🏠 Housebuilding slumps

Good morning. In today’s update - housebuilding activity slumped to a 14-year low, British American Tobacco soldiers on with a post-tobacco strategy, gambling firm 888 is gearing up for an activist shakeup and there’s a shock merger in golf world between LIV and the PGA.

Markets

• Having dipped in the morning on the back of an unexpected interest rate hike from the Bank of Australia, UK equities recovered into the afternoon.

  • The large-cap FTSE 100 closed up 0.4%, having dipped by around half a percent in early trading

• Positive updates from British American Tobacco (+1.5%), Paragon (+9.4%) and Chemring (+9.1%) provided support to markets.

Corporate News

Despite an acceleration in the global shift away from tobacco and a “disappointing” performance in the US, British American Tobacco shares rose as it held its forecasts steady for the full year; losses narrowed at its ‘new categories’ business (e-cigarettes etc) as it boasted 900k new users across the first half, offsetting some down-trading in the US for traditional tobacco products. (Link, BAT)

British defence company Chemring benefitted from a “fundamental change” in the global security landscape following the Ukraine war and heightened tensions in the South China Sea; Chemring’s order book reached a record £750m over the last six months, with the Countermeasures & Energetic* division growing 113% compared to the same period in 2022. (FT, Chemring)

*(Countermeasures: protection against guided missiles, Energetic: explosives and propellants for ammunition)

FTSE 250 challenger bank Paragon saw shares jump over 9% as the company reported record interim earnings and a jump in deposits; Paragon - one of the biggest lenders to professional landlords - reported underlying profits up 22% to £129m, driven by a jump in mortgage lending and an increase in net interest margins following recent Bank of England rate hikes. (Link, Paragon)

Telegraph Media Group - owners of the Daily and Sunday Telegraphs - is reportedly on the verge of entering administration after talks broke down between Lloyds Bank and owners, the Barclays family; the family insist the loans in question “in no way affect the operations or financial stability” of the newspaper. (Times)

Deals

Shares in bookmaker 888 rose 14% on Tuesday after it was revealed a group of gambling industry veterans had built a 6% stake in the business, pushing for changes to maximise shareholder value; the consortium - including former chairman of Entain, Lee Feldman - is pushing for “leadership and strategy” changes in a bid to boost a share price that’s lost 80% of its value over the last two years. (BBG)

AB Foods, owner of Primark and major food and ingredients businesses, announced the £48m acquisition of dairy tech company National Milk Records; ABF are hoping NMR’s technology will help drive efficiencies across its agriculture business, making its farmers more profitable. (Link, ABF)

A vitamin company led by former Dragons’ Den star Tej Lalvani is thinking through a potential sale of the business, that could net up to £1bn; Vitabiotics - founded by Lalvani’s father in the 1970s - produces well-known supplements such as Wellman/Wellwoman and Feroglobin (the adverts of which are difficult to miss on the London underground). (BBG)

Frasers Group - Mike Ashley’s retail outfit - has upped its stake in Asos to around 9%, taking advantage of recent weakness in the share price; Frasers had reportedly floated the idea of the two forming a closer partnership in return for an additional 5% stake in Asos, which the eCommerce group is said to have declined in favour of a wider capital raise. (Link)

Economy / General

Despite a sharp drop in housebuilding activity, the UK’s construction sector held up in May, driven by growth in commercial and civil engineering projects; S&P’s Construction PMI reported a reading of 51.6 in May (above 50 signals growth), whilst housebuilding recorded its lowest ever result (42.7), excluding the pandemic. (Link, S&P)

Media watchdog Ofcom is proposing to increase the amount of advertising minutes allowed to be shown by public service broadcasters such as ITV, Channel 4 and Channel 5. The move would bring the PSBs in-line with other commercial channels, who are currently permitted to show nine minutes of ads per hour; the commercial broadcasters are arguing this would hurt news output. (Link, FT)

An extra bank holiday in May failed to boost spending across the month, as retail sales increased just 3.9% in annual terms - well below April’s reading of 5.2%. (Link)

🌎 Global Snapshot

A shock announcement in the golfing world on Tuesday saw rivals LIV Golf and the PGA Tour announce a merger to “unify” the sport; LIV golfers who had previously been suspended from playing in PGA events will be able to re-apply from 2024 onwards, whilst all lawsuits will be dropped. As part of the deal, Saudi Arabia’s Public Investment Fund will also make an investment in the combined entity. Golf-related stocks including Topgolf and Acushnet (Titleist owner) jumped on the news. (Link)

Venture capital giant Sequoia announced plans to split its China business into a separate unit as part of a global restructuring; the move will see three distinct units created - US & Europe, China and Southeast Asia & India - with the firm citing an “increasingly complex” dynamic following a heightening in geopolitical tensions. (Link)

The Independents - a Paris-based luxury marketing group - raised a $400m funding round led by FL Entertainment and Towerbrook; the funds - a mix of debt, preferred shares and equity - will reportedly be used as a war chest to roll up smaller agencies. (FT, Link)

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