Shares round-up: Hays, Moneysupermarket, Premier Foods

FTSE 250 stocks that currently inspire confidence – and why.

Confidence-boosting updates from Hays (LSE:HAS) and Moneysupermarket (LSE:MONY) showed the FTSE 250 index pair remain well placed to reward shareholders despite torrid trading conditions.

Recruitment firm Hays has been significantly impacted by the pandemic, but today’s half-year results included details of a cash return plan alongside early signs of jobs market momentum.

There was no interim dividend, but Hays has pledged to declare a single full-year payment based on three times earnings cover with annual results in August. What’s more, the company has identified £150 million of surplus capital it intends to return to shareholders via a two-stage special dividend starting with the award of £100 million at the full-year results.

The group raised £196 million from shareholders at the height of the pandemic in April, but with trading and cash generation more robust than modelled at the time there had been expectations in the City for some form of capital return.

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UBS analysts said the special dividend was more generous than expected, with the potential for subsequent awards of between £25 million and £75 million a year leading to a 4%-5% yield.

They have a price target of 180p, while counterparts at Jefferies also reiterated their ‘buy’ recommendation and said the risk/reward balance on Hays shares remains favourable. The stock is currently at 156.3p after falling 1% today in the wake of in-line interim results.

As well as improved profitability in the second quarter, CEO Alistair Cox said activity rebounded to pre-Christmas levels by early February after an initially slow new year return to work.

Net fees were down 24% to £422.8 million in the six months to 31 December, leading to an 84% slide in earnings per share (EPS) to 0.75p. However cash collection was strong, with £379.5 million on the books at the end of the half-year.

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The uncertain recovery picture at Moneysupermarket is reflected in the company’s broad range of underlying earnings guidance for 2021 of between £96.4 million and £128.8 million, with the biggest influencing factor being how long travel restrictions remain in place.

Revenues from travel insurance were negligible in 2020 and the price comparison site also had to contend with a sharp downturn in availability of credit and banking products as lending criteria tightened and interest rates fell.

Adjusted earnings fell 24% to 107.8 million last year, with early 2021 trading reflecting the current lockdown measures as the Q1 performance for insurance and money is similar to last spring. The motivation for customers to switch energy deals has also been depressed by the low savings on offer, although this may change after Ofgem’s recent price cap increase.

Despite the uncertainty, shares rose 7% to 285.8p today after chief executive Peter Duffy maintained the full-year dividend at 11.71p a share to reflect longer-term prospects and net cash of £23.6 million at the end of December.

He said: “The business is resilient, and our dividend reflects our confidence for the future. 

“Our job now is to encourage consumers to engage with us more and save on more of their bills. We will use our data better so consumers find our sites easier to use and are reminded when there are savings available to them.”

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The shares are at their highest level since September, but UBS analysts think there’s the potential to reach 340p.

Other stocks doing well in the FTSE 250 index included Premier Foods (LSE:PFD) as the Mr Kipling and Bisto firm continues to capitalise on favourable trading conditions by retiring expensive debt.

Its latest £30 million repayment of senior secured floating rate notes takes the figure repaid in the 2020-21 financial year to about £190 million, generating interest savings of £9.5 million a year that can be used for investment.

Premier shares rose 2.6p to 92.1p as the St Albans-based company also said it is on track for a debt/earnings leverage ratio of below two times by the financial year-end in early April.