Monday 23/09/19

1. In RETAIL NEWS, Thomas Cook collapses and Ikea eyes a big China expansion
2. In FOOD-RELATED NEWS, sandwich supremo Greencore diversifies and Meatless Farm gets a C4 investment
3. In INDIVIDUAL COMPANY NEWS, SoftBank looks to oust WeWork’s CEO and CBD company Vertical Wellness strives to get the message out
4. In OTHER NEWS, I bring you something that will make your eyes go funny…

So Thomas Cook collapses and Ikea aims at China…

Thomas Cook collapses after knife-edge rescue talks fail (Financial Times, Alice Hancock and Daniel Thomas) heralds the demise of the 178-year old travel operator as talks held between the lenders, shareholders and the government over the weekend failed to result in a rescue package. This will leave 21,000 jobs at risk and 150,000 UK holiday makers stuck abroad who will now have to rely on the Civil Aviation Authority to organise the biggest emergency repatriation in peacetime. Restructuring specialist AlixPartners is expected to work with the CAA to sort out the mass-repatriation which could take around two weeks. Chinese conglomerate Fosun had offered to contribute £450m to the rescue package, but it all fell apart in the end. Just to give you an idea of scale, when Monarch collapsed in October 2017 (it was the UK’s fifth biggest airline at the time) the CAA chartered around 30 planes to repatriate 85,000 of Monarch’s customers, costing £60m. Anyone who’s yet to travel with Thomas Cook from the UK has been advised by the CAA NOT to go to the airport as all of the company’s bookings have been cancelled, but those who have booked package holidays will be able to claim compensation via the Atol protection scheme (which should happen within 60 days). Those who’ve booked flights with Thomas Cook airlines, however, probably won’t be covered by Atol and will need to make claims via travel insurance or their credit card companies. There’s also a potentially nasty thing that arrangers of stag/hen-dos may have to deal with – that banks may decide that only the purchaser’s flight is covered, with the rest of the booking being judged as a cash transaction between the

purchaser and the rest of the group. * SO WHAT? * Things have been looking decidedly shaky at Thomas Cook for a while and it’s no secret that the whole industry has been suffering from a combination of late bookings (because of people waiting to see what happens with Brexit), weakening sterling, higher fuel prices and intensifying competition from people putting their holidays together online, among other things. Rivals fear fallout from Thomas Cook failure (Daily Telegraph, Oliver Gill) shows that hundreds of smaller travel agents will suffer from Thomas Cook’s collapse because if they have combined Thomas Cook flights with third-party hotels, they will be responsible for either replacing the flight or refunding the cost of the entire trip – which could be disastrous. However, The airline bosses who will welcome Cook’s fall (Daily Telegraph, Oliver Gill) shows that airlines such as Virgin Atlantic and Flybe will be among those fighting for Thomas Cook’s take-off and landing slots at Gatwick (where it has 200) and Manchester (where it has 350). EasyJet, Lufthansa, AirFrance KLM and Norwegian Air could also potentially benefit from Thomas Cook’s demise by either getting some extra slots or raising prices. Tough times.

Ikea assembles $1.4bn China expansion drive (Financial Times, Tom Hancock) highlights the Swedish retailer’s biggest annual investment in China where it is allocating $1.4bn over the next year following a sudden slowdown in sales growth there. It is hoping to benefit from Chinese consumer spending growth via new stores and a revamp of existing ones. * SO WHAT? * China is in Ikea’s top five markets in the world, but sales growth has slowed in the country as its large store formats have proved to be less appealing to customers and competition from the likes of Japan’s Muji has attracted more affluent customers. Ikea continues to invest heavily in testing different formats and improving logistics and digital offerings.

Sandwich maker Greencore aims to diversify and Meatless Farm gets a Channel 4 boost…

Greencore looks to diversify into sushi and salads (Financial Times, Leila Abboud) shows that the UK’s biggest sandwich maker is intending to expand its existing offering into sushi, salads and hot meals in order to spur growth after selling its US business last year for £817m. Chief exec Patrick Coveney, who’s been at the head of the company since 2007, is also talking about returning cash to shareholders via dividends and share buy backs and is also considering the acquisition of “several” companies worth up to £50m in the next three to five years in order to broaden its existing offering. Fun fact: Greencore makes a staggering three out of every five sandwiches sold in the UK every year 😱. * SO WHAT? * It sounds like the company is ticking all the boxes for investors with a chunky disposal, promises of returning cash to shareholders and expansion from its core offering that is RELATED to its core offering. For instance, it recently bought Freshtime – a company that specialises in making salads and chilled

snacks – which will broaden Greencore’s product line-up accordingly whilst also boosting its relationship with the Co-Op. Greencore’s share price has increased by 27% this year versus the FTSE250 rising by only 15%.

