Two FTSE 250 Stocks Under the Spotlight: INCH, SRP

About Inchcape PLC

Inchcape Plc (INCH) is a London, United Kingdom-based automotive retailer and distributor. The group functions in around 32 national markets. The company’s business is differentiated in three segments: Distribution, Retail and Central. The Distribution segment comprises geographical regions, such as the United Kingdom and Europe, Asia, Australasia, and Emerging Markets. The Retail segment comprises geographical regions, such as the United Kingdom and Europe, Australasia, and Emerging Markets.

INCH-Recent developments

The company recently announced that it would be selling its three retail sites to Sime Darby Motors in Australia. Earlier this year, in May and July 2019, the company sold three sites to similar other parties. This transaction is expected to conclude in fourth quarter provided regulatory and partners approvals are given in favour. This sale of sites will result in cash proceeds of £63 million and they have generated revenue of £79 million (year to date). These sites included brands like Volkswagen, British Motor Works, Mini and JLR. In total, six retail sites have been disposed which shall generate a cashflow of £76 million.

This move is in line with management’s strategy to develop core distribution capabilities and efficient utilisation of the resources. These disposals of sites will help the company in streamlining the business in Australia with respect to distribution.

INCH-Financial Highlights for H1 Financial Year 2019 period ended 30th June 2019

For the first half of the financial year 2019, the company’s reported revenue rose by 2.4 per cent to £4,725 million as compared with the H1 financial year 2018 of £4,614 million, while on a constant currency basis, revenue surged by 2.7 per cent, due to the growth in the emerging markets. The operating profit before exceptional items declined by 10.4 per cent to £179.8 million in H1 FY2019 against the £200.6 million in H1 FY2018. On a constant currency basis, operating profit before exceptional items reduced by 11.1 per cent. Operating margins decreased by 50bp to 3.8 per cent in H1 FY2019 (AER basis) as compared with the previous year data. Reported profit before tax stood at £153.7 million in H1 FY2019, a decrease of 3.3 per cent as compared to £158.9 million in H1 FY2018. On a constant currency basis, profit before tax (before exceptional items) declined by 12.8 per cent to £156.3 million in H1 FY2019 from £177.2 million in H1 FY2018, due to the challenging retail trading environment and impact on margins. Free cash flow reduced by 63 per cent to £25 million in H1 FY2019 from £67.5 million in H1 FY2018.

The company’s overall financial performance remained decent with improvement in the top-line and the bottom-line financial performance. But the company’s operating profit and profit before tax had declined, which questions the operational performance of the company. In UK & Australia, the company had disposed of 10 loss generating sites, generating a cash flow of £34 million.

Few of the company’s markets have weakened during the period. The company’s operations are impacted by the AUD/JPY currency headwind. The company had faced challenges in the Chilean market. The company’s operations are impacted by the ongoing uncertainty created over the Brexit, as it would disturb the supply chain.

The company is focused on controlling costs and improving efficiency through Ignite initiatives. Cash generation remains the focus of the company, and the company expects its cash conversion to be in line with the set guidance, supported by a declined level of capex versus last year data.

INCH- Share price performance

Daily Chart as at 12-September-19, before the market close (Source: Thomson Reuters)

On 12th September 2019, at 02:10 PM GMT while writing, INCH shares were trading at GBX 638 per share; which were up by 0.31 per cent as compared to the previous day closing price level. The company’s Market capitalisation was recorded at £2.58 billion at the time of writing.

On 21st September 2018, the shares of INCH have touched a new peak of GBX 699.50 and reached the lowest price level of GBX 482.20 on 25th October 2018 in the last 52 weeks. The company’s shares were trading at 8.79 per cent lower from the 52-week high price mark and 32.31 per cent higher from the 52-week low price mark at the current trading level as can be seen in the price chart.

The stock’s traded volume was hovering around 363,290 at the time of writing before the market close. The company’s 5-day stock’s average traded volume was 1,096,432.40; 30 days average traded volume- 947,321.13 and 90 days average traded volume – 946,045.98. With a beta of 1.22, the company’s stock was more volatile in comparison with the index considered as the benchmark.

The shares of the company have delivered a positive return of 2.66 per cent in the last quarter. The company’s stock was up by 15.32 per cent from start of the year to till date. The company’s stock has generated a negative return of 5.57 per cent in the last year along with dividend yield of 4.21 per cent.

Serco Group PLC

Serco Group Plc (LSE: SRP) is a business support services company headquartered in the United Kingdom. Defence, Justice & Immigration, Transport, Health and Citizen Services are different segments in which company operates. Its shares are listed on the London Stock Exchange and got admitted in 1988, on the bourse for trading. The group is a constituent of FTSE All-Share, FTSE 350 and FTSE 250 indices. Its geographical area of operations is subdivided into four areas; the UK, Americas, Asia Pacific and the Middle East.

SRP-Recent News

Since October 2009, the company has been providing onshore immigration services and detention network in Australia. These services include education, accommodation, facilities management and other services. The current contract of Serco was supposed to expire on 10th December 2019. However, the company got a notification regarding the contract for an extension of two years up to 10th December 2021. The company is now awaiting discussions to finalise the terms of the contract extension.

SRP-Financial highlights for H1 FY19

The company’s revenue surged by 8 per cent on actual exchange rate to £1,475.5 million in H1 FY19 from £1,366.2 million in H1 FY18. The company’s reported operating profit after factoring exceptional items stood at £17.2 million in H1 FY19. The company’s diluted earnings per share (underlying) stood at 2.62 pence in H1 FY19 as against 1.84 pence in H1 FY18. The company’s reported net debt stood at £206.7 million in H1 FY19 as against £220.1 million in H1 FY18. The company had a strong order intake during the period as the order book surged by £2.0 billion to £14.0 billion. Serco Group Plc has not declared an interim dividend for H1 2019.

 SRP- Share price performance

Daily Chart as at 12-September-19, before the market closed (Source: Thomson Reuters)

On 12th September 2019, at 02:15 PM GMT while writing, SRP shares were trading at GBX 150.30 per share; up by 0.94 per cent as compared to the previous day closing price level. The company’s market capitalisation was recorded at £1.82 billion at the time of writing.

On 11th September 2019, the shares of SRP have touched a new peak of GBX 152.13 and reached the lowest price level of GBX 83.50 on 10th December 2018 in the last 52 weeks. The company’s shares were trading at 1.20 per cent lower from the 52-week high price mark and 80 per cent higher the 52-week low price mark at the current trading level as can be seen in the price chart.

The stock’s traded volume was hovering around 422,436 at the time of writing before the market close. The company’s 5-day stock’s average traded volume was 1,359,263.60; 30 days average traded volume- 1,578,192.10 and 90 days average traded volume – 1,704,435.94. With beta of 1.33, the company’s stock was more volatile in comparison with the index considered as the benchmark.

The shares of the company have delivered a positive return of 11.54 per cent in the last quarter. The company’s stock surged by 55.75 per cent from start of the year to till date.

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