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Are these the best FTSE 250 stocks to watch in April 2024?


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Greggs, ITV, Ocado, Greencoat UK Wind and Direct Line could be the best FSTE 250 shares to watch next month. These shares have been selected for recent market news.

ftse 250Source: Bloomberg
 

Written by: Charles Archer | Financial Writer, London
 

The FTSE 250 is now essentially flat, both over the past year and year-to-date, at 19,592 points. Unlike its older brother — the FTSE 100, whose constituents derive the majority of their income from overseas — the FTSE 250 is far more domestically focused.

And the economic trajectory of the UK remains perhaps as uncertain as it looked throughout 2023. CPI inflation remains at 4% and is expected to fall to 2% relatively soon — though analysts then expect the crucial measure to start rising thereafter.

With the base rate at 5.25%, investors are looking to rate cuts in 2024. However, Bank of England Governor Andrew Bailey has previously noted that ‘we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.’ This implies rate cuts may come later than the market currently expects — though central banks do pivot as evidence changes.

With an election likely coming within the next few months after the budget which saw another, potentially unaffordable long-term, two percentage points cut from National Insurance, the winds of political and economic change continue to blow for the best FTSE 250 shares.

Best FTSE 250 shares to watch

These shares have been selected for recent market news.

Greggs

Greggs has once again impressed the market — full-year results saw the baker’s profit before tax rise by 27% year-over-year to £188.3 million — with a year-end cash position of £195.3 million. Accordingly, the FTSE 250 operator is paying a 40p per share special dividend on top of the ordinary 46p special dividend.

The company opened a record 220 new shops in 2023, a net increase of 145 to 2,473 locations. And looking forward, it expects to open between 140 and 160 net shops in 2024, with a target to have more than 3,000 Greggs locations open by 2026.

With inflationary pressures ‘reducing,’ the company also saw total sales rise by 19.6% year-over-year to £1.8 billion. CEO Roisin Currie enthused that ‘we are very much on track to deliver our bold five-year growth plan to double sales by 2026 and to have significantly more than 3,000 shops in the UK over the longer term.’

ITV

ITV shares have jumped a couple of times recently. To start with, it announced that it has sold its stake in BritBox to BBC Studies for £255 million — with the £235 million net of loan repayments and tax to be used to fund share buybacks.

Then the media company delivered mixed full-year results; 2023 revenue fell by 2% to £4.3 billion as advertising revenue dipped by 8% to £1.6 billion. Accordingly, pre-tax profits crashed by 41% to just £396 million — with the ‘challenging advertising market’ blamed for the financial adversity.

However, production arm ITV Studios saw revenue rise by 4% to a record £2.2 billion — while adjusted EBITDA increased by 10% to £286 million. And having disposed of BritBox, investors were also cheered by growth in ITVX.

And the company is also delivering on its cost cutting promises. It had originally planned to deliver £150 million of savings by 2026 and hit £130 million by the end of 2023. At the end of this calendar year, ITV expects to have generated annualised gross savings of al least £50 million per annum.

Ocado

Ocado also enjoyed some mixed results; adjusted earnings came in at £51.6 million, up from a £74.1 million loss in 2022. Importantly, this was driven by a maiden £15.4 million underlying profit from Ocado’s Technology Solutions segment — where the investment in robot-operated warehousing is finally delivering. Indeed, CEO Tim Steiner noted that opening these customer fulfilment centres were key to cost efficiencies.

The Joint Venture with Marks & Spencer — which is now subject to some legal issues — returned to positive adjusted EBITDA of £10.4 million.

However, the FTSE 250 company still generated a loss before tax of £393.6 million — while a £100 million improvement, this includes the £187 million settlement received from Sweden’s AutoStore. While Steiner argues, perhaps fairly, that the business has made ‘tangible steps forward,’ there remains some way to go to group profitability.

Greencoat UK Wind

Greencoat UK Wind has delivered strong results; increasing its dividend to 10p per share against a target of 8.76p, and informing investors it is now confident it will pay the same dividend in 2024.

As one of the UK’s largest windfarm operators — it generated 1.5% of total UK demand last year — the trust saw total shareholder return hit 5.4%. On the other hand, net asset value fell by 3p per share to 164.1p, in common with many renewable energy trusts. But cash generate hit £405 million — and the dividend is covered more than two times over.

Chair Lucinda Riches enthuses that ‘with our continuing strong cash flow and dividend cover, we can confidently target a dividend of 10p per share with respect to 2024, extending our track record of attractive dividends and returns. We are now delivering net returns to investors of 10% on NAV, and we remain confident in our ability to continue to meet our objectives of dividend growth in line with RPI and capital preservation in real terms.’

The company invested £821 million into windfarms in the year, increasing its net generating capacity by 397MW and taking the gross value of its portfolio to some £6.2 billion.

Direct Line

Direct Line shares recently surged after reports that Belgium-based insurer Ageas has made a bid for the FTSE 250 company. While management has rejected the advance, it is the latest in a line of potentially undervalued UK companies which have received offers in the recent past — including Hotel Chocolat and Currys.

Indeed, Ageas is potentially considering a follow-up bid worth some £3.1 billion. For context, Direct Line has suffered through several profit warnings and a CEO exit in 2023. But recent quarterly results may demonstrate an improvement in the business, with motor insurance growing by some 115%.

And the company is shortly set to welcome ex-Aviva stalwart Adam Winslow as CEO — though if the takeover occurs, this may be a moot appointment before long.

 

 
 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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