Good morning! After yesterday's gains, the S&P 500 is now 200 points higher than it was on 31st March, just before the tariff shock.
The Agenda is complete.
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
Carnival (LON:CCL) (£19.8bn) | Redeems nearly $1bn of notes due 2026 (7.625%), replaces them with 5.875% notes due 2031. | ||
DCC (LON:DCC) (£5.0bn) | Adj. op profit +4.9% to £704m. FY March 2026: “good operating profit growth on a continuing basis”. | ||
Bytes Technology (LON:BYIT) (£1.33bn) | Invoiced income +15%, op profit +17% (£66m). FY26: “Confidence for continued strong growth”. | ||
Renew Holdings (LON:RNWH) (£629m) | Rev +13%, PBT +5% (£31m). “Confident… to navigate current headwinds and deliver exps”. | ||
Wickes (LON:WIX) (£474m) | Strong start to 2025. Rev +6.9% y/y. Comfortable with market forecasts for 2025 adjusted PBT. | ||
On Beach group (LON:OTB) (£422m) | Volume +11%, ahead of market. Confident in delivering expectations (adj. PBT £38.2m). | GREEN (Roland) Today’s results are in line, but suggest OTB is enjoying strong booking momentum and potentially gaining market share. With the peak summer season ahead, I’m going to leave our positive view unchanged in light of strong booking momentum and my belief that continued growth could translate into improved profitability. | |
Warehouse Reit (LON:WHR) (£403m) | SP down 13% yest. to 94.9p | PINK (AMBER/GREEN) (Graham) | |
Restore (LON:RST) (£336m) | Confident of achieving full year expectations, with all divisions expected to deliver higher adjusted operating profit. Two acquisitions were completed in April, one of them immaterial but the other costing nearly £8m: an on-site shredding company based in Surrey. | AMBER/GREEN (Graham) [no section below] This provider of business services (notably document storage and document destruction) reassures investors of its prospects both organically and inorganically. Profit margins are fine (they target an adj. margin of 20%, from the current 17.7%) and net debt is ok at £89m, with a leverage multiple at 1.6x. The strategy of bolt-on M&A is another positive feature. Overall, however, I agree with Mark (see coverage in March) that in the absence of organic growth it’s difficult to argue that this should be priced much higher than it is currently. PER c. 11x | |
Marston's (LON:MARS) (£262m) | LfL sales +1.3%. Adj. PBT £19m (last year: £0.2m loss). Net debt £881m. FY25 expected in line. | ||
Idox (LON:IDOX) (£259m) | Paying up to £7.9m (12.6x EBITDA) for Plianz, a public sector compliance software provider. | ||
Midwich (LON:MIDW) (£220m) | Challenging market, expect FY25 adj op profit to be “materially below” previous expectations. 2025 YTD has seen a mid-single digit decline in organic revenue and some cost inflation. | BLACK (AMBER/RED) (Roland) [no section below] AV distributor Midwich says it’s achieving record market share with many of its vendors. Unfortunately, with revenue down (and presumably falling volumes), cost inflation is eating into the company’s slim profit margins. While low margin/high volume distribution businesses can deliver attractive returns, the cyclical exposure here is proving painful. My other concern is the balance sheet. FY24 net debt of £130.6m (2.0x EBITDA) is higher than I’d want to see at this point. While I think the business will probably recover, the combination of leverage and today’s profit warning mean I’m going to maintain our previous cautious view. | |
Macfarlane (LON:MACF) (£165m) |
FY25 expectations unchanged. Q1 sales +14.2%, mainly due to acquisitions. Q1 profit was lower vs Q1 24 due to lower gross margins and costs from site consolidation and acquisitions. £4m buyback. Expect stronger H2. | AMBER/GREEN (Roland) [no section below] I am a fan of this buy-and-build business, which has historically been well run and looks reasonably priced to me on a P/E of 8. Today’s AGM update does not contain any nasty surprises, but does reveal a range of cost pressures that have depressed margins. Some of these look like temporary issues, but the number of moving parts involved suggests to me that a measure of caution might be sensible given the “challenging” market conditions. I’ve moderated my positive view to reflect these challenges. | |
