📱 Vodafone / Three UK Mega-Merger on the Cards

Vodafone and Three are on the verge of creating the UK’s biggest telecoms business, Shell plans to dish out £4bn more to investors following bumper Q1 profits and the UK service sector showed continued strength in April.

May 05, 2023

Good morning. In today’s update - Vodafone and Three are on the verge of creating the UK’s biggest telecoms business, Shell plans to dish out £4bn more to investors following bumper Q1 profits and the UK service sector showed continued strength in April.

Have a great long weekend and see you on Tuesday.

Markets

UK equities were dragged sharply lower on Thursday as renewed fears over the health of the global banking sector weighed on sentiment - Barclays (-3.3%), Standard Chartered (-2.1%), HSBC (-1.6%) and Lloyds (-1.4%) all suffered, along with other financial services firms. More widely - the FTSE 100 fell -1.1%, whilst the FTSE 250 dropped -0.6%.

Top Stories

📱  Vodafone / Three UK merger on the horizon

Vodafone is reportedly close to agreeing a £15bn deal with CK Hutchinson (owner of Three UK) to merge their respective UK businesses. The deal would create the largest UK telecoms business with around 28m customers, and is expected to attract a lengthy competition regulatory process given the scale. The government is also expected to take a look on national security grounds (CK is Hong Kong-owned) - however, the two sides hope that Vodafone’s majority (51%) ownership will help smooth any bumps. (FT)

💰 Shell investor payouts soar

The London-listed oil giant reported bumper profits for Q1, driven by improved operational performance and a strong showing from its trading unit - particularly in natural gas. The group reported adjusted earnings of $9.6bn - well above both market estimates ($8bn) and the first quarter of 2022 ($9.1bn). As a result, Shell maintained its dividend and announced a huge $4bn in additional share buybacks; shares rose 0.9% on the day. (Official)

📈 UK service sector powers on

The UK saw its biggest rise in service sector growth for 12 months during April, according to a closely watched survey. The S&P Services PMI recorded a reading of 55.9 in April (above 50 signals growth), driven by “stronger consumer spending” - particularly in the travel, tourism and leisure sectors. April’s reading was the third month in a row the services industry has recorded expansion, adding to signs of a wider recovery in the British economy. However, businesses made more effort to pass inflated costs on to consumers, with the survey noting that prices charged by firms had increased from March’s 19-month low. (see full report here)

What Else Happened?

Economics / Politics / General

Mortgage approvals in the UK hit a five-month high during March, in further signs of recovery in the property market.

Chinese tech giant PDD - parent of Temu and Pinduoduo - moved its headquarters from China to Ireland as it pushes for global expansion.

Deals

Discussions over a potential deal between Eddie Hearn’s Matchroom Boxing and CVC were KO’d after the two failed to agree on price.

Thursday’s top VC deals:

  • Adarga - the UK software developer catering to the needs of the Ministry of Defence and other national security clients - raised £17m in funding

  • AI-enabled drug discovery company MultiOmic Health raised a £5m seed round

  • Fuuse raised £2.5m to develop its EV infrastructure software

Company News / Trading Updates

Trainline’s net ticket sales jumped 72% in the year to February - above pre-pandemic levels - even with recent rail strikes. (Official)

UK investment platform Hagreaves Lansdown posted an increase in new business for Q1 as investor sentiment returned - shares closed 1.1% higher. (Official)

Despite a boost to revenue from higher interest rates, profits at FTSE 250 lender Virgin Money sunk after provisions for bad loans jumped nearly 600%. (Official)

Next posted Q1 sales better than markets expected, but struck a bearish tone for the second quarter; the retailer said it believed demand was pulled forward in the run up to Easter. (Official)

🌎 Global Snapshot

Johnson & Johnson awoke the sleepy IPO markets with the $47bn listing of its consumer health unit Kenvue; the IPO of the company behind brands such as Band-Aid and Listerine was the biggest since 2021.

Despite falling for the second quarter in a row, Apple beat market sales forecasts, driven by strong iPhone sales; CEO Tim Cook claimed the quarter was “better than we expected”. (Official)

The number of people in the US filing for unemployment benefits climbed last week, signalling a (gradual) softening in the labour market amid weaker demand.

Canada-based TD Bank pulled out of a deal to acquire regional bank First Horizon, following a lack of clarity on regulatory approvals; First Horizon shares sunk 33% on the news.

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