Metcash in middle of reinvention - Sydney Morning Herald
THE grocery wholesaler Metcash Ltd ticked all the wrong boxes yesterday. It delivered a full-year profit that was below expectations, it announced plans to buy a non-core business and it decided to raise capital in a shabby equities market.
To make matters worse Metcash is also feeling the increased financial heat from legacy deals - having to write off loans and investments in supermarket retail joint ventures.
This is a company in the middle of an exercise in re-invention. But it's a process that is being undertaken in a very difficult environment.
In the midst of all this the company's chief executive, Andrew Reitzer, needs to explain why his $215 million acquisition of Franklins is taking longer than expected to gain traction and reap the promised returns.
Investors would be justified in questioning whether Metcash overpaid for what is essentially an investment in creating a monopoly in the supply of wholesale groceries to independent retailers - particularly at a time when the smaller corner shop end of the market is disappearing.
But it is not just the smaller players that are under pressure.
The independent stores that Metcash supplies have been caught in the cross-fire between two large supermarket chains - Coles and Woolworths - that have been engaged in a price discounting war.
This is what is eating at the margins of all grocery retailers. It is the underlying problem that is behind Metcash's problematic earnings.
How Metcash deals with these structural/competitive issues is now being judged.
The most immediate concern from the market's perspective is the discounted rights issue it announced yesterday. On the surface the discount to the prevailing price doesn't look all that significant - about 7.5 per cent.
But those that participate in the issue are eligible for this year's 16¢ dividend. Factor this into the equation and the true issue price is $3.30 - a much more significant discount. If one also takes into account Metcash's price a few weeks ago of $4.06 (before it issued a profit warning) the discount looks steeper again - more than 18 per cent. The good news is that in offering this level of discount most existing investors will be disinclined to miss the opportunity to take their entitlement.
But analysts are understandably wondering why Metcash did not draw down on its existing borrowing facility, which is estimated to be between $325 million and $370 million, of which to date only $180 million has been deployed.
To date the list of companies that have tapped the market to raise cash have done so with their backs against the wall, having unsuccessfully tried to sell assets, or whose businesses are in cyclical decline and need a capital buffer.
Not surprisingly the list is dominated by retail and companies such as Billabong and Ten, with some expectations that Seven West and Myer could join that list.
Metcash said its decision to raise equity rather than utilise debt was based on its desire to be conservative around funding.
Others analysts have queried why the company has (they believe) used debt to fund a dividend.
Analysts have also raised a question over the company's decision to include retail sales from its Franklins stores in the revenue number from wholesale sales. They take the view that without this boost the wholesale revenue numbers would have been negative in the 2012 financial year.
So there is understandable concern about the future performance of the company's wholesale supermarkets division.
To be fair, as the Franklins retail operations are sold to independent operators that use Metcash as a wholesale supplier the wholesale performance will improve.
The value in the Metcash model is all about being a monopoly supplier. This is the reason it paid $215 million to buy Franklins - more than twice the nearest rival offer.
It will take time for this value to flow through to Metcash's earnings. Legal action by the competition regulator set this back by a year and during this time the performance of the Franklins retail stores declined.
As Metcash's newly acquired supermarkets are onsold to independent retail operators there is evidence the new owners have achieved a better performance.
But progress has certainly been slower than investors would like.
Metcash has decided to speed up the process of investing in non-grocery areas. Some worry that boosting funds applied to hardware or getting into the automotive parts business has risks.
But using its logistics skills across a range of different products is probably not a bad idea. Metcash will buy 75 per cent of Automotive Brands Group - the largest privately owned distributor in the automotive parts and aftermarket sector.
The company can take some of the excess storage capacity from its Mitre 10 distribution centres.
In doing so Metcash is consolidating its core competence as a supply chain logistics operator. Of the money raised, $70 million to $80 million will be allocated to its new distribution centre and about $90 million will be deployed in bolt-on acquisitions that will be centred on buying fresh produce wholesalers.
Such wholesale changes certainly contain risks.
PUC Approves Higher Prices for Wholesale Electricity - NPR News
Courtesy PUC
PUC’s Donna Nelson
Public Utility Commission Chair Donna Nelson and Commissioner Rolando Pablos voted to approve an increase in the price cap for wholesale electricity in Texas this morning. Commissioner Kenneth Anderson, Jr. abstained.
