📉 Vodafone "Must Change"

PLUS: the BoE had mixed UK labour market data to chew on, Boohoo shares surged despite swinging to a loss and both sides are hopeful an agreement can be reached to stop the US defaulting on its $31tn in debt.

May 17, 2023

Good morning. In today’s update - Vodafone announced 11,000 jobs would be cut after disappointing results, the BoE had mixed UK labour market data to chew on, Boohoo shares surged despite swinging to a loss and both sides are hopeful an agreement can be reached to stop the US defaulting on its $31tn in debt.

Markets

UK equities gave up their morning gains as early news broke of a stalemate in the US over debt ceiling discussions, whilst markets also digested the latest labour market data in the UK (below). Poor economic data out of China also weighed on sentiment, with natural resources in particular taking a hit. Overall - the FTSE 100 closed 0.3% lower, whilst the FTSE 250 (+0.1%) managed to stay (marginally) above the waterline.

Top Stories

📉 Vodafone “must change”, according to new CEO

The telecoms giant said it would cut 11,000 jobs (around 10% of the workforce) over the next three years as the business looks to “simplify”. Newly minted CEO Margherita Della Valle claimed performance had “not been good enough”, as the business reported flat revenues and profits for 2023 (year to April). The outlook wasn’t much rosier - Vodafone expect profits and free cash flow to dip again in 2024. Shares dropped 7.4% on the news. (Official)

🔄  UK labour market data sends mixed signals

Official data from the ONS showed a potential softening of the labour market on Tuesday; unemployment rose to 3.9% (from 3.8%), whilst the number of economically inactive people (people outside the workforce who are not looking for work) increased 0.4%. However, in a worrying sign for the BoE, wages continued to grow - average private sector earnings across the three months to March increased 7% compared to a year ago.

🛍 Boohoo battles on

The online retailer’s shares surged 6.8% on Tuesday, despite reporting an 11% fall in revenue (to £1.7bn) and swinging to a pre-tax loss of £91m for the year to February. However, markets were encouraged by Boohoo’s progress on cost cutting measures, with the retailer finishing the year with more cash than expected (around £6m compared to forecasts of a £70m net debt position). The company also relayed strong ambitions for US expansion and plans to open a distribution centre in the states to cut down shipping times. (Official)

What Else Happened?

Economics / Politics / General

New York has benefitted from the Brexit standoff between the UK and Brussels, as its share of global derivatives trading hit a record 51%; the UK now accounts for just 14%, down from over 70% before leaving the EU. (FT)

PM Rishi Sunak is reportedly mulling a reversal of the ‘tourism tax’ - VAT refunds for overseas shoppers - after pressure from the tourism and hospitality industries.

Deals

London-based employee engagement platform Reward Gateway has been acquired by French employee experience platform Edenred, for £1.2bn.

Blackstone and Thomson Reuters plan to sell around £2.4bn worth of London Stock Exchange Group shares - approximately 5% of the company’s share capital.

Swiss investment firm Partners Group is reportedly mulling a potential $2bn sale of UK public sector software company Civica, having acquired it in 2019. (BBG)

Private equity firm BC Partners have tapped former Daily Mail CEO Paul Zwillenberg to advise on their bid for Ascential’s consumer data unit.

Today’s VC round up:

  • Oneday - the UK-based entrepreneurship edtech - raised £5m in funding to help it launch an MBA.

  • Tenzo - an AI powered restaurant management app - raised a £4m Series A funding round led by Amadeus Capital Partners and S28 Capital.

  • Hotel Manager - a UK hospitality tech startup - raised £2.2m in seed funding led by Fuel Ventures.

Company News / Trading Updates

FTSE 100 real estate firm Land Securities rose 2.4% as it reported higher valuations for its properties than markets were expecting. (Official)

Cost cutting measures helped Robinsons owner Britvic expand profit margins in the first half of the year, despite a “challenging inflationary environment”. (Official)

Cigarette giant Imperial Brands offset falling sales volumes with an increase in prices, reporting a 28% rise in operating profits. (Official)

🌎 Global Snapshot

President Biden and congressional Republican Kevin McCarthy made progress on debt ceiling negotiations on Tuesday, hoping to get a deal done “by the end of the week”.

China reported disappointing economic data as both retail sales and industrial production missed economist expectations.

Home Depot shares dropped 2.2% as the home improvement retailer posted a big miss on Q1 revenue numbers and downgraded its full year sales forecasts.

Tesla will “try out” advertising, according to Musk.

🔈 Share The Long & Short

Know any friends who would benefit from having a daily summary of all things UK business and finance 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)M