FTSE 250 movers: Future surges on Jeffries upgrade

Future surged on Wednesday as Jefferies upgraded the shares to ‘buy’ from ‘underperform’ and hiked the price target to 1,280p from 635p.

The bank said "signs of inflection and Growth Acceleration Strategy (GAS) progress provide us with confidence to double upgrade".

Jefferies said it was confident of a strong return to growth in revenue, supported by macro inflection, positive audience trends, content quality improvements, and further upside from higher yielding US direct ad sales.

The bank said peaking macro pressure skews risk to the upside. It said macro improvement should result in a strong return to revenue growth, especially for digital ads & affiliate product.

"We expect Future to outperform peers, due to its highly cyclical Tech & Gaming portfolio (66% of audience), monetised largely via digital Ads (30% of revenue) and affiliate product (10%)," it said.

It also noted that importantly, the top 12 websites (around 70% of traffic) show positive momentum.

"Our analysis, suggests that the core online audience will continue to recover and support a continued recovery in the overall audience which will enable a return to growth in digital ad and affiliate product revenue with the macro," it said.

Jefferies also said it sees further upside from a continued mix shift towards higher yielding US direct ad sales.

"Future has demonstrated some traction here, with a +2pp increase in share of direct and branded content as part of Digital Ads in 1H24," it noted.

Jefferies said direct ads offer a 4x higher yield versus open auction.

"Whilst difficult to quantify, we see room for growth and margin expansion, aided by improvements in content quality and a larger US sales force," it said. "We expect the benefits of US investments to become evident as the macro inflects and the US ad market recovers."

Online electricals retailer AO World posted a surge in full-year profit on Wednesday, topping its own guidance range as its plan to pivot the business to focus on profit and cash generation bore fruit.

In the year to the end of March 2024, adjusted pre-tax profit jumped 186% to £34.4m even as revenue dipped 9% to £1.04bn. AO World had guided to profit coming in at the top end of a range of £28m to £33m.

AO said revenue was as expected "following the decisive actions taken to remove non-core channels and loss-making sales and returning to growth in Q4".

The company said it had strengthened its balance sheet, with overall liquidity of £116m as at the end of March, versus £89m in 2023, and net funds of £34.4m, up from £3.6m.

The retailer said that despite ongoing macroeconomic challenges, it still expects to deliver on its ambition for double-digit revenue growth in FY25 and adjusted pre-tax profit of £36m to £41m.

It also reiterated its medium-term guidance of adjusted pre-tax profit margin of 5%, double digit growth and earnings per share growing faster than revenue.

Founder and chief executive John Roberts said: "We have made good progress on our profit performance in FY24, which is a testament to the success of our strategic pivot to focusing on profit and cash generation.

"We are now a much simpler, more efficient business and are performing better than ever for customers, with excellent and sustainable unit economics.

"Our focus now is on delivering profitable top line growth with an ambition for double digit revenue growth in FY25.

"During the year we passed the milestone of 500,000 Trustpilot reviews, with an increased Trust score of 4.8 out of 5. This ranks AO as the leading and most trusted UK retailer for the combination of volume and quality and is an output of the amazing service we deliver every day for customers at scale."

Alliance Trust and Witan Investment Trust are to join forces, the British firms announced on Wednesday, creating a major new £5bn vehicle.

The investment trusts said the merged firm, to be called Alliance Witan, would likely qualify for inclusion in the FTSE 100.

In a statement, the London-listed firms said Alliance Witan would be a "more liquid, high-profile and cost-efficient one stop shop investment vehicle".

They continued: "With net assets of around £5bn, significant economies of scale, eligibility for FTSE 100 inclusion, powerful and well-established brand recognition on both sides and proven marketing expertise…Alliance Witan will aim to be the UK’s leading global equity investment proposition."

Under the terms of the deal, Witan’s assets will roll into Alliance in exchange for the issue of new Alliance Witan shares to Witan shareholders.

Alliance Trust’s manager, Willis Towers Watson, will have overall responsibility for managing the combined assets. It will also make a "significant contribution" to help absorb transaction costs.

"Alliance Trust shareholders are not expected to suffer any net asset value dilution from the direct costs of the transactions," the firms noted.

The deal is expected to complete by the start of the fourth quarter of 2024, at the latest.

Russ Mould, investment director at AJ Bell, said: "The investment trust M&A machine has been going into overdrive over the past year or so.

"Investors who want to beat the market often turn to actively-managed investment funds or trusts in the hope they will outperform. Given that these fund managers are collecting an annual fee, one would hope they can do better than the market, but Witan has found it hard to achieve this on a sustainable basis,

"Retirement plans for Witan’s chief executive Andrew Bell prompted a review of the trust, and it was effectively plonked on the market."

Witan announced in March that Bell would be stepping down after 14 years with the business.

Apax Global Alpha unveiled a new capital allocation framework and kicked off a share buyback programme and also revealed that its long-serving chair would be stepping down.

Market Movers

FTSE 250 - Risers

Future (FUTR) 1,074.00p 7.08%
Apax Global Alpha Limited (APAX) 160.00p 4.17%
Rotork (ROR) 335.40p 3.01%
Carnival (CCL) 1,283.50p 2.60%
Centamin (DI) (CEY) 120.20p 2.47%
Witan Inv Trust (WTAN) 266.50p 2.11%
Britvic (BVIC) 1,181.00p 1.81%
Indivior (INDV) 1,282.00p 1.67%
CMC Markets (CMCX) 319.00p 1.59%
Petershill Partners (PHLL) 209.00p 1.46%

FTSE 250 - Fallers

Pagegroup (PAGE) 423.60p -6.28%
Trustpilot Group (TRST) 220.00p -4.35%
Alpha Group International (ALPH) 2,270.00p -4.22%
PureTech Health (PRTC) 185.80p -3.43%
Aston Martin Lagonda Global Holdings (AML) 150.10p -3.04%
Hays (HAS) 95.90p -2.84%
SDCL Energy Efficiency Income Trust (SEIT) 66.00p -2.65%
Lancashire Holdings Limited (LRE) 590.00p -2.48%
Helios Towers (HTWS) 119.00p -2.46%
Jupiter Fund Management (JUP) 76.70p -2.29%