Treatt (LON:TET) (£163m) | Revenue -11%. PBT -60% to £2.9m. Net cash £0.9m. FY25 outlook unchanged. | AMBER (Roland) | |
Iqe (LON:IQE) (£89m) | FY24 in line, revenue +2.4% to £118m, adjusted pre-tax loss £22.3m, actual pre-tax loss £37m. FY25 to be within range of forecasts: revenue £115.1 - 123m and adj. EBITDA £7.4 - 10m. The company’s new CEO was previously the CFO for a year. A comprehensive strategic review is ongoing as they continues to explore the sale of IQE Taiwan. | RED (Graham) [no section below] This is described as a “solid set of financials” which is inconsistent with another large loss and a movement into net debt of £19m. Adjusted EBITDA is meaningless in my view due to the large and important depreciation charges on the company’s asset base. That asset base does provide security to the lenders but I continue to fear for the equity. As we saw in March, the company has borrowed funds at an implied interest rate of 18%. Stockopedia categorises this as a Value Trap and I agree: while it is trading at a discount to tangible book, I personally don’t think that’s enough to make this an attractive investment candidate. Let's see if they can raise substantial funds through the sale of their Taiwan business. | |
Activeops (LON:AOM) (£79m) | SP +8% “Leading provider of Decision Intelligence software for service operations.” FY March 26 YTD: gained an additional £1m of software ARR, plus £1.5m of training and implementation services. Confidence that FY26 will be in line. Can Genuity FY26 estimates: revenue +8% (£32.8m), adj. PBT £2.3m. | AMBER (Graham) [no section below] This has often seemed to be overvalued and in P/E terms that remains the case today. However, net cash of c. £21m covers about a quarter of the market cap. FY25 saw double digit revenue growth (although only 8% growth is currently forecast for FY26) and it is categorised by Stockopedia as a High Flyer. Overall, I’m comfortable upgrading our stance on this to neutral. I note that ARR was reported to be £28m at the most recent year-end; this means the company is only trading at a multiple of c. 3x recurring revenue (or only c. 2x recurring revenue if we adjust out the cash balance). In a SaaS/software context that could be considered cheap by American standards. | |
Angling Direct (LON:ANG) (£29m) | Revenue +12%, adj PBT +23.6% to £2.0m. Slightly ahead of exps. Outlook: “significant opportunity” | AMBER (Megan) A nice set of results, with particular mention to the surge in popularity in the company’s fishing ‘club’. But profits remain elusive and this is another example of small cap executives being overly generous with their own remuneration. | |
Revolution Beauty (LON:REVB) (£24m) | FY25 revenue -26%, adj EBITDA to be £6.0-6.5m. Net debt £26.3m. FY26: soft start; Zeus f’casts cut | BLACK (RED) (Graham) It's an automatic red from me, due to the funding situation, but there have been other reasons to stay away from this. If or when it's recapitalised, I could change my stance. | |
ITIM (LON:ITIM) (£18m) | Revenue +11% to £17.9m. PBT £0.2m vs FY23 loss. “Strong pipeline of new customers”. |
Graham's Section
Warehouse Reit (LON:WHR)
Down 13% yesterday, latest share price 96.2p (£407m) - Extension of PUSU Deadline - Graham - AMBER/GREEN
This RNS emerged just after mid-day yesterday, with news of some difficulty with the takeover of Warehouse REIT.
A quick review of key dates:
27th March. WHR Board said that having discussed it with its major shareholders, it would be minded to recommend a takeover from Blackstone at 115p.
28th April. The deadline for a firm takeover offer was extended, “in order to provide additional time for Blackstone to finalise its due diligence”.
