A Day in the Life:

So I was going to get so much done yesterday afternoon.

I was going to tidy my desk, clear emails, catch up on a bit of RNS reading etc. but, as I was called upon at short notice to pick the ten-year-old up from school and then had to deal with a crisis in the duck pen when I got her home, none of this was to be.

Instead I found myself roped into saving an amorous male mallard duck (c1kg) that had followed our four apparently alluring female Cayuga ducks into the duck pen only to find himself facing the feisty, violent and generally nasty Cayuga drake (c4kg) who had been slumbering on a rock but who then apparently spent the rest of the afternoon attempting to visit violence upon the unwanted intruder.

And he no doubt would have succeeded in doing so had we not intervened.

But, though I hear it was beautifully sunny in London yesterday, it was extremely wet in Yorkshire and slipping around in a foot of sloppy mix of mud and duck poo whilst wearing 11” wellies was not my idea of fun.

However, we saved the bird so all’s well that ends well. On to the news:

The News:

PUB, RESTAURANT & DRINKS PRODUCER NEWS:

• The Association of Licensed Multiple Retailers and the British Beer & Pub Association are leading the call for a reduction in VAT for pubs and restaurants. The trade bodies have hired Chris Guyver, a veteran Westminster lobbyist of 20 years, to spearhead the campaign. Guyver cited the disparity in rates between pubs and supermarkets, adding: ‘Unlike other countries in Europe, the British government hasn’t taken action to reduce VAT in the sector, despite the positive contribution it would make to job creation. We believe it should address this important issue.’

• The BBPA has published guidance for pubs looking to capitalise on the Euro 2016 football tournament, which is freely available on its website.

• Enterprise Inns reports that it yesterday bought back 174,455 of its own shares for cancelation at between 101.25p and 103.25p per share

• JDW also bought back shares yesterday, 40k at 688p.

• Eat has reportedly stopped paying staff during lunch breaks due to the costs of the new national living wage.

• Half of all meals in the UK are eaten alone and nearly a third of people go a whole week without eating with someone else, according to a study from The Big Lunch.

• The abolition of National Insurance contributions for apprentices under 25 will provide a welcome boost for businesses, according to the ALMR. Chief executive of the trade body, Kate Nicholls, said: ‘Scrapping NICs for apprentices under the age of 25 will reduce financial burdens for employers and allow them to push that money back into training and further employment,’ but added that the ALMR will continue to push for a similar measure for all employees.

• Charterhouse Leisure has appointed Christie + Co as advisors to review options for the 10-strong Coal Grill & Bar group, writes MCA. The group reported sales in the year to the end of February 2016 rose by 19.6% to £12.2m and Group EBITDA grew by 22.9% to £1.1m.

• Tesco shares gave back over 5% after its chief executive Dave Lewis cautioned that the rate of profit improvement would slow in the first half of this year. The supermarket chain’s £162m statutory pre-tax profit for the year to 27 February stands in stark contrast to last year’s £6.3bn but the market remains ‘challenging, deflationary, and uncertain’. Suggests whilst this is not the end of the battle with the hard discounters, it is not even the beginning of the end, it is, perhaps, the end of the beginning.

• Premier Foods. See 60 seconds comment below. Group attracting a poor Press, pressure on now to deliver. Group has turned down 65p. Presumably it was looking for markedly more. It now has to get its share price above that sort of level within a non-geological time-frame in order to still critics. Outlook is good, however. Group reports full year numbers on 17 May and, although that is too early to provide any tangible evidence that things are on the up, we would expect to see any ‘rainy-day-good-news’ perhaps put in the shop window.

LEISURE TRAVEL:

• STR data Weds, though impacted by shift in Easter into March in 2016, confirms us in our view that the London market is slowing down. EasyHotel, which updated on H1 numbers earlier in the week, seems to be bucking the trend. As with pubs and restaurants, it could be that nimble new entrants will make the situation worse for incumbents.

• STR data. Easter in March 16 cuts business stays, increases lower paying leisure. April number therefore very interesting. We will get more of an idea at that stage as to whether this is a timing difference or whether there is a major slow-down going on in the latter. The former will certainly be having an effect and we believe the latter is in play, too.

