Good morning. After a very busy week for company news, let's see what's in store today.
The agenda is now complete - it's relatively busy for a Friday.
Today's report is now complete - thank you for all your comments this week, have a great weekend!
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
Natwest (LON:NWG) (£44.7bn) | PBT up 18.4% to £3.6bn, with improved net interest margin and lower costs. Interim dividend +58% to 9.5p with £750m buyback in H2. FY25 guidance upgraded: RoTE now expected to be >16.5% (prev. 15-16%) | AMBER/GREEN (Roland) A strong Q2 has followed a good Q1 and provided support for a further upgrade to full-year guidance. While the shares aren’t as cheap as they were, NatWest seems to be trading well and does not look too expensive to me, assuming the current rate of profitability is sustainable. | |
Rightmove (LON:RMV) (£6.2bn) | Rev +10%, op profit +10% to £145.4m. Total membership +1%. 2025 guidance unchanged. | ||
Mitchells & Butlers (LON:MAB) (£1.7bn) | LFL sales +4.5% for 42wks YTD with improving trend. Outlook at top end of consensus exps. | ||
Law Debenture (LON:LWDB) (£1.3bn) | H1 NAV total return of 15.0%. IPS unit saw revenue +7.7% and PBT +7.5% to £28.2m. | ||
Firstgroup (LON:FGP) (£1.3bn) | Trading for YTD (Mar-Jul) in line with exps. Adj EPS to be flat or better in FY26. | ||
Jupiter Fund Management (LON:JUP) (£717m) | H1 AUM up 4% at £47.1bn. | AMBER/GREEN (Roland) A drop in revenue in H1 reflects unchanged management fee margin on lower average AUM. As a result, costs swallowed up 82% of revenue in H1, cutting profits (and the dividend) by more than a third. In isolation these results don’t seem great, but I think there’s some evidence of improving underlying performance, with net flows turning positive in Q2. These shares aren’t as cheap as they were, but continue to trade below book value with a solid balance sheet. The CCLA acquisition should add useful scale and help to improve cost ratios. I’m happy to leave our moderately positive view unchanged. | |
Marshalls (LON:MSLH) (£668m) | PW: rev +4% in H1, but activity has softer since May.
Management sees no sign of improvement in remainder of 2025. | BLACK (AMBER/RED) (Roland) I think Marshalls is a decent business, but it’s suffering from a fall in volumes and a switch to cheaper, commoditised products in its core landscaping division. A failure to reduce debt levels versus 2024 also suggests to me that leverage at the half-year mark may be higher than the 1.8x multiple reported in H1 24. After three profit warnings we could be close to a low point. But until housing demand improves I suspect performance will remain under pressure, so I’m going to take a cautious view for now. | |
Close Brothers (LON:CBG) (£619m) | Selling brokerage unit Winterflood for £103.9m. Should improve CET1 by 0.3% to 14.3%. | AMBER/GREEN (Roland) [no section below] Close Brothers is continuing to sell non-core assets as it raises cash to fund potential liabilities estimated at £165m, relating to historic motor finance commissions. My impression is that Winterflood (a City broker with a small-cap specialism) is highly regarded by its institutional clients. However, profits are highly cyclical and the business is prone to periods when it’s loss making. For example, H1 saw a loss of £0.8m, but the third quarter saw a £0.4m operating profit. The previous disposal of Close’s asset management division may also mean that historic synergies have been lost. Close’s balance sheet has always looked relatively strong to us, as Graham discussed here. This disposal will provide further support for the bank’s CET1 ratio and leave it positioned to focus on its core role as a specialist lender. I see plenty of value here but remain somewhat cautious about regulatory risks and the potential for a broader drag from the motor finance issue. | |
Smarter Web (OFEX:SWC) (£576m) | LBT of £0.7m for 6mo to 30 April 2025. At 24/07/25, SWC had £1m cash and 1,825 bitcoin (c.£160m) | ||
Taylor Maritime (LON:TMI) (£220m) | FY25 NAVps -24.7% to $1.114. Total NAV return -16.6% due to softer market. Demand outlook “modest”. | ||
John Wood (LON:WG.) (£128m) (suspended) | Sold 50% interest in RWG (turbine repair) for $135m. Proceeds will be used to reduce debt. | PINK | |