Yesterday. The deadline is extended again, to 30th May.
But the new deadline may be irrelevant now, as Blackstone aren’t currently willing to proceed at 115p:
On 7 May 2025, Blackstone wrote to the Board raising several matters arising from its due diligence, the most significant of which relates to contrasting views on the valuation of the Company's development asset at Radway Green. As a result, Blackstone stated that it was not in a position to proceed with its offer on the financial terms of the Final Indicative Proposal. The Board is engaged with its financial advisers, its independent valuer and Blackstone in order to assess the merits of each of Blackstone's points, as well as to highlight potential value accretive items which may not be reflected in Blackstone's ongoing assessment.
Graham’s view
As things stand, it seems to me that there are only a few possible outcomes:
Blackstone walks away; no deal.
WHR shareholders accept a lower price.
The third option is that WHR succeeds in convincing Blackstone that they are worth 115p per share, but I’d guess that’s the least likely option.
What bothers me the most about this is that the company claimed to have net tangible assets (calculated using real estate standards) of 127.5p per share as of 30th September 2024. It has only paid 3.2p of dividends since then. So the 115p proposal was already a significant discount to net tangible assets. And yet they’ve been unable to get this deal over the line. It doesn’t say a lot for how they’ve valued their assets.
I guess the value of development assets - such as at Radway Green - are inherently more uncertain than the value of mature assets.
I am going to leave my default “AMBER/GREEN” stance here as I do with most investment trusts/REITs, as WHR’s discount to official net asset value is again in the region of 30%. At the current share price, it’s cheaper by £80 million compared to what Blackstone has considered paying for it. So I would think that it’s more likely than not to offer some value at the current level - but now with potentially a very long wait for a takeover.
Revolution Beauty (LON:REVB)
Down 38% to 4.65p (£15m) - Trading Statement - Graham - RED (BLACK)
Commiserations to anyone holding this overnight.
Checking our previous coverage, I’m relieved to see that I was RED on this last year, despite an “ahead of expectations” trading update at the time. That was at a share price of nearly 30p.
Today’s update points out that the company has discontinued over 6,000 stock-keeping units “to create a scalable and profitable foundation for future growth”. I’m surprised it had so many products to begin with!
Revenue for FY February 2025 is £141.6m: down 26% year-on-year and £2m below forecasts.
Underlying adjusted EBITDA is “between £6 and £6.5m” but the adjustments to this figure are going to be enormous, and I don’t think it’s a useful figure for investors.
Net debt finished the year at £26m.
Current trading:
The Company had planned for double digit net sales declines to continue into the first quarter of FY26, driven by the remaining impact of the SKU discontinuations, but March and April have been softer than planned due primarily to performance weakness in pure play digital retailers (excluding Amazon that continues to grow significantly) and weakened consumer confidence impacting USA performance. Management considers both impacts as short to medium term.
They point out some positive findings relating to their brand from consumer research and rankings, but it's cold comfort when sales are poor.
And they continue to reduce costs and inventories (I note that inventories have nearly halved year-on-year).
Tariffs - the company helpfully quantifies that 23% of their sales last year were in the US market, and 60% of those products were manufactured in China. The announcement two days ago means a much lower impact than previously modelled.
Review of funding options
The really serious news is saved until the end (emphasis added):
While the Board has confidence in the future medium-term prospects for the Company, cash management has been tight and it is clear that the delivery of the strategy will benefit from a more robust capital structure with additional capital to invest into the Company. As such, the Board has been actively reviewing the Company's funding structure.
Revolution Beauty's fully £32m revolving credit facility ("RCF") runs to October 2025. The Company's banking partners remain supportive of the Company, and it has been in active and constructive dialogue with its banking partners regarding amending and extending the current RCF to provide adequate flexibility for the Company going forward.
I recall that there were going concern warnings for the company last year - it has been walking a financial tightrope.