Channel 4 takes a bite of Meatless (The Times, Alistair Osborne) heralds a big investment by Channel 4’s Commercial Growth Fund, believed to be in seven figures, into UK-based Beyond Meat rival The Meatless Farm Company in exchange for advertising airtime across its main channel and streaming service. Meatless Farm makes a range of vegetarian-friendly mince, burgers and sausages that are currently sold in Sainsbury’s, Morrisons and Amazon-owned Whole Foods across the US. Danish founder Morten Toft Bech said that “Our mission is to make it easy for people to reduce their red meat consumption by switching to plant-based meat alternatives. Making the swap, even if it’s just once a week, can make a huge difference to our planet – it’s the equivalent of taking 16 million cars off the road”. * SO WHAT? * I think that this is quite an interesting move for both sides as Channel 4 gets a stake in a business that is in a super-hot area at the moment – meat substitutes – while Meatless Market gets some nice advertising. It just remains to be seen whether it can take on the likes of Beyond Meat or Impossible Foods.

Softbank looks at ousting WeWork’s founder and Vertical Wellness continues to increase CBD awareness…

In SoftBank moves to oust Neumann as WeWork chief executive (Financial Times, Eric Platt and Andrew Edgecliffe-Johnson) we see that there are rumours that major shareholder SoftBank is looking to call a board meeting this week to demote founder Adam Neumann following the collapsed IPO attempt, his erratic behaviour and news of his drug use. It’s not clear yet whether the majority of board members share SoftBank’s sentiment, so I guess a vote would give us all a clearer picture. Did you know that, in the original IPO filing documents, it said that Neumann’s shares would have 20x the voting power of ordinary shares, his wife would have a say in picking his successor in the even of his death, and WeWork’s board would have NO women?! OK, so some of these were scaled back as the company tried to appease potential investors, but in the end it all proved too much and the IPO didn’t take place. News of his marijuana use on the company jet and tequila-fuelled company parties probably didn’t help either. * SO WHAT? * Neumann sounds like a complete d***, but then again chief execs don’t have to be likeable! I think that he just reflects the arrogance of many founders in recent years who are more than happy to take investors’ money but give them zero in return. I suspect that WeWork’s failure to sweet-talk investors will be a salutary lesson for all those other arrogant, massively loss-making, one-trick ponies waiting in the wings to stuff their pockets with

investor cash with zero blow-back. Ironically enough, given my previous profession, I think that shareholders who bang on about being the owners of the company and their importance is a load of rubbish. Yes, they own the shares, but very rarely do they ACTUALLY give a **** about the company and its employees. However, you have to draw the line somewhere and having your cake and eating it by selling shares whilst at the same time giving shareholders heavily-diluted (or zero) voting rights is taking massive liberties IMHO. The sooner this practice is stamped out the better.

Hemp CFO’s quest: educate banks, auditors on the benefits of CBD (Wall Street Journal, Nina Trentmann) looks at the challenges facing CBD-maker Vertical Wellness ahead of its IPO. The company works with farmers to grow hemp in Kentucky, Tennessee and California and processes the flowers, leaves and stems of the hemp plant to turn them into CBD oil, which is used in all sorts of products including creams, lotions and shampoos. As you may recall, cannabidiol (aka CBD), was legalised in the US last year but given that this has only been a recent development, the company is still finding it hard to appoint auditors and bankers given the product’s shady past. * SO WHAT? * Many cannabis companies have gone over the border to Canada over the years to develop their wares given looser legal restrictions, but all of them – listed and unlisted – are racing to build scale in their operations in anticipation of mass-legalisation across the world. Although a public listing will invite much closer scrutiny by investors, it is one way to bring in a lot of money quickly – and the money is needed to build scale. I suspect that there will continue to be more consolidation in what is still a fragmented industry.

And finally, in other news…

I thought I’d leave you today with something really annoying: Can you spot the showerhead among the household items? (Daily Mail, Latoya Gayle https://tinyurl.com/yxgfou79). This will make your eyes go funny!