📈 FCA Plots London Market Shakeup

The UK’s financial regulator proposed measures to help stem an exodus from London’s markets, Lloyds suffered despite better than expected Q1 profits, Flutter gained more market share in the US and GSK spinout Haleon’s profit missed the mark.

May 04, 2023

Good morning. In today’s update - The UK’s financial regulator proposed measures to help stem an exodus from London’s markets, Lloyds suffered despite better than expected Q1 profits, Flutter gained more market share in the US and GSK spinout Haleon’s profit missed the mark.

Markets

UK equities recovered modestly from the previous day’s heavy losses, despite investors keeping a close eye on the Fed’s rate decision - the FTSE 100 and FTSE 250 closed +0.2% and +0.3% higher respectively.

Sentiment was held back by banks and housebuilders, whilst on the upside - education company Pearson clawed back some of the previous day’s AI-related losses, closing 10% ahead.

Top Stories

🛫  FCA takes steps to stem London exodus

Following a string of high-profile departures from London’s stock market, the FCA are proposing a sweeping set of changes designed to lure corporates back. Measures proposed include:

  • Removing the requirement for three years audited financials before a company lists on the LSE

  • Allowing more dual-class structures (also known as “golden shares”), favoured by tech founders wanting to keep control of their business

  • Simplifying the Premium/Standard listing approach

  • Changing the rules around related party transactions (which Softbank cited as a reason for not listing Arm in London)

The FCA put forward the proposals with a view to implementing them by the end of the year.

📉  Lloyds shares fell despite higher Q1 profits

Higher interest rates helped net interest margins at Lloyds improve to 3.2% (from 2.7% a year ago), whilst pre-tax profit rose 46% to £2.3bn, beating market expectations. However, the bank left forecasts unchanged for the full year (despite the expectation of higher interest rates), and echoed Natwest’s concerns that margins were being squeezed by higher competition. It also saw customer deposits fall by around £2bn since December. Shares lost 3.6% on the day, with sentiment also potentially affected by volatility in US regional bank stocks the night before. (Official)

🇺🇸  Flutter looks stateside for growth

The owner of Sky Bet and Paddy Power hailed solid growth in the US, along with a rebound in UK & Ireland activity during Q1. Across the pond, market share grew to 50% - with revenue growing 92% year-on-year - led by its US brand FanDuel. The UK & Ireland business was also a strong performer, with revenue climbing 17% driven by solid retention of gamers that joined during the World Cup. Overall - group revenue jumped 46% to £2.4bn in constant currency terms. (Official)

🤧  Flu season boost not enough for Haleon

Shares in the GSK spinout - producer of brands such as Sensodyne toothpaste and Panadol paracetamol - dropped 3.4% after Q1 profit missed market expectations, despite hiking prices. Separately, Pfizer (which owns 32% of Haleon), confirmed it would begin to sell down its stake over the coming months; this was “expected”, according to Haleon’s CFO. (Official)

What Else Happened?

Economics / Politics / General

Adobe’s $20m acquisition of design platform Figma is the latest deal in the crosshairs of the UK’s Competition and Markets Authority.

Dyson announced plans to build a £100m technology centre in Bristol, alongside similar investments in Singapore and the Philippines.

Deals

Manchester-based CyberAI raised £7m for its cyber security platform that’s used to analyse behavioural data and spot risky user actions.

Hackajob - the london-based marketplace for companies to hire technical talent - raised a $25m Series B to fund expansion into the US.

Company News / Trading Updates

Barratt Developments, one of the UK’s largest developers, echoed recent positivity around a housing market recovery and held its profit outlook stable for 2023. (Official)

Aston Martin shares dropped 3.7% despite reporting a 27% year-on-year rise in revenue and holding its full-year forecast steady. (Official)

High street staple Card Factory hailed a return to shops as the company recorded a 27% rise in revenue for the year to January. (Official)

Oops - the finance director of FTSE 100 RS Group stepped down following a relationship with a colleague.

🌎 Global Snapshot

The Fed raised rates by 25bp on Wednesday but signalled this may be the last hike of the cycle; the central bank said it no longer “anticipates” further rate rises.

PacWest’s shares plunged nearly 60% in after-hours trading after it was revealed the LA-based bank was exploring strategic options including a potential sale.

US drugmaker Eli Lilly announced that its Alzheimer's drug - Donanemab - showed a 35% improvement in cognitive decline in a late-stage trial.

Despite quarterly financials broadly in-line with market expectations, Qualcomm shares fell in after-hours trading as the chipmaker reported a fall in sales of handset chips. (Official)

The hunter became the hunted - Carl Icahn’s Icahn Enterprises was targeted by short-seller Hindenburg Research, causing a 20% drop in the billionaire’s conglomerate.

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