Good morning! It's another slightly quieter Monday without the deluge of news that we are used to seeing in the middle of the week.
All done for today, thanks for dropping by! Cheers.
Spreadsheet accompanying this report: link (last update: 22nd July).
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
GSK (LON:GSK) (£56.9bn) | upported by positive phase III trial data, “significant need for new antibiotics for gonorrhoea”. | ||
Plus500 (LON:PLUS) (£2.4bn) | EBITDA +1% to $185m, active customers +2%. FY25 outlook in line, $165m shareholder return. | GREEN (Graham) No reason to change my view on this after an interesting H1 report that sees the average customer deposit double, average user acquisition cost fall 17%, and a slight increase in EBITDA. Profits from customer losses were lower than last year - but there was strong underlying growth in spreads, commissions and fees. | |
| Diversified Energy (LON:DEC) (£853m) | Interim Results | Prod +35% to 1,007MMcfe/d, rev +79%, adj free cash flow +49% to $102m. FY25 outlook unchanged. | AMBER (Roland) H1 results from this onshore US oil and gas consolidator show a big step up in profits and production, thanks to the recent acquisition of Maverick Natural Resources. However, crunching the numbers suggests to me that organic production may have declined over the last nine months. I also take a broader look at the company’s history and conclude that many dividends have been debt funded, while heavy borrowing and dilution to fund acquisitive growth has not necessarily generated much value for equity holders. Looking ahead, the 9% dividend yield and modest P/E could offer value, although I’d suggest further research may be needed, so have adopted a neutral view. |
Marshalls (LON:MSLH) (£522m) | Rev +4%, adj PBT -17% to £22m. No signs of improving demand. Outlook unchanged from 25 July. | ||
Anglo-Eastern Plantations (LON:AEP) (£379m) | Rev +39%, PBT +78% to $62.6m, driven by higher volume and price. Net cash $245m. £8m buyback. | AMBER/GREEN (Roland) These results are excellent, with volume and commodity price growth supporting a 75% increase in half-year profits relative to H1 2024. AEP’s balance sheet appears remarkably strong, with $245m of net cash, perhaps prompting questions about whether the company could be a little more generous with its minority shareholders. A programme to replant mature plantations and add additional mill capacity should support future growth in crop yields and total throughput. Meanwhile, the shares now trade on c.6.3x trailing earnings and could be cheap if palm oil prices remain stable as expected. The only real caveats to this are that this remains a commodity producer and there are no forecasts in the market. For these reasons, I’m going to maintain our moderately positive view. | |
Caledonia Mining (LON:CMCL) (£335m) | Rev +30%, net profit +147% to $20.5m. Net cash $26m, 14c dividend. FY prod on track. | ||
Sovereign Metals (LON:SVML) (£210m) | Fleet will scale from 36 units to peak at 81. Suppliers identified, reviewed w/ Rio-SVM committee. | ||
S4 Capital (LON:SFOR) (£132m) | SP +5% Received proposal from MSQ Partners regarding possible combination. Very early stage. | PINK (AMBER) (Graham) [no section below] This advertising group has been depressed (in share price terms) for years now, and today's news of a possible merger with London-headquartered MSQ has been greeted in a lukewarm manner by the market, with the shares currently up by only 5%. SFOR says that the deal "would be structured as an acquisition of MSQ", and not as a takeover by MSQ. This would appear to dampen the possibility of an easy cash exit for long-suffering SFOR shareholders. On a related point, if SFOR needs to print more of its own shares to get this deal over the line, the timing would appear rather unfortunate as SFOR is currently trading at an earnings multiple of only 4x (although this is before adjustments). I'm afraid that SFOR's track record is uninspiring and these preliminary discussions with MSQ don't change my impression of it. I'll leave our neutral stance unchanged on valuation grounds. | |
Gemfields (LON:GEM) (£66m) | SP +5% | AMBER (Roland) [no section below] Gemfields had net debt of almost $60m on 30 June, including the proceeds from the recent $30m rights issue. So it’s not surprising that the cash from the sale of Fabergé is going to be used for working capital to help fund improvements at the group’s gem mines. The bigger question for me is whether the mining business can deliver on forecasts for a significant step up in revenue and profit in H2 25 and 2026. Expectations are for both ruby and emerald production to increase in H2 due to production upgrades/restarts. Consensus forecasts suggest revenue of c.$200m in 2025, rising to c.$400m in 2026. If gem prices remain stable, this could support a FY26 P/E of >3 – potentially cheap. However, Gemfields only generated $60m of revenue in H1 this year, leaving a significant H2 weighting, with corresponding risk of disappointment. I can’t take a strong view here without in-depth research so will remain neutral, with the caveat that I consider this a somewhat speculative situation and would personally be inclined to wait for September’s interim results before making any trading decisions. | |
