Good morning and welcome back! The Agenda is now complete.
1pm. Wrapping up for today, thank you!
Spreadsheet that accompanies this report: updated to 14/2/2025.
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
National Grid (LON:NG.) (£36bn) | Sale of NG Renewables | Sale of US onshore renewables business to Brookfield Asset Mgt for $1.7bn. | |
B&M European Value Retail SA (LON:BME) (£2.9bn) | Update on FY25 guidance | Profit warning: FY25 adjusted EBITDA now exp £605-£625m (prev. £620-£650m). CEO retiring. |
BLACK / AMBER/RED (Roland) |
Supermarket Income REIT (LON:SUPR) (£882m) | Update on Portfolio Initiatives | Tesco disposal & lease renewals above benchmark. Further Carrefour acquisitions in France. | AMBER/GREEN (Roland - I hold) [no section below] |
ME International (LON:MEGP) (£837m) | Final Results | 2024 rev +3.4% to £308m, PBT +9.4% to £73.4m. Laundry driving growth. Key cut service launched. | AMBER/GREEN (Graham) PBT of £76-80m is forecast for the current year. This would continue the path of solid, undramatic growth. I don't view this as a bargain at current levels, but I do retain our moderately positive stance. PER c. 14x. |
| XPS Pensions (LON:XPS) (£806m) | Acquisition of Polaris | Buys an insurance consultancy for £23m cash upfront plus up to £35m payable in three years. | AMBER/GREEN (Roland - I hold) [no section below] |
Georgia Capital (LON:CGEO) (£513m) | Final Results | FY24 NAVps +12% to 27.14p. NCC improved by 3.1% to 12.8%. Positive outlook. | |
CLS Holdings (LON:CLI) (£285m) | TU | 2024 EPRA earnings and NTAV to be in line with market exps. FY portfolio valuation -5.8%. | |
B.P. Marsh & Partners (LON:BPM) (£240m) | TU | Group funds £74.1m (LY: £40.5m). Robust pipeline of potential new & follow-on investments. | GREEN (Graham) A reassuring update. The company might have more cash than it needs but that's a nice problem to have. Now trading much closer to NAV than it did before, so the arguments for remaining positive have to be a little more nuanced. |
Tristel (LON:TSTL) (£167m) | Interim Results | Following a solid first half, trading remains in line with exps for year to June 2025. | AMBER/GREEN (Roland) |
Gooch & Housego (LON:GHH) (£114m) | AGM TU | Closely monitoring impact of tariffs. Assuming success in navigating tariffs, exps are unchanged. | AMBER (Graham) Positive order book improvement (£126m) helped by an acquisition. Further bolt-ons are possible. More flexible now with some manufacturing outsourced. May need to raise prices for customers due to tariff-related inflation. Stock offers some value currently against forecasts, with the adjusted P/E falling to 10x. But the company has been around for a long time and while performance has been ok, it hasn’t been exciting. Quality might be just average at the end of the day. |
Petrofac (LON:PFC) (£38m) | Update on Financial Restructuring | Existing shareholders to be allocated 2.2% of existing share capital (previously 2.5%). | RED (Graham) New equity raise increased by $30m, total equity raise becomes $224m. Some creditors are also offered additional equity ($25m). Court proceedings 28th Feb. Can review my negative stance on this when the dust settles and it’s refinanced. Will be on much more stable footing when this is done. |
Arcontech (LON:ARC) (£14m) | Interim Results | Rev +4%, adj. PBT -7.5%. Net cash £7.2m. Trading in line with exps, confident in full year outturn. | |
Croma Security Solutions (LON:CSSG) (£12m) | Half-Year Report | Solid performance since half-year. Trading well in a challenging environment, confident in outlook. |
Graham's Section
ME International (LON:MEGP)
Down 3% to 215.5p (£810m) - Annual Results - Graham - AMBER/GREEN
Roland already covered the year-end trading update here.
Therefore, many of the financial headlines published today were already known.
One small clarification is that in its year-end update, MEGP said that its full-year EBITDA was “not less than £112m”. The actual result is £114m.
Currency movements were a noteworthy headwind, which we already knew they would be, knocking £10m off revenues and £3m off EBITDA, as the value of Japanese Yen and Euro revenues declined against the pound.
Without the currency headwind, revenues were up 6.8%.
Including the currency headwind, revenues were only up 3.4%.
Similarly, EBITDA was up 10.1% if you adjust out the currency headwind, or up 7.1% including it.
They are “exploring options” to mitigate currency risk. I don’t think they particularly need to: I think their profit margin is wide enough, and their balance sheet healthy enough, that they can afford to ride out currency volatility. But they say they might want to hedge their “large GBP commitments”, such as dividends.
Laundry is the main growth driver at the moment. Revenues in laundry rose from £76m in 2023 to £90.6m in 2024.
Photobooth revenue was about flat, after taking into account the currency headwind. Photobooth is still responsible for the majority (56%) of MEGP’s revenue. This division is just treading water for now.
The KPIs help to summarise the situation: there is ongoing fast growth in laundry units, while the number of photobooths declined (but the company is spending heavily to modernise them).
PBT margin remained very nice at 23.8%, up from 22.5% the previous year. PBT was £73.4m.
Net cash finished the year strongly again at £38m (previous year: £34m).
Historically MEGP has been a strong cash generator. Checking the summary cash flow statement, I see that in 2024 it generated £87m (after-tax) from operations. Capex spend was <£55m, nearly half of which related to growing the laundry business.
CEO comment:
"I am pleased to report a year of strong strategic progress with record profitability for the Group.
"We have continued to deliver on our long-term strategy of expanding our laundry business across new and existing geographies, which is a key focus for the Group, as well as upgrading our well-established estate of photobooths.”
MEGP has launched an automated key-cutting service, Kee.ME, but it doesn’t seem to have a functioning website yet, unless I’m mistaken. Hopefully it will have a website soon?
I live within five minutes of an enormous Tesco that already has a MEGP photo-booth, a set of laundry machines and many (far too many!) of their children’s rides. I’ll be keeping an eye out for a new automated key-cutting service on site. If it arrives, it will compete directly with a Timpsons that has been there for years.
Outlook: the CEO tells us that in 2025, they are planning to install 1,200 laundry machines, costing £28 - 32m. They have signed multi-year agreements with an independent forecourt operator (300 machines) and Morrisons (200 machines).
The Chairman says that the Board is anticipating PBT of £76 - 80m.
Graham’s view
Roland was AMBER/GREEN on this in December at the same share price (215p) and I have to wholeheartedly agree with him.
Some reasons to like the stock:
Excellent competitive position - highly visible and recognisable machines in public spaces, and multi-year agreements with the owners of the sites who are only too happy to host the machines for additional footfall. International scale and expertise. Difficult for competitors to muscle in on this.
Good cash generation historically and a nice net cash position. Negative: maintenance capex is expensive as photobooths are replaced with next-generation machines.
Shareholder-aligned management (three members of the Crasnianski family).
Reasons to be negative:
There will always be concerns that photobooths will become obsolete due to phone cameras. This has been said for years but people continue to use photobooths!
Valuation: stock has 5-bagged since its post-Covid low, and is more expensive now in P/E ratio terms than it usually has been in the past. PER c. 14x.
Limited top-line revenue growth. Demand for photobooths and laundry units is hardly going to outstrip the growth of the economy as a whole?
StockRanks love MEGP even more than I do, with Momentum playing a big role in supporting its score:
Well done to those who've been holding it in recent years:
B.P. Marsh & Partners (LON:BPM)
Up 6% to 689p (£255m) - Trading Statement - Graham - GREEN
B.P. Marsh & Partners Plc (AIM: BPM), the specialist venture capital investor in early stage financial services businesses, provides an update on trading for the Group's financial year to 31 January 2025.
This is a reassuring update, although we don’t yet know what the new Net Asset Value calculation will be. NAV as of July 2024 was £253m.
For now, we are reassured that BPM is enjoying “continued strong performance from the portfolio”.
After some large disposals last year, it has an enormous cash balance (as a percentage of NAV) of £74m.
The plan is to reduce this cash balance by paying out £5m in dividends every year for three years, starting in the current year (FY Jan 2026).
It also wanted to buy back a small quantity of its own shares (£1m). The original policy was to do so when the shares were trading at a discount of 20%+ against NAV.
That was modified until only a discount of 10%+ was required.
But even that discount is no longer available:
The current discount of 5.55% to our Net Asset Value per share has now meant the Company is unable to buy back shares under its Share Buy-back programme, but is subject to review
Hopefully, the company will have plenty of productive ways to use its cash balance, rather than leaving it on deposit. There is “a robust pipeline of potential new and follow-on investments”.
Disposals: BPM reviews its highly successful investments, Lilley Plummer and CBC, that it sold last year.
New investments: three new investments were made in the year to Jan 2025. It’s highlighted that “origination continues to be network-driven and management team partners are often well known to B.P. Marsh”. Investment sizes are modest but hopefully can still move the needle given the increased scale of its overall portfolio now.
Follow-on investment sizes were larger: $12.6m into US-based XPT and £12.5m into Pantheon.
There is detail given on performance at certain investees for those who wish to read more.
Insurance market outlook: not much has changed here but it all sounds quite positive and I would say reassuring. Remember that catastrophe insurers have had a lot to deal with recently:
The Group continue to track key trends in the insurance sector in which we operate, with a specific focus on premium rates and mergers and acquisitions (M&A) activity.
Given the portfolio predominantly operates in specialist risk areas, rates tend to be less volatile and therefore we remain confident that our portfolio is suitably prepared to weather a softening market.
The ongoing consolidation trends in the insurance market show no signs of slowing down as we move into 2025. This activity remains a catalyst for substantial prospects for the Group, both in terms of new investments and activity within our core portfolio.
Furthermore, both the Group and its portfolio companies continue to attract interest from entrepreneurial individuals and teams who are seeking to remain outside of this consolidation process, creating further avenues for new investments, strategic partnerships and expansion in the year ahead.
Graham’s view
I tend to be GREEN on this one. Today, however, I have to face the challenge of valuation: the company no longer trades at a discount that makes it very easy for me to think it’s undervalued. It’s up 20% since I covered it in October.
However, I view this company as a long-term winner and a compounder, so I’m inclined to leave my stance unchanged even if it is now trading around its NAV.
All the reasons I liked before still stand: it has specialist expertise and it sticks to its knitting; its culture attracts staff who stay for many years; it invests in areas which aren’t easy for private investors to access.
It does face the same challenge as the likes of JDG and other successful compounders. Due to its past success, it now faces the challenge of deploying more capital. But that’s a nice problem to have.
Some might also think that there is key man risk with Brian Marsh OBE, who owns over 38% of the company.
Personally I have little hesitation in remaining positive on this one. I also note that this stock made it onto Ed’s New Year Naps for 2025 and clearest trending small caps.
Roland's Section
B&M European Value Retail SA (LON:BME)
Down 5% to 275p (£2.7bn) - Directorate Change & Update on FY25 Guidance - Roland - BLACK (AMBER/RED)
Bad news for shareholders in this discount retailer – it’s a profit warning today:
The Company today updates its previously disclosed profit guidance range. FY25 Group adjusted EBITDA (pre-IFRS 16) is now expected to be in the range of £605m to £625m, which reflects the current trading performance of the business, an uncertain economic outlook and the potential impact of exchange rate volatility on the valuation of our stock and creditor balances which is a non-cash item.
Let’s unpack this a little. B&M’s last update was in January, when the company narrowed its EBITDA guidance to £620m-£650m for the year ending in March 2025.
Today’s updated EBITDA guidance of £605m to £625m represents a reduction of 3%, if we take the mid-point of each range.
