Tesco’s fleet of corporate jets is up for sale and Dunnhumby, the data mining empire behind its Clubcard loyalty scheme, could also be up for grabs as the troubled supermarket group’s new boss Dave Lewis looks for ways to shore up the supermarket giant’s finances.
Analysts think Lewis needs to find £2bn-£3bn, either from the pockets of big City investors or selling some of the family silver – or both – if it is to have a sure financial footing from which to recover from this year’s collapse in profits and the accounting scandal that has exposed a £250m black hole in expected first half profits.
With a turnover of £70bn, Tesco stopped being simply a retailer a long time ago as it established a bank and started building flats as well as stores. But some retail experts think it strayed too far when it started investing in trendy restaurant chains, tablet computers and video streaming services.
Selling new shares to investors would provide a quick fix to the situation but disposals are also on the agenda if Lewis makes good his promise to focus on getting the retail basics right.
There are a number of assets and businesses Tesco could sell:
Dunnhumby
With a mooted £2bn price tag said to be hanging off its giant servers, the London-based company behind Tesco’s successful loyalty scheme Clubcard is one of the jewels in the Tesco crown.
Founded by married couple Edwina Dunn and Clive Humby, with the click of a mouse Dunnhumby can profile you faster than the FBI can. From your shopping trolley it can tell whether you are a single, a fast-food junkie or a family juggling a tight budget with school-age children.
The data enables Tesco to put the right products in the right stores and target promotions accurately – insight that helped Tesco usurp Sainsbury’s as market leader in 1995.
Dunn and Humby, dubbed Mr and Mrs Clubcard, are no longer involved, having stepped down at the start of 2013.
The accounts for that year show a pre-tax profit of £67.6m on sales of £165m – a year when it paid Tesco a £140m dividend. There’s no doubt Dunnhumby’s services are valuable but getting someone to part with £2bn might be a stretch.
Dobbies Garden Centres
We don’t imagine Dave Lewis has much time for gardening these days which is a shame because Tesco owns Dobbies, the Scottish garden centre chain. Sir Terry Leahy slapped £156m on the table for the business back in 2007 at the height of the pre-recession spending boom when being “green” and green-fingered was all the rage.
Not much has been heard about the still-Edinburgh-based garden chain since. Dobbies most recent figures, for the year to 24 February 2013, were blighted by the wettest summer for 100 years: profits crashed 30% to £7.3m on sales of £137.4m.
A sale would not make that much difference to Tesco’s coffers but Lewis may think pruning its UK empire will make it healther in the long-term.
Giraffe/Blinkbox
People used to do their shopping at Tesco but as Britons turn their back on the big weekly shop, previous chief executive Phil Clarke had a crack at reinventing its biggest stores as fun places to hang out – with the addition of cafes, restaurants and soft play centres.
At the same time it threw money at new digital services such as movie streaming website Blinkbox and its own-brand tablet, the Hudl.
This thinking led to last year’s near £50m acquisition of restaurant chain Giraffe, a haunt for middle-class families thanks to its tolerant attitude to mess and willingness to serve mojitos alongside baby food.
Why Tesco bought it, as opposed to renting space to it, is not clear and the most recent publicly available accounts show a loss of nearly £5m on sales of £44m as new openings weighed on its performance.
Another surprise purchase was a stake in Harris and Hoole, the coffee chain named after coffee-loving characters in Samuel Pepys’ diary, for an undisclosed sum.
Tesco is thought to be soliciting offers for Blinkbox, which was set up by former Channel 4 and Vodafone executives to create a competitor to Amazon’s LoveFilm and Netflix. If a buyer cannot be found the heavily loss making streaming service could just be closed down.
“The inherent value of Blinkbox is its relationships with content providers,” says Ken Olisa, chairman of technology merchant bank Restoration Partners.
“It’s an example where content is king.”
Tesco Asia
Tesco was once held up as an example of one of the few British retailers able to succeed beyond these shores.
Recent years have been less kind, with the retailer forced to retreat from the US after losing some £1.8bn on the failed Fresh & Easy venture in California and Nevada. While Lewis might like to offload its struggling business in central Europe, it is its more successful operations in Asia that are more likely to interest investors.
Its South Korean chain Homeplus is its largest business after the UK, closely followed by the Lotus business in Thailand. It also operates a sizeable hypermarket chain in Malaysia.
Shore Capital’s Clive Black estimates Tesco’s Asian arm is worth £9bn-10bn should Lewis want to sell or float it, although doing so would cut off a key avenue of future growth.
Tesco Air
It recently emerged that Tesco was also operating its own airline as a new $50m (£31m) Gulfstream G550 corporate jet, ordered by Clarke, touched down in the UK with impeccable timing.
The jet was a replacement for the company’s older Gulfstream which was on the market for $30m-$35m. To placate investors Lewis has now put its whole fleet – including the new jet – up for sale, while Kansas Transportation, the company which owned the corporate jets, has been put into liquidation.
Its other jets – a Hawker 800 and two Cessna Citations – could have a resale value of more than $60m, according to aircraft brokers.
