Daily Stock Market Report (Wed 16 April 2025) - JIM, MERC, OXIG, BNZL, JNEO, SOS, SMWH, XPS, RIO, PMI, G4M

Good morning! It's another busy day for updates.

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Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
Rio Tinto (LON:RIO) (£70.8bn)	Q1 production results	Production/costs for the year on track. Pilbara iron ore at lower end of guidance due to cyclones. Rio highlights “an uncertain future impact from tariffs on the commodity markets”. The Chinese property market is said to be stabilising, and the US economy is also said to have been strong in Q1.	AMBER/GREEN (Roland) [no section below] Today’s update doesn’t highlight any serious operational concerns and expectations are unchanged. Of course, the real story with commodity producers is always about prices and demand. Potential disruption from tariffs and a possible US economic slowdown inject some uncertainty into the outlook. Based on current commodity prices, Rio looks very reasonably valued to me and offers a well-covered 6% dividend yield. However, I’d also argue that the current valuation does not yet price in the risk of a more negative outlook, hence my moderately positive view.
Antofagasta (LON:ANTO) (£15.1bn)	Q1 production report	Copper production up 20%. Full year guidance maintained. 660-700,000 tonnes.
Bunzl (LON:BNZL) (£10.1bn)	Trading Statement	PW. Operational challenges in North America, where falling volumes and deflation have combined with execution problems delivering an expanded own brand offering. FY25 op margin now exp <8% (2024: 8.3%). Buyback paused.	BLACK (AMBER/RED) (Roland) Today’s downgrade seems quite modest, but the issues described by the company suggest a difficult combination of internal missteps and macroeconomic headwinds. While I respect the track record of this long-term compounder, I think there’s a material risk of further downgrades, so have taken a moderately negative view today.
Barratt Redrow (LON:BTRW) (£6.2bn)	Trading Update	Well placed to deliver housing volumes in line. Cost inflation to be broadly flat. £508m net cash.
Tritax Big Box REIT (LON:BBOX) (£3.4bn)	Asset Disposals	£235.7m of sales. 50% of UK Commercial Property REIT portfolio. 2.9% premium to book.
MITIE (LON:MTO) (£1.5bn)	Trading Update	FY25 revenue +13%. Op profit guidance upgraded to c. £230m. New £125m buyback launched.
WH Smith (LON:SMWH) (£1.2bn)	Interim Results	Revenue in the remaining travel business +6%, “trading profit” +12% to £56m. Group PBT flat at £45m, in line with expectations. Leverage at 1.7x after successful debt refinancing, with more cash due to come in from the sale of the high street business.	AMBER/GREEN (Megan) [No section below] The market was rightly underwhelmed by the £76m enterprise valuation of WH Smith’s high street business, announced in late March. Even more so today given relatively uninspiring revenue growth in the remaining travel business. There are also some funny decisions being made here - why is the company buying back shares while struggling to push down leverage? A new chapter in WH Smith’s life could present opportunities, but I am wary.
Hays (LON:HAS) (£1.1bn)	Trading Update	Q3 net fees down 9% LfL (temp down 6%, perm down 14%). FY25 op profit to be in line (£56.9m).
Oxford Instruments (LON:OXIG) (£946m)	Trading Update	Revenues for the year to March 2025 +9% at constant FX, in line with expectations. Adj. op profit +13% at constant FX, but just +3% at actual FX. Ad. op margins improved to 17.8% (from 16.5% last year).	AMBER/GREEN (Megan) Operating margins are improving, as the company focuses on trimming back costs. I’m not inclined to turn fully positive yet as I still think there are some unanswered questions (especially around the uninspiring pace of growth). But I think this is one to watch.
XPS Pensions (LON:XPS) (£818m)	Trading Update	Rev +18%. Confident full year results in line with previously upgraded expectations.	AMBER/GREEN (Graham) [no section below] We tend to like this fast-growing pensions consultancy that enjoys various tailwinds including “ongoing regulatory change” and, recently, projects to fix some public service pension schemes following the “McCloud Judgement”. Year-on-year growth rates are expected to decline in FY26 and the PEG ratio is now over 3x. At 19x earnings it’s not cheap. But it has delivered. I’ll stay consistent with the trend and leave our mildly positive position unchanged.
Discoverie (LON:DSCV) (£522m)	Trading Update	Underlying earnings to be slightly ahead of expectations. Sales for the year down 2% at constant FX.