Zanaga Iron Ore (LON:ZIOC) (£65m) | Post-tax NPV10 +37% to $5.2bn. IRR increased to 26.7%. FOB op cost exp $27/t, 30yr life of mine. | ||
Aurrigo International (LON:AURR) (£42m) | SP -29% Tariffs weighing. Full-year revenues to be significantly below exps. EBITDA materially impacted. Canaccord Genuity forecasts: FY25 revenues £7.5m (previously: £12m), adj. pre-tax loss £3.9m (previously: £2.5m). | BLACK (RED) (Graham) [no section below] I can't see any records of this technology company in the archives. It's going to debut with RED today after a severe profit warning that has knocked nearly a third off the market cap. Aurrigo first listed on AIM in 2022 and still enjoys a high degree of insider ownership, with the founding brothers (including the CEO) having 43% ownership. That is a positive but other positives are difficult to find considering the lack of profits in recent years, combined with today's news. CG have cut their revenue forecast for the company for this year by nearly 40%, due to the impact of US tariffs on automotive activity, which is set to create a deeper loss. I note that the company was already set to make a loss even on the EBITDA level. The company has a modest net cash position but it's not enough to allay my concerns about the risks facing shareholders here. | |
Kromek (LON:KMK) (£33m) | SP +4% c. £860k of orders in CBRN Detection segment, majority to be delivered in H1 of FY April 2026. | AMBER/RED (Graham) [no section below] Kromek’s CEO says that these orders “underscore the global demand for our mission-critical solutions and the broad, growing base of organisations that rely on our technology”. However, there is no change to forecasts or the investment thesis at Cavendish, so I think it’s fair to say that they were already priced in here. That said, the share price has reacted positively to this announcement. Overall, it’s difficult to know what to make of Kromek: it has been very unprofitable for years, and its adjusted PBT forecasts for FY April 2025-2027 are £4.9m, £2.1m and £1m (in that order!). It might be a little harsh but I think caution is still the best approach, so I’m leaving it on AMBER/RED. | |
MicroSalt (LON:SALT) (£27m) | Further $330k payments in 2024 should have been disclosed. Not considered “fair and reasonable”. | RED (Graham) [no section below] A really strange RNS, which follows an announcement on 6th August that there was “an early, partial debt repayment” of $150k that was also a related party transaction that that Independent Directors would not have considered fair and reasonable, and that they were unaware of. It’s a serious corporate governance issue and a red flag in its own right, although the company assures us that processes have been improved. I’m RED on MicroSalt primarily because it’s a Sucker Stock with minimal revenues, not because they paid their debts to their majority unnecessarily early. | |
Zenith Energy (LON:ZEN) (£15m) | 5 developmental solar projects in Piedmont, Italy bought for €3.1m. Ready-to-build in 12-16 months. | ||
LMS Capital (LON:LMS) (£14m) | £3.9m loan to Dacian (Romanian O&G company) at 14.25%. LMS ownership rises to 67%. LMS total NAVps falls from 44.8p to 38.8p. | ||
Wishbone Gold (LON:WSBN) (£11m) | Drilling intersects mineralisation in its first hole deepening program. “Highly encouraging.” |
Graham's Section
Plus500 (LON:PLUS)
Down 6% to £32.32 (£2.3bn / $3.2bn) - H1 2025 Interim Results - Graham - GREEN
Plus500, a global multi-asset fintech group operating proprietary technology-based trading platforms, today announces its interim results for the six-month period ended 30 June 2025.
It feels like I’ve been GREEN on this for a long time now: most recently last month when we had the strong H1 trading update.
Now we have the full H1 report, with confirmation of the numbers, including 4% revenue growth and 1% EBITDA growth.
There were 56,000 new customers out of 180,000 total customers, i.e. 31% of the customer base was “new”.
That’s slightly more solid than H1 last year, when 32% of the customer base was “new”.
There is even stronger evidence of customer churn being under control with the statement that 47% of H1 OTC revenue (i.e. leveraged trading revenue) was generated by customers who have been with PLUS for over five years. In H1 last year, the corresponding figure was only 31%.
