Interactive Investor

Why this is an historic trading session for FTSE 250

16th March 2021 15:05

Graeme Evans from interactive investor

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While many markets, including the FTSE 100, trade below pre-pandemic highs, UK mid-caps are flying.

Surging mid-cap stocks created a landmark session for the London market today as the FTSE 250 index finally managed to erase the pandemic losses of a year ago.

The domestic-focused benchmark rallied almost 1.5% at one point to peak at 21,798, which is higher than the 21,780 seen in mid-February prior to a 40% plunge over the following month.

In contrast to the tepid progress of the FTSE 100 index, the mid-cap index is now within sight of the all-time high seen at the end of December 2019 as bargain-hunting investors continue to pile into value stocks on the back of hopes for an economic rebound in 2021.

Beneficiaries in todays session included shopping centre owner Hammerson (LSE:HMSO), which jumped 15% or 5.55p to 42.35p, and leisure firm Cineworld (LSE:CINE) after a gain of 6.3p to 113.3p.

Just Group (LSE:JUST) rose 5.75p to 100.70p after the retirement income products firm said it achieved its target for capital self-sufficiency a year ahead of plan, meaning it now has a greater flexibility to pursue growth opportunities in its markets.

Numis Securities said this was an important turning point for the group, which also reported operating profits 9% higher at £239 million and about 21% ahead of the City consensus.

Panmure Gordon noted that shares were still trading at a 52% discount to net asset value at the end of 2020, with today's results and recent easing of macroeconomic pressures prompting it to increase its price target by 13p to 139p. Numis is at 160p.

In a busy session for mid-cap results, the performance of Computacenter (LSE:CCC) stood out after its annual adjusted profits broke the £200 million barrier.

The IT services business said: “While it took 36 years for the group to reach £100 million of adjusted profit before tax, we are very pleased that it only took another three years to reach £200 million.”

Computacenter set a high bar in its 2019 results, but with demand for its services boosted by the remote working of firms and organisations during the pandemic its profits jumped 37% for the fastest growth in its 22 years as a stock market company.

Revenues from public sector customers, including those in local and central government, increased by 37%, and now account for 32% of the total compared with 25% in 2019.

A series of profits upgrades meant the shares rallied from 1,342p in early April to 2,538p at the end the year before settling at 2,086p last month. They were 82p higher at 2,356p today after a dividend haul of 50.7p a share for 2020 came in 37% higher than the figure declared for 2019.

Chief executive Mike Norris said the new year had got off to a positive start, with more details due in a trading update planned for next month. He said: “While Computacenter will always focus on the long term and resist the temptation of short-term actions to maintain growth, we feel the opportunity for progression this year, while not certain, is real.”

Computacenters positive update helped keep up the momentum for shares in two other IT stocks in the FTSE 250 index, with Softcat (LSE:SCT) and Kainos (LSE:KNOS) both 3% higher today.

One of the few second-tier stocks struggling was 4imprint (LSE:FOUR) after the promotional merchandise business revealed annual profits plunged 93% to just US$3.8 million (£2.7 million).

Chairman Paul Moody noted an encouraging recovery since the initial shock of the pandemic, although order count in the first two months of this year was still 65% of 2019 levels. In the past three weeks, however, there has been a marked increase in trading momentum as order intake has returned to near the 70% level seen in the fourth quarter.

The financial position is also strong with cash of just under $40 million but shares fell 9%, or 235p, to 2,455p, as the Manchester-based company declared no dividend for 2020.

The highly regarded business, which generates most of its revenues in North America, saw shares slump by 60% in less than a month during March after the coronavirus hit corporate demand and raised fears about its sizeable China supply chain.

Products range from basic giveaways such as pens, bags and drinkware to higher-value items such as embroidered apparel or ear buds. All-important trade shows have been cancelled, but the company believes it is well placed for when the US economy recovers.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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