BUSINESS LIVE: JD Sports’ US growth boosts sales; Hays profits fall; Business activity accelerates

Plans to increase UK tax on energy companies will put thousands of jobs at risk and undermine the country’s progress towards net zero emissions, an industry body has warned.

At the end of July, the government confirmed that it would increase the energy tax on ‘exceptional’ income from November.

This increases the tax rate from 35 to 38 percent and the nominal tax rate for upstream oil and gas activities increases to 78 percent.

British business activity accelerated this month as cost pressures eased to their lowest level in more than three years, a survey showed on Thursday, pointing to steady growth in the second half of 2024.

The preliminary “flash” estimate for Britain’s S&P Global Composite Purchasing Managers’ Index rose to 53.4 in August from 52.8, the highest reading since April and above the median forecast of 52.9 in a Reuters poll of economists.

A figure above 50 indicates growth. According to data company S&P Global, the figures correspond to an economic growth of 0.3 percent on a quarterly basis.

While this growth rate represents a slowdown from the first half of the year, when the economy was recovering from a brief recession, it is still stronger than the usual pace of the past two years.

“August saw a welcome combination of stronger economic growth, higher employment and lower inflation, according to preliminary PMI survey data,” said Chris Williamson, chief economist at S&P Global Market Intelligence.

The CEO of JD Sports Fashion declined to comment on takeover rumors on Thursday, while the group said it was making progress with its growth plans for the US.

CEO Regis Schultz told reporters: “If we had something to say, we would have said it,” after reports emerged in early August that a potential strategic buyer was interested in taking over the company.

JD Sports saw underlying revenue grow 2.4 percent in the second quarter, with solid performances from its US and European businesses masking a continued decline in the UK.

Mark Crouch, Market Analyst at eToro:

‘Hays investors were prepared for disappointing results this morning, and that’s exactly what they got as the multinational recruitment firm reported a dramatic 50% drop in profits.

‘It wasn’t long ago that the recruitment industry was booming, and for the tech sector, a key part of Hays’ business, there was abundant growth and expansion. However, following a prolonged period of high inflation and higher interest rates, the sector is experiencing a severe decline in confidence.

‘Recruitment agencies are feeling the effects of the deteriorating economic conditions that businesses are facing. Cost-cutting measures are now high on the priority list of companies.

‘With job seekers reluctant to change jobs and employers much more reluctant to hire, the year ahead looks uncertain. Hays shares are down 15% in 2024 and approaching COVID lows, a period when recruitment agencies were barely functioning, so a recovery can’t come soon enough for Hays.’

Tech entrepreneurs paid tribute last night to Mike Lynch, who died after his superyacht sank in Italy.

Friends and colleagues in the industry mourned the loss of an “inspirational giant” known as the “British Bill Gates” after divers confirmed his body had been found in the wreck of the Bayesian.

The body of Lynch’s daughter Hannah, 18, was also found inside the vessel off the coast of Sicily, as were those of two others who had not been identified last night.

Russell Pointon, Director of Content, Consumer and Media at Edison Group:

‘In a year so far that has been tough for the recruitment sector, which is often seen as a barometer of business confidence, group rates fell by 12% at Hayes, by 8% at Temp and by 17% at Fixed.

As the Group previously reported, operating profit before exceptional circumstances fell 46% year-on-year to £105.1m, driven by challenging conditions in key markets, including low confidence levels and longer than normal time-to-hire, leading to a decline in vacancies.

‘Looking ahead, the Group expects to increase both fees and operating profit from current capacity as average placement volumes per consultant return to more normal levels. The Group also expects to deliver further structural cost savings of approximately £30 million per annum by the end of FY27 through ongoing back-office efficiency programmes.

‘Hays will face continued economic uncertainties and a tough labour market, but there is hope that lower interest rates will boost market confidence.’

Mamta Valechha, Consumer Goods Analyst at Quilter Cheviot:

The latest trading update from ‘JD Sports’ points to a quarter of improved activity in the three months to August, as guided by management. Organic revenue grew by 8.3% as JD Sports benefited from easier comparisons and a summer of sport with the European Championships and Olympics dominating the calendar. This will more than offset some of the poor weather we have seen this summer.

‘JD Sports is performing well across all regions, with North America being the strongest of the group. We should see further growth here following the acquisition of Hibbett, which increases JD Sports’ exposure in the South East and Mid West. This deal has been completed ahead of schedule and is highly complementary to the JD Sports business.

‘But most importantly, management reiterated its full-year guidance of 6-9% organic growth, stressing that while JD Sports had struggled with lower consumer spending earlier in the year, the business is likely to recover on the back of innovation and the Hibbett deal, which are driving earnings growth.

‘Valuation remains undemanding, especially when you consider the previous highs. The share price does not currently reflect the strength of JD’s market position and future growth potential. To see a re-rating, investors need some reassurance about Nike’s turnaround, but hopefully new innovations and exciting product lines will keep growth on the agenda in the second half of the year.’

Major high street retailers are being criticised for their ‘murky and confusing’ loyalty pricing, with some retailers offering deals that aren’t as good as they seem.

Amid the cost of living crisis, supermarkets and other retailers have come under fire for introducing a two-tier pricing structure.

Customers without a loyalty card, or who simply don’t feel comfortable with the large amount of data they store about you, are likely to spend more money at the checkout.

North Sea oil and gas company Ithaca Energy has reported lower net profit for the first half of the year, due to write-downs, lower production and a drop in natural gas prices.

Ithaca, which in April agreed to buy almost all of Eni’s UK oil and gas producing assets for about £754 million in shares, cut its full-year 2018 production forecast to 76-81 thousand barrels of oil equivalent per day (kboepd), from 80-87 kboepd previously expected.

Production fell to 53 kboepd for the six months ended June 30, compared with 75.8 kboepd last year.

The company said production was impacted by operational issues in its non-operated joint ventures and infrastructure, along with planned closures in its operated portfolio.

Recruitment giant Hays has revealed annual profits have fallen by more than 90 percent following a global slump in hiring.

Group pre-tax profit fell 91 per cent to £14.7m in the year to June 30, while net costs fell 12 per cent to £1.1bn.

On an underlying basis, pre-tax profit halved to £94.7m.

The company said global hiring conditions have been “challenging” since the end of the year, but it is “too early to assess trends” as September is a key month for hiring.

In the UK and Ireland, activity has been ‘relatively subdued and conditions remain challenging’ since the general election.

Revolut may not have been to every investor’s taste, but one company that was popping the champagne was Molten Ventures.

According to the venture capital firm, the value of its stake in the banking app has more than doubled to £160m.

It comes after Revolut, which was granted a banking licence in July after a three-year wait, was this month valued at £35bn following the sale of almost £400m worth of shares.

JD Sports saw underlying revenue grow 2.4 percent in the second quarter, with solid performances from its US and European businesses masking a continued decline in the UK.

UK like-for-like sales fell 0.8 percent in the 13 weeks to August 3, an improvement on the 6.4 percent decline in the first quarter.

Comparable sales increased by 5.7 percent in North America, by 3 percent in Europe and by 0.1 percent in the Asia-Pacific region.

The FTSE 100-listed group maintained its full-year forecast for pre-tax and adjustment profits of £955m to £1.04bn, up from £917.2m last year.