⛽ Asda gets its petrol stations

Good morning. In today’s update - the Issa brothers are close to finalising a £10bn merger between Asda and EG Group, Pets At Home delivered record revenues as pet owners continued to splash, UK retail sales fell back in May and Chanel committed to London.

Enjoy the long weekend and see you on Tuesday.

Markets

• UK equities fell lower on Thursday as sentiment was hampered by poor UK retail sales, a surprise downward revision to German GDP (tipping them into a recession) and a continued impasse on US debt ceiling discussions.

• Overall - the FTSE 100 and FTSE 250 fell 0.7% and 0.5% respectively

Corporate News

Shares in Pets At Home dipped 2.6% despite reporting better-than-expected results for the year to March, with revenues up 7% to £1.4bn and underlying profit before tax of £136m; the company said it planned to invest £400m over the next five years to create a “one-stop” digital platform for its products and services. (Link, Pets)

After a positive 2022 in which Chanel grew revenue 17% and profits 6% (to $5.8bn), the luxury brand is planning to expand its London headquarters having agreed a new 20-year lease on its Mayfair office. (Link)

Investment platform AJ Bell reported a solid half-year update to markets on Thursday, with revenue and profits up 37% and 61% respectively; the platform also managed to grow assets under management by 39% and customers to 455k, which CEO Michael Summersgill said might be “slightly surprising” to investors given the challenging market conditions. (Link, AJB)

Tate & Lyle - one of the world’s biggest producers of ingredients for the food and beverage market - reported a 22% jump in profits for the year to March, with prices hikes more than offsetting cost inflation; shares rose 1.9% in response. (Link, T&L)

In a brief update to markets ahead of its AGM, mixer specialist Fevertree said it was trading in line with expectations for the year so far, recording its highest ever quarterly market share in the UK hospitality sector (6% ahead of pre-pandemic); total revenues are forecasted to come in around £400m. (Link, Fever)

Deals

The Issa brothers - owners of both Asda and petrol station giant EG Group - are reportedly close to finalising a £10bn merger between the two companies; the deal is expected to accelerate Asda’s expansion into the convenience store sector and will create a combined company with around £30bn in revenue. (Link)

FTSE 250 defence technology group Qinetiq announced it was on the hunt for acquisitions after it reported a 33% jump in pre-tax profits for the year to March (to £190m), driven by a “heightened” geopolitical threats. (FT, Qinetiq)

Signaloid - a Cambridge-based deeptech startup that helps companies account for uncertainties in data - raised £3m in seed funding led by IQ Capital. (Link)

Economy / General

The CBI’s monthly retail sales index showed a downturn in May compared to the previous month, falling to a weighted balance of -5 (from +10 in April); however, firms expect the situation to improve as consumer sentiment picks up and energy bills look set to decrease in the Summer. (Link, CBI)

UK car production motored in April, growing 9.9% year-over-year as exports surged; cars destined for outside the UK increased 14.7%, the majority of which were headed for the EU. EVs and hybrids continued to grow, accounting for 38% of all cars produced over the month. (Link)

Households are set to see a marginal easing in their energy bills as the price cap falls to £2,074 (from £2,500) starting in July; separately, shares in British Gas owner Centrica rose after Ofgem announced a £10 rise in energy bills from October, boosting supplier profit margins from 1.9% to 2.4%. (Link)

🌎 Global Snapshot

A downwards revision to German GDP in the first quarter - from zero to -0.3% - pushed Europe’s largest economy into a technical recession as households tightened their belts amid sky-high energy prices; the downturn in Q1 comes after a 0.5% contraction in the last quarter of 2022 (two quarters of negative growth constitutes a technical recession). (Link)

Abu Dhabi National Oil Co (or Adnoc) spun off its logistics and services unit in a $769m IPO on the Abu Dhabi stock exchange, and drew in a cool $125bn in orders - 163 times oversubscribed; the listing of the state-owned oil company’s $2.5bn gas business earlier in the year was also oversubscribed by around 50x, amid strong demand. (BBG)

Credit ratings agency Fitch has put the US’ credit rating on negative watch, indicating it could potentially downgrade if lawmakers fail to agree on terms for a debt ceiling deal; Treasury Secretary (and former Fed Chair) Janet Yellen claimed the US could default as early as June should no agreement be reached. (Link)

Retailer Gap surged in after-hours trading after reporting significantly improved margins during the first quarter; revenue dipped 6% to $3.3bn (broadly in-line with market forecasts), whilst losses narrowed to $18m (from $162m) as the retail giant powered ahead with a cost-cutting programme. (Link)

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