Record (LON:REC) (£126m) | SP -5% AUM +7% to $107.9bn, net flows neutral. Average fee rates “broadly unchanged from previous quarter”. Performance fees £0.4m (Q1 25: £1.6m), albeit last year was considered exceptional. Outlook unchanged: "revenue growth in low single digits and EPS flat" | AMBER/GREEN (Roland holds) [no section below] As a shareholder, I’m a little disappointed by today’s update and am not surprised Record’s share price has dipped. While I recognise the company’s business is inherently lumpy when it comes to winning new asset mandates, management’s warning that achieving FY26 guidance will depend on closing a pipeline of “large, complex deals” suggests to me that there is some scope for a shortfall. This is especially true, in my view, as I assume of this pipeline relates to areas being targeted for growth, outside Record’s core currency hedging business. These concerns aside, I continue to like this business for reasons Graham discussed in June - it is highly profitable, a respected niche expert in currency risk management and has a very strong balance sheet. Dividends have always been generous without risking financial strength. To reflect my mixed views (and the falling StockRank), I’ve moderated our rating slightly today. | |
GreenX Metals (LON:GRX) (£107m) | Historic core logging analysis of Tannenberg copper project. £252m arbitration award is being contested. | ||
Venture Life (LON:VLG) (£72m) | Continuing rev +38% to £15.3m in H1 w/ net cash of £36m. FY25 result to be in line with exps. | ||
Helix Exploration (LON:HEX) (£46m) | Inez #1 wireline logging complete, 140ft reservoir identified. Flow testing to commence early Aug 25. | ||
Metals One (LON:MET1) (£31m) | Agreed to acquire 75% of two US companies from Thor Energy (LON:THR) for cash & shares totalling £1.1m. | ||
FIH (LON:FIH) (£24m) | Rev -22% due to construction disruption. Pre-tax loss of £6.2m. Dividend held at 6.75pps. |
Roland's Section
Marshalls (LON:MSLH)
Down 21% to 207p (£524m) - Trading Update - Roland - BLACK (AMBER/RED)
After tentative signs of a recovery earlier this year, it looks like conditions have weakened again at this building materials business. Today’s half-year update includes a material profit warning for full-year 2025.
H1 trading: group revenue rose by 4% to £319m during the first half of the year, driven by a mix of volume growth and weaker pricing. This seems consistent with previous trading updates in March and May, suggesting that the improving trend Graham noted in March may have continued until recently.
H2 outlook: However, the company says that activity levels have softened since the end of May. Management currently expects “no improvement in market activity levels through the remainder of 2025”.
FY25 profit guidance: as a result of this revised outlook, Marshalls has cut its profit guidance for the full year 2025:
FY25 adjusted pre-tax profit is now expected to be between £42m and £46m
Consensus earnings forecasts prior to today were for FY25 EPS of around 16p per share, broadly flat on 2024. So I’d assume that pre-tax profit expectations were also similar to last year’s figure of £52m.
On this basis, today’s updated guidance represents a cut of c.15% at the mid-point. However, this morning’s share price fall of over 20% suggests the market may be pricing in a result towards the lower end of this range:
What’s gone wrong?
From what I can tell, the main cause of today’s downgrade is the group’s landscaping business, which generated 42% of H1 revenue. Contrary to what the name might suggest, this division manufactures and supplies paving, kerbstones and other manufactured products for the built environment.
Landscaping: divisional revenue only fell by 1% to £135m in H1, compared to a decline of 11% in the first half of 2024. The company says it had seen positive engagement with customers, leading to volume gains and improvements in market share.
However, it seems any improvement in volume was insufficient to offset previous losses and weaker pricing power. The company highlights several issues in today’s update that have led to reduced profitability:
“Structural overcapacity in the UK supply chain continuing to exert downward pressure on prices”
“Increased value engineering in construction projects”, with customers switching to basic commodity items rather than higher-margin products
“Underutilisation of our manufacturing network”
Price cuts to win market share
To offset these pressures, the company is scaling back its manufacturing network. A partial site closure in H1 will give annualised savings of £3m, while further actions are now planned to increase annualised savings to c.£9m.
No detail is provided on divisional profit today. But I suspect that the dual impact of lower prices and negative operating leverage from manufacturing means that landscaping profits have fallen very sharply indeed this year.
Other divisions: the company’s Building Products and Roofing Products division traded more strongly in H1, with revenue up by 5% and 11% respectively. Performance in roofing is being aided by the continued growth of Viridian Solar, which Marshalls acquired in 2021.
Balance sheet & Debt: net debt rose by £18m to £152m at 30 June, compared to December 2024. The company says this is due to seasonal working capital movements and a final £6.6m payment due to the sellers of Viridian Solar.