Estimates: Zeus have made some big changes to FY26 and FY27 forecasts, e.g. there’s a 15% cut in the FY26 revenue forecast to £127m. The corresponding adj. EBITDA forecast is cut from £12m to £8m, and the adj. PBT forecast moves from a £2.4m profit to a £1.2m loss.
Graham’s view
This is an automatic RED from me due to the funding situation. But additionally, there have been red flags surrounding this company - please see last year’s coverage and previous commentary for more.
Boohoo (or what is now called “Debenhams”!) has a very large stake in REVB, which I do not view as a positive.
Its adj. EBITDA numbers are make-believe.
Even on Zeus forecasts, adjusted profits will barely be positive in FY 2027.
The existing equity is not safe in my view - they should raise fresh equity if they can. They probably should have done so already.
Megan's Section
Angling Direct (LON:ANG)
Up 8% to 43p (£29m) - Final Results - Megan - AMBER
On a recent trip to an AirBnB without streaming services, I took to terrestrial television for my evening entertainment for the first time in several years. The best option available was Mortimer & Whitehouse: Gone Fishing.
I am not an angler and have no interest in sitting by the side of a river waiting for a fish to take a nibble at some bait, haul the thing in and then chuck it back. But I have to say, I can see why the huge surge in the popularity of fishing in the UK is being attributed to the programme. Bob Mortimer and Paul Whitehouse decided to embark on their fishing trips after the former’s heart surgery left him housebound. There is no denying that pitching up on the banks of a river or a lake, with a cool box of beers and a good friend is a good way to get over trauma, to get some fresh air and gentle exercise.
The many thousands of Brits who have followed the two comedians’ lead have been stocking up on fishing supplies, much to the delight of Angling Direct. In the last five years, the company has reported compound annual sales growth of 14% and has just reported record UK sales of £86.4m for the year to January 2025.
Physical stores continue to be the biggest contributor to both revenue volume and growth, with numbers for FY25 up 14% to £50.7m. The company has 54 stores across the UK, making it far and away the largest angling retailer in the country. According to industry statistics, of the estimated 1400 fishing tackle shops nationwide, just 150 of them are owned by multi-store brands.
The company’s online presence is serviced by its five websites and app, the latter of which has been downloaded 147,000 times. Online sales in the UK rose 8% to £35.7m in FY25, while European sales (which are driven by the company’s German, French, Dutch and EU websites) rose 14% to £4.9m.
Perhaps the most noticeable figure in the company’s numbers is the 86% increase in members of Angling Direct’s fishing club ‘MyAD’, which now boasts over 409,000 members. These are subscribers who sign up their email address and download an exclusive members app in exchange for discounts, event invitations and in-store offers. Management attributes the increase in fishing club membership as a key reason for higher in-store footfall from both existing and new customers.
Balance sheet strength funds growth
Angling Direct has no debt and was sitting on £12.5m of cash and cash equivalents at the end of the financial year. The company tends to deploy its cash into the expansion of the store estate, which saw it open three brand new stores and acquire three existing ones during the period. With over 1200 independently owned and operating fishing stores in the UK, there is plenty of scope for further consolidation.
In FY25, the company invested £4.4m in capital expenditure to refit and expand the store estate, as well as make improvements in the logistical operation. A further £4.1m of cash was deployed into increasing the level of inventory, to enable faster rollout of new stores. This increase in working capital was partially offset by higher creditors.
The only external borrowings are the company’s lease liabilities, worth £12.8m at the end of the 2025 financial year.
Growth without profits
Margins at both the UK store estate and online operation are not particularly impressive. The former reported pre-tax profits of £5m and the latter £3.3m in the financial year, both equivalent to margins of just less than 10%.
But almost all of the company’s profits are wiped out by the £5.5m costs associated with running the head office, which seems excessive. Chief executive Steve Crowe pocketed a £250,000 pay rise this year to take his salary just shy of £500,000. Admin expenses were the main leap in operating costs in the year.