Hunting (LON:HTG) (£430m)	AGM & Q1 2025 Trading Update	Q1 trading in line. EBITDA $38.7m. Suggests minimal/no impact from tariffs.
Brooks Macdonald (LON:BRK) (£230m)	Q3 AUMA Update	Funds under management and advice +7% to £18.6bn. Q3 net outflows £129m.Outlook in line.
Life Science Reit (LON:LABS) (£155m)	Full Year Results	NAV 74.4p (2023: 79.9p). Adj EPS -10% to 1.7p. Strategic review ongoing. No dividend.
Mercia Asset Management (LON:MERC) (£110m)	Trading Update	FY25 EBITDA exp materially ahead of exps. Inflows totalling £250m in Q1. No redemptions.	GREEN (Graham) Despite woes in the mainstream fund management sector, this provider of debt and equity financing to regional businesses is going from strength to strength. Excellent balance sheet strength and growing earnings from 3rd-party fund management.
Jubilee Metals (LON:JLP) (£95m)	Operational Update	Updated FY25 prod guidance: Chrome +12% to 1.85Mt, PGM +6% to 38kOz.
Speedy Hire (LON:SDY) (£89m)	Trading Update and Refinancing	FY25 (y/e 31 Mar) to be in line with exps. Mixed trading, higher debt. Refinanced successfully.
DP Poland (LON:DPP) (£83m)	Trading Update	FY24 results in line. Q1 FY25: PL sales +6.5%, orders -0.1%. Croatia +12.5%, orders +1.1%.
Premier Miton (LON:PMI) (£75m)	Q2 AUM Update	£10.2bn AUM at 31 March, £221m net outflows during the quarter. £3m of cost savings by Sept 25. The company emphasises that most of the outflows were driven by flows from a single fund that has had shorter term relative underperformance.	AMBER/GREEN (Graham) [no section below] I’m AMBER/GREEN on most fund managers now, in recognition of their cheapness but also their challenges and deeply negative business momentum. As noted by Mark in January, Premier Miton is suffering only mild outflows compared to other managers and this has continued in its Q2 period (to March) with outflows c. 2% of starting AUM. It remains healthily profitable and should remain so with £3m of “cost efficiencies” identified which it will benefit from in the next financial year (existing net income forecast: £14.3m). Very little to dislike here.
Journeo (LON:JNEO) (£41m)	Purchase Order ($2.5m)	Order from Outfront Media (NYQ:OUT) for 600 displays for New York Subway Cars, delivery this year.	GREEN (Roland) [no section below] Today’s win looks positive for this 2025 NAPS stock - but I suspect it’s already priced into market forecasts, so I don’t expect an upgrade. However, I’d imagine a successful partnership with Outfront Media could be beneficial for Journeo, given the US group’s scale and reach. With Journeo trading on c.10x earnings and benefiting from significant net cash, I’m happy to maintain a positive view.
PROCOOK (LON:PROC) (£33m)	Trading Update	FY rev +11%, LFL +4.9%. FY adj EBITDA to be in line. PBT “to reflect” new store costs & FX.
M Winkworth (LON:WINK) (£26m)	Full Year Results	Rev +17%, PBT up 10% to £2.3m. Net cash £4.1m. Sales rev up 18%, lettings up 6%.
Gear4music (HOLDINGS) (LON:G4M) (£25m)	Asset Purchase and Trading Update	Spent £0.6m on £1.8m of stock & assets from a failed competitor. Confident in FY26 outlook.	AMBER (Megan) A nice little bit of business from a company that has spent most of the last five years disappointing its investors. The previously noted decline in debt could mark a turning point, but I remain on the fence.
Cirata (LON:CRTA) (£22m)	Trading Update	Q1 FY25 bookings up 330% to $3.0m YoY, but NAm below plan. Q1 cash burn $1.4m, has $8.3m.
Sosandar (LON:SOS) (£17m)	Trading Update	SP down 14% PW. Revenue -20% to £37.2m, with FY25 PBT of “not less than” £0.5m - described as “softer than hoped”. This is well below previous expectations of £1.0m. FY26 outlook in line, with April trading “strong”.	BLACK (AMBER/RED) (Roland) [no section below] An updated note from broker Singer this morning confirms this result is significantly below its previous PBT forecast of £1.0m. So I think we might see this as a profit warning for FY25. Sosander’s management says the shortfall was driven by a weak February and that sales trends have been positive since then. However, with an increased cost base from six stores and only minimal profitability, I think a moderately negative view is prudent.
Jarvis Securities (LON:JIM) (£8m)	Sale of Retail Brokerage & Strategic Direction (15/4 pm)	Jarvis plans to sell its brokerage to Interactive Investor for £11m and wind down other operations.	PINK (Graham) Selling up for a paltry sum compared to prior levels of profitability. My conclusion is to steer clear of any companies that undergo a skilled person review.
IXICO (LON:IXI) (£7m)	Trading Update	Exp H1 rev +26% to £3.2m. Order book £13.1m at 31 Mar, £5m net cash. H1 adj LBT exp £0.7m.

