UK corporate news is dominated on Thursday by takeovers and profit warnings as FTSE 250 pubs chain Ei Group (EIG) and one-time online fashion superstar ASOS (ASC:AIM) hit the headlines.
Shares in the UK's largest pubs chain Ei soared more than 39% to 286p in early trade as investors react to an agreed takeover deal from Slug & Lettuce pubs owner Stonegate Pub Company.
Controlled by private equity firm TDR Capital, Stonegate has struck a deal to buy Ei for £1.3bn, at a stroke massively expanding Stonegate’s network by adding more than 4,000 pubs to its current roster of 770.
Under the deal, Stonegate will offer 285p in cash for each Ei share, a premium of more than 38% on Wednesday’s closing price of 206p.
IN NEED OF A FASHION FIX
Going in the opposite direction is one-time online fashion star ASOS after the company issued another profit warning.
ASOS said that full year profits are now expected to be in the range of £30m to £35m, a huge cut to previous guidance of £55m. The bleak downgrade comes after the company suffered difficulties with new warehouses in Atlanta, US, and Berlin in Germany, slamming the brakes on global growth ambitions.
ASOS goes on to add that it will incur £47m of ‘transition costs’ from ongoing problems with the two facilities, and will also be hit with £3.5m restructuring charge.
This news sparks a massive rejection by investors, hammering the share price 14% lower to £23.62, although that's shows a recovery from earlier 20% declines, but it still swipes more than £300m off the firm's market value.
The ASOS shock is in line with a rather bleak start for UK shares in early trading on Thursday, taking their cue from Asian markets which saw a steep sell-offs overnight in response to dismal export data in Singapore.
Exports from Singapore – seen as a barometer for global trade given it is one of the most trade-dependent economies in the world – fell for a second time in a row, sinking 17.3% in June compared to a year ago.
The benchmark FTSE 100 index, already hit with rising no worries over a no-deal Brexit, once again fell below the 7,500 mark having opened 0.48% lower at 7,499.56.
While the FTSE 250, more representative of the UK economy given it has more domestically-focused companies, fell 0.29% to 19,556.61.
Back to UK stocks, low cost airline Easyjet (EZJ) had a better morning with its shares rising 3.6% to £10.72 as it expects to meet the market’s full-year expectations on pre-tax profit following a ‘robust’ third quarter.
In a trading update, it said with 78% of seats sold for the second half of its year, it has ‘better full year visibility’ with headline profit before tax for the 12 months to 30 September expected to be between £400-440m, which is in line with market expectations.
While in the FTSE 100, diversified miner Anglo American (AAL) fell 1% to £21.81 after it cut its diamond production guidance and reported a fall in iron ore production at its Kumba mine.
However, the company said in its quarterly production report that it is still ‘broadly’ on track to meet its full-year production target.
Utility provider SSE (SSE) gained 0.8% to £11.63 after its outlook for the year remained unchanged despite lower than expected output of renewable energy in the three months to 30 June.
In its trading statement, it also re-iterated its intention to recommend a full-year dividend of 80 pence per share.