Estimates: I don’t have access to broker notes, but B&M’s FY24 results showed EBITDA of £629m converting into adjusted earnings of 36.8p per share.
Consensus EPS forecasts were c.35p ahead of today. I’d pencil in revised earnings estimates of perhaps 34p per share.
Comment: B&M has previously commented on consumer spending and the general economic outlook, so I’m not surprised to see these factors stated as reasons for lower guidance.
The comments on exchange rates are said to relate to US dollar stock purchases and are expected to reverse out in FY26 when currency hedges are settled and the stock is sold. I don’t think there’s anything to worry about here.
Overall, this is a relatively small profit warning, but it comes on the back of a sequential reduction in expectations that had already seen FY25 earnings consensus fall by 13% before today’s warning.
CEO Departure: CEO Alex Russo has decided to retire and will leave the business on 30 April 2025.
Russo joined as CFO in 2020 and was appointed CEO in September 2022, taking over from former owner-CEO Simon Arora.
He’s thanked in today’s announcement and the search for a successor is underway. However, an unplanned departure after just over two years in the role suggests to me that the board may also feel that fresh leadership is required.
Roland’s view
I have previously been a fan of this business, viewing it as well run and with significant quality advantages compared to the main supermarkets.
Profitability and cash generation have historically been excellent:
Today’s update isn’t good news, but the shares are now down by 50% in 12 months and trading on a single-digit P/E.
I would argue that plenty of bad news is now priced into the shares.
However, I wonder if there’s now some risk that a broader financial reset may be needed, including a cut to the company’s (fairly generous) ordinary dividend.
Despite negative LFL sales over the last year, the group has continued to expand fairly aggressively in the UK and in France.
As Graham commented in January, B&M uses a little more debt than seems necessary. The recent £150m special dividend could perhaps have been more prudently used to reduce borrowing levels.
Another potential concern is that Trading Director Bobby Arora (former CEO Simon’s brother) will be retiring in March. Historically, he has masterminded B&M’s stock buying and its regularly refreshed seasonal offers.
I’m tempted to stay neutral here, but I feel that prudence dictates a shift to AMBER/RED until we learn more about B&M’s FY25 financial performance and FY26 outlook.
Tristel (LON:TSTL)
Up 0.3% to 348p (£166m) - Interim Results - Roland - AMBER/GREEN
The headline news is that there is no change to full-year expectations for this manufacturer of infection prevention products (my bold):
The Company remains cash generative, debt free, and maintains a progressive dividend policy with an 8% increase in the interim dividend. Following a solid first half, trading remains in line with expectations for the year to 30 June 2025.
This is consistent with the guidance provided with Tristel’s AGM statement in December, which we covered here.
Tristel shares are unmoved today, reflecting the unchanged outlook. But today’s interim results do contain some points that are worth highlighting, in my view.
Half-year results summary: Tristel sells disinfectant products that use a proprietary chlorine dioxide technology for the contamination of medical devices and surfaces under the Tristel and Cache brands, respectively.
Today’s half-year results cover the six months to 31 December 2024. They show solid but unspectacular growth in sales and profits – albeit with one or two niggles.
Revenue up 8% to £22.6m
Reported pre-tax profit up 9% to £3.7m
Adjusted pre-tax profit up 19% to £4.9m
Adjusted EPS down 5.9% to 8.17p per share
Interim dividend up 8% to 5.68p per share
Net debtCash of £11.7m (2023: £10.8m)
A couple of points are worth highlighting here.
Adjusted PBT: the gap between adjusted and reported PBT relates to remuneration costs, of various kinds. I would be inclined to include these costs in my estimate of profits:
Adjusted for share-based payments (£0.3m) and exceptional succession costs (£0.9m), totalling £1.2m (2023: £0.7m)
EPS fall: despite higher pre-tax profit, earnings per share (calculated post tax) fell.
This was due to an increase in the group’s effective tax rate from 10% to 25%, causing the tax charge to rise to £0.9m (2023: £0.4m).