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Graham's Section

Jarvis Securities (LON:JIM)

Down 56% to 18.9p (£8m) - Sale of Retail Brokerage and Strategic Direction - Graham - PINK

At 3pm yesterday, Jarvis announced the sale of their main trading division to Interactive Investor for £11m, with their other services also being shut down. The sale is conditional on Jarvis keeping 90% of both their customers and their assets under administration before completion, which is anticipated in July.

Comment by the MD:

"We believe this transaction represents the best outcome for the Group and its clients given the position of Jarvis Investment Management at this time and its future viability"

It's been some time since I commented on this - see last August - but it's definitely one that I got very badly wrong, acknowledging the very high risk involved but maintaining my positive stance on it all the way down.

They are now shutting down and selling up for a paltry sum compared to their previous levels of profitability. 

A particular source of frustration is the lack of public information around the findings of the FCA's skilled person review. As I concluded last August, in future instances I am going to run for the hills whenever I hear that this type of review is taking place - they are expensive, drawn-out affairs and shareholders/the investing public are the last to be told of their findings. I now believe that any company with this type of review taking place has to be avoided, sadly.

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Mercia Asset Management (LON:MERC)

Up 14% to 29p (£125m) - Trading Update - Graham - GREEN

Mercia is “the regionally focused, specialist alternative asset manager with over £1.8billion of assets under management”.

Some pleasing news here: EBITDA for FY March 2025 will be materially ahead of current market expectations.

The benefits of Mercia's increasing scale are now beginning to feed their way into the Group's overall financial performance. Together with a continuing focus on efficiency, Mercia now expects its EBITDA for FY25 to be materially ahead of current market expectations.

You may recall from our previous coverage that Mercia trades cheaply against the value of its balance sheet, where it has its own longstanding portfolio of direct investments, but it also has a growing fund management business.

In Q4 it has raised an additional £250m and again saw no redemptions.

It closed the year with £40m of cash and zero debt.

Estimates: thanks to Equity Development for publishing a refreshed note this morning with a new AUM estimate for March 2025 of £2.2bn (includes £2bn of 3rd-party funds). The new EBITDA estimate is £7.7m (previously £6.2m) and the new PBT estimate is £4.8m (previously £3.3m). The company is estimated to have net assets of nearly £188m.

Graham’s view: I have been positive on this for a while and again put it on my 2025 watchlist. The shares are still trading around where they were at the end of 2024 (having travelled lower before recovering), and we’ve now had an “ahead of expectations” update. So there is no reason at all for me to change my positive stance.

While it’s impossible to have total conviction in the long-term success of the fund management business, the signs so far are very positive. If I was valuing it purely on current earnings and on the fund management business, perhaps I’d be less enthusiastic. It’s the very strong cash and asset position that convinces me I need to be positive on this.