• Number of overnight trips in Britain said to be +9% last year on 2014. Has to be good news for Merlin, etc.

• The family founders of rental website Holidaycottages.co.uk have sold half of their £30m business to private equity. Holidaycottages.co.uk, now part-owned by Phoenix Equity Partners, lets out countryside houses to tourists, with its various sites bringing in anything from £200 a week to £8,000 a week.

• Staycity is to open 202 studio, one-bedroom, and two-bedroom apartments in Liverpool’s Corn Exchange building, creating up to 40 jobs. The site is expected to open towards the end of 2016.

• Re its takeover, Kuoni announces ‘successful initial acceptance period [re bid] with 72.6% of Kuoni B shares tendered’.

• STR’s March 2016 Pipeline Report shows 163,943 rooms in 1,131 projects Under Contract in Europe, up 17.9% year-on-year. Meanwhile, data for the US shows 499,492 rooms in 4,071 projects Under Contract, up 15.2% on March 2015.

• The European Commission is contemplating a one-year suspension of its visa waiver agreement with the US and Canada. The move follows Washington’s refusal to apply the Visa Waiver Programme to European countries such as Poland, Croatia, Cyprus, and Romania.

• Iata has condemned an ‘irresponsible’ strike which has forced Brussels airport to close just three weeks after its terrorist attack.

FINANCE & MARKETS:

• IMF warns risks to global financial stability have increased. Commodity price moves have destabilised some countries’ economies. Report says there is a ‘growing concern about a mutually reinforcing dynamic of weak growth and low inflation that could produce sustained economic and financial weakness’.

• Surge in buy to let mortgage lending impacts numbers. Lending +61% in March vs last year. Rise expected to be temporary. The Council of Mortgage Lenders reports ‘activity has been boosted by landlords seeking to complete purchases before tax changes in April.’ It continues ‘we do not expect activity to show such strong year-on-year growth later in the year.’

• Reuters’ poll suggests majority of economists believe a Brexit would be damaging for the UK economy.

• UK house price inflation is set to moderate over the coming months as elections in Scotland, Wales, and Northern Island, along with the EU referendum, set to take their toll.

• Greek economy expected to shrink by around 1.0% this year following 0.3% contraction last year.

• World markets: UK and Europe strongly better yesterday on better China numbers. US up & Far East up in Thursday trade

• Oil price a little lower at around $43.60 per barrel

Premier Foods – McCormick walks away…

Note sent to clients yesterday morning.

Backdrop:

• PFD & MKC engaged in formal discussion over the last 2wks

• MKC says today it will not proceed – here

• Says it would not be able to propose a mutually satisfactory price

• Premier responds that it has a bright future – here

• Adds the Nissin deal ‘will expand PFD’s range of growth opportunities’

He said, she said…

• So did MKC find something or recognise that PFD would not roll over?

• We do not think talks progressed to the nitty-gritty of price

• MKC eye-balled PFD management & the latter didn’t blink

• Sure it needed to pay much more, MKC walked & is offside for 6mths

• It could come back (Rule 2.8) if there is a rival offer

Where to from here? Short term.

• Share register may churn, chancers will get out

• Standard Life & Paulson (vocal in their comments) need to commit or sell

• Meaning short term weakness is unavoidable

Where to from here? Medium term.

• The last month has been a defining point between eras

• 1mth ago (yes, just 1mth), PFD was a friendless, highly indebted & un-investable basket case

• Now it has had bid approaches, has a supportive shareholder (at 63p) & could grow at double (more including Nissin) the rate previously asserted – here

Conclusion:

• A left-field approach (which would get MKC out of the 6mth sin-bin) is possible

• And operationally, management will be under intense pressure to deliver

• Here the signs are good. Capex, marketing, exports, Paul Hollywood, TLC re Batchelors etc.

• And, if this is an investible company, it’s too cheap

• EBITDA c£147m pays interest (£42m), capex (£25m), pension (£57m) & cuts debt by >£20m

• PER is 5x (pre the growth mentioned above) & EV/EBITDA is < half that of MKC