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LONDON BRIEFING: Keywords would back GBP2.0 billion bid as EQT circles

Mon, 20th May 2024 07:47

(Alliance News) - London's FTSE 100 is called to open higher at the start of the week, while the pound climbed and gold hit another record high, with investors hopeful the Federal Reserve could soon cut US interest rates.

Focus this week will be on minutes from the Fed's May meeting, as well as UK inflation data.

XTB analyst Kathleen Brooks commented: "The Atlanta Fed President said last week that he thinks rate cuts could come late this year, however, as we have pointed out in past notes, the timing of the US Presidential election in November, may impact the Fed's timing on when to cut rates. If the Fed cuts rates in September, which is the last Fed meeting before the election, then the Fed could come under political scrutiny as a rate cut may be seen as a boost to the Biden campaign. Right now, the market has priced a 50% chance of a September rate cut.

"There is only a 22% chance of a July rate cut, however, it would be a convenient time to cut rates as it would avoid any accusation of political bias. The market is expecting the first US rate cut to come in December, but if US economic data continues to deteriorate then the Fed may cut sooner. It will be interesting if the potential for a July cut is discussed in the FOMC minutes."

Hopes of a Fed cut this year lifted gold as high as over USD2,450 an ounce, its best-ever level.

The latest UK consumer price index reading is released Wednesday. It is expected to show that the rate of consumer price inflation moderated markedly to 2.1% in April, from 3.2% in March, according to FXStreet cited consensus.

In early UK corporate news on Monday, AstraZeneca announced a new facility in Singapore, Kainos lifted its dividend, and AIM listing Keywords backed a possible GBP2.0 billion private equity takeover tilt.

Here is what you need to know at the London market open:




FTSE 100: called up 0.1% at 8,429.46


Hang Seng: up 0.6% at 19,662.42

Nikkei 225: up 0.7% at 39,069.68

S&P/ASX 200: up 0.6% at 7,863.70


DJIA: closed up 134.21 points, 0.3%, at 40,003.59

S&P 500: closed up 0.1% at 5,303.27

Nasdaq Composite: closed down 0.1% at 16,685.97


EUR: up at USD1.0884 (USD1.0866)

GBP: up at USD1.2704 (USD1.2696)

USD: up at JPY155.74 (JPY155.53)

GOLD: up at USD2,441.65 per ounce (USD2,407.63)

(Brent): up at USD84.39 a barrel (USD83.61)

(changes since previous London equities close)




Monday's key economic events still to come:

10:00 BST UK Bank of England Deputy Governor Ben Broadbent speaks


House prices hit a new record in May, with the number of sales up 17% on-year, as the momentum of the Spring selling season continued. Rightmove's house price index showed the average price of property coming to the market for sale rose 0.8% in May to GBP375,131. The online property portal said pent-up demand from would-be buyers who paused their plans last year is a key driver behind increased home-mover activity despite mortgage rates remaining elevated for longer than anticipated. The number of sales being agreed during the first four months of the year is 17% higher than last year, outstripping the 12% increase in the number of new sellers coming to market. Nonetheless, the market remains price-sensitive with average asking prices just 0.6% higher than a year ago. Larger properties led the price growth, with average prices up by 1.3% compared with last year. Despite the uptick in prices, sales were taking an average of 154 days to complete, which Rightmove described as "painful". Rightmove's Director of Property Science Tim Bannister said despite the latest increase "it's important to remember that prices overall are still only 0.6% ahead of this time last year".


Britain's post-Brexit border with the EU has been plagued by chronic delays and uncertainty, ramping up costs for businesses and the government, the nation's spending watchdog said. The UK departed from the EU in January 2021 following a standstill transition period but has still yet to complete full implementation of post-Brexit customs controls. "The UK leaving the EU created a large-scale change in arrangements for the movement of goods across the border," said National Audit Office boss Gareth Davies in a report on the situation. "However, more than three years after the end of the transition period, it is still not clear when full controls will be in place." When the UK left the European single market and customs union on January 1, 2021, the EU immediately implemented customs controls for goods heading from the UK into the bloc. But the UK government has delayed the introduction of customs checks five times for goods heading into the country, citing delays with infrastructure and technology.