Management insists on reporting heavily adjusted EBITDA as the main profit figure, which rose 20% to £3.4m. Underlying operating profits were £1.9m.
Megan’s view:
It seems quite extraordinary to me that the UK’s biggest fishing retailer isn’t able to thrive in a market where demand for fishing equipment is soaring. Sure, sales are booming and the company has got lots of avid customers, but that isn't translating into meaningful profits or returns for shareholders.
The company’s shares are currently trading at a little over a third of their peak value in 2018.
It doesn’t help that this is a highly illiquid stock with over 85% of the shares held by a handful of major shareholders. Or that one of those major shareholders (founder Martyn Page) has been selling some of his stake.
It’s a shame because I like the story and the business and it feels like there should be more for private investors to get excited about here. But there are too many uncertainties. So I am staying neutral. AMBER.
Roland's Section
Treatt (LON:TET)
Unch at 271p (£163m) - Half Year Results - Roland - AMBER
Treatt PLC ("Treatt" or the "Group"), the manufacturer and supplier of a diverse and sustainable portfolio of natural extracts and ingredients for the beverage, flavour and fragrance industries, announces its half year results for the six months ended 31 March 2025 (the "Period").
Treatt issued a profit warning in April (see our coverage here), but today’s half-year results thankfully leave this revised outlook unchanged, perhaps opening the door for the start of a recovery.
Half-year results summary: the key numbers from today’s results are the same as those provided in April, but let’s take a quick look at the story to add in some additional detail:
Revenue down 11% to £64.2m
Gross margin: 24.9% (H1 24: 27.8%)
Adjusted pre-tax profit down 52.1% to £3.6m
Adjusted EPS down 52% to 4.5p
Interim dividend unchanged at 2.6p per share
As a backdrop to this, the group reports an improved balance sheet position. Net cash was £0.9m at the end of March, versus net debt of £0.7m at the end of September.
In terms of profitability, my sums suggest a trailing 12-month operating margin of 10.0% and a TTM return on capital employed of 9.8% (FY24: 13.1%). I’ve used TTM figures as Treatt’s profits are generally seasonally weighted to H2, so looking at H1 alone might give an unreasonably negative view.
If this turns out to be a low point for profitability, then I’m quite comfortable with these figures. Treatt has a respectable if unspectacular record of profitability:
Trading commentary - the two main causes for the H1 shortfall were reiterated:
High citrus prices leading to lower volumes due to customer reformulation;
Weaker consumer confidence in the US.
In situations like this, I find it can be useful to look for any change in the tone or substance of management commentary. In this case, my feeling is that today’s commentary is entirely consistent with Treat’s update in April.
There is also some positive operational progress for the current year:
H2 sales “already 50% covered”, with a further 35% expected through repeat business. The remaining 15% (consistent with prior year) is expected to be delivered through known pipeline opportunities;
Cost savings have been made in H1 and the company does not expect an increase in FY25 overheads versus FY24.
New contract wins also offer the potential for growth:
We are encouraged by some exciting wins in Premium, including securing a large new customer in North America, capitalising on the low and no sugar trend. Additionally in New Markets, we have a healthy pipeline of opportunities for H2 and are progressing distribution arrangements to expand our reach.
Outlook: the company provides clear guidance for the current year, reiterating the figures provided on 10 April:
… the Group expects full year revenue of between £146m and £153m, and PBTE between £16m and £18m for the full year to 30 September 2025.
I don’t have access to any updated broker notes today, but consensus figures in Stockopedia have been revised since April and now suggest FY25 earnings of 21.8p per share, rising to 24.1p per share in FY26.
These estimates leave the stock looking very reasonably valued, in my view, if they can be delivered:
Roland’s view
With a debt-free and profitable business trading close to book value, I think it’s reasonable to believe that Treatt is trading at a level that could offer value.
