FTSE 100 Live: Arm IPO, July deficit £4.3bn, Microsoft tables new Activision deal
John Wood Group Enhances Guidance
Engineering company John Wood Group has rejected a £1.7 billion takeover bid but has boosted its profit forecast after achieving impressive results, in a move to restore investor confidence.
The organization mentioned that due to several significant ventures in the oil, gas, and chemical sectors, they predict a higher profit than initially anticipated for the entire year. Furthermore, their estimated revenue is expected to reach £6 billion.
Earlier this year, Wood was targeted for a takeover by private equity firm Apollo Global. However, discussions fell apart as Wood turned down several offers.
The stock has risen by 4% to reach 159p, although it remains over 30% lower than its value four months prior, when shareholders were optimistic about a potential acquisition.
The Chief Executive Officer, Ken Gilmartin, expressed his satisfaction with the evident advancement shown in our recent outcomes, demonstrating the successful realization of Wood's immense capabilities. This accomplishment reflects our commitment to fulfilling the growth strategy we unveiled in November of the preceding year.
We have had a promising beginning to the year, achieving an increase in earnings, improvements in our operational efficiency, an expansion in our workforce, and a bolstered pipeline. Furthermore, our remarkable corporate culture has continued to evolve and flourish, as demonstrated by the highest-ever rating received from our employees through the net promoter score system.
US IPO: Arm Prepares For Highly-Anticipated Debut
Arm, a semiconductor company owned by Softbank, submitted an application for the largest initial public offering (IPO) in 2023 in the United States. It is expected that the company aims to achieve a market value ranging from $60 billion to $70 billion.
Arm, a company headquartered in Cambridge, announced its intentions to go public on the New York Stock Exchange instead of London, in the month of March.
Arm highlighted the expanding area of artificial intelligence as a prominent application for its chips in its submission.
Arm stated that it will play a key role in the shift towards AI- and ML-powered computing as it becomes more prominent worldwide. Arm's processors are already responsible for running AI and ML tasks in countless devices like smartphones, cameras, digital TVs, cars, and cloud data centers. The central processing unit (CPU) is essential in all AI systems, whether it operates solely on the AI workload or collaborates with a co-processor such as a graphics processing unit (GPU) or a neural processing unit (NPU).
In the upcoming field of advanced language models, AI that generates content, and self-driving cars, there will be a stronger focus on efficiently boosting the speed of these algorithms with minimal power consumption.
"In our most recent Instruction Set Architecture (ISA), Central Processing Units (CPUs), and Graphics Processing Units (GPUs), we have incorporated fresh features and directives to expedite forthcoming Artificial Intelligence (AI) and Machine Learning (ML) algorithms. We are collaborating with notable enterprises such as Alphabet, Cruise LLC, Mercedes-Benz, Meta, and NVIDIA to implement Arm technology for executing AI workloads."
The pricing details will be disclosed in the future, however, it is predicted to result in a valuation ranging from $60 billion to $70 billion.
BHP Earnings Drop, Awaiting China's Response
Australia's BHP, formerly a significant member of the FTSE 100 index, announced today a substantial decline in its earnings for the fiscal year ending on June 30.
The mining company experienced a decline in its income, with a reduction of 17% or $11.3 billion to $53.8 billion (£42.1 billion). This drop was primarily caused by a substantial decrease in the prices of essential resources. Surprisingly, even though there was an increase in the quantity of copper, iron ore, and nickel sold, as well as advantageous currency exchange rates, it was not enough to offset the overall decline.
BHP announced that its proficient handling of the influence of inflation on expenses mitigated the decrease in fundamental earnings to only 37%, amounting to $13.4 billion (£10.5 billion).
The company is set to distribute a last payment of $80 cents per share, equivalent to $4.1 billion, on 28 September. This payment accounts for 59% of the company's earnings. Despite a decrease from the previous year's 325 cents, this brings the total for the year to 170 cents, remaining the third highest payout in the company's records.
In the last three years, BHP has shared over $40 billion (£31.2 billion) with its shareholders.
CEO Mike Henry stated that China and India have continued to display strong demand for commodities, despite a significant slowdown in developed economies.
He included: "In the near future, China's direction depends on how well the recent policy actions work. We anticipate a robust growth in India, supported by a thriving construction sector that will lead to an increase in the production of steel."
In a broader sense, there is a growing acknowledgment of the significance of vital minerals and worldwide efforts to encourage investments in their production and consumption. This gives rise to both prospects and hurdles.
