FTSE 250 movers: Watches of Switzerland surges; Hays slips

by | Jul 13, 2023

(Sharecast News) – Diploma shares soared on Thursday as the company said revenues had risen 9% in the first nine months of the year and bought DICSA, a Spain-based distributor of fluid power solutions for £170m.
Reported revenue growth was 21% with net contribution of 8% from acquisitions and disposals, and a 4% foreign exchange benefit.

Diploma said trading so far had increased confidence in full year guidance of around 7% organic revenue growth, 7% contribution to revenue from acquisitions net of disposals; operating margin of 19%; and free cash flow conversion of 90%.

Steve Clayton, head of equity funds at Hargreaves Lansdown said: “Diploma say that their business model continues to add value for their customers, who make repeat purchases as a result, which is leading to a strong operating margin outcome for the year, suggesting profits could be rising ahead of the pace of revenue growth.”

“We hold Diploma in our HL Select UK Growth Shares fund precisely because of the group’s ability to keep churning out the consistent organic sales growth they have reported today, boosted by a regular flow of bolt-on M&A deals. The added-value distribution model gives the group pricing power, allowing it to hold and grow margins even at a time of inflationary pressure. The balance sheet is in fine shape, with leverage still modest even after today’s news of the addition of DICSA to the group.”

Clayton said the Diploma’s business model was a “relatively capital-lite operating structure” allowig the group to earn high returns on investment.”

Watches of Switzerland posted a big increase in full-year sales and profits.

Group sales increased by 19% at constant currencies to reach £1.54bn, helped by an especially strong showing in the U.S..

That drove a 23% jump in statutory profits before tax to £155m, while free cash flow strengthened 30% to £146m.

The watchmaker also reiterated its guidance for its 2024 financial year, voicing confidence in the outlook for organic growth, even as it continued “to actively pursue additional inorganic growth opportunities to enhance that growth.”

Domino’s Pizza said it had appointed Andrew Rennie as chief executive officer with effect from 7 August 2023.

Hays reported a dip in quarterly fee income on Thursday, on the back of growing macroeconomic uncertainties.

The white collar recruiter, which specialises in both temporary and permanent positions, said net fees fell by 2% on both a total and like-for-like basis in the three months to 30 June.

Within that, the biggest falls were seen in the UK and Ireland, down 7% on a like-for-like basis, and in Australia and the rest of the world, off 15%.

Temporary and contracting – which accounts for 58% of growth fees – rose 4% but permanent was down 9%.

However, the firm insisted it remained on track to meet full-year guidance.

Alistair Cox, chief executive, said: “We delivered a resilient fourth quarter performance against a tougher market backdrop, and we expect 2023 full-year operating profit will be in line with market expectations.

“Growth was again drive by temporary and contracting, our largest business and key strategic focus. However, permanent hiring processes continue to lengthen.

“Despite macroeconomic uncertainties, our key markets remain characterised by skill shortages and wage inflation. Our early management actions to increase average fee margins and control our costs have underpinned our performance, and consultant productivity is good overall.”

Analysts are expecting full-year operating profits of around £196m.

Despite high levels of job vacancies, recruitment confidence has been affected by weaker macroeconomic effects, including high inflation and increasing interest rates. A number of sectors, including technology and financial services, have also seen mass lay-offs.

Last week Hays’ rival Robert Walters also reported a slide in quarterly fee income.

FTSE 250 – Risers

Watches of Switzerland Group (WOSG) 713.50p 11.22%
Softcat (SCT) 1,473.00p 6.20%
Caledonia Investments (CLDN) 3,310.00p 5.58%
Domino’s Pizza Group (DOM) 308.00p 5.26%
Diploma (DPLM) 3,084.00p 4.05%
Currys (CURY) 54.35p 3.43%
Vietnam Enterprise Investments (DI) (VEIL) 599.00p 3.28%
4Imprint Group (FOUR) 4,595.00p 3.14%
Tyman (TYMN) 267.00p 3.09%
SDCL Energy Efficiency Income Trust (SEIT) 76.20p 2.97%

FTSE 250 – Fallers

Digital 9 Infrastructure NPV (DGI9) 51.10p -4.84%
Carnival (CCL) 1,244.50p -3.71%
Sirius Real Estate Ltd. (SRE) 84.80p -2.97%
Wetherspoon (J.D.) (JDW) 712.00p -2.60%
PureTech Health (PRTC) 219.50p -2.44%
Crest Nicholson Holdings (CRST) 184.00p -2.44%
Clarkson (CKN) 2,960.00p -2.31%
Hays (HAS) 102.10p -2.30%
Elementis (ELM) 105.40p -2.23%
CLS Holdings (CLI) 142.60p -2.19%

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