C&C Group in talks to buy Conviviality's Matthew Clark and Bibendum

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C&C Group (CCR), with the support of AB InBev (ABI), is in advanced talks to buy Matthew Clark and Bibendum along with their subsidiaries Catalyst, Peppermint, Elastic and Walker & Wodehouse, conditional on the appointment to administrations to Conviviality Brands, expected later today.

The acquisition will be for “a nominal sum” and C&C will provide sufficient funds to support the ongoing working capital and other cash requirements of the business, the official statement said.

AB InBev will provide extra financial support for the deal. C&C’s will fund its investment from its existing financial facilities.

At completion, Matthew Clark Bibendum will have £102m of working capital facilities provided by its current lenders, repayable in instalments over the 12 months following completion.

In the latest audited accounts for the 52 weeks ended 30 April 2017, Matthew Clark Bibendum had gross revenues of £1,219m and adjusted EBITDA of £51.3m (pre central costs).

However, in its trading update of 21 March, Conviviality said it expected that the adjusted EBITDA for the entire group for the year ending 29 April to be £45.5m-£46m. Gross assets of approximately £230m are expected to be acquired at completion.

Matthew Clark Bibendum will be run as a separate business. C&C believes it will ”offer significant revenue opportunities” and ”provide significant earnings accretion and attractive returns on capital in the first full financial year following completion”.

Stephen Glancey, Group chief executive, of C&C, said: “We know the Matthew Clark and Bibendum businesses very well. They are great businesses with unparalleled on-trade market access, a wide range of supplier relationships and supported by a knowledgeable and loyal employee base.”

The last few weeks had been challenging for employees, customers and suppliers alike.

“We hope today’s announcement can put an end to this period of disruption and uncertainty. We look-forward to working with our new colleagues and other stakeholders to bring stability and restore the group’s position as one of the leading and most respected drinks suppliers to the UK hospitality sector,” he said.

C&C Group shares have jumped 6.8% this morning to €2.74. 

Morning update

Grocery sales have increased in value by 2.5% in the 12 weeks to 25 March compared with the same period last year despite the impact of the “Beast from the East”, the latest market snapshot from Kantar Worldpanel shows.

Iceland, after two years of continuous growth, saw sales fall 0.8% over the past 12 weeks and dropped market share to 2.1%.

Aldi and Lidl continued to make their mark with both retailers achieving new market share highs. Aldi, which grew sales by 10.7%, increased market share by 0.5 percentage points to reach a 7.3% share of the market, while Lidl clocked in year-on-year sales growth of 10.3% to reach a 5.3% share.

Tesco (TSCO) enjoyed a sales increase of 2.4% to hold market share steady at 27.6% – the first time it has held share since December 2016 – attracting an extra 262,000 customers. The group saw sales growth of branded goods overtake own-label groceries for the first time since June 2015.

Morrisons (MRW) also saw sales increase by 2.4% with a resulting market share of 10.4%. Growth at the retailer was helped by a strong performance in online sales, with Morrison’s e-commerce offering proving particularly popular among younger, more affluent shoppers.

Asda’s market share fell back by 0.2 percentage points to 15.6% even though it encouraged shoppers to up the size of their baskets by 2.4% – the fastest increase experienced amongst the big four.

Sainsbury’s (SBRY) also suffered a fall in market share drop – down 0.3 percentage points to 15.8% – despite sales growth of 0.6%. The retailer has continued its move away from promotions: only 32.7% of sales at Sainsbury’s were achieved while a product was on offer.

The Co-op saw sales increase by 0.1%, with the disposal of 300 stores to McColl’s no longer impacting performance. Waitrose also experienced sales growth – up 1.5% year-on-year – while its market share fell 0.1 percentage points to 5%.

Online sales growth continues to slow – only increasing 3.6% compared with this time last year. Ocado outperformed the overall online market with sales growth of 9.3%, to hold market share at 1.2%.

Grocery inflation now stands at 2.5% for the 12 week period ending 25 March 2018. Prices have been rising since the 12 weeks to 1 January 2017, following a period of grocery price deflation which ran for 30 consecutive periods from September 2014 to December 2016.

