Tesco (TSCO) and Booker (BOK) have requested that the Competition and Markets Authority fast track its investigation into deal to a more in-depth phase 2 investigation.

The CMA commenced its phase 1 review on 30 May, but Tesco and Booker want the CMA to speed up its move into a more detailed phase 2 process.

The two retailers said in a statement: “We expect it to issue an early decision to refer to Phase 2 within the next two weeks. We are grateful to the CMA team for the work they have done to date and appreciate the support of customers, suppliers and colleagues during this process.”

The phase 1 process was due to be completed by 25 July.

The CMA said if it proceeds with a fast track procedure it would expect to issue a phase 1 decision within the next 10 working days.

The statutory timetable for the in-depth phase 2 investigation would be 24 weeks.

The CMA added that the fast track process has been used in a number of CMA merger investigations previously including BT/EE and Ladbrokes/Coral.

Morning update

Greene King (GNK) has posted a 6.9% rise in annual revenues to record high of £2.22bn in the year to 30 April 2017.

Revenue growth was driven by good performance from the underlying business and by the additional seven weeks of Spirit trading in comparison with last year.

Adjusted profit before tax was up 6.6% to £273.5m, but reported pre-tax profits slipped 2.6% to £184.9m.

EBITDA surpassed £500m for the first time in the company’s history, reaching £524.1m, up 5.5% on last year.

Operating profit before exceptional and non-underlying items was up 4.9% at £411.5m while operating margin decreased 0.3%pts to 18.6% as the positive contribution from Spirit

Synergies were offset by brand conversion costs and the more challenging cost environment.

Its Pub Company division saw life-for-like growth of 1.5%, with total sales up by 7.7%, while its Pub Partners division saw revenues grow 5.8%.

Brewing & Brands achieved revenue of £200.3m in the year, up 1.7%. Own brewed volume was down 2.8%, in line with the total ale market and beating the cask ale market. Its share of the UK cask ale market was 10.3%.

CEO Rooney Anand said: “Greene King has delivered another set of record results, generating full year EBITDA of over £500m for the first time. The team has worked hard to maintain momentum during the period and successfully completed the integration of Spirit a year ahead of schedule. This has led to a stronger, more competitive business with an industry-leading portfolio of brands.

“Our performance has been achieved against a demanding backdrop of increased costs, weaker consumer confidence and increasing competition. While I expect these challenges to intensify over the next few years, Greene King has a very strong track record of delivery in tough market conditions.

“Using the scale that the Spirit acquisition has brought, we will continue towards our aim of being the best pub company in Britain. We will achieve this goal by ensuring we have the best brands, the best invested estate and the best people in the industry. We will target further market outperformance, in a growing market, supported by additional cost efficiencies, a robust balance sheet and strong cash generation to deliver long-term growth and attractive returns for our shareholders.”

Also this morning Real Good Food (RGD) has announced it has raised £15.5m of expansion capital from a new investor and two existing shareholders via debt finance and new equity.  

This new injection of capital will be raised by way of the issue of a secured loan note instrument of up to £8.75m from funds managed and controlled by Downing. The loan notes are redeemable in full after three years and Downing has committed to subscribe for shares in Real Good Food of 10% of the issued share capital at a price of 35p per share raising a further £2.75m.

The Company has also secured two £2m from existing shareholders.

The funds will be use to invest in an expansion plan at two of its businesses, Renshaw and Haydens.

The two main areas of investment are at Renshaw’s Crown Street site in Liverpool and Haydens in Devizes. Both these businesses are seeing significant increases in forward demand; this has been driven by international expansion and the launch of a mainstream retail brand at Renshaw and the acquisition of two major new retail customers at Haydens.

At Renshaw, the Company will invest approximately £7 million in expanding capacity by over 50% as well as the installation of new soft icings and discs production lines.

At Haydens, the acquisition of two new major customers has put short term pressure on operational capacity and the company will therefore invest approximately £8m in order to reconfigure site operations, including blast freezing capability and the installation of a new, automated Yum Yum line. This is expected to take site capacity from its existing level of up to approximately £30m revenues to over £50m  of sales.

Real Good Food said: “Both of these investments, as well as increasing capacity, bring significant benefits in efficiency, upskilling the workforce and mitigating the impact of the forthcoming Living Wage increases.”

