September 4, 2018

Pegler’s market report – 04.09.18: The good and the bad

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (04.09.18) Business section under the title Pegler’s Market Report:

The good and the bad

Coca-Cola is to buy Britain’s largest coffee chain Costa Coffee for £3.9bn. Costa’s parent, Whitbread, had signalled it was planning to demerge its ‘jewel in the crown’ earlier in the year, however this deal has secured a significant higher premium than what could have been created by spinning it off alone.

The news sent Whitbread’s share price soaring, adding around £1bn to its market value.

Whitbread has spent the last few years building Costa up as an international brand, making it attractive to Coca-Cola, which until now did not have any coffee products in its stable. The US giant is expected to roll out cans of Costa Coffee to vending machines and push the brand into restaurants and pubs.

Costa is by far the largest coffee chain in the UK with more than 2,400 stores, as well as 1,400 overseas outlets and 8,000 Costa Express self-service machines.

The move will leave Whitbread holding its Premier Inn chain of hotels as well as the Beefeater and Brewers Fayre restaurant brands. Other brands it has jettisoned in recent years include TGI Friday’s, a 50pc stake in Pizza Hut UK and the Whitbread brewery business from which it took its name.

Aston Martin has announced its plans to float in London alongside the sports car maker’s interim results. The maker of vehicles favoured by James Bond has been positioning for a public offering for several years under chief executive Andy Palmer, who has overhauled the business with a revamped product line-up and returned it to profit after years of losses.

Warwickshire-based Aston is thought to be targeting a valuation of up to £5bn in an autumn flotation that will see at least 25pc of the company listed.

Mr Palmer, who joined Aston from Nissan in 2014, has steered the car maker back into the black with his “Second Century” plan for the 105-year-old business.

This has involved new models as well as the development of the company’s first hybrid-electric vehicle and an SUV, which will be built at a new factory in Wales. It has also taken write downs on older models and equipment in a move the chief executive described as “cleaning up the balance sheet”.

Homebase has secured approval from its landlords and creditors to close 42 of its 241 stores as part of a turnaround plan by its new owners that could leave around 1,500 staff out of a job. The retailer is closing the stores through a company voluntary arrangement (CVA), an insolvency procedure used by business to shut under-performing shops and secure big discounts on rents at other sites.

Payday lender Wonga has announced its intention to go into administration after losing its battle to stay afloat. The company said in a statement that it had assessed all options and had decided that administration was the appropriate route. It had already stopped accepting new loan applications as it fought to stave off collapse. Its demise in the UK follows a surge in compensation claims amid a government clampdown on payday lenders.

By David Pegler, Brighton Capital Management