With previously-acquired customers trading more, that puts less pressure on customer acquisition, although PLUS trumpets its own marketing technologies as the reason for more efficient customer acquisition. Whatever the reason, the average user acquisition cost fell by an impressive 17%.
Another standout figure is the average deposit per active customer, which doubled to $17,250. This has not yet translated into significant growth in average revenue per user - which must be due to the growth of futures and share dealing products within Plus500’s arsenal. A share dealing account, for example, might involve a larger deposit but generate lower revenues than a leveraged trading account.
Still, it can’t be a bad thing to see customers depositing much larger amounts of money at PLUS!
The company itself says that higher deposits highlight “the Group's diversified product offering and its sustained success in attracting higher value customers”. They note that their “non-OTC business”, i.e. their futures and share dealing platforms, were responsible for a massive 64% of customer deposits in H1, vs. only 36% last year.
US futures: this rapidly growing division is on track to deliver more than $100m of revenue this year.
Licenses: A wide variety of new permissions have been secured or are in the works (clearing membership at the Intercontinental Exchange in the US, licences in Japan, UAE and Canada, and an acquisition in India).
New shareholder returns: $90m of buybacks and $75m of dividends.
Buybacks are less exciting now than they were a few years ago:
With a P/E multiple of around 12x (before adjusting for cash), perhaps greater emphasis should be placed on dividends rather than buybacks at this stage?
Outlook: in line.
Market expectations: “revenue and EBITDA of $746.2m and $345.2m, respectively, for FY 2025”.
The market might be slightly disappointed that there was no upgrade today, seeing as nearly 54% of the full-year EBITDA estimate has already been achieved in H1.
Graham’s view
There is a slight reduction in PBT compared to H1 last year, but it’s a marginal difference and it has come about due to small difference in financial income and financial expenses. So I’m not going to place much importance on this.
The big picture is that PLUS continues to earn excellent profit margins (operating margin 47%) and demonstrate wonderful cash generation ($129m of pre-tax cash generated from operations in H1, despite a working capital drag of $22m).
An important breakdown I always look out for is how much of the company’s revenue is derived from the trading losses of its customers - I was sceptical about PLUS for a long time due to the lack of hedging of customer trades. Not only is this a risky way to operate, but it leaves them open to accusations that they want their customers to lose!
For H1, out of total revenue of $415m, there was “customer trading performance”, i.e. profits from customers’ losses, of $14m.
In H1 last year, this figure was nearly $40m. So the fact that customers didn’t lose as much, in the aggregate, did curtail revenue and profit growth by a material amount.
Plus500 continues to say that it expects Customer Trading Performance to be “broadly neutral over time”.
I don’t believe that - I expect Customer Trading Performance to be a great source of revenue and profits for them, as it has been in the past.
However, the cost of that income is that they need to manage the risk of unhedged trades, but they have been doing that for a long time already.
One key element of risk management is their own cash balance, which stood at $938m at the end of H1. Maybe $400m of this is surplus to requirements?
Overall, I don’t see any reason to change my stance on this one. It’s not as cheap as it was, but cash is covering nearly a quarter of the market cap, and some allowance needs to be made for that.
It’s a classic High Flyer:
Well done to long-term holders. This is the best-performing stock in the FTSE All-Share over the last 12 years, and I can see it continuing to do well. I remain a long-term holder in their competitor IG group (LON:IGG).
Roland's Section
Anglo-Eastern Plantations (LON:AEP)
Up 7% to 1,030p (£407m) - Half Year Results & Share Buyback Programme - Roland - AMBER/GREEN
Checking back in the archives, Mark covered this Indonesian palm oil producer in June when he took a moderately positive view on the company’s delayed 2024 results.
Happily, today’s half-year results have been produced in a far more reasonable time frame. This has created an unusual scenario, where we are reviewing a company’s interim results just two months after its full-year results were published.
One benefit of today’s timely numbers is that they provide a more current view of the company’s situation than June’s figures did. The news appears to be good – AEP benefited from higher palm oil prices compared to H1 2024 and also achieved a useful increase in production, resulting in a 75% rise in H1 profits:
Fresh Fruit Bunch (FFB) production +7% to 530.4kt
Average CPO (palm oil) price +15% to $863/t
Revenue up 39% to $230.5m
Pre-tax profit up 78% to $62.6m
Earnings +75% to $1.2336 per share
These results translate into an operating margin of 25.7% (H1 24: 19.4%) and should drive a further improvement in the company’s healthy quality metrics:
Trading commentary: AEP is vertically integrated, owning its own plantations and processing mills. Processing capacity in the mills is far greater than the company’s production, so AEP also buys fruit from external sources to process and sell through its milling operations.