The majority of this expansion plan is expected to be completed by the end of September 2017 and is budgeted to cost approximately £15m.

Packaging firm DS Smith (SMDS) has acquired US firm Interstate Resources to provide it with a “significant entry point into US market”.

The family owned paper and corrugated packaging business is based in the East of the US, with 24 sites, and 1500 employees.

DS Smith said the deal “provides a well-positioned, balanced and invested platform to build a significant market position”.

It has paid US$920m (£722m) for the 80% equity, with an option to buy remaining 20% over five years, plus debt of approximately US $226m.

Meanwhile, DS Smith has announced its annual results.

Corrugated box volumes grew by 3.2% on a like-for-like basis,with good momentum in the second half of the year. All regions have shown growth, with particularly good growth from the UK, which has seen more benefit from e-commerce customers, and from the Central Europe and Italy region.

Overall sales growth of 6% was broadly equally weighted between the contribution from organic growth and from acquired businesses (net of disposals), which contributed 3% growth each on a constant currency basis.

Adjusted operating profit increased by 5% on a constant currency basis to £443 million (17% on a reported basis), driven by the contribution from volume growth and from the net

contribution of businesses acquired. Input cost increases were driven by a rise in the cost of

raw materials and other operating costs, which impacted profit by £36 million.

Miles Roberts, group CEO, commented: “We are delighted to report another year of good growth for DS Smith, delivered  through a combination of acquisitions and organic development. We have expanded our customer offering during the year both geographically and through our continuous focus on innovative solutions for our customers and delivered

against all our medium-term financial targets.

“Today’s announcement of our intended acquisition of Interstate Resources Inc. in the US offers a very exciting opportunity for us to grow and support our customers’ needs over a wider geographic area.

Although economic conditions remain uncertain, our innovation-led offering, the scale of our operations, and the momentum in the business gives us confidence in further growth and sustainable returns in the years ahead.”

Finally, trading on AIM of Chinese seafood company Aquatic Foods Group has been suspended pending the publication of the company’s annual report and accounts.

On the markets this morning, the FTSE 100 is back up 0.5% to 7,423.2pts.

Tesco - along with the other supermarkets - has edged up after this morning’s news, up by 0.3% to 172.3p.

Greene King has fallen 0.7% to 684p, DS Smith has jumped 8.7% to 482.6p, but Real Good Food has slumped 7.1% to 33.9p.

Early risers include Marks & Spencer (MKS), up 0.6% to 342.9p, FeverTree (FEVR), up 0.6% to 1,685p, Booker Group (BOK), up 0.4% to 188.2p, Sainsbury’s (SBRY), up 0.4% to 259.3p and Morrisons (MRW), up 0.3% to 242.7p.

Fallers include Coca Cola HBC (CCH), down 1.8% to 2,295p, B&M European Value Retail (BME), down 0.8% to 338.7p, WH Smith (SMWH), down 0.9% to 1,695p and Greggs (GRG), down 0.7% to 1,098p. 

Yesterday in the City

The FTSE 100 was down a further 0.6% to 7,387.8pts yesterday as international stocks fell back due to the surge in the pound after Bank of England governor Mark Carney suggested interest rates could be on the way.

The pound jumped 1% against the US dollar at US$1.294 yesterday on Carney’s comments.

The supermarkets continued their recovery from heavy falls post-Amazon/Whole Foods.

Sainsbury’s was one of the FTSE 100’s better performers, rising 1.7% to 258.4p, Tesco (TSCO) was up 1.6% to 171.8p and Booker Group (BOK) rose 1% to 187.4p.

Also on the rise after falls earlier this week after rival Debenhams posted weaker than expected results was Marks & Spencer (MKS), which was up 1.3% to 340.8p.

The rising pound hit the FTSE 100 tobacco firms, with British American Tobacco (BATS), falling 1.4% to 5,351p, Imperial Brands (IMB), down 1.3% to 3,530p. Other firms hit included Coca-Cola HBC (CCH), down 1.4% to 5,351p, Greencore (GNC), down 1.4% to 247.5p, Dairy Crest (DCG), down 1.2% to 607p and Cranswick (CWK), down 1% to 2,839p.

 

 

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