Kansas Transportation’s accounts show Tesco spent £29m flying executives around the world in private planes between 2005 and 2012, but with fewer countries to visit the company’s airfare bill will probably come down anyway.
theguardian.com
Analysts think Lewis needs to find £2bn-£3bn, either from the pockets of big City investors or selling some of the family silver – or both – if it is to have a sure financial footing from which to recover from this year’s collapse in profits and the accounting scandal that has exposed a £250m black hole in expected first half profits.
With a turnover of £70bn, Tesco stopped being simply a retailer a long time ago as it established a bank and started building flats as well as stores. But some retail experts think it strayed too far when it started investing in trendy restaurant chains, tablet computers and video streaming services.
Selling new shares to investors would provide a quick fix to the situation but disposals are also on the agenda if Lewis makes good his promise to focus on getting the retail basics right.
There are a number of assets and businesses Tesco could sell:
Dunnhumby
With a mooted £2bn price tag said to be hanging off its giant servers, the London-based company behind Tesco’s successful loyalty scheme Clubcard is one of the jewels in the Tesco crown.
Founded by married couple Edwina Dunn and Clive Humby, with the click of a mouse Dunnhumby can profile you faster than the FBI can. From your shopping trolley it can tell whether you are a single, a fast-food junkie or a family juggling a tight budget with school-age children.
The data enables Tesco to put the right products in the right stores and target promotions accurately – insight that helped Tesco usurp Sainsbury’s as market leader in 1995.
Dunn and Humby, dubbed Mr and Mrs Clubcard, are no longer involved, having stepped down at the start of 2013.
The accounts for that year show a pre-tax profit of £67.6m on sales of £165m – a year when it paid Tesco a £140m dividend. There’s no doubt Dunnhumby’s services are valuable but getting someone to part with £2bn might be a stretch.
Dobbies Garden Centres
We don’t imagine Dave Lewis has much time for gardening these days which is a shame because Tesco owns Dobbies, the Scottish garden centre chain. Sir Terry Leahy slapped £156m on the table for the business back in 2007 at the height of the pre-recession spending boom when being “green” and green-fingered was all the rage.
Not much has been heard about the still-Edinburgh-based garden chain since. Dobbies most recent figures, for the year to 24 February 2013, were blighted by the wettest summer for 100 years: profits crashed 30% to £7.3m on sales of £137.4m.
A sale would not make that much difference to Tesco’s coffers but Lewis may think pruning its UK empire will make it healther in the long-term.
Giraffe/Blinkbox
People used to do their shopping at Tesco but as Britons turn their back on the big weekly shop, previous chief executive Phil Clarke had a crack at reinventing its biggest stores as fun places to hang out – with the addition of cafes, restaurants and soft play centres.
At the same time it threw money at new digital services such as movie streaming website Blinkbox and its own-brand tablet, the Hudl.
This thinking led to last year’s near £50m acquisition of restaurant chain Giraffe, a haunt for middle-class families thanks to its tolerant attitude to mess and willingness to serve mojitos alongside baby food.
Why Tesco bought it, as opposed to renting space to it, is not clear and the most recent publicly available accounts show a loss of nearly £5m on sales of £44m as new openings weighed on its performance.
Another surprise purchase was a stake in Harris and Hoole, the coffee chain named after coffee-loving characters in Samuel Pepys’ diary, for an undisclosed sum.
Tesco is thought to be soliciting offers for Blinkbox, which was set up by former Channel 4 and Vodafone executives to create a competitor to Amazon’s LoveFilm and Netflix. If a buyer cannot be found the heavily loss making streaming service could just be closed down.
“The inherent value of Blinkbox is its relationships with content providers,” says Ken Olisa, chairman of technology merchant bank Restoration Partners.
“It’s an example where content is king.”
Tesco Asia
Tesco was once held up as an example of one of the few British retailers able to succeed beyond these shores.
Recent years have been less kind, with the retailer forced to retreat from the US after losing some £1.8bn on the failed Fresh & Easy venture in California and Nevada. While Lewis might like to offload its struggling business in central Europe, it is its more successful operations in Asia that are more likely to interest investors.
Its South Korean chain Homeplus is its largest business after the UK, closely followed by the Lotus business in Thailand. It also operates a sizeable hypermarket chain in Malaysia.
Shore Capital’s Clive Black estimates Tesco’s Asian arm is worth £9bn-10bn should Lewis want to sell or float it, although doing so would cut off a key avenue of future growth.
Tesco Air
It recently emerged that Tesco was also operating its own airline as a new $50m (£31m) Gulfstream G550 corporate jet, ordered by Clarke, touched down in the UK with impeccable timing.
The jet was a replacement for the company’s older Gulfstream which was on the market for $30m-$35m. To placate investors Lewis has now put its whole fleet – including the new jet – up for sale, while Kansas Transportation, the company which owned the corporate jets, has been put into liquidation.
Its other jets – a Hawker 800 and two Cessna Citations – could have a resale value of more than $60m, according to aircraft brokers.
Kansas Transportation’s accounts show Tesco spent £29m flying executives around the world in private planes between 2005 and 2012, but with fewer countries to visit the company’s airfare bill will probably come down anyway.
theguardian.com
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