📉 Savings drain

Good morning. In today’s update - UK households are dipping into savings at an alarming rate, Salesforce announced a significant investment in the UK’s tech industry, water companies are scrambling to shore up their finances, and there’s a new generative AI player raising funds from big-name backers.

Markets

• London equities returned to losing ways on Thursday as investors reacted to turmoil in the utility sector, whilst UK yields were also on the rise

  • The FTSE 100 and FTSE 250 lost 0.4% and 0.8% respectively

• Banknote producer De La Rue was a notable small-cap riser, jumping 21% after a positive trading update.

Corporate News

The UK’s tech industry was boosted after software giant Salesforce announced it would invest £3.2bn over the next five years on the back of “strong demand”; PM Rishi Sunak called the investment a “ringing endorsement” of the UK economy. (Link)

Value retailer B&M continued to benefit from customers trading down in the face of surging inflation, reporting better-than-expected results for the last quarter; total group sales jumped 13.5% to £1.3bn, with around £1.1bn of that coming from the UK. (Link, B&M)

Despite a slump in volumes amid a “challenging environment”, Moonpig reported stronger revenue and EBITDA for the year to March, driven by higher selling prices; the online card retailer delivered sales of £320m (2022: £304m), with EBITDA increasing to £84m (2022: £75m). Shares gained 4%. (Link, MP)

FTSE 250 outsourcer Serco jumped 8.6% on Thursday after forecasting higher profits for 2023, driven by surging demand for immigration staff and strong growth internationally - the company now expects underlying profits of £140m. (Link, Serco)

Deals

Following the Thames Water fiasco, Yorkshire Water scrambled to shore up its balance sheet by raising £500m from investors; the raise was part of a five-year, £940m funding plan agreed to by shareholders including Singapore’s GIC, Germany’s DWS and PE group Corsair Capital. (Link, FT)

British Lithium agreed a joint venture deal with French-listed Imerys to develop the UK’s largest Lithium deposit; the project will cost around £575m but is expected to produce enough of the metal to power 500k electric vehicles, reducing the UK’s dependence on imports. (Link)

In today’s VC update:

• Material Evolution - a UK-based, low-carbon producer of cement made from industrial waste - raised a £15m Series A led by KOMPAS VC. (Link)

• Scriptic - a London-based studio developing interactive shows - raised $5.7m in seed funding led by KITKRAFT. (Link)

• RoboK - a Cambridge uni spinout using AI to analyse CCTV footage to spot unsafe workplace behaviour - raised £1.7m in funding. (Link)

Economy / General

UK savings are being drained at the fastest ever recorded pace, according to BoE data, as consumers draw down on pandemic-related savings to sustain living standards; across May, households withdrew around £4.6bn from bank accounts. (Link)

The Crown Estate’s coffers increased by more than £300m last year (to £443m) thanks to offshore wind farms; the estate owns six projects around the UK, earning revenue through payments made by renewable energy firms seeking access to the farms. The monarchy typically keeps 25% of the profits generated from the Crown Estate. (Link)

The UK’s mortgage problems were made clear today after BoE data highlighted the vast gap between rates currently being paid and rates on new mortgages; the average rate currently stands at 2.8% (as of May), whereas the average two-year fixed rate is now around 6.3%. (Link)

🌎 Global Snapshot

News

Microsoft, Nvidia, Eric Schmidt and Bill Gates were amongst those backing a $1.3bn funding round for Inflection AI - the startup developing a “kind” and “supportive” generative chatbot; the company, started by one of DeepMind’s founders, was launched in May this year. (Link)

An oversized bet on the fixed income market has left Bank of America with a $100bn paper loss, according to data from the FDIC; the number far outweighs rivals such as JP Morgan and Wells Fargo (who each had around $40bn in unrealised losses at the end of Q1) - analysts have called the balance sheet a “mess”. (FT)

Authentic Brands - an acquisition company focussed on apparel and celebrity brands - raised $500m from PE group General Atlantic, at a valuation of $20bn; the company was last valued at $12.7bn in 2022 and plans to go public “in the next 24 months”, according to CEO Jamie Salter. (Link)

Warmer weather and progress on cost-cutting measures offset an increase in costs at H&M, as the retailer posted better-than-expected results for the first half of the year; shares in Stockholm-traded H&M surged 18% after the company reported a 9% jump in sales, as well as a surprising (positive) drop in inventory levels. (Link, H&M)

Markets

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