The Public Utility Commission was voting on whether to raise the maximum wholesale price that electricity providers can charge. Currently, it’s capped at $3,000 per megawatt hour. In an interview yesterday PUC spokesman Terry Hadley told KUT News that the new proposal would raise the cap to $4,500.
It’s part of an effort to get companies to build more power plants at a time when officials worry the Texas may not have enough electricity to avoid rolling blackouts in long term.
“By having a higher wholesale price during peak demand periods, that would encourage the investment community to develop new power-generation plants in Texas,” Hadley said.
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If the vote was approved this summer Anderson said power companies would be “carting money away not in wheel barrows, but in Mack trucks,” at an April 12th Commission meeting.
Meanwhile some groups worry that the price hike could mean higher electric rates for consumers.
Right now, there is no comprehensive analysis of consumer impact. Estimates of the increase have varied widely so far – from a two percent hike per household to an increase amounting to $200 for every person in Texas, reports KUT News, lead station for StateImpact Texas.
UPDATE 1-Texas regulators raise power price cap by 50 percent - Reuters UK
(Adds details, comments, background)
HOUSTON, June 28 (Reuters) - Texas electric regulators voted Thursday to raise the price cap for wholesale power by 50 percent, beginning in August, to send a message that the state needs additional generation soon to meet growing power needs.
The Public Utility Commission of Texas voted 2-0 to increase the market cap when supplies are tight to $4,500 per megawatt-hour from $3,000 per MWh to encourage new investment in power plants to supply the $34-billion wholesale market.
The higher price cap for real-time power, which takes effect in August, is viewed as an interim step ahead of an even higher cap of $7,500-$9,000 for 2013 and beyond, which the commission is expected to act on later this year.
"It is important to send a strong signal at this time," said PUC Chairman Donna Nelson during Thursday's open meeting, which was web cast. "One thing we can't do is ignore this and move forward blindly and have faith that we will have enough electricity."
The Electric Reliability Council of Texas (ERCOT), which oversees the power grid serving most of the state, has warned that there will likely be more rolling blackouts in the coming years as power supply struggles to keep pace with demand.
After a power-plant construction boom in Texas in the early 2000s, low-cost natural gas and tight financial markets have stalled new investment in generation. At the same time, stricter federal environmental rules are expected to force older, dirtier coal-fired power plants to shut.
Power plant developers say it's already too late to add new generation by 2014, when ERCOT says power reserves will drop below 10 percent.
The state's supply was tested this week when an early heat wave pushed peak-hour electric demand in Texas to record levels for June or July, and raised wholesale prices to the current cap of $3,000 briefly on Tuesday.
In 2011, Texans consumed a record amount of electricity, particularly over the summer when air conditioners ran for extended periods during the hottest summer on record. ERCOT declared emergencies on a half dozen days last August, narrowly avoiding the need for rolling power outages.
Commissioner Rolando Pablos said he voted to raise the price cap in the interests of the state and not of any particular special interest group.
"Energy prosperity leads to economic prosperity," Pablos said. "A robust and reliable electric system will help us get there."
While companies that generate power support the higher price cap, groups representing large industrial power users, electric retailers and consumer groups opposed it, saying it would only raise costs without a guarantee that new plants will be built.
Some groups said other market adjustment made by ERCOT since 2011 were sufficient to maintain reliability this summer, according to PUC filings.
Several Texas lawmakers said the commission needed to take more time to understand how the higher price cap will affect retail prices.
"If last summer taught us anything, it is to hope for the best but plan for the worst," Nelson said.
Although Commissioner Ken Anderson also supports a higher price cap, he abstained from Thursday's vote, on worries that companies that buy power in the wholesale market won't have time to adjust hedging strategies or additional collateral requirements by August.
"However, I am mindful, the market has a huge expectation for this," Anderson said. "We absolutely need a higher system-wide offer cap."
The commissioners disputed arguments that the higher cap will dramatically impact power bills for most customers.
Retail rates are at historic lows, Nelson said in a memo, noting that electric prices today are much lower, when adjusted for inflation, than rates charged in 2001 before the state moved to a competitive market for generation.
Power producers in Texas include Luminant, a unit of privately held Energy Future Holdings, NRG Energy , Calpine Corp, NextEra Energy and Exelon Corp. (Editing by Bernadette Baum)
The tables are turning for community shops - Peterborough Evening Telegraph
As we all know, the retail landscape has seen unprecedented change over recent decades, as the advent of national chains and convenience shopping saw the demise of many of the country’s once-cherished independents.
