Friday 24/05/19

1. In MARKETS & POLITICS NEWS, trade war fears give investors the jitters and May looks “Mexit” in the face
2. In LEISURE-RELATED NEWS, Mitchells & Butler toasts solid profits, Hollywood Bowl eyes crazy golf expansion, Thomas Cook gets an offer and Merlin considers going private
3. In RETAIL NEWS, Casino and Rallye shares are suspended, unloved retail parks spark interest while B&M disappoints
4. In OTHER NEWS, I bring you some tips on what to look out for in restaurants. For more details, read on…

So global market nerves jangle at US-China trade while PM May eyes a departure…

Global markets rocked as US-China trade and tech rift deepens (The Guardian, Larry Elliott) highlights the fall in Asian, European and North American stock markets as investors got increasingly concerned about the escalating war of words (and actions!) between China and the US. Weirdly (and I say that given the scale of the recent anti-Huawei campaign led by the US), Trump said last night that “If we made a deal, I could imagine Huawei being possibly included in some form or some part of it”. * SO WHAT? * This sounds to me like Trump is backpedaling slightly on his aggressive stance towards the embattled telecoms tech company, which might leave other countries who’ve acted on his warnings high and dry. Trump’s rhetoric has pushed countries to either partially or fully exclude Huawei from their 5G networks which will have p!ssed the Chinese off no end and so they may well take their frustration out by

pulling investments from these countries in retaliation. If the US does a deal including Huawei now, it will look like Trump and his security advisers were talking BS all along IMHO. I think all of this is ultimately about the US wanting to stop China from being better than them at tech and putting a massive spanner in its huge growth machine. Everyone else is just being caught in the cross-fire.

Theresa May to give firm departure date as Brexit deal founders (Financial Times, Laura Hughes, George Parker and Sebastian Payne) heralds what will be the inevitable “official” demise of Theresa May’s time as PM as she is expected to outline plans to step down. Downing Street advisers are due to meet at 10am today to be briefed on further details, but senior Conservative MPs believe that her formal departure will be in the week of June 10th, after Trump’s state visit. * SO WHAT? * TBH, I think most people will be surprised at how long she has remained in power given the continued failure of her deal and the growing frustration of Brexiteers and Remainers alike. Apart from being a mid-table Premiership football manager, this has probably got to be one of the least attractive jobs going at the moment, no??

M&B pubs do well, Hollywood Bowl eyes crazy golf, Thomas Cook gets and offer and Merlin considers going private…

All change at M&B sends profits soaring for pub chain (Daily Telegraph, Michael O’Dwyer) shows the parent of All Bar One, Harvester and Toby Carvery announcing a solid 8.7% jump in pre-tax profits for the six months to April 13th, partly due to better weather versus the same time last year. Mitchells and Butlers (M&B) runs 1,700 UK pubs and restaurants is positive about the future as many changes being made across the business are starting to bear fruit. The most recent Mother’s Day was its third best sales day ever – beaten only by the last two Christmas Days – bolstering the chief executive’s boast of M&B brands being associated with celebrating special occasions. A particular highlight among its brands was the success of its Miller and Carter steakhouses. * SO WHAT? * It just goes to show that even in the dark days of Brexit uncertainty we are still going out! It also goes to show that failures, like the most recent one at Jamie’s Italian, aren’t a given – and that there’s still money to be made if it’s done right.

Talking about fun stuff, Firm strikes out towards crazy golf (The Times, Dominic Walsh) shows that the UK’s biggest tenpin bowling operator is about to move into crazy golf! Hollywood Bowl has just bought two sights in York and Thorpe Park, Leeds that are going to be called Puttstars – and games will include an electronic scoring system. Sounds great, right?! The company currently operates 60 sites under the Hollywood Bowl and AMF brands and it just announced increases in revenues and profits. * SO WHAT? * Again, this shows that, against an uncertain economic backdrop, Brits are still willing to spend on “experiences” although that kind of confidence evaporates when it comes to spending on big ticket items like cars and houses. If you

provide the right atmosphere and the right offering there are still punters out there willing to spend money.