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Megan's Section

Oxford Instruments (LON:OXIG)

Up 6% to £17.28 (£1.0bn) - Trading Update - Megan - AMBER/GREEN

Overview:

• Revenues for the year to March 2025 +9% at constant FX, in line with expectations.
• Adj. op profit +13% at constant FX, but just +3% at actual FX.
• Adj. op margins improved to 17.8% (from 16.5% last year).

Unsurprisingly, demand for the company's semiconductor services has been especially strong, helping lift revenues in the larger Imaging and Analysis business, with margins here of 24%.

The smaller Advanced Technology business has also benefited from semiconductor demand, with an improvement in the client base helping lift the division back to profitability.

Megan's view

The share price slump at Oxford Instruments has continued in the last few months as broker forecasts for the 2025 and 2026 financial years (ended in March) have been cut. Today’s trading update reassures that trading has been in line with the current consensus thanks to a return to profitability of the smaller ‘Advanced Technology’ business.

At 14x forecast earrings, there is an argument to be made that the shares now present better (if not good) value.

Operating margins are improving, as the company focuses on trimming back costs. I’m not inclined to turn fully positive yet as I still think there are some unanswered questions (especially around the uninspiring pace of growth). But I think this is one to watch. AMBER/GREEN

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Gear4music (HOLDINGS) (LON:G4M)

Up 15% to 135p (£28m ) - Asset purchase and trading update - Megan - AMBER

It’s been a rocky road for Gear4Music investors since the company’s IPO.

The company came to Aim in 2015 as an asset-light specialist retailer of music equipment with annual revenues of £24m. Ten years later, the annual revenues are heading towards £150m, but the company is worth less than it was when it listed.

What’s gone wrong? Gearing.

At the last count, the company was sitting on £21m of interest-bearing loans, with net debt of £14.4m, equivalent to 60% of the market value of the company. Gearing has come down from its painful peak a few years ago, but it’s still at a slightly uncomfortable 80%. And the debt doesn’t come cheap, meaning interest costs have eaten into company profits in the last couple of years.

And so today, it’s nice today to see a bit of financial wizardry going on at the company. Management has bought up a load of inventory from a company in administration at below cost price. In addition to the £1.8m of stock, the company has acquired £0.6m of commercial data and trademarks as part of the deal.

Inventory management has historically been another slightly sore spot for Gear4Music. A ridiculously high level of inventory during 2022/23 as demand began its downturn post-pandemic left the company having to hive off stock at a massively discounted rate, which hurt gross margins. At the last count, the company was sitting on over £40m of inventory, which is almost the equivalent of the company’s current enterprise value.

In addition to grabbing an opportunistic deal for cheap stock, management has also confirmed that trading remains in line with current expectations. Which is a relief considering how much stock the business had to shift in the second half of the financial year.

Megan’s view:

Gear4Music is a nice business which has paid the price for being enticed by previously cheap borrowing costs. A rise in interest rates alongside a slowdown in demand have caused the company and its investors a world of pain in the last few years.

That’s said, with debt coming down and the balance sheet seemingly being managed more effectively, there is value in the current share price. Perhaps one for deep value investors to take a bite at, but it’s not one for me. AMBER

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Roland's Section

Bunzl (LON:BNZL)

Down 23% to 2,370p (£7.8bn) - Trading Update - Roland - BLACK (PW) / AMBER/RED

We reduce our 2025 guidance to reflect the operational challenges faced by our largest business in North America, and the implications on the remainder of the year from a more challenging start for the Group.

FTSE 100 distribution specialist Bunzl supplies a myriad of non-food products to a wide range of customers. It’s a long-term compounder that’s become a byword for reliable performance, so today’s profit warning is surprising, perhaps accounting for the severe de-rating the stock has suffered this morning:

What’s interesting here is that the StockRanks (and the market) appear to have picked up warning signs from Bunzl’s 2024 results in early March. These prompted a sell-off despite 2025 guidance being left unchanged. Shareholders who noted this might have been able to avoid today’s drop.

I didn’t study those results in detail at the time. But looking back now, they did highlight warning signs in North America (the cause of today’s warning). Both sales and volumes were lower in North America last year, and management commented on persistent deflation, which can be hard for a low-margin business to deal with.

North America generates more than half the group’s revenue, so when this business catches a cold, the whole of Bunzl sneezes!

