💊 GSK goes hunting in Canada

GlaxoSmithKline agreed a $2bn deal to acquire Bellus Health, mixed data on UK wages gave Andrew Bailey & Co something to chew on and airliner EasyJet predict a return to pre-pandemic capacity by the summer.

April 19, 2023

Good morning. In today’s update - miners boosted by solid China growth helped the FTSE 100 hold onto gains, GlaxoSmithKline agreed a $2bn deal to acquire Bellus Health, mixed data on UK wages gave Andrew Bailey & Co something to chew on and airliner EasyJet predicted a return to pre-pandemic capacity by the summer.

Markets

The FTSE 100 shrugged off this morning’s mixed wage report to pull further ahead, helped in part by the mining sector which was boosted by a strong GDP print in China - Anglo American (+3.3%), Glencore (+1.8%) and Antofagasta (+1.8%) were all amongst the index’s biggest risers.

Mitie Group (+13.5%) was the standout performer in the FTSE 250 after forecasting an increase in expected profit for the year, as well as announcing a new share buyback scheme. The FTSE 250 (+0.1%) as a whole finished marginally ahead.

Top Stories

🤝  GSK returns to the acquisition hunt

The healthcare giant agreed a $2bn deal for Canada-listed biotech company Bellus Health on Tuesday, aiming to help fill the upcoming gap in its drug pipeline. Bellus owns Camlipixant, a drug for chronic coughs currently in late stage clinical development, and which analysts at Jefferies suggest could reach peak US sales of $1.2bn. GSK paid a hefty premium though - the offer represents a 100% increase over the latest share price. GSK is set to lose patent protection over a compound in its HIV treatment in 2027, with £5bn in sales at risk. (Official)

🚦 Mixed jobs data gives BoE food for thought

Average wages in the UK grew faster than economists expected in the three months through February, increasing 6.6% compared to a year ago (vs forecasts of a slowdown to 6.2%). However, there were signs of the labour market easing in the data. The unemployment rate ticked up to 3.8% (the highest since June last year), whilst the number of vacancies also fell for a ninth consecutive month in a row (echoing recent warnings from recruiters Page and Robert Walters). (Full ONS report here)

📈  EasyJet report jump in profits

Low-cost airline EasyJet hailed strong bookings demand over Easter and into the summer, raising its profit forecast for the second time this year. The company now expects to beat market forecasts for pre-tax profit of £260m - double its previous target of £126m. EasyJet expect to be back “around” pre-pandemic capacity levels by the summer, despite a rise in ticket prices owing to higher fuel and labour costs. Shares closed up 1.6%. (Official)

What Else Happened?

Economics / Politics / General

Corporate insolvencies jumped 16% year-on-year (a three-year high) as companies continue to battle with a surge in costs and dampening demand.

Deals

Asset manager Liontrust is reportedly mulling a bid for GAM, its Swiss-listed rival whose shares have been slashed in half over the past year.

Sainsbury’s has joined Waitrose, Holland & Barrett and Redbus Ventures as a potential buyer of troubled supermarket Planet Organic’s brand name and IP

Manchester-based Voicescape - developer of communication software tools for social housing providers - secured £9m in funding from BGF to help scale its product offering.

Company News / Trading Updates

Ladbrokes owner Entain saw shares jump 7.2% after reporting a “strong start” to 2023 in an update to investors; Q1 net gaming revenue rose 15% year-on-year, whilst its 50% ownership in BetMGM benefitted from the Super Bowl and March Madness in the US. (Official)

Ping An, the Chinese investor calling for HSBC to spin off its Asia business and increase dividends, lamented management and claimed the bank had “fundamentally failed to address key business model challenges”.

THG gave back some of Monday’s M&A-related share price gains, slumping 19.8% after reporting an increase in annual losses to £550m; Founder and CEO Matthew Moulding admitted it was not where the company had “planned to be”. (Official)

Volumes at money transfer firm Wise dropped 10% as customers cut back on discretionary spending - shares sunk 7.8%.

🌎 Global Snapshot

China’s economic growth smashed economist forecasts in Q1 2023, growing 4.5% year-on-year compared to estimates of a 4% increase, driven by a rebound in consumer spending following pandemic-led lockdowns.

Goldman Sachs failed to replicate rival JP Morgan’s upbeat trading statement, posting a 18% slide in profits due to poor trading in its fixed-income unit; shares dropped 1.7%.

Netflix posted a mixed set of results on Tuesday, falling short of revenue forecasts but beating on earnings; the streamer also announced it would be pushing back the implementation of its crackdown on password sharing, saying it had already seen a hit to subscriber growth from the limited rollout so far. (Official)

🔈 Share The Long & Short

Know any friends who would benefit from having a daily summary of all things UK business and finance news delivered directly to their inbox?

Copy and paste this link to others: www.thelongandshort.co.uk/subscribe

Feedback

Got any suggestions for how we can make The Long & Short more useful for you? Fire them over to [email protected] (or just reply to this email).