Purchases from external sources rose by 28% to 593.5kt during the half year as the company backfilled additional capacity at its newly commissioned HPP Mill. This extra volume added further to the operating leverage provided by higher palm oil prices versus H1 2024, helping to drive the 75% increase in H1 earnings.
Another new mill is under construction, with commissioning expected in December 2026.
In addition to new mill capacity, AEP completed 768 hectares of new or re-planting in H1, as part of a programme to expand production and improve yields:
The Group remains committed to its strategic replanting programme, targeting the replacement of ageing and Dura palms with higher-yielding Tenera seedlings to enhance long-term productivity and improve crude palm oil ("CPO") extraction rates.
Balance sheet & cash position: AEP has no debt and has reported a [net] cash position of $245m today, up from $182m at the end of last year.
This translates into cash of 452p per share, according to the company, or nearly half the current market cap at 1,030p per share.
I applaud the business for maintaining a strong balance sheet and wouldn’t want to see this change. But in this context today’s £8m share buyback does seem relatively insignificant.
I can see that limited liquidity in this closely-held stock (the main shareholder controls over 50%) could make a larger buyback difficult. But why not distribute a special dividend?
As things stand, shareholders will have to wait for AEP’s third-quarter update to find out what the interim dividend will be for the current year. Last year saw a single payout of $0.51 for the full year, giving a trailing dividend yield of around 3.9%. I think it’s reasonable to assume an increase is likely this year, perhaps suggesting a prospective yield between 4% and 5%.
Outlook: AEP recently signed up Cavendish as a broker, but as yet there are no forecasts in the market and no broker notes on Research Tree.
As a result, the only guidance available today is this rather non-committal outlook statement:
We remain confident in the long-term demand fundamentals for CPO and expect satisfactory financial performance for the remaining months of 2025.
In fairness, management does provide some colour on the market conditions they expect for the remainder of the year, flagging up some positive geopolitical factors:
CPO prices are expected to stay firm for the remaining months of 2025, bolstered by India's reduction in import duties from 20% to 10%, which has improved price competitiveness and triggered increased buying activity in the major consuming market. Furthermore, in Indonesia, domestic demand for CPO continues to strengthen, driven by industrial consumption under the newly implemented B40 biodiesel mandate.
Trailing 12-month earnings for AEP add up to 224c or c.163p per share. That puts the stock on a trailing P/E of 6.3 after this morning’s share price gains.
Roland’s view
I don’t see much to dislike here, but I think it’s worth remembering that this is a commodity producer with some exposure to political and regulatory changes, such as the recent cut to India’s import duty.
There seem to be plenty of tailwinds at the moment, but these situations tend to vary over time. This may be one reason why AEP is keen to maintain such a strong balance sheet – profits have been volatile in the past:
A strong net cash position means the company’s long-term plans should be unaffected by any unpredictable changes in short-term trading conditions.
The lack of visibility on earnings expectations is also a little frustrating. Hopefully Cavendish will start to provide some coverage for investors following these results. In the meantime, I’m quite happy to maintain Mark’s AMBER/GREEN view today.
Diversified Energy (LON:DEC)
Up 8% to 1,184p (£926m) - Half Year Results - Roland - AMBER
Diversified Energy Company PLC (LSE: DEC, NYSE: DEC) today announced its interim results for the six months ended June 30, 2025, reporting performance in line with expectations and highlighting key strategic and financial achievements.
This oil and gas producer is a consolidator, focused on buying up portfolios of mature gas wells in onshore US markets and operating them as efficiently as possible through to end-of-life and decommissioning. Most production is natural gas, which accounted for 84% of output in H1 (H1 24: 77%).
Source: June 2025 corporate presentation
Today’s results have received a positive reception from the market and highlight some positive operational and financial metrics for H1 2025:
Revenue up 79% to $804m
Adjusted EBITDA up 92% to $418m
Adjusted free cash flow up 49% to $152m
Production up 35% to 1,007Mmcfe/d
Personally, I disagree with this calculation of free cash flow. My reading of the H1 cash flow statement suggests a more modest figure of $115m, including disposals and all finance costs but excluding acquisitions.
Maverick acquisition growth vs organic production: it’s worth noting that today’s figures include a full Q2 contribution from the $1.3bn acquisition of Maverick Natural Resources, which completed in mid-March.
At the time of the Maverick acquisition, Diversified said it could increase revenue by 95% and add 55% to free cash flow.
The company also said that Diversified’s current production (30 Sept 24) was c. 850MMcfe/d, with Maverick producing c.350MMcfe/d. That gives a pro forma total of 1,200MMCfe/d, suggesting that the combined group’s output is now around 15% lower than it was at the end of September 2024.
The company hasn’t provided any split between organic and acquisitive growth in today’s financials, but perhaps we can get a sense of the Maverick contribution by comparing Q1 and Q2 figures with the initial claims made at the time of the acquisition:
Q2 revenue up 73% vs Q1
Q2 adjusted free cash flow up 38% vs Q1
Again, we see that Maverick may not yet be contributing the full benefit suggested at the time the acquisition was announced.
Of course, commodity prices have moved around since the Maverick deal was announced in January.
In addition, the integration of Maverick is not yet complete. Further savings are likely – management have said today they now expect to achieve $60m of synergies, up from $50m previously.
Trading summary: DEC is actively managing its portfolio and realised c.$70m from disposals during the half year.
Conversely, drilling additional wells through a partnership arrangement “continues to produce >60% IRRs”. 124 wells have been drilled in this way over the last three years.
Environmental credits relating to coal mine methane also appear to be providing an incremental source of revenue – c.$6.6m was generated from these during the half year. This figure is expected to continue growing.
To handle decommissioning, the company has set up a dedicated unit, Next LVL. This business retired 213 wells in H1, including 170 Diversified wells.
Balance sheet/shareholder returns: net debt rose by c.$900m to $2.6bn in H1, while leverage fell from 3.0x EBITDA to 2.6x EBITDA. While commodity price movements may have affected leverage, I think the main reason for both changes is the acquisition and subsequent EBITDA contribution from Maverick.
A Q2 dividend of $0.29 per share (unchanged) has been declared.
Around 3.3m shares have also been repurchased for $43m so far in 2025 – about 4% of the current share count.
Outlook: Diversified has left its 2025 guidance unchanged today, guiding for full-year production of 1,050-1,100MMcfe/d – so only a slight increase on H1 figures.
Adjusted EBITDA is expected to be $825-875m, with adjusted free cash flow of c.$420m.
Leverage is expected to fall to 2.0-2.5x by year end.
Consensus estimates on Stocko suggest full-year earnings of $1.86 per share, with a dividend of $1.43. That leaves the shares trading on a P/E of 8 with a yield of more than 9.5%.
The indicative free cash flow also implies a c.30% free cash flow yield versus market cap, which could be
Of course, profits remain highly dependent on commodity pricing. We can see that there’s been some weakness in earnings per share expectations over the last year:
Roland’s view
Diversified has become popular with UK investors for its high dividend yield since listing in 2015. The shares currently offer a forecast yield of over 9% and there are currently buybacks underway, too.
Management is keen on talking up the company as a consolidation play with the potential to lower costs and improve performance and environmental compliance when compared to smaller independent operators.
Production growth has certainly been dramatic, rising 30-fold over the last decade:
Source: June 2025 corporate presentation
However, I think it’s worth considering how this growth has been funded.
The level of long-term debt have risen 74-fold since 2015 (prior to today’s results):
The share count has risen approximately nine-fold:
Today’s H1 balance sheet shows a book value of $728m for Diversified’s equity. This is lower than that reported in 2019, despite numerous acquisitions over the last five years (see slide above):
The share price is currently broadly unchanged from its 2017 IPO level:
Shareholders have received some attractive dividends, but the payout was cut by c.60% last year:
In my view this business has been built by relying on cheap debt and dilution. I think value creation for shareholders has been questionable, largely depending on whether individual investors have had good luck with their timing.
In my view, this is a more speculative situation for equity investors than it might first appear to be. Indeed, I think we might question why Diversified – a wholly US-based business – chose to list in the UK rather than its domestic market.
At current levels, the shares could potentially offer some value, but I suspect this will still depend on commodity prices and any further corporate activity.
Without further research I can’t take a strong position here, so I’m going to mirror the algorithms and take a neutral view today. AMBER.
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