Thomas Cook receives offer for northern European arm (The Guardian, Jasper Jolly) highlights an offer that has been received by the ailing travel company for its northern European business from private equity company Triton Partners, which bought the Dutch-Swiss travel company Sunweb Group in December. * SO WHAT? * Thomas Cook is having a very tough time at the moment due to its massive debts and Brit holiday makers not booking holidays with them because of Brexit uncertainty. As a result, its share price has cratered by a whopping 90% since May last year. It has been receiving all sorts of offers for various bits of its airlines business, so this is just the latest approach it’s had. At least it’s getting offers, I guess!

In Entertainment giant Merlin to sound out private buyout (Daily Telegraph, Oliver Gill) we see that the company behind Alton Towers, Legoland and Madame Tussauds has been advised to sell itself by ValueAct Capital, one of its biggest shareholders. ValueAct believes that the company should be taken private because the City is not giving the world’s second-biggest visitors attraction group enough credit. The company backed Merlin’s management and said that it believes that the private investors would value it at a 30% premium to its current value if it went down this path. * SO WHAT? * If you were being cynical about this, you could say that it’s just ValueAct talking its own book (it has a 9.3% stake in Merlin) but then again, if it didn’t believe in what the management was doing it would no doubt be very vocal about it and demand seats on the board etc. Given the difficult economic outlook, maybe going private would protect the company from being tarnished with bad sentiment elsewhere and help it to concentrate better but it all depends on what the management wants to do in the future. If it wants to make some sizeable acquisitions, for instance, it may be better to stay “public” to raise more money more broadly, but if wants to grow organically for the foreseeable future then maybe private is the way to go.

France’s Casino and Rallye hit problems, UK retail parks might get some love and B&M has a tough time…

Shares in Casino and parent Rallye suspended in Paris (Financial Times, Harriet Agnew and Robert Smith) heralds a potential major restructuring at the group as shares were suspended yesterday. Casino owns supermarket chains Monoprix, Franprix and Geant and has been selling off assets to reduce its debts but it seems that things have come to a head with its hugely complex structure. Casino’s problems have been made worse by an ongoing price war with supermarket rivals Carrefour, Auchan and E.Leclerc. Shares in both Casino and parent company Rallye have fallen by around 40% since March. * SO WHAT? * Shares don’t get suspended lightly – so this must be very serious. We’ll just have to wait to see what happens.

Partners give retail parks some love (The Times, Louisa Clarence-Smith) looks at what could be some rare good news for Britain’s unloved retail parks as American asset managment group Pimco’s Bravo Strategies III has bought

four retail parks in Aberdeen, Dundee, Inverness and the Isle of Wight for £60.5m in a joint venture with British investor New River Reit. California-based Pimco is one of the world’s most influential investors and New River has a £1.3bn portfolio of 34 shopping centres, 19 retail parks and 650 community pubs. * SO WHAT? * Yes, this property is pretty cheap, but it’s cheap for a reason. I would also argue that it is particularly risky to buy these assets when footfall at these places is dropping and tenants are moving out as they continue to go out of business. Still, I guess that there’s a price for everything. I just wonder whether they’ll do anything to make these places any better!

B&M shares discounted amid German woes (The Times, Elizabeth Burden) highlights difficulties in the discounter’s German business, but it sounds like these problems are behind them and that the company is now on the front foot. Chief exec Simon Arora said that “We enter the new financial year with renewed trading momentum, particularly in the UK, a high quality new store expansion programme in place and investing in our new infrastructure to support future growth”. However, B&M dampens Asda bid speculation (Daily Telegraph, Ashley Armstrong) shows that the company was keen to bat away speculation that it was planning a reverse takeover of Asda in the wake of the failed Asda-Sainsbury’s merger. For now, it seems that the company wants to grow organically.

And finally, in other news…

I thought that some of you may be heading out to pubs/restaurants over the coming Bank Holiday weekend, so maybe this will come in useful for you: Chefs reveal red flag they look out for at restaurants – and questions they ask (The Mirror, Zoe Forsey https://tinyurl.com/y4jy6gcf). Some of it is kind of obvious, but some of it less so – and worth keeping in mind!