Lancashire Times
A Voice of the Free Press
3:00 AM 14th May 2022

Market Analysis: Morrisons/McColl’s And Bayer

This week's Market Analysis looks at Morrisons / McColl and Bayer: wind in its sails - at last!

Ross Hindle, the retail sector Senior Analyst at Third Bridge says about the Morrisons/McColl’s situation:

“Our experts say that it is natural for Morrisons to be at the forefront of the takeover battle for McColl's, given their deep existing relationship. The McColl estate currently operates around 250 Morrisons Daily outlets.”

“ Integration should grow the Morrisons revenue stream. With 1,160 shops under McColl’s, our experts see opportunities to convert some attractive locations into more Morrisons Daily stores.”

“Our experts estimate that approximately 500-700 McColl’s stores will be converted into Morrisons Daily outlets. Around half of the remaining stores will be kept as convenience stores, and the remaining less profitable locations will be sold or closed. The big question remains how large the tail of underperforming stores is”

“After the acquisition, Morrisons can potentially offer better supplier relationships, extensive logistic networks, and more efficient operational standards to improve the performance of McColl’s.”

On Bayer Sebastian Skeet, Senior Analyst at Third Bridge comments:

“After a number of years in the doldrums, Bayer appears to finally have wind in its sails. On a currency and portfolio adjusted basis, Bayer Group sales and EPS grew by 14% and 36% respectively, largely driven by the Crop Science, Consumer Health and a positive currency effect. Despite an uncertain macroeconomic backdrop, Bayer confirmed their 2022 outlook.”

“In Q1’22, Bayer only managed low single digit growth for its Pharmaceutical division, with Eylea and Nubequa offsetting price related declines in China, although ongoing launch and R&D costs translated into a decline in EBITDA.”

“It is broadly understood that key pharmaceutical assets Xarelto and Eylea, which represent roughly 24% and 17% of Pharma revenue in Q1’22 respectively, face a revenue “cliff” in the coming years as patents expire and competitive threats ramp up.”

“Recently, however, Bayer has changed the narrative. In April this year, the company posted early phase clinical data for their next generation anticoagulant Asundexian that suggest it could represent a stopgap to Xarelto and Eylea declines. Coupled with the ongoing Kerendia launch and Nubequa’s label expansion, management are seemingly more upbeat on future Pharma performance.”

Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors.