ranges thanks to weakening inflation and cheaper production costs. Prices of some lines have retreated to last summer’s prices, which could also be helpful to the pressured consumer!

At the posher end of the scale, Burberry profits hit by slump in luxury spending (The Times, Isabella Fish) shows that Burberry reported a 13% drop in profit before tax. * SO WHAT? * Burberry’s CEO made a song and dance about the government ignoring calls to reverse the 20% VAT shopping refund (aka “tourist tax”) being a major reason for lower sales in the UK but the fact is that the US was its worst-performing region. Its shops in Europe seemed to pick up the slack though as sales in the region rose by 14% (so doesn’t this mean that Burberry is still getting the sales anyway??). If current momentum continues, Burberry will find it difficult to achieve previously-stated revenue guidance for the full year. It seems that Burberry has caught the luxury lurgie that LVMH and other companies have had, something that the likes of Prada and some others have managed to avoid! Burberry: turnaround play requires a rain check (Financial Times, Lex) points out that Burberry will be more sensitive to a downturn than LVMH because LVMH’s broader spread of brands and product should make fortunes less volatile.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Lenovo sees signs of PC demand recovery, Meta tries more dodging and celeb AI voices are trialled…

Lenovo sees signs of recovery in PC market and tech sector (Financial Times, Qianer Liu) shows that although Lenovo reported its fifth quarter in a row of falling revenues it sounds like there’s light at the end of the tunnel as the company, which is the world’s biggest PC maker by shipments, says it is seeing signs of recovery in PC demand. * SO WHAT? * Lenovo’s Infrastructure Solutions Group, which provides storage, software and services for business has seen definite signs of recovery and the company is also hoping that it will be able to jump on the AI bandwagon with a new AI product portfolio for consumers and enterprise customers that it launched last month. Its first AI PC, a computer embedded with AI functions, is due for release in H2 next year and it is hoped that this could prompt a replacement cycle (I’d say that the last replacement cycle happened under lockdown when everyone wanted to get tooled up with the latest tech to work from home in 2020). Lenovo also offers AI infrastructure products, but they might be excluded by US restrictions. It is continuing with its efforts to diversify from its core business and now sales from non-PC businesses represented about 40% of group revenues in the September quarter.

Meanwhile, Meta deflects child harm inquiry by pointing to Apple and Google app stores (The Guardian, Blake Montgomery) shows that Meta is now trying to drag Google and Apple into its 💩storm

by appealing to US lawmakers to regulate their app stores more assiduously in order to protect children. Meta is itself being investigated about its failures to shield children on its platforms. * SO WHAT? * This is just Big Tech posturing and an attempt to distract attention from Meta’s own failures, surely! That said, I think the others SHOULD be dragged into it to make sure that everyone is on a level playing field. I’ve always said that Apple in particular always seems to manage to duck the controversy but it is also part of the problem!

Then in John Legend and Sia among singers to trial AI versions of voices with YouTube (The Guardian, Dan Milmo) we see that YouTube has brought together some music artists to offer AI-generated versions of their singing voices that can be used as soundtracks for creator videos! It’s using a music generation model created by its own AI unit to produce 30-second clips in a limited trial. Alec Benjamin, Charlie Puth, Charli XCX, Demi Lovato, John Legend, Sia, T-Pain, Troye Sivan and Papoose are signed up for the experiment, called Dream Track, using a small group of US creators making Shorts. Creators just have to type an idea into the creation prompt, select an artist and then an original Shorts soundtrack will pop up for the creator to use in their Short! * SO WHAT? * Nice! This sounds amazing, a bit creepy and slightly frightening in equal measure! As I’ve said before, this kind of thing might be great if you are already an established star but this will surely make it even harder for anyone new to break into the creative industries…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Great Portland ploughs money into London property, Crest Nicholson announces job losses, Cruise has more bad news and Qinetiq’s share price drops despite rising orders…

In a quick scoot around some of today’s other interesting stories, Great Portland buys more London property than it sells for first time in decade (Financial Times, Joshua Oliver) shows that the FTSE250 office landlord and developer has bought more London property than it’s sold since 2013 as high interest rates and plummeting property values prompted those of a nervous disposition to hit the exit. The company made a number of well-timed acquisitions in the aftermath of the financial crisis and it says that it is now finding value! It’s bought £123m worth of property around Soho, Oxford Street and Bermondsey since March and is currently looking at around £700m worth of investments. It’ll be interesting to see whether rivals follow its lead or whether they decide to wait a bit longer before going bargain hunting! Elsewhere in real estate, Housebuilder Crest to cut jobs in weak market (Daily Telegraph, Riya Makwana) shows that housebuilder Crest Nicholson is about to cut jobs due to the ongoing weakness in the housing market. Unfortunate, but also unsurprising given recent newsflow.

Another victim of circumstance is also having to adjust expectations as per Cruise Suspends Employee Share Program, Citing Need to Revalue Business (Wall Street Journal, Mike Colias) which shows that GM’s driverless unit is suspending an internal programme that allows employees to cash-out their shares in the company in order to revalue (downwards!) the business following last month’s pedestrian accident which let to a cessation of robotaxis last month! Driverless cars/Cruise: robotaxi rollout is stop, start, stop (Financial Times, Lex) makes some really excellent points about driverless cars and how sensitive we are when things go wrong. Although GM says that it’s committed to Cruise, it’s possible that it could sell the business or perhaps absorb it into its broader business and use it to accelerate its driver assistance capabilities. At the moment, a standalone taxi business does not look commercially viable…

Then in Qinetiq’s shares take a dive but orders swell (The Times, Robert Miller) we see that investors sold out of their holdings as Qinetiq Group reported weaker half year profits although the defence tech company’s orders hit a record high! * SO WHAT? * There is an investment saying that “it is better to travel than to arrive” and maybe investors think that now is a good time to take some money off the table with reasonable, but not stellar, prospects ahead. Of course, if the Israel-Hamas/Russia-Ukraine wars escalate (or if there are other conflicts that pop up as well!) the picture may be different but maybe for now some investors feel the time is right to cash out…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I’ve got a question for you. Do you think my morning routine comprises of getting up at 4am, creeping downstairs to make a cup of tea whilst not trying to disturb the dog too much, having a banana and sitting down for a few hours writing Watson’s Daily or do you think that I do what this guy does for his morning routine?? The next question is how long did you have to think about your answer 🤣?!?! Nice touch with the coconut though…