Prices are rising fastest in markets such as butter, fresh fish and fresh pork, fresh lamb, and are falling in only a few markets, including laundry detergents and ambient cooking sauces.

 

 

Fraser McKevitt, head of retail and consumer insight, said: “The Beast from the East played havoc with consumers’ usual shopping plans. In the run up to and during the cold snap, shoppers stockpiled groceries buying 4% more items than normal, increasing the average value of a trip from £14.99 to £15.80.

“However, they simultaneously visited stores 5% less often as they stayed wrapped up at home, meaning overall lost sales from the storm were minimised to £22 million. Warming foods and drinks were the go-to items for customers after braving the snowy weather – sales of hot beverages and tinned soup grew by 8.4% and 27.5% respectively over the past month.”

Easter eggs rolled off the shelf in March with sales up 69% compared with this time last year despite a 35p jump in average prices to £1.83, McKevitt said.

“Almost 15m shoppers picked up Easter eggs last month while the average household, tempted by promotional offers, was swayed into buying at least two Easter eggs to meet their seasonal chocolate fix. Hot cross buns also saw a steep rise, with sales up £7.7 million compared to this time last year.”

Slowing price inflation and the recent “Beast from the East” weather failed to derail the strong growth rates seen across the UK’s leading supermarkets, according to Nielsen retail data released today.

The amount of items shoppers bought rose 0.4% year-on-year – the second highest rise since 2016, excluding seasonality-affected periods,

even though the weather meant the number of visits to grocery stores fell during the four weeks ending 24 March.

As a result, and combined with inflation, shoppers spent 3.3% more on groceries compared with the same period last year – or 2.6% more, excluding the discounters.

Mike Watkins, Nielsen’s UK head of retailer insight, said the winter weather in late February and early March disrupted shopping patterns but not enough to knock food retail off of its stride because its underlying health remained strong.

“This is built on the big four supermarkets having adapted well to changing market conditions and consumer behaviour, and the sector has effectively seen 13 straight months of growth above 2%. This is in stark contrast to non-food retail who are still adapting to their changing marketplace.”

Watkins pointed out that even though grocery sales in the week of the storms fell 1%, “they rallied by 12% the week after (week ending 10 March) - helped by Mother’s Day - as shoppers returned to the high street.”

Three categories in particular benefited as shoppers stocked up in advance of the storms: beers, wines and spirits saw a 7% year-on-year rise in sales during the four week period, frozen foods rose 5% and packaged grocery 4%. Fresh produce sales, however, fell 2%.

Tesco enjoyed the most improved year-on-year performance among the top four supermarkets over the twelve weeks ending 24 March, with sales up 3.1%, its fifth consecutive period of 3%-plus growth. This was followed by Asda at 2.9%.

Overall, Iceland, up 3.9%, had the best growth figures outside of the discounters. In contrast, even though they’ve gained shoppers, M&S sales, up 1.3%, have started to slow due to fewer store openings than a year ago.

Watkins said: “The recent Nielsen Consumer Confidence survey showed that 48% of shoppers are looking to save money, so some may be cutting out ‘unnecessary’ trips as part of carefully managing household finances.

“Furthermore, with a cold, wet and early Easter unlikely to have helped underlying sales as much as hoped in the last few days, all retailers will now be keeping an eye on the start of a late spring and the May Bank Holiday to kick-start spend. However, the good news is that supermarket food inflation is now slowing which might help shoppers spend more on impulse categories.”

Food inflation slowed down substantially in March, inflation standing at 0.4%, down from 1.6% in February, the latest British Retail Consortium (BRC) – Nielsen Shop Price Index for March shows. This is the lowest food inflation rate since February 2017.

Fresh food inflation slowed to the lowest rate since March 2017. Prices increased by 0.3% in March on the same month last year, compared to 0.9% in February. This is the lowest rate of inflation since March 2017.

Ambient food inflation rate was lower in March by close to two percentage points compared to February. Ambient prices increased by 0.6% in March on the previous year, while in February inflation stood at 2.5%. This is the lowest rate since February 2017.

