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


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These five companies could be the best FTSE 250 shares to watch next month. They have been selected for recent market news.

ftse 250Source: Bloomberg
 

Written by: Charles Archer | Financial Writer, London
 

Despite having risen by 2.3% year-to-date to almost 20,000 points, the FTSE 250 index continues to underperform both older brother the FTSE 100, in addition to alternative index choices including the S&P 500 and tech-heavy NASDAQ 100 in 2024.

FTSE 250 macroeconomics

The FTSE 250 remains arguably an indicator of the UK’s wider economy, which continues to remain on an uncertain trajectory. This is because unlike the FTSE 100, whose companies derive the lion’s
share of their income from overseas, FTSE 250 businesses are primarily domestically focused.

Perhaps the most worrying trend for the FTSE 250 is delistings. Offers from larger businesses or private equity for the likes of Hotel Chocolat, Currys, or recently tech darling Darktrace all go to highlight perceived UK under valuations — and of course, this also applies to FTSE 100 businesses as well. Shell is again considering a move to the US, following in the footsteps of CRH, Arm, Flutter and Smurfit Kappa.

And the UK’s economy remains on an uncertain trajectory. Of course, where there’s uncertainty there is often opportunity — with certain FTSE 250 shares in the spotlight recently for arguably good news.

CPI inflation rose by 3.2% in the 12 months to March 2024 — down from 4% in January — and far below the peak of 11.1% in October 2022. Accordingly, all eyes are on potential Bank of England interest rate cuts. The base rate remains at 5.25%, and the market is expecting cuts later this year.

However, the bank is concerned that inflation may resurge, with chief economist Huw Pill recently warning that cuts are still ‘some way off,’ despite being ‘somewhat closer ’ — especially amid continued strong wage data and relatively low unemployment. Conversely, the Insolvency Service recently noted that the number of companies declared insolvent in England and Wales in February 2024 rose by 17% year-over-year to 2,102 firms.

Best FTSE 250 stocks to watch

These shares have been selected for recent market news.

Just Group

Just Group, the financial services company specializing in retirement, recently reported full-year results which saw a 47% year-over-year rise in underlying operating profit to £377 million — driven by increases in new business and in-force profits.

For context, retirement income sales grew by 24% to £3.9 billion, while new business profits rose by a third to £355 million. And the company’s defined benefit market enjoyed a record year, while the guaranteed income for life market increased by 46% to £5.3 billion, hitting its highest level in a decade.

The business also saw a healthy capital coverage ratio of 197% and a return on equity of 13.5%. The dividend was increased by 20% to 2.08p per share, and it expects a further 15% growth in underlying operating profit into the future.

CEO David Richardson enthused ‘We are delighted with our financial performance in 2023, a record year for the group, and are confident of exceeding our medium term profit growth pledge…Given the multiple opportunities available and strong structural growth drivers in our chosen markets, we have never been more confident in our ability to deliver sustainable and compounding growth.’

Telecom Plus

Telecom Plus — which owns the Utility Warehouse brand — recently released a fiscal year end trading update to 31 March 2024, in which the business saw record customer numbers, profits and dividend payout.

Customer numbers grew by an organic 14.1%, ‘against a background of normalized competition and falling energy prices.’ And the company passed the 1 million customer milestone in Q4., having delivered compound double-digit percentage customer growth for each of the last five half-year periods.

Telecom Plus also noted that FY24 adjusted profit before tax is expected to be towards the upper end of market expectations — with continued strong interest in its partner income opportunity, with the number of partners now up by 14% to 68,000. The dividend was also hiked in line with inflation from 80p to 83p.

Co-CEO Steve Burnett enthuses that ‘Our innovative multiservice customer proposition, together with our unique word of mouth route to market, has put us firmly on track to deliver another set of record results…we expect to continue delivering record customer numbers, profits and returns to shareholders over the years ahead.’

WH Smith

WH Smith's ‘good’ interim results to 29 February 2024 saw the retailer’s revenue rise by 8% year-over-year to £926 million, driving headline group profit before tax and non-underlying items to £46 million. The retailer is also investing in future growth, with £140 million in capital expenditure and around 110 new stores expected in this financial year.

WH Smith also paid an interim dividend of 11p per share, ‘reflecting strong trading and cash generation combined with confidence in future prospects’ and noted that trading momentum has continued ahead of the key summer period.

CEO Carl Cowling noted that the company ‘is in its strongest ever position as a global travel retailer. We have had a good first half and our businesses are well positioned for the peak summer trading period…I am particularly pleased with the outstanding performance from our UK Travel business which has seen a 19% increase in trading profit.’

The CEO also highlighted North America, in which WH Smith has recently opened a further 13 shops as part of its international expansion strategy.

Mobico Group

In recent delayed results, Mobico — formerly National Express Group — saw revenue grow by 12.2%, driven by a ‘record year at ALSA and driver & route recovery in North America School Bus.’ However, adjusted operating profit fell from £197.3 million in FY22 to £168.6 million as the business was hit with by cost inflation, reduction in Covid subsidies, and lower profitability in Germany.

On the other hand, its strategic shift is expected to deliver potentially £50 million of annualised savings across two stages — and Mobico won 43 new contracts worth over £1 billion in total contract value and circa £126 million in annualised revenue.

And for FY24, it expects to generate an adjusted operating profit of between £185 million and £205 million.

CEO Ignacio Garat notes that ‘Our 2023 results are below the expectations we set ourselves at the beginning of the year…I am nevertheless encouraged by the progress we have made in transforming the business, with the new leadership we have appointed in North America School Bus and the UK & Germany making a tangible impact and the first phase of our Accelerate cost efficiency program delivering ahead of expectations.’

PureTech Health

PureTech Health has been having an excellent 2024 after the schizophrenia treatment business — Karuna — which it helped establish, was bought by Bristol-Myers Squibb for $14 billion.

As part of the deal, PureTech realised $293 million proceeds from its remaining stake in Karuna, which means it has generated $1.1 billion from an initial investment of $18.5 million — and is evidence of a working business model.

In full-year results, the company highlighted significant operational and clinical progress, with the maturation of its Internal Programs, the launch of two new Founded Entities, including a $100 million Series A financing for Seaport. It also maintains a robust balance sheet, with cash, cash equivalents and short-term investments of $573.3 million as of the end of March.

CEO Dr Bharatt Chowrira noted that ‘2023 was a landmark year for PureTech, in which we made strong strategic and clinical progress. We've carried this momentum into 2024, with our hub-and-spoke R&D model continuing to deliver value for both patients and shareholders. PureTech pioneered the hub-and-spoke model, and we believe this novel approach has never been more important than in recent years.’

 
 

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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