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Markets: SuperValu is second-biggest Irish retailer; Aldi and Lidl growing rapidly
By Finfacts Team
Mar 18, 2014 - 12:25 PM

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Markets news on stocks, currencies and commodities: SuperValu is second-biggest Irish retailer; Aldi and Lidl growing rapidly.

The latest supermarket share figures from Kantar Worldpanel in Ireland, published today for the 12 weeks ending 2 March, show that SuperValu has become Ireland’s second largest grocer following the rebrand of Superquinn’s stores on 13 February.

David Berry, commercial director at Kantar Worldpanel, said: “Bringing 24 Superquinn stores under the SuperValu banner has enhanced the retailer’s position as a major player in the grocery market. SuperValu now accounts for 25.3% of Irish shoppers’ grocery market spend, just 1.1 percentage points behind Tesco. Its sales have remained broadly in line with the market, which shows that it has been able to retain its market share while acquiring assets. Now, the main challenge for SuperValu is to convince previously loyal Superquinn shoppers of the merits of the SuperValu brand, and ultimately hold onto their custom."

Dunnes Stores saw its share fall  4.7% to 22.4%.

Despite the overall grocery market declining for the fifth successive month, Aldi and Lidl continue to impress. Both retailers are delivering double digit sales growth, and have increased their market shares by 1.4 and 0.8 percentage points respectively. Over the past three years Aldi and Lidl have captured a combined 3.8 share points from the competition, and have grown sales by 37% in an overall grocery market which has grown by just 1%. Conversely, Tesco and Dunnes have both experienced declines in market share and actual sales as the result of the pressure exerted by the increasingly competitive market place.

February saw the grocery market’s weakest performance since September 2011, with sales declining by 0.6%. Falling inflation has played a significant part in this as vegetables and bread, two important staple items, are now cheaper than they were last year.

Grocery inflation stands at 1.7% for the 12 week period ending 2 March 2014, down from 2.9% last period and the lowest level since April 2012.

The inflation  figure is based on over 30,000 identical products compared year-on-year in the proportions purchased by Irish shoppers and therefore represents the most authoritative figure currently available. It is a ‘pure’ inflation measure in that shopping behaviour is held constant between the two comparison periods – shoppers are likely to achieve a lower personal inflation rate if they trade down or seek out more offers.

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UTV Media FY13 in line and positive trends in current trading: Gavin Kelleher of Goodbody comments -- "Group revenue of £107.8m, was -4% yoy and in line with our £107.9m forecast (adjusted for disc. ops). Operating profit came in at £19.9m versus our £20.1m forecast (adjusted for disc. ops). H2 saw improving trends with revenue +3% yoy and operating profit +10% yoy (H1: revenue -11%, operating profit -36%).

In Radio GB, revenue was -7% yoy to £50.5m which was impacted by tough comps with no major sporting event last year. Divisional operating profit was £7.9m, in line with our forecasts. Radio Ireland revenue was -0.8% yoy to £20.8m and operating profit was £5.1m, in line. This division showed an improving revenue trend as it moved through the year (H1: - 10%; H2: +9%).

Television revenue was in line with expectations at £31.9m, -2% yoy, and operating profit was £7.4m. The statement noted that its Irish television business was +11% in H2. In New Media (UTV Connect & Portals now within discontinued operations), revenue was £4.6m and operating profit £2.3m.

Net debt came in at £49.1m, flat yoy and the group has declared a final dividend of 5.25p, full year 7p, in line with our forecast.

Television revenue in Q1 is expected to be up +5% with Irish TV revenue +11%, and in April TV revenues are expected to be up 10%. In Radio Ireland, there are clear signs of a recovery as the group is guiding +9% on a local currency basis in Q1 and further single-digit growth in April. In Radio GB, the group is guiding revenue +7% in Q1 (talkSPORT +12%) and +17% in April (talkSPORT +25%) highlighting some of the benefit from the World Cup. Management notes that as it sees growth in its core markets, it can look forward to seeing the benefits of the operational gearing in its business model reflected in future results.

