Daily Stock Market Report (Fri 8th August 2025) - BoE decision, PEN, VCP, AGR/PHP

Good morning- welcome to Friday's report!

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BoE Decision

Some interesting developments at the Bank of England yesterday, where rates were cut (as expected) in a seemingly “hawkish” fashion, from 4.25% to 4%.

The majority in favour of a rate cut was only 5 against 4.

With inflation at an 18-month high of 3.6%, nearly double the 2% target, rate cuts are becoming harder to justify.

Unlike other central banks which have the so-called “dual mandate” to manage inflation and promote economic growth, the Bank of England is supposed to be primarily focused on keeping inflation low.

In their own words:

We set monetary policy to achieve low and stable inflation. This is our primary monetary policy objective.

In practice, this means keeping inflation at 2% over the medium term, which is the target set for us by the Government.

Subject to this primary objective, we also support the Government’s other economic aim, which is strong, sustainable and balanced growth.

If inflation is 3.6%, I would naively think that tackling this should be their priority.

Yesterday’s release pointed to external factors driving inflation, while also noting that the problem was getting worse:

The increase in headline inflation was explicable by factors such as supply issues in certain food items and changes in administered prices. However, increases in food and energy price inflation might prove salient for households’ formation of inflation expectations… Overall, the MPC judged that the upside risks around medium-term inflationary pressures had moved slightly higher since May.

But the economy was also a concern, with differing views on the committee:

UK economic activity had remained subdued. A margin of spare capacity was estimated to have opened up, which was expected to act against some continuing inflationary persistence. There was a range of views around the extent to which it had opened and would continue to build. The labour market was continuing to loosen gradually. For some members, weak employment growth pointed to further spare capacity building. For others, potential structural changes in the labour market meant that sufficient slack might not have emerged and might not build further to weigh on inflation.

In the end, the committee had to vote twice for the first time in its nearly 30-year history.

They no longer described monetary policy as “restrictive”, instead saying “the restrictiveness of monetary policy had fallen as Bank Rate had been reduced.”

These small changes in language are used as signals and clues in the financial markets around future decisions.

With bank rate now at 4%, markets are less confident that it will fall to 3.75% this year. There are only two small cuts, down to 3.5%, priced in by the end of 2026.

With the Bank of England more concerned about inflation than the markets had expected, the FTSE fell 0.7% yesterday (but it has been very strong recently). More dramatically, the pound soared by about half a US cent, jumping through 1.34 against the dollar:

(1-week chart from tradingeconomics.com)

And the pound reversed its recent losses against the euro:

(1-week chart from tradingeconomics.com)

Good news for holidaymakers, less good news for exporters!

I was extremely impressed by how the Bank of England (and other central banks) subdued the inflation genie in recent years. But perhaps they grew a little too accustomed to their success, and a little complacent. Perhaps rates should simply stay where they are for the time being?

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The Agenda is complete.

Spreadsheet accompanying this report: link.

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Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
GSK (LON:GSK) (£56.4bn)	CureVac/BioNTech mRNA patent litigation settlement	$370m to GSK and GSK to receive 1% royalty on Pfizer US sales of flu/Covid mRNA vaccines.
Flutter Entertainment (LON:FLTR) (£40.1bn)	Q2 2025 Update	Increased guidance. Revenue $17,260m (prev: $17,080m), adj. EBITDA $3,295m (prev: $3,180m).
TBC Bank (LON:TBCG) (£2.9bn)	2Q and 1H 2025 Results Report	H1 net profit +6% (665m GEL), ROE 23.7%. Quarterly dividend 1.75 GEL, and 75m GEL buyback.
Assura (LON:AGR) (£1.59bn)	Update following discussions with Assura plc Board	KKR says attractiveness of the PHP offer for Assura has reduced, and their offer is 1.1% higher.	PINK (Graham) [no section below] Interesting tension here as KKR expresses disagreement with its rival suitor PHP over the cause of weakness in the PHP share price. PHP is attempting to buy Assura with a mix of cash and its own shares, and therefore the PHP share price - and its likely future trajectory - is a hot topic. PHP says the weakness is temporary, as it is caused by traders who are waiting for the PHP deal to complete. KKR suggests that these traders aren't hedged and will want to sell their PHP shares in the market after the takeover completes - with the implication that the PHP share price is not about to suddenly rebound. Of course nobody can say with any certainty what will happen. What is certain is that KKR's all-cash bid is currently worth more than PHP's bid, but it is PHP's bid that currently has the blessing of Assura's board. This story seems likely to run and run.
Smarter Web (OFEX:SWC) (£439m)	Bitcoin Purchase	Purchases 50 BTC, now has 2,100 BTC, total amount purchased £171m, also has cash £19.5m.
Stelrad (LON:SRAD) (£217m)	Interim Results	Rev -4.6%, adj. op profit +1.1% (£15.9m). Actual op profit £3.8m. Unchanged Board expectations.
Victoria (LON:VCP) (£103m)	2026 SSNs vote in favour of extending maturity	97.3% of 2026 senior secured notes voted to extend maturity to 2029 on attractive terms.	RED (Graham) Hopefully its credit ratings can improve but I'm not convinced the equity has a positive value here.
Petra Diamonds (LON:PDL) (£24m)	Proposed Refinancing	SP +39% Updated plan with $18-20m in savings against prior guidance. Refinancing: extension of bank debt and notes, $25m rights issue at premium price 16.5p.
Pennant International (LON:PEN) (£12m)	Trading Update	SP -14% MoD contract award delayed, so 2025 turnover to be lower than market expectations.	BLACK (RED) (Graham) Much too dangerous for me considering the lack of tangible assets on the Dec 2024 balance sheet, the losses incurred in H1, and now a profit warning that highlights the lumpy nature of revenues. We were already AMBER/RED on this but I think fully RED is now justified.