With that backdrop, let’s take a look at today’s update for more detail.

Q1 trading update: Bunzl’s underlying revenue, which is the most comparable measure of organic performance, fell by 0.9% during the first quarter. Acquisitions contributed a further 5.7% in revenue growth versus Q1 24, but of course these come with their own additional costs.

Overall profitability appears to have fallen, perhaps quite sharply:

Adjusted operating profit was down significantly year-on-year in the first quarter, reflective of an operating margin decline driven by performance in North America and Continental Europe.

North America: softer trading appears to have combined with a misfiring effort to expand Bunzl’s own-brand offering.

The company’s largest business in this region “primarily services foodservice and grocery customers” and has been trying to develop “an enhanced own brand offering” to sit alongside its core third-party product offerings.

Unfortunately, this appears to have been a more complex shift than expected:

This has required substantial investment and change in the sales and operating model, which has been more challenging to execute than expected.

Continued deflation in the first quarter has compounded these problems – Bunzl has to carry a certain amount of inventory, but if sale prices are falling then this could lead to severe (albeit temporary) pressure on margins, until pricing stabilises.

The end result makes for grim reading:

• “Slower than anticipated volume improvement”

• “An isolated customer category loss”

• “Higher operating costs”

• All of which has led to “a significant decline in adjusted operating profit”

I suspect the focus on own brand products was part of a move to try and support or improve margins, particularly after the inflationary pressure we’ve seen in recent years. However, it sounds to me like this has been poorly managed operationally and may also have faced some pushback from customers.

Bunzl confirms that management changes are being made:

We have taken a series of decisive actions to improve performance. These include leadership changes to ensure there is a renewed focus on commercial agility and operational excellence.

Continental Europe: to add to the pressure on group profits, Bunzl’s operating margin was lower during Q1 in Europe as well. However, this decline is said to have been “broadly in line with expectations” – i.e. only slightly worse than expected!

Rest of the World: strong underlying revenue growth is reported, driven by Latin America.

2025 guidance update: Bunzl now expects “moderate revenue growth” at constant FX, driven by acquisitions. Excluding acquisitions, underlying revenue is expected to be “broadly flat”.

Adjusted operating margin is expected to be “moderately below 8.0%”, compared to 8.3% in 2024. This figure will be weighted to H2 for seasonal and operational reasons – H1 operating margin is expected to be “around 7.0%”.

The company emphasises this guidance is being offered without any clarity on the potential impact of US tariffs on inflation and economic growth. I see this as a warning that further downgrades could be needed.

Previous consensus estimates on Stocko suggested reported revenue would rise by 2.7% to £12.1bn this year, so it’s not clear to me exactly how much of a downgrade this is.

However, if we assume revenue of £12bn and apply a 7.8% adjusted operating margin, the resulting profit figure of £936m would be 4% below the £976m reported last year. From what I can see, previous expectations were for an operating profit figure of c.£1bn.

Bunzl has also paused its ongoing share buyback programme to try and reduce leverage to the lower end of its 2.0x-2.5x EBITDA target range. I’m fully on board with this – I would have preferred the company to have already been focusing on debt reduction rather than pandering to the fashion for buybacks.

Roland’s view

I’m only guessing at these numbers – without access to broker notes, it’s hard to be clear on the exact impact on forecasts of today’s announcement.

However, at face value this appears to be a relatively modest downgrade. Given this, a 25% share price drop seems a harsh reaction.

My reading of this situation is that the market shares my view that further downgrades could be needed before Bunzl fixes its internal issues in North America and perhaps starts to benefit from a more stable macro environment.

Fundamentally, I think this is still a decent business, but our research has found that a company’s first profit warning is often the start of a longer period of weakness.

Personally, I don’t see any good reason to buy Bunzl just yet. Although my estimates suggest a potentially cheap EBIT/EV yield of c.9%, I think it’s probably more sensible for investors to stay on the sidelines and see what unfolds over the coming year.

I’m tempted to take a neutral view, out of respect for Bunzl’s strong track record and the seemingly modest scale of today’s downgrade. But I can’t help feeling there’s a relatively high chance of further bad news, so I’m going to go AMBER/RED until we know more.