The seasonality argument seems reasonable given that net debt is now broadly unchanged from the same time one year ago. However, the prospect of lower profits this year suggests to me that leverage is likely to have increased from the 1.8x figure reported in August 2024.
Roland’s view
The analyst consensus chart on the StockReport tells us that this is the third time the company has cut its guidance for 2025:
Stock market wisdom is that profit warnings come in threes. Our research has found that this isn’t always strictly accurate, but it is true that companies often underperform for an extended period of time after an initial warning.
I can certainly see the case for arguing that Marshalls’ profits are probably close to a cyclical low.
However, I’m a little concerned by the bleakness of today’s outlook and the possibility of rising leverage. The company has previously said that new housing and housing RMI (repairs/improvements) make up around 70% of group revenue. While this sector remains subdued, I suspect Marshalls will also remain under pressure.
The shares were trading on a FY25 forward P/E of 16 prior to today’s warning. My guess is that this ratio will be very similar when the share price drop and cut to earnings guidance are netted out.
On balance, I’m not convinced this business is looking truly cheap just yet, so I’m going to downgrade our view one notch to AMBER/RED today.
Jupiter Fund Management (LON:JUP)
Down 4% to 129p (£687m) - Half-Year Report - Roland - AMBER/GREEN
At first glance, Jupiter’s half-year results seem to give with one hand and take with the other. While flows improved in H1, profits fell sharply. However, having reviewed today's results I'm inclined to remain relatively optimistic.
Positive AUM performance
The good news is that assets under management (AUM) rose by 4% to £47.1m during the first half of the year, relative to December 2024. After adjusting for a net outflow of £0.2bn, the implied market performance is about 4.4%.
For contrast, the FTSE All-Share index rose by 6.8% over this period, while the S&P 500 gained 5.5%.
Against this backdrop Jupiter’s H1 investment performance doesn’t seem outstanding to me. However, the company says 64% of its AUM has outperformed its peer group median over the last three years, up from 61% at the end of 2024.
Perhaps a more significant factor is that flows turned positive during the second quarter:
H1 net outflow: £0.2bn
Q1 net outflow: £0.5bn
Q2 net inflow: £0.3bn
Interestingly, flows were positive from institutional clients (+£1.6bn) but negative from retail/wholesale channels (-£1.8bn). My reading of this is that self-directed investors are continuing to find cheap index trackers, gold and crypto more exciting than mutual funds which may be underperforming all of those assets.
Ultimately, I imagine the real catalyst for inflows would be if fund managers like Jupiter can point to flagship funds that are outperforming the wider market. I’m not convinced that’s the case just yet, although I think the picture is probably improving.
Profit slump
The bad news is that improving flows and investment performance did not translate into stronger financial results. Here are the main headlines numbers:
Net revenue down 11.4% to £153.9m
Adjusted pre-tax profit down 36.5% to £30.4m
Reported pre-tax profit down 28.9% to £27.5m
Adjusted earnings down 36% to 4.2p per share
Interim dividend down 34% to 2.1p per share
The fall in revenue reflects a sharp drop in management fees:
There are two reasons for this:
H1 25 average AUM was £45.7bn (H1 24: £52.1bn)
Net fee margin was flat at 0.66%, but management says this was below expectations due to mix and a weighting to institutional flows (presumably lower fees)
Well-paid staff appear to be another reason for the drop in profits. Compensation costs as a percentage of revenue rose to 50% during the half year (H1 24: 46%).
In total, costs accounted for 82% of revenue during the half year (H1 24: 76%).
As these numbers show, fund managers have relatively high fixed costs. The resulting negative operating leverage explains why the fall in profits was much greater than the fall in revenue for the half year.
Of course, if flows strengthen and market movements remain positive, then this leverage could turn positive, potentially putting a rocket under profits.
There's no guarantee of when -- or if -- this will happen.
In the meantime, shareholders face a dividend cut, as Jupiter maintains its sensible policy of paying out 50% of earnings.
Outlook
CEO Matthew Beesley is doing a reasonable job in my view and strikes a positive note about the remainder of the year:
With a marked recovery in client sentiment across both channels, improving investment performance across all time periods and the strongest investment line-up we have ever had, there are good reasons to be optimistic that we can continue to build on this momentum going forward.
There’s no formal guidance in today’s results, so I assume consensus expectations for the year will remain broadly unchanged. After a strong run recently, these price Jupiter on a FY25E P/E of 15 after this morning’s drop.