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Graham's Section

Pennant International (LON:PEN)

Down 13% to 24p (£10m) - Trading Update - Graham - RED

I’m going to downgrade this all the way to RED seeing as Mark was already AMBER/RED in July.

Earlier in July, the company finished carrying out sale-and-leaseback transactions on its properties, in order to reduce its overdraft. They were “confident” they would meet market expectations.

Unfortunately, that confidence was misplaced, as a contract award has been delayed.

Before getting into that, here are some H1 figures in today’s update:

• Revenues £4.5m (H1 last year: £7.4m)

• Adjusted loss before tax £1.7m (H1 last year: loss £0.4m)

Net debt as of the end of June of £2m. I note that the update in early July said that £1.125m would be received for (the last two sale-and-leaseback deals.

GenFly (“Generic Flying Controls Trainer): contract negotiations with the Ministry of Defence are continuing, “but it has now become apparent that newly-introduced approval processes within the MOD are likely to push the August award date into Q4 2025 or later”.

This puts Genfly revenues into 2026 and later years. Genfly was supposed to provide 15% of full-year revenues for 2025.

CEO comment:

"While it is disappointing that the GenFly contract will start later than expected, we will push to secure the award as soon as possible, while keeping focus on implementing our Auxilium strategy to achieve long-term growth in our software and services segments. Indeed, it was pleasing to see the early fruits of these efforts in the achievement of record-level ARR during the first half and we look forward to materially growing this number in 2026 and later years."

Graham’s view

There are multiple reasons for caution here: a track record of losses, reliance on large contracts whose timing of award is unpredictable, and a net debt position which strikes me as likely unsuitable for a company of this size and status. The company has been addressing the problem with sale-and-leasebacks, but that’s a temporary and costly solution, which amounts to hollowing out the balance sheet to fund past losses.

Checking the accounts to Dec 2024, I see that net assets were £8.3m, but £6.7m were intangible. After making an adjusted loss of £1.7m, it seems to me that tangible net assets could be turning negative.

This is much too dangerous-looking for my taste and therefore I’m RED on this. Let’s hope they can turn it around.

Victoria (LON:VCP)

Down 4% to 86.5p (£99m) - 2026 SSNs vote in favour of extending maturity - Graham - RED

It’s remarkable to think of the heights this once achieved:

However, it turned out that financially engineering a bunch of flooring companies with massive leverage did not lead to a sustainable stream of riches for everyone involved. Quelle surprise!

The entire company is now trading at only twice the value of Geoff Wilding’s custom-built superyacht, which he apparently sold this year for $66m.

But it’s not all bad news: Victoria’s 2026 bondholders have overwhelmingly supported an agreement to extend the maturity of their notes. These notes, with a face value of €490m outstanding, will not be repayable until 2029.

CFO comment:

"The strong support received from our 2026 SSN noteholders demonstrates confidence in Victoria's credit and outlook. By delivering a comprehensive refinancing of our short-term maturities we have provided certainty for all of our stakeholders and established firm foundations from which to continue executing our cost-saving and strategic growth plans."

The old notes had an interest rate of 3.625%, and have been refinanced on “attractive terms”.

So what is the new interest rate? 9.875% per annum, with most of this interest being paid via “payment-in-kind”, i.e. paying the interest with more bonds rather than with cash. Only 1% will be paid in cash.

Payment-in-kind is typically used by companies that are light on cash but can convince lenders they will eventually be good for it.

Credit ratings: Victoria is rated CCC+ at Fitch, after a downgrade in May. From Fitch’s website, anything within the CCC region is considered to have “Substantial credit risk: Very low margin for safety. Default is a real possibility.”

Victoria is also rated CCC+ at S&P, with a similar meaning: “Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments”.

Graham’s view

This refinancing news will hopefully lead to upgrades to Victoria's credit ratings. But of course, paying off its debts successfully doesn’t mean that there will be anything left over for equity holders. The new, much higher interest rate will eventually increase the amounts owed to lenders. I’m not convinced there is any equity value here, so it’s a RED from me.