FTSE 250 movers: FirstGroup hits buffers

(Sharecast News) - FTSE 250 down 0.67% to 18,571.99 at 1500 GMT.

Shares in pub chain JD Wetherspoon fell after the company posted a rise in sales on Wednesday as it continues to recover from pandemic restrictions, but said it had seen a slight slowdown in October.

In an update for the 14 weeks to 6 November, the company said like-for-like sales were 9.6% higher than the same period last year and 0.4% higher than the 14 weeks ending 3 November 2019.

However, it also noted that costs, especially in respect of labour, food and repairs, were substantially higher.

"Trading has been broadly in line with expectations, although October has been a slightly slower month," it said.

For the first nine weeks of the financial year, sales were up 1.5% versus the same period in calendar-year 2019. For the last five weeks, meanwhile, sales were 1.1% lower than the same period two years ago. Compared with 2021, sales were 10.1% higher for the first nine weeks and 8.9% higher for the last five weeks.

Chairman Tim Martin said: "Sales have improved since the ending of restrictions in the early part of this calendar year and are considerably above the same period in the last financial year.

"The company reported a return to positive cash flow in FY22 and anticipates a positive cash flow in the current year.

"In my comments on the full year results released on 7 October 2022, I set out various threats to the hospitality industry and these continue to apply. Those caveats aside, in the absence of further lockdowns or restrictions, the company remains cautiously optimistic about future prospects."

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Generally sales are holding up at JD Wetherspoon, but we will need to hold our breath to find out if the more recent slowdown is a blip or a trend, as customers feel their wallets ever more squeezed. The World Cup may provide some relief, but JD Wetherspoon is not a sports led outlet.

"With an acceleration in pub disposals and efforts to make a dent its debt levels, it feels like the pub chain is battening down the hatches, and that may well be a sensible move as we enter a period of increasing economic uncertainty."

The pub chain said in its update that it had opened one pub during the period and sold five pubs, giving rise to a cash inflow of £1.9m.

UK food and clothing retailer Marks & Spencer fell as it expected a material contraction in demand over the next 18 months as it reported a fall in interim profit, but backed its customers to be more resilient than market assumptions.

The company said adjusted pre-tax profits fell 24% to £205.5m in the six months to October 1 as its food business bore the brunt of trying to maintain competitive prices by not passing on inflationary costs.

Chief executive Stuart Machin expected market conditions to become more challenging in the 2023/24 fiscal year. "The combined impacts of the cost-of-living squeeze and the most marked rise in the cost of doing business for many years are creating pressure on margins industry-wide," he said.

Profits were also hit by the exit from Russia due to the war on Ukraine and a loss at online joint venture Ocado Retail. There was also no government Covid-related business rate relief.

Trading in the first four weeks of the second half was in line with forecasts, with clothing and home sales up 4.2%, food sales up 3% and international up 4.1%.

Half-year operating profit before adjusting items at the food unit fell to £71.8m from £124.0 as inflation hit 11%. However, sales rose 5.6% driven by growth in franchise and hospitality activity.

Clothing and homewares sales rose 14% during the period. Overall group revenue increased 8.5% to £5.5bn.

Machin said the cost-of-living crisis would result in unviable capacity leaving the industry, "creating opportunities for the leaner players who remain".

"We believe that the M&S positioning and the accelerated change underway, give scope for greater resilience and we are very confident the business will emerge with a strengthened market position and prospects for growth," he said.

"In highly uncertain market conditions, there is a large variation in plausible forecasts for customer demand. Whilst we are therefore planning on a material contraction in market demand the M&S customer may prove more resilient than some market commentators assume."

He said M&S's 30 million-strong customer base had slightly higher incomes and age demographics, with a high proportion in above average paid jobs or retired.

"Despite the recovery in demand since the pandemic and return to travel these age groups shielded more and many retain a savings cushion affording some resilience to the headwinds," he said.

Third Bridge analyst Orwa Mohamad said M&S faced a challenging period with overall revenues for the UK grocery market expected to be flat or in decline over the next six months.

"Any growth in revenues is going to be driven by inflation. Margins erosion will continue for at least the next 12-18 months because of M&S's positioning. M&S needs to absorb some inflation costs because it lacks the scale advantages enjoyed by the likes of Tesco. It will probably look to reduce promotional activity first," he said.

"The biggest challenge for M&S is shifting its image from an occasion shop to a weekly shop. There is a risk that large numbers of infrequent shoppers simply drop the brand from their repertoire as they trim back their discretionary spend."

First Group slumped posted a sharp drop in revenues and profitability for the half alongside a similarly deterioration in its debt metrics.

For the first six months of the 2023 financial year, the coach and rail operator posted a near 29% reduction in revenues on a statutory basis to reach £2,215m, while profits before tax fell by more than 98% to £8.7m.

In turn, earnings per share were in the red by 0.1p, also on a statutory basis, down from 42.4p one year ago.

Going the other way, net debt ballooned from £234.2m in FY 2022 to £1,475.0m.

Group adjusted attributable profit did improve, from £13.3m to £30.8m, with management stating that it was in line with its own expectations.

Adjusted EPS meanwhile fell from 6.6p to 3.4p.

The company also declared an interim dividend of 0.9p, versus none for the equivalent period of 2022.

As of 1136 GMT, shares of First Group were down by 7.86% to 98.50p.

FTSE 250 - Risers

Hochschild Mining (HOC) 61.60p 5.39% BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 157.80p 4.23% Ferrexpo (FXPO) 127.10p 2.42% Telecom Plus (TEP) 2,215.00p 1.84% Scottish American Inv Company (SAIN) 506.00p 1.40% Beazley (BEZ) 653.00p 1.32% Moneysupermarket.com Group (MONY) 184.70p 1.26% Jlen Environmental Assets Group Limited NPV (JLEN) 121.60p 1.16% Schroder Asia Pacific Fund (SDP) 481.50p 1.16% Hilton Food Group (HFG) 544.00p 1.12%

FTSE 250 - Fallers

FirstGroup (FGP) 95.60p -10.57% Wetherspoon (J.D.) (JDW) 455.20p -6.76% Mitchells & Butlers (MAB) 132.80p -5.41% ITV (ITV) 69.42p -5.11% SSP Group (SSPG) 204.20p -4.36% Marks & Spencer Group (MKS) 112.00p -4.31% IP Group (IPO) 68.00p -3.89% Essentra (ESNT) 224.00p -3.86% 888 Holdings (DI) (888) 99.40p -3.78% Molten Ventures (GROW) 372.20p -3.77%