However, the tables are quietly turning and as the high street continues to hit crisis, the expert opinion is that the future of British shopping lies in a concerted community focus.
This can be seen in the continued success of Queensgate, which has always and continues to offer a truly diverse retail mix, as Sam Eastwood, centre director, explains:
“Last December saw retail-expert, Mary Portas, unveil a high-profile, independent review into the state of the UK High Streets’ which showed that up to a third were ‘degenerating or failing’. The report claimed that the reason for this is a notably outdated retail model which no longer serves the needs of the modern shopper. Also the national surge in convenient, out-of-town retail parks, weakening the lure of city centre destinations for the busy shopper.
“On a more positive note, the consensus was that this by no means the end for city centre shopping, however rapid change is paramount. For the consumer looking for a more than a fast purchase, scope remains for those seeking a more holistic, enjoyable retail day-out. Portas revealed a burgeoning demand for a more vibrant, eclectic shopping experience whereby town centres offer a wide range of local services to create a richer retail, cultural and community hub.
“Fortunately for Queensgate, we are proud to say that we have always strived to provide a deeply-rooted community service and unique retail mix. Today, for example, we have over 25 independent stores, equating to almost a quarter of the centre; far above that of the national average.
“Since the centre’s inception, the importance of differentiation has been clear. This is seen in the popular Westgate Arcade, a charming alcove full of intriguing boutiques for customers to explore and covering everything from accessories and jewellery to hairdressing and food. This eclectic mix of independent retailers offers a truly different experience for visitors - an escape from the high street buzz for shoppers seeking something unique and original.
“Of course, most shoppers will know of our Reflections café and Michael John hairdressers, both of which have been at Queensgate since the very beginning in 1982. Both businesses continue to thrive and are built on delivering a personable approach. While many nationals continue to struggle, this clearly shows how the independent factor and something as simple as a friendly, familiar face can make all the difference in these trying times.
“Conversely, the advent of independent stores is a great way to support the local economy. In terms of new or young businesses, Queensgate, with its diverse unit sizes and varying rental tones, offers an opportune starting point for those looking to operate in a city centre environment. Indeed, occupying a city centre location is not the cheapest option but the initial outlay can pay in dividends in the longterm; they key is to understand the market and create a retail offer which engages and excites shoppers.
“A good example is The Oculist which has enjoyed major success since launching in Westgate Arcade, having quickly built up a strong and regular client base. It is also a good stepping stone for small traders to evolve into retailer units as they grow and expand their client base.
“Ultimately, however, whether a national or individual retailer, retailers must remember that the customer will always gravitate towards quality and value. At Queensgate, for example, our recent high street additions, Pandora and Schuh, have shared the same success as new independents Maysons and The Oculist, all of which are flourishing despite the difficult economy. The reason for this is the fact that they know their market, they understand their customer, have a personalised customer service, maintain have a fully honed brand concept and simply keep getting it right. “That’s not to forget the fundamentals at centre management level as well. Something as simple as car parking, for example, can make all the difference to a centre’s footfall power. At Queensgate we have always strived to provide the best car parking facilities possible for our shoppers, at highly competitive prices, to make coming to the centre as easy as possible. Only last year, we started a £10 million refurbishment project to completely refurbish and regenerate all four centre car parks which continues to gain pace.
“It might sound simple but something as basic as a well-maintained car park can make all the difference; it is about streamlining the ease of the customer journey, creating a good first impression and, ultimately, ensuring customers are in the right mood to shop.
“Testament to our efforts, Peterborough was recently revealed by a new Retail Risk report by Shopping Centre magazine as one of the UK’s safest towns to invest in. This clearly demonstrates that, amid a weakened economy, it is those retail hubs which do not become yet another faceless modern complex but retain a local focus, personality and individuality which will survive.
“This is clearly reflected in the council’s continued investment in Peterborough’s Cathedral Square, in order to improve the retail landscape, creating a vibrant atmosphere which attracts further retailer investment.
“Indeed, all the favourite national retailers make up a major part of Queensgate, such as recently launched Fat Face, Jack & Jones, Hotter Shoes and the soon to arrive Primark but, as a reflecting the needs of its community, we dually recognise the importance of ensuring a quality, local offer. This is what has always made Queensgate stand out from the busy shopping crowd, creating a vibrant, distinguished retail experience designed to keep customers coming back. And so, as the revival of the UK’s independents fast emerges, we look forward to expanding the mix even further.”
For further information go to: www.queensgate-shopping.co.uk
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Print this pageTexas may increase wholesale electricity rates - AP - msnbc.com
AUSTIN, Texas — With temperatures now soaring into the 100s, the Texas Public Utility Commission is set to vote Thursday on raising the price cap on wholesale electricity rates by 50 percent later this summer, a move advocates hope would spur construction of new power plants to help the state avoid rolling blackouts and meet future energy demands.
The state's large industrial users warn such a move could raise wholesale market costs by billions of dollars, and consumer groups worry that will eventually trickle down to monthly household electric bills for most Texans.
And Thursday's vote could be just the start. Commissioners are considering, but aren't expected to vote on, tripling the wholesale price starting in summer of 2013.
The idea behind the price boost is that the lure of new profits would encourage investors to build more power plants. But critics warn that electric providers could just pocket the money and not build any new plants in an effort to make more money by keeping supply low during high-demand summer and winter months.
"There's no guarantee" of new construction, said Tim Morstad, associate state director for AARP-Texas. "They're breaking out the blank check for power companies. Slow down."
But the three-member utility commission appears headed toward approving a wholesale price increase. The sticking point seems to be on when the hike would take effect.
Commissioners, appointed by Republican Gov. Rick Perry, will vote on a plan to raise the wholesale cap from the current $3,000 per megawatt-hour to $4,500 starting Aug. 1. The cap increase would affect wholesale rates within the Electric Reliability Council of Texas electric grid, which covers most of the state except for El Paso, parts of the Panhandle and points in northeast and southeast Texas.
ERCOT warns that without additional generating capacity, the state would soon not be able to keep up with demand. Luminent Energy Co., a private utility, supports the increase, saying it would send "a strong signal" to investors that future prices will support building new generating facilities.
Utility Commission Chairwoman Donna Nelson favors the Aug. 1 price increase to encourage investment in new power plants as soon as possible.
Commissioner Ken Anderson also appears to favor raising the price cap, but not this year. He argues that no one is going to build a new plant by Aug. 1. If higher prices hit this summer, power companies will be "carting money away not in wheel barrows, but in Mack trucks," Anderson said at the commission's April 12 meeting.
"I don't know what signals it sends this summer, other than panic," Anderson said.
Although electric providers typically sign long-term contracts for energy at a set price, they often fill in gaps on high-usage days by purchasing electricity on the "spot market," where prices are set several times an hour. That market can be compared to buying and selling on the stock market, where prices can be determined by sharp increases in demand and shortages.
Texas Industrial Energy Consumers, which includes refineries and chemical manufacturers, warned that a sudden rate increase could create instability in electric pricing and drive smaller electric retail providers out of business.
"These are staggering numbers," the industrial group wrote in comments on the proposed Aug. 1 wholesale price increase.
What no one seems to have a handle on is how a wholesale price increase could eventually result in higher household electric bills.
Public Utility Commission spokesman Terry Hadley said the agency hasn't done a study of the potential impact on the average Texan. Hadley said much of Texas' retail electric market is based on contracts where retail providers offer household customers long-term contracts at set rates. How those companies adjust to a wholesale price increase will depend on their business plan.
"It does bring more risk to the retail provider," Hadley said.
As for the hope that an increase in profits would spur investment in new power plants, Hadley said the PUC couldn't make any promises.
"In the competitive market, generators handle the risk (of building) themselves," Hadley said.
National utility consultant Robert McCollough of Portland, Ore., said Texas would be running "a bizarre experiment" if it believes a rate hike would spur new investment in power plants.
"A bank wants a steady revenue stream. What you have in Texas is an unsteady revenue stream. Everybody makes all their money on bad days," he said. "Unless you're the king of Saudi Arabia financing this out of the household budget, (building power plants) is not going to happen."
Three state lawmakers also have expressed concern. Democratic Sens. Rodney Ellis of Houston and Wendy Davis of Fort Worth, and Rep. Sylvester Turner of Houston questioned whether the higher wholesale price would give Texans anything for their money in the future.
"It would indeed be troubling to see Texas families pay higher rates and still face the threat of rolling blackouts," without new power plants, Ellis wrote to the commission.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Surely she doesn't need any free money! TOWIE's Lucy Mecklenburgh helps launch the world's first cashback boutique - Daily Mail
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She's certainly made a name for herself on The Only Way Is Essex so the last thing that Lucy Mecklenbugh needs is free money.
Instead the 20-year-old reality TV star urged members of the public to try and get their hands on some as she helped launch the world's first cashback boutique Quidco.
Surrounded by tons of money, Lucy encouraged shoppers to get paid to enter their favourite shops.
Quids in! Lucy Mecklenburgh helps to launch the world's first cashback boutique Qudico in London today
The store on London's Rathbone Palce - where customers are paid to peruse - opened for business alongside other high-street shops Argos, The Body Shop, Debenhams and Vodafone.
The boutique was met by queues of shoppers hoping to get their hands on free money from the shop's glamorous shop assistant, Lucy.
Wearing a bright blue peplum dress with black heels, the brunette had certainly dressed up for the occasion and arrived carrying several shopping bags.
Lucy is certainly familiar with the retail business as she owns her own shop, Lucy's Boutique, and has even decided to join the Quidco check-in revolution.
Lady in blue: The TV star wore a bright dress and black patent heels as she arrived at the launch
'I love a bargain': Lucy said that she thinks the concept of Quidco is 'wicked'
'While Lucy's Boutique brings in the crowds, today has been ridiculous,' she said of today's launch.
'Nothing draws in excited shoppers more than free cash. I love a bargain, and whether it's our designer handbags or a slap-up meal, I always looking for the best deal.
'Also, to keep Lucy's Boutique right on the cutting edge, I need snazzy services like Quidco. It's wicked.'
The high security retail experience will go down in history as the only shop in the world where consumers can literally pick up free money.
Show me the money! The brunette has decided to introduce Quidco in her own store Lucy's Boutique
From clothes rails of cash to live mannequins draped in dosh, shoppers witnessed a shrine to free money and the pop-up Boutique marked the next generation of a mobile app from Quidco that pays shoppers for simply entering their favourite high street stores.
'Shopping is one of the UK's favourite pastimes and shoppers are rarely told they will be paid to do it,' said Andy Oldham, Managing Director of Quidco.
'Creating a boutique giving away free money, seemed the perfect way to promote the app that literally pays shoppers for shopping.'
But while Lucy was in London handling cash, her co-star Lauren Pope was in Cardiff City Centre giving make-up tips to TOWIE fans.
The blonde wore a bright red fitted dress with a black and gold waist belt and peep-toe heels.
Busy lady: Lauren Pope was in Cardiff City Centre giving make-up tips to fans
Nash Finch Expands in Minnesota - Analyst Blog - NASDAQ
Minneapolis, Minnesota based wholesale food distributor, Nash Finch Company ( NAFC ) inaugurated two new Family Fresh Markets in the Wisconsin and Farmington regions in Minnesota. While the company inaugurates a new Family Fresh Markets at 303 South Main Street, River Falls, Wisconsin, today, the other one will be inaugurated tomorrow at 15 Elm Street, Farmington.
There are currently two Family Fresh Markets stores in this region. The stores will offer products like meat, seafood, natural and organic foods at a competitive price.
As a part of the opening ceremony the company will donate cash to the local community Food Banks and also donate books to local schools via Nash Finch's Feeding Imagination program.
As part of its expansion strategy, in May 2012, the company entered into an agreement to supply food to more than 80 Dollar General Stores, in the Nebraskan region. The company has been strategically moving ahead to acquire major operating units before Walmart steps into the region of Nebraska. As a part of this strategy it acquired 'Bag n Save' supermarkets and 'No Frills' supermarket in May 2012, which will help it to spread its business in the Nebraska region.
Nash Finch operates corporate-owned grocery stores, located primarily in the Upper Midwest, in the states of Colorado, Iowa, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. The corporate-owned stores principally operate under the Sun Mart, Econofoods, Avanza, Family Thrift Center, Pick 'n' Save, Family Fresh Market, Prairie Market, and Wholesale Food Outlet banners.
Currently, we have a long-term Neutral recommendation on Nash Finch, which carries a Zacks #4 Rank (short term Sell rating).
NASH FINCH CO (NAFC): Free Stock Analysis Report
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ouh love the colour of her dress!! rented one from pret-a-rent last week! glad to see it on someone else as i wasn't so sure. she looks gorgeous and has the body to pull it off.
- Abigail, UK, 28/6/2012 17:42
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