BUSINESS LIVE: JD Sports’ US growth boosts sales; Hays profits slump; Ithaca suffers from lower gas prices

Mark Crouch, eToro market analyst:

‘Hays investors were braced 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 technology sector, which is a major arm of Hays’ operations, growth and expansion were plentiful. However, after a prolonged period of high inflation and rising interest rates, the sector is experiencing a serious loss of confidence.

‘Recruiting firms have suffered the consequences of the tightening economic conditions facing businesses, and cost-cutting initiatives are now high on companies’ list of priorities.

‘With job seekers putting off moving and employers much more cautious about hiring, the year ahead looks uncertain. Hays shares are down 15% on 2024 and are approaching COVID lows – a period when, for a time, recruitment firms barely operated – so recovery can’t come soon enough for Hays.’

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

Friends and industry colleagues have mourned the loss of an “inspirational titan” who was known as the “British Bill Gates” after divers confirmed his body was found in the wreck of the Bayesian.

The body of Lynch’s 18-year-old daughter Hannah was also found on the boat off the coast of Sicily, as were two other people who had not been identified by last night.

Russell Pointon, director of content, consumer and media at Edison Group:

‘In a tough year so far for the recruitment sector, often seen as an indicator of business confidence, group fees at Hayes were down 12%, Temp was down 8% and Perm was down 17%.

‘As the Group previously reported, pre-exceptional operating profit was down 46% year-on-year to £105.1m, impacted by challenging conditions in key markets, such as low confidence levels and a longer than normal ‘time to hire’, leading to a reduction in job vacancies.

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

‘Hays will have to deal with current economic uncertainties and a difficult hiring environment, but with some hope that the easing of interest rates could boost market confidence.’

Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:

JD Sports’ latest trading update points to an improvement in activity in a quarter of the three months to August, in line with management’s forecasts. Organic sales grew by 8.3% as JD Sports benefited from easier comparisons and the summer of sport, with the Euros and Olympics dominating the calendar. This will have 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 all. This is where we should see further growth following the acquisition of Hibbett, which will enhance JD Sports’ exposure in the South East and Midwest of the US. This deal has been completed ahead of schedule and is highly complementary to the JD Sports business.

‘However, crucially, management reiterated its full-year guidance of 6-9% organic growth, highlighting that while JD Sports was hit earlier in the year with weaker consumer spending, it is likely to bounce back due to innovation and the Hibbett deal bringing growth to the bottom line.

“Its valuation remains undemanding, especially given its previous highs. The share price currently does not reflect the strength of JD’s market position or its future growth potential. For a new valuation to occur, investors need some reassurance about Nike’s turnaround, but new innovations and exciting product lines in the second half of the year should hopefully keep growth on the agenda.”

Major retailers have been criticised for their “murky and confusing” loyalty pricing practices, with some offering deals that aren’t as good as they seem.

During the cost of living crisis, supermarkets and other retailers have been criticised for introducing a two-tier pricing structure.

Customers who don’t have a loyalty card, or who simply aren’t comfortable with the large amount of data they have on you, are likely to spend more at the checkout.

North Sea oil and gas company Ithaca Energy reported lower net profit for the first half of the year, hurt by impairment charges, lower production and a decline in natural gas prices.

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

Production fell to 53 kboepd in the six-month period ended June 30, from 75.8 kboepd last year.

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

Recruitment giant Hays has revealed its annual profits fell by more than 90 per cent following a global slump in hiring.

The group saw its pre-tax profits slump in the year to June 30, down 91 per cent to £14.7bn, while net fees fell 12 per cent to £1.1bn.

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

He said global hiring conditions remained “challenging” since the end of the year, but it was “too early to assess trends” given that September is a key month for recruitment.

In the UK and Ireland, he said activity has been “relatively subdued since the general election and conditions remain challenging”.

Revolut may not be to everyone’s taste, but one of the companies that uncorked the champagne was Molten Ventures.

The venture capital boutique said the value of its stake in the banking app has more than doubled to £160m.

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

JD Sports enjoyed underlying sales growth of 2.4 per cent in the second quarter as a strong performance in its US and European businesses masked a continued decline in the UK.

UK like-for-like sales fell 0.8 per cent in the 13 weeks to August 3, an improvement after falling 6.4 per cent in the first quarter.

But comparable sales rose 5.7 percent in North America, 3 percent in Europe and 0.1 percent in the Asia-Pacific region.

The FTSE 100-listed group has maintained its full-year pre-tax profit forecast of £955m to £1.04bn, down from £917.2m last year.