Consensus estimates have been quite volatile recently, however, so the trend chart may be worth watching for further updates over the coming days:
Note that analysts are not pricing in a recovery in any earnings growth in 2026.
Roland’s view
Beesley also reminds investors that the ongoing acquisition of non-profit specialist CCLA will make a significant addition to AUM when completed – CCLA is said to have more than £15bn under management, although my sums suggest fee margins may be somewhat lower than those of Jupiter.
Even so, CCLA is expected to help Jupiter achieve economies of scale. That may help the company hit its target of reducing costs to 70% of revenue.
By way of illustration, applying this cost ratio to today's half-year results would have increased pre-tax profit by c.65% to around £46m. If Jupiter can grow AUM and keep costs stable, then operating leverage could drive very rapid profit growth.
Whether this can be achieved remains uncertain, but that is certainly the bull case for investing in unloved fund managers.
In Jupiter's case, I think it's fair to say the shares could still offer value at current levels, even after recent gains:
While the timing of a fuller recovery remains uncertain, fortunately Jupiter’s balance sheet continues to look strong. These half-year results show £195m of cash and net assets of £841m. In my view, the company can afford to do the right things and remain patient in pursuit of a recovery -- potentially a big advantage.
Graham was AMBER/GREEN on Jupiter in April and July. I’m going to leave that view unchanged today. While I’m probably slightly less positive than he is, I believe there is still plenty of latent upside here if Jupiter can improve its flows and keep its costs under control.
Natwest (LON:NWG)
Up 2.5% to 516p (£41.8bn) - Half-Year Report - Roland - AMBER/GREEN
Today’s half-year results contain a modest upgrade to full-year guidance and reveal a substantial increase to shareholder returns from this high street bank. This positive update follows on from a strong Q1 update, which I covered here in May.
H1 results: income (revenue) for the half year rose by 11.9% to £8.0bn, supporting a 19.5% increase in net profit to £2.7bn. Adjusted earnings rose by 28% to 30.9p per share.
Dividend & Buyback: NatWest’s interim dividend has been increased by 58% to 9.5p per share. The bank has also announced a new £750m share buyback today.
Improved profitability: this H1 growth was driven by an increase in interest-earning assets (i.e. loans & mortgages), which rose by 3.4% to £542bn. Profitability on these loans also improved, with the bank’s net interest margin climbing 21 basis points to 2.28% (H1 24: 2.07%).
The end result was that the bank’s return on tangible equity (RoTE) for the half year rose to 18.1% (H1 24: 16.4%). As was the case in Q1, this was comfortably ahead of the bank’s previous guidance range for the year of 15%-16%.
Upgraded outlook: in my review in May, I speculated that this previous guidance implied the remainder of the year might be less profitable, on an RoTE basis.
That could still be the case, but CEO Paul Thwaites has now upgraded his full-year guidance, suggesting he does not expect too much of a slowdown in H2:
RoTE now expected to be greater than 16.5% (prev. 15-16%)
Income (revenue) excluding notable items to be greater than £16bn (prev. £15.2-15.7bn)
It’s interesting to note that consensus forecasts were already trending ahead of this previous guidance. Prior to today, the StockReport was showing consensus revenue of £15,995m for 2025, for example.
This may help explain the modest increase in share price today – some of this strong Q2 has already been priced in.
Roland’s view
Today’s positive update is reflected in the StockReport’s analysts consensus chart, which has been trending steadily higher for the last 18 months:
The mood music from the UK economy remains poor but NatWest’s performance (and that of Lloyds earlier this week) still seems pretty healthy.
However, today’s guidance still implies that the second half of the year is likely to be less profitable than the first half for NatWest.
Bad debt also rose during the half year. Today’s results show a loan impairment rate of 0.19%, compared to just 0.03% during the first half of 2024. This translated into impairment losses of £382m, nearly eight times the £48m reported during the same period last year.
Today’s guidance for a full-year impairment rate of under 0.2% is unchanged. It’s fair to say this level of bad debt is still very low. However, I think this is still a metric worth monitoring for any clues it may provide about the health of this mainstream lender’s customers.
Valuation: NatWest shares have doubled over the last two years and now trade at a 46% premium to their H1 tangible net asset value of 351p.
The stock is clearly not as cheap as it was and the premium to NTAV means there is perhaps less of a safety margin. However, NatWest’s double-digit returns on equity and forecast dividend yield of 5.8% suggest to me that the overall valuation remains reasonable here, assuming earnings remain stable.
I remain broadly positive on the valuation and outlook here and am comfortable leaving my previous AMBER/GREEN view unchanged today.
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