Barclays raises Future price target to 1,260 (970) pence - 'overweight'


Berenberg cuts Kistos price target to 305 (455) pence - 'buy'




AstraZeneca announced plans for a USD1.5 billion manufacturing facility in Singapore to produce antibody drug conjugates, treatments that deliver "highly potent cancer-killing agents". The pharmaceutical firm aims to start design and construction of the facility by the end of 2024, with "targeted operational readiness from 2029". It added: "The planned greenfield facility, supported by the Singapore Economic Development Board, will be AstraZeneca's first end-to-end ADC production site, fully incorporating all steps of the manufacturing process at a commercial scale. Manufacturing of ADCs is a multi-step process that comprises antibody production, synthesis of chemotherapy drug and linker, conjugation of drug-linker to the antibody, and filling of the completed ADC substance."




Kainos reported annual earnings growth and lifted its dividend, and also announced a new chair. Independent Non-Executive Director Rosaleen Blair will replace outgoing Tom Burnet as chair. Burnet steps down following the IT provider's annual general meeting on September 24. Kainos, a partner of enterprise software provider Workday, said revenue in the year to March 31 rose 2.0% to GBP382.4 million from GBP374.8 million. Pretax profit climbed 19% to GBP64.8 million from GBP54.3 million. Kainos upped its final dividend by 19% to 19.1 pence per share from 16.1p a year prior. Its total dividend amounted to 27.3p, a rise from 23.9p. "Our latest results, record our 14th consecutive year of growth with disciplined execution in the current macro-economic climate," Chief Executive Officer Russell Sloan said. "Despite the ongoing global economic uncertainty, we believe that our largest business areas, Workday Products, Workday Services and the public sector segment of Digital Services, will continue to be resilient and will offer substantial growth opportunities in both the near term and medium term. We are well positioned within these markets, both locally and, increasingly, internationally, and we remain confident in our strategy." Sloan said "excitement is increasing" at the Workday Products arm, with annual recurring revenue there of GBP100 million the goal by 2026. In Digital Services, it saw a "solid performance", with a strong showing in core healthcare offering, though it noted a "reduction" in the commercial business.


Property investor British Land said it has struck a deal to sell a 50% stake in the Meadowhall Shopping Centre in Sheffield for GBP360 million. British Land said the sale is in line with its plan to sharpen its focus on retail parks and "reduce exposure to covered shopping centres". The asset was sold to partner Norges Bank Investment Management. "This follows the sale of some ancillary land by the Joint Venture for GBP7 million (British Land share) earlier this year. Together these deals value the entirety of the Meadowhall Estate at GBP734 million, 3% above September 2023 book value," the firm said. Proceeds, after net debt of GBP200 million, are expected to total GBP156 million. Those funds will be used for "general corporate purposes including reinvestment into retail parks".




Keywords Studios said it would be "minded to recommend" a possible offer from EQT Group, following a series of bids from the private equity firm. The AIM-listed provider of technical and creative services for video game production said the latest cash approach of 2,550p per share is a "significant increase from the initial proposal". It values all of Keywords at around GBP2.03 billion. The firm currently has a market capitalisation of GBP1.16 billion. Keywords said the latest approach follows "four previous unsolicited proposals from EQT in recent months". It added: "The board remains confident in the company's growth strategy of building the only truly global platform providing solutions to the video games and entertainment industries, both organically and through acquisitions, and EQT is supportive of this strategy." Should a firm offer be made, Keywords would give it its backing, for now, however, it advised shareholders to "take no action".


Serica Energy said it has received final approval from the UK government's North Sea Transition Authority to develop the Belinda field. Belinda is the fifth well in Serica's Triton area drilling offering.

"The field will be tied back to the Triton [floating production storage and offloading] following the drilling of the development well which is scheduled to take place in the first half of 2025," the oil and gas company added. "Proven and probable reserves in the Belinda field are estimated at about 5 million barrels of oil equivalent (80% oil). Production is scheduled to commence in 1Q2026 following the tie-back work to the Triton FPSO."


Ryanair reported a profit climb on the back of higher customer figures, helped by Easter this year landing in March, as it eyed further customer growth. The Dublin-based airline company said pretax profit jumped 35% to EUR2.13 billion in the financial year ended March 31 from EUR1.57 billion a year prior. Revenue climbed 25% to EUR13.44 billion from EUR10.78 billion. Ryanair reported 183.7 million customers for the financial year just ended, up 9.0% from 168.6 million. This was boosted by a "record" first half and strong Easter traffic in late March. The company added that the board approved a EUR700 million share buyback programme, which will start later this week. Ryanair said: "In a higher interest rate environment, we intended to pay down remaining debt as it matures in 2025 and 2026, while also financing our aircraft capex from internal resources. Once these priorities have been secured, group policy is to prioritise growth to drive shareholder value while maintaining a strong, investment grade, balance sheet, and delivering shareholder returns."


By Eric Cunha, Alliance News news editor

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