In April, Graham downgraded our view to AMBER/RED to reflect our knowledge that profit warnings often mark the start of a longer period of underperformance.
There is an argument for me to maintain this view today, but on balance I think that could be too harsh. April’s guidance has been clearly reiterated and no new problems seem to have arisen.
While the impact of tariffs remains a potential risk, I’m going to take a chance and move our coverage up to neutral. I think this balances the risk of a further downgrade with the recovery potential I can see here. AMBER.
On Beach group (LON:OTB)
Down 3% 263p (£413m) - Interim Results - Roland - GREEN
H1 PBT growth of +23% is in line with expectations and stated after the net £1.5m investment into the Republic of Ireland.
Shares in this online travel agent are down slightly this morning, but today’s in-line results look solid to me and the forward valuation continues to look undemanding to me.
The key summer trading season remains ahead of us (OTB’s year end is 30 September) but management confirms that full-year expectations remain unchanged.
H1 financial highlights:
Revenue up 7% to £64.2m
Booked total transaction value (TTV) up 13% to £640.7m
Adjusted pre-tax profit up 23% to £7.6m
Reported pre-tax profit up 18% to £3.3m
Interim dividend up 11% to 1.0p
One interesting point of this business model is that the company holds quite a lot of customer cash as pre-payment for holidays. So-called cash held in trust was £224.2m at the end of March, contributing to net finance income of £2.2m for the half year.
As we saw with Jet2 recently, this provides a useful boost to profitability.
However, I can’t ignore the gaping void between the company’s adjusted and reported earnings. Actual pre-tax profit is less than 50% of the adjusted figure.
The usual suspects are to blame – share-based payments, exceptional items and amortisation of acquired intangibles. I’m not a fan of these exclusions but I recognise they’re widely used.
In these circumstances I usually turn to the cash flow statement to get an idea of which version of profit matches cash generation most closely. In this case, I estimate an underlying H1 free cash flow figure of £6.9m, which is admittedly quite close to the adjusted pre-tax profit figure.
Trading commentary: OTB says that the total value of holidays booked rose by 13% in H1, while the volume of bookings rose by 11%.
Management says this is “significantly ahead of the package holiday market”, suggesting OTB could be gaining market share.
Booking momentum seems to be improving compared to the same periods last year:
Q1 volumes +7%;
Q2 volumes +15%;
Q3 volumes (to date) +18%.
More broadly, OTB is continuing to expand its reach and has added 5% capacity to popular beach destinations and 3% capacity to all European locations. The company has now also established a brand offering in Ireland, expanding its addressable market.
Outlook: management sounds confident…
As a result of these factors, and the continued execution of strategy, another record year is expected.
… but have stopped short of upgrading guidance today:
Board is confident in delivering FY25 profit in line with current consensus expectations (Adjusted PBT £38.2m).
The company’s medium-term growth targets are unchanged:
On track to deliver medium term ambition of £2.5bn TTV, £100m EBITDA and £85m PBT.
Roland’s view
Although forecasts have been left unchanged today, On The Beach has benefited from a steady stream of upgrades over the last year:
The shares have also risen by more than 50% over the last year, reflecting this improving outlook and earning the stock a High Flyer styling:
However, as Graham pointed out in February, profits exceeded pre-Covid levels last year and are expected to rise further this year. The shares still look reasonably valued to me, based on forecast earnings:
While quality metrics are still average, I think it’s reasonable to expect recent improvements to continue if the company can extend its run of growth over the next 18 months:
I considered downgrading our view to AMBER/GREEN today, given the in line outlook in these results.
However, On The Beach generates the majority of its profit in H2 and appears to be enjoying strong trading momentum at the moment. If bookings remain strong over the summer, I think there’s some scope for a further upgrade at some point. Given the stock’s reasonable valuation, I have decided to maintain our GREEN view for now.
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