Helen Dickinson, BRC chief executive, said: “Shop price deflation accelerated in March, driven by a substantial slowdown in food inflation, which reached its lowest rate for a year. As the impact of the pound’s depreciation one year on are beginning to fizzle out, retailers are passing the positive impact through to the shop floor.

In light of this, the support for a zero-tariff trade deal on the end-status agreement between the EU and UK, is encouraging news for retailers. But this needs to be accompanied by a focus on reducing potential customs friction on the movement of goods, in order for retailers to mitigate any further pressure on prices for their customers.”

On the markets this morning, the FTSE 100 climbed marginally by 0.03% to 7,032.9pts in early trading.

Early risers include C&C Group (CCR), up 4.5% to €2.74 in initial market reaction to the announcement that it was in advanced talks to buy Matthew Clark and Bibendum. Paypoint (PAY) climbed 1.5% to 816p, Premier Foods (PFD), 4% to 39p and Morrisons (1.4% to 215.3p).

Fallers so far today include DS Smith (SMDS), down 0,9% at 463.7p, Fevertree Drinks (FEVR), off 0.9% at 2,679p, Sainsbury’s down 0.7% at 235.8p and Marks & Spencer (MKS), down 0.5% at 267.2p.

Yesterday in the City

The FTSE 100 closed down 0.4% at 7,030.5pts

The big news was Landmark member AF Blakemore’s decision to sell its 12 cash & carry depots as going concerns following a strategic review.

Geoff Hallam, joint group managing director, said the move away from the cash & carry sector would allow the company to invest further across its wider business and focus its future strategy upon its remaining divisions, as it continued to drive innovation within the retail and wholesale distribution sectors.

“The company has now informed colleagues and will support all 520 of those impacted throughout this process,” he said.

Further information would be provided as the situation progressed over the coming weeks.

Mark Titley, property director, is handling all enquiries about buying the sites.

The wholesale division serves retail club members, as well as vending, forecourt and catering customers. It is one of nine Blakemore divisions.

Confirmation of the plans comes eight months after it was reported that Blakemore had appointed KPMG to explore a sale.

The IHS Markit/CIPS Purchasing Managers’ Index (PMI) released yesterday shows the UK manufacturing sector maintained a steady pace of expansion last month.

Output growth picked up, although this was offset by slower increases in both new orders and employment. On the price front, rates of inflation in input costs and output charges remained elevated despite easing slightly since February.

The seasonally adjusted IHS Markit/CIPS PMI posted 55.1 in March, little-changed from 55 in February. The average reading over the opening quarter as a whole – 55.1 – was the weakest in a year, suggesting that the underlying pace of expansion has been generally slower since the start of 2018.

Manufacturing production rose for the twentieth successive month in March. The rate of expansion accelerated to the sharpest in the year-so-far, despite a moderation in growth of incoming new orders. Similar to the trend in the headline PMI, average rates of expansion in production and new business over quarter one were lower than in recent quarters, suggesting that the underlying strength of the upturn has downshifted since the turn of the year.

Companies continued to report solid inflows of new work from both domestic and overseas markets in March. New export orders rose for the twenty-third month running, with the rate of increase slightly above the average for the sequence (despite easing to a five-month low). The latest expansion in new export business was linked to successful marketing campaigns, a favourable exchange rate and improved sales volumes to existing clients.

Price pressures moderated in March, with rates of increase in input costs and output charges both decelerating. Although purchase prices rose to the weakest extent in the year-to-date, the pace of inflation was still relatively strong. Higher costs reflected raw material shortages, supply chain disruption and rising commodity prices.

Duncan Brock, group director at the CIPS, said: “After the mini-boom of productivity at the end of last year, the sector still held its own, delivering a steady if unremarkable performance with overall activity improving very modestly from last month.”

Stocks on the up included PureCircle (PURE), up 5.4% to 388p, Stock Spirits Group (STCK) up 3.8% to 258p, McBride (MCB), up 1.1% at 160p and Hilton Food Group (HFG) closed 1.2% higher at 840p.

Fallers included Greencore, down 1.7% to 130.3p, TATE & Lyle (TATE), off 1.3% at 537.6p, Whitbread down, 1.9% at 3,630p and SSP Group (SSPG)closed 1.5% lower at 602.5p.