'Chancellor's Challenge: Tax Cuts Unveiling'
According to Ruth Gregory, the deputy chief UK economist at capital economics, the public borrowing figures in the UK "do not alter the overall situation" when it comes to taxes and expenditures. As a result, the Chancellor is still facing limitations and constraints.
She stated that the latest update on July's public finances showed more positive news regarding the fiscal situation. However, considering the ongoing increase in interest rates and the upcoming mild recession, we maintain our belief that the Chancellor will face difficulties in proposing significant long-term tax reductions in the Autumn Statement while also abiding by his fiscal guidelines.
We have two reasons to exercise caution. Firstly, if our prediction of a decline in the economy towards the end of this year turns out to be accurate, it is highly likely that tax revenues will not meet expectations. The Office for Budget Responsibility (OBR) has made projections relying on a GDP growth rate of 0.2% and 2.1% for the years 2023/24 and 2024/25 respectively. However, our estimates indicate a modest growth of only 0.1% and 0.8% in those same years.
Furthermore, the surge in anticipated market rates and the incline in more extended-dated gilt yields since March are likely to contribute approximately £18bn to the OBR's prediction for expenditure on debt interest by the year 2027/28.
Therefore, we believe that the Chancellor will have limited flexibility to announce significant and long-lasting reductions in taxes or increases in spending during the Autumn Statement, as doing so could put his financial regulations at risk.
Nvidia Soars, Nasdaq Gains 1.6%, FTSE 100 Steady
The value of Nvidia stocks increased by 8% last night as investors prepared themselves for the possibility of Nvidia achieving the same level of success as it did in the previous quarter. The company is expected to release its interim results tomorrow.
The Nasdaq Composite experienced an increase of 1.6% due to optimistic expectations that Nvidia has gained more advantage from a significant change in AI investment. Conversely, there was a slight decline of 0.1% in the Dow Jones Industrial Average, while the S&P 500 index saw a positive improvement of 0.7%.
Nvidia, set to release its financial results later today, made the most significant upward adjustment in guidance for a three-month period in the semiconductor sector when it last disclosed its numbers earlier in the year. Its stock has surged by over 200% thus far in 2023.
On the flip side, the FTSE 100 index relinquished its early profits and concluded just marginally lower yesterday, marking its seventh uninterrupted streak of decline. CMC Markets anticipates that the leading stock market in London will commence today's trading with a modest increase of six points at 7264.
Asia-based investors experienced a familiar narrative during today's trading session as China's markets witnessed additional volatile trading activity.
The Hang Seng index, which has entered a bearish phase due to seven uninterrupted declines, has managed to bounce back and is currently up by 0.6% after initially showing negative performance earlier today.
New Microsoft Bid For Activision After CMA Refusal
Microsoft has presented a fresh iteration of its highly successful agreement with Activision following the rejection of a prior proposition by the Competition and Markets Authority.
In light of the recent agreement, Microsoft will not be obtaining the cloud streaming privileges for all existing and forthcoming Activision games over the next decade and a half.
Microsoft announced that it has made changes to the deal in order to address the concerns raised by the Competition and Markets Authority (CMA). The main focus of these changes is to enable Ubisoft, an independent content supplier, to have the opportunity to provide Activision's gaming content to all providers of cloud gaming services.
The CMA announced that it will initiate a fresh inquiry, with a mandated due date of 18th October 2023 for reaching a determination.
Sarah Cardell, CEO of the CMA, stated: "This is not a go-ahead signal. We will thoroughly and impartially evaluate the specifics of the redesigned agreement and its effect on market competition, taking into account external input."
"Our objective remains the same - any forthcoming determination concerning this fresh agreement will guarantee that the expanding cloud gaming industry keeps reaping the rewards of fair and efficient rivalry, fostering innovative solutions and a wide range of options for consumers."
The acquisition of the company responsible for developing Call Of Duty, World Of Warcraft, and Candy Crush would be among the largest ever witnessed in the tech sector.
UK July Deficit: £4.3bn
In July, the budget shortfall in the United Kingdom reached £4.3 billion, showing a noteworthy decrease compared to previous months. However, it remains the fifth-highest borrowing amount ever recorded for the month of July.
The amount was lower than the anticipated £5.0 billion.
In regards to the current tax year, the amount of money borrowed by the government stands at £56.6 billion. Surprisingly, this is £11.3 billion lower than what was originally estimated by the OBR. This revelation implies that the government might have more flexibility in terms of raising expenditures or decreasing taxes than previously thought.
The amount of debt held by the government reached £2,578.9 billion, which accounts for 98.9% of the total value of goods and services produced in the country. This happened after surpassing the 100% milestone not long ago.
