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(Alliance News) - Stock prices in London are seen opening lower on Wednesday, tracking falls in Asian equity markets overnight amid rising inflation fears, as markets look ahead to US Federal Reserve policy meeting minutes.
In early company news, private equity firm KKR agreed a GBP2 billion takeover deal for FTSE 250-listed infrastructure investor John Laing. Magazine publisher Future delivered a strong first-half performance, and plumbing and heating products supplier Ferguson was optimistic over its full-year prospects.
IG futures indicate the FTSE 100 index is to open 54.54 points lower at 6,979.70. The blue-chip index closed up just 1.39 points at 7,034.24 on Tuesday.
John Laing received GBP2.0 billion takeover offer from Aqueduct Bidco, a newly formed company owned by funds advised by Kohlberg Kravis Roberts & Co.
Under the terms of the offer, each John Laing shareholder will receive 403 pence in cash for each John Laing share. The offer is a 27% premium to the closing price of 318p on May 5, which was the last date prior to the announcement by John Laing that it was in discussions with KKR and is an 11% premium to Tuesday's closing price of 361.00p.
"Whilst the board has full confidence in John Laing's strategy and management team, it is clear that many of the initiatives are at an early stage of development, retain an element of execution risk and that it will take time for these to deliver value. The John Laing board believes that the offer from KKR represents an attractive and certain value in cash today for John Laing shareholders and reflects the high quality of the business, its people and future prospects, as well as providing a positive outcome for John Laing pensioners," said Chair Will Samuel.
"KKR is a strong partner, providing long-term capital and global expertise to accelerate John Laing's strategy, growing the development capacity and assets of John Laing and creating opportunities for our employees and broader stakeholders. This is particularly relevant in the current environment where there may be significant opportunities to invest in critical infrastructure which responds to public needs," Samuel added.
Ferguson said it delivered revenue and profit growth ahead of expectations in the third quarter.
For the three months to April 30, revenue was USD5.92 billion, up 25% from USD4.75 billion a year ago, and underlying trading profit was USD560 million, up 69% from USD333 million.
Ferguson said US market demand accelerated through the quarter as the US economy continued to re-open.
Given the better than expected results, Ferguson revised its outlook for financial 2021 upwards as it said it expects to continue to outperform strong end-markets in the fourth quarter.
Ferguson expects to generate group trading profit in the range of USD2.00 billion to USD2.10 billion in the year that ends July 31. In financial 2020, trading profit, which excludes exceptional items and amortisation of acquired intangible assets, was USD1.67 billion, up 8.6% from financial 2019.
"Ferguson has brought forward its Q3 announcement as we delivered strong revenue and profit growth ahead of expectations. Our associates continued to provide outstanding service and support to our customers in the face of increasing supply chain pressures leading to product availability concerns. We were pleased with the strong earnings growth and margin expansion arising from continued operating efficiencies and pass through of acute price inflation as the US economy re-opens," Chief Executive Officer Kevin Murphy said.
Future said it delivered a robust first-half performance extending its track record of growth in revenue, and profit. The magazine publishers calls itself a "global platform for intent-led specialist media".
For the six months to March 31, revenue was GBP272.6 million, up 89% from GBP144.3 million last year, and pretax profit was GBP56.9 million, doubled from GBP27.1 million.
Looking ahead, Future said it has started the third quarter ahead of management expectations and expects full-year results to be "materially ahead" of market expectations.
"I am delighted to report the ongoing successful execution of our strategy with record revenue and profit in this half, materially ahead of market expectations. Following an exceptional e-commerce and digital advertising performance during Black Friday and Christmas in the first quarter, we have carried this strong trading momentum through to the end of the first half," said CEO Zillah Byng-Thorne.
"The progress we continue to make is testament to the diversity of our revenue streams, the agility of our people, and the scalable operating model we have built over time, which generates long-term sustainable growth," Zillah Byng-Thorne added.
Future raised its estimate of the annual cost synergies that it will achieve from the integration of recent acquisition GoCo to GBP15 million from GBP10 million. Future bought the owner of the GoCompare.com website for GBP594 million, completing the purchase in January.
In Asia, the Japanese Nikkei 225 index ended down 1.5% on Wednesday. In China, the Shanghai Composite was down 0.6%, while markets were closed in Hong Kong for the National Day holiday. The S&P/ASX 200 in Sydney ended 2.0% lower.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.8%, S&P 500 down 0.9% and Nasdaq Composite down 0.6%.
US stock trading has been choppy over the past few weeks, as investors weigh signs of rising inflation against hopes for strengthening economic growth in the second half of 2021.
This comes ahead of Wednesday's release of Federal Reserve meeting minutes at 1900 BST. The central bank has repeatedly emphasized it will maintain its easy-money stance, but volatility in markets show investors remain unconvinced by those assurances.
The minutes of the Fed's April meeting could give a fuller view of FOMC members' thoughts about rising prices.
Meanwhile, fears over the spread over the Indian variant of Covid-19 in the UK remain prevalent. Health Secretary Matt Hancock has voiced his frustration that some people are still not getting the coronavirus vaccine, including people in hospital in Bolton - which has been particularly hard-hit by the Indian strain.
"Markets appear caught between concerns over rising cases and the spread of the India variant of coronavirus, and optimism over the so-called reopening trade, making it difficult to read the direction of the next move. This paralysis of indecision is likely to see markets here in Europe open lower this morning," said CMC Markets analyst Michael Hewson.
"One of the main worries that has been creating volatility in financial markets this past few weeks has been the potential for a sharp rise in inflationary pressures. These concerns have started to gain ever more traction after big surges in US and Chinese inflation last week."
The pound was quoted at USD1.4191 early Wednesday, flat from USD1.4189 at the London equities close Tuesday, after UK inflation data.
UK inflation picked up sharply in April as coronavirus restrictions eased, according to the latest figures from the Office for National Statistics on Wednesday.
On an annual basis, UK consumer prices rose 1.5% in April, accelerating from inflation of 0.7% in March. The latest reading just beat market consensus, cited by FXStreet, for a 1.4% increase.
Consumer price inflation rose 0.6% month-on-month in April, quickening from a 0.3% rise in March. The print was in-line with market forecasts.
The euro was priced at USD1.2235, up from USD1.2206. Against the yen, the dollar was trading at JPY108.91, flat from JPY108.94.
Brent oil was quoted at USD68.01 a barrel Wednesday morning, down from USD69.36 late Tuesday. Gold was trading at USD1,867.98 an ounce, little changed from USD1,868.50.
The economic events calendar on Wednesday has eurozone consumer prices at 1000 BST. US MBA mortgage applications are at 1200 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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