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FTSE 250 movers: Inchcape motors on UK sale; PageGroup slumps

By Frank Prenesti

Date: Monday 15 Apr 2024

(Sharecast News) - FTSE 250 (MCX) 19,838.98 0.60%
PageGroup shares slumped on Monday after the recruitment firm reported lower first-quarter gross profit and cut 100 jobs itself as employers in its key markets slowed hiring rates.

The recruitment firm on Monday said gross profit for the first three months of the year fell 12.9% to £219.7m on an annual basis, with UK and Asia-Pacific operations down 19.2% and 22% respectively.

France and Germany also saw a marked slowdown, with gross profit falling 16% in each in the first quarter versus single digit falls in the prior three months as the slower end to the fourth quarter of 2023 continued, particularly within Continental Europe.

"Conversion of final interviews to accepted offers is still the most significant challenge, as candidate and client sentiment remains subdued reflecting the general macro-economic uncertainty in most of our markets," said chief executive Nicholas Kirk.

"Permanent recruitment was more impacted than temporary across all of our markets, as clients continue to seek more flexible options."

Last month, PageGroup reported a 39.6% slump in pre-tax profits for 2023.

AJ Bell investment director Russ Mould said shareholders, "and perhaps economists and policymakers" would be worried that temporary hires were now also coming under pressure.

"Fee income fell year-on-year for the first time since the pandemic. Usually employers will focus on full-time hires if they are feeling confident and temporary ones if they have less visibility, so retrenchment in part-time posts is a potentially troubling sign."

"The good news here, though, is that chief executive Nicholas Kirk and the board are not planning any further substantial reduction in headcount.

"Moreover, analysts are already expecting a weak 2024 for the company. The consensus estimate for pre-tax profit this year is £103m, compared to 2023's £119m. That forecast has seeped lower from £129m back in January, when Kirk issued a mild profit warning after a soggy end to 2023, and implies a second straight drop in annual profits."

Mitie shares soared on Monday as the cleaning-to-security services outsourcer upgraded its annual profit forecast and launched an extra £50m share buyback on the back of record revenues.

Operating profits are now expected to rise by 23% to at least £200m compared with £162m a year earlier and a January forecast of at least £190m.

Revenue was expected to jump 11% to £4.5bn after a particularly strong final three months of 2023 where sales were up 10%. Shares in the company were up more than 7% in morning trade against a falling London market.

"We have continued to see sustained demand from our clients for transformational projects across their estates, driven by macro trends including decarbonisation, the modernisation of the built environment, and changes in the regulatory landscape," the company said in a trading update.

Hargreaves Lansdown analyst Susannah Streeter said the group had been making "significant strides" in keeping inflationary costs under control and turning its large pipeline of opportunities into contracts wins, with the UK government a key customer.

Shares in Inchcape raced ahead on Monday after the automotive distributor announced the disposal of its UK Retail operations to Group 1 Automotive UK for £346m.

The deal, which does not need approval from Inchcap's shareholders, is part of the company's strategy to focus on being a "higher margin, capital-light, cash generative, diversified, scalable and global distribution business", the company said in a statement.

UK Retail generated just over £2bn in sales for Inchcape in 2023, equal to 18% of group revenues, but the strategic importance of the operations "has become limited", according to chief executive Duncan Tait.

After the completion of the disposal, expected to happen in the third quarter, Inchcape will then hand £100m back to shareholders by way of a share repurchase over the following 12 months. The rest of the money will be used to fund future growth.

"As we continue to deliver on our strategic ambition of becoming the leading global distribution partner to our OEM partners worldwide, this transaction represents a significant step along that journey," said Tait.

"Our UK Retail business is a high-quality business, with an experienced and high-performing management team, and has been an important part of the group's growth."

Digital services and IT provider Kainos Group said in an update on Monday that it expected solid revenue growth and robust growth in adjusted profit before tax for the financial year just ended.

The FTSE 250 company said that despite revenues trending slightly below consensus forecasts, adjusted profit before tax was set to align with expectations.

Amid the prevailing economic climate, Kainos said its business showed resilience in the 12 months ended 31 March, particularly evident in its workday products and services segments.

The company said it had strived to maintain a balanced approach between growth, international expansion, investment in the future, and profitability, given the macroeconomic environment.

In the digital services division, Kainos reported a commendable revenue performance from its public sector team, accompanied by strong sales performance.

Healthcare revenues meanwhile showed recovery momentum post the pandemic-related peak.

However, subdued demand within commercial clients offset that performance.

As a prominent player in the workday consulting sector, the workday services division sustained healthy growth, fostering valuable relationships with international clients across significant European and North American markets.

The workday products division meanwhile reported a robust performance, driven by both established products such as Smart Test for automated testing, Smart Audit for compliance monitoring, and Smart Shield for data masking, as well as the successful launch of employee document management in September, marking the company's most successful product launch to date.

"We remain confident in our strategy; our core markets have proven to be resilient and offer substantial further growth opportunities and we are well positioned within these markets, both locally and, increasingly, internationally," the Kainos board said in its statement.

"Our confidence is reinforced by our long-term customer relationships, and the calibre of our people, who continue to excel in delivering high-impact solutions for our customers.

"In the near-term, an increased backlog, a robust pipeline and a strong balance sheet provide excellent visibility of the strength of our performance in the current financial year."

Kainos said it would announce its results for the year ended 31 March on 20 May.

FTSE 250 - Risers

Mitie Group (MTO) 119.40p 6.99%
Kainos Group (KNOS) 1,012.00p 5.09%
Inchcape (INCH) 731.00p 4.65%
Crest Nicholson Holdings (CRST) 197.30p 4.56%
Trustpilot Group (TRST) 197.60p 4.33%
IWG (IWG) 184.30p 3.31%
Kier Group (KIE) 128.40p 3.22%
Wetherspoon (J.D.) (JDW) 748.50p 2.96%
Aston Martin Lagonda Global Holdings (AML) 162.80p 2.84%
SSP Group (SSPG) 211.80p 2.72%

FTSE 250 - Fallers

Pagegroup (PAGE) 448.20p -7.43%
Wizz Air Holdings (WIZZ) 2,014.00p -3.82%
Vietnam Enterprise Investments (DI) (VEIL) 579.00p -3.66%
Hays (HAS) 93.35p -3.26%
Endeavour Mining (EDV) 1,789.00p -2.93%
Ashmore Group (ASHM) 182.70p -2.77%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 471.00p -2.69%
Ithaca Energy (ITH) 120.40p -2.27%
Centamin (DI) (CEY) 127.60p -2.07%
Harbour Energy (HBR) 289.90p -2.03%

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