Thursday 09/12/21

1. In OMICRON IMPACT NEWS, BoJo announces Plan B, sterling slides, businesses complain and Tui cuts capacity
2. In M&A AND IPO NEWS, the Big Four and Aussie dealmakers rake in the fees, Nestlé offloads a massive stake in L’Oréal, CMA CGM does a $3bn logistics deal and investors get increasingly picky about tech IPOs
3. In REAL ESTATE & CONSUMER TREND NEWS, Evergrande’s lows get lower and China property is in a right old mess while UK consumers continue to face property price frenzy, rising energy bills and now higher coffee prices
4. In MISCELLANEOUS NEWS, Tesco ponies up and decides to tuck into consumer data, Gridserve is to roll out a motorway charging network and GameStop judders
5. AND FINALLY, I bring you Disneyland’s hidden door (for celebs and rich people) and some really weird sandwiches…

So the US threatens Russia, global stocks bounce and Ashtead benefits from supply chain issues…

📢 It’s Thursday – so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers where I will do a detailed review of the week as well as chance for Q&A and discussion. The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

Boris Johnson moves to Plan B to control Omicron spread amid MPs’ anger (Financial Times, Sebastian Payne, George Parker, Laura Hughes and Oliver Barnes) highlights the reintroduction of measures designed to limit the spread of the new Covid variant. Measures like working from home from Monday, mandatory masks in all indoor venues from Friday – apart from pubs and restaurants – and the requirement for Covid-19 passports for large indoor and outdoor gatherings were all brought back against the backdrop of Boris Johnson’s Christmas party scandal. Sterling’s slide continues as Plan B ends chances of rate increase (The Times, Dominic Walsh) highlights the pound’s ensuing weakness

as expectations of a rate rise next week are leaching away because everyone reckons the MPC members are going to want to see how the Omicron spread develops before taking any action and Cities bracing for another bleak winter of empty streets (Daily Telegraph, Helen Cahill) highlights the obvious dismay of businesses that are going to suffer as a result of these measures. Those in the leisure industry will be particularly badly affected with cancellations etc.

Talking of which, Tui Group cuts capacity as Omicron hits travel (The Times, Dominic Walsh) shows that Europe’s biggest travel and tourism business has decided to cut its winter capacity as bookings get cancelled due to the Omicron outbreak. It said that it would cut its winter capacity to around 60%, but remained positive about summer 2022. * SO WHAT? * It is so so sad that this variant has taken hold just as businesses were starting to see the faint light of recovery. If the Omicron variant proves not to have as serious consequences as other variants, it may be that things will bounce back strongly – however, it still may be too late for many businesses who were holding on for a decent Christmas to carry them through to next year.

Advisory fees mean big bucks for advisers, Nestlé sells down L’Oréal, CMA CGM agrees a logistics deal and investors get pickier about tech IPOs…

Big four post strongest performance since Enron as advisory business booms (Financial Times, Michael O’Dwyer) shows that accounting firms posted their strongest financial performance since the collapse of Enron in 2002 as KPMG, Deloitte, EY and PwC combined are thought to have raked in $167.3bn in turnover for the financial year ended 2021. The advisory business has been powered by huge amounts of deal making and the growth of ESG consulting. Australia sets M&A record as dealmakers revel in rebound (Financial Times, Nic Fildes) provides yet more evidence of the sheer volume of deal making elsewhere as lawyers and bankers in the country have seen A$308bn of deals agreed in Australia versus a ten-year average of A$100bn, according to data from Refinitiv! The demand has been driven by cheap borrowing, pent-up demand for transactions after the lows of 2020 and an economic rebound.

In terms of current goings-on, however, Nestlé trims L’Oréal stake by €9bn (Financial Times, Judith Evans) shows that Nestlé is selling down its stake in L’Oréal for nigh on €9bn but will still have a 20.1% holding and two seats on the board. Activist investor Third Point attempted, unsuccessfully, to get Nestlé to sell its stake in 2017 but I guess with the L’Oreal share price approaching all-time highs you can’t blame the Swiss food giant for cashing in on a stake that dates back to 1974 when Liliane Bettencourt, daughter of L’Oréal founder Eugène Schueller,

asked Nestlé to buy a stake to stop nationalisation of the company by France’s Socialists. * SO WHAT? * I think that this just makes things neater for both sides in terms of making them less intertwined (although a 20.1% stake is still pretty chunky!) and gives Nestlé some funds to indulge in its own share buyback, which investors love! The question that everyone will be asking now is whether Nestlé will stop there or whether this is the start of further moves to make a proper exit from the stake.

Then in French shipping group CMA CGM agrees $3bn logistics deal (Financial Times, Victor Mallet and Harry Dempsey) we see that CMA CGM is furthering its moves into global logistics as it has bought a load of warehouses in the US and Europe along with cloud-based digital platform Shipwire from US tech group Ingram Micro. Presumably the shipping group is taking advantage of having extra cash because it is experiencing a boom at the moment and Ingram Micro is cashing in on the current demand for warehouses and the need for efficient logistics. * SO WHAT? * Although this wasn’t exactly cheap, it does mean that CMA CGM will be able to better compete against rivals such as DHL and Kuehne + Nagel.

