Proactive Investors -
- FTSE 100 up 38 points at 8,159
- Keywords Studios bought by private equity
- Services sector slows on election caution
UK services sector slows to seven-month low
Britain's service sector saw its growth slow in June, a sign that both consumers and companies are remaining cautious ahead of the general election tomorrow.
S&P Global's UK services PMI slipped to 52.1 in June, down from 52.9 in May but importantly it was ahead of the 51.2 that the market had forecast.
It marks a seven-month low for the sector but remains ahead of the 50 mark, which separates the difference between growth and contraction.
The reading for the average PMI, which combines services output with the manufacturing sector, reached 52.3 last month, lifting from May's 53 and ahead of market guidance of 51.7.
"We are seeing some evidence of a pre-general election seize up across the UK services economy... as the prospect of a change in government led to the adoption of a ‘wait-and-see’ approach by some," said Joe Hayes at S&P Global.
"Nevertheless, we’re on track for another quarter of GDP growth, according to composite PMI data for the three months to June, albeit one that will be less punchy than the first quarter’s 0.7%.
"Prices still continue to show a high degree of stickiness across the UK service sector, although input cost inflation once again trended lower in June."
Keywords Studios agrees takeover bid
Shares in Keywords Studios lifted more than 2.5% today to 2,383p after the video game ancillaries specialist accepted a takeover offer worth 2,450p per share.
Private equity firm EQT will buy the company for £2.1 billion or £2.2 billion including debt.
EQT's consortium includes two state-backed investment groups, Canadian-owned CPP and Rosa, a subsidiary of Singapore’s investment fund Temasek.
The consortium said this latest offer was final and would not be raised unless a third party makes a rival bid.
Directors at the company have recommended shareholders vote in favour of the deal.
Katie Cousins at Shore Capital said: "We have been supportive of the offer, seeing a decent premium above recent share price levels which has suffered headwinds from the threat of AI and softer organic growth.
"EQT has a long and successful track record of investing in services and global technology industries, and it believes that it can support KWS build on the Group’s existing dominance within a larger and growing video games industry, by unlocking growth at a greater pace by expanding into adjacent media and entertainment end-markets and fast-growing technologies."
Topps Tiles tumbles on weak market backdrop
Topps Tiles shares have dropped more than 4% after it reported a further decline in sales in the third quarter, with market conditions remaining challenging.
Sales were down 6.2% in the first 39-weeks of its financial year, worsening from the 5.8% revenue decrease reported in its interim results.
Topps said it is continuing to take market share as it calculates that the UK tile market is down 10-15% year-on-year.
"Market conditions have remained challenging overall, with subdued demand in the domestic repair, maintenance and improvement (RMI) sector, especially for bigger ticket projects," it said.
JD Sports tumbles ahead of AGM
JD Sports is leading the top FTSE 100 fallers today after it dropped close to 4%, with its shares down more than 10% in the week since Nike (NYSE:NKE) issued a sales warning.
Today's share price drop comes ahead of its annual general meeting on Thursday and is at a time when several clothing retailers have warned of tough conditions.
ShareAction, the campaign group fighting for responsible investment, is planning to attend JD's AGM to urge the company to increase hourly salaries for its lowest-paid employees in a bid to "protect living standards".
Yesterday, fellow retailer Shoe Zone warned annual profits would be lower than expected due to a multitude of headwinds, potentially offering negative read-across to the sports clothing group.
Shoe Zone said it "experienced weaker than expected spring/summer sales from April to June, due to unseasonal weather conditions”.
In the US last week, Nike was forced to warn investors that upstart rivals were starting to take larger chunks out of its sales.
As newer brands such as Roger Federer’s On and France’s Hoka look to steal market share, Nike said it expects a mid-single-digit percentage drop in sales during the current financial year.
Morning so far
London's main index has opened higher this morning as election talks grows in both Europe and the US.
Tomorrow will see Brits head to polling stations to vote in what could be the Conservative's worst election since the turn of the century.
Keir Starmer's Labour is predicted to win 484 of the 650 seats up for grabs, outperforming the 418 taken by former party leader Tony Blair in his landslide win back in 1997 and also the most in its history.
Meanwhile, in the US, investors are starting to bet on the likelihood of a Trump presidency after Biden's self-proclaimed loss at the first set of debates last week.
Odds for Biden to take office for a second term have dropped by 32% since the live debate, while bets on Trump have been on the rise, says political betting site PredicIt.
In company news, Keywords Studios PLC (AIM:LON:KWS, OTC:KYYWF) has agreed to an all-cash bid from a consortium led by Scandinavian private equity group EQT.
The deal values the video game ancillaries specialist at £2.1 billion or £2.2 billion including debt.
The offer, worth 2,450p per share, was flagged last week and follows an original approach worth 2,250p in May.
Vodafone and Virgin Media O2 to network share
Shares in Vodafone (LON:VOD) have opened flat this morning after it and Virgin Media O2 announced a new long-term network-sharing agreement which extends the current arrangement for more than a decade.
The plans aim to significantly enhance network coverage, quality, and competition across the UK.
It is subject to the approval of the merger between Vodafone UK and Three UK by the Competition and Markets Authority (CMA), which is anticipated to close by the end of 2024.
Post-merger, Vodafone and Three intend to invest £11 billion in network infrastructure over the next decade.
Ahmed Essam, chief executive of European markets at Vodafone, stated: "With this agreement and our planned merger with Three UK, we will transform the mobile experience for over 50 million customers in the UK for the next decade."