Begbies Traynor, Ascential, and easyJet could be the best FTSE 250 shares to watch next month. These shares are selected for recent market news.
Down 10.3% year-to-date, the FTSE 250 has been irregularly falling since hitting 24,195 points in early September 2021, to just 17,165 points today.
The UK’s domestically focused index is highly sensitive to the country’s changing fiscal and monetary policy — and while there is more nuance — the bottom line is that the Bank of England base rate has risen from 0.1% to 5.25% over the past couple of years, while corporation tax for larger companies has jumped from 19% to 25%.
And further volatile macroeconomic changes are coming up in November.
First, there’s the Monetary Policy Committee meeting on 2 November to decide where rates go next, then the CPI inflation reading on 15 November, followed by the Autumn Statement on 22 November. This statement — among other things — is rumoured to include changes to ISA products that will likely benefit UK investors, after a period of tax rises and allowance cuts.
Accordingly, it’s worth considering that the economic picture may change markedly over the next few weeks. But for now, here’s three of the best FSTE 250 shares to watch — all of which have seen recent news.
1. Begbies Traynor
Begbies Traynor is an insolvency expert specialising in corporate restructuring. In recent full-year results, it saw another ‘successful year of continued growth with results ahead of original market expectations.’
Revenue grew by 11% year-over-year, free cash flow hit £14.1 million, the dividend increased by 9% to 3.8p for the year, the sixth year of increases in a row. The FTSE 250 company remains confident of ‘a further year of growth in line with market expectations... (with a) strong order book of insolvency revenue (up 19% in the year), driven by continued increase in insolvency market volumes.’
Today, the firm has released analysis prepared by Red Flag showing that the number of firms in ‘critical financial distress’ — defined as having county court judgements exceeding £5,000 — has jumped by 25% to nearly 38,000 businesses over the past three months.
Regional Managing Partner Julie Palmer notes that ‘tens of thousands of British companies are now in financial dire straits now that the era of cheap money is firmly behind us.’
Further, The UK Insolvency Service has announced that the last two quarters have seen the highest quarterly insolvency numbers since Q2 2009, alongside the highest number of creditors’ voluntary liquidations since 1960.
Begbies shares have fallen by 21.7% year-to-date, but this may be a chance to buy the dip.
easyJet shares have fallen by 23.7% over the past six months, including a sharp fall even after reporting its positive Q4 results. The FTSE 250 airline delivered record Q4 profit before tax, expected to be between £440 million and £460 million, while passenger numbers increased by 8% and ticket yields by 9%.
The mid-cap company expects that capacity will grow by circa 15% in Q1 and has set a medium-term target to deliver more than £1 billion of profit before tax. To deliver this growth, easyJet has confirmed 157 ‘firm orders’ for additional aircraft, with a further 100 ‘purchase rights’ — which could see the fleet almost double in size to 587 aircraft over the next decade.
The company is also promising to restart dividends, and it’s perhaps this dual ambition which is sending shares lower — usually, companies focus either on capital growth or shareholder returns.
Of course, there are other issues brewing in the background. Over the past few months, air traffic control strikes, wildfires in Greece, and seemingly endless UK technical IT glitches have all helped to pile pressure on easyJet’s share price. And then there’s fears that the Israel-Hamas war could escalate into a regional conflict; an outcome that the World Bank thinks could send oil to $150.
However, the airline is well hedged for jet fuel over the medium term — and better hedged than competitor IAG. This could see shares recover over the next month as investors consider the long-term outlook.
UK-based data and technology company Ascential rose sharply after announcing that it now plans to offload two divisions to focus on its events business. The small cap tech sector has been significantly impacted by rising rates — and the numbers achieved for these assets may have taken the markets by surprise.
US-listed advertising titan Omnicom is spending £741 million on Ascential’s digital commerce business, while private equity-founded Wind UK Bidco 3 is buying the product design segment for up to £700 million. This will yield a combined enterprise value of circa £1.4 million and cash proceeds of £1.2 billion.
Ascential plans to return £850 million to shareholders, and thereafter focus solely on events such as the Money 20/20 fintech conference in Las Vegas or the Cannes Lions marketing festival. The company has been undergoing a strategic review since April 2022, and this step forward could unlock significant value.
CEO Duncan Painter enthuses that ‘Omnicom's and Digital Commerce's complementary technology and data platforms, together with their strong client relationships will be instrumental in accelerating the realisation of Digital Commerce's strategy, and WGSN is also well set for its next chapter of growth under new ownership. Ascential's continuing business with its world-leading Events brands remains well-positioned to succeed as a high quality, independent UK-listed business.’
Ascential shares have fallen since their peak yesterday, perhaps marking an opportunity for high-risk investors.
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