Meanwhile, I thought I’d include Tech IPOs: newly listed companies are growing more expensive (Financial Times, Lex) because it just highlights how valuations of newly-listed US tech companies reached a two-decade high last year! Despite this, listings and revenue multiples (= flash way of saying the size of revenues being promised) are continuing to rise despite the fact that many of these start-ups are not profitable! IPOs of BNPL firm Affirm, robotics company UiPath, trading app Robinhood and Rivian are all examples of start-ups valued on promises! The pipeline for more is strong and there are now over 600 start-ups that have reached unicorn status but it looks like investors may be getting more selective as time goes on and more frothy IPOs flop after an initial frenzy…

Evergrande sinks to new lows and China property has more problems, while UK consumers are faced by rising property prices, energy bills and expensive coffee…

Evergrande stock hits new lows as investors brace for possible default (Financial Times, Thomas Hale and Joe Rennison) shows that the share price of the world’s most indebted developer hit its lowest level this year as doubt was cast over Evergrande’s ability to repay debts and Fresh jitters in property sector after Kaisa shares suspended (The Guardian, Martin Farrer and Phillip Inman) shows that another property group, this time Kaisa Group Holdings, also prompted property market jitters as its shares were suspended on the Hong Kong stock exchange when news emerged that it was struggling to make a loan repayment. It is certainly kicking off in the sector now and so you know that everyone else is going to be second-guessing who’s next in line for some drama. Tough times…

Meanwhile, the UK consumer seems to be getting squeezed from all sides as per Panic buyers pay above the odds amid house shortage (Daily Telegraph, Rachel Mortimer), which cites the latest survey by RICS (Royal Institution of Chartered Surveyors) which shows that movers are panic buying in popular areas due to the shortage of available properties. Usually, the housing market slows down at this time of year but the lack of homes coming onto the market is resulting in bidding wars. Households face big rise in energy bills (The Times, Emily Gosden) cites a report from Citizens Advice which asserts that energy bills could rise to almost £1,900 a year from April as suppliers continue to collapse and then Coffee hits 10-year high as shipping bottlenecks squeeze supply (Financial Times, Emiko Terazono) shows that prices on futures markets are now the highest they’ve been for ten years – arabica bean prices are now almost double the level they were at at the beginning of this year! Rising shipping costs, hoarding of beans by farmers and worries about further drought in Brazil after frosts in July have all led to the current situation. When WILL the consumer catch a break, eh??

Tesco caves and moves forward, Gridserve rolls out a charging network and GameStop judders…

It’s all go at the moment at Britain’s #1 supermarket as Tesco workers given above inflation pay rise to avert Christmas strikes at depots (Daily Telegraph, Laura Onita) shows that it has caved to demands and agreed to a 5.5% pay increase with unions – with extras – in order to avert a walk-out of 1,200 workers in the run-up to Christmas and Tesco to unleash adverts on Clubcard users (Daily Telegraph, Ben Woods) shows that the company is going to use the vast amount of customer data it has collected over the years from Clubcard users to indulge in a bit of advertising to boost its income. It will use its data analytics business, Dunhumby, to get advertising income from a customer base that encompasses 58% of the population! Tesco added that it will be launching Tesco Radio, an in-store broadcaster, in April. * SO WHAT? * I think that it’s good that the UK’s #1 supermarket is not resting on its laurels and moving into new areas to grow revenues. I just wonder what innovations (if any) that its rivals have up its sleeves? I also wonder what’s happened to Jack’s, its “cheep and cheerful” spin-off. Tesco seem to have remained very quiet on that…

In other interesting news bits today, Motorway charging network to be rolled out by Gridserve (Daily Telegraph, Rachel Millard) shows that Gridserve is going to be rolling out hundreds of high-powered EV chargers at motorway service stations across the UK in addition to developing a new EV-focused forecourt at Gatwick airport. It describes these moves as the “biggest upgrade of motorway electric vehicle charging infrastructure in UK history”. Gridserve currently owns the Electric Highway charging network that already has 80% of all charge points at motorway service stations. The EV evolution continues!

Then in GameStop earnings report: loss widened last quarter (Wall Street Journal, Sarah E. Needleman) we see that the infamous US games retailer had a tough quarter as it continued to turn its business around. It has suffered due to a lack of gaming consoles from Microsoft and Sony although sales of hardware and collectibles were strong. * SO WHAT? * Although GameStop was the poster child for last year’s meme traders, the fact is that it is a 💩 company in a highly competitive industry undergoing a massive management overhaul. It remains to be seen whether the saying “you can’t polish a t*rd, but you CAN roll it in glitter” pans out!

…in other news…

While there are undoubtedly downsides of being rich and famous (and I am not talking from personal experience here as I am neither!) there are some interesting upsides, one of which is this: ‘Hidden’ door at Disneyland theme parks that will cost you £25,000 to walk through (The Mirror, Jessica Taylor). Whaaaaat?? Then there was a story that caught my eye because it reminded me of some of the more bizarre interpretations of what passes for a sandwich in Japan in Tokyo’s beautiful new hot-selling fruit sandwich cubes…are from a 300 yen store?!? (SoraNews24, Casey Baseel). When I used to live in Tokyo I was constantly amazed at what Japanese people used to put in sandwiches (although actually, there were some winners – like a tonkatsu sandwich, for instance). Mind you, they are often surprised at what goes into our ‘sushi’ 😂!