BUSINESS LIVE: JD Sports' US growth powers sales; Hays profits plunge; Business activity accelerates

Plans to hike Britain’s windfall tax on energy firms risk thousands of jobs and undermine the country’s progress to net zero emissions, an industry body has warned.

The Government confirmed in late July it would move ahead with an increase in the Energy Profits Levy on ‘extraordinary’ earnings from November.

This will take the tax rate from 35 to 38 per cent and build the headline rate of tax on upstream oil and gas activities to 78 per cent.

British business activity has accelerated this month as cost pressures have eased to their weakest in over three years, according to a survey on Thursday that signals steady growth momentum going into the second half of 2024.

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

Readings above 50 denote growth and data company S&P Global said the figures were consistent with the economy expanding at a quarterly rate of 0.3 per cent.

While that pace of growth would mark a slowdown from the first half of the year, when the economy rebounded from a brief recession, it is stronger than the typical pace of the past two years.

‘August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data,’ said Chris Williamson, chief business economist at S&P Global Market Intelligence.

The chief executive of JD Sports Fashion refused to be drawn on takeover speculation on Thursday, as the group demonstrated progress with its US growth plans.

Boss Regis Schultz told reporters ‘if we had something (to say) we would have said it,’ following reports in early August claiming a potential strategic buyer is interested in acquiring the firm.

JD Sports enjoyed underlying sales growth of 2.4 per cent in the second quarter as a solid performance in its US and European businesses masked 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 with the multinational recruitment firm reporting a dramatic 50% fall in profits.

‘It wasn’t too long ago that the recruitment industry was flourishing, and for the tech sector, which is a significant arm of Hays’ operations, growth and expansion was abundant. However, following a prolonged period of high inflation and higher interest rates, the sector is experiencing a serious lull in confidence.

‘Recruitment firms have suffered the consequences of the tightening economic conditions facing businesses, with cost-cutting initiatives now high on the list of priorities for companies.

‘With job seekers holding off on switching roles, and employers much more tentative when hiring, the year ahead looks uncertain. Hays shares are down 15% in 2024 and are nearing the COVID lows, a period when for a time, recruitment firms barely operated, so a recovery cannot come soon enough for Hays.’

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

Friends and industry colleagues mourned the loss of an ‘inspiring titan’ who was known as the ‘British Bill Gates’ after divers confirmed that his body was found in the wreck of the Bayesian.

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

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

‘In a difficult year so far for the recruitment sector, often seen as a bellwether for business confidence, group fees at Hayes decreased by 12%, with Temp, down 8% and Perm down 17%.

‘As the Group previously reported, pre-exceptional operating profit decreased 46% YoY to £105.1 million, impacted by tough conditions in key markets, such as low confidence levels and longer-than-normal ‘time-to-hire’, leading to reduced job vacancies.

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

‘Hays will have to tackle ongoing economic uncertainties and a challenging hiring environment, but with some hope that easing interest rates may boost market confidence.’

Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:

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

‘JD Sports is performing well across all regions, with North America the strongest of the lot. It is here where we should see further growth following the acquisition of Hibbett, enhancing JD Sports’ exposure in the South-East and Mid-West of the US. This deal has been completed ahead of schedule and is highly complementary to the JD Sports business.

‘However, most importantly, management reiterated its full year guidance of 6-9% organic growth, highlighting that while JD Sports has been 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 when you consider its previous highs. The share price does not currently reflect the strength of JD’s market position and future growth potentials. To see a re-rating investors need a bit of reassurance about the Nike turnaround, but hopefully new innovation and exciting product lines in the second half of the year should keep growth on the agenda.’

Leading high street retailers have been blasted for their ‘murky and confusing’ loyalty pricing practices, with some offering deals that are not as good as they appear.

During 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 simply uncomfortable with the reams of data they hold on you, will likely spend more at the checkout.

North Sea oil and gas company Ithaca Energy has reported a 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 nearly all Eni’s UK oil and gas producing assets for about £754million in stock, lowered its full-year production forecast to 76 to 81 thousand barrels of oil equivalent per day (kboepd), from 80 to 87 kboepd expected earlier.

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

The company said its output was hit by operational issues across its non-operated joint ventures and infrastructure together with planned shutdowns across operated portfolio.

Recruitment giant Hays has revealed annual profits plunged by more than 90 per cent after a global pull-back in hiring.

The group saw pre-tax profits shattered in the year to 30 June, down 91 per cemt to £14.7million as net fees slumped 12 per cent to £1.1billion.

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

It said worldwide hiring conditions remain ‘challenging’ since its year-end, but that it was ‘too early to assess trends’ given that September is a key month for recruitment.

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

Revolut might not be to every investor’s taste but one firm cracking open the champagne was Molten Ventures.

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

It comes after Revolut, which secured a banking licence in July after a three-year wait, was this month valued at £35billion after selling nearly £400million worth of shares.

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

Like-for-like sales in the UK fell 0.8 per cent in the 13 weeks to 3 August, an improvement having been down 6.4 per cent in the first quarter.

But like-for-like sales were up 5.7 per cent in North America, up 3 per cent in Europe and up 0.1 per cent in the Asia Pacific region.

The FTSE 100-listed group has maintained its full-year forecast of profit before tax and adjusting items of £955million to £1.04billion, up from £917.2 million last year.