Tristel’s tax rate seems to vary a lot from year to year. I’d need to do further research to understand why, but I’d probably assume it will stay over 20% unless guided otherwise.
Profitability: this is a profitable business. An 82% gross margin translated into an H1 operating margin of 16.2%, highlighting Tristel’s pricing power.
My sums suggest a trailing 12-month return on capital employed (ROCE) of 19.6%, consistent with prior (non-COVID) years:
Trading commentary: sales growth of 8% (£1.7m) during the period was split between additional volume of £1.3m and £0.4m from price increases.
Management says H1 sales growth was slower than in recent years for two specific reasons:
Higher than usual sales staff turnover in France and Australia
Dilution of sales efforts away from the core Tristel products towards the “less well-known Cache Surface range”. This situation is now being managed to achieve a better balance of effort.
Tristel already has a big market share in the UK, via its NHS footprint. The big story for many years has been the potential for this business to break into the US market.
Having achieved the necessary FDA approval in 2023, hopes were high, but this process has got off to a slower start than expected. I believe this may have contributed to the change of CEO in September 2024.
Previous commentary has seemed to me to suggest a lack of sales resource and know-how on the part of Tristel’s US partner, Parker Laboratories. Today’s commentary suggests the situation is now improving:
Our longstanding partner, Parker Labs, remains deeply committed to the growth plan. It has invested heavily in building a national sales force while leveraging its established distribution network for the USA and Canadian ultrasound markets. This dual approach strengthens our market presence and supports long-term growth.
However, financial results remain limited, with Americas revenue of just £96k during the half year:
The company says it is making meaningful progress and starting to see broader adoption following early wins. Examples are given in Florida and Massachusetts, where health systems are rolling out products across multiple sites after initial adoption at a single site.
However, there’s clearly a long way to go. Australia, a far smaller market, generated £1.9m of revenue in H1.
Outlook & Estimates: CEO Matt Sassone and Chairman Bruno Holthof are both keen to emphasise that Tristel’s focus will remain on international growth:
We are pleased with a solid first six months and the Board remains confident in the outlook for the year, with international expansion continuing to be a key driver of growth.
Tristel says it remains on track to meet its internal target for revenue growth of 10% to 15% CAGR over the three years to 30 June 2025.
House broker Cavendish has provided a more detailed update today – many thanks for this coverage. These updated estimates show revenue growth being trimmed slightly to sit at the lower end of the company’s target range.
Cavendish says this is due to slower US sales growth than expected, but its analysts expect cost control to remain tight, supporting strong margins. As a result, earnings expectations are broadly unchanged for FY25 and have increased for FY26:
FY25E: adj EPS 17.46p (-0.8%)
FY26E: adj EPS 18.08p (+8.3%)
These estimates leave Tristel shares on an unchanged rolling forecast P/E of c.20:
Roland’s view
Earnings forecasts for FY26 have been cut twice over the last year. Today’s update from Cavendish doesn’t reverse this but is a step in the right direction:
It’s clear that achieving volume sales in the US has turned out to be much harder than expected. Aside from any shortcomings in Parker Labs’ sales force, Tristel says it has faced “stringent purchasing bureaucracy”.
Today’s downgraded revenue forecasts are disappointing in my view, as this is ultimately meant to be a sales growth story. Ultimately, cost control isn’t the big issue here.
The risk remains that Tristel will turn out to be another successful British company whose efforts to conquer the US market are unsuccessful.
However, the new CEO seems a good fit and has previous US healthcare experience. Early signs of progress and new sales initiatives – such as targeting “less-bureaucratic physician offices” – may help to get US growth back on track.
I don’t think the story has changed today. But the results are a reminder that the next phase of growth could be a little slower than hoped for.
Strong profitability and a net cash position mean the P/E of 20 and 4%+ dividend yield look plausible to me as a possible entry point for bulls. But slower progress on revenue has prompted me to downgrade my view by one notch to AMBER/GREEN.
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