Overall, the FY13 performance was as expected but the key takeaway for us was the very encouraging trends being seen in current trading. We are unlikely to make any significant changes to FY14 numbers following this morning’s results (except for some mix changes). The performance in the year to date leaves us comfortable with our numbers and a continuation of these trends would leave upward bias. It’s worthwhile highlighting that our FY14 forecasts are inclusive of £3m in start-up costs in UTV Ireland (underlying operating profit growth forecast is for c.16% yoy ex this investment). We view this, along with the talkSPORT International business, as attractive long-term growth drivers for the group. We reiterate BUY".

Economic View: The FOMC’s communication challenge; Dermot O'Leary, chief economist at Goodbody, comments - - "While the changing of the guard at the Federal Reserve has gone smoothly thus far, Janet Yellen faces her most important task over the next two days at her first FOMC meeting as Chair. While recent data has indicated that the US economy has slowed somewhat, it is unlikely to change the tapering path initiated by her predecessor. In this regard, the announcement of a further $10bn reduction in asset purchases is expected.

More important though will be the communication of the Fed’s forward guidance. Similar to the Bank of England, the FOMC will have to explain how they will maintain an accommodative monetary policy in light of a faster than expected reduction in the unemployment rate. It is likely that a more qualitative approach will be used that goes beyond the 6.5% unemployment rate threshold. Yellen will also have the opportunity to lay out the Fed’s views on the scale of spare capacity in the US economy. Given the uncertainty around the calculation of the size of the output gap this will not be an easy task.

After injecting record amounts of stimulus into the economy over recent years, the task of removing this stimulus is not easy. Bernanke learned last year that communicating this policy runs the risk of a sharp increase in yields, with knock-on implications in a wide range of markets. It is now Janet Yellen’s turn to face the market scrutiny."

FBD Holdings: Government considering applying 1% levy to all insurance policies; Eamonn Hughes of Goodbody says - - "Reports in this morning’s Irish Independent indicate the Government is considering applying a levy on all insurance policies, to create a distress fund to assist c. 50,000 homes who are unable to buy flood cover. The proposed 1% charge would bring total levies on home and motor insurance policies to 6%, following the 2% levy introduced in September 2011 to cover the losses at Quinn Insurance and the 3% Insurance levy introduced in 1982. At the crux of the issue, the Government maintains the insurance industry is not sufficiently protecting those living in flood prone areas, in spite of significant amounts being spent on flood defences in certain areas.

The introduction of the levy would be disappointing for the insurance industry and its customers alike given the levies that are already in place. This does not alter our positive view on FBD and we are unlikely to make any changes to forecasts at this point, given the levy will affect all policies and insurance companies equally."  

US markets

In New York Monday, the Dow rose 182 points or 1.13% to 16,247.

Both the S&P 500 added 0.96% and the Nasdaq advanced by 0.81%

US benchmark updates

Asia Markets

The MSCI Asia Pacific Index gained 0.6% Tuesday.

Japan's Nikkei 225 climbed 0.94%; China's Shanghai Composite added 0.08%; South Korea's KOSPI advanced 0.66%; Australia's S&P/ASX 200 rose 0.51% and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index climbed 0.10%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600  is off 0.25% in early afternoon trading Tuesday.

In Dublin, the ISEQ  has slid 0.19%

Glanbia is off 1.06%; no movement in UTV Media shares.

European Benchmarks

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3908 and at £0.8376.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time high of 11,771 on May 21, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 3.11%, to 1,619 points, Bloomberg report.

On Friday in London the BDI closed up 4 points or 0.27% to 1,481.

The index rose by 220% in 2013 to 2,237.

Global rebalancing — the tanker scrapyard index?

Crude oil for April 2014 delivery is trading on the Chicago York Mercantile Exchange (CME/Nymex) at $98.12 up 4 cents from Monday's close. In London, Brent for April 2014 delivery is trading on the International Commodities Exchange at $106.35. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013: US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,362.70 down $10.20 from Monday's closing - - the gold price fell 28% in 2013, the biggest annual plunge since 1981.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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