🍏 Food Is Expensive

Food prices continued to spiral, people are ordering less items at Ocado, BP joined forces with the Abu-Dhabi state oil company for a deal in Israel, and an exciting London-based AI startup is backed by Microsoft.

March 29, 2023

Good morning. In today’s update - food prices continued to spiral, people are ordering less items at Ocado, BP joined forces with the Abu-Dhabi state oil company for a deal in Israel and an exciting London-based AI startup is backed by Microsoft.

Markets

Tuesday was a mixed bag for UK markets despite concerns over the banking sector continuing to subside, as investors digested separate reports showing a persistent surge in food price inflation (below). The FTSE 100 (+0.2%) gained modestly whilst the FTSE 250 found itself -0.7% lower.

The oil giants were pushed higher by gains in crude and positive sentiment on the back of BP’s 50% acquisition of NewMed Energy (below). On the other side of the coin - Hargreaves Lansdown (-2.6%) suffered as investors read across from rival CMC Markets’ (-3.6%) profit warning yesterday – AJ Bell (-0.3%) also found themselves slightly off the boil, albeit to a lesser extent.

Top Stories

🍽️ Food Inflation on The Menu

Two separate reports provided grim reading for UK consumers on Tuesday. The British Retail Consortium’s latest report showed annual food inflation for the year to March had reached 15%, up from 14.5% on February and the highest on record. The increase was driven in part by a surge in fresh food (17% increase YoY), as a result of poor harvests in Europe and Africa. Separately, data from researcher Kantar showed grocery prices had increased by a record 17.5%, pushing up the average shopping bill by around £840 annually. (BRC official)

…Despite This, Ocado Retail Struggled with Customer Spending in Q1 🛒

Ocado shares declined on Tuesday as investors digested the details from an update of its Retail JV with M&S. Despite posting a marginal increase in sales for the first quarter of 2023, the business posted a fall in average basket size (number of items per order) and stagnant average order values - all the more notable after today’s food inflation data. The company remained upbeat on the full year outlook however, forecasting profits in the second half of the year due to a “return to volume growth”. (Official)

🤝  BP and ADNOC Team Up For $2bn NewMed Bid

Oil giant BP announced that they, along with Abu Dhabi’s state oil company, had submitted an offer for 50% of listed Israeli natural gas producer, NewMed Energy. The pair have reportedly offered around £2bn for the stake, with the intention to take NewMed private if the deal closes. The news was a win-win for shareholder all round – BP’s shares were up 2.3% on the day, whilst NewMed surged 37% (unsurprising given BP’s offer was at a 73% premium to the prior day’s share price).

✍🏻 UK AI Startup Backed by Microsoft

Hazy, founded in 2017 as a spinout of UCL, raised a $9m Series A funding round with backing from Microsoft’s VC fund, along with banking heavyweights Wells Fargo and Nationwide. The company produces synthetic data, helping companies protect sensitive information whilst preserving the overall usefulness of the information, and claims to have been the first to bring the idea to market. Hazy will use the funds to fuel growth across the UK, US and Europe.

What Else Happened?

Economics / Politics / General

BoE Governor Andrew Bailey drew comparisons to the dramatic collapse of Barings Bank on Tuesday, telling MP’s the central bank was on “high alert” after the downfall of SVB.

Deals

FTSE 100 safety equipment company Halma announced a €150m deal for Cyprus-based FirePro – a designer of aerosol fire suppression systems. (Official)

London-based PR firm Camarco, who boasts clients including Elliot Management and Bain Capital, has been swept up by US rival Apco Worldwide in a £20m deal.

Connect Earth, the startup developing a platform for financial firms to track their carbon footprint, raised a $5.6m seed round to fund expansion into the US.

Company News / Trading Updates

Shares of FTSE 250 IT provider Softcat jumped 5.6% today as they reported a strong set of half-yearly numbers, forecasting full-year profits to be ahead of expectations. (Official)

Irn-Bru owner AG Barr saw its shares drop 6.1% despite posting a jump in annual revenue, as the company warned of “short-term” impacts on profit margins as a result of ongoing investment and inflationary cost pressures. (Official)

House buyers are gradually getting used to higher mortgages, according to Bellway Homes CEO Jason Honeyman, as the company signalled signs of recovery for 2023.

Gambling giant William Hill was stung with a £19.2m fine by regulators for “widespread failures” in regards to protecting consumers – including one gambler who was allowed to spend £23k in 20 minutes without checks.

The number of female FTSE 100 CEOs hit double figures as Diageo appointed Debra Crew to top job.

Games developer Team17’s shares slumped 8.7% across Tuesday on news that long-time CEO and Co-Founder, Debbie Bestwick, would be stepping down.

🌎 Global Snapshot

Chinese eCommerce giant Alibaba announced a dramatic restructuring on Tuesday, splitting the company into six distinct business group designed to “unlock” shareholder value. Markets didn’t hate it - shares were up 14.3%.

Apple announced it would begin rolling out its long-awaited buy-now-pay-later feature for Apple Pay – allowing users to split the cost of a purchase over a number of weeks.

Offices of five major banks based in Paris have been raided by French authorities as part of an investigation into the dividend tax fraud scheme, designed to help foreign clients avoid taxes.

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