FTSE 250 round-up: Hill & Smith, Coats, Rotork, Genus
City writer Graeme Evans examines four UK mid-caps that shared well-received updates today.
20th November 2024 13:33
by Graeme Evans from interactive investor
The exposure of the FTSE 250 index to American markets and beyond was in the spotlight today after Hill & Smith, Coats, Rotork and Genus posted well-received updates.
Coats Group (LSE:COA) is the world’s largest supplier of industrial thread to the footwear industry, while Hill & Smith (LSE:HILS) makes over half its revenues through US-based operations ranging from galvanising services to the supply of engineered products in multiple industries.
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Animal genetics business Genus (LSE:GNS) and the Bath-based flow control engineer Rotork (LSE:ROR) are also significant global players, with a big chunk of their revenues from the US.
In a session when the FTSE 250 index drifted due to concerns over the UK interest rate outlook, all but Coats out of the quartet appeared near the top of the risers’ board by lunchtime.
Hill & Smith led the way after it reported a 7.5% rise in revenues on a constant currency basis and 2% on an organic basis, an improvement on the first-half growth rates. The operating margin was ahead of the same period last year, while cash conversion continues to be strong.
The West Midlands-based company has benefited from strong demand across a range of US infrastructure markets, boosting the performance of the Engineered Solutions division.
Revenue and profit in the Roads & Security division were lower than the same period last year, partly reflecting the challenging UK market backdrop.
The company has ramped up its US exposure through the acquisitions of Whitlow, a maker of structural steel substation components for the US electrical infrastructure market, and Trident Industries, a US-based designer and supplier of composite utility poles.
New boss Rutger Helbing believes the company is in a good place to deliver further value creation for shareholders, given the exposure to attractive infrastructure end markets. He plans to give his initial observations on the company with annual results in March.
Shares are up 13% so far this year, but with Shore Capital believing they now look to be fairly valued after downgrading the stock from Buy to Hold this morning.
Coats chief executive David Paja also briefed investors for the first time today, with the new boss reporting an improvement in sales growth to 11% in the four months to 31 October.
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This was driven by accelerating growth in the footwear division and continued momentum in apparel, partly offset by sustained weakness in performance materials.
He reiterated full-year guidance and said his initial view after two months at the helm showed “a premium quality business, executing well with opportunities for further improvement and a strong platform for future profitable growth”.
Shares are up 28% to 94.6p this year, but Peel Hunt believes they are “excellent value” based on its price target of 125p. It points out that sales are improving as industry de-stocking ends and Coats gains market share, while margins are well ahead of the initial guidance of 17%.
Rotork shares are back in positive territory for 2024 after a trading update showed order intake was 8% higher year-on-year.
The performance was led by the water and power division and by oil and gas, where customers in the Middle East and North America have been focused on increased gas production and the delivery of their decarbonisation commitments.
Cash-generative Rotork remains active in looking for acquisition opportunities, while continuing with its £50 million share buyback programme.
An AGM update by Genus provided reassurance for investors after a year in which shares have fallen by 20%, including a 16% reverse in November.
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Genus has been impacted by challenging China market conditions as well as foreign exchange headwinds. The company is headquartered in Basingstoke but operates in more than 25 countries on six continents, with research laboratories located in Madison, Wisconsin.
The in-line profit performance in the first quarter offered encouragement today, supported by stronger trading in the porcine genetics market and an improvement in the bovine division. Genus has also made further regulatory submissions in relation to its PRRS Resistant Pig (PRP) programme, which is progressing as planned.
The shares rose 28p to 1722p but Peel Hunt continues to believe there’s room to reach 3,100p. The broker said today: “We see potential for meaningful improvement as cost savings are delivered, markets start to improve and potential in PRP is realised.”
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