The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
One area of expansion for MRW might be to finally swallow McColls and have another shot at owning a convenience chain. You would also get to be the biggest post office operator - or would this be one of those "dumb decisions" we want management to avoid.
McColls shops are currently undergoing conversion to get a Morrisons facia. 300 stores will get the conversion by 2024, the chain has about 1200 stores. The stores stock Safeway or MRW branded products. Why pays for what? Presumably McColls pay the cost of store conversion. What do Morrison's get out of it? Is it just a better way to shift more wholesale product?
MCLS is currently valued at just 37m - that's a fraction of the amount Dalton lost on Kiddicare. However they carry a lot of debt and don't own any of their shops (?) so you just get the stock and the goodwill (which can't be a brand name worth much when the key aim is to improve the image by sticking a MRW badge on the shops).
https://www.thedrinksbusiness.com/2021/03/morrisons-plans-300-more-convenience-stores-as-part-of-mccoll-deal/
"The new deal, which extends the existing wholesale partnership until 2027, will acceleration the conversion of McColls stores to the new Morrison Daily format over the next three years. So far 31 stores have moved to the new fascia, with 300 planned by 2024.
McColls chief executive Jonathan Miller said the “milestone” extension would ensure the continued supply of a supermarket-quality offer across its entire estate and would allow it to execute a strategy to deliver sustainable profitable growth.
“In Morrisons we retain a long-term partner with best-in-class sourcing and manufacturing capabilities and a leading convenience offer for the local neighbourhood communities we serve across the country,” he said.
“Despite the challenges presented by COVID-19, the new partnership represents another significant step forward in achieving our strategic goal of increasing our fresh food offering in our store estate, while offering the best value for money for our customers. We are well positioned to continue enhancing our convenience offer and improving the quality of our estate at a time when the importance of neighbourhood stores has never been greater.”
That is the problem. There is nothing for the supermarkets to invest in, it is a sector that is saturated with low margins and little opportunity for growth.
Why dividends? Because it stops or reduces management chance to make dumb decisions. https://moneyweek.com/9902/moneyweek-basics-how-dividends-protect-your-shares-from-bad-management-60400
Look back at the major supermarkets over the last 20 years. They had gone on a crazy buying spree - the space race. No wonder the Germans had a free pass to expand when the majors had crippled themselves with reckless spending on new stores.
https://www.investorschronicle.co.uk/2016/09/30/shares/get-to-grips-with-grocery-retail-lSzztxrXw524JSuHTzkSIJ/article.html
Good analysis of the problem in this old article.
"The problem has been that all this new space has not made enough money in return. This means a lot of this money spent has been effectively wasted and has done considerable damage to the finances of the supermarket companies. Sales are higher, but profit margins have either stayed low - in the case of Sainsbury's - or collapsed.
To put this spending into some kind of perspective, the supermarkets were spending very large proportions of their trading or operating cash flow (the cash that comes into the business from selling goods) on capital expenditure - opening new stores and fitting them out, as well as keeping their existing stores in good condition.
This has meant that the companies' cash flow performances were dire. The amount of money left over after capex, tax and interest was paid - known as free cash flow - has been considerably less than the companies' reported profits. In fact, you could be forgiven for asking yourself what the true profitability of supermarkets actually was."
So why are dividends so important to you.
I would rather the company invests in growing the company rather than paying cash back.
It may pay good dividends but the share price has gone nowhere in years, it was higher last century.
How would selling shares benefit me? I don’t rely on dividends, they are the jam on top of the bread, so as to speak. I get a small pension, which pays the bills. I trade shares, but my overall aim is to continually improve my shares portfolio, but I prefer dividends to growth. Currently, I re-invest the dividends into new shares. If I then get into financial trouble, I can sell shares. My point is totally about the fact that, in my opinion, Morrison’s, & it’s shares, are good, getting better, & its shares worth buying.