Apollo Global Management is in talks to join the Fortress Investments-led consortium bidding to buy Morrisons and will not make its own approach for the supermarket.
The investment group announced this morning it is in the “preliminary stages of discussions” with Fortress, which “may result in funds managed or advised by Apollo forming part of the investment group led by Fortress”.
As a consequence of these discussions, Apollo confirms that it does not intend to make an offer for Morrisons other than as part of the Fortress offer
Apollo announced it was exploring its own bid for Morrisons days after news broke that the Fortress-led consortium – which includes Canadian pension fund CPPIB and a subsidiary of US group Koch Industries – had agreed a deal worth £9.5bn, including debt, for the supermarket.
Apollo said this morning that it “notes Fortress’s intentions regarding the Morrisons business” – commitments which have been strongly touted by the Morrisons board – and would be “fully supportive of Fortress’s stated intentions regarding Morrisons”.
Previous bidder Clayton, Dubilier & Rice (CD&R) is still considering whether to launch a renewed bid.
Morrisons shares have edged back 0.3% on the news to 261.2p.
Take-home grocery sales fell by 5.1% during the 12 weeks to 11 July, according to Kantar, as the reopening of the hospitality industry and return to more normal shopping behaviour hit year-on-year comparisons.
Kantar said that despite the 12-week fall, sales are still strong compared with pre-pandemic times and shoppers spent £3bn more on more on groceries than they did during the same period in 2019 with sales up 10.9%.
All the major grocers were in decline in the most recent period, but up significantly on the same period two years ago.
Morrisons was the worst hit during the most recent period, with sales down 6.7% (up 9.6% on a two year basis), with Asda down 6.1% (up 4.3% on a two-year basis).
Tesco and Sainsbury’s were down 3.7% and 3% respectively (and up 10.8% and 10.1% respectively on a two-year basis).
Waitrose was the only physical retailer to grow sales during the 12-weeks, up 0.1% in the period.
Discounters Aldi and Lidl were at 0% and down 0.7% respectively.
With online’s rapid rise starting to taper, Ocado’s growth has also slowed over the past 12 weeks to 3.0%, though it remained the fastest growing retailer and increased its market share by 0.1 percentage points to 1.8%.
Fraser McKevitt, head of retail and consumer insight at Kantar, commented: “The number of people choosing to buy groceries online fell by 81,000 in July compared with the same four weeks last year. As the nation returned to shops, workplaces and restaurants over the past month, digital baskets shrunk by 8% to an average of £80 per shop, the lowest since February 2020. As a result, year-on-year sales growth for online groceries has dropped for the first time ever – falling by 2.6%. The channel currently accounts for 13.3% of the total market.”
Iceland, Co-op and independent stores all received a boost in the early days of the pandemic as people shopped closer to home. In comparison with the highs of 2020, these grocers’ market share has inevitably fallen this year but all three experienced double digit sales growth compared with 2019.
On the markets this morning, FeverTree has posted “strong” sales growth in the first half of its financial year, despite a sharp slowdown in UK growth.
For the six months to 30 June the premium mixers supplier posted total revenue growth of 39% at constant currency, which was ahead of the board’s expectations and was achieved despite comparable levels of Covid restrictions in the first half compared to the previous year.
UK sales were up 4% despite the on-trade remaining closed for the first quarter of the year, with gradual reopening in the second quarter.
It said its off-trade sales have “remained strong”, increasing by 17% compared to 2019 as cocktail consumption at home continues to grow.
In the US it posted a 32% revenue increase year-on-year, noting the result was “particularly encouraging given the very strong comparators from the first half of 2020”. Off trade sales remained “very strong” and it has been encouraged by progress in the on-trade since reopening.
Total European revenue for the first half of the year was up 102%, which was 81% on a like-for-like basis, at constant currency and excluding £4.7 million revenue from GDP’s portfolio brands during the period.
FeverTree said this was an “incredibly strong performance” even taking into account the impact of last years’ importer de-stock, which still points to underlying growth of around 30%.
Rest of the World sales were up 73% year-on-year with underlying growth of 40% across the region.
However, the group said gross margins have been “significantly” impacted by elevated costs due to the disruption impacting global logistics.
Consequently, it anticipates gross margins of approximately 44% for the full year, delivering an EBITDA margin of around 20%.
It stated: “Whilst we anticipate some margin improvement next year, we believe logistic cost headwinds will continue alongside input cost increases on raw materials and product costs. However, we remain very confident of continued strong sales momentum across our regions and continue to invest in the business to capitalise on the longer-term structural growth opportunity ahead of us.”
CEO Tim Warrillow commented: “Fever-Tree has made significant progress in the first half of 2021, delivering a strong revenue performance. The last 18 months have highlighted the strength of the Fever-Tree brand amongst our consumers and customers as well as the fantastic team and partners we have in place. We continued to invest in the opportunity during the pandemic and have already started to see the benefits of our long-term outlook as the world has started to reopen
“Our performance in the On-Trade as it has reopened has been encouraging in all our markets and our performance in the Off-Trade has also remained strong, with sales far exceeding pre-COVID levels in the UK, US, across Europe, and the Rest of the World.
“Our margins have been notably impacted by global logistics disruption. Despite this, we remain confident as ever in the strength of our business model and the opportunity to improve margins as we cycle out of the current period of COVID disruption.
“Our long-term opportunity continues to be enhanced by the structural trends we are seeing, including the growing interest in premium spirits and the popularity of long mixed drinks. This momentum is being supported by our retail and spirit partners, and Fever-Tree’s ability to capitalize and drive this opportunity is unmatched by any other premium mixer brand, giving us confidence in the future growth potential for Fever-Tree.”
Elsewhere, Irn-Bru maked AG Barr has issued a trading update stating that full year performance is likely to be higher than previously guided.
In March it said the business was in strong financial health, with our brands and business poised for growth on a like for like basis.
Trading since then has been better than anticipated, driven by a combination of factors, some Covid related, including customer restocking, in the hospitality sector in particular, and some associated with underlying brand momentum, such as the positive performance of recent innovation launches.
As such, the group now expects profit for the current 53-week financial year, to the end of January 2022, to be slightly ahead of the performance delivered in the 52-week year prior to Covid.
It will provide further information at our scheduled first half trading update on 3 August.
Meanwhile, Virgin Wines has said that its financial year finished positively with strong levels of customer demand in May and June.
Revenue and EBITDA for its full year to 30 June are now anticipated to be marginally higher than previous expectations, with revenue of £73.8m, an increase of 30% over 2020 and a 74% increase over 2019, and EBITDA of £6.4m compared to £4.4m last year.
Its customer base grew year-on-year by 24% and is up 44% since the start of 2020.
The Company also remains well capitalised with net cash of £8.4m at year end and will continue to assess opportunities to invest this cash to deliver attractive shareholder returns, including organic investment initiatives.
It said positive sales momentum has continued into July despite the Government’s lifting of lockdown restrictions and the opening up of hospitality across England.
“The Board is confident that the underlying growth drivers which the direct-to-consumer wine sector is experiencing, as well as the shift in customer behaviour towards online retailing, remain strong,” it stated.
CEO Jay Wright commented: “FY21 has been a transformational year for Virgin Wines delivering significant growth in our revenue, our profit and our customer base. This has been achieved whilst successfully listing the business on AIM and navigating the operational complexities that comes with significant growth in a COVID world. Over this period, keeping our people safe alongside maintaining the outstanding service levels our customers are so used to, has been a priority.
“We finish FY21 in excellent shape and in a stronger position than ever to continue our growth. Whilst we will all be watching with interest consumer trends that may develop over the coming year, we have seen nothing but encouraging signs over recent months that the customers we have acquired are staying loyal, our subscription schemes are as robust as ever and that our ability to attract new customers at a competitive cost per recruit remains.
“I strongly believe the strength of our business model, with our consistent and proven ability to deliver increased profit in tandem with increased revenue, places us in an advantageous position when it comes to being a long-term e-commerce winner in a post lockdown world.”
Fmcg group Supreme has posted a 33% revenue growth in its first year has a listed company.
In the year to 31 March, total revenues were up 33% to £122.3m with 36% revenue growth from vaping and 38% growth in Sports Nutrition and Wellness.
Gross profit grew by 24% driven by increases for manufactured lines that benefitted from economies of scale and efficiency improvements.
However, gross profit as a percentage of sales was marginally lower (1.8ppt) reflecting the change in the sales mix with the addition of the branded household consumer goods category.
Adjusted profit before tax was up 21% to £16.4m, but statutory profit before tax was down 2% to £13m, reflecting the costs of its February 2021 IPO.
It said the current financial year has “has started well”, including two new customers wins Sainsburys (who will begin to stock 88vape in 400 stores starting in late Summer) and Core Communications who aim to supply 88vape to their network of 25,000 independent retailers.
It has also been boosted by the completion of two acquisitions in June 2021 – Vendek Limited, Ireland’s leading distributor of batteries and lighting products, and the stock and brands of Sci-MX Nutrition.
CEO Sandy Chadha commented: “Supreme performed very strongly in the year ended 31 March 2021, as reflected by the 21% increase in Adjusted EBITDA that we achieved, underpinned by solid trading across all of our key categories.
“The management team has big ambitions to deliver sustained growth and further leverage the platform we have built at Supreme, including its status as a quoted company. There are clear and very exciting opportunities that exist for our business, particularly in categories like Sports Nutrition & Wellness and Vaping, and I look forward to providing further updates in due course as we capitalise on these.”
“We have made a good start to the current financial year and look to the future with confidence.”
On the markets this morning, the FTSE 100 has recovered 1% to 6,910.5pts so far today.
Risers so far this morning include Stock Spirits, up 5% to 252p, Diageo, up 1.6% to 3,489p and Glanbia, up 1.6% to €14.48.
Fallers include FeverTree, down 4.8% to 2,333p, Science in Sport, down 2.7% to 71p and Just Eat Takeaway.com, down 2.5% to 5,882p.
Yesterday in the City
‘Freedom day’ brought little celebration in the City, with shares sharply down on concerns of rising Covid cases and the possibility of restrictions being reintroduced later in the year.
The FTSE 100 dropped 2.3% back to 6,844.3pts – the lowest levels since April – as travel, leisure and hospitality stocks fell on worries over rising Covid cases.
In the grocery sector, shares that took a battering in the early days of the pandemic were down heavily again yesterday, with leisure-focused and food-to-go companies suffering.
Drinks supplier and distributer C&C Group fell 6.6% to 205.8p, Coca-Cola Europacific Partners was down 6.3% to €48.85, WH Smith dropped 5.2% to 1,479p, Greencore fell 4.9% to 117.3p, Marks & Spencer was down 4.3% to 132.3p, SSP Group was down 4.3% to 228.8p, Primark owner Associated British Foods down 4.1% to 1,965p and Nichols, down 4% to 1,387p.
Parsley Box, which sends ambient ready meals to the over 60s, plunged 15.7% yesterday after the group mentioned in a mostly positive trading update that growth had slowed recently as society reopened.
The day’s few risers included food delivery specialists Just Eat Takeaway.com, up 3.3% to 6,034p, Deliveroo, up 1.7% to 299.7p and household cleaning